REG - Macau Prop Opp Fund - Interim Report for the period end 31 Dec 2016 <Origin Href="QuoteRef">MPO.L</Origin> - Part 2
02/03/2017 16:01
- Part 2: For the preceding part double click ID:nRSB3955Ya
Cash flows from financing activities
Proceeds from bank borrowings 15,215 36,302 36,266
Repayment of bank borrowings (1,431) (38,070) (38,367)
Share buyback - (3,016) (3,016)
Interest and bank charges paid (3,016) (3,347) (5,400)
Net cash generated from/(used in) financing activities 10,768 (8,131) (10,517)
Net movement in cash and cash equivalents 5,599 (11,200) (16,121)
Cash and cash equivalents at beginning of period/year 12,741 28,749 28,749
Effect of foreign exchange rate changes (47) (37) 113
Cash and cash equivalents at end of period/year 18,293 17,512 12,741
The notes form part of these interim condensed consolidated financial
statements.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
For the six-month period from 1 July 2016 to 31 December 2016
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 interim condensed consolidated financial statements for the six months
ended 31 December 2016 comprise the interim financial statements of the
Company and its subsidiaries (together referred to as the "Group"). The Group
invests in residential and commercial properties and property-related ventures
primarily in Macau.
There have been no change to the Group's principal risks and uncertainties in
the six-month period to 31 December 2016 and the Board of Directors does not
anticipate any changes to the principal risks and uncertainties in the second
half of the year. Principal risks and uncertainties are further discussed in
the Manager's Report above.
The interim condensed consolidated financial statements are presented in US
Dollars ("US$") and are rounded to the nearest thousand ($'000).
These interim condensed consolidated financial statements have been approved
for issue by the Board of Directors on 2 March 2017.
1. Significant accounting policies
Basis of accounting
The annual 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 accounting
policies and valuation principles adopted are consistent with those of
previous financial year.
The interim condensed consolidated financial statements have been prepared in
accordance with International Accounting Standard ("IAS") 34, Interim
Financial Reporting. The same accounting policies and methods of computation
are followed in the interim financial statements as compared with the annual
financial statements. The interim condensed consolidated financial statements
do not include all information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's annual
financial statements as of 30 June 2016. The interim report has been reviewed,
not audited, by the Auditor.
New and amended standards and interpretations applied
The following amendments to existing standards and interpretations were
effective for the year ended 30 June 2017 and therefore were applied in the
current interim period, but either they were not applicable to or did not have
a material impact on the Group:
- IAS 1 Disclosure Initiative - amendments to IAS 1
- IFRS 11 Accounting for acquisitions of interests in Joint Operations
amendments
- Amendments to IFRS 10, IFRS 12 and IAS 28; Investment Entities: Applying
Consolidation Exemption
- Annual improvements 2012-2014 cycle
- Amendments to IAS 19; Employee Benefits
Going concern
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 as at 31 December 2016, 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.
The Directors believe it is appropriate to prepare the financial statements of
the Group on the going concern basis based upon existing cash resources, the
forecasts described above, the extension of the life of the Company until the
end of 2018 following the failure of the discontinuation vote at the Annual
General Meeting on 14 November 2016 and the Directors' assessment of the
Group's committed banking facilities and expected continuing compliance with
related covenants.
Seasonal and cyclical variations
The Group does not operate in an industry where significant or cyclical
variations as a result of seasonal activity are experienced during the
financial year.
2. 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.
Furthermore, foreign exchange and political risk 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 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.
3. Investment property
Unaudited 1 Jul 2016 - 31 Dec 2016US$'000 Unaudited 1 Jul 2015 - 31 Dec 2015US$'000 Audited 1 Jul 2015 - 30 Jun 2016US$'000
At beginning of the period/year 206,595 243,810 243,810
Capital expenditure on property 342 444 1,237
Fair value adjustment 10,231 (35,923) (38,227)
Exchange difference 96 52 (225)
Balance at end of the period/year 217,264 208,383 206,595
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 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 valuations based on its
knowledge of the property market and compare these to previous valuations.
The Group's investment properties were revalued at 31 December 2016 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.
See Note 12 in relation to deferred tax liabilities on investment property.
