Half Yearly Report

RNS Number : 5401T

Masawara Plc

30 September 2010

 

Masawara PLC

 

("Masawara" or the "Company")

 

 

Interim Results

 

 

Masawara PLC (AIM:MASA) is pleased to present the interim results its 100% owned subsidiary FMI Zimbabwe (Private) Limited for the period ended 30 June 2010 and the pro forma balance sheet of the Company as at 30 June 2010 reflecting the impact of the successful fundraising of approximately $25m and the Company's admission to AIM as if it had taken place at the period end.

 

Highlights

 

§ Masawara was admitted to AIM and successfully raised approximately $25m on 19 August 2010

 

§ The initial portfolio comprises an effective 40 per cent. interest in Joina City, the single largest commercial and retail building in Harare, and a 30 per cent. interest in TA Holdings Limited ("TA Holdings"), a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange

 

 

For more information contact:

Masawara plc Julian Vezey   Cenkos Securities plc (Nominated adviser and broker) Max Hartley/Elizabeth Bowman

+263 4 751 805   +44 20 7397 8900

 

 FMI ZIMBABWE (PRIVATE) LIMITED

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2010
		Group			Group
		Six Months ended 30 June 2010			Twelve Months ended 31 Dec 2009
		unaudited			audited
	Notes	US$			US$
Rental Income		42,008			-
Operating expenses		138,446			24,381
GROSS (LOSS)		(96,438)			(24,381)
Share of (loss) of Associates	10.1	(338,942)			(724,407)
Fair value on investment property	9	639,081			83,525
Finance Cost	3.1	(1,676,033)			(3,047,332)
Finance Income	3.2	129,000			234,172
LOSS BEFORE TAXATION		(1,343,332)			(3,478,423)
Taxation Expense	4	(31,954)			(4,180)
Loss for the period		(1,375,286)			(3,482,603)
Attributable to:
Equity holders of parent		(1,160,376)			(2,713,222)
Non-controlling Interest		(214,910)			(769,381)
Loss for the period		(1,375,286)			(3,482,603)
Consolidated statement of Comprehensive income
Loss for the period		(1,375,286)			(3,482,603)
Other Comprehensive income
Share of other comprehensive income in associates net of tax	10.1	(441,732)			(180,153)
Total comprehensive loss for the period, net of tax		(1,817,018)			(3,662,756)
Equity holders of parent		(1,602,108)			(2,893,375)
Non-controlling Interest		(214,910)			(769,381)
Loss for the period		(1,817,018)			(3,662,756)

 

 

 

FMI ZIMBABWE (PRIVATE) LIMITED

 

UNAUDITED INTERIM CONSOLIDATED Statement of Financial Position

As at 30 June 2010

		Group	Group
	Notes	30 June 2010	31 Dec 2009
		unaudited	audited
		US$	US$
EQUITY AND LIABILITIES
Issued Capital		-	-
Retained  Profit		2,014,306	3,174,682
Other Capital Reserve		(650,105)	(180,153)
Non-Distributable Reserve	5	8,311,127	8,311,127
Equity attributable to equity holders of the parent		9,675,328	11,305,656
Non-controlling Interest		(141,040)	73,870
Total equity		9,534,288	11,379,526
Non-Current Liabilities
Financial Liabilities	6	35,720,577	33,521,032
Deferred Tax	4	1,298,658	1,266,704
Total Non-Current Liabilities		37,019,235	34,787,736
Current Liabilities
Accounts payable		192,765	143,521
Total Liabilities		37,212,000	34,931,257
Total equity and liabilities		46,746,288	46,310,783
ASSETS
Non-Current Assets
Property, Plant and Equipment		2,650	3,533
Financial Assets	8	2,097,835	2,579,995
Investment Property	9	28,288,216	26,393,547
Investment in Associates	10.1	16,067,823	16,876,718
Total non-current assets		46,456,524	45,853,793
Current Assets
Other Receivables	11	14,082	9,131
Sundry Debtor	11	270,342	-
Prepayments		-	235,393
Cash resources		5,340	212,466
Total current assets		289,764	456,990
Total Assets		46,746,288	46,310,783

 

 

FMI ZIMBABWE (PRIVATE) LIMITED

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2010

 

