REG - Macau Prop Opp Fund - Final Results for the period to 30 June 2015 <Origin Href="QuoteRef">MPO.L</Origin> - Part 4
24/09/2015 07:01
- Part 4: For the preceding part double click ID:nRSX0287Ac
(38,401) (134,295)
As at 30 June 2014 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$'000
Trade and other receivables (excluding prepayments) - 6,452 7 112 - - 6,571
Cash and cash equivalents 43,528 - - - - - 43,528
Deposits with lenders - - - - 2,656 - 2,656
Financial assets at fair value through profit or loss - - - - 315 - 315
Total financial assets 43,528 6,452 7 112 2,971 - 53,070
Trade and other payables - 512 3,727 - - - 4,239
Interest-bearing loans - 781 2,651 33,359 49,164 57,241 143,196
Financial liabilities at fair value through profit or loss - - 975 - - - 975
Deposits on property pre-sales - - 5,451 - - - 5,451
Performance fee payable - 23,964 - - - - 23,964
Total financial liabilities - 25,257 12,804 33,359 49,164 57,241 177,825
Net financial position 43,528 (18,805) (12,797) (33,247) (46,193) (57,241) (124,755)
Fair value hierarchy
Financial investments measured at fair value
IFRS 13 requires disclosure of fair value measurements by level as discussed in Note 1.
The Group's interest rate swaps have been classified within level 2 which makes use of a model with inputs that are
directly or indirectly observable market data. The following table presents the value carried on the consolidated statement
of financial position by level within the valuation hierarchy as at 30 June 2015:
As at 30 June 2015 As at 30 June 2014
US$'000 US$'000
Non-current assets 174 315
Current liabilities (569) (975)
Net interest rate swap liabilities (395) (660)
The fair value of the interest rate swaps is determined from proprietary models based upon recognised financial principles
and reasonable estimates about relevant future market conditions. The inputs used in fair valuing the interest rate swaps
are swap rates, date convention, calculation periods, transactional costs and other costs. There have been no changes in
the valuation technique during the year. The interest rate swaps have been fair valued at each reporting period. There have
been no transfers between levels.
As stated above, movements in the significant unobservable inputs upon which the fair value is calculated, would have an
effect on the overall fair market value of the interest rate swaps. The Board believes that a reasonable sensitivity range
expected in each input would be a flat movement of +/- 1%.
For all assets and liabilities, other than those recognised at fair value or whose fair value is disclosed within these
financial statements, carrying value of the asset/liability is an approximation of their fair value.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of 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 2015, there were no borrowings other than the Group 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. During the year, the
Company has purchased 3,881,036 (2014: 8,585,000) Ordinary Shares at a weighted average price of 237.75p (2014: 201.89p) as
per Note 12. All of the shares bought back 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 judgements
Management makes 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, net realisable value and adjusted net asset value are based on the current market
valuation provided by Savills (Macau) Limited, an independent valuer. Savills are 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.
b)Inventory is stated at the lower of cost and net realisable value ("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.
The Group did not make any critical accounting judgements, other than as described above, in the year ended 30 June 2015.
4. Subsidiaries
All special-purpose vehicles (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 2) Limited
Macau (Site 4) Limited
MPOF Macau (Site 5) Limited
MPOF Macau (Site 6) Limited
Macau (Site 7) Limited
Macau (Site 8) Limited
Macau (Site 9) Limited
Macau (Site 10) Limited
The Fountainside Company Limited
The Waterside Company Limited
Castelo Branco Companhia Limitada
Braga Companhia Limitada
Vila Real Companhia Limitada
Portalegre Companhia Limitada
During the current year, the following Hong Kong companies: Top Century Properties Limited; Windex Properties Limited;
Excelsior Properties Limited and World Pacific Properties Limited were liquidated. The following BVI companies: Lucky Go
International Limited; Right Year International Limited; Magic Bright International Limited and Swift Link Limited were
liquidated after their underlying properties were disposed of. Please refer to Note 7 for further details of inventories
disposed of during the year.
