REG - Macau Prop Opp Fund - Annual Financial Report <Origin Href="QuoteRef">MPO.L</Origin> - Part 4
28/09/2017 07:07
- Part 4: For the preceding part double click ID:nRSb0317Sc
swap 20 (78) (581)
Other financing costs 14 (280) (324)
Bank and other interest 1 -
(5,341) (5,441)
Profit/(Loss) for the year before tax 27,392 (49,192)
Taxation 9 (4,284) 3,541
Profit/(Loss) for the year after tax 23,108 (45,651)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations (965) (137)
Total comprehensive income/(loss) for the year 22,143 (45,788)
Profit/(Loss) attributable to:
Equity holders of the Company 23,108 (45,651)
Total comprehensive income/(loss) attributable to:
Equity holders of the Company 22,143 (45,788)
2017US$ 2016 US$
Basic and diluted profit/(loss) per ordinary share attributable to the equity holders of the Company during the year 17 0.3023 (0.5961)
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 30 June 2017
Note Share Retained Distributable Foreign Total US$'000
CapitalUS$'000 EarningsUS$'000 Reserves US$'000 Currency Translation
ReserveUS$'000
Balance brought forward at 1 July 2016 764 38,724 66,208 947 106,643
Profit for the year - 23,108 - - 23,108
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - (965) (965)
Total comprehensive income for the year - 23,108 - (965) 22,143
Balance carried forward at 30 June 2017 764 61,832 66,208 (18) 128,786
Note Share Retained Distributable Foreign Total US$'000
Capital US$'000 Earnings US$'000 Reserves US$'000 Currency Translation
Reserve US$'000
Balance brought forward at 1 July 2015 775 84,375 69,213 1,084 155,447
Loss for the year - (45,651) - - (45,651)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - (137) (137)
Total comprehensive loss for the year - (45,651) - (137) (45,788)
Share buyback 12 (11) - (3,005) - (3,016)
Balance carried forward at 30 June 2016 764 38,724 66,208 947 106,643
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 June 2017
Note 2017US$'000 2016US$'000
Net cash used in operating activities 16 (4,210) (4,904)
Cash flows from investing activities
Capital expenditure on investment property 6 (36) (1,237)
Movement in pledged bank balances (1,199) 537
Net cash used in investing activities (1,235) (700)
Cash flows from financing activities
Proceeds from bank borrowings 15,115 36,266
Repayment of bank borrowings (4,621) (38,367)
Share buyback 12 - (3,016)
Interest and bank charges paid (5,439) (5,400)
Net cash generated from/(used in) financing activities 5,055 (10,517)
Net movement in cash and cash equivalents (390) (16,121)
Cash and cash equivalents at beginning of year 12,741 28,749
Effect of foreign exchange rate changes 742 113
Cash and cash equivalents at end of year 13,093 12,741
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
General information
Macau Property Opportunities Fund Limited (the "Company") is a Company incorporated and registered in Guernsey under The
Companies (Guernsey) Law, 1994. This law was replaced by the Companies (Guernsey) Law, 2008 on 1 July 2008. The Company is
an authorised entity under the Authorised Closed-Ended Investment Schemes Rules 2008 and is regulated by the GFSC. The
address of the registered office is given on Directors and Company Information.
The consolidated financial statements for the year ended 30 June 2017 comprise the financial statements of the Company and
its subsidiaries (together referred to as the "Group"). The Group invests in residential and commercial properties and
property-related ventures primarily in Macau.
These consolidated financial statements have been approved for issue by the Board of Directors on 27 September 2017.
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRS; applicable legal and regulatory
requirements of Guernsey Law and under the historical cost convention as modified by the revaluation of investment
properties and derivative financial instruments.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 3. The consolidated financial statements are presented in US Dollar and all
values are rounded to the nearest thousand ($'000), except where otherwise indicated.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and
position, are set out in the Manager's Report. The financial position of the Group, its cash flows and its liquidity
position are described in the Capital Management section of the Manager's Report.