Capital expenditure in the period relates to the fit-out costs for The
Waterside.
Rental income arising from The Waterside of US$896,000 (6 months ended 31
December 2015: US$1,104,000, 12 months ended 30 June 2016: US$2,109,000) was
received during the period. Direct operating expenses of US$461,000 (6 months
ended 31 December 2015: US$251,000, 12 months ended 30 June 2016: US$967,000)
arising from The Waterside that generated rental income were incurred during
the six-month period. Direct operating expenses during the period arising from
vacant units totalled US$166,000 (6 months ended 31 December 2015: US$171,000,
12 months ended 30 June 2016: US$325,000).
The table below shows the assumptions used in valuing the investment
properties which are classified as Level 3 in the fair value hierarchy:
Property information Carrying amount /fair value as at 31 December 2016: US$'000 Valuation technique Input Unobservable and observable inputs used in determination of fair values Other key information
Name The Waterside 217,264 Term and reversion analysis Term rent (inclusive of management fee and furniture) HK$17.30 psf (30 June 2016: HK$19.50 psf) Age of building
Type Completed apartments Term yield (exclusive of management fee and furniture) 1.4% - 2.2%(30 June 2016: 1.6% - 2.4%) Remaining useful life of building
Location One Central Tower 6 Macau Reversionary rent (exclusive of management fee and furniture) HK$16.20 psf(30 June 2016: HK$19.00 psf)
Reversionary yield 1.80%(30 June 2016: 2.00%)
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$11 million (6 months ended 31 December 2015: US$10 million, 12 months
ended 30 June 2016: US$10 million) or decrease by US$11 million (6 months
ended 31 December 2015: US$10 million, 12 months ended 30 June 2016: US$10
million).
If the term and reversionary yields or discount rates increased/decreased by
5% (and all other assumptions remained the same), the fair value of The
Waterside would decrease by US$10 million (6 months ended 31 December 2015:
US$10 million, 12 months ended 30 June 2016: US$10 million) or increase by
US$11 million (6 months ended 31 December 2015: US$11 million, 12 months ended
30 June 2016: US$11 million).
The same valuation method was deployed in June 2016 and December 2016.
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 transfer between levels during the period or a change in
valuation technique since the last period.
4. Deposits with lenders
Pledged bank balances represents deposits pledged to the Group's bankers to
secure the banking facilities and interest rate swaps granted to the Group.
Deposits amounting to US$2.2 million (31 December 2015: US$3.0 million, 30
June 2016: US$2.1 million) have been pledged to secure long-term banking
facilities and are, therefore, classified as non-current assets. There are no
other significant terms and conditions associated with these pledged bank
balances.
Unaudited Unaudited Audited
31 Dec 2016 31 Dec 2015 30 Jun 2016
US$'000 US$'000 US$'000
Pledged for loan covenants 2,169 2,958 2,113
Pledged for interest rate swaps - 232 -
2,169 3,190 2,113
5. Inventories
Unaudited Unaudited Audited
1 Jul 2016 - 31 Dec 2016 1 Jul 2015 - 31 Dec 2015 1 Jul 2015 - 30 Jun 2016
US$'000 US$'000 US$'000
Cost
Balance brought forward 67,410 67,288 67,288
Additions 155 296 438
Disposals - (254) (254)
Exchange difference 31 16 (62)
Balance carried forward 67,596 67,346 67,410
Additions include capital expenditure, development costs and capitalisation of
financing costs. Financing costs of US$47,000 (6 months ended 31 December
2015: US$nil, 12 months ended 30 June 2016: US$nil) relating to Senado Square
loan facility were capitalised during the period, including US$17,000 (6
months ended 31 December 2015: US$nil, 12 months ended 30 June 2016: US$nil)
of interests capitalised to the property.
Under IFRS, inventories are valued at the lower of cost and net realisable
value. The carrying amounts for inventories as at 31 December 2016 amounts to
US$67,596,000 (6 months ended 31 December 2015: US$67,346,000, 12 months ended
30 June 2016: US$67,410,000). Net realisable value as at 31 December 2016 as
determined by independent, professionally-qualified valuer, Savills (Macau)
Limited, was US$185,830,000 (6 months ended 31 December 2015: US$195,343,000,
12 months ended 30 June 2016: US$185,211,000).
