| Mon 30 Nov 2009, 14:57 | | MSP - MAS - Interim Financial Statements Six Months From 1 March 2009 To 31 |
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MSP
MSP
MSP - MAS - Interim Financial Statements Six Months From 1 March 2009 To 31
August 2009
MAS PLC
Previously Mergon Property Holdings Limited
(Incorporated in the Isle of Man)
(Registration number 2893V)
Share code: MSP
ISIN: IM00B4LFGH00
("MAS" "the Company" or "the Group")
Interim Financial Statements
Six months from 1 March 2009 to 31 August 2009
Directors` Report
The Directors` present their half-yearly report and the interim financial
statements for the six months ended 31 August 2009.
MAS is an Isle of Man domiciled Company formed to invest in real estate and
real estate related assets. The Company has completed a first round of
fundraising in August 2009, issuing a total of 9,309,721 new ordinary shares of
no par value via a dual listing on the Euro MTF market of the
Luxembourg Stock Exchange (primary listing) and on the Alternative Exchange
(AltX) of the JSE Limited (secondary listing).
The funds raised shall be invested in real estate and real estate related
assets in the primary jurisdictions of Switzerland, Germany and the United
Kingdom. The Company is a closed-ended infinite life investment, and aims to
maximize shareholder value through a high income distribution policy. The
Company aims to distribute annually all distributable cash profits taking into
account various factors including the Company`s operating results and current
and anticipated operating cash needs. Other than in exceptional circumstances,
it is not the intention to retain profits for investment purposes.
The Group seeks investment opportunities that offer the possibility of
attaining substantial capital appreciation with low associated risks. Unforseen
events particular to the industry in which the Group invests, as well as
general economic and political conditions, may have a significant impact on the
Group`s operations and profitability.
Results and Dividend
During the period under review, the Group made a loss of 522,996 (prior period:
profit 1,337).
This loss relates primarily to direct and indirect expenses incurred during the
listing process, and costs incurred to set-up the appropriate structures with
which to acquire property. The costs are therefore of a non-repetitive nature.
The Directors will not consider the payment of a dividend until after the
financial year ending 28 February 2010.
Prospects
The Directors believe that MAS will be well positioned to capitalise on
attractive investment opportunities over the next quarter.
Registered Office:
25 Athol Street
Douglas
IM1 1LB
Isle of Man
Directors Date of Appointment
Lukas Nakos
Malcolm Levy
Gideon Oosthuizen
Ronald Spencer* 16 July 2009
Jaco Jansen* 16 July 2009
non-executive, *independent
Secretary Date of Appointment
Helen Cullen 13 March 2009
On behalf of the Board:
Statement of Directors` responsibilities in respect of the Directors` report
and the financial statements
The Directors are responsible for preparing the Directors` Report and the
financial statements in accordance with applicable law and regulations.
The Directors have elected to prepare the financial statements in accordance
with International Financial Reporting Standards.
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and the Group and of the profit or loss of
the Group for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company and the Group will not
continue in business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Group and Company. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 AUGUST 2009
Notes (Unaudited) (Audited)
Six months Period ended
ended 31 28 February
August 2009 2009
Euros Euros
Income
Expenses
Investment adviser fees (2,015) -
Operating expenses (467,725) (16,866)
Administration expenses and
disbursements (16,227) (15,428)
Audit and accounting fees (14,166) -
Company secretarial expenses (51,142) -
Directors fees (44,633) -
General expenses (20,125) (1,438)
Legal and professional expenses 2 (321,434) -
Exchange differences 3 (21,450) 23,504
Results from operating
activities (491,190) 6,638
Finance costs (31,806) (5,301)
(Loss) / profit before taxation (522,996) 1,337
Taxation - -
Total comprehensive (loss) /
profit (522,996) 1,337
Earnings/ (loss) per share (cents) (253.4) 1,336.8
Weighted average number of
outstanding shares 206,407 100
The Directors consider that all results are derived from continuing
activities
CONSOLIDATED BALANCE SHEET
AS AT 31 AUGUST 2009
(Unaudited) (Audited)
Six months Period ended
ended 31 August 28 February
2009 2009
Notes Euros Euros
Non-current assets
Investment Property 6 2,201,819 2,141,532
Current assets
Trade and other receivables 21,404 858
Cash and cash equivalents 7,533,607 21,291
7,555,011 22,149
Total assets 9,756,830 2,163,681
Current liabilities (amounts
falling due within one year)
FEC Liability (10,749) -
Trade and other payables (957,919) (123,271)
Net current assets /
(liabilities) 6,586,343 (101,122)
Non Current Liabilities
Loans 5 - (2,038,973)
Total liabilities (968,668) (2,162,243)
Net Assets 8,788,162 1,437
Capital and reserves
Share capital 4 9,309,821 100
Retained (loss) / profit (521,659) 1,337
Shareholder equity 8,788,162 1,437
