REG - Macau Prop Opp Fund - Annual Financial Report <Origin Href="QuoteRef">MPO.L</Origin> - Part 5
28/09/2017 07:07
- Part 5: For the preceding part double click ID:nRSb0317Sd
capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
During the year ended 30 June 2017, there were no borrowings other than the Group's loan facilities in place which are
classified as interest bearing loans in the Consolidated Statement of Financial Position.
Discount management policy
The Board's intention is to apply an active discount management policy, buying back shares if there is a significant
discount of share price to Adjusted Net Asset Value ("Adjusted NAV") for a sustained period of time, subject to cash flow
operating needs of the Company. During the year, the Company has purchased nil ordinary shares. During the prior year, the
Company purchased 1,101,000 ordinary shares at a weighted average price of 176.64p as per Note 12. All of the shares bought
back in the prior year were cancelled.
Shares which are bought back by the Company may either be cancelled or held in treasury and subsequently re-issued.
Pursuant to the Companies (Guernsey) Law, the number of shares of any class held as treasury shares must not, at any time,
exceed 10% of the total number of issued shares of that class at that time. The authority to buy back up to 14.99% per
annum of shares in issue is renewed at each Annual General Meeting of the Company by special resolution.
The Board remains committed to an active discount management policy.
3. Critical accounting estimates, assumptions and judgement
The Directors and Investment Adviser (the "management") make estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are outlined below:
a) Fair value of the investment property, NRV and Adjusted NAV are based on the current market valuation provided by
Savills, an independent valuer. Savills is required to make assumptions on establishing the current market valuation. The
most significant assumptions (as described further in Note 6), relate to estimating costs to complete property under
development, future income streams and discount rates applicable to these estimates. The valuation has been made on the
assumption that the owner sells the properties in the open market without a deferred term contract, leaseback, joint
venture, management agreement or any similar arrangement, which could serve to affect the value of the properties. This is
an accounting assumption.
b) Inventory is stated at the lower of cost and NRV. NRV for completed inventory property is assessed with reference to
market conditions and prices existing at the reporting date, and is determined by the Group, having taken suitable external
advice and in the light of recent market transactions. NRV in respect of inventory property under construction (see Note
7), is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs
to complete construction and less an estimate of the time value of money to the date of completion. This is an accounting
estimate.
c) Deferred tax liabilities are recognised for potential tax charges to the extent that it is probable that taxable profits
will exceed taxable losses, against which can be utilised. Significant management judgement is required to determine the
amount of deferred tax liabilities that can be recognised, based upon the likely timing and the level of future taxable
profits, together with future tax planning strategies. This is an accounting judgement.
The Group did not make any critical accounting judgements, other than as described above, in the year ended 30 June 2017 or
the year ended 30 June 2016.
4. Subsidiaries
All SPVs are owned 100% by the Company. The following subsidiaries have a year end of 31 December to coincide with the
Macanese tax year:
· Macau (Site 1) Limited
· MPOF Macau (Site 5) Limited
· The Fountainside Company Limited
· Castelo Branco Companhia Limitada
· Portalegre Companhia Limitada
· MPOF Macau (Site 2) Limited
· MPOF Macau (Site 6) Limited
· The Waterside Company Limited
· Braga Companhia Limitada
During the current year, the following Guernsey companies: MPOF (7A) Limited, MPOF (7B) Limited, MPOF (8A) Limited, MPOF
(8B) Limited, MPOF (9A) Limited, MPOF (9B) Limited, MPOF (10A) Limited, MPOF (10B) Limited, MPOF (Monte) Limited and MPOF
(Paulo) Limited were liquidated. MPOF Mainland Company 1 Limited, a Barbados company, was liquidated. The following
Macanese companies - Macau (Site 4) Limited, Macau (Site 7) Limited, Macau (Site 8) Limited, Macau (Site 9) Limited, Macau
(Site 10) Limited and Vila Real Companhia Limitada were liquidated.
The consolidated financial statements include the financial statements of the Company and the subsidiaries listed below:
Ownership Incorporation
Macau (Site 1) Limited 100% Macau
MPOF Macau (Site 2) Limited 100% Macau
MPOF Macau (Site 5) Limited 100% Macau
MPOF Macau (Site 6) Limited 100% Macau
The Waterside Company Limited 100% Macau
Braga Companhia Limitada 100% Macau
Portalegre Companhia Limitada 100% Macau
The Fountainside Company Limited 100% Macau
Castelo Branco Companhia Limitada 100% Macau
MPOF (Penha) Limited 100% Guernsey
MPOF (Taipa) Limited 100% Guernsey
MPOF (Jose) Limited 100% Guernsey
MPOF (Sun) Limited 100% Guernsey
MPOF (Guia) Limited 100% Guernsey
MPOF (Antonio) Limited 100% Guernsey
MPOF (6A) Limited 100% Guernsey
MPOF (6B) Limited 100% Guernsey
Bream Limited 100% Guernsey
Cannonball Limited 100% Guernsey
Civet Limited 100% Guernsey
Gorey Hills International Limited 100% BVI
Hillsleigh Holdings Limited 100% BVI
Jin Mei International Limited 100% BVI
Mega League Investments Limited 100% BVI
Poly Advance Management Limited 100% BVI
Smooth Run Group Limited 100% BVI
Worthy Way Limited 100% BVI
China City Properties Limited 100% Hong Kong
East Base Properties Limited 100% Hong Kong
Eastway Properties Limited 100% Hong Kong
Elite Gain Limited 100% Hong Kong
Glory Properties Limited 100% Hong Kong
New Perfect Properties Limited 100% Hong Kong
Pacific Asia Properties Limited 100% Hong Kong
Weltex Properties Limited 100% Hong Kong
5. Segment reporting
The Chief Operating Decision Maker (the "CODM") in relation to the Company is deemed to be the Board itself. The factors
used to identify the Group's reportable segments are centred on asset class and differences in both geographical area and
regulatory environment. Furthermore, foreign exchange and political risks are identified, as these also determine where
resources are allocated.
