NTS Annual Report 2010 CONTENTS · Chartered Accountants BancABC 7th Floor (Zimbabwe) ZB Bank Limited Mercury House Kenilworth Gardens 24 George Silundika Avenue 1 Kenilworth Road

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Directorate, Management and Administration 2

Chairman's and Chief Operating Officer's Report 3

Directors' Report 5

Corporate Governance 7

Statement of Directors' Responsibility for Financial Reporting 8

Independent Auditors' Report 9

Statement of Comprehensive Income 12

Statement of Financial Position 13

Statements of Changes in Equity 14

Statement of Cash Flows 15

Notes to the Financial Statements 16

Analysis of Shareholders 43

Notice of Annual General Meeting 44

CONTENTS

NTS Annua l Repo r t 2010

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DIRECTORATE, MANAGEMENT AND ADMINISTRATION

DIRECTORS:NON-EXECUTIVEDr. L.C. Ceneviz (Brazilian) ChairmanMr. M. Bhatia (Indian) [Appointed on 4 September 2009]Mr. B.V. Mancama

EXECUTIVEMr. K. Mandevani Group Managing DirectorMr. C. Makoni Chief Operating OfficerMr. S.N. Mandimika Administration Director

BOARD COMMITTEES:AUDIT COMMITTEE REMUNERATION COMMITTEEMr. B.V. Mancama Chairman Dr. L.C. CenevizDr. L.C. Ceneviz Mr. K. MandevaniMr. M. Bhatia Mr. C. Makoni

EXECUTIVE MANAGEMENTMr. K. Mandevani Group Managing DirectorMr. C. Makoni Chief Operating OfficerMr. S.N. Mandimika Administration DirectorMr. T. Choto Operations ExecutiveMr. B. Mukono AccountantMr. H. Chikombero Human Resources ManagerMr. S. Nhamoinesu Audit and Security ManagerMr. P. Mawindo Procurement and Distribution Manager

ADMINISTRATION:REGISTERED SHARE TRANSFER COMPANYOFFICE SECRETARIES SECRETARYStand No. 4608 Corpserve (Private) Limited Mr. S.N. MandimikaCorner Cripps and Seke Road 2nd Floor, ZB CentreGraniteside Corner Kwame Nkrumah Avenue P.O. Box 3018 and First StreetHarare P.O. Box 2208

Harare

AUDITORS BANKERS LEGAL ADVISORSDeloitte & Touche Kingdom Bank Limited Atherstone & CookChartered Accountants BancABC 7th Floor(Zimbabwe) ZB Bank Limited Mercury HouseKenilworth Gardens 24 George Silundika Avenue1 Kenilworth Road P.O. Box 2625Newlands HarareP.O. Box 267Harare

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CHAIRMAN'S AND CHIEF OPERATING OFFICER'S REPORT FOR 2010

EnvironmentThe political stability enabled National Tyre Services Limited (“the Company”) to survive in the year under review. The multi-currency monetary policy provided the Company with the chance to get back to normalcy with regards to pricing stability, planning and financial reporting.

Easy access to foreign currency and remittability enabled some of the key suppliers to extend credit. Letters of credit are still difficult to access as the country risk is perceived to be high by some financial institutions.

Financial reporting and audit opinionThe Company has been able to report in United States dollar terms as this was adopted as the reporting currency with effect from 1 April 2009.

The audit opinion has been qualified as with other financial statements prepared in this transitional period per guidelines of the Public Accountants and Auditors Board (PAAB).

Operations reviewWith the stability of the economy and increase in operational activities in the Company, the employees who had been identified for retrenchment were recalled to work. The Chinhoyi branch was re-opened in December 2009 and has been making significant contributions. The Masvingo branch re-opened in April 2010 and has been performing above budget. Plans are in hand to open the Gweru and Kwekwe branches in the 2010 / 2011 financial year. This will be subject to the availability of stocks.

The Company was awarded the coveted Best Manufacturing Franchisee of 2009 by Bandag at a ceremony held in South Africa on 15 April 2010. The accolade is testimony of the Company's resilience and its insistence on high standards despite the obvious economic challenges of 2008/2009.

Some of the Company's key suppliers such as Apollo Tyres South Africa and Bandag extended credit terms, which helped the management of working capital. Dunlop Zimbabwe (Private) Limited has also been supportive with locally produced tyres. Other supply arrangements were negotiated with local suppliers to ensure availability of products to our customers.

DividendGiven the recovery efforts and the need to conserve cash, the Directors are of the opinion that it would not be appropriate to declare a dividend for the year ended 31 March 2010.

ProspectsRecognising that stock availability will be a key success factor in the short to medium term, efforts will be made to secure prioritization of supply from current suppliers as well as arranging new sources.

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Economic and political stability will help increase business confidence which has a knock-on effect on retail spending patterns. The Company will continue to focus on volume driven profitability.

AppreciationWe record our thanks and appreciation to employees, customers, financiers, suppliers, various advisers and our colleagues on the Board for their positive contribution to the company during the year under review.

Dr. L.C. Ceneviz C. MakoniChairman Chief Operating Officer

29 June 2010

CHAIRMAN'S AND CHIEF OPERATING OFFICER'S REPORT FOR 2010 (continued)

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The Directors submit to members their report together with the audited financial statements of the Company for the year ended 31 March 2010. These financial statements have been approved by Messrs K. Mandevani and C. Makoni, Group Managing Director and Chief Operating Officer respectively on behalf of the Board of Directors.

Share capitalThe authorised share capital remained at 400,000,000 ordinary shares. During the year ended 31 March 2010 the issued share capital increased by 250,000 ordinary shares, being share options exercised by staff as detailed in note 12, to bring the total issued to 252,762,420 ordinary shares at year end. No share options were granted during the year.

Financial results The Company results for the period are summarised as follows:

2010US$

Profit before tax 168,022Income tax credit 197,582Profit attributable to equity holders 365,604

ReservesDetails of movements in reserves are shown in the statement of changes in equity on page 14

DividendGiven the recovery efforts and the need to conserve cash it is proposed that no dividend be declared in respect of the financial year ended 31 March 2010.

DirectorateMr. V. K. Mittal resigned as Director on 4 September 2009.

Mr. M. Bhatia was appointed Director on 4 September 2009. Having been appointed during the year Mr. Bhatia retires in terms of Article 105 of the company's articles of association and, being eligible, offers himself for re-election.

Messrs K. Mandevani and C. Makoni retire by rotation and, being eligible, offer themselves for re-election.

Directors' feesMembers will be asked to approve the Directors' fees as detailed in note 5 of the financial statements for the year ended 31 March 2010.

