REG - Macau Prop Opp Fund - Final Results for the period to 30 June 2015 <Origin Href="QuoteRef">MPO.L</Origin> - Part 3
24/09/2015 07:01
- Part 3: For the preceding part double click ID:nRSX0287Ab
8 19,194 -
Financial liabilities at fair value through profit or loss - interest rate swap 20 569 975
21,536 34,629
Total liabilities 191,421 192,085
Total equity and liabilities 346,868 414,939
Net Asset Value per share (US$) 17 2.00 2.74
Adjusted Net Asset Value per share (US$) 17 3.97 4.89
The accompanying notes below are an integral part of these consolidated financial statements. The consolidated financial
statements were approved by the Board of Directors and authorised for issue on 23 September 2015.
Alan Clifton Wilfred Woo
Director Director
Consolidated Statement of Comprehensive Income
2015 2014
Note US$'000 US$'000
Income
Sale of inventories 7 27,906 24,639
Rental income 4,311 5,052
Net (loss)/gain from fair value adjustment on investment property 6 (62,048) 83,645
Fair value gain on disposal of investment property 6 - 17,251
Other income 11 -
(29,820) 130,587
Expenses
Cost of sales of inventories 7 11,004 14,977
Management fee 19 8,117 8,080
Performance fee 19 - 23,969
Non-Executive Directors' fees 18 231 247
Auditors' remuneration 23 122 162
Property operating expenses 15 1,687 1,380
Sales and marketing expenses 202 1,725
General and administration expenses 13 1,490 1,910
Loss on foreign currency translation 194 573
(23,047) (53,023)
Operating (loss)/profit for the year (52,867) 77,564
Finance income and expenses
Net gain on valuation of interest rate swap 20 265 95
Bank loan interest (3,901) (2,774)
Interest expense on interest rate swap 20 (1,035) (1,031)
Other financing costs 14 (506) (542)
Bank and other interest 2 5
(5,175) (4,247)
(Loss)/profit for the year before tax (58,042) 73,317
Taxation 9 5,515 (8,242)
(Loss)/profit for the year after tax (52,527) 65,075
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations (5) 249
Total comprehensive (loss)/income for the year (52,532) 65,324
(Loss)/profit attributable to:
Equity holders of the Company (52,527) 65,075
Total comprehensive (loss)/income attributable to:
Equity holders of the Company (52,532) 65,324
2015 2014
US$ US$
Basic and diluted (loss)/profit per Ordinary Share attributable to the equity holders of the Company during the year 17 (0.6661) 0.7609
Consolidated Statement of Changes in Equity
Share capital Retained earnings Distributable reserves Foreign currency translation reserve Total
Note US$'000 US$'000 US$'000 US$'000 US$'000
Balance brought forward at 1 July 2014 814 136,902 84,049 1,089 222,854
Loss for the year - (52,527) - - (52,527)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - (5) (5)
Total comprehensive income for the year - (52,527) - (5) (52,532)
Share buyback 12 (39) - (14,836) - (14,875)
Balance carried forward at 30 June 2015 775 84,375 69,213 1,084 155,447
Share capital Retained earnings Distributable reserves Foreign currency translation reserve Total
Note US$'000 US$'000 US$'000 US$'000 US$'000
Balance brought forward at 1 July 2013 900 71,827 141,212 840 214,779
Profit for the year - 65,075 - - 65,075
Items that may be reclassified subsequently to profit or loss
Exchange difference on translating foreign operations - - - 249 249
Total comprehensive income for the year - 65,075 - 249 65,324
Return of Capital - - (29,000) - (29,000)
Share buyback 12 (86) - (28,163) - (28,249)
Balance carried forward at 30 June 2014 814 136,902 84,049 1,089 222,854
Consolidated Statement of Cash Flows
2015 2014
Note US$'000 US$'000
Net cash (used in)/generated from operating activities 15 (38,497) 3,859
Cash flows from investing activities
Capital expenditure on investment property 6 (103) (3,604)
Movement in pledged bank balances 6 2,243
Proceeds from disposal of investment property 6,452 58,199
Net cash (used in)/ generated from investing activities 6,355 56,838
Cash flows from financing activities
Proceeds from bank borrowings 51,441 111,563
Repayment of bank borrowings (13,622) (76,716)
Share buyback 11 (14,875) (28,249)
Return of Capital - (29,000)
Interest and bank charges paid (5,654) (4,283)
Net cash generated from/(used in) financing activities 17,290 (26,685)
Net movement in cash and cash equivalents (14,852) 34,012
Cash and cash equivalents at beginning of year 43,528 9,864
Effect of foreign exchange rate changes 73 (348)
Cash and cash equivalents at end of year 28,749 43,528
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 Guernsey
Financial Services Commission. The address of the registered office is given below.