Based on the above and a review of information provided to the Board, it has been concluded that the Group is currently
organised into one reportable segment based on the geographical area, Macau.
This segment includes residential, commercial and mixed-use properties. Furthermore, there are multiple individual
properties that are held within each property type. However, the CODM considers, on a regular basis, the operating results
and resource allocation of the aggregated position of all property types as a whole, as part of their on-going performance
review. This is supported by a further breakdown of individual property groups only to help support their review and
investment appraisal objectives.
Information about major customers
The Group does not have any customers or rental agreements which represent more than 10% of Group's revenues. Revenues
represented by rental income were US$2,055,000 for the year ended 30 June 2017 (2016: US$2,109,000).
6. Investment property
2017 2016
US$'000 US$'000
At the beginning of the year 206,595 243,810
Capital expenditure on property 36 1,237
Fair value adjustment 36,013 (38,227)
Exchange difference (1,451) (225)
Balance at end of the year 24,193 206,595
Valuation gains and losses from investment property are recognised in profit and loss for the period, and are attributable
to changes in unrealised gains or losses relating to investment property (completed and under construction) held at the end
of the reporting period.
The valuation process is initiated by the Investment Adviser who appoints a suitably qualified valuer to conduct the
valuation of the investment property. The results are overseen by the Investment Adviser. Once satisfied with the
valuations based on their expectations, the Investment Adviser reports the results to the Board. The Board reviews the
latest valuation based on their knowledge of the property market and compares these to previous valuations. The Group's
investment properties were revalued at 30 June 2017 by independent, professionally-qualified valuer, Savills. The valuation
has been carried out in accordance with the current Royal Institution of Chartered Surveyors (RICS) Appraisal and Valuation
Standards to calculate the market value of the investment properties in their existing state and physical condition, with
the assumptions that:
· The owner sells the property in the open market without any arrangement, which could serve to affect the value of the
property.
· The property is held for investment purposes.
· The property is free from encumbrances, restrictions and outgoings of any onerous nature which could affect its
value.
The fair value of investment property is determined by Savills, using recognised valuation techniques. The technique
deployed was the income capitalisation method. The determination of the fair value of investment property requires the use
of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital
values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the
property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at
the reporting date.
Capital expenditure on property during the year relates to fit-out costs for The Waterside.
Rental income arising from The Waterside of US$2,055,000 (2016: US$2,109,000) was received during the year. Direct
operating expenses of US$954,000 (2016: US$967,000) arising from The Waterside that generated rental income were incurred
during the year. Direct operating expenses during the year arising from vacant units totalled US$284,000 (2016:
US$325,000).
There are no disposals of investment property during the year.
The following tables show the inputs used in valuing the investment property which is classified as Level 3 in the fair
value hierarchy:
Property Carrying amount / fair value as at 30 June 2017US$'000 Valuation Input Unobservable and observable inputs used in determination of fair values Other key
information technique information
Name The Waterside 241,193 Term and Term rent(inclusive of management HK$17.1 psf Age of building
Reversion fee and furniture)
Analysis
Type Residential/ Term yield(exclusive of management 1.4% - 2.2% Remaining
Completed fee and furniture) useful life
apartments of building
Location One CentralTower 6 Macau Reversionary rent(exclusive of management HK$17.1 psf
fee and furniture)
Reversionary yield 1.7%
Property Carrying amount / fair value as at 30 June 2016US$'000 Valuation Input Unobservable and observable inputs used in determination of fair values Other key
information technique information
Name The Waterside 206,595 Term and Term rent(inclusive of management HK$19.5 psf Age of building
Reversion fee and furniture)
Analysis
Type Residential/ Term yield(exclusive of management 1.6% - 2.4% Remaining
Completed fee and furniture) useful life
apartments of building
Location One CentralTower 6 Macau Reversionary rent(exclusive of management HK$19.0 psf
fee and furniture)
Reversionary yield 2.0%
The fair value of The Waterside is determined using the income approach, more specifically a term and reversion analysis,
where a property's fair value is estimated based on the rent receivable and normalised net operating income generated by
the property, which is divided by the capitalisation (discount) rate. The difference between gross and net rental income
includes the same expense categories as those for the discounted cash flow method with the exception that certain expenses
are not measured over time, but included on the basis of a time weighted average, such as the average lease up costs. Under
the income capitalisation method, over- and under-rent situations are separately capitalised (discounted).
If the estimated reversionary rent increased/decreased by 5% (and all other assumptions remained the same), the fair value
of The Waterside would increase or decrease by US$12 million.
If the term or revisionary yield increased/decreased by 5% (and all other assumptions remained the same), the fair value of
The Waterside would decrease by US$12 million or increase by US$13 million.