DIRECTORS' REPORT

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AuditorsMembers will be requested to approve the remuneration of the auditors for the financial year ended 31 March 2010 and re-appoint Deloitte & Touche as auditors for the ensuing year.

By order of the Board

S.N. MandimikaCompany Secretary

29 June 2010

DIRECTORS' REPORT (continued)

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IntroductionNational Tyre Services Limited continues to be committed to the principles of transparency, integrity and accountability in the interests of its shareholders, employees and other stakeholders. In carrying out the affairs of the Company, Directors and employees are required to adhere to these principles and follow ethical values consistent with high standards of conduct in their professional and business practices.

Board of DirectorsThe Board currently comprises of three non-executive Directors and three executive Directors with a non-executive Director as its Chairman. It meets four times a year to approve and monitor the implementation of strategic plans and to review key risks and performance areas of the Company.

Audit committeeAn audit committee chaired by a non-executive Director meets four times a year and interacts with internal and external auditors who have unrestricted access to the committee. It considers compliance with financial reporting requirements, accounting policies, effectiveness of internal control systems and risk management issues. Significant findings are brought to the attention of the Board.

Remuneration committeeThe remuneration committee comprises of one non-executive Director, who is the Chairman, and two executive Directors. The committee reviews the remuneration of executive Directors and executive management in line with policy.

Management reportingStrategic plans and annual budgets affecting all business units are reviewed and approved by the Board. Monthly results and the financial status of various operating units are reviewed against budgets.

Safety, Health and Environmental managementThe Company gives utmost priority to the creation, maintenance and continual improvement of a healthy and safe working environment as well as the protection of the environment. These objectives are part of good business practice, corporate social responsibility and contributions towards sustainable business development. The Company is proud to be operating credible health, safety and environmental management systems.

CORPORATE GOVERNANCE

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The Directors of National Tyre Services Limited are responsible for the maintenance of adequate accounting records, and the preparation of financial statements for each financial year, that give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the results and cash flows for that year. They are also required to select appropriate accounting policies, to safeguard the assets of the Company and to make reasonable and prudent judgements and estimates. Accounting policies, which follow International Financial Reporting Standards (IFRSs), have been consistently applied, where practicable. Areas of departure are disclosed in accounting policy notes 3.1 and critical judgemental areas in note 4 to the financial statements.

The Directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements, and to safeguard, verify and maintain accountability of assets, and to prevent and detect material misstatements and losses. The systems are implemented and monitored by suitably trained personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

The financial statements have been prepared in accordance with the accounting policies set out in the accounting policy notes. The financial statements do not comply with the disclosure requirements of the Companies Act (Chapter 24.03) and the relevant Statutory Instruments, as regards presentation of comparative financial information. Non-compliance with certain IFRSs is disclosed in note 3.1 to the financial statements.

The Directors have reviewed the Company's budget and cash flow forecast for the year to 31 March 2011. On the basis of this review, and in light of the current financial position, the Directors are satisfied that the Company is a going concern and have thus continued to adopt the going concern basis in preparing the financial statements.

The financial statements set out on pages 12 to 42 were approved by the Directors and are signed on their behalf by:

K. Mandevani C. MakoniGroup Managing Director Chief Operating Officer

29 June 2010

STATEMENT OF DIRECTORS' RESPONSIBILITY FOR FINANCIAL REPORTING

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REPORT OF THE INDEPENDENT AUDITORS

To the members of National Tyre Services LimitedWe have audited the accompanying financial statements of National Tyre Services Limited set out on pages 12 to 42, which comprise the statement of financial position as at 31 March 2010 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes.

Directors' responsibility for the financial statementsThe company's Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

The Directors have elected to comply with the guidance in the Joint Media Statement on the Impact on Financial Reporting as a Consequence of the Change in Functional Currency (the Financial Reporting Guidance) issued jointly by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE) in July 2009.

Auditors' responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit report has been modified in the manner in which we report on the compliance of these financial statements with provisions of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96), as set out in the guidance and recommendations on audit reports issued jointly by the PAAB, the ZSE and the ZAPB in March 2010 (the Guidance on Audit Reports).

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for adverse opinion on financial performance and cash flowsNon-compliance with International Accounting Standard (IAS) 29 (Financial Reporting in Hyperinflationary Economies) and IAS 21 (The Effects of Changes in Foreign Exchange Rates)The Company operated under a hyperinflationary economy in the prior year. The entity changed its functional and reporting currency to United States dollars with effect from 1 February 2009 and 1 April 2009 respectively. All comparative information, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity have not been prepared in conformity with International Financial Reporting Standards in that the requirements of IAS 29 and IAS 21 have not been complied with in converting the financial information during the period of hyperinflation into an applicable measurement base at the date of reporting for the following reasons:

• the inability to reliably measure inflation because of the interaction of multiple economic factors which were pervasive to the Zimbabwean economic environment as explained in note 19; and

• the inability to adjust items that were recorded in Zimbabwe dollars into United States dollars at the date of change of functional currency as more fully explained in note 20

This also caused us to issue an adverse audit opinion on the financial statements relating to the prior year.

Non-compliance with IAS 1 (Presentation of Financial Statements)The Directors have not presented any comparative information for the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and notes to the financial statements as required by IAS 1 because they believe the information will be misleading. Due to the hyperinflationary environment prevailing in the prior financial year, comparatives could not be objectively converted to the new functional and presentation currency due to the existence of a multiplicity of exchange rates and unavailability of inflation indices from August 2008 to January 2009. Comparative information has thus been provided for the statement of financial position only, which was prepared subsequent to the date of change in functional currency.

Adverse opinion on financial performance and cash flowsIn our opinion, because of the significance of the matters described in the Basis for adverse opinion paragraph, the financial statements do not give a true and fair view of the Company's financial performance and cash flows for the year ended 31 March 2010 in accordance with International Financial Reporting Standards.

Unqualified opinion on the financial positionIn our opinion, the financial statements, in all material respects, give a true and fair view of the financial position of National Tyre Services Limited at 31 March 2010 in accordance with International Financial Reporting Standards.

REPORT OF THE INDEPENDENT AUDITORS (continued)

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Report on other legal and regulatory requirementsIn our opinion, the financial statements have not been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) and Statutory Instruments (SI 33/99 and SI 62/96) due to the inability to comply with IAS 1 and IAS 21.

In our opinion, the Company has complied, in all material respects, with the Financial Reporting Guidance. This guidance was issued jointly by the PAAB, the ZSE and the ZAPB to assist preparers of financial statements in converting their financial statements from Zimbabwe dollars into their new functional currency in a manner that is consistent with the principles of IFRS, in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of functional currency.