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
Macau (Site 4) Limited 100% Macau
MPOF Macau (Site 5) Limited 100% Macau
MPOF Macau (Site 6) Limited 100% Macau
Macau (Site 7) Limited 100% Macau
Macau (Site 8) Limited 100% Macau
Macau (Site 9) Limited 100% Macau
Macau (Site 10) 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
Vila Real 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 (Monte) Limited 100% Guernsey
MPOF (Paulo) Limited 100% Guernsey
MPOF (Guia) Limited 100% Guernsey
MPOF (Antonio) Limited 100% Guernsey
MPOF (6A) Limited 100% Guernsey
MPOF (6B) Limited 100% Guernsey
MPOF (7A) Limited 100% Guernsey
MPOF (7B) Limited 100% Guernsey
MPOF (8A) Limited 100% Guernsey
MPOF (8B) Limited 100% Guernsey
MPOF (9A) Limited 100% Guernsey
MPOF (9B) Limited 100% Guernsey
MPOF (10A) Limited 100% Guernsey
MPOF (10B) Limited 100% Guernsey
MPOF Mainland Company 1 Limited 100% Barbados
Bream Limited 100% Guernsey
Cannonball Limited 100% Guernsey
Civet Limited 100% Guernsey
Gainsun Investments Limited 100% BVI
Gorey Hills International Limited 100% BVI
Hillsleigh Holdings Limited 100% BVI
Jin Mei International Limited 100% BVI
Mega League Investments Limited 100% BVI
Multi Gold International 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
Goldex Properties Limited 100% Hong Kong
Honway 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 Macau Property Opportunities Fund Limited is deemed to be
the Board itself. The factors used to identify the Group's reportable segments are centred on asset class, differences in
geographical area and differences in regulatory environment. Further, foreign exchange and political risk is 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 sector, 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 each represent more than 10% of Group revenues. Revenues
represented by rental income were US$4,311,000 for the year ended 30 June 2015 (2014: US$5,052,000).
6. Investment property
2015 2014
US$'000 US$'000
At the beginning of the year 306,575 266,498
Capital expenditure on property * (631) 3,604
Proceeds from disposals - (64,651)
Gain on disposal of investment property - 17,251
Fair value adjustment (62,048) 83,645
Exchange difference (86) 228
Balance at end of the year 243,810 306,575
* Stamp duty expenditure relating to the purchase of The Waterside had been capitalised in the prior year. During the
current year, the stamp duty was settled at an amount equal to US$734,000 less than estimated initially. This amount has
been removed from the asset cost as at 30 June 2015. See Note 25 for further detail.
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 review the
latest valuation based on their knowledge of the property market and compare these to previous valuations. The Group's
investment properties were revalued at 30 June 2015 by independent, professionally-qualified valuers Savills (Macau)
Limited. 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 (Macau) Limited 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 less the over-provision of stamp
duty on The Waterside made in the prior year.
Rental income arising from The Waterside of US$4,311,000 (2014: US$4,957,000) was received during the year. Direct
operating expenses of US$1,400,000 (2014: US$939,000) 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$159,000 (2014:
US$58,000).
There are no disposals of investment property during the year. In the prior year, the Group disposed of APAC Logistics
Centre and Cove Residence properties in Zhuhai, China, for a total consideration of RMB392 million (US$64.7 million). The
net profit from the disposal amounting to US$29 million was distributed by way of a return of capital in April 2014.
