Final Results
Macau Property Opportunities Fund
17 September 2007
Macau Property Opportunities Fund Limited
('MPO' or the 'Company')
Final results for the period ended 30 June 2007
Macau Property Opportunities Fund Limited is pleased to announce its final
results for the period ended 30 June 2007. The Company, which is managed by
Sniper Capital Limited, develops and invests in property opportunities primarily
in Macau and also in the Western Pearl River Delta region of Southern China.
Highlights
• The Company was admitted to AIM in June 2006 following the placing of 105
million shares raising US$196.5 million (£105 million)
• Three strategic acquisitions made in the period, committing US$148 million,
representing 78% of the Company's total equity
• 38% uplift in property portfolio valuation and 25.2% uplift in Adjusted NAV
per share since admission
• Strong pipeline of potential investment opportunities with 9 sites (value of
c.US$500 million) currently under negotiation
• Substantial ongoing foreign investment in hotels, casinos and integrated
resorts underpinning all segments of the Macau market.
David Hinde, Chairman, said:
'We believe these results demonstrate the success of Sniper Capital's strategy
of targeting niche and strategically positioned assets in the region and their
stringent acquisition criteria. The Company has a strong pipeline of investment
opportunities and I am confident that the Company will continue to generate
significant value for shareholders in the years ahead.'
For further information:
Public Relations
Hogarth Partnership Limited
No. 1 London Bridge
London SE1 9BG
Andrew Jaques/Sarah Richardson
Tel: +44 20 7357 9477
Nominated Adviser & Broker
Collins Stewart Europe Limited
9th Floor, 88 Wood Street
London EC2V 7QR
Hugh Field/Jonny Sloan
Tel: +44-7523 8350
Manager
Sniper Capital Limited
Tel: +852 2292 6700
Email: info@snipercapital.com
www.snipercapital.com
Website: www.mpofund.com
Stock Codes: Bloomberg: MPO LN
Reuters: MPO.L
Macau Property Opportunities Fund Limited is a closed-end investment fund
registered in Guernsey and traded on the Alternative Investment Market of the
London Stock Exchange.
The Company's investment policy is to provide shareholders with an attractive
total return through investing in property opportunities in one of the world's
fastest growing and most dynamic regions - Macau and the Western Pearl River
Delta of Southern China.
The Fund is managed by Sniper Capital Limited, an independent investment manager
that specialises in property investment opportunities in niche, undervalued and
developing markets.
Chairman's Statement
It gives me great pleasure to present to shareholders the maiden annual results
of Macau Property Opportunities Fund Limited ('MPO' or 'the Company') for the
period ended 30 June 2007. During its first full year of operation, MPO
demonstrated encouraging progress in the execution of its investment strategy
and firmly established itself as a leading investor in the Macau market.
Since admission, the Company has made three strategic acquisitions out of a
total of 93 sites assessed, each bringing with it unique and valuable attributes
to the Company's portfolio. This high degree of selectivity clearly illustrates
the Company's adherence to its stringent and disciplined investment process of
acquiring well-positioned assets within targeted market segments. The combined
acquisition and estimated development costs of these three projects takes MPO's
total commitments to-date to US$148 million, or approximately 78% of the
Company's total equity, of which US$47 million had been paid in cash as at 30
June 2007 out of a
net US$189 million raised on admission to trading on AIM.
The Adjusted NAV per share* as at 30 June 2007 was US$2.2534 (112.6p), a 25.2%
increase over the Company's NAV per share of US$1.8001 (96.21p) on admission.
These results demonstrate the ability of the Manager, Sniper Capital, to
generate attractive total returns for the Company's shareholders through the
acquisition of niche and strategically positioned assets in its target markets
of Macau and the Western Pearl River Delta region of Southern China. I am
pleased to note that this has been reflected in strong outperformance of the
Company's stock price versus the overseas property fund sector since admission
and that MPO remains one of the top performing AIM-listed overseas property
funds this year.
Looking ahead, MPO continues to identify a strong flow of exciting investment
opportunities, with nine sites having a combined value of approximately US$500
million currently under negotiation. I remain satisfied with the quality and
type of investment proposals being presented to the Board and am encouraged by
the Manager's steadfast pursuit of our core investment principles.
With the compelling macro, micro and demographic trends in Macau and the
surrounding Western Pearl River Delta combined with the focused and disciplined
execution skills of Sniper Capital, I am confident that the Company has positive
and exciting prospects and will continue to generate significant value for
shareholders in the years ahead.