Emphasis of matterWithout further qualifying our opinion, we draw your attention to the following paragraph, which, along with other matters, indicates that the Company is operating in an uncertain economic environment.

Fair value determination for transactions, assets and liabilitiesThe determination of fair values presented in the financial statements is affected by the prevailing economic environment and may therefore be distorted. This may result in significant variations in fair values, depending on factors and assumptions used in determination of the fair values. The significant assumptions and the estimation uncertainties have been disclosed in note 4 to these financial statements.

DELOITTE & TOUCHEChartered AccountantsHarare, Zimbabwe

29 June 2010

REPORT OF THE INDEPENDENT AUDITORS (continued)

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STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2010

Notes 2010US$

REVENUE 6,145,594

Cost of sales (4,247,815)

GROSS PROFIT 1,897,779

Selling, marketing and distribution expenses (630,317)Administration expenses (1,430,978)OPERATING LOSS (163,517)

Finance income 2,106Other income 329,433

PROFIT BEFORE TAX 5 168,022

Income tax credit 6 197 582

PROFIT FOR THE YEAR 365,604

Earnings per share - Basic (cents) 7 0,14

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As at 31 March 2010

Notes 2010US$ US$

ASSETS

Non-current assets 5,041,258 5,228,200Property, plant and equipment 8 2,853,719 3,038,085Investments 9 2,187,539 2,190,115

Current assets 1,153,724 529,196Inventories 10 644,329 347,580Trade and other receivables 11 195,934 65,450Cash and cash equivalents 313,461 116,166

Total assets 6,194,982 5,757,396

EQUITY AND LIABILITIES

Total equity 4,037,248 3,666,223Issued capital 12 1 1Share options reserve 5,421 -Non-distributable reserve 3,666,222 3,666,222Retained earnings 365,604 -

Non-current liabilities 1,411,219 1,740,563Deferred tax liabilities 6 1,146,219 1,415,563Deferred income 13 265,000 325,000

Current liabilities 746,515 350,610Trade and other payables 14 720,040 315,610Bank overdrafts - 35,000Current tax liabilities 6 26,475 -

Total equity and liabilities 6,194,982 5,757,396

Directors

K. Mandevani C. MakoniHarare

29 June 2010

2009

STATEMENT OF FINANCIAL POSITION

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Share NonIssued option distributable Retained Totalcapital reserve reserve earnings equity

US$ US$ US$ US$ US$

Balance at 31 March 2009 1 - 3,666,222 - 3,666,223Recognition of shared based payments - 5,421 - - 5,421Profit for the year - - - 365,604 365,604Balance at 31 March 2010 1 5,421 3,666,222 365,604 4,037,248

Prior year comparatives have not been disclosed for reasons given in note 21.

STATEMENT OF CHANGES IN EQUITY

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2010US$

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 168,022Adjustments for:- Expense recognised in respect of equity-settled share-based payments 5,421- Depreciation expense 185,200- Profit on disposal of property, plant and equipment (70,790)- Impairment loss recognised on available-for-sale investments 2,576- Finance income (2,106)- Deferred income recognised (60,000)Operating cash flows before working capital changes 228,323Changes in workings capital- Increase in inventories (296,749)- Increase in receivables (130,484)- Increase in payables 404,430Cash generated from operations 205,520Income taxes paid (45,285)NET CASH GENERATED FROM OPERATING ACTIVITIES 160,235

CASH FLOWS FROM INVESTING ACTIVITIESPayments for property, plant and equipment (17,336)Proceeds from disposal of property, plant and equipment 87,290Finance income 2,106NET CASH GENERATED FROM INVESTING ACTIVITIES 72,060

NET INCREASE IN CASH AND CASH EQUIVALENTS 232,295Cash and cash equivalents at beginning of year 81,166CASH AND CASH EQUIVALENTS AT END OF YEAR 313,461

Prior year comparatives have not been disclosed for reasons given in note 21.

STATEMENT OF CASH FLOWS

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1. GENERAL INFORMATION

National Tyre Services Limited is a company incorporated in Zimbabwe and is listed on the Zimbabwe Stock Exchange. The registered office and main business address of the Company is stand 4608 corner Cripps/Seke Road Graniteside Harare Zimbabwe. The activities of the Company include the reprocessing and the retailing of tyres.

2. ADOPTION OF NEW AND REVISED STANDARDS

2.1 Standards affecting presentation and disclosures

In the current year, the Company has adopted the following new and revised Standard:IAS 1: (Revised) Presentation of financial statements - which has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of financial statements.

2.2 Standards and Interpretations adopted with no effect on the financial statements

The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.

NOTES TO THE FINANCIAL STATEMENTS

IFRS 8: Operating segments

Medium-sized Entities

Amendments to IFRS 2: Share-based Payment - Vesting Conditions and Cancellations

IAS 23 (as revised in 2007) Borrowing Costs

IFRS 8 is a disclosure Standard that requires re-designation of reportable segments based on the segments used by the "Chief Operating Decision Maker" to allocate resources and assess performance.

This Standard is available immediately but the adoption has to be decided by the jurisdiction of implementation.

The amendments clarify the definition of vesting conditions for the purposes of IFRS 2, introduce the concept of 'non-vesting' conditions, and clarify the accounting treatment for cancellations.

The principal change to the Standard was to eliminate the option to expense all borrowing costs when incurred. This change has had no impact on these financial statements because it has always been the Company's accounting policy to capitalize borrowing costs incurred on qualifying assets.

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Amendments to IAS 32: Financial Instruments: Presentation and IAS 1 : Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation

IFRIC 13: Customer Loyalty Programmes

IFRIC 16: Hedges of a Net Investment in a Foreign Operation

IFRIC 18: Transfers of Assets from Customers (transfers received on or after July 1, 2009)

Improvements to IFRSs (2008)

Amendments to IAS 39 (Revised): Financial Instruments Recognition and Measurement

The revisions to IAS 32 amend the criteria for debt/equity classification by permitting certain puttable financial instruments and instruments (or components of instruments) that impose on an entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only on liquidation, to be classified as equity, subject to specified criteria being met.

The Interpretation provides guidance on how entities should account for customer loyalty programmes by allocating revenue on sale to possible future award attached to the sale.

The Interpretation provides guidance on the detailed requirements for net investment hedging for certain hedge accounting designations.

The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from 'customers' and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognise the asset at its fair value on the date of the transfer, with the credit recognised as revenue in accordance with IAS 18: Revenue.