The following table shows the assumptions used in valuing the investment property which is classified as Level 3 in the
fair value hierarchy:
Property information Carrying amount/fair value as at 30 Jun 2015 US$ '000 Valuation technique Input Unobservable and observable inputs used in determination of fair values Other key information
Name The Waterside 243,810 Term and Term rent HK$27.8 psf Age of building
Type Residential/Completed apartments Reversion Analysis Term yield 1.80% Remaining useful life of building
Location One Central (exclusive of management fee and furniture)
Tower 6 Reversionary rent (exclusive of management fee and furniture) HK$25.8 psf
Macau Reversionary yield 2.3%
(exclusive of management fee and furniture)
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 by US$12 million or decrease by US$12 million.
If the term, revisionary yield or discount rate 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$13 million.
The Waterside is currently valued at highest and best use. There is no extra evidence available to suggest that it has an
alternative use that would provide a greater fair value measurement.
Financial investments measured at fair value
IFRS 13 requires disclosure of fair value measurements by level as discussed in Note 1.
There have been no transfers between levels during the period or a change in valuation technique since last period.
7. Inventories
2015 2014
US$'000 US$'000
Cost
Balance brought forward 54,351 64,768
Additions 23,959 4,520
Disposals (11,004) (14,977)
Exchange difference (14) 40
Balance carried forward 67,288 54,351
During the year the Group, purchased a luxury private house located in Macau's Penha Hill neighbourhood for a total
acquisition cost of HK$182,320,000 (US$23,500,000) (inclusive of stamp duty and all other fees and expenses). The
acquisition is complementary to the Group's portfolio given that the property adjoins the Group's existing property The
Green House. The Green House together with this newly acquired property is now named as Estrãda da Penha.
Additions also include capital expenditure, development costs and capitalisation of financing costs.
Interest costs of US$225,000 (2014: US$374,000) relating to The Fountainside loan facility were capitalised during the
year.
Under IFRS, inventories are valued at the lower of cost and net realisable value. The carrying amounts for inventories as
at 30 June 2015 amounts to US$67,288,000 (2014: US$54,351,000). Net Realisable Value as at 30 June 2015 as determined by
independent, professionally-qualified valuer, Savills (Macau) Limited, was US$217,655,000 (2014: US$226,966,000).
27 units and 5 car parking spaces of The Fountainside (2014: six individual units in One Central Residences) were sold
during the year for a total consideration of US$27.9 million (HK$216.4 million) (2014: US$24.6 million (HK$191.1 million))
against a total cost of US$11.0 million (HK$85.6 million) (2014: US$15.0 million (HK$116.2 million)) which resulted in a
net profit of US$16.9 million (HK$130.8 million) (2014: US$9.7 million (HK$74.9 million)) after all associated fees and
transaction costs. These disposals were completed on various dates after the occupancy permit was issued on 10 February
2015.
8. Interest-bearing loans
2015 2014
US$'000 US$'000
Bank loans - Secured
- Current portion 19,194 -
- Non-current portion 147,576 128,952
166,770 128,952
The Group has a term loan facility with Hang Seng Bank for The Waterside and the individual One Central Residences units.
On 4 September 2014, a new tranche was executed for HK$100 million (US$13 million) (tranche 4) to top up the loan
facility.
As at 30 June 2015, four tranches remained outstanding. Tranche 1 had an outstanding balance of HK$79.4 million (US$10.2
million) (2014: HK$79.4 million (US$10.2 million)); Tranche 3 had an outstanding balance of HK$750 million (US$96.7
million) (2014: HK$ 750 million (US$96.7 million)); and Tranche 4 had an outstanding balance of HK$100 million (US$12.9
million) (2014: HK$ Nil (US$ Nil)). Interest is paid quarterly on this loan facility. As at 30 June 2015, the loan-to-value
ratio for the Hang Seng One Central facility was 46.28%.
The interest rates applicable to Tranche 1, Tranche 3 and Tranche 4 of the term loan are 1.6% per annum, 2.25% per annum
and 2.35% per annum, respectively, over the one, two or three-month HIBOR rate. The choice of rate is at the Group's
discretion. Tranche 1 matures on 25 November 2015 whereas Tranche 3 and Tranche 4 mature on 19 September 2020. The
principal is to be repaid in half-yearly instalments commencing 19 September 2015 with 40% 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 Residence units will be waived, subject to the Group maintaining a loan-to-value ratio of not
more than 50% on the facility.