David Hinde
Chairman
Macau Property Opportunities Fund Limited
* NAV per share & Adjusted NAV per share as at 30 June 2007. Adjusted NAV per
share is calculated by taking the NAV per share calculated under IFRS and
adjusting inter alia to include the properties owned by the Company at net
realisable value rather than at the lower of cost or net realisable value.
Manager's Report
The Company's first full year of operation proved to be productive, with the
successful completion of three acquisitions totalling US$148 million in
commitment value, or approximately 78% of the Company's total equity. Since
then, the Manager has continued negotiations on a number of interesting
opportunities, whilst adhering to its disciplined approach of seeking to acquire
strategically well-positioned assets in its stated market segments.
With nine sites totalling approximately US$500 million in combined acquisition
value currently at advanced stages of review or negotiation, the Company is on
course to be substantially invested by year-end.
Macau remains a small and difficult market in which to operate, with lengthy
negotiation times going hand-in-hand with the most lucrative and best-positioned
opportunities. Conversion of deals often requires overcoming multiple ownership
structures, complex title issues and extended due diligence processes.
Despite the economic buoyancy being experienced in the Hong Kong and Macau
labour markets, the Manager has successfully recruited a number of high quality
individuals in the areas of research, finance, project management and
operations. This has more than doubled the size of its team to 16 people since
admission, and will further assist with the sourcing, development, marketing and
management of the Company's properties. With an expanding local presence and
growing reputation as one of the few key international operators in Macau,
Sniper Capital is well-positioned to continue to expand and strengthen its
resources over the coming year.
Sniper Capital's on-the-ground presence, strong reputation and well-established
local network continue to generate a consistent stream of interesting and varied
opportunities. The combination of its strong international relationships and
local market presence is proving invaluable in allowing the Manager to maximise
investor returns through combining international levels of quality in design,
development and finishing with its local knowledge, partners and access to
projects.
The Company's public profile has grown significantly during the year, assisted
by our strategic investor relations efforts, the continued growth in
international media coverage of Macau and a number of articles about MPO in high
quality publications. With the recent launch of the Venetian Macao in August and
a number of other high-profile casino/resort openings imminent, the
international focus on Macau is set to escalate further.
Current investments & pipeline
In its maiden year, the Company has made three significant property acquisitions
in Macau amounting to a total commitment (including estimated development costs)
of US$148 million. The Company's transaction flow has been achieved primarily by
means of the Manager's well-established local network and to a lesser extent
through an expanding range of relationships with local developers, financial
institutions and agents.
The Company's three portfolio properties remain at various stages of development
as indicated in the portfolio summary below.
We are pleased with the quality and positioning of these properties and have
been in ongoing negotiations on a number of similarly interesting opportunities
throughout the year. Sniper Capital continues to adhere to its disciplined
approach of seeking to acquire strategically well positioned assets in its
target market segments and continues to reject assets which are believed to be
in less desirable locations or in sub-optimal market segments.
Steady progress is being made on a number of attractive investment opportunities
and we remain optimistic that this should lead to further acquisition
announcements in the near future. Currently nine sites with a combined
acquisition value of approximately US$500 million are at advanced stages of
negotiation. Despite the small, niche market in which Sniper Capital is
operating, there has been no reduction in the flow of interesting sites assessed
over the last year, indicating the strength of our private local sourcing
network.
We remain cautious of the middle-market residential sector across Macau,
continuing to focus on our core target areas:
• residential projects in well-established neighbourhoods
• super-luxury residential projects in prime locations
• entry-level residential projects
• retail projects in well-established neighbourhoods
• leisure/commercial projects in strategic locations
• affordable hotel and serviced apartment projects in key locations
The Manager believes that the Company has sufficient capital at the present time
for the completion of the current owned and targeted acquisitions and, in
addition, is in discussions with a number of institutions for the arrangement of
debt financing for the development and redevelopment of all such projects.
Property Portfolio
The Company's three acquisitions to date have been on Macau Peninsula, all
within the residential sector, but targeted at very different areas of this
market segment.
Portfolio Summary
Sector Type Positioning Current status Acquisition Expected Total capital
cost redevelopment commitment*
cost
(US$m) (US$m) (US$m)
1 Residential Redevelopment Local Residents Planning 8.6 7.08 15.68
2 Residential Development Premium Luxury Construction 86.58 N/A 86.58
3 Residential Redevelopment Entry Level Consolidating 20.57 25.39 45.96
Total 115.75 32.47 148.22
* Includes acquisition & expected redevelopment costs.