The financial risk management objectives and policies of the Group and the exposure of the Group to credit risk, market
risk and liquidity risk are discussed in Note 2 to the consolidated financial statements.
The Group continues to meet its capital requirements and day-to-day liquidity needs through the Group's cash resources. As
part of their assessment of the going concern of the Group, the Directors have reviewed the comprehensive cash flow
forecasts prepared by management which make assumptions based upon current and expected future market conditions, including
predicted future sales of properties. It is the Directors' belief that, based upon these forecasts and their assessment of
the Group's committed banking facilities, it is appropriate to prepare the financial statements of the Group on a going
concern basis.
At the Annual General Meeting held on 14 November 2016, the shareholders voted against the Discontinuation Vote which would
have led to the realisation of the portfolio of the Company's assets. In accordance with the Articles of Incorporation, the
Company now has until November 2018 to hold a further continuation vote on which the shareholders can vote on the future of
the Company. The Directors have considered whether the continuation vote before the end of 2018 gives rise to a material
uncertainty that might cast significant doubt about the Company's ability to continue as a going concern and have concluded
that it does not due to the fact that the Board has the continued support of major shareholders and it is likely that
returns from sales of properties would be lower if the Group were forced to sell as a result of discontinuation, given that
the market is gradually improving and expected to strengthen.
The Directors believe it is appropriate to prepare the financial statements of the Group on a going concern basis based
upon existing cash resources, the forecasts described above, the extension of the life of the Company (September 2017 to
November 2018 being greater than a 12-month period) and the Directors' assessment of the Group's committed banking
facilities and expected continuing compliance with related covenants.
New and amended standards and interpretations applied
The following amendments to existing standards and interpretations were effective for the year ended 30 June 2017 and
therefore were applied in the current year, but either they were not applicable to or did not have a material impact on the
Group:
· IAS 1 Disclosure Initiative - amendments to IAS 1
· IFRS 11 Accounting for acquisitions of interests in Joint Operations amendments
· Amendments to IFRS 10, IFRS 12 and IAS 28; Investment Entities: Applying Consolidation Exemption
· Annual improvements 2012-2014 cycle
· Amendments to IAS 19; Employee Benefits
New and amended standards and interpretations not applied
The following new and amended standards and interpretations in issue are applicable to the Group but are not yet effective
or have not been adopted by the European Union and therefore, have not been adopted by the Group:
Effective datesno earlier than
IFRS 9 Financial instruments 1 January 2018
IFRS 15 Revenue from contracts with customers 1 January 2018
IFRS 16 Leases 1 January 2019
The Directors anticipate that with the exception of IFRS 9 (the impact of which will be assessed closer to the effective
date), the adoption of these standards and interpretations in the period of initial application will not have a material
impact on the financial statements of the Group.
Consolidation
The consolidated financial statements incorporate the financial statements of the Company and all SPVs controlled by the
Company (its subsidiaries). Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. The
financial statements of subsidiaries are included in the consolidated financial statements from the date control commences
until the date control ceases. Certain of the Company's subsidiaries have non-coterminous year-ends. These companies are
consolidated on the basis of actual transactions occurring within the financial year.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns different from those of other business segments. A geographical segment is engaged in providing products or
services within a particular economic environment that are subject to risks and returns different from those segments
operating in other economic environments.
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment and
related business. This segment includes residential and commercial properties and property-related ventures primarily in
Macau. Please refer to Note 5 for segment reporting.
Foreign currency translation
a) Presentation currency
Items included in the financial statements of each of the Group entities are measured using the currency of the primary
economic environment, in which the entity operates, Macanese Patacas (the "functional currency"). The consolidated
financial statements are presented in US Dollars ("US$") which is the Group's presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date
of the transaction. Foreign exchange gains and losses - resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the Consolidated Statement of Comprehensive Income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation
of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair
value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive
income or profit or loss are also recognised in other comprehensive income or profit or loss).