During the current year, the Group executed a loan facility with the Industrial and Commercial Bank of China (Macau)
Limited to refinance the credit facility with OCBC Wing Hang Limited (Macau) (previously known as Banco Weng Hang S.A.) in
relation to The Fountainside redevelopment project. The facility amount is HK$220 million (US$28.4 million) with a tenor of
3 years to mature in March 2018. Full amount of the facility was drawdown in March 2015 to repay the OCBC Wing Hang
facility. Interest is charged at 3% per annum over the three-month HIBOR rate. The principal is to be repaid in half-yearly
instalments commencing 12 months after drawdown date 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 a result of the refinancing, all units
presold with a total value of HK$202.6 million (US$26.1 million) pledged as collateral were released.
As at 30 June 2015, the facility had an outstanding balance of HK$214.4 million (US$27.7 million) (2014: HK$100 million
(US$12.9 million)). Sales proceeds of US$0.3 million (2014: US$1.3 million) were pledged with the lender. As at 30 June
2015, the loan-to-value ratio for The Fountainside facility was 49.33%.
The Group has two loan facilities for the purchase and redevelopment of Estrãda da Penha:
Banco Tai Fung
The loan facility with Banco Tai Fung has a term of 3 years and the facility amount is HK$70 million. Interest is charged
at 3.2% per annum over the six-month HIBOR rate and repayment is due in full at maturity in June 2017. As at 30 June 2015,
the facility had an outstanding balance of HK$70 million (US$9.0 million) (2014: 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
Group is the guarantor for this term loan. Interest is paid monthly on this loan facility. As at 30 June 2015, the
loan-to-value ratio for this facility was 44.59%.
ICBC Macau
The loan facility with Industrial and Commercial Bank of China (Macau) Limited was executed on 11 December 2014. The term
of the loan is 3 years and the facility amount is HK$79 million. Interest is charged at 3.2% per annum over the three-month
HIBOR rate and repayment is due in full at maturity in December 2017. As at 30 June 2015, the facility had an outstanding
balance of HK$79 million (US$10.2 million) (30 June 2014: HK$ Nil (US$ Nil)). This facility is secured by a first legal
mortgage over the property as well as a pledge of all income from the property. The Group 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 2015, the loan-to-value ratio for this facility was 42.47%.
Bank loan interest paid during the year was US$4,126,000 (2014: US$3,148,000), including US$225,000 (2014: US$374,000)
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 2015, the fair value of the interest-bearing loans was
US$57,000 higher than their carrying value (2014: the fair value of the financial liabilities was US$27,000 higher than
their carrying value).
The Company's Interest-bearing loans have been classified within Level 2 of the fair value hierarchy (Note 1) 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 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$1,914) (2014:£600 (US$942)).
The Group would only be exposed to Hong Kong profits tax if it is:
(i) not exempted under the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (the "Ordinance") and it is;
(ii) treated as carrying on a trade or business in Hong Kong either on its own account or through any person as an agent.
No accrual has been made for Hong Kong profits tax as the Board believes that no such tax exposure exists at the end of the
reporting year (2014: US$ Nil).
The Group is not subject to any income, withholding or capital gains taxes in the British Virgin Islands ("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% (2014: 10%) of any rent received or 6% (2014: 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 structure.
The Group also has exposure to People's Republic of China taxation for its business operation in the People's Republic of
China. The Board considers that the Group's exposure to People's Republic of China 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.