Amendments to IFRS 1, IAS 1, IAS 16, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41 resulting from the May and October 2008 Annual Improvements to IFRSs majority of which are effective for annual periods beginning on or after January 1, 2009.

Amendments for embedded derivatives when reclassifying financial instruments.

2.2 Standards and Interpretations adopted with no effect on the financial statements: continued

NOTES TO THE FINANCIAL STATEMENTS (continued)

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2.2 Standards and Interpretations adopted with no effect on the financial statements: continued

Amendments to IFRS 7: Financial Instruments Disclosures

Amendments to IAS 27: Consolidated and Separate Financial Statements

IFRIC 15: Agreements for the Construction of Real Estate

Amendments enhancing disclosures about fair value and liquidity risk.

Amendments relating to the cost of an investment on first time adoption.

The Interpretation standardizes accounting practice across jurisdictions for the recognition of revenue by real estate developers for sales of units, such as apartments or houses, 'off plan'- that is before construction is complete.

2.3 Standards and interpretations in issue but not yet effective

At the date of authorization of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

IFRS 1(Revised) First time Adoption of IFRS - Amendment relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective for annual periods beginning on or after July 1, 2009);IFRS 1(Revised) First time Adoption of IFRS - Amendment on additional exemptions for first-time adopter (effective for annual periods beginning on or after July 1, 2010);IFRS 1(Revised) First time Adoption of IFRS - Amendments relating to oil and gas assets and determining whether an arrangement contains a lease (effective for annual periods beginning on or after January 1, 2010)IFRS 2(Revised) Share-based Payment- Amendment relating to Group cash-settled share based payment (effective for annual periods beginning on or after January 1, 2010);IFRS 3(Revised) Business Combinations - Comprehensive revision on applying the acquisition method and consequential amendments to IAS 27 (revised) Consolidated and Separate Financial Statements, IAS 28 (revised) Investments in Associates and IAS 31 (revised) Interests in Joint Ventures (effective for annual periods beginning on or after July 1, 2009);

IFRS 5Amendments resulting from May 2008, Annual Improvements to IFRS's (effective for annual periods beginning on or after July 1, 2009)IFRS 9Financial Instruments - Classification and Measurement (effective for annual periods beginning on or after January 1, 2013)IAS 24(Revised) Related Party Disclosures - Amendment on disclosure requirements for entities that are controlled, jointly controlled or significantly influenced by a Government (effective for annual periods beginning on or after January 1, 2011);

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2.3 Standards and interpretations in issue but not yet effective (conituned)

IAS 32(Revised) Financial Instruments: Presentation - Amendments relating to classification of Rights Issue (effective for annual periods beginning on or after February 1, 2010);IAS 39(Revised) Financial Instruments: Recognition and Measurement - Amendments relating to Eligible Hedged Items (such as hedging Inflation risk and Hedging with options) (effective for annual periods beginning on or after July 1, 2009);IFRIC 9Amendment to IFRIC 9 (revised): Reassessment of Embedded Derivatives relating to assessment of embedded derivatives in case of reclassification of financial assets out of the FVTPL category (effective for annual periods beginning on or after July 1, 2009);IFRIC 14Amendment to IFRIC 14: IAS 19 The limit on a Defined Benefit Asset - Minimum Funding Requirement and their interaction (effective for annual periods beginning on or after January 1, 2011);IFRIC 16Amendment to IFRIC 16 - Hedges of a Net Investment in a Foreign Operation relating to the restriction on the entity that can hold hedging instruments (effective for annual periods beginning on or after July 1, 2009)IFRIC 17Distributions of Non-cash Assets to Owners (effective for annual periods beginning on or after July 1, 2009); andIFRIC 19Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 1, 2010). Others Amendments to IFRS 2, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 36, IAS 38 and IAS 39 resulting from April 2009 Annual Improvements to IFRSs (Majority effective for annual periods beginning on or after January 1, 2010).

The Directors are yet to assess the impact that the adoption of these Standards and Interpretations will have on the financial statements in the period of initial application.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Statement of compliance

The financial statements have not been prepared in conformity with IFRS, promulgated by the International Accounting Standards Board (IASB), which includes standards and interpretations approved by the IASB as well as International Accounting Standards and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions (IFRS's), due to non compliance with IAS 1 (Presentation of Financial Statements), IAS 21 (The Effects of Changes in Foreign Exchange Rates) and IAS 29 (Financial Reporting in Hyperinflationary Economies)

The effects of these departures have not been quantified but, having regard to their nature, are considered to be material and pervasive to the financial statements. The exceptions arise from the circumstances which have given rise to a change in the company's functional currency from the Zimbabwe dollar to the United States dollar, as more fully explained in notes 19, 20 and 21.

As a result of the inability of most entities reporting in Zimbabwe to report fully in terms of IFRS, the Public Accountants and Auditors Board (PAAB)1, the Zimbabwe Accounting Practices Board (ZAPB)2 and the Zimbabwe Stock Exchange (ZSE)3 issued recommendations that assisted preparers of financial statements in converting their financial statements from Zimbabwe dollars into their new functional currency in a manner that is consistent with the principles of IFRS, in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of the functional currency. These recommendations were also made in order to achieve a fair measure of market comparability and consistency for regulatory oversight and in the interest of various stakeholders, such as investors who have an interest in high quality financial information. The PAAB, the ZAPB and the ZSE recommended that all entities reporting in Zimbabwe adopt this Financial Reporting Guidance for converting their financial statements into the entity's new functional currency at the date of change over. Although it is not a legal requirement to apply the Financial Reporting Guidance, the Directors, in line with their fiduciary responsibilities to prepare financial statements that fairly present the state of affairs and performance of the Company have adopted these recommendations as it is the best possible manner in which they can present financial statements that are as fair as is practical under the circumstances prevailing.

As suggested in the Financial Reporting Guidance, assets and liabilities carried at fair value were valued at the date of change of the functional currency and carried at their fair values in the new functional currency. Non-monetary assets and liabilities were valued at their deemed cost. Equity was recognised as the residual of the Company's net assets and treated as a non-distributable reserve.

1 The Public Accountants and Auditors Board (PAAB) is a body established by statute under the Public Accountants and Auditors Act [Chapter 27:12], as a regulatory body for the accountancy profession in Zimbabwe.

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2 The Zimbabwe Accounting Practices Board (ZAPB) is a technical sub-committee of the PAAB. The body enjoys statutory recognition as the national accounting standards setting advisory authority. It includes representatives of users, preparers and auditors of financial statements.3 The Zimbabwe Stock Exchange (ZSE) is a licensed securities exchange under the Securities Act.