Group	Attributable to Equity Holders of the Parent				Non-controlling	Total Ordinary
	Non - Distributable	Other Capital	Retained Profit	Total	Interest	Shareholders Equity
	Reserve	Reserve	US$			US$
Balance as at 31 December 2009	8,311,127	(180,153)	3,174,682	11,305,656	73,870	11,379,526
Loss for the Period			(1,160,376)	(1,160,376)	(214,910)	(1,375,286)
Other Comprehensive income	-	(469,952)	-	(469,952)		(469,952)
Total Comprehensive income	-	(469,952)	(1,160,376)	(1,630,328)	(214,910)	(1,845,238)
Balance at 30 June 2010	8,311,127	(650,105)	2,014,306	9,675,328	(141,040)	9,534,288

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the twelve months ended 31 December 2009

 

Group	Attributable to Equity Holders of the Parent				Non-controlling	Total Ordinary
	Non - Distributable	Other Capital	Retained Profit	Total	Interest	Shareholders Equity
	Reserve	Reserve	US$			US$
Balance as at 1 January 2009	8,311,127	-	5,887,904	14,199,031	843,251	15,042,282
Loss for the Year			(2,713,222)	(2,713,222)	(769,381)	(3,482,603)
Other Comprehensive income	-	(180,153)	-	(180,153)		(180,153)
Total Comprehensive income	-	(180,153)	(2,713,222)	(2,893,375)	(769,381)	(3,662,756)
Balance at 31 December 2009	8,311,127	(180,153)	3,174,682	11,305,656	73,870	11,379,526

 

 

FMI ZIMBABWE (PRIVATE) LIMITED

UNAUDITED INTERIM CONSOLIDATED Statement of CASH FLOWS

for the six months ended 30 June 2010
		Group		Group
		Six Months Ended 30 JUNE 2010		Twelve Months Ended 31 DEC 2009
		unaudited		audited
		US$		US$
NET CASH OUTFLOW FROM OPERATING ACTIVITIES	12	(321,602)		(348,839)
INVESTING ACTIVITIES		(409,035)		(1,265,172)
Investment Property	9.1	(1,020,195)		(1,059,554)
Debenture Investment	8.1	611,160		(205,618)
Cash outflow before financing		(730,637)		(1,614,011)
FINANCING ACTIVITIES
Increase in Loans during the period		523,511		1,826,477
(Decrease)/Increase in cash and cash equivalents		(207,126)		212,466
Cash & Cash equivalents at beginning of period		212,466		-
Cash & Cash equivalents at end of period		5,340		212,466
Comprising:
Cash & Bank Balances		5,340		212,466

 

 

 

FMI ZIMBABWE (PRIVATE) LIMITED

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 June 2010

 

1. Corporate information

 

FMI Zimbabwe (Private) Limited ("the Company") is a private limited liability company incorporated and domiciled in Zimbabwe. The Group financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates (together referred to as "the Group").

 

2.1 Basis of preparation

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2009.

 

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, current assets and current liabilities that have been measured at fair value. Financial liabilities and financial assets are held at amortised cost. Investments in associates have been accounted for using the equity accounting method. The consolidated financial statements are presented in United States Dollars and all values are rounded to the nearest dollar (US$) except when otherwise indicated.

 

 

In accordance with IAS 39, financial assets and financial liabilities would ordinarily be measured at fair value through the profit and loss account. However, due to the significant number of unknown variables and assumptions, the directors consider that it is not possible to fair value these financial assets and financial liabilities. Accordingly, given these challenges, the Directors have concluded that it is a more appropriate and fair presentation to designate these assets and liabilities at amortised cost from 1 January 2009.

 

The accounting policies within FMI Zimbabwe (Private) Limited's financial statements for year ended 31 December 2009 erroneously disclosed the financial assets and liabilities as being held at fair value through profit and loss when these items had in fact been held at amortised cost since 1 January 2009. The Directors have therefore amended the accounting policy in respect of the measurement of these financial assets and liabilities from "available for sale" and "fair value through profit and loss" respectively, to "amortised cost". Given that these financial assets and liabilities were effectively measured at amortised cost in the prior year financial statements, no restatement of the comparative figures within the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position is required in respect of this amendment to the accounting policy.

 

Statement of compliance

 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), except for:

 

The Group's comparative consolidated financial statements were not prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting.