Property 1
Property 1 was acquired in October 2006 and is a 100% interest in a prime
residential redevelopment project, located in a very well-established and
popular residential neighbourhood. The site is currently unoccupied and is
ideally suited for a mid-rise residential development targeted towards local
residents seeking to upgrade the quality of their existing accommodation and
facilities. The planning and design process for this site continues to progress
well, with initial concepts having been received from prequalified architects
and with construction expected to commence in the first half of 2008. In the
meantime, continued price escalation and income growth in the vicinity bodes
well for the ultimate selling price of the units. It is the Company's current
intention to sell all of the residential units in this project either on a
pre-sale basis or on completion.
Acquisition date 17 October 2006
Sector Residential
Location South-Western Macau Peninsula
Current status Planning
Title Freehold
Classification Residential/Commercial
Land area 13,000 ft(2)/1,200 m(2)
Acquisition cost US$8.6 million
Projected development cost US$7.08 million
Total commitment US$15.68 million
Positioning Local middle-income residents
Proposed development Apartments with car parking
Estimated completion date End 2009
Property 2
Property 2 was acquired in November 2006 and comprises an entire luxury
residential tower (Tower Six), forming part of a high-end, mixed-use waterfront
project, 'One Central', currently under construction in the heart of Macau. This
prestigious project is being jointly developed by two of the region's top
developers, Hongkong Land and Shun Tak Holdings, and includes a 400,000 square
foot premier shopping complex, a 210-room, 6-star Mandarin Oriental Hotel and a
50,000 square foot clubhouse and infinity pool for the exclusive use of
residents.
The residential portion of the project, 'One Central Residences', comprises
seven residential towers, two of which have been sold en bloc by the developer
and the remainder released and reportedly sold out to the public. Due for
completion in 2009, 'One Central' is a development of unprecedented quality and
positioning, setting new standards of design, finishing and luxury which give
the Company immediate participation in one of its core target segments, the
premium luxury residential market. Development is on schedule, with foundation
work now completed and construction of the podium area well advanced. The
surrounding area continues to be transformed, with the scheduled opening of the
adjacent MGM Macau later this year and the announcement by Wynn Macau of a
second hotel tower due for completion in 2010. It is the Company's current
intention to retain ownership of Tower Six until completion of the project.
Acquisition date 13 November 2006
Sector Residential
Location Central Macau Peninsula
Current status Under construction
Title Leasehold
Classification Mixed use
Gross floor area 148,000 ft(2)/13,750 m(2)
Acquisition cost US$86.58 million
Total commitment US$86.58 million
Positioning Premium luxury
Proposed development High rise apartment tower
Estimated completion date Mid 2009
Property 3
Property 3 was acquired in November 2006 and is a 100% interest in a
redevelopment site located in an up-and-coming area for entry-level buyers
situated close to the China border in the northern part of Macau. The
surrounding area is now undergoing widespread regeneration and urban renewal, as
demand for entry-level residential property increases and as available land in
established areas becomes increasingly scarce. MPO intends to develop the site
into a multi-storey residential project designed to cater for this rapidly
growing market segment of entry-level purchasers. The Company remains in active
negotiations to acquire additional parcels of land in the area to consolidate
its holdings in this promising location, after which planning and architectural
design processes will be initiated.
Acquisition date 13 November 2006
Sector Residential
Location Northern Macau Peninsula
Current status Consolidating
Title Leasehold
Classification Residential/retail
Land area 20,000 ft(2)/1,860 m(2)
Acquisition cost US$20.57 million
Projected development cost US$25.39 million
Total commitment US$45.96 million
Positioning Entry-level
Proposed development High-rise apartment block
Estimated completion date End 2009
Property market
The Macau property market performed strongly during the year, with most sectors
characterised by rapidly developing supply and demand dynamics and a range of
very significant external and internal developments. The single largest driver
remains the substantial ongoing foreign investment in hotels, casinos and
integrated resorts. With the large number of projects planned and under
construction by both foreign and domestic companies, this situation looks set to
continue in the coming years. Domestically, a number of issues have arisen
during the year which had significant and varying impact on different sectors of
the Macau property market, including:
• government policy changes on residency scheme entitlements
• changes to visitor visa application regulations
• infrastructure spending
• reviews of development approvals and land policy
• increased regulation of foreign investment across the border in
Mainland China
Although these domestic issues have caused some short-term uncertainty in the
markets, we believe that over the longer term these issues should result in a
stronger, better regulated and better structured market across Macau.