The consolidated financial statements for the year ended 30 June 2015 comprise the financial statements of the Company and
its subsidiaries (together referred to as the "Group"). The Group invests in residential and commercial property and
property-related ventures primarily in Macau.
These consolidated financial statements were approved for issue by the Board of Directors on 23 September 2015.
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 International Financial Reporting Standards
("IFRS") as adopted by the European Union; 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 as adopted by the European Union 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.
There was a presentational reclassification within the consolidated statement of cash flows whereby it was deemed
appropriate to include the 'movement in pledged bank balances' under 'investing activities' as opposed to 'financing
activities' as in prior periods. This resulted in no net cash flow impact.
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 Extraordinary General Meeting held on 7 April 2014 the shareholders voted in favour of amending the Company's
Articles of Incorporation so that the next continuation vote would take place no later than 31 December 2016. This will
allow a suitable timeframe for the maximisation of the value of the Company's portfolio. The Directors have considered
whether the continuation vote before the end of 2016 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; only 25% of shareholder support is required to ensure continuation;
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.
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 and the Directors'
assessment of the Group's committed banking facilities and expected continuing compliance with related covenants.
New and amended standards and interpretations adopted by the Group
The following amendments to existing standards and interpretations were effective for the year, but either they were not
applicable to or did not have a material impact on the Group:
Effective dates
IFRS 10 Consolidated financial statements 1 January 2014
IFRS 11 Joint arrangements 1 January 2014
IFRS 12 Disclosure of interests in other entities 1 January 2014
IAS 27 Separate financial statements 1 January 2014
IAS 28 Investments in associates and joint ventures 1 January 2014
IAS 32 Financial instruments: presentation - offsetting
financial assets and financial liabilities (Amendments) 1 January 2014
IAS 36 Impairment of assets - recoverable amount disclosures for
non-financial assets(Amendments) 1 January 2014
IAS 39 Financial instruments: recognition and measurement -
Novation of derivatives and continuation of hedge
accounting(Amendments) 1 January 2014
IFRIC 21 Levies 1 January 2014
IFRS 10,
IFRS 12
& IAS 27 Amendments in respect of investment entities 1 January 2014
Various Annual improvements to IFRSs 2010 - 2012 cycle 1 July 2014
Various Annual improvements to IFRSs 2011 - 2013 cycle 1 July 2014
IAS 19 Employee benefits - defined benefit plans: employee contributions
(amendments) 1 July 2014
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
and have not been adopted by the European Union and therefore have not been adopted by the Group:
Effective dates
IFRS 9 Financial instruments no earlier than 1 January 2018
IFRS 14 Regulatory deferral accounts 1 January 2016
IFRS 15 Revenue from contracts with customers 1 January 2018
The Directors anticipate that with the exception of IFRS 9, the precise impact of which is yet to be analysed, 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 special-purpose vehicles
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 that are 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 that are 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 property 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 (the "functional currency"). The consolidated financial statements are
presented in US Dollars 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:
- Assets and liabilities for each statement of financial position are presented at the closing rate at the date of that
statement of financial position;
- Income and expenses for each statement of comprehensive income are translated at average exchange rates; and
- All resulting exchange differences are recognised as a separate component of other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign
operation is recognised in profit or loss.