No sales of inventories were recorded for the six months ended 31 December
2016. For the six months ended 31 December 2015, and the 12 months ended 30
June 2016, three car parking spaces and one motorcycle parking space of The
Fountainside were sold for a total consideration of US$1.0 million (HK$8.1
million) against a total cost of US$0.2 million (HK$2.0 million) which
resulted in a net profit of US$0.8 million (HK$6.1 million) after all
associated fees and transaction costs.
6. Interest rate swaps
During the period, the Group paid net interest to the banks of US$70,000 (6
months to 31 December 2015: US$393,000, 12 months to 30 June 2016: US$581,000)
as shown in financing expenses on the consolidated statement of comprehensive
income.
The swaps are treated as financial assets at fair value through profit or loss
with a net period end value of US$210,000 (31 December 2015: financial
liability of US$68,000, 30 June 2016: financial liability of US$104,000). For
the period ended 31 December 2016, a fair value gain of US$314,000 (6 months
ended 31 December 2015: US$327,000, 12 months ended 30 June 2016: US$291,000)
arising from the net interest rate swaps has been recognised in the
consolidated statement of comprehensive income.
All swaps held are categorised in Level 2 of the fair value hierarchy. There
was no transfer between Levels 1, 2 and 3 or changes in valuation techniques
during the period. The swaps have been valued on the basis of discounting
future cash flows at prevailing interest rates.
There was no change in the counterparty credit risk during the period.
Standard Chartered Bank
The Group had interest rate swaps with Standard Chartered Bank to mitigate
risks associated with the variability of cash flows arising from interest rate
fluctuations, all of which matured during the year ended 30 June 2016.
The total notional amount of the interest rate swap for the year ended 30 June
2016 and the period ended 31 December 2015 was HK$500,000,000 and
HK$100,000,000, respectively, being a notional amount of HK$100,000,000 for
each swap.
Under these swap, 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. The Group placed HK$1,800,000 (US$232,000) as at 31
December 2015 with Standard Chartered Bank as a pledged deposit to secure the
interest rate swap facilities.
Hang Seng Bank
The Group also has 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$250,000,000 (31 December
2015: HK$250,000,000, 30 June 2016: HK$250,000,000), the tenor of the swap is
five years with a maturity date on 19 March 2018. Under this swap, the Group
receives quarterly interest at variable rates of 3-month HIBOR and pays
quarterly interest at fixed rate of 1.00% per annum.
7. Interest-bearing loans
Unaudited Unaudited Audited
31 Dec 2016 31 Dec 2015 30 Jun 2016
US$'000 US$'000 US$'000
Bank loans - Secured
- Current portion 28,886 1,501 14,444
- Non-current portion 148,830 162,614 149,279
177,716 164,115 163,723
The Group has a term loan facility with Hang Seng Bank for The Waterside and
the individual residential units at 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 for up to the end of 2017.
As at 31 December 2016, three tranches remained outstanding. Tranche 3 had an
outstanding balance of HK$572 million (US$73.8 million) (31 December 2015:
HK$572 million (US$73.8 million), 30 June 2016: HK$572 million (US$73.7
million)); Tranche 4 had an outstanding balance of HK$76 million (US$9.8
million) (31 December 2015: HK$76 million (US$9.8 million), 30 June 2016:
HK$76 million (US$9.8 million)); and Tranche 5 had an outstanding balance of
HK$281 million (US$36.3 million) (31 December 2015: HK$281 million (US$36.3
million), 30 June 2016: HK$281 million (US$36.3 million)). As at 31 December
2016, the loan-to-value ratio for the Hang Seng One Central facility was
51.90%.
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 period ended 31 December 2016, 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 31 December 2016, the
loan-to-value ratio for Senado Square facility was 17.82%.