 

IAS 34 requires an entity to disclose comparative information in respect of the comparable interim period. The Zimbabwean economy was effectively dollarized on 29 January 2009 following authorization by monetary and fiscal authorities to use multiple currencies for trading in Zimbabwe. As a consequence of the dollarization, the Group changed its functional and presentation currency from Zimbabwean Dollar (Z$) to United States Dollar (US$). The effective date has been deemed to be 1 January 2009 for the Group. The functional currency of local entities was also changed from Zimbabwean Dollars to United States Dollars. The functional currencies of entities outside Zimbabwe under an associate remain unchanged from prior year.

 

In light of the dollarization of the Zimbabwean economy, the Public Accountants and Auditors Board ("PAAB"), Zimbabwe Accounting Practices Board ("ZAPB") and the Zimbabwe Stock Exchange ("ZSE") jointly provided a guidance ("the Financial Reporting Guidance") to determine a foreign currency opening statement of financial position on the date of change in functional currency from Z$ to hard currency. This guidance was only issued in August 2009, and was therefore used when preparing the annual accounts in December 2009. Interim financials were not prepared in June 2009. Alternative methods of deriving US$ comparatives as at 30 June 2009 were deemed to be a process that would not meet the financial reporting objective of generating high quality, transparent information at a cost that does not exceed the benefits to users and therefore comparatives for the six months ended 30 June 2009 have not been presented. Comparatives for the consolidated statement of comprehensive income, consolidated statements of changes in equity and consolidated statement of cashflows are for the twelve months ended 31 December 2009.

 

The financial statements comprise the statements of financial position, Statements of comprehensive income, Statements of changes in equity, and Statements of cash flows and notes to the financial statements.

 

2.2 Basis of consolidation

 

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2010.

 

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full.

 

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non-controlling interest even if that results in a deficit balance.

 

2.3 Significant accounting policies

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2009, except for the adoption of new standards and interpretations as of 1 January 2010, noted below:

·; IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions

The standard has been amended to clarify the accounting for group cash-settled share-based payment transactions. This amendment also supersedes IFRIC 8 and IFRIC 11. The adoption of this amendment did not have any impact on the financial position or performance of the Group.

·; IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. The amendment had no effect on the financial position or performance of the Group.

·; IFRIC 17 Distribution of Non-cash Assets to Owners

This interpretation provides guidance on accounting for arrangements whereby an entity distributes noncash assets to shareholders either as a distribution of reserves or as dividends. The interpretation had no effect on the financial position or performance of the Group.

 

2.3.1 New and amended IFRS and IFRIC interpretations issued not yet effective

 

The Group has not early adopted the following new and amended IFRS and IFRIC interpretations which are issued but not yet effective, for accounting periods beginning on 1 January 2009. Except for IFRS 9, the adoption of these standards, amendments and interpretations is expected not to have any significant impact on the company's financial statements in the period of initial application but additional disclosures will be required.

 

 

 

Standard	Subject	Effective date*	Date issued
IFRS 9	Financial instruments	1-Jan-13	Nov-09
IAS 24	Related party disclosures	1-Jan-11	Nov-09
IFRIC 19	Extinguishing financial liabilities with equity instruments	1-Jul-10	Nov-09

3. Finance cost and income Group Group

Six Months Ended Twelve Months Ended 30 June 2010 31 Dec 2009

US$ US$

3.1 Finance Costs

Imputed interest on financial liabilities (1,676,033) (3,047,332)

 

3.2 Finance Income

Imputed interest on financial assets (note 12.2) 129,000 234,172

 

4. Income Taxes

Taxation Expense
The major components of taxation expense for the six months ended 30 June 2010 are:
Statement of comprehensive income - profit or loss
Current taxation:
Current taxation charge	-		-
Deferred tax:
Relating to origination and reversal of temporary differences	(31,954)		(4,180)
Taxation expense reported in profit or loss	(31,954)		(4,180)
Tax Reconciliation
Accounting loss before tax	1,343,332		3,478,423
Tax at standard rate (25%) (2009 - 30.90%)	(335,833)		(1,074,833)
Permanent differences	335,833		1,074,833
Fair value adjustment gain taxable under Capital Gains Tax	(31,954)		(4,180)
Taxation expense	(31,954)		(4,180)
Deferred Tax
Deferred Tax resulted from the following:
Revaluations of investment properties to fair Value	1,298,658		1,266,704
Reconciliation of Deferred Tax
Opening balance	1,266,704		1,262,524
Recognised in profit and loss	31,954		4,180
Closing Balance	1,298,658		1,266,704