Residential
In the residential market the demand drivers remained robust throughout the
year, with transactions in 1Q07 increasing by 115% YoY to 10,324. Secondary
transactions rose 77% during this period while primary transactions surged by
254%. These numbers moderated slightly in 2Q07, but total transactions were
still up 90% YoY for 1H07, with analysts forecasting continued significant
growth in demand for local housing going forward. Demand has been driven by the
strong population influx, rising household incomes and rapid household
formation, with rental growth supported by imported labour for both the
construction and operation of the new hotels, casinos and integrated resorts.
The effect of rising incomes can be seen most dramatically on residential
property affordability, where overall affordability across the sector has
improved despite the growth seen in property prices since 2005.
Looking ahead, some analysts are expecting household income to increase at 10%
per annum for the next few years, but for residential property prices to
accelerate to a 20% compound annual growth rate. This would have the effect of
reducing overall affordability but still keeping it within 'comfortable' levels
and well within current Hong Kong levels.
As experienced in other markets across Asia, however, declining levels of
overall market affordability can have significant implications for developers of
residential property, whether targeted at investors or the local population. The
Company is therefore monitoring these developments carefully in order to fully
capitalise on the opportunities such changes will inevitably present.
The strength of demand has created a positive year for Macau's residential
property market, resulting in an impressive 90% sales record for the 10
residential projects launched for sale in the last 12 months. The rapid growth
in employment from the new casino developments has driven down unemployment
rates to historic lows of 3.0% and increased the population of Macau by 11% over
the past 24 months. Imported labour at the end of 2Q07 was up 20.3% YoY. With
further developments scheduled to reach completion every year for the next five
years, there is currently no sign of this job growth situation changing. This is
likely to continue to have substantial and positive effects on residential
demand growth for the years ahead.
Goldman Sachs estimates that an average of 10,000 new households per year will
be created from 2007 to 2010, representing a 13% growth in Macau's total
population over the same period. This level of growth will far exceed the 24,000
households formed in the last 5 years, and far outstrips the current forecasts
of residential property completions.
At the same time, the continued competition for labour from the new hotels and
casinos has resulted in rapid growth in earnings and household income for Macau
residents. This earnings growth has outstripped the growth seen in property
prices since 2005, and looking ahead there seems little reason to see it
moderate.
Hong Kong residential property prices are often used as a benchmark for Macau's
residential rents and values, particularly in the luxury sector. Luxury
residential prices in Hong Kong have been setting records during the last year,
with new high-rise residential projects across Hong Kong and the New Territories
increasingly commanding substantial premiums ranging from HK$20,000 - HK$40,000
per square feet. Against this backdrop, the current luxury residential prices
being achieved in Macau for new super luxury high-rise projects of HK$5,000 -
HK$7,000 per square feet should continue to be very attractive to Hong Kong
investment capital, and leave considerable opportunity for price increases as
they catch up with their Hong Kong equivalents.
Casinos and hotels
Gaming receipts are the principal measure of success for the casino industry.
For the six months to June 2007 these rose by 46.3% YoY to US$4.8bn. This strong
growth came on the back of visitor arrival growth for the six months to June
2007 of 21.3% YoY, bringing the cumulative number of visitors to 12.6 million
for the 1H07. The much awaited growth in hotel nights in Macau is beginning to
make itself felt, albeit slowly, with a YoY growth of 38.6% in June 2007, and
with average hotel occupancy rate increasing by 3.3 percentage points to 73.7%,
with 4-star hotels leading the way at 80.7%. The average length of stay of hotel
guests increased by 0.11 nights to 1.26 nights, despite the number of hotel
rooms increasing by 12.5% from 11,748 in June 2006 to 13,222 currently. The
majority of hotel guests originated from Mainland China (45.3%) and Hong Kong
(31.5%).
In May 2007, the Crown Macau in Taipa was opened by the US-listed Melco-PBL
joint venture, adding to the market 222 gaming tables and 550 slot machines as
well as VIP rooms, over five floors. The Crown presents itself as a 6-star
contemporary hotel and casino primarily devoted to the high-end gaming market.