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 properties
Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or
condition of the specific asset. 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
(Macau) Limited who hold recognised and relevant professional qualifications and have recent experience in the location and
category of the investment property 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's derivative financial instruments are financial assets and liabilities at fair value through profit and loss.
Financial instruments classified at fair value through profit or loss are recognised on trade date, which is the date on
which the Group commits to purchase the asset or assume the liability and are carried 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 net realisable value. Net realisable value 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 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 is carried at fair value through profit or loss if it 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 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.
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 of 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 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 share premium and are part of the Group's reserve account that may be legally paid out in
the form of a dividend. Payments to shareholders from reserves can be seen as a distribution of capital, rather than
accumulated profit.
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.
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 bases 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 conclusions 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 as disclosed in the
Group's prospectus which is available on the Group's website. The Group's overall market positions are 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 rate 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 2015 and 30 June 2014. 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 HK$/US$, due to the HK$ being pegged to the US$, and up to a 10% increase/decrease for all other
currencies.
Other currencies Total
As at 30 June 2015 US$'000 £'000 HK$'000 '000 US$'000
Trade and other receivables (excluding prepayments) - - 3,190 111 3,301
Cash and cash equivalents 1 41 28,511 196 28,749
Deposits with lenders - - 2,650 - 2,650
Financial assets at fair value through profit or loss - - 174 - 174
Total financial assets 1 41 34,525 307 34,874
Trade and other payables - 362 59 1,352 1,773
Interest-bearing loans - - 166,770 - 166,770
Financial liabilities at fair value through profit or loss - - 569 - 569
Deposits on property presales - - - - -
Performance fee payable - - - - -
Total financial liabilities - 362 167,398 1,352 169,112
Net financial position 1 (321) (132,873) (1,045) (134,238)
Other currencies Total
As at 30 June 2014 US$'000 £'000 HK$'000 '000 US$'000
Trade and other receivables (excluding prepayments) - - 6,459 112 6,571
Cash and cash equivalents 2 86 42,889 551 43,528
Deposits with lenders - - 2,656 - 2,656
Financial assets at fair value through profit or loss - - 315 - 315
Total financial assets 2 86 52,319 663 53,070
Trade and other payables 506 - 45 3,688 4,239
Interest-bearing loans - - 128,952 - 128,952
Financial liabilities at fair value through profit or loss - - 975 - 975
Deposits on property presales - - 5,451 - 5,451
Performance fee payable 23,964 - - - 23,964
Total financial liabilities 24,470 - 135,423 3,688 163,581
Net financial position (24,468) 86 (83,104) (3,025) (110,511)
The table above presents financial assets and liabilities denominated in foreign currencies held by the Group as at 30 June
2015 and 30 June 2014 and can be used to monitor foreign currency risk as at that date.
At 30 June 2015, if Sterling weakened/strengthened by 10% against the US Dollar with all other variables held constant, the
post-tax loss for the year and movement in foreign currency translation reserve would have been US$32,000 higher/lower
(2014: US$9,000 lower/higher). Any movement would have no other effect on the remaining equity components of the Group. The
HK Dollar is pegged to the US Dollar 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. If the HK Dollar weakened/strengthened by 1% against
the US Dollar with all other variables held constant, the post-tax loss for the year and movement in foreign currency
translation reserve would have been US$1,329,000 higher/lower (2014: US$831,000 higher/lower). Any movement would have no
other effect on the remaining equity components of the Group.
The Macanese Patacas is fixed to the HK Dollar at a rate of MOP:HK$ 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.
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$968,000 higher/US$1,046,000 lower (2014: US$2,124,000
higher/US$1,747,000 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 and all other variables were held constant, the Group's loss for the year would have
increased by US$1,354,000 (2014: US$763,000) (based on the interest bearing net financial liability per the table below).