5. Non-distributable Reserves

 

Non-distributable reserves represent the equity of the Group on the change of the functional currency to United States Dollars effective from 1 January 2009. In future, once guidance has been issued by the Zimbabwe Registrar of Companies, part of the non- 

 

 

distributable reserve will be allocated to issued share capital on redenomination of nominal value of the shares from Zimbabwe Dollar to United States Dollar.

 

6. Financial liabilities at amortised cost Group Group

30 June 2010 31 Dec 2009

US$ US$ Financial liabilities comprise the following:

Loans from non-controlling shareholders	5,705,433	5,433,745
Loans from holding company	30,015,144	28,087,287
At end of period	35,720,577	33,521,032

 

These loans are unsecured and do not have fixed repayment terms. In terms of the loan agreement, the loans shall be repaid if;

 

·; There are sufficient cash reserves after the repayment of the loans to settle any current creditors; and

·; The Group is reasonably expected to be able to pay non-current creditors when they become due and payable out of the income stream after the repayment of the loans.

The fulfillment of the abovementioned conditions will be satisfied when the Joina City project is complete and generates income. Based on this management are of the view that for at least twelve months after the year ending 31 December 2010 the company will have an unconditional right to defer settlement of the liability.

 

The shareholders agreed the fair values of the loans at the date of change of functional currency to United States dollars. The loans are interest-free unless the shareholders agree otherwise. In line with International Financial Reporting Standards, interest has been imputed at the open market rate of 10%. At 31 December 2009 the shareholders had agreed not to charge interest. At this date, it is uncertain when the shareholders will agree when interest should be charged. It is the view of the directors that the agreement to start charging interest will depend on the commercial operation of the Joina City building subject to the following conditions being met:

 

·; There are sufficient cash reserves in the company after the repayment of the loans to settle any current creditors of the company and

·; The company is reasonably expected to be able to pay non-current creditors when they become due and payable out of the income stream of the company after the repayment of the loans.

 

The Directors feel that the interest rate of 10% is still relevant as additional facilities have been negotiated in July 2010, within the FMI Holdings Group that indicate that rates are still around 10%, as market conditions have not changed significantly to warrant a change in the interest rate.

 

The shareholders loans were capitalized in July 2010 refer to note 19 (2.1.1)

 

7.1 Loans from non-controlling shareholders

Group Group

30 June 2010 31 Dec 2009

US$ US$

Deemed opening balance	5,433,745	4,940,269
Finance cost	271,688	493,476
At end of period	5,705,433	5,433,745

 

Included in the balance above is an amount of US$2.5million which is subject to a put option. The put option allows the counterparty to call the debt at the completion of the building, but this will result in dilution of the non-controlling interest. Indications to management are that it is unlikely that the option will be exercised, and therefore it is classified as a long-term financial liability.

 

The controlling shareholders pledged as security all its shares in a subsidiary company (present and future) and ceded its rights under any and all shareholder loans to the subsidiary.

 

7.2 Loans from holding company Group Group

30 JUNE 2010 31 DEC 2009

US$ US$

FMI Holdings (Private) Limited
Opening Balance	28,087,287	23,706,954
Increase in loans during the period	523,511	1,826,477
Finance cost	1,404,346	2,553,856
At end of period	30,015,144	28,087,287

 

The loans were extended to FMI Zimbabwe (Private) Limited by its holding company for investment purposes.

 

8. Financial Assets

Financial assets comprise the following:

8.1 Debenture Investment

Opening cost	2,579,995	2,140,205
Finance income	129,000	234,172
Investments disposed/invested during the period	(611,160)	205,618
Closing Balance	2,097,835	2,579,995

 

 

On completion of the Joina City the debenture loans will earn a coupon rate of 2% or 0.288 times dividend cover whichever is higher. The debentures are repayable five years after the completion of the Joina City. The debentures are unsecured.

 

The co-owners agreed the fair values of the debentures at the date of change of functional currency to US dollars. The debentures are currently interest-free as the building is not complete.