2015 2014
US$'000 US$'000
People's Republic of China tax authorities provision 2,324 2,323
Deferred taxation 17,385 24,838
Provisions for Macanese taxations 2,600 -
22,309 27,161
People's Republic of China tax authorities provision
As at 30 June 2015 due to the prior year disposal of the APAC Logistics Centre and Cove Residences in Zhuhai, China, the
Group is in the process of submitting a tax return to the People's Republic of China tax authorities. The provision has
arisen due to the profit on the disposal. The Group has received taxation advice as to the potential charge that may be
imposed by the People's Republic of China tax authorities. As the outcome is uncertain as to the charge, the Group has
taken the approach of taking the mean of the highest and lowest potential charge estimated. The provision relating to the
tax is expected to be settled within one to two years.
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 credit for the year of US$5,515,000 (2014: tax charge of US$8,242,000) comprised a deferred tax credit of
US$7,453,000 arising from the reduction in the value of investment property offset by a provision for Macanese taxes of
US$1,938,000 at a rate of 12%.
10. Trade and other receivables
Current assets 2015 2014
US$'000 US$'000
Trade receivables 3,189 7
Prepayments 897 943
4,086 950
Other payables principally comprise amounts outstanding for operating expenses.
11. Trade and other payables
Current liabilities 2015 2014
US$'000 US$'000
Accruals 385 511
Other Payables 1,388 3,728
1,773 4,239
Other payables principally comprise amounts outstanding for operating expenses.
12. Share capital
Ordinary Shares
2015 2014
US$'000 US$'000
Authorised:
300 million Ordinary Shares of US$0.01 each 3,000 3,000
Issued and fully paid:
77.5 million (2014: 81.4 million) Ordinary Shares of US$0.01 each 775 814
The Company has one class of Ordinary Shares which carry no right to fixed income.
Ordinary Shares repurchases
During the year, under the authority first granted in the Extraordinary General Meeting of 28 June 2010 and renewed at each
Annual General Meetings held since, the Company repurchased 3,881,036 (2014: 8,585,000) Ordinary Shares or 3.70% (2014:
8.18%) of the originally issued shares, totalling US$14,875,000 (2014: US$28,249,000) at an average share price of 237.75p
(2014: 201.89p). All shares bought back under the buyback programme were at market value and were cancelled.
The following table summarises all shares repurchased by the Company during the year and as at 30 June 2015:
Number of shares Repurchase Price per Share *
Total shares repurchased /average price at beginning of year 23,585,000 151.54
26 August 2014 555,000 250.00
28 August 2014 1,030,000 250.00
05 September 2014 450,000 250.00
18 September 2014 396,036 236.50
26 September 2014 137,500 230.09
01 October 2014 362,500 234.97
17 April 2015 500,000 218.00
06 May 2015 450,000 210.00
Total shares repurchased /average price during the current year 3,881,036 237.75
Total shares repurchased/average price at end of year 27,466,036 163.72
* Price in pence Sterling
After the year end a further 1,101,000 shares were repurchased at an average price of 176.6p and cancelled.
The Board has publicly stated its commitment to undertake share buybacks at attractive levels of discount of the share
price to Adjusted NAV. In order to continue this strategy, the Board intends to renew this authority at the 2015 Annual
General Meeting.
13. General and administration expenses
2015 2014
General and administration expenses US$'000 US$'000
Legal and professional 372 625
Holding Company administration 344 376
Guernsey SPV administration 172 188
British Virgin Islands, Hong Kong, & Macanese SPV administration 99 101
Insurance costs 19 18
Listing fees 24 17
Printing & postage 54 51
Other operating expenses 406 534
1,490 1,910
Administration fees for the British Virgin Islands, Hong Kong and Macanese SPVs are payable to Adept Capital Partners
Services Limited in which Thomas Ashworth is a shareholder and Director.
14. Other financing costs
2015 2014
Finance costs US$'000 US$'000
Bank charges 161 12
Loan arrangement fees 345 530
506 542
As at 30 June 2015, unamortised loan arrangement fees were US$807,000 (2014: US$754,000).