3.2 Change in functional and reporting currency

The Company changed its functional and reporting currency from Zimbabwe dollars to United States dollars (US$) with effect from 1 February 2009 and 1 April 2009 respectively, following the liberalisation of the foreign currency market and the approval to trade in multi-currencies. Thus, these financial statements are presented in United States dollars.

3.3 Basis of preparation

The basis of preparation of the financial statements is International Financial Reporting Standards. The financial statements are prepared under the historical cost convention as modified by the valuation of certain non-current assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets with the exception of opening deemed costs as explained in note 4.

The principal accounting policies are set out below.

3.4 Property, plant and equipment

All property, plant and equipment held for use in production, supply of goods and services, or for administrative purposes are shown at cost less depreciation and any accumulated impairment losses in the statement of financial position.

Freehold land is not depreciated

Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. These assets are depreciated over their estimated useful lives, which are as follows:

Buildings 40 yearsPlant and machinery 5 yearsMotor vehicles 5 yearsComputers 3 yearsFurniture and fittings 3 years

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The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Any impairment of an asset below its carrying value is charged to profit or loss in the year it occurs.

3.5 Investment property

Investment property, which is property held to earn rentals and/or capital appreciation, is stated at its fair value in the statement of financial position. Gains or losses arising from changes in the fair value of property are included in profit or loss for the period in which they arise.

3.6 Inventories

Raw materials, goods for resale, consumables and manufactured goods are stated at the lower of cost and net realisable value. The first-in-first-out basis is used in determining the cost of all categories. The value of manufactured goods includes direct cost of raw materials, labour and an allocation of manufacturing overheads incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

3.7 Impairment of tangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

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3.7 Impairment of tangible assets (continued)

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

3.8 Financial instruments

RecognitionFinancial assets and liabilities are recognised on the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial assets

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Available-for-sale investmentsInvestments in unlisted shares that are not traded in an active market are classified as available for sale financial assets and are stated at fair value as determined by the Directors. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. N

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Impairment of financial assets: continuedThe carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Financial liabilities and equity instruments issued by the CompanyDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Other financial liabilitiesOther financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire.

3.9 Foreign currencies

Transactions denominated in foreign currencies are recorded at the rate of exchange ruling on the transaction date.

Monetary items, which are denominated in foreign currencies, are translated at the rate of exchange ruling at the statement of financial position date. Gains or losses arising on translation are credited or charged against income.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets stated at fair value are translated at rates ruling at the date the fair value was determined.

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3.10 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current taxThe tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred taxDeferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the periodCurrent and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss. N

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3.11 Revenue

Revenue represents the fair value of consideration received or receivable for goods and services provided in the normal course of business, net of discounts and value added tax. Sales of goods are recognised when the significant risk and rewards of ownership have been transferred to the buyer..

Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the interest rate that exactly discounts estimate future cash receipts through the expected life of the financial asset to the assets net carrying amount.

Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.

The Company's policy for recognition of revenue from operating leases is described in note 3.14.

3.12 Pension obligations

The National Tyre Services Pension Fund is a defined contribution plan. Eligible employees are also members of the National Social Security Authority Scheme. Contributions to both funds are charged to profit or loss when employees have rendered service entitling them to the contributions.

3.13 Deferred income

Amounts due under agreements where the lessee undertook the construction of a building were credited to deferred income at fair value as at the date of completion. This amount is then amortised over the 10-year period of the agreement as operating rental income on a straight-line basis.

Deferred income represents the un-amortised portion of future rental income that will be credited to income over the period of the lease. The balance is calculated as the value of future rentals at market rates.

3.14 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

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3.14 Leasing: continued

The Company as lessorAmounts due from leases under finance leases are recorded as receivables at the amount of the Company's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company's net investment outstanding in respect of the leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and are recognised on a straight line basis over the period of the lease.

The Company as lesseeRental payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

3.15 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

3.16 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

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4. CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE ENTITY'S ACCOUNTING POLICIES

In the process of applying the Company's accounting policies, which are described in note 3, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

4.1 Determination of opening balances

The Directors elected to apply the Financial Reporting Guidance issued by the PAAB. This guidance recommended that all assets and liabilities be measured at their fair value in US$ on the date of the Company's change in functional currency. The opening deemed carrying amounts of assets and liabilities previously reported in Zimbabwe dollars were determined on the basis described below which the Directors believe presents a fair valuation of the assets, liabilities and equity of the Company as of that date.

Property, plant and equipment and investment property

Inventories

Cash and cash equivalents

Other financial assets

Liabilities

Deferred tax

Deferred income

Equity

Land, buildings and investment property were professionally valued at 31 March 2009. The Directors reassessed these values in line with subsequent market trends and adjustments were made where necessary. Plant and equipment are carried at recoverable amounts.

Inventories were valued at actual cost in United States dollars if the actual cost was known. All other inventories were valued at net realisable value.

Actual United States dollar amounts.

Recoverable amounts.

Settlement amounts agreed with creditors in United States dollars.

Income tax values were established on the basis of available guidance from the Zimbabwe Revenue Authority as modified by the Directors. Deferred tax was calculated on the difference between the income tax values and carrying amounts of assets and liabilities.

Based on Directors' valuations.

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4.2 Useful lives and residual values of property, plant and equipment

As described in note 3.4 above, the Company reviews the estimated useful lives and residual values of property, plant and equipment at the end of the reporting period. Due to the change in the functional and reporting currency for the Company and the end of hyperinflation in Zimbabwe, the Directors reassessed the opening carrying amounts of property, plant and equipment as described in note 4.1 above. Remaining useful lives and residual values were reassessed based on business trends, technological developments and management's future plans. The useful lives and residual values so determined involved the exercise of significant levels of judgement based on data that was not readily observable.