The latest milestone event for Macau was the August opening of the Las Vegas
Sands' Macau flagship, the US$2.3 billion, 3,000-room Venetian Macao resort.
With a reported US$25 million marketing budget, this will continue to make
headlines over the coming months and is likely to kick-start the 'Integrated
Resort' experience being developed on the Cotai Strip. The hotel, the casino,
the arena and meetings/convention space were all fully operational on the
opening date.
Announcements of new or expanded projects across Macau continue to be released
and include:
• a second hotel block at the Wynn Macau following the success of its
initial phase
• Macau Studio City's US$4 billion, 6 million square feet project on
the Cotai Strip which will include a Ritz-Carlton hotel, Marriott hotel and a
Playboy club
• a proposed casino to be developed by Genting/Star Cruises opposite
the Wynn Macau on the Macau Peninsula
• a proposed US$3 billion Virgin Casino being planned on the Cotai
Strip by Richard Branson of Virgin Group.
The Macau Gaming Bureau forecasts 35 casinos to be operating by 2010 (versus 27
today), which will ensure the continued growth in the development of the casino
and hotel sector in Macau.
Infrastructure
Macau infrastructure projects continue apace in order to keep up with the rapid
development in the gaming and tourism sectors. Approval has been secured for the
construction of the proposed Macau-Taipa tunnel, which is due to commence in
October 2007, and work has also reached completion on a new border crossing with
China.
The initial proposed plans for the Macau light rail project were recently
released and it is understood that the final routing should soon be announced
following a public consultation process. We believe that this project is an
important part of Macau's overall public infrastructure plan and will contribute
greatly towards easing current and future traffic congestion, as well as
creating value in new locations as the system approaches operation.
Retail
The retail sector can be divided into two very distinct sectors: casino retail,
and the non-casino, or local retail sector. The casino retail sector is
currently undergoing something of a renaissance, with the new casinos and
resorts providing an estimated 4 million square feet of new casino retail space
planned or under construction over the next few years. At the forefront of this
renaissance is Las Vegas Sands Corporation's Venetian Macao, where over 400
retailers are reportedly now committed, representing 80% of the 1.2 million
square feet of new retail space available. The influx of top international
retailers is set to change Macau's retailing landscape dramatically and will
likely drive the strong anticipated growth in the Territory's non-gaming
revenues.
The non-casino, or local retail sector, is driven by different dynamics;
however, this sector is also performing strongly with retail sales up 21.3% YoY.
This growth is largely due to the rising disposable incomes and increased job
security of local households as well as the growing influx of new workers and
expatriates and the corresponding demand from local, Hong Kong and some
international retailers wishing to cater to this demand.
MICE
The development of the Meeting, Incentive, Conference and Exhibition (MICE)
industry is expected to have a significant impact on the Territory's non-gaming
revenues over the next few years.
It is anticipated that the MICE industry will grow dramatically from a very low
base once the Venetian Macao convention and exhibition centre makes its presence
fully felt during the rest of 2007 and into 2008. It is unofficially reported
that the response from organisers for this new state-of-the-art facility has
already been very strong and some estimates forecast this industry could attract
an additional 1.12 million business travellers to Macau every year.
Office
The grade A office sector in Macau remains limited in terms of both supply and
demand. However, there has recently been an increase in demand for grade B
office space from the peripheral and support industries such as
telecommunications, financial and other professional services, advertising
agencies and logistics companies. As a result of this growth in demand, the
office sector recorded the highest growth in the number and value of
transactions in 1Q07, with increases of 266% and 458% YoY respectively. Again,
this growth is off a relatively low base and is therefore likely to become more
muted in the months and years ahead.
Economic overview
In the first half of 2007, Macau's economy grew by 31.4% in real terms and 39.4%
in nominal terms, mainly driven by private investment and exports of services.
Overall visitor spending increased on the back of the flourishing gaming and
tourism sector, while exports of goods dropped. Exports of gaming services in
the first half of 2007 grew by 46.2% and visitor arrivals continued to rise, up
21.3% YoY to 1H07, while per-capita spending of visitors increased by 0.8% YoY
to US$184. Visitors from Mainland China who make up 54% of the visitors had an
average per-capita spending of US$356.