The Group has a HK$220 million (US$28.4 million) term loan facility with the
Industrial and Commercial Bank of China (Macau) Limited in relation to The
Fountainside redevelopment project with a tenor of three years to mature in
March 2018. Interest is charged at 3% per annum over the 3-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 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 31 December 2016, the facility had an outstanding balance of HK$187
million (US$24.1 million) (31 December 2015: HK$200.7 million (US$25.9
million), 30 June 2016: HK$198.1 million (US$25.5 million)). Sales proceeds of
US$nil (31 December 2015: US$0.1 million, 30 June 2016: US$nil) were pledged
with the lender. As at 31 December 2016, the loan-to-value ratio for The
Fountainside facility was 53.58%.
The Group has two loan facilities for the purchase and redevelopment of
Estrada da Penha:
Banco Tai Fung
The loan facility with Banco Tai Fung has a term of three years and the
facility amount is HK$70 million. Interest is charged at 3.2% per annum over
the 6-month HIBOR rate and repayment is due in full at maturity in June 2017.
As at 31 December 2016, the facility had an outstanding balance of HK$70
million (US$9.0 million) (31 December 2015: HK$70 million (US$9.0 million), 30
June 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. Interest is paid monthly on this loan facility. As at 31
December 2016, the loan-to-value ratio for this facility was 45.75%.
ICBC Macau
The loan facility with Industrial and Commercial Bank of China (Macau) Limited
has a term of three 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 31 December 2016, the facility had
an outstanding balance of HK$79 million (US$10.2 million) (31 December 2015:
HK$79 million (US$10.2 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 31 December 2016, the
loan-to-value ratio for this facility was 43.17%.
Bank loan interest paid during the period was US$2,415,000 (6 months period
ended 31 December 2015: US$2,374,000, 12 months period ended 30 June 2016:
US$4,827,000), including US$17,000 (31 December 2015: US$nil, 30 June 2016:
US$nil), capitalised during the period (see Note 5). As at 31 December 2016,
the carrying amount of interest-bearing loans included unamortised prepaid
loan arrangement fee of US$659,000 (31 December 2015: US$926,000, 30 June
2016: US$791,000).
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 31 December 2016, the fair value of
the financial liabilities was US$188,000 lower than the carrying value of the
financial liabilities (31 December 2015: US$289,000 lower than the carrying
value of the financial liabilities, 30 June 2016: US$378,000 lower than the
carrying value of the financial liabilities).
The Group's interest-bearing loans have been classified within Level 2 as they
have observable inputs from similar loans. There have been no transfers
between levels during the period or a change in valuation technique since last
period.
8. Basic and diluted earnings/(loss) per Ordinary Share
Basic and diluted earnings/(loss) per equivalent Ordinary Share is based on
the following data:
Unaudited6 months Unaudited6 months Audited12 months
1 Jul 2016 - 31 Dec 2016 1 Jul 2015 - 31 Dec 2015 1 Jul 2015 - 30 Jun 2016
Profit/(Loss) for the period/year (US$'000) 4,413 (36,971) (45,651)
Weighted average number of Ordinary Shares ('000) 76,433 76,733 76,584
Basic and diluted earnings/(loss) per share (US$) 0.0577 (0.4818) (0.5961)
9. Net asset value reconciliation
Unaudited Unaudited Audited
31 Dec 2016 31 Dec 2015 30 Jun 2016
US$'000 US$'000 US$'000
Net assets attributable to ordinary shareholders 111,117 115,513 106,643
Uplift of inventories held at cost to market value 120,111 129,971 119,672
Adjusted Net Asset Value 231,228 245,484 226,315
Number of Ordinary Shares Outstanding ('000) 76,433 76,433 76,433
NAV per share (IFRS) (US$) 1.45 1.51 1.40
Adjusted NAV per share (US$) 3.03 3.21 2.96
Adjusted NAV per share (£)* 2.45 2.18 2.23
* US$:GBP rates as at relevant period end
The NAV per share is arrived at by dividing the net assets as at the date of
the consolidated statement of financial position, by the number of Ordinary
Shares in issue at that date.
Under IFRS, inventories are carried at the lower of cost and net realisable
value. The Adjusted NAV includes the uplift of inventories to their market
values.
The Adjusted NAV per share is derived by dividing the Adjusted Net Asset Value
as at the date of the consolidated statement of financial position, by the
number of Ordinary Shares in issue at that date.
There are no potentially dilutive instruments in issue.