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5. PROFIT BEFORE TAX 2010US$

Profit for the year has been arrived at after charging (crediting):- Current year audit fees and expenses 25,000- Depreciation of property, plant and equipment 185,200- Rental income (170,812)- Deferred income recognised on rentals (60,000)- Profit on disposal of property, plant and equipment (70,788)- Impairment loss on available-for-sale equity investments 2,576- Employee costs Staff remuneration 1,128,820 Equity-settled share-based payments expense 5,124 Pension (National Social Security Authority) 16,969 Other defined contribution plans 47,234

Included in employee costs is Directors' remuneration of:- Fees for services as Directors 1,865

6 INCOME TAXES

6.1 Income tax creditCurrent tax expense 71,762Deferred tax- Change in tax rate (225,427)- Deferred tax credit relating to the origination and reversal of temporary differences (43,917)

(197,582)

The credit for the year can be reconciled to the accounting profit as follows:

Profit before tax 168 022Income tax expense calculated at 30.9% 51 919Effect on deferred tax balances due to the change in income tax rate from 30.9% to 25.75% (effective 1 January 2010) (225,427)Effect of expenses that are not deductible in determining taxable profit (24,074)Income tax credit recognised in profit or loss (197,582)

6.2 Current tax liabilities

Income tax payable 26,475

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6.3 Deferred tax balances Beginning of year profit or loss end of yearUS$ US$ US$

Property, plant and equipment 873,265 (192,949) 680,316Investment property 641,560 (106,026) 535,534Deferred income (100,425) 32,187 (68,238)Other 1,163 (2,556) (1,393)

1,415,563 (269 344) 1,146,219

Recognised in Balance at

7. EARNINGS PER SHARE

7.1 Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows.

2010

US$

Profit for the year 365,604Weighted average number of ordinary shares in issue 252,741,587Basic earnings per share (cents) 0.14

7.2 Diluted earnings per share has not been calculated as the extent of the dilution is immaterial.

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8. PROPERTY, PLANT AND EQUIPMENT

Land and Furniture Plant and Motorbuildings and fittings equipment vehicles Total

US$ US$ US$ US$ US$

Cost or deemed cost

Balance at 31 March 2009 2,429,345 66,990 211,000 330,750 3,038,085Additions - 1,504 1,332 14,500 17,336Disposals - - - (18,000) (18,000)Balance at 31 March 2010 2,429,345 68,494 212,332 327,250 3,037,421

Accumulated depreciation and impairment

Balance at 31 March 2009 - - - - -Depreciation expense 54,411 22,832 42,332 65,625 185,200Eliminated on disposals of assets - - - (1,498) (1,498)Balance at 31 March 2010 54,411 22,832 42,332 64,127 183,702

Carrying value at 31 March 2009 2,429,345 66,990 211,000 330,750 3,038,085

Carrying value at 31 March 2010 2,374,934 45,662 170,000 263,123 2,853,719

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9. INVESTMENTS 2010US$

Investment property 2,166,855Available-for-sale investments 20,684

2,187,539

9.1 Investment property

The fair value of the Company's investment property at 31 March 2010 was arrived at on the basis of a valuation carried out at that date by the Directors, with reference to the professional valuation carried out at 31 March 2009.

9.2 Available-for-sale investments 2010US$

At fair value

Balance at beginning of year 23,260Impairment loss recognised (2,576)Balance at end of year 20,684

The investment is represented by unquoted Zimsun time shares (6 units; 2009 6 units)

10 INVENTORIES

Raw materials 168,693Finished goods 442,485Consumable stores 33,151

644,329

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11. TRADE AND OTHER RECEIVABLES

Trade receivables 200,485Allowance for doubtful debts (9 426)

191,059Other receivables 4,875

195,934

The average credit period on sales of goods is 21 days. No interest is charged on trade receivables and the Directors consider that the carrying amount of trade and other receivables approximates their fair value. Allowances for doubtful debts are recognised against specific trade receivables and trade receivables in excess of 90 days based on estimated irrecoverable amounts determined by reference to past default experience.

Of the trade receivables balance at the end, US$ 48,083 is due from Triangle Limited and US$ 20,154 from Cross Country Containers. There are no other customers who represent more than 10% of the total balance of trade receivables individually.

Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period but against which the Company has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Company does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Company.

Ageing of past due but not impaired 2010US$

21 - 90 days 86,080+ 90 days 8,760

94,840

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12. SHARE CAPITAL

The original par value of issued shares has been reduced to nil by the restatement of the Zimbabwe dollar under hyperinflation and its subsequent conversion to United States dollars. The total share capital has been presented as US$1 in these financial statements in accordance with the guidance in the Joint Media Statement on the Impact of Financial Reporting as a Consequence of the Change in Functional Currency (the Financial Reporting Guidance) issued jointly by the Public Accountants and Auditors Board, the Zimbabwe Stock Exchange and the Zimbabwe Accounting Practices Board in July 2009.

12.1 Authorised 2010 2009Number of shares Number of shares

Ordinary shares 400,000,000 400,000,000

12.2 Issued and fully paid

Balance at beginning of year 252,512,420 250,842,420Ordinary shares issued under share option scheme 250,000 1,670,000Balance at end of year 252,762,420 252,512,420

The Company has one class of shares, which carries no rights to fixed income.

12.3 Unissued shares

Unissued shares under the control of the Directors 147,237,580 147, 487,580

12.4 Directors' interests

At 31 March 2010 Directors held directly or indirectly the following shares:

Mr. C. Makoni 147,496 -Mr. S.N. Mandimika 50,000 50,000Options held under the staff share option scheme:Mr. S.N. Mandimika 300,000 300,000

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12.5 Share options

The Company operates an approved share option scheme. Equity settled share options are granted to certain key employees over a period of usually 5 years, the price being the market value on the date of grant provided they remain in employment with the Company. Each share option converts into one ordinary share of the Company on exercise. Options that are vested but not taken up expire after 7 years.

The share option measurement requirements of IFRS 2 (Share-Based Payments) were not complied with in determining the fair value of share option granted which was determined by the Directors as 1.5 US cents per share with reference to guidance received from the Zimbabwe Stock Exchange. The non compliance was estimated to be qualitatively and quantitatively immaterial in the context of these financial statements.

2010 2009Number of options Number of options

Analysis of share optionsBalance at beginning of year 1,560,000 4.270,000Exercised during the year (250,000) (1,670,000)Forfeited during the year - (1,040,000)Balance at year end 1,310,000 1 560 000Exercisable at year end 890,000 720 000Exercisable after year end 420,000 840 000Options under the control of Directors not yet granted 15,216,052 15 216 052

16,526,052 16 776 052

The weighted average stock exchange price on the date of exercise was 1.2 US cents. No cash was received on exercise of these share options as the exercise price was determined in Zimbabwe dollars and at the date of exercise the Directors had not determined the United States dollar equivalent.

The 420,000 share options that are exercisable after year end comprise 300,000 options exercisable on 1 June 2010 and 120,000 options exercisable on 1 October 2010.

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13. DEFERRED INCOME 2010US$

Recognisable within one year 60,000Recognisable within 2 - 5 years 205,000

265,000

The deferred income is the un-amortised future rental income of the investment property. The lessee (Kingdom Bank Limited) undertook the construction of a building in exchange for a rent-free period of 10 years ending October 2014. This is measured as the fair value of the cash flows from future rentals at the Directors' estimate of current market rates.