These financial statements were approved by the Board of Directors and signed
on their behalf by:
Lukas Nakos Malcolm Levy
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 AUGUST 2009
Notes (Unaudited) (Audited)
Six months
ended 31 Period ended 28
August 2009 February 2009
Euros Euros
OPERATING ACTIVITIES
Loss / profit before taxation (522,996) 1,337
Finance costs 31,806 5,301
Exchange differences 21,450 (23,504)
Cash generated from operations (469,740) (16,866)
Changes in working capital 824,851 122,413
Finance costs (31,806) (5,301)
Cash generated from operating
activities 323,306 100,246
INVESTING ACTIVITIES
Investment properties under
construction (60,287) (2,141,532)
Cash generated from investing
activities (60,287) (2,141,532)
FINANCING ACTIVITIES
Issuance of share capital 7,270,748 100
(Repayment)/ proceeds from loan
Facilities - 2,038,973
Cash generated from financing
activities 7,270,748 2,039,073
NET (DECREASE)/INCREASE IN CASH
AND
EQUIVALENTS 7,533,767 (2,213)
Cash and equivalents at the
beginning of the period 21,291 -
Translation effect on revaluation
of monetary assets and
liabilities (21,450) 23,504
CASH AND EQUIVALENTS AT PERIOD END 7,533,,607 21,291
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 AUGUST 2009
31 Aug-09 31 Aug-09 31 Aug-09
Share Retained
Capital Income Total
Euros Euros Euros
Opening balance at 3 July 2008 (date
of incorporation) - - -
Issue of shares 100 - 100
Profit for period to 28 February 2009 - 1,337 1,337
Closing balance as at 28 February
2009 (audited) 100 1,337 1,437
Loss for period to 31 August 2009 - (522,996) (522,996)
Issue of shares 9,309,721 - 9,309,721
Closing balance as at 31 August 2009
(unaudited) 9,309,821 (521,659) 8,788,162
Notes to the interim financial statements
1. Significant Accounting Policies
MAS has prepared its financial statements in accordance with International
Financial Reporting Standards ("IFRS"). IFRS comprise accounting standards
issued by the International Accounting Standards Board ("IASB") and its
predecessor body as well as interpretations issued by the International
Financial Interpretations Committee ("IFRIC") and its predecessor body.
Basis of accounting
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset investments, and
in accordance with IFRS without exception.
Going concern
The Group has financial resources in the form of commitments from investors and
investments that can be realised. Accordingly, the Directors continue to adopt
the going concern basis.
Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiary undertakings for the period under review. The
acquisition method of accounting has been adopted. Under this method, the
results of subsidiary undertakings acquired or disposed of in the year are
included in the consolidated income statement from the date of acquisition or
up to the date of disposal. Subsidiaries are those enterprises controlled by
the Company. Control exists where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that presently are
exercisable are taken into account. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases. Intra- group balances and
any unrealised income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealised
losses are eliminated in the same way as unrealised gains, but to the extent
that there is no evidence of impairment.
Revenue recognition
Revenue includes the rent received on real estate investments, including
interest and dividends and is accounted for on an accruals basis.
Investments
Direct real estate Investments are classified as Investment Properties and
comprise both freehold and leasehold land and buildings and installed equipment
held for the purpose of earning rental income and for capital appreciation.
Investment property is treated as a long-term investment and is initially
recognised at cost (including related transaction costs) and subsequently
carried at fair value.
Subsequent additions that produce future economic benefit to the Group are
capitalised. Investment property under construction is valued at cost.
Maintenance and repairs which neither materially add to the value of the
properties nor prolong their useful lives are expensed in the income statement.
Independent valuations are obtained on an annual basis. The Directors shall
value the investment properties on an interim semi-annual basis. Investment
properties are classified as held for sale when the Directors have approved the
disposal of the properties. The valuation calculations are based on the
aggregate of the net annual rents receivable and associated costs, using the
discounted cash flow method. The discounted cash flow method takes projected
cash flow and discounts it at a rate which is consistent with the comparable
market transactions. Any gains or losses arising from changes in fair value are
included in the net profit or loss for the year. The net gains or losses are
transferred to a revaluation reserve and are not available for distribution.
These fair value adjustments are excluded from the computation of distributable
profit. Gains or losses arising from the disposal of investment properties,
being the difference between the net disposal proceeds and the carrying value,
are brought to account in the determination of the net profit for the year.