10. Cash flows from operating activities
Unaudited Unaudited Audited
6 months 6 months 12 months
1 Jul 2016 - 31 Dec 2016 1 Jul 2015 - 31 Dec 2015 1 Jul 2015 - 30 Jun 2016
US$'000 US$'000 US$'000
Cash flows from operating activities
Profit/(Loss) for the period/year before tax 4,807 (41,127) (49,192)
Adjustments for:
Net gain on valuation of interest rate swap (314) (327) (291)
Net (gain)/loss from fair value adjustment on investment property (10,231) 35,923 38,227
Net finance costs 2,609 2,950 5,732
Operating cash flows before movements in working capital (3,129) (2,581) (5,524)
Effect of foreign exchange rate changes 61 53 (137)
Movement in trade and other receivables 1,044 1,947 2,183
Movement in trade payables, provision and other payables 238 (143) 77
Movement in inventories (155) (42) (184)
Taxation paid (2,830) (1,319) (1,319)
Net change in working capital (1,703) 443 757
Net cash used in operating activities (4,771) (2,085) (4,904)
Cash and cash equivalents (which are presented as a single class of assets on
the face of the interim condensed consolidated statement of financial
position) comprise cash at bank and other short-term, highly-liquid
investments with a maturity of three months or less.
11. Related party transactions
Directors of the Company are all Non-Executive and by way of remuneration
receive only an annual fee.
Unaudited Unaudited Audited
6 months 6 months 12 months
1 Jul 2016 - 31 Dec 2016 1 Jul 2015 - 31 Dec 2015 1 Jul 2015 - 30 Jun 2016
US$'000 US$'000 US$'000
Directors' fees 74 106 187
The Directors are considered to be the key management personnel (as defined
under IAS 24) of the Company. Directors' fees outstanding as at 31 December
2016 was US$37,000 (31 December 2015: US$49,000, 30 June 2016: US$39,000).
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 management fees during the period as detailed in the Interim
Condensed Consolidated Statement of Comprehensive Income. Management fees are
paid quarterly in advance and amounted to US$2,391,000 (6 months to 31
December 2015: US$3,108,000, 12 months to 30 June 2016: US$5,528,000) at a fee
of 2.0% per annum of the Net Asset Value, as adjusted to reflect the Property
Investment Valuation Basis. Thomas Ashworth received no Directors' fees from
the Group.
No performance fee was accrued at period end as the previous high watermark
had not been surpassed (6 months to 31 December 2015: US$nil, 12 months to 30
June 2016: US$nil). No performance fee was paid during the period (6 months to
31 December 2015: US$nil, 12 months to 30 June 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 British Virgin Islands
SPVs and received fees during the period of US$50,000 of which US$nil was
outstanding at the period end (6 months to 31 December 2015: US$50,000 of
which US$nil was outstanding, 12 months to 30 June 2016: US$101,000 of which
US$nil was outstanding).
The Group has a Development Management Services Agreement with a development
management company named Headland Developments Limited ("Headland"). Thomas
Ashworth has beneficial interest in and is a Director of Headland and
therefore constitutes a related party of the Group. During the period,
Development Management Services fees of HK$nil (US$nil) (6 months to 31
December 2015: HK$nil (US$nil), 12 months to 30 June 2016: HK$nil (US$nil))
were capitalised in investment property and HK$66,000 (US$8,000) (6 months to
31 December 2015: HK$20,000 (US$3,000), 12 months to 30 June 2016: HK$170,000
(US$22,000)) were capitalised in inventories. As at 31 December 2016, US$1,000
(31 December 2015: US$3,000, 30 June 2016: US$5,000) was outstanding.
The Group has a Project Management Services Agreement with a property
management company named Bela Vista Property Services Limited ("Bela Vista").
Thomas Ashworth has beneficial interest in and is a Director of Bela Vista and
therefore constitutes a related party of the Group. During the period, Project
Management Services fees of US$nil (6 months to 31 December 2015: US$nil, 12
months to 30 June 2016: US$62,000) were capitalised in investment property. As
at 31 December 2016, US$nil (31 December 2015: US$nil, 30 June 2016:
US$62,000) was outstanding.
All intercompany loans and related interest are eliminated on consolidation.