The domestic employment situation continued to improve and median employment
earnings registered a significant increase which both contributed to a strong
increase in private consumption expenditure. Overall median monthly employment
earnings rose by 19.3% to US$957 in 2Q07. Amongst the various economic
activities, employment earning in the 'real estate business' logged the highest
growth at 30.9%. As a result of the continued demand for labour, the
unemployment rate dropped by 0.8% to 3.0% during 2Q07, and private consumption
expenditure recorded real growth of 13.1%. The total value of retail sales grew
by 5.4% over the first quarter of 2007 to US$406 million in 2Q07, representing a
strong 27.1% growth YoY.
Overall investment managed to sustain a strong growth rate, driven by the
on-going construction of the large-scale gaming, integrated resort and
entertainment facilities. As a result, investment in construction in the private
sector surged by 42.4%, and by 77.4% in the public sector.
Key economic statistics
Period Figure YoY%
Unemployment rate Jun 07 3% -0.8%
CPI Jun 07 114.7 +5.3%
Visitor arrivals Jan-Jun 07 12.64m +21.3%
Gaming receipts Jan-Jun 07 US$4.79bn +46.3%
Retail sales 2Q07 US$400m +28.9%
Median monthly income 2Q07 US$963 +19.3%
Real GDP 2Q07 US$4.73bn +31.4%
Population Jun 07 520,000 +5.87%
Government policy
The most immediate and dramatic policy issue to affect the Macau property market
is the government's review of land policy. In particular the government is
looking to introduce greater transparency to the government land disposal
process, potentially through the introduction of a land auction system. The
short-term impact of this is that applications for land swaps, land-use
conversions and increased plot ratios have all been suspended or delayed pending
the introduction of the new system. Some analysts predict that this delay could
lead to a 30% drop in medium-term residential supply from 4,300 units per year
to 3,100 units per year over the next four years. The longer-term impact of this
land policy review is positive for the overall market as it will lead to a more
level playing field for all market participants, better urban planning, more
sustainable long-term growth and could provide an additional boost to property
prices by allowing more international participants to enter the market.
Another policy which is likely to be mildly positive for the residential
investment market in Macau is the recent tightening of China's foreign
investment rules, making it more difficult and more expensive for foreigners to
invest profitably in the property markets of mainland China. Retail investors
looking to gain exposure to China's economic growth in a more investor-friendly
and tax-efficient jurisdiction will therefore look at Macau as an attractive way
of securing such exposure.
Policies which have had a more negative impact on the Macau market include the
suspension of the investment residency scheme in April 2007, and the recent
restrictions by central government on multiple visa applications. The former is
a scheme whereby foreign nationals investing US$130,000 could apply for Macau
residency. At the time, we suggested this was only a short-term measure and
would have little or no lasting impact on the market, and indeed it seems the
scheme is now set to be reintroduced with higher and more realistic investment
thresholds.
The initial impact was a knee-jerk drop in low-end local housing prices, and
even this has since recovered. The second policy could be more damaging in the
short term to the growth of the gaming market in Macau by reducing the number of
repeat visits by regular gamblers. In the longer term, however, we believe that
it is a reflection of Central Government's desire to control problem gambling
and to achieve a long-term and sustainable growth of the Macau gaming and
convention market.
In general, government policy towards the development of the gaming, convention
and integrated resort business in Macau is extremely positive both from the
local government and China's central government. The ultimate goal of the
authorities appears to be to ensure the long-term stable growth of these
industries in Macau while at the same time balancing the needs of the local
population and ensuring that the necessary infrastructure is put in place to
facilitate and accommodate the pace of growth being generated.
Financial Review
Since its admission to AIM on 5 June 2006, Macau Property Opportunities Fund has
recorded a strong set of financial results, reflecting its ability to execute
according to its investment strategy and acquire niche sites at attractive
prices. As at the financial year-end 30 June 2007, the Company has spent US$47
million on three property acquisitions with a combined total commitment,
including estimated redevelopment costs, of US$148 million, out of converted net
equity raised of US$189 million.
The first site acquired is a prime residential redevelopment project, located in
a very well-established neighbourhood on Macau Peninsula. The second site
comprises an entire luxury residential tower, forming part of a high-end,
mixed-use waterfront project on Macau Peninsula, 'One Central'. The third site
is a redevelopment site located in an up-and-coming area for entry-level buyers
on Macau Peninsula. These properties have been valued as at 30 June 2007 by
Savills, resulting in an uplift in Adjusted NAV of US$45 million (equivalent to
an overall 38% increase above the cost of the three properties), which equates
to an increase in the value of the Company of 23.2%.