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
c) Group companies
The results and financial position of all the Group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
i. assets and liabilities for each statement of financial position are presented at the closing rate at the date of that
statement of financial position;
ii. income and expenses for each statement of comprehensive income are translated at average exchange rates;
iii. all resulting exchange differences are recognised as a separate component of other comprehensive income; and
iv. on disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign
operation is recognised in profit or loss.
Foreign currency translation reserve
Foreign currency differences arising on translation of foreign operations into the Group's presentation currency are
recognised in other comprehensive income and presented in the foreign currency translation reserve in equity.
Investment property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by
companies in the consolidated Group, is classified as investment property. Investment property also includes property that
is being constructed or developed for future use as investment property.
Investment property is measured initially at its cost, including related transaction costs.
Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance costs are charged to the Consolidated Statement of Comprehensive Income during the financial period in which
they are incurred.
After initial recognition, investment property is carried at fair value.
Fair value measurements
The Group measures certain financial instruments such as derivatives, and non-financial assets such as investment property,
at fair value at the end of each reporting period. Also, fair values of financial instruments measured at amortised cost
are disclosed in the financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place either:
· in the principal market for the asset or liability; or
· in the absence of a principal market, in the most advantageous market for the asset or liability.
The Group must be able to access the principal or the most advantageous market at the measurement date. The fair value of
an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic
benefits by using the asset in its highest and best use, or by selling it to another market participant that would use the
asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs
significant to the fair value measurement as a whole:
Level 1 - inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Group
has the ability to access at the measurement date;
Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (that is, prices) or indirectly (that is, derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level
input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Fair value of investment property
Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or
condition of the specific investment property. If this information is not available, the Group uses alternative valuation
methods such as recent prices on less active markets or discounted cash flow projections. Valuations are prepared
semi-annually by Savills, whose valuers hold recognised and relevant professional qualifications and have recent experience
in the location and category of the investment properties being valued. Investment property that is being redeveloped for
continuing use as investment property continues to be measured at fair value, if the fair value is considered to be
reliably measurable. Changes in fair values are recorded in the Consolidated Statement of Comprehensive Income.
Fair value of interest rate swaps
The Group uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate
fluctuations.
Derivative financial instruments are initially recognised at fair value on the date on which a contract is entered into,
and are subsequently measured at fair value and presented as financial assets or liabilities at fair value through profit
or loss. Related realised and unrealised gains and losses are included in net gains/(losses) on financial
assets/liabilities at fair value through profit or loss.
Fair value is calculated through the use of discounted cash flows based on the contracted interest rates.
Inventories
Properties and land that are being held or developed for future sale are classified as inventories. In the opinion of the
Board, inventories are held with a view to short term sale in the ordinary course of business. They are individually
carried at the lower of cost and NRV. NRV is the estimated selling price in the ordinary course of business less costs to
complete redevelopment and selling expenses. Cost is the acquisition cost together with subsequent capital expenditure
incurred, including capitalised interest where relevant.
Borrowing costs
Borrowing costs incurred for the purpose of acquiring, constructing or producing a qualifying asset, such as investment
property or inventory, are capitalised as part of the cost. Borrowing costs are capitalised while the acquisition or
construction is actively underway, and cease once the asset is substantially complete, or suspended if the development is
suspended. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing of funds. The interest capitalised is calculated
using the Group's weighted average cost of borrowing after adjusting for borrowing associated with specific developments.
Where borrowings are associated with specific developments, the amount capitalised is the gross interest incurred on those
borrowings less any investment income arising from their temporary investment.
Impairment
Financial assets
A financial asset carried at fair value through profit or loss falls within the scope of IAS 39. A financial asset not
carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash
flows of that asset that can be estimated reliably.