The Waterside is currently valued at its highest and best use. There is no extra evidence available to suggest that it has
an alternative use that would provide a greater fair value measurement.
There have been no transfers between levels during the period or a change in valuation technique since the last period.
7. Inventories
Cost 2017US$'000 2016US$'000
Balance brought forward 67,410 67,288
Additions 457 438
Disposals (3,459) (254)
Exchange difference (414) (62)
Balance carried forward 63,994 67,410
Additions include capital expenditure, development costs and capitalisation of financing costs.
Finance costs of US$317,000 (2016: US$nil) relating to the Senado Square loan facility were capitalised during the year,
including US$287,000 (2016: US$nil) of interest capitalised to the property.
Under IFRS, inventories are valued at the lower of cost and NRV. The carrying amounts for inventories as at 30 June 2017
amounts to US$63,994,000 (2016: US$67,410,000). NRV as at 30 June 2017 as determined by independent,
professionally-qualified valuer, Savills, was US$182,670,000 (2016: US$185,211,000).
One unit of The Fountainside and one individual unit of One Central Residences (2016: 3 car parking spaces and 1 motorcycle
parking space of The Fountainside) were sold during the year for a total consideration of US$6.4 million (HK$49.3 million)
(2016: US$1.0 million (HK$8.1 million)) against a total cost of US$3.5 million (HK$27.0 million) (2016: US$0.2 million
(HK$2.0 million)) which resulted in a net profit of US$2.9 million (HK$22.3 million) (2016: US$0.8 million (HK$6.1
million)) after all associated fees and transaction costs.
8. Interest-bearing loans
Bank loans - Secured 2017US$'000 2016US$'000
- Current portion 19,617 14,444
- Non-current portion 153,775 149,279
173,392 163,723
The Group has a term loan facility with Hang Seng Bank for The Waterside and the individual units in One Central
Residences. On 4 November 2015, a new tranche of the facility was executed for HK$282 million (US$36.4 million) (Tranche 5)
to finance the principal instalments of the previous tranches, up to the end of 2017.
As at 30 June 2017, three tranches remained outstanding. Tranche 3 had an outstanding balance of HK$572 million (US$73.3
million) (2016: HK$572 million (US$73.7 million)); and Tranche 4 had an outstanding balance of HK$76 million (US$9.7
million) (2016: HK$76 million (US$9.8 million)); and Tranche 5 had an outstanding balance of HK$281 million (US$36.0
million) (2016: HK$281 million (US$36.3 million)). As at 30 June 2017, the loan-to-value ratio for the Hang Seng One
Central facility was 47.36% (2016: 57.98%).
The interest rates applicable to Tranche 3, Tranche 4 and Tranche 5 of the term loan are 2.25% per annum, 2.35% per annum
and 2.35% per annum, respectively, over the 1-, 2- or 3-month HIBOR rate. The choice of rate is at the Group's discretion.
The term loan matures on 19 September 2020. The principal is to be repaid in half-yearly instalments commencing 19 March
2018 with 50% of the principal due upon maturity. The loan-to-value covenant is 60%. The facility is secured by means of a
first registered legal mortgage over The Waterside and the individual residential units owned by the Group at One Central
Residences as well as a pledge of all income from the units. The Company is the guarantor for the credit facility. In
addition, the Group is required to maintain a cash reserve equal to six months' interest with the lender. Early prepayment
covenant for sales proceeds out of the individual One Central Residences units will be waived, subject to the Group
maintaining a loan-to-value ratio of not more than 50% on the facility.
During the year ended 30 June 2017, the Group executed a two-year loan facility with Hang Seng Bank for Senado Square
redevelopment project. The total facility amount is HK$118 million (US$15.2 million) divided into 2 tranches: Tranche A is
a term loan facility for an amount of HK$59 million (US$7.6 million) for refinancing the property acquisition cost; Tranche
B is a revolving loan facility for an amount of HK$59 million (US$7.6 million) for general working capital needs. The full
amount of the facility was drawndown in December 2016. Interest is charged at 2.7% per annum over the 1-, 2- or 3-month
HIBOR rate. The choice of rate is at the Group's discretion. The facility will mature on 10 December 2018 and the principal
is to be repaid by one lump sum at maturity. The loan-to-value covenant is two-tier, on a stand-alone basis: 45% and in
aggregate with the One Central facility: 60%. The facility is secured by means of a first registered legal mortgage over
the Group's interest in Senado Square as well as a pledge of all sales proceeds. The Company and MPOF Macau (Site 5)
Limited are the joint guarantor for the loan facility. In addition, the Group is required to maintain a cash reserve equal
to six months' interest with the lender. As at 30 June 2017, the loan-to-value ratio for Senado Square facility was
17.82%.
The Group has a HK$220 million (US$28.2 million) term loan facility with the Industrial and Commercial Bank of China
(Macau) Limited in relation to The Fountainside redevelopment project with a tenor revised from 3 years to 5 years and to
be matured in March 2020. Interest is charged at 3% per annum over the 3-month HIBOR rate. The principal is to be repaid in
half yearly instalment commencing 5 September 2017 with 50% of the principal due upon maturity. The loan-to-value covenant
is 60%. The facility is secured by means of a first registered legal mortgage over all unsold units and car parking spaces
of The Fountainside as at the loan facility date as well as a pledge of all income from the units and the car parking
spaces. The Company is the guarantor for the credit facility.