 

The $611,160 disposal represents part of the funds received from the disposal by Melville of part of its shareholding in Cherryfield Investments (Pvt) Limited.

 

In line with International Financial Reporting Standards, interest has been imputed at the open market rate of 10%.

 

As mentioned above the debenture interest becomes chargeable on the completion of the Joina City and the agreement of the Cherryfield shareholders. Management have been advised by the developer, Joina Development company (Pvt) Ltd that the best estimate for completion will be by December 2010. It is important to note that FMI Zimbabwe through its subsidiary Melville is a minority shareholder in Cherryfield holding 8.06% at 30 June 2010.  

 

8.2 Fair value hierarchy

 

As at 30 June 2010, the Group held the following financial instruments measured at fair value:

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

 

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 

Group

 

Financial Assets measured at fair value	JUNE 2010	Level 1	Level 2	Level 3
	US$	US$	US$	US$
Other receivables	284,424		284,424
Cash and Cash equivalents	5,340	5,340
Financial liabilities measured at fair value
Other payables	192,764		192,764

 

During the reporting period ending 30 June 2010, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

 

9. Investment Property Group Group

30 JUNE 2010 31 DEC 2009

US$ US$

Opening balance	26,393,547	25,250,468
Capitalised costs	1,255,588	1,059,554
Fair Value adjustment	639,081	83,525
Closing Balance	28,288,216	26,393,547

 

The investment property is the Group's share of a 57.31% joint ownership in Joina City.

 

An independent valuation was performed on the Joina City at 1 March 2010. The investment property has been carried at this valuation at 30 June 2010. Management does not believe there has been a material change in the value of the Joina City property between 1 March 2010 and 30 June 2010. The fair value of investment property under construction had been determined on a market value basis in accordance with International Valuation Standards, as set out by the International Valuation Standards Council (IVCS). The valuation was prepared on an aggregated un-geared basis. In arriving at their estimates of market values the valuers used their market knowledge and professional judgment and not only relied on historical transactional comparables. The valuers had reference to the relevant professional guidelines and statements issued under the Royal Institution of Chartered Surveyors Appraisal and Valuation Manual (the "Red Book"), IVCS and the REIZ (Real Institute of Zimbabwe) Standards.

The valuation was performed by CB Richard Ellis (Private) Limited (Zimbabwe), an accredited independent valuer with recognized and relevant professional qualifications and with recent experience in the location and category of the investment property being valued.

 

10. Investment in Associates

 

FMI Zimbabwe (Private) Limited through Tencled Incorporated (Private) Limited and FMI Investments (Private) Limited has a 27.87% shareholding in TA Holdings Limited which is an investment holding company listed on the Zimbabwe Stock Exchange whose principal strategic investments are in insurance, agro-chemicals, and hospitality and leisure. The Company also has a 24.225% interest in FMI Securities (Private) Limited, a company which brokers transactions on the Zimbabwe Stock Exchange. The shareholding in FMI Securities (Pvt) Ltd was diluted by the admission of a new shareholder as at 1 March 2010 from 48.50% to 24.225%.

 

TA Holdings Group Group

30 June 2010 31 Dec 2009

US$ US$

Share of the associate's statement of financial position:
Current assets	18,885,339	22,100,142
Non-current assets	24,600,578	25,390,701
Current liabilities	(18,609,237)	(22,559,237)
Non-current liabilities	(6,037,077)	(5,534,119)
Less: Non-Controlling Interest	(2,789,706)	(2,605,483)
Equity	16,049,897	16,792,004
Share of the associate's revenue and profit:
Revenue	6,583,509	11,647,291
(Loss) for the year	(308,542)	(703,853)
Other comprehensive income	(433,564)	(260,287)
FMI SECURITIES
Share of the associate's statement of financial position:
Current assets	168,883	246,102
Non-current assets	26,996	65,305
Current liabilities	(177,953)	(226,694)
Equity	17,926	84,713
Share of the associate's revenue and profit:
Revenue	19,145	160,238
Loss for the year	(30,400)	(20,554)
Other comprehensive income	(8,168)	(6,340)

10.1 Aggregate Group Investments in Associates

Opening cost	16,876,718	17,781,278
Share of other comprehensive income	(441,732)	(180,153)
Share of Loss before tax	(338,942)	(724,407)
Adjustment on opening balance after dilution in FMI Securities (Pvt) Ltd	(28,221)	-
Carrying Amount of Investment in Associate	16,067,823	16,876,718