14. TRADE AND OTHER PAYABLES 2010US$

Trade and other payables 613,401Provisions 106,639

720,040

The average credit period on purchases is 14 days for local suppliers and between 30 and 60 days for foreign suppliers. Interest is charged by certain but not all suppliers on overdue payables. The Directors consider that the carrying amount of trade and other payables approximates their fair value.

14.1 Trade and other payables 2010US$

Trade 260,852Accrued expenses (i) 276,150Other payables 76,399

613,401

(i)Accrued expenses include technical fees amounting to US$ 76,252 payable to a related party as disclosed in note 18.

14.2 Provision 2010US$

Employee benefits (ii) 106,639

(ii)The provision for employee benefits represents provisions for annual leave and bonus.

15. BORROWING POWERS

In terms of article 87 of the Articles of Association, the borrowing power of the Company shall not exceed the nominal amount of the issued capital plus the total of the free reserves.

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16. PENSION OBLIGATIONS

The Company and its employees contribute to the National Tyre Services Pension Fund. The fund operates a defined contribution plan, the assets of which are held in a separate trustee-administered fund. Contributions to the fund by the Company amount to 12% and by employees, 7% of pensionable emoluments.

The National Social Security Authority Scheme was promulgated under the National Social Security Authority Act (Chapter 17:04). Contributions amount to 4% (April 2009 to December 2009) and 3% of pensionable emoluments subject to a limit of US$ 6 per employee with effect from 1 January 2010.

17. FINANCIAL RISK MANAGEMENT

Management is responsible for implementing the strategy to ensure that an appropriate risk management framework is operating effectively across the Company. The Company does not speculate in trading of derivative or other financial instruments. Management of the Company meet on a weekly basis to analyse, amongst other matters, currency and interest rate exposures and to re-evaluate treasury management strategies against revised economic forecasts.

17.1 Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.The Company's capital consists of issued capital and reserves as disclosed in the statement of changes in equity. The Company did not have any significant borrowings at year end.

17.2 Categories of financial instruments 2010US$

Financial assetsCash and cash equivalents 313,461Trade and other receivables 195,934Available-for-sale investments 20,684

530,079

Financial liabilitiesTrade and other payables 720,040Current tax liabilities 26,475

746,515

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17.3 Foreign currency risk management

The Company's exposure arises mainly on import of raw material and finished goods. The Company manages the risk through negotiating with significant suppliers to be invoiced in United States dollars. The Company did not have significant foreign currency denominated monetary assets and monetary liabilities at year end.

17.4 Interest risk management

The Company is exposed to interest rate risk through borrowings it makes from financial institutions. The Company has adopted a non-speculative policy on managing interest rate risks. Only approved financial institutions with sound capital bases are utilised both to borrow funds at fixed interest rates and to invest surplus funds.

17.5 Liquidity risk management

The Company operates within Board approved borrowing limits, which are geared for peak and seasonal trading requirements. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows.

17.6 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Potential credit risk consists of trade debtors. The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Ongoing credit evaluations are performed to maintain creditworthiness of customers.

Trade receivables consist of a large number of customers, spread across diverse industries. The Company does not have credit risk exposure to an individual counterparty representing more than 10% of the trade receivable balance with the exception of those identified in note 11.

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18. RELATED PARTY TRANSACTIONS

The Company's ultimate holding company is Apollo Tyres Limited incorporated in India. This owns 47% of the Company's ordinary shares.

The Company conducted the following transactions with the holding company and other related parties, which are not part of National Tyre Services Limited. Details of balances and transactions between the Company and the related parties are disclosed below.

18.1 Trading transactions 2010US$

Fellow group companyDunlop Zimbabwe (Private) LimitedPurchases 656,604

Holding companyApollo Tyres - South Africa (Proprietary) LimitedPurchases 1,861,681Balance owing to related party - purchases 252,814Balance owing to related party - technical fees 76,252

The amounts outstanding are unsecured and will be settled in cash in 60 days with no interest charge. No guarantees have been given or received.

18.2 Compensation of Directors and key management personnel

The remuneration of Directors and other members of key management during the year was as follows:

2010US$

DirectorsShort term benefits 68,095Post-employment benefits 14,662

Key managementShort term benefits 105,205Post-employment benefits 18,446

206,408

The remuneration committee, having regard to the performance of individuals and market trends determines the remuneration of the Company's Directors and key management personnel.

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19. LIMITATIONS OF FINANCIAL REPORTING IN THE GENERAL ENVIRONMENT PREVAILING

The uncertainties in the adverse Zimbabwean economic environment prior to introduction of trading in multiple currencies resulted in limitations in financial reporting.

The inflation indices applicable to the Zimbabwe dollar during the period prior to formalisation of multi-currency trading were not published from 31 July 2008. Estimates by economists, of Zimbabwe dollar inflation in the period post 31 July 2008 were wide ranging and extremely high (percentages in excess of hundreds of trillions to quadrillions, in some cases). It was impossible to reliably measure inflation in Zimbabwe during this period because the rate of change of inflation on a daily basis was extremely high. Any attempt to measure inflation was subject to various limitations because reliable and timely price data was not available. The inability to reliably measure inflation was also exacerbated by the existence of multiple exchange rates, the use of foreign currency for some transactions and the existence of multiple pricing criteria for similar products based on the mode of settlement.

However, on 29 January 2009 the Monetary and Fiscal authorities authorised the use of multiple foreign currencies for trading in Zimbabwe. This resulted in a change in the functional currency for most entities reporting in Zimbabwe. In accordance with the requirements of International Financial Reporting Standards, entities are required to convert their financial statements into the new functional currency at the date of changeover. The Company was not able to convert its Zimbabwe dollar transactions incurred prior to the formalisation of multi-currency trading into the new functional currency for reasons explained in note 20.

As a result of these uncertainties and inherent limitations, the Directors advise caution on the use of all comparative information.

20. NON-COMPLIANCE WITH IAS 21, IN RESPECT OF THE MEASUREMENT OF ALL COMPARATIVE INFORMATION

The Company's functional currency changed with effect from February 2009 from Zimbabwe dollars to United States dollars. The Company has chosen to report all its transactions in United States dollars because it is the new functional currency applicable to all current transactions.

Transactions that were previously reported in Zimbabwe dollars in prior periods need to be converted into United States dollars in order to present the prior year financial information in a similar currency of presentation to the current financial year. Due to the macroeconomic environment prevailing in the previous year, as explained in note 19, the

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Company has not been able to present a comparative statement of comprehensive income, a comparative statement of changes in shareholders' equity and a comparative statement of cash flows as such information would be misleading. It is thus not possible to show comparative financial statements in United States dollars in a manner consistent with IAS 21 and IAS 29.