As at 30 June 2017, the facility had an outstanding balance of HK$162 million (US$20.8 million) (2016: HK$198.1 million
(US$25.5 million)). Sales proceeds of US$nil (2016: US$nil) were pledged with the lender. As at 30 June 2017, the
loan-to-value ratio for The Fountainside facility was 47.79% (2016: 56.76%).
The Group has two loan facilities in relation to Estrada da Penha:
Banco Tai Fung
The loan facility with Banco Tai Fung originally had a term of 3 years and the facility amount is HK$70 million which
expired in June 2017 and was subsequently renewed for another term of 2 years. Interest was originally charged at 3.2% per
annum over the 6-month HIBOR rate and was revised to 2.3% per annum over the 3-month HIBOR rate, and repayment is due in
full at maturity in June 2019. As at 30 June 2017, the facility had an outstanding balance of HK$70 million (US$9.0
million) (2016: HK$70 million (US$9.0 million)). This facility is secured by a first legal mortgage over the property as
well as a pledge of all income from the property. The Company is the guarantor for this term loan. Interest is paid monthly
on this loan facility. As at 30 June 2017, the loan-to-value ratio for this facility was 42.94% (2016: 47.62%).
ICBC Macau
The loan facility with Industrial and Commercial Bank of China (Macau) Limited has a term of 3 years and the facility
amount is HK$79 million. Interest is charged at 3.2% per annum over the 3-month HIBOR rate and repayment is due in full at
maturity in December 2017. As at 30 June 2017, the facility had an outstanding balance of HK$79 million (US$10.1 million)
(30 June 2016: HK$79 million (US$10.2 million)). This facility is secured by a first legal mortgage over the property as
well as a pledge of all income from the property. The Company is the guarantor for this term loan. In addition, the Group
is required to maintain a cash reserve equal to six months' interest with the lender. Interest is paid monthly on this loan
facility. As at 30 June 2017, the loan-to-value ratio for this facility was 40.72% (2016: 45.14%).
Bank loan interest paid during the year was US$5,079,000 (2016: US$4,827,000), including US$287,000 (2016: US$nil)
capitalised during the year (see Note 7).
Amortised loan arrangement fees for the year are disclosed in Note 14.
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market
interest rates when they were first recognised with current market rates for similar financial instruments.
The estimated fair value of fixed interest bearing loans is based on discounted cash flows using prevailing market interest
rates for debts with similar credit risk and maturity. As at 30 June 2017, the fair value of the interest-bearing loans was
US$84,000 lower than the carrying value of the financial liabilities (2016: the fair value of the interest-bearing loans
was US$378,000 lower than the carrying value of the financial liabilities).
The Group's interest-bearing loans have been classified within Level 2, as they have observable inputs from similar loans.
There have been no transfers between levels during the period or a change in valuation technique since the last period.
9. Taxation
The Company is exempt from taxation in Guernsey under the provisions of The Income Tax (Exempt Bodies) (Guernsey)
Ordinances, 1989 to 1992, and is charged an annual exemption fee of £1,200 (US$1,462) (2016: £1,200 (US$1,742)).
The Group would only be exposed to Hong Kong profits tax if it is:
i. not exempted under the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (the "Ordinance") ; and
ii. treated as carrying on a trade or business in Hong Kong either on its own account or through any person as an
agent.
No accrual has been made for Hong Kong profits tax, as the Board believes that no such tax exposure exists at the end of
the reporting year (2016: US$nil).
The Group is not subject to any income, withholding or capital gains taxes in the BVI. No capital or stamp duties are
levied in the BVI on the issue, transfer or redemption of shares. As a result, no provision for BVI taxes has been made in
the consolidated financial statements.
The Macanese SPVs are liable to Macau property tax in respect of their ownership of Macau properties. Taxation will be
charged at the higher of 10% (2016: 10%) of any rent received or 6% (2016: 6%) of the official ratable rentable value.
Newly built residential buildings or commercial buildings are exempt from property tax for four years and six years,
respectively (such time running from the month after the occupancy permit is issued) for properties located in Macau
peninsula and outlying islands. Macau Complementary Taxes are generally levied on income and profits arising in or derived
from commercial and/or industrial activities carried on in Macau. There is no distinction made between a "revenue profit"
and "capital profit" under the Macau complementary tax regulations. Accordingly, all income booked by a Macau corporate
taxpayer, including gains on sale of investment/immovable property, will be subject to complementary tax. In general, gains
on the disposal of shares in a Macau company (such as an SPV of the Company) should not attract Macau complementary tax.
The Board closely monitors and assesses the level of provisions for Macanese tax taking into consideration factors such as
the Group's structure.
The Group had exposure to PRC taxation for its previous business operation in the PRC. The Board considers that the
Group's exposure to PRC tax has been properly reflected in the Group's consolidated financial statements.
As at the year-end, the following amounts are the outstanding tax provisions.
2017US$'000 2016US$'000
Current liabilities
PRC tax authorities provision - 2,514
Non-current liabilities
Deferred taxation 17,003 12,782
Provisions for Macanese taxations 2,260 2,409
19,263 15,191
PRC tax authorities provision
As at 30 June 2016, a tax provision had been made against the potential tax charge by the PRC tax authorities on the gain
on disposal of the APAC Logistics Centre and Cove Residence. During the year ended 30 June 2016, an interim payment of
HK$6,278,000 (US$810,000) was made to partially settle the tax liability to the PRC tax authorities. On 25 August 2016, the
Group submitted the final tax return to the PRC tax authorities and the final assessed tax liability totalled HK$19 million
(US$2.45 million) was fully settled on 26 August 2016.