15. Property operating expenses
2015 2014
Property operating expenses US$'000 US$'000
Property management fee 693 656
Property taxes 677 339
Utilities 35 27
Other property expenses 282 358
1,687 1,380
16. Cash flows from operating activities
2015 2014
US$'000 US$'000
Cash flows from operating activities
(Loss)/Profit for the year before tax (57,365) 73,317
Adjustments for:
Net gain on valuation of interest rate swap (265) (95)
Net loss/(gain) from fair value adjustment on investment property 62,048 (83,645)
Gain on disposal of investment property - (17,251)
Net finance costs 5,429 4,342
Operating cash flows before movements in working capital 9,847 (23,332)
Effects of foreign exchange rate changes (5) 371
Movement in trade and other receivables 3,424 21
Movement in trade payables, provision and other payables (32,610) 16,382
Movement in inventories (12,712) 10,417
Net change in working capital (47,673) 26,820
Net cash (used in)/from in operating activities (38,497) 3,859
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.
17. Basic and diluted (loss)/profit per ordinary share and net asset value per share
The basic and diluted (loss)/profit per equivalent Ordinary Share is based on the loss attributable to equity-holders for
the year of US$52,527,000 (2014: profit of US$65,075,000) and on the 78,862,869 (2014: 85,525,452) weighted average number
of Ordinary Shares in issue during the year.
30 June 15 30 June 14
Loss Attributable US$ '000 Weighted Average no. of Shares '000s EPS US$ Profit Attributable US$ '000 Weighted Average no. of Shares '000s EPS US$
Basic and diluted (52,527) 78,863 (0.6661) 65,075 85,525 0.7609
Net asset value reconciliation 2015 2014
US$'000 US$'000
Net assets attributable to ordinary shareholders 155,447 222,854
Uplift of inventories held at cost to market value 152,565 174,909
Adjusted Net Asset Value 308,012 397,763
Number of Ordinary Shares Outstanding ('000) 77,534 81,415
NAV per share (IFRS) (US$) 2.00 2.74
Adjusted NAV per share (US$) 3.97 4.89
Adjusted NAV per share (£)* 2.53 2.86
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 net realisable value. The Adjusted NAV includes the uplift of
inventories to their market values.
The Adjusted NAV per share is arrived at by dividing the Adjusted Net Asset Value 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.
* US$:GBP rate as at 30 June 2015 is 1.573 (2014: 1.7103).
18. Related party transactions
Directors of the Company are all Non-Executive and by way of remuneration receive only an annual fee which is denominated
in Sterling.
2015 2014
US$'000 US$'000
Directors' fees 231 247
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 2015 were US$58,578 (2014 US$63,708).
Thomas Ashworth is a shareholder and 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.
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 British Virgin Islands SPVs and received fees
during the year as detailed in Note 13.
No performance fee was accrued at the year end (30 June 2014: US$23,964,000). A performance fee of US$23,964,000 was paid
during the year (30 June 2014: US$10,943,000).
The Group has a Development Management Services Agreement with a development management company named Headland Developments
Limited ("Headland"). Headland is part-owned by Thomas Ashworth 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.
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 Macau Property Opportunities Fund Limited 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, 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 Net
Asset Value, 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 were US$8,117,000 (2014: US$8,080,000) with US$ Nil
outstanding as at 30 June 2015 (2014: 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"); and
(ii) the achievement of a 'high watermark': 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.
If the Basic Performance Hurdle is met, and the high watermark 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 watermark (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 2015, no performance fee was accrued (2014: US$23,964,000) by the Group. During the year ended 30
June 2015, a performance fee of US$23,964,000 was paid (2014: US$10,943,000) by the Group. This performance fee is based on
the basic performance hurdle.
The Manager's appointment as Investment Adviser 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 3 months (or 6 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 Developments
Limited ("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 are 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) (2014: US$280,000 (HK$2,169,000)) were
capitalised in investment property and US$113,000 (HK$875,000) (2014: US$465,000 (HK$3,600,000)) were capitalised in
inventories. As at 30 June 2015 US$ Nil (2014: US$28,504) was outstanding.