 

 

 

10.2 Percentage shareholdings of Group Associates are as follows:

 

TA Holdings Limited	27.87%
FMI Securities (Private) Limited	24.225%

 

11. Other Receivables and Sundry debtors GROUP GROUP

30 JUNE 2010 31 DEC 2009

Other Receivables US$ US$

Related Parties

Cherryfield Investments (Private) Limited	14,082	9,131
At 30 June 2010	14,082	9,131

Sundry debtors

Related Parties

Masawara Plc	258,711	-
New World Property Managers	11,631	-
At 30 June 2010	270,342	-

 

12. Net Cash outflow from Operating Activities
	Group	Group
	Six months Ended	Twelve months Ended
	30-Jun-10	31-Dec-09
	US$	US$
Loss before taxation	(1,343,332)	(3,478,423)
Share of Associate Profit/(Loss) before tax	338,942	724,407
Depreciation of equipment	885	1,767
Finance Income	(129,000)	(234,172)
Finance Cost	1,676,033	3,047,332
Fair value adjustment on investment property	(639,081)	(83,525)
Increase in receivables	(275,293)	(9,130)
Increase in prepayments	-	(235,393)
Increase in accounts payable	49,244	(81,702)
Net cash outflow from operating activities	(321,602)	(348,839)

13. Capital Commitments

 

GROUP GROUP

30 JUNE 2010 31 DEC 2009

US$ US$

 

Authorised and Contracted	418,440	1,086,252
At end of period	418,440	1,086,252

 

The amount represents commitments to the funding of Joina City towards its completion. The amount will be funded from the cash resources of the Holding Company as shareholders loans under the same terms and conditions of the existing shareholders loans.

 

 

14. Contingent Liabilities and Guarantees

 

14.1 Limited Guarantee

 

Limited Guarantees	-	1,296,000
Total at end of period	-	1,296,000

 

The Company's subsidiary FMI Investments (Private) Limited has been released from a guarantee given on behalf of FMI Holdings (Private) Limited's borrowing from Stanbic Bank Zimbabwe Limited. The signed guarantee which was in place where FMI Investments (Private) Limited pledged some of its shares in TA Holdings Limited to secure the loan was also released during the period.

 

14.2 Unlimited Guarantee

GROUP GROUP

30 JUNE 2010 31 DEC 2009

US$ US$

 

Unlimited Guarantees	2,500,000	2,500,000
Total at end of period	2,500,000	2,500,000

 

The Company's subsidiary Melville Investments (Private) Limited has not been released from a pledge given on behalf of FMI Holdings (Private) Limited and the Company's option to repay Kingdom Joina Holdings Limited upon conversion of its investment in Joina City on a put option basis, see note 8.1. The amount is secured by Melville's shareholding in Dubury Investments (Private) Limited.

 

15. Uncertain economic environment

 

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 formalization 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 Group was not able to convert its Zimbabwe Dollar transactions incurred prior to the formalisation of multi-currency trading into the new functional currency.

 

As a result of these uncertainties and inherent limitations, the directors' advice caution on the use of all comparative information, the statement of comprehensive income, and the statement of cash flows for decision making purposes. The Directors, however, believe that the statement of financial position fairly presents the assets and liabilities of the Group and therefore fairly presents the shareholder's equity.

 

 

16. Comparative information

 

The Directors have not presented comparative information for the period ended 30 June because they believe that it will be misleading. Due to the prevailing economic environment in the previous year as described in note 15, it is not possible to convert financial statements into US$ in a manner consistent with IAS 21 and IAS 29.

 

17. Going concern

 

Notwithstanding the matters raised in note 15 the Directors have assessed the ability of the Company to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is appropriate given the asset base of the group.