21. COMPARATIVE INFORMATION

Comparative figures have only been shown in respect of the Statement of Financial Position. Due to the prevailing economic environment pervasive in prior year, it is not possible to convert reliably the prior year Zimbabwe dollar figures into their equivalent United States dollar figures in a manner consistent with the requirements of IAS 21 (The Effects of Changes in Foreign Exchange Rates) and IAS 29 (Financial Reporting in Hyperinflationary Economies). The Directors are of the opinion that any attempts to convert these amounts would be misleading to the users of the financial statements.

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As at 31 March 2010

Number of Shares held

TRADE CLASSIFICATION

Local nominees 99,833,310 39.50%Local companies 72,992,394 28.88%Local individuals (Residents) 16,036,846 6.34%Insurance companies 48,963,081 19.37%Pension funds 2,588,679 1.02%Fund managers 548,495 0.22%Non-resident shareholders 7,825,687 3.09%Investments and trusts 3,393,604 1.34%Banks 448,729 0.18%Other organisations 131,595 0.00%

252,762,420 100%

SIZE OF SHAREHOLDING Issued Shares Number of Shareholders

1 - 5,000 492,146 0.19% 217 42.58%5,001 - 10,000 631,101 0.25% 80 15.41%10,001 - 25,000 1,317,140 0.52% 80 15.41%25,001 - 50,000 1,485,878 0.59% 37 7.13%50,001 -100,000 2,449,678 0.97% 34 6.55%100,001-500,000 9,670,354 3.83% 42 8.09%500,001 - 1,000,000 5,919,293 2.34% 9 1.73%> 1,000,000 230,796,830 91.31% 16 3.08%

252,762,420 100% 519 100%

MAJOR SHAREHOLDERS:

Top Ten Shareholders Issued Shares

MBCA Nominees (Private) Limited 86,867,731 34.37%Old Mutual Life Assurance Company Zimbabwe Limited 48,897,688 19.35%Radun Investments (Private) Limited 31,194,348 12.34%Zimcor Limited 16,656,418 6.59%Abry Investments (Private) Limited 10,000,000 3.96%Messina Investments (Private) Limited 7,223,745 2.86%TFS Nominees (Private) Limited 6,610,748 2.62%Tanvest (Private) Limited 6,375,700 2.52%Walton, Desmond Patrick 5,206,896 2.06%Old Mutual Zimbabwe Limited 4,366,591 1.73%

223,399,865 88.38% NA

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ANALYSIS OF SHAREHOLDERS

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NOTICE IS HEREBY GIVEN that the forty - eighth Annual General Meeting of the Company will be held in the Boardroom, Stand 4608, Corner Cripps/Seke Road, Graniteside, Harare on 5 August 2010 at 4.00pm for the following business:

ORDINARY BUSINESS1. Financial statements

To receive, consider and adopt the Company's financial statements for the year ended 31 March 2010 together with the report of the Directors and auditors thereon.

2. Directors' remunerationTo approve the Directors' remuneration for the year ended 31March 2010.

3. Election of DirectorsTo appoint Directors: Messrs. K. Mandevani and C. Makoni retire by rotation and, being eligible, offer themselves for re-election. Mr. M. Bhatia, appointed during the year, retires in terms of Article 105 and, being eligible, is offering himself for re-election.

4. AuditorsTo re-appoint Deloitte & Touche as auditors for the current year and approve their remuneration for the year ended 31 March 2010.

SPECIAL RESOLUTION5. Re-denomination of the authorized share capital

To resolve as a special resolution, with or without amendment, that:-a. "The authorized share capital of the Company be re-denominated from 400,000,000 (four

hundred million) ordinary shares of ZWD0.00005 (five thousandth of a Zimbabwean cent) each to 400,000,000 (four hundred million) ordinary shares of US$0.0001 (one hundredth of a United States cent) each;

b. "The Directors be authorised to transfer from the capital reserves an equivalent of the nominal value to fund the above re-denomination and this will amount to US$25,276.24 (twenty five thousand, two hundred and seventy six United States dollars and twenty four cents); and

c. "The Memorandum and Articles of Association of the Company be amended in compliance with the re-denomination, such that any reference to "nominal value" be changed to read "US$0.0001".

NOTE:A member entitled to attend and vote at this meeting is entitled to appoint one or more persons (who need not be members) in the alternative to attend and vote and speak instead of him. All proxies must be lodged in the Company's registered office not less than 48 hours before the time of holding the meeting. A form of proxy is enclosed for the convenience of any shareholder who may be unable to attend.

By order of the Board

S.N. MandimikaCompany Secretary Corner Cripps/Seke RoadGranitesideP O Box 3018Harare29 June 2010NA

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NOTICE OF ANNUAL GENERAL MEETING

44

If you have changed your address please fill in the details in the space provided below:

Name in full:

_______________________________________________________________________

New address:

Signature: _________________________

Date: _____________________________

_______________________________________________________________________

_______________________________________________________________________

I/We ______________________________ of _____________________________

Being a member of the above Company and entitled to vote, hereby appoint

____________________________________________________________ or failing

him_______________________________________________________________

of _________________________________________________________________as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 5th August 2010 at 4.00 pm and at any adjournment thereof.

Signed at ____________________________ this _____ day of ____________ 2010

Signature of Member ______________________

(For official use: No. of shares held: __________________)

NOTE:1. In terms of Section 129 of the Companies Act (Chapter 24:03) a member of

the Company is entitled to appoint one or more proxies to act in the alternative, to attend and vote and speak instead of him. A proxy need not be a member of the Company.

2. Section 77 of the Company's Articles of Association provides that instruments of proxy must be deposited at the registered office of the Company not less than forty-eight hours before the time appointed for holding the meeting.

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PROXY FORMCHANGE OF ADDRESS

NTS Annua l Repo r t 2010 NTS Annua l Repo r t 2010

POST CARD

THE SECRETARYNATIONAL TYRE SERVICES LIMITEDP O BOX 3018HARAREZIMBABWE

POST CARD

THE SECRETARYNATIONAL TYRE SERVICES LIMITEDP O BOX 3018HARAREZIMBABWE

NTS Annual Report 2010 CONTENTS · Chartered Accountants BancABC 7th Floor (Zimbabwe) ZB Bank Limited Mercury House Kenilworth Gardens 24 George Silundika Avenue 1 Kenilworth Road

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