Losses are recognised in the Consolidated Statement of Comprehensive Income. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through the Consolidated Statement of
Comprehensive Income.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other than investment property, are reviewed at each reporting
date to determine whether there is any indication of impairment. If any of such indication exists, then the asset's
recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in
use and its fair value less costs to sell.
Leases
Leases in which the Group does not transfer substantially all the risks and benefits of ownership to a lessee are
classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying
amount of the leased asset and recognised over the term of the lease on the same basis as rental income. Contingent rents
are recognised as revenue in the period in which they are earned.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset
is reduced through the use of an allowance account, and the amount of the loss is recognised in the Consolidated Statement
of Comprehensive Income. When a trade receivable is uncollectible, it is written off against the allowance account for
trade receivables. Subsequent recoveries of amounts previously written off are credited in the Consolidated Statement of
Comprehensive Income.
Cash and cash equivalents
Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and on hand and demand
deposits with an original maturity of three months or less and other short-term, highly-liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value. For the purpose of the
Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Deposits with lenders are excluded and not considered cash and cash equivalents.
Deposits with lenders
Deposits with lenders comprise cash held at bank that is pledged for loan covenants and are recognised as current and
non-current assets.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets. Shares issued by the Company
are recorded based upon the proceeds received, net of incremental costs directly attributable to the issue of new shares.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and includes rental income and income
from property trading.
Rental income
Rental income from operating leases is recognised in income on a straight-line basis over the lease term. When the Group
provides incentives to its customers, the cost of incentives is recognised over the lease term, on a straight-line basis,
as a reduction of rental income.
Sale of completed property
A property is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally
on unconditional exchange of contracts. On disposal, a property that is held by a single-asset subsidiary and when disposal
is achieved through the sale of such subsidiary and where it is judged as an asset disposal, the proceeds from disposal
thereof are recognised in income and net assets disposed of, excluding long-term debt, are recognised in cost of sales in
expenses. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied.
Sale of property under development
Where property is under development and an agreement has been reached to sell such property when construction is complete,
and where the Directors determine the pre-sale to constitute the sale of a completed property, revenue is recognised when
the significant risks and rewards of ownership of the real estate have been transferred to the buyer.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down and are subsequently measured at amortised cost using the effective
interest method.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the date of the consolidated statement of financial position.
Finance income and expenses
Interest income is recognised using the effective interest rate method in the Consolidated Statement of Comprehensive
Income.
Finance costs comprise interest expense on borrowings. Interest expense is recognised using the effective interest rate
method in the Consolidated Statement of Comprehensive Income.
Distributable reserves
Distributable reserves consist of the Group's retained earnings that may be legally paid out in the form of a dividend.
Payments to shareholders from reserves can be seen as a distribution of accumulated profit.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position
if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a
net basis, to realise the assets and to settle the liabilities simultaneously.
Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by
the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in
the Consolidated Statement of Comprehensive Income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on all temporary differences at the reporting date between the
tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, except where the timing of
the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date. Deferred income tax relating to items recognised directly in equity is recognised in equity
and not in the Consolidated Statement of Comprehensive Income.
As a result of the discussion of the IFRS Interpretations Committee in its July 2014 meeting relating to deferred taxation
for a single asset held by a corporate wrapper, the Group has recognised the deferred tax liability for the taxable
temporary timing difference relating to the investment property carried at fair value.
2. Financial risk management, policies and objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk
and cash flow and fair value interest rate risk), credit risk and liquidity risk.
The Board of Directors provides written principles for overall risk management, as well as written policies covering
specific areas, such as foreign exchange risk, interest rate risk and liquidity risk.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of
changes in market prices, whether caused by factors specific to an individual financial instrument or all factors affecting
all financial instruments traded in the market including foreign exchange risk, equity price risk and cash flow and fair
value interest rate risk as detailed below.
The Group's market risk is managed by the Manager in accordance with policies and procedures in place. The Group's overall
market position is monitored on a quarterly basis by the Board of Directors.