Deferred taxation
The Group has recognised a deferred tax liability for the taxable temporary difference relating to the investment property
carried at fair value.
Provisions for Macanese taxations
The Group has made provisions for property tax and complementary tax arisen from its Macau business operations.
Tax Reconciliation
No tax reconciliation has been presented because the Company is exempt from taxation in Guernsey (except as described
above). The tax charge for the year of US$4,284,000 (2016: tax credit of US$3,541,000) comprised a deferred tax charge of
US$4,322,000 (2016: credit of US$4,587,000), arising from the increase in the value of investment property offset by a
reversal in the tax authorities provision for the PRC of US$53,000 (2016: increase in provision of US$1,000,000) and
provision for Macanese taxes of US$15,000 (2016: US$46,000) at a rate of 12%.
10. Trade and other receivables
Current assets 2017US$'000 2016US$'000
Trade receivables 468 1,013
Prepayments 1,220 83
1,688 1,096
11. Trade and other payables
Current liabilities 2017US$'000 2016US$'000
Accruals 351 454
Other payables 1,590 1,437
1,941 1,891
Other payables principally comprise outstanding amounts for operating expenses.
12. Share capital
Ordinary shares 2017US$'000 2016US$'000
Authorised: 300 million ordinary shares of US$0.01 each 3,000 3,000
Issued and fully paid:76.4 million (2016: 76.4 million) ordinary shares of US$0.01 each 764 764
The Company has one class of ordinary shares which carries no rights to fixed income.
Ordinary shares repurchases
During the prior year, under the authority first granted in the Extraordinary General Meeting of 28 June 2010 and renewed
at each Annual General Meetings thereafter, the Company repurchased 1,101,000 ordinary shares or 1.05% of the originally
issued shares, totalling US$3,016,000 at an average share price of 176.64p. During the current year, no shares were
repurchased by the Company. All shares bought back under the buyback programme were at market value and were cancelled.
The Board has publicly stated its commitment to undertake share buybacks at attractive levels of discount of the share
price to Adjusted NAV. In order to continue this strategy, the Board intends to renew this authority at the 2017 Annual
General Meeting.
13. General and administration expenses
General and administration expenses 2017US$'000 2016US$'000
Legal and professional* 747 317
Holding Company administration 269 262
Guernsey SPV administration 134 131
BVI, Hong Kong, & Macanese SPV administration 91 101
Insurance costs 17 19
Listing fees 17 21
Printing & postage 32 44
Other operating expenses 217 260
1,524 1,155
* During the year, the Company incurred expenses of US$356,000 in relation to a bid for the entire portfolio, which are
recorded under legal and professional expenses.
Administration fees for the BVI, Hong Kong and Macanese SPVs are payable to Adept Capital Partners Services Limited in
which Thomas Ashworth is a shareholder and Director.
14. Other financing costs
Financing costs 2017US$'000 2016US$'000
Bank charges 11 11
Loan arrangement fees 269 313
280 324
As at 30 June 2017, unamortised loan arrangement fees were US$608,000 (2016: US$791,000). These have been netted off
against the interest bearing loans and also split between current and non-current.
15. Property operating expenses
Property operating expenses 2017US$'000 2016US$'000
Property management fee 742 742
Property taxes 247 275
Utilities 26 18
Other property expenses 234 236
1,249 1,271
16. Cash flows from operating activities
Cash flows from operating activities 2017US$'000 2016US$'000
Profit/(Loss) for the year before tax 27,392 (49,192)
Adjustments for:
Net gain on valuation of interest rate swap (95) (291)
Net (gain)/loss from fair value adjustment on investment property (36,013) 38,227
Net finance costs 5,436 5,732
Operating cash flows before movements in working capital (3,280) (5,524)
Effects of foreign exchange rate changes (965) (137)
Movement in trade and other receivables (592) 2,183
Movement in trade payables, provision and other payables 468 77
Movement in inventories 3,002 (184)
Net change in working capital 2,878 2,076
Taxation paid (2,843) (1,319)
Net cash used in operating activities (4,210) (4,904)
Cash and cash equivalents (which are presented as a single class of assets on the face of the Consolidated Statement of
Financial Position) comprise cash at bank and other short-term, highly-liquid investments with a maturity of three months
or less. For both year ends, there are no cash equivalents held by the Group.
17. Basic and diluted earnings/(loss) per ordinary share and net asset value per share
The basic and diluted earnings/(loss) per equivalent ordinary share is based on the profit attributable to equity holders
for the year of US$23,108,000 (2016: loss of US$45,651,000) and on the 76,432,964 (2016: 76,583,767) weighted average
number of ordinary shares in issue during the year.