12. Taxation provision
The Group has exposure to People's Republic of China taxation for its previous
business operation in the People's Republic of China. The Board considers that
the Group's exposure to People's Republic of China tax has been properly
reflected in the Group's consolidated financial statements.
As at period end, the following amounts are the outstanding tax provisions.
Unaudited Unaudited Audited
31 Dec 2016 31 Dec 2015 30 Jun 2016
US$'000 US$'000 US$'000
Current liabilities
People's Republic of China tax authorities provision - - 2,514
Provisions for Macanese taxation 2,149 - -
2,149 - 2,514
Non-current liabilities
People's Republic of China tax authorities provision - 1,514 -
Deferred taxation 13,235 13,078 12,782
Provisions for Macanese taxation - 2,235 2,409
15,384 16,827 17,705
People's Republic of China tax authorities provision
As at 31 December 2015 and 30 June 2016, tax provision has been made against
the potential tax charge by the People's Republic of China tax authorities on
the gain on disposal of the APAC Logistics Centre and Cove Residences. 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 has 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 the deferred tax liability for the taxable temporary
difference relating to the investment property carried at fair value.
Provision for Macanese taxations
The Group has made provisions for property tax and complementary tax arising
from its Macau business operations.
Tax charge
The tax charge for the period of US$394,000 (6 months to 31 December 2015: tax
credit of US$4,156,000, 12 months to 30 June 2016: tax credit of US$3,541,000)
comprised a deferred tax charge of US$447,000 (6 months to 31 December 2015:
deferred tax credit of US$4,311,000, 12 months to 30 June 2016: deferred tax
credit of US$4,587,000) arising from the increase in the value of investment
property and a reversal in the tax authorities provision for the People's
Republic of China of US$53,000 (6 months to 31 December 2015: US$nil, 12
months to 30 June 2016: increase in provision of US$1,000,000). For the six
months to 31 December 2016, there was no provision for Macanese taxes at a
rate of 12% (6 months to 31 December 2015: US$nil, 12 months to 30 June 2016:
US$46,000). For the six months to 31 December 2015, property tax expenses of
US$155,000 reduced the tax credit balance.
13. Subsequent events
There have been no significant events occurring after the reporting date of
the Interim Report for the period ended 31 December 2016.
DIRECTORS AND COMPANY INFORMATION
DirectorsChris Russell (Chairman) Thomas Ashworth Alan CliftonWilfred Woo Audit CommitteeAlan Clifton (Chairman) Wilfred Woo Chris Russell Management Engagement CommitteeAlan Clifton (Chairman) Chris RussellWilfred Woo Nomination and Remuneration Property ValuersSavills (Macau) Limited Suite 1309-10 13/F Macau Landmark 55 Avenida da Amizade Macau Solicitors to the Group as to English Law Norton Rose LLP3 More London Riverside London SE1 2AQ Advocates to the Group as to Guernsey Law Carey OlsenCarey House Les Banques St. Peter PortGuernsey GY1 4BZ Public RelationsMHP Communications 6 Agar StreetLondon WC2N 4HN Administrator & Company Secretary Heritage International Fund Managers Limited Heritage HallP.O. Box 225Le Marchant Street St. Peter Port, Guernsey Channel Islands GY1 4HY Macau and Hong Kong AdministratorAdept Capital Partners Services Limited26/F Jubilee Centre42-46 Gloucester Road Hong Kong Registered Office Heritage HallP.O. Box 225Le Marchant Street St. Peter Port,
CommitteeAlan Clifton (Chairman) Thomas Ashworth Wilfred WooChris Russell ManagerSniper Capital Limited Vistra Corporate Services CentreWickhams Cay II Road Town, TortolaVG 1110British Virgin Islands Investment AdviserSniper Capital (Macau) Limited 918 Guernsey Channel Islands GY1 4HY
Avenida da Amizade14/F World Trade Centre Macau Corporate BrokerLiberum Capital Limited Ropemaker Place, Level 12 25 Ropemaker StreetLondon EC2Y 9LY Independent AuditorsErnst & Young LLPP.O. Box 9Royal ChambersSt. Julian's AvenueSt. Peter PortGuernsey GY1
4AF
This information is provided by RNS
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