Sensitivities to market risks included below are based on a change in one factor while holding all other factors constant.
In practice, this is unlikely to occur and changes in some of the factors may be correlated, for example, changes in
interest rates and changes in foreign currency rates.
a) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign
exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in
foreign operations. The Group's policy is not to enter into any currency hedging transactions. The tables below summarise
the Group's exposure to foreign currency risk as at 30 June 2017 and 30 June 2016. The Group's financial assets and
liabilities are included in the table, categorised by their currency at their carrying amount in US$'000. In the current
economic climate, management's assessment of a reasonable possible change in foreign exchange rates would be up to a 1%
increase/decrease for Hong Kong Dollar ("HK$")/US$, due to the HK$ being pegged to the US$, and up to a 10%
increase/decrease for all other currencies.
The table below presents financial assets and liabilities denominated in foreign currencies held by the Group as at 30 June
2017 and 30 June 2016, and can be used to monitor foreign currency risk as at that date.
At 30 June 2017, if Sterling weakened/strengthened by 10% against US$ with all other variables held constant, the net
assets and movement in foreign currency translation reserve would have been US$14,000 higher/lower (2016: US$11,000
higher/lower). Any movement would have no other effect on the remaining equity components of the Group. There are no
material transactions that would have effect on the profit/loss for the year. The HK$ is pegged to the US$ with the Hong
Kong Monetary Authority pledging to keep the exchange rate within a trading band of 5 Hong Kong cents either side of
HK$7.80 per dollar. The foreign exchange risk is considered minimal and as such the Company does not actively manage
against this risk. If the HK$ weakened/strengthened by 1% against the US$ with all other variables held constant, the net
assets and movement in foreign currency translation reserve would have been US$1,572,000 higher/lower (2016: US$1,489,000
higher/lower). Any movement would have no other effect on the remaining equity components of the Group. There are no
material transactions that would have effect on the profit/loss for the year.
The Macanese Patacas ("MOP") is fixed to the HK$ at a rate of MOP:HK$ of 1.03. Due to the low level of assets held in this
currency, a 10% change in rate would not have a significant effect on the consolidated financial statements.
Movements in other currencies would not have a significant impact on the consolidated financial statements.
US$US$'000 £US$'000 HK$US$'000 Other Total US$'000
currencies
US$'000
As at 30 June 2017
Trade and other receivables (excluding prepayments) - - 468 111 579
Cash and cash equivalents - 20 13,016 57 13,093
Deposits with lenders - - 3,312 - 3,312
Financial assets at fair value through profit or loss - - 21 - 21
Total financial assets - 20 16,817 168 17,005
Trade and other payables 178 158 8 1,597 1,941
Interest-bearing loans - - 174,000 - 174,000
Financial liabilities at fair value through profit or loss - - 30 - 30
Total financial liabilities 178 158 174,038 1,597 175,971
Net financial position (178) (138) (157,221) (1,429) (158,966)
US$US$'000 £US$'000 HK$US$'000 Other Total US$'000
currencies
US$'000
As at 30 June 2016
Trade and other receivables (excluding prepayments) - - 1,013 111 1,124
Cash and cash equivalents - 66 12,638 37 12,741
Deposits with lenders - - 2,113 - 2,113
Total financial assets - 66 15,764 148 15,978
Trade and other payables 114 172 23 1,582 1,891
Interest-bearing loans - - 164,514 - 164,514
Financial liabilities at fair value through profit or loss - - 104 - 104
Total financial liabilities 114 172 164,641 1,582 166,509
Net financial position (114) (106) (148,877) (1,434) (150,531)
b) Cash flow and fair value interest rate risk
The Group is exposed to fair value interest rate risk with regards to its interest rate swaps through the variability of
the valuation of the interest rate swaps caused by changes in the market expectations about future interest rates and other
variables.