30 June 2017 30 June 2016
Profit Weighted Average EPS Loss Weighted Average EPS
Attributable US$'000 No. of Shares US$ Attributable US$'000 No. of Shares US$
'000s '000s
Basic and diluted 23,108 76,433 0.3023 (45,651) 76,584 (0.5961)
Net asset value reconciliation 2017US$'000 2016US$'000
Net assets attributable to ordinary shareholders 128,786 106,643
Uplift of inventories held at cost to market value 120,521 119,672
Adjusted NAV 249,307 226,315
Number of ordinary shares outstanding ('000) 76,433 76,433
NAV per share (IFRS) (US$) 1.69 1.40
Adjusted NAV per share (US$) 3.26 2.96
Adjusted NAV per share (£)* 2.50 2.23
* US$:GBP rate as at 30 June 2017 is 1.303 (2016: 1.326).
The NAV per share is arrived at by dividing the net assets as at the date of the Consolidated Statement of Financial
Position, by the number of ordinary shares in issue at that date.
Under IFRS, inventories are carried at the lower of cost and NRV. The Adjusted NAV includes the uplift of inventories to
their market values.
The Adjusted NAV per share is arrived at by dividing the Adjusted NAV as at the date of the Consolidated Statement of
Financial Position, by the number of ordinary shares in issue at that date.
There are no potentially dilutive shares in issue.
The fair value of the inventories are classified as Level 3 in the fair value hierarchy and are determined either using the
market approach specifically the sales comparison approach, where a property's fair value is estimated based on the average
selling price of similar properties in the market or the residual method where a property's fair value is derived by taking
the gross development value and deducting the associated costs and fees. There are no changes on the fair valuation
technique used from prior year.
18. Related party transactions
Directors of the Company are all non-executive and by way of remuneration, receive only an annual fee which is denominated
in Sterling.
2017US$'000 2016US$'000
Directors' fees 150 187
The Directors are considered to be the key management personnel (as defined under IAS 24) of the Company. Director's fees
outstanding as at 30 June 2017 were US$38,752 (2016: US$39,461).
Thomas Ashworth has a beneficial interest in and is a Director of Sniper Capital Limited. Sniper Capital Limited is the
manager to the Group and received fees during the year, as detailed in the Consolidated Statement of Comprehensive Income
and on the basis described in Note 19.
Management fees paid for the year totalled US$4,867,000 (2016: US$5,528,000) with US$nil outstanding as at 30 June 2017
(2016: US$nil) (see Note 19). Management fees of US$1,137,000 have been prepaid as at 30 June 2017 (2016: US$nil).
No performance fee was accrued at the year end (2016: US$nil). No performance fee was paid during the year (2016: US$nil).
Thomas Ashworth is a shareholder and Director of Adept Capital Partners Services Limited. Adept Capital Partners Services
Limited provides administrative services to the Macanese, Hong Kong and BVI SPVs and received fees during the year as
detailed in Note 13.
The Group has a Development Management Services Agreement with a development management company named Headland Developments
Limited ("Headland"). Thomas Ashworth has a beneficial interest in and is a Director of Headland and therefore, constitutes
a related party of the Group. Development Management Services fees capitalised in investment property and inventories
during the year are detailed in Note 19.
The Group has a Project Management Services Agreement with a property management company named Bela Vista Property Services
Limited ("Bela Vista"). Thomas Ashworth has a beneficial interest in and is a Director of Bela Vista and therefore,
constitutes a related party of the Group. Project Management Services fees capitalised in investment property during the
year are detailed in Note 19.
All intercompany loans and related interest are eliminated on consolidation.
19. Material contracts
Management fee
Under the terms of an appointment made by the Board of Directors of the Company on 23 May 2006, Sniper Capital Limited was
appointed as Manager to the Group. The Manager is paid quarterly in advance, a fee of 2.0% of the net asset value, as
adjusted to reflect the Property Investment Valuation Basis. During the year ended 30 June 2015, an amendment was made to
the Investment Management Agreement relating to the definition of net asset value on which the fee is calculated. The
definition of net asset value changed to include an 'add-back' of deferred taxation to the Adjusted NAV, subject to a
claw-back provision, as the Directors are of the opinion that such a liability will not be payable by the Group in the
future. Management fees paid for the year totalled US$4,867,000 (2016: US$5,528,000) with US$nil outstanding as at 30 June
2017 (2016: US$nil).
Performance fee
In addition, the Manager is entitled to a performance fee in certain circumstances. This fee is payable by reference to the
increase in Adjusted NAV per ordinary share over the course of each calculation period. The first calculation period ended
on 30 June 2007; each subsequent performance period is a period of one financial year.
Payment of the performance fee is subject to:
i. the achievement of a performance hurdle condition: Adjusted NAV per ordinary share at the end of the relevant
performance period must exceed an amount equal to the US Dollar equivalent of the Placing Price increased at a rate of 10%
per annum on a compounding basis up to the end of the relevant performance period (the "performance hurdle");
ii. the achievement of a 'high water mark': Adjusted NAV per ordinary share at the end of the relevant performance
period must be higher than the highest previously reported Adjusted NAV per ordinary share at the end of a performance
period in relation to which a performance fee, if any, was last earned; and
iii. the accumulated distributions per ordinary share to shareholders exceed the high water mark.
If the basic performance hurdle is met, and the high water mark exceeded, the performance fee will be an amount equal to
20% of the excess of the Adjusted NAV per ordinary share at the end of the relevant performance period over the higher of
(i) the basic performance hurdle; (ii) the Adjusted NAV per ordinary share at the start of the relevant performance period;
and (iii) the high water mark (in each case on a per share basis), multiplied by the time weighted average of the number of
ordinary shares in issue in the performance period (or since Admission in the first performance period) (together, if
applicable, with an amount equal to the VAT thereon).