20. Interest rate swaps
During the year the Group paid net interest to the bank of US$1,035,000 (2014: US$1,031,000) as shown in financing expenses
on the consolidated statement of comprehensive income.
The swaps are treated as financial liabilities and financial assets at fair value through profit or loss with a net year
end value of US$395,000 (2014: US$660,000). For the year ended 30 June 2015, a fair value gain of US$265,000 (2014:
US$95,000) 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 has 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.
The total notional amount for the interest rate swaps is HK$500 million, being a notional amount of HK$100 million for each
swap. The tenor of each swap is five years, with the earliest maturity date being 6 August 2015 and the latest being 20 May
2016.
Under these swaps, the Group receives quarterly interest at variable rates of three-month HIBOR and pays quarterly interest
at fixed rates ranging from 1.395% to 2.09% per annum.
The Group has placed HK$5,500,000 (US$709,500) (2014: HK$10,725,000 (US$1,384,000)) with Standard Chartered Bank as a
pledged deposit to secure the interest rate swap facilities.
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 five years with maturity date of
19 March 2018. Under this swap, the Group receives quarterly interest at variable rates of three-month HIBOR and pays
quarterly interest at fixed rate of 1% per annum.
21. Deposits with lenders
Pledged bank balances represents deposits pledged to the banks to secure the banking facilities and interest rate swaps
granted to the Group. Deposits amounting to US$1.9 million (2014: US$2.7 million) have been pledged to secure long-term
banking facilities and are, therefore, classified as non-current assets. There are no other significant terms and
conditions associated with these pledged bank balances.
2015 2014
US$'000 US$'000
Pledged for loan covenants 1,941 1,272
Pledged for interest rate swaps 709 1,384
2,650 2,656
22. Commitments and contingencies
As at 30 June 2015, the Group had agreed construction contracts with third parties and is consequently committed to future
capital expenditure in respect of inventories of US$ Nil (2014: Nil).
23. Auditors' remuneration
All fees payable to the auditors relate to audit services and interim review fees except for US$4,850 that was paid to
Ernst & Young Tax Services Limited in Hong Kong for tax advice in relation to the Zhuhai disposal (2014: US$12,000 was paid
for advice in relation to the Foreign Account Tax Compliance Act (FATCA) to Ernst & Young LLP in Guernsey).
Audit fees were broken down as follows:
2015 2014
US$'000 US$'000
Ernst & Young LLP Group audit 90 112
Ernst & Young LLP Group interim review (non-audit) 27 32
Non Ernst & Young LLP Subsidiary auditors' remuneration 5 18
122 162
24. Operating leases - Group as lessor
The Group has entered into leases on its property portfolio.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2015 are as follows:
2015 2014
US$'000 US$'000
Residential
Within 1 year 1,145 2,394
After 1 year, but not more than 5 years - 98
Total future rental income 1,145 2,492
The majority of leases involve tenancy agreements with a term of 12 months.
25. Provision
2015 2014
US$'000 US$'000
Macau tax authorities provision - 1,343
- 1,343
In the prior year, a provision of US$1,343,000 was made for potential additional stamp duty and related costs due in
relation to The Waterside. During the year ended 30 June 2015, an amount totalling US$609,000 (MOP4,860,000) was paid to
the Macau tax authorities relating to this provision. The remaining provision of US$734,000 has been written back and
reducing the cost of The Waterside, as it had been initially capitalised therein.
26. Subsequent events
After the year end a further 1,101,000 shares were repurchased at an average price of 176.6p and cancelled.
There were no other significant events occurring after the reporting date of the Annual Report and Accounts for the year
ended 30 June 2015.
Notice of Annual General Meeting
NOTICE is hereby given that the Annual
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