Under the terms of the swap contracts, if the swap rates were to increase/decrease by 1% with all other variables held
constant, this would result in the post-tax profit being US$177,000 higher/US$136,000 lower (2016: US$556,000
higher/US$468,000 lower). Any movement would have no other effect on the remaining equity components of the Group.
Unexpected volatility or illiquidity in the markets in which the Group holds positions can impair the Group's ability to
conduct its business or cause it to incur losses.
The Group's interest rate risk is managed by the Manager, in accordance with policies and procedures in place and mitigated
through the use of interest rate swaps (see Note 20). The Group's overall positions and exposures are monitored on a
quarterly basis by the Board of Directors.
If interest rates had been 1% higher/lower and all other variables were held constant, the Group's profit for the year
would have decreased/increased by US$1,576,000 (2016: loss for the year increased/decreased by US$1,497,000) (based on the
interest bearing net financial liability per the table below before factoring in impact of interest rate swaps held). This
is mainly due to the Group's exposure to interest-bearing loans.
The following table details the Group's exposure to interest rate risks:
Interest Non- Total US$'000
BearingUS$'000 interest
BearingUS$'000
As at 30 June 2017
Trade and other receivables (excluding prepayments) - 579 579
Cash and cash equivalents 13,093 - 13,093
Deposits with lenders 3,312 - 3,312
Financial assets at fair value through profit or loss 21 - 21
Total financial assets 16,426 579 17,005
Trade and other payables - 1,941 1,941
Interest-bearing loans 174,000 - 174,000
Financial liabilities at fair value through profit or loss 30 - 30
Total financial liabilities 174,030 1,941 175,971
Interest Non- Total US$'000
BearingUS$'000 interest
BearingUS$'000
As at 30 June 2016
Trade and other receivables (excluding prepayments) - 1,124 1,124
Cash and cash equivalents 12,741 - 12,741
Deposits with lenders 2,113 - 2,113
Total financial assets 14,854 1,124 15,978
Trade and other payables - 1,891 1,891
Interest-bearing loans 164,514 - 164,514
Financial liabilities at fair value through profit or loss 104 - 104
Total financial liabilities 164,618 1,891 166,509
The Group has entered into various interest rate swaps as disclosed in Note 20.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered into with the Group. The Group is exposed to credit risks from both its leasing activities and
financing activities, including deposits with banks and financial institutions.
The Group's main exposure to credit risk is its balances with banks. This risk is mitigated through using banks with a high
credit rating.
The Group's deposits, including deposits with lenders, are split by class with the following ratings from Fitch and Moody's
Ratings:
Credit Rating 2017US$'000 2016US$'000
AA- 738 273
A+ 12,722 2,411
A 2,136 15
A- 16 16
BBB+ 775 12,117
BBB 18 22
16,405 14,854
The Group is exposed to loss of rental income and increase in costs, such as legal fees, if tenants fail to meet their
payment obligations under their leases. The Group seeks to mitigate default risk by diversifying its tenant base and
requiring deposits or guarantees from banks or parent companies, where there is a perceived credit risk or in accordance
with prevailing market practice.
All of the Group's major tenants have met their rental requirements within the terms of arrangement and no material
receivables have not been impaired which are past due.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.
Liquidity risk
The Group adopts a prudent approach to liquidity management and maintains sufficient cash reserves and borrowings to meet
its obligations. The Group maintains sufficient cash and obtains funding through credit facilities to meet its current
liabilities and property development expenditure.
Of the Group's total exposure to banks of US$16,405,000 (2016: US$14,854,000), deposits amounting to US$3,312,000 (2016:
US$2,113,000) have been pledged to secure banking facilities, of which US$3,107,000 (2016: US$2,113,000) relates to
long-term banking facilities, and are, therefore, classified as non-current assets. Pledged bank balances represent
deposits pledged to the banks to secure the banking facilities granted to the Group.