In the year ended 30 June 2017, no performance fee was accrued (2016: US$nil) by the Group. During the year ended 30 June
2017, a performance fee of US$nil was paid (2016: US$nil) by the Group. This performance fee is based on the basic
performance hurdle.
The Manager's appointment is terminable by the Manager or the Company on not less than 12 months' notice. The Company may
terminate the Management Agreement with immediate effect, if either or both of the Principals is removed from their
position of full-time employment with the Manager or ceases to be available for any reason beyond the Manager's reasonable
control and the Manager fails, within three months (or six months in the case of one only) of such event, to cause to be
made available the services of a competent replacement(s) of equivalent skill and experience. The Management Agreement may
also be terminated with immediate effect by either the Manager or the Company if the other party has gone into liquidation,
administration or receivership or has committed a material breach of the Management Agreement.
Development Management Services Agreement
A Development Management Services Agreement dated 1 June 2010 was entered into between the Group and Headland, under which
Headland provides development management services to the Group in respect of the Group's properties that require
development. Headland is paid a development management fee based on the hourly rates of its personnel and the actual time
spent on each project for the Group. Such hourly rates will be reviewed annually by the Board. Budgeted development
management fees are submitted to the Board for approval and are used to monitor against actual fees charged to the Group.
Under certain circumstances, a fixed percentage fee cap based on construction value of the project may apply, should the
Board deem necessary.
The Group also agrees to reimburse Headland for any reimbursable expenses reasonably incurred in the performance of its
duties under the agreement. Headland agrees to exercise all the reasonable skill, care and diligence to be expected of a
prudent and competent development manager experienced in the provision of development management services for projects of a
similar size, scope, nature and complexity as the projects on which it will be engaged by the Group.
During the year, development management services fees of US$nil (HK$nil) (2016: US$nil (HK$nil)) were capitalised in
investment property and US$17,000 (HK$133,000) (2016: US$22,000 (HK$170,000)) were capitalised in inventories. As at 30
June 2017, US$1,000 (2016: US$5,000) was outstanding.
Project Management Services Agreement
The Group and Bela Vista entered into a Project Management Services Agreement, under which Bela Vista provides project
management services to the Group in respect of the renovation and enhancement works at The Waterside. Bela Vista is paid a
project management fee based on a percentage of the total renovation and enhancement costs and expenses incurred or
contracted by The Waterside. Such percentage will be reviewed annually by the Board.
During the year, project management services fees of US$10,146 (HK$78,806) (2016: US$62,399 (HK$484,143)) were capitalised
in investment property. As at 30 June 2017, US$nil (2016: US$62,399) was outstanding.
Agency Services Agreement
The Group and Bela Vista entered into an Agency Services Agreement, under which Bela Vista provides agency services to the
Group in respect of the sales of residential units and car and motorbike parking spaces of The Fountainside as well as the
individual units in One Central Residences. Bela Vista is paid an agency services fee based on a percentage of the total
sales considerations. Such percentage will be reviewed annually by the Board.
During the year, agency services fees of US$38,352 (HK$297,890) (2016: US$nil (HK$nil)) were paid. As at 30 June 2017,
US$nil (2016: US$nil) was outstanding.
20. Interest rate swaps
During the year, the Group paid a net interest of US$78,000 (2016: US$581,000) to the bank as shown in financing expenses
on the Consolidated Statement of Comprehensive Income.
The swaps are treated as net financial liabilities at fair value through profit or loss with a year end value of US$9,000
(2016: US$104,000). For the year ended 30 June 2017, a fair value gain of US$95,000 (2016: US$291,000) arising from the net
interest rate swaps has been recognised in the Consolidated Statement of Comprehensive Income.
There are no changes in the counterparty credit risk during the period.
Standard Chartered Bank
The Group entered into five interest rate swaps with Standard Chartered Bank to mitigate risks associated with the
variability of cash flows arising from interest rate fluctuations. All of the interest rate swaps matured during the prior
year, with the earliest maturity date being 6 August 2015 and the latest being 20 May 2016.
The total notional amount for the interest rate swaps was HK$500 million, being a notional amount of HK$100 million for
each swap.
Under these swaps, the Group received quarterly interest at variable rates of 3-month HIBOR and paid quarterly interest at
fixed rates ranging from 1.395% to 2.09% per annum.
Hang Seng Bank
The Group has also entered into an interest rate swap with Hang Seng Bank to mitigate risks associated with the variability
of cash flows arising from interest rate fluctuations.
The notional amount for the interest rate swap is HK$250 million, the tenor of the swap is 5 years with maturity date on 19
March 2018. Under this swap, the Group receives quarterly interest at variable rates of 3-month HIBOR and pays quarterly
interest at a fixed rate of 1% per annum.
21. Deposits with lenders
Pledged bank balances represent deposits pledged to the banks to secure the banking facilities granted to the Group.
Deposits amounting to US$3.1 million (2016: US$2.1 million) have been pledged to secure long-term banking facilities and
are, therefore, classified as non-current assets. There are no other significant terms and conditions associated with these
pledged bank balances.
2017US$'000 2016US$'000
Non-current 3,107 2,113
Current 205 -
Pledged for loan covenants 3,312 2,113
22. Commitments and contingencies
As at 30 June 2017, the Group had agreed construction contracts with third parties and is consequently committed to future
capital expenditure in respect of inventories of US$nil (2016: US$nil).