 

18. Events after the reporting period

Group Re-arrangements and listing on AIM (UK)

 

As disclosed in the financial statements of 31 December 2009, FMI Holdings (Private) Limited, the parent company of FMI Zimbabwe (Private) Limited embarked on a due diligence exercise in the second quarter of 2010, and the directors would like to report that the exercise was successfully completed in August 2010 and FMI Zimbabwe Group is owned by Masawara Plc (a subsidiary of FMI Holdings (Pvt) Ltd) and was listed on the London Stock Exchange's Alternative Investment Market (AIM). AIM is the London Stock Exchange's international market for smaller growing companies. This transaction will have the following impacts on the Company:

 

18.1 Esi Wilhemina Daniels Memorial Trust (EDWMT) was admitted as a 5,5% shareholder of FMI Zimbabwe (Pvt) Ltd on 21 July 2010 as part of the implementation of a Share Swap Agreement with FMI Holdings (Pvt) Ltd. In return the EDWMT handed over 100% of Beshog Investments to FMI Holdings (Pvt) Ltd. FMI Holdings (Pvt) Ltd ceded 5,5% of its shareholders loans in FMI Zimbabwe (Pvt) Ltd to the EDWMT.

 

18.2 Beshog Investments (Pvt) Ltd, a subsidiary of FMI Holdings (Pvt ) Ltd transferred 3,513,704 shares held in TA Holdings Ltd (TA) to FMI Investments Pvt Ltd on 12 August 2010. This increased FMI Investments Pvt Ltd shareholding in TA to 30%.

 

18.3 The shareholders loans in FMI Zimbabwe owed to FMI Holdings (Pvt) Ltd and the EWDMT were capitalized. 10,000 ordinary shares issued to the shareholders in their respective percentage shareholding in August 2010.

 

18.4 In August 2010, the Shareholding in the company changed from FMI Holdings and EDWMT, to Masawara (Mauritius), in accordance to the Share Swap Agreements.

 

18.5 Service agreements were entered into between the company and each of Shingai Mutasa and Julian Vezey in connection with their respective appointments as employees of the company, and Julian Vezey was also appointed as a Director of the company.

 

18.6 The company entered into an Investment management agreement with Masawara Plc, where it was appointed as Investment Advisor. Masawara Plc will pay the company an annual fee equal up to 2% of its net asset value.

 

 

19. MASAWARA PLC

Unaudited pro forma statement of financial position as at 30 June 2010

 

The following unaudited pro forma statement of financial position of the Group as at 30 June 2010 is prepared to illustrate the effect on the statement of financial position of the Group of the Placing and other transactions referred to in note 18 above as if they had taken place on 30 June 2010. The following unaudited pro forma statement of financial position is based on the unaudited historical financial information of the Group as at 30 June 2010. The unaudited pro forma financial information has been prepared on the basis set out in the notes below for illustrative purposes only. Due to its nature, the pro forma financial information addresses a hypothetical situation and, therefore does not represent the Group's actual financial position or results.

 

 

Statement of Financial Position
as at 30 JUNE 2010
	FMI Zimbabwe	Masawara Plc	Masawara Plc	Masawara Plc
	Group	Group	Placing	Group
	Unaudited	Re-arrangements	Adjustments	Unaudited
	June 2010	Before Listing		June 2010
	US$ (Note 1)	US$ (Note 2)	US$ (Note 3)	US$
EQUITY AND LIABILITIES
Issued Capital	-	666,667	326,962	993,629
Share Premium	-	40,042,879	21,820,600	61,863,479
Retained Profit	2,014,306	(367,232)	(159,405)	1,487,669
Non-Distributable Reserve	8,311,127	-	-	8,311,127
Other Capital Reserve	(650,105)	-	-	(650,105)
Group Restructuring Reserve	-	(9,308,096)	-	(9,308,096)
Equity attributable to equity holders of the parent	9,675,328	31,034,218	21,988,157	62,697,703
Non-controlling Interest	(141,040)	-	-	(141,040)
Total equity	9,534,288	31,034,218	21,988,157	62,556,663
Non-Current Liabilities
Financial Liabilities	35,720,577	(30,015,144)		5,705,433
Deferred Tax	1,298,658	-		1,298,658
Total Non-Current Liabilities	37,019,235	(30,015,144)		7,004,091
Current Liabilities
Accounts payable	192,765	(276,738)	1,911,993	1,828,020
Total Liabilities	37,212,000	(30,291,882)	1,911,993	8,832,111
Total equity and liabilities	46,746,288	742,336	23,900,150	71,388,774
Assets
Non-Current Assets
Property, Plant and Equipment	2,650	-	-	2,650
Financial Assets	2,097,835	-	-	2,097,835
Investment Property	28,288,216	-	-	28,288,216
Investment in Associates	16,067,823	1,001,047	-	17,068,870
Total non-current assets	46,456,524	1,001,047	-	47,457,571
Current Assets
Other Receivables	14,082	-	-	14,082
Sundry Debtor	270,342	(258,711)	-	11,631
Cash resources	5,340	-	23,900,150	23,905,490
Total current assets	289,764	(258,711)	23,900,150	23,931,203
Total Assets	46,746,288	742,336	23,900,150	71,388,774

 

 

Net asset value per ordinary share was 62.96 cents as at 30 June 2010.