The Group has term loan facilities with Hang Seng Bank, Industrial and Commercial Bank of China (Macau) Limited, and Banco
Tai Fung for its investments in The Waterside, individual units in One Central Residences, Senado Square, Estrada da Penha,
and The Fountainside. The Group's liquidity position is monitored by the Manager and is reviewed quarterly by the Board of
Directors. Please refer to Note 8 for details of the facilities.
The table below analyses the Group's financial assets and liabilities into relevant maturity profiles based on the
remaining period at the Consolidated Statement of Financial Position date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows (including interest payments).
As at 30 June 2017 On Demand US$'000 Less than 3 Months 3 to 12 1 to 2 2 to 5 Over Total US$'000
US$'000 Months Years Years 5 Years
US$'000 US$'000 US$'000 US$'000
Trade and other receivables (excluding prepayments) - 464 4 111 - - 579
Cash and cash equivalents 13,093 - - - - - 13,093
Deposits with lenders - - 205 271 2,836 - 3,312
Financial assets at fair value through profit or loss - - 21 - - - 21
Total financial assets 13,093 464 230 382 2,836 - 17,005
Trade and other payables - 917 1,024 - - - 1,941
Interest-bearing loans - 1,412 23,786 52,850 108,921 - 186,969
Financial liabilities at fair value through profit or loss - - 30 - - - 30
Total financial liabilities - 2,329 24,840 52,850 108,921 - 188,940
Net financial position 13,093 (1,865) (24,610) (52,468) (106,085) - (171,935)
As at 30 June 2016 On Demand US$'000 Less than 3 Months 3 to 12 1 to 2 2 to 5 Over 5 Years Total US$'000
US$'000 Months Years Years US$'000
US$'000 US$'000 US$'000
Trade and other receivables (excluding prepayments) - 1,006 7 111 - - 1,124
Cash and cash equivalents 12,741 - - - - - 12,741
Deposits with lenders - - - - 2,113 - 2,113
Total financial assets 12,741 1,006 7 111 2,113 - 15,978
Trade and other payables - 1,211 680 - - - 1,891
Interest-bearing loans - 2,690 16,978 43,370 115,808 - 178,846
Financial liabilities at fair value through profit or loss - 38 43 23 - - 104
Total financial liabilities - 3,939 17,701 43,393 115,808 - 180,841
Net financial position 12,741 (2,933) (17,694) (43,282) (113,695) - (164,863)
Fair value hierarchy
Financial investments measured at fair value
IFRS 13 requires disclosure of fair value measurements by level as discussed in Note 1.
The Group's interest rate swaps have been classified within Level 2, which makes use of a model with inputs that are
directly or indirectly observable market data. The following table presents the value carried on the Consolidated Statement
of Financial Position by level within the valuation hierarchy as at 30 June 2017:
As at As at
30 June 2017US$'000 30 June 2016US$'000
Current assets 21 -
Non-current liabilities - (23)
Current liabilities (30) (81)
Net interest rate swap liabilities (9) (104)
The fair value of the interest rate swaps is determined from proprietary models based upon recognised financial principles
and reasonable estimates about relevant future market conditions. The inputs used in fair valuing the interest rate swaps
are swap rates, date convention, calculation periods, transactional costs and other costs. There have been no changes in
the valuation technique during the year. The interest rate swaps have been fair valued at each reporting period. There have
been no transfers between levels.
As stated above, movements in the significant direct or indirect observable inputs upon which the fair value is calculated,
would have an effect on the overall fair market value of the interest rate swaps. The Board believes that a reasonable
sensitivity range expected in each input would be a flat movement of +/- 1%.
For all financial instruments, other than those recognised at fair value or whose fair value is disclosed within these
financial statements, carrying value of the financial asset/liability is an approximation of their fair value.
Capital risk management
The Group's objectives, when managing capital, are to safeguard the Group's ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to
reduce the cost of
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