23. Auditors' remuneration
2017US$'000 2016US$'000
Audit fees 101 110
Non-audit fees 245 25
346 135
Non-audit services from auditors pertain to interim review, work performed on a bid for the entire portfolio (US$76,000)
and tax advice related to the disposal of APAC Logistics Centre and Cove Residence in prior years.
24. Operating leases - Group as lessor
The Group has entered into leases on its property portfolio.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2017 are as follows:
Residential 2017US$'000 2016US$'000
Within 1 year 1,229 902
After 1 year, but not more than 5 years - 46
Total future rental income 1,229 948
The majority of leases involve tenancy agreements with a term of 12 months.
25. Subsequent events
There were no significant events occurring after the reporting date of the annual report for the year ended 30 June 2017.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE is hereby given that the Annual General Meeting of the Company will be held at Lefebvre Place, Lefebvre Street, St
Peter Port, Guernsey, GY1 4HY on 8 November 2017 at 2.30pm for the transaction of the following business:
Ordinary Business
The Company's Accounts, the Directors' Report and the Auditors' Report for the year ended 30 June 2017 will be laid before
the meeting and the following resolutions will be proposed as ordinary resolutions:
1. To receive and adopt the audited accounts, the Directors' report, and the Auditors' report for the year ended 30 June
2017.
2. To approve the Directors' Remuneration Report for the year ended 30 June 2017.
3. To appoint Ernst & Young LLP, who have indicated their willingness to act, as auditors of the Company to hold office
until the next Annual General Meeting of the Company.
4. To authorise the Directors to determine the remuneration of Ernst & Young LLP.
5. To re-appoint Chris Russell, who retires as a Director of the Company, in accordance with Articles 20.3 of the
Articles of Incorporation of the Company.
6. To re-appoint Wilfred Woo, who retires as a Director of the Company, in accordance with Articles 20.3 of the Articles
of Incorporation of the Company.
7. To re-appoint Alan Clifton, who retires as a Director of the Company in accordance with the Alternative Investment
Company Code of Corporate Governance ("AIC Code").
8. To re-appoint Thomas Ashworth, who retires as a Director of the Company, in accordance with the AIC Code and UKLA
Listing Rules 15.2.12A (1) and 15.2.1.13A.
Special Business
The following resolutions will be proposed as special resolutions:
9. THAT the Company in accordance with Section 315 of The Companies (Guernsey) Law, 2008 (as amended) (the "Law") be
approved to make market purchases (as defined in Section 316 of the Law) of its own ordinary shares either for retention as
treasury shares or for cancellation, provided that:
i) the maximum number of shares authorised to be purchased is the lower of 11,457,301 ordinary shares and 14.99 percent of
the ordinary shares in issue immediately following the passing of this resolution;
ii) the minimum price which may be paid for a share is £0.01;
iii) the maximum price which may be paid for an ordinary share is an amount equal to the higher of (a) 105 percent of the
average of the middle market quotations for a share as derived from the London Stock Exchange Daily Official List for the
five business days immediately preceding the day on which that ordinary share is purchased; and (b) either the higher of
the price of the last independent trade and the highest current independent bid at the time of purchase;
iv) subject to paragraph (v) below, such authority shall expire at the next Annual General Meeting of the Company unless
such authority is varied, revoked or renewed prior to such date by a special resolution of the Company in general
meeting;
v) notwithstanding paragraph (iv), the Company may make a contract to purchase ordinary shares under such authority prior
to its expiry which will or may be executed wholly or partly after its expiration and the Company may make a purchase of
shares pursuant to any such contract.
Heritage International Fund Managers Limited
Company Secretary
Heritage Hall, Le Marchant Street
St Peter Port, Guernsey
GY1 4HY
27 September 2017
Notes to the Notice of the Annual General Meeting
1. A member is entitled to attend and vote at the Annual General Meeting provided that all calls due from him in respect of
his shares have been paid. A member is also entitled to appoint one or more proxies to attend and, on a poll, vote instead
of him. The proxy need not be a member of the Company.
2. Pursuant to Article 18.7 of the Company's Articles of Incorporation, a resolution put to the vote shall be decided on a
show of hands or by a poll at the option of the Chairman.
3. A form of proxy is enclosed with this notice. To be effective, the instrument appointing a proxy (together with any
power of attorney or other authority under which it is executed or a duly certified copy of such power) must be sent to
Capita Asset Services, PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF, no later than 2.30pm on Monday, 6
November 2017, or not less than 48 hours before the time for holding any adjourned meeting, as the case may be. A
corporation may execute a proxy under its common seal or by the hand of a duly authorised officer or other agent.
Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the
meeting.
4. The quorum for the Annual General Meeting is at least two shareholders present in person or by proxy.
5. Resolutions
- More to follow, for following part double click ID:nRSb0317SfRecent news on Macau Property Opportunities Fund
See all newsREG - Macau Prop Opp Fund - Interim Results for period ended 31 December 2025
AnnouncementREG - Macau Prop Opp Fund - Quarterly Net Asset Value Update
AnnouncementREG - Macau Prop Opp Fund - Investor Update H2 2025
AnnouncementREG - Macau Prop Opp Fund - Quarterly Net Asset Value Update
AnnouncementREG - Macau Prop Opp Fund - Result of AGM
Announcement