Indirect real estate investments are initially recorded at the purchase price,
including capitalised costs of acquisition. Following the guidelines of
International Accounting Standard 39 `Financial Instruments: Recognition and
Measurement` ("IAS 39"), the real estate investments are classified as held for
trading. The investments are initially recognised at cost and are subsequently
re-measured at fair value. For non-publicly traded investments, fair value is
determined by means of a Directors`s valuation on a semi-annual basis, and by
external recognised third party valuers at the end of each financial year. The
valuation methods will include generally accepted valuation methodologies for
the types of asset, including but not limited to internally prepared discounted
cash flow estimates, residual valuation, cost method, third-party appraisals
and recent transaction comparables. Unrealised gains and losses arising from
the revaluation of investments will be included in the income statement.
Publicly-traded investments in active markets are reported at the market
closing price less a discount, as appropriate, determined by management to
reflect any sale restrictions.
Indirect investments that are not publicly traded are reported at fair value,
as determined by management. The amount determined to be fair value may
incorporate management`s own assumptions, including appropriate risk
adjustments for non-performance and lack of marketability.
The methods used to estimate the fair value of private investments include: (1)
an income approach, such as discounted cash flows, (2) a market approach, such
as fair value derived by reference to observable valuation measures or key
performance metrics for comparable companies or assets, sales contracts and
letters of intent to buy, third party appraisals, option pricing models or
other comparable market data, and (3) acquisition cost, excluding transaction
costs, when determined by management to be the best indicator of fair value.
Considerable judgment is required in interpreting market data to determine the
estimates of value;
accordingly the estimates of value presented in the financial statements are
not necessarily indicative of the amounts that the Group could realise in a
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair values.
Foreign currency
Transactions in currencies other than Euro are recorded at the rate of exchange
prevailing at the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Non-monetary
assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates at the balance sheet date. Other
non-monetary assets and liabilities denominated in foreign currencies are
translated at the initial drawdown rate. Gains and losses arising on
translation are included in the net profit or loss for the period.
Functional and Presentational Currency
The financial statements are presented in Euro, which is the functional
currency of the Group.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash at bank.
Other Assets
Other assets consist of short term assets. The Directors consider the carrying
value of the other assets approximates to their fair value.
Borrowings
Interest bearing bank loans are recorded at the proceeds received, net of
direct issue costs. Borrowing costs are amortised over the term of the loan.
Derivatives
The Group has currency exposures related to its investments and may enter into
portfolio level and investment specific foreign exchange contracts and other
derivatives to hedge such exposures.
Movements in the fair value of derivatives are accounted for in the income
statement. The Group may also use interest rate derivatives to hedge interest
rate exposure on the underlying debt of the property portfolio.
Risk management
Liquidity Risk - the risk that arises when the maturity of assets and
liabilities do not match. An unmatched position potentially enhances
profitability, but can also increase the risk of losses.
The Group has internal procedures focused on ensuring the efficient but prudent
use of cash and availability of working capital. The liquidity risk inherent in
the Group is mainly as a result of the tenant risk in the property portfolio.
Should a tenant default, liquidity risk may result in the inability of the
Group to cover the interest payments. As a result adequate cash buffers are
maintained, and tenant strength is reviewed on a continual basis.
Market price risk - the risk that the market price of an investment or
financial instrument will fluctuate due to changes in foreign exchange rates,
market interest rates, market factors specific to the security or its issuer or
factors generally affecting all investments.
The risk to the Group relates to an imbalance between demand and supply for the
relevant investments and financial instruments in the portfolio, which could
potentially result in a disorderly market. This risk is mitigated through the
use of a dedicated Asset Manager focussed on continual assessment of the
portfolio and its movements in relation to the broader market.
Foreign exchange risk - the Group holds both assets liabilities denominated in
currencies other than Euro, the functional and presentation currency. It is
therefore exposed to currency risk, as the value of the assets denominated in
other currencies will fluctuate due to changes in exchange rates. The Group`s
policy is to hedge, on a case-by-case basis, all foreign exchange exposures and
commitments.
At the 31 August 2009 the company had the following currency balances:
31 August 2009
GBP ZAR
Foreign currency 1,479 79,185,637
EUR EUR
Euro equivalent 1,679 7,102,360
The South African rand balance was fully hedged at the end of the period via a
forward purchase contract for the entire rand balance in the accounts, at a rate
of 11.1661. The closing spot rate on 31 August 2009 between the Euro and ZAR was
11.1492. Any
exchange differences on the underlying cash position would be equally offset by
gains in the forward purchase contract. The sterling balance was considered
immaterial to hedge and kept in the ordinary course of business.