This is mainly due to the Group's exposure to interest-bearing loans. The majority of loans are hedged, see details below.
The following table details the Group's exposure to interest rate risks:
As at 30 June 2015 Interest bearing Non-interest bearing Total
US$'000 US$'000 US$'000
Trade and other receivables (excluding prepayments) - 3,301 3,301
Cash and cash equivalents 28,749 - 28,749
Deposits with lenders 2,650 - 2,650
Financial assets at fair value through profit or loss - 174 174
Total financial assets 31,399 3,475 34,874
Trade and other payables - 1,773 1,773
Interest-bearing loans 166,770 - 166,770
Financial liabilities at fair value through profit or loss - 569 569
Total financial liabilities 166,770 2,342 169,112
As at 30 June 2014 Interest bearing Non-interest bearing Total
US$'000 US$'000 US$'000
Trade and other receivables (excluding prepayments) 6,452 119 6,571
Cash and cash equivalents 43,528 - 43,528
Deposits with lenders 2,656 - 2,656
Financial assets at fair value through profit or loss - 315 315
Total financial assets 52,636 434 53,070
Trade and other payables - 4,239 4,239
Interest-bearing loans 128,952 - 128,952
Financial liabilities at fair value through profit or loss - 975 975
Deposits on property pre-sales - 5,451 5,451
Performance fee payable - 23,964 23,964
Total financial liabilities 128,952 34,629 163,581
The Group has entered into various interest rate swaps as disclosed in Note 20.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered into with the Group. The Group is exposed to credit risks from both its leasing activities and
financing activities, including deposits with banks and financial institutions.
The Group's main exposure to credit risk is its balances with banks. This risk is mitigated through using banks with a high
credit rating.
The Group's deposits, including deposits with lenders, are split by banks with the following ratings from Fitch and Moody's
Ratings:
2015 2014
Credit Rating US$ '000 US$ '000
AA - -
AA- 2,679 2,707
A+ 28 22,232
A 17 14,550
A- 22,617 3,610
BBB+ 6,058 3,085
31,399 46,184
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. 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$31,399,000 (2014: US$46,184,000), deposits amounting to US$2,650,000 (2014:
US$2,656,000) have been pledged to secure banking facilities, of which US$1,941,000 (2014: US$2,656,000) relates to
long-term banking facilities, and are, therefore, classified as non-current assets. Pledged bank balances represent
deposits pledged to the banks to secure the banking facilities granted to the Group.
The Group has term loan facilities with Hang Seng Bank, Industrial and Commercial Bank of China, and Banco Tai Fung for its
investments in The Waterside, individual units in One Central Residences, Estrãda da Penha, and The Fountainside. The
Group's liquidity position is monitored by the Manager and is reviewed quarterly by the Board of Directors. Please refer to
Note 8 for details of the facilities.
The table below analyses the Group's financial assets and liabilities into relevant maturity profiles based on the
remaining period at the consolidated statement of financial position date to the contractual maturity date. The amounts
disclosed in the table are the contractual discounted cash flows.
As at 30 June 2015 On demand US$'000 Less than 3 months US$'000 3 to 12 months US$'000 1 to 2 years US$'000 2 to 5 years US$'000 Over 5 years US$'000 Total US$'000
Trade and other receivables (excluding prepayments) - 3,183 7 111 - - 3,301
Cash and cash equivalents 28,749 - - - - - 28,749
Deposits with lenders - - 709 - 1,941 - 2,650
Financial assets at fair value through profit or loss - - - 47 127 - 174
Total financial assets 28,749 3,183 716 158 2,068 - 34,874
Trade and other payables - 821 952 - - - 1,773
Interest-bearing loans - 5,287 18,186 29,555 75,398 38,401 166,827
Financial liabilities at fair value through profit or loss - 258 311 - - - 569
Total financial liabilities - 6,366 19,449 29,555 75,398 38,401 169,169
Net financial position 28,749 (3,183) (18,733) (29,397) (73,330)
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