 

 

Note:

 

1 The consolidated balance sheet information of the FMI Zimbabwe (Pvt) Ltd Group at 30 June 2010 has been extracted without adjustment from the unaudited FMI Zimbabwe (Pvt) Ltd Group interim accounts as set out on page 5 of this report.

 

2 Masawara Plc was incorporated in Jersey as a subsidiary of FMI Holdings (Private) Limited of Zimbabwe. Adjustments to the pro forma balance sheet of the Group relating to the Masawara Plc reorganization before the Placing reflect:

 

2.1 The shareholders of FMI Zimbabwe (Pvt) Ltd, FMI Holdings (Pvt) Ltd (94.50%) and Esi Wilhemina Daniels Memorial Trust (5.50%) converted their shareholders loans in the company in exchange for equity in FMI Zimbabwe (Pvt) Limited in their proportions. The share exchange had the effect of reducing the financial liabilities by US$30,015,144.

 

2.2 After the conversion of the shareholders loans to equity, the shareholders then entered into a share exchange agreement with Masawara Mauritius, a 100% subsidiary of Masawara Plc and in turn Masawara Mauritius entered into a back to back share exchange with Masawara Plc. FMI Zimbabwe (Pvt) Ltd was exchanged at a net asset value of US$40,709,546.

 

The share exchange agreements resulted in the issuance of 66,666,667 ordinary shares to the shareholders of FMI Zimbabwe as follows:

 

FMI Holdings (Pvt) Ltd 63,000,000 shares

EWDMT 3,666,667 shares

 

The shares were issued at a nominal value of US$0.01 (US$666,667) and the balance of US$40,042,879 was allocated to share premium.

 

2.3 The intention of the shareholders of FMI Zimbabwe (Pvt) Limited was to list the company through Masawara with two major assets, the Joina City property and a shareholding in TA Holdings Ltd. The FMI Zimbabwe Group had a 27.87% shareholding in TA Holdings Limited and its major shareholder, FMI Holdings (Pvt) Limited, caused the transfer of 2.13% or 3.5million TA Holdings Ltd shares from one of its subsidiaries at a market value of US$1,018,974. An associate FMI Securities (Pvt) Ltd was considered not crucial to the FMI Zimbabwe group and was transferred to FMI Holdings (Pvt) Limited at its Net Book Value of US$17,927. These two transactions had a net effect of US$1,001,047, which increase the investment in associate and reduced the shareholders loans.

 

2.4 The accounts payable and receivable were adjusted for intercompany accounts related to expenses paid for Masawara Plc by FMI Zimbabwe.

 

3. On 19 August 2010 Masawara undertook a public offering of shares on AIM in the UK. 30,957,863 shares were issued raising $24,147,133. $3,355,457 of share issue costs were incurred as a result of the placement, of which $1,355,866 were settled through the issue of 1,738,315 shares. The share issue costs have been debited to share premium account in line with the Jersey company law and an amount of $159,405 related to expenses which are not permitted to be off-set against the share premium account has been debited to the income statement. The adjustments to the Masawara Plc pro-forma Balance sheet relating the placing represent:

 

	Number of shares	Price/Share	Total Value $
Share Capital
Authorised Share Capital	35,000,000,000	0.01	350,000,000
Issued Share Capital	99,362,845	0.01	993,628
Share Premium
Shares issued at issue price	30,957,863	0.78	24,147,133
Share settlement issue costs	1,738,315	0.78	1,355,886
Less Nominal value of shares issued	32,696,178	0.01	(326,962)
Share premium arising from issue		0.77	25,176,057
Less Share issue expenses			(3,355,457)
Total Share Premium			21,820,600

 

 

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