Interest rate risk - a significant part of the funding of the companies
portfolios derives from debt.
Debt is managed on an active basis, hedging against adverse movements in
interest rates.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax
relating to operations in taxable jurisdictions. Income tax is recognised in
profit or loss except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year in
each taxable jurisdiction, using tax rates enacted or substantively enacted at
the Balance Sheet date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided using the Balance Sheet liability method, based on
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their tax bases. The amount of deferred
tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the Balance Sheet date.
2. Legal and professional expenses
Legal and Professional expenses comprise the following:
(Unaudited) (Audited)
Six months Period
ended ended
Aug-09 Feb-09
Euros Euros
Corporate advisers 181,654 -
Legal Services - MAS Property Advisers Ltd 66,220 -
Independent taxation and professional advice 42,239 -
JSE Limited 10,776 -
Bourse de Luxembourg 9,583 -
Due diligence costs and other 10,962 -
321,434 -
3. Exchange differences
Exchange gains and losses arise from the revaluation of the monetary assets and
liabilities. In the period under review, a loss of 71,662 was incurred in order
to hedge the proceeds from fundraising in South Africa. Due to exchange control
restrictions in South Africa, there was a time differential between issue of
shares upon receipt of ZAR denominated subscription proceeds, and the
conversion of those proceeds into Euro. Given the inherent volatility of the
ZAR, management considered it prudent to hedge the conversion of these funds
for that time period, and an offsetting gain of 53,200 was made. Other exchange
differences relate to the restatement of monetary assets and liabilities at the
end of the period.
4. Share capital
During the period under review, the Company issued 9,309,721 ordinary shares of
no par value (period ended 28 February 2009: 100 shares of no par
value) via a dual listing on the Euro-MTF market of the Luxembourg Stock
Exchange (primary listing) and on the AltX
(secondary listing). The current issued share capital of the Company is
9,309,821 ordinary shares. The company does not have authorised share capital
as it is registered under the Companies Act 2006.
31 Aug 09 28 Feb 09
Share Capital 9,309,271 100
5. Loans
On 31 July 2009 the loan liability, plus accrued interest at a rate of ECB base
rate plus a margin of 2%, was redeemed against the issue of new shares at par
value in the course of a private placing that immediately preceded the listing
of the Company`s shares.
6. Investment property
The Group has transacted to acquire a logistics and office property near Zurich
(the "DPD Property"), and a portfolio of retail properties from discount
retailer Aldi in Germany (the "Aldi portfolio") under a sale and leaseback
arrangement. A deposit of CHF3 million was paid for the DPD property and is
reflected in the financial statements. The following commitments have been made
regarding the acquisitions of these properties:
DPD Property Aldi Portfolio
Location Zurich, Switzerland Various, Germany
Currency CHF EUR
Purchase Price 20,353,433 10,462,300
Rent (p.a.) 1,304,000 732,108
Yield 6.35% 6.9975%
Debt 13,000,000 8,370,000
Expected Completion Date 15-Jan-10 01-Dec-09
7. Taxation
The Company is ultimately resident in the Isle of Man for taxation purposes.
The Isle of Man has a 0% rate of corporate income tax to which the Company is
subject, and no taxation was payable for the period under review.
8. Related party transactions
The Company received South African rand denominated irrevocable undertakings
from investors for the amount of ZAR 79,185,636. As the number of shares to be
issued was required to be fixed several days before it was practicable to
convert this currency to the base currency of the fund, it was decided prudent
to hedge this amount for this period. The Company took advice and considered
various options and costings in order to mitigate this risk. The most
appropriate was offered by Barclays Bank and required a margin deposit of
Euro375,000.
As the Company had inadequate funds to place this deposit appropriate funding
was sought. Given that banks were not prepared to lend on an unsecured basis,
Mergon Services Limited offered to provide GBP110,000 at a cost of 5%. To reach
the balance, Lukas Nakos and Malcolm Levy loaned Euro55,000 and GBP47,000
respectively at the same terms. Prior authorisation was received from the Board
of Directors before the transaction.
9. Financial support
The Company has been provided with a commitment to provide financial support
from Mergon Services Limited, should the Company require, to allow it to meet
its liabilities as they fall due until at least the end of the current
financial year.
10. Comparative period
The comparative period is from 3 July 2008 (date of incorporation) to
28 February 2009.
30 November 2009
Isle of Man
Sponsor
PSG Capital (Pty) Limited
Date: 30/11/2009 14:57:01 Produced by the JSE SENS Department.
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