When these property revaluations are combined with the operating profit/loss for
the period, the Adjusted NAV of the Company has increased in US dollar terms by
25.2%, leading to the calculation of a performance fee accrual over and above
the Basic Performance Hurdle of 10% per annum on a compounding basis.
The final audited results are summarised below:
Date US$ £
NAV per share at admission # 05.06.06 1.8001 0.9621
NAV per share ## 30.06.07 1.8290 0.9140
NAV per share (after performance fee) ## 30.06.07 1.7928 0.8960
Adjusted NAV per share ## 30.06.07 2.2534 1.1260
Adjusted NAV per share (after performance fee) ## 30.06.07 2.2172 1.1080
Adjusted NAV uplift since Admission 25.2% 17.0%
# Using US$/£ exchange rate of 1.871.
## Using US$/£ exchange rate of 2.001.
The net proceeds from the placing were £101.02 million after deducting expenses
of Admission and Placing of £3.98 million. These net proceeds were converted
into US dollars following the placing at an average exchange rate of US$1.871/£,
resulting in converted net proceeds from the placing of US$189.01 million.
The Company's audited financial statements as at 30 June 2007 have been prepared
in accordance with International Financial Reporting Standards (IFRS), and the
three properties acquired by the Company to date have, therefore, been valued at
the lower of cost and net realisable value. This treatment results in an
Accounting NAV per share for the Company of US$1.8290 compared to an NAV per
share on admission to AIM of US$1.8001. The main contributor to this increase is
the interest income earned on cash balances that have been maintained by the
Company during the period (primarily earned on cash balances that have been
maintained with the Royal Bank of Scotland International in Guernsey).
Valuation
A valuation of all the Company's property holdings was carried out as at 30 June
2007 by Savills (Macau) Limited. Savills is one of the leading international
property advisers, with over 140 offices and associates across the UK,
Continental Europe, Asia Pacific and Africa, and with a strong presence in Hong
Kong and Macau.
Savills' valuation has been used in the determination of the fair market value
of the Company's property interests and, hence, has been used in the calculation
of the NAV and the Adjusted NAV of the Company. 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 (which is
also defined by the Hong Kong Institute of Surveyors (HKIS)) of the properties
in their existing state and physical condition. The Market Value of these
properties is stated on page 9 of this document. The Adjusted NAV per share
resulting from this uplift is US$2.2534, representing an uplift of 25.2% to the
NAV per share on admission to AIM.
Financing
The Company used cash that it held to purchase its first and third properties
(as stated on page 26 of the Manager's Report). It is expected that bank
financing will be obtained to pay for the redevelopment cost of these
properties, and indicative terms have already been obtained from a number of
international financial institutions who have expressed strong interest in
providing financing for the redevelopment of these two properties.
The Company has taken advantage of the payment terms provided on the purchase of
Tower 6 of 'One Central Residences', which has resulted in only 20% of the total
acquisition cost being paid to the seller as of 30 June 2007. A further 10% of
the total acquisition cost is due within 12 months of the financial year-end of
the Company, with the 70% balance being payable on the handover of the property
which is expected to occur during 2009. The Company expects to obtain bank
financing to fully fund the payment of the 70% acquisition cost balance.
The Company will not breach its stated maximum level of gearing of 60% of the
overall value of the Company.
Trading of shares
The Company's shares were listed at an offer price of £1.00 as of 5 June 2006.
The highest share price since admission was £1.3625 on 8 May 2007, and the share
price as of 7 September 2007 is £1.155 per share, representing a 2.6% premium
above the Adjusted NAV per share as of 30 June 2007. The Company's shares have
seen a steady increase in daily traded volumes since listing, with the average
daily trading volume since admission now at approximately 300,000 shares per
day. The highest daily volume traded was 8.96 million shares on 20 June 2007.
Significant shareholdings*
Name of shareholder Number of shares %
Amvescap (Invesco & Aim) 26,675,786 25.40%
GLG Partners 16,900,000 16.10%
Universities Superannuation Scheme 10,500,000 10.00%
Insight Investment Management 6,800,000 6.50%
JP Morgan Fleming Asset Management 5,048,481 4.80%
MPC Investors 4,465,604 4.20%
Midas Capital Partners 3,880,000 3.70%
74,269,871 70.70%
Other 30,730,129 29.30%
Total 105,000,000 100.00%
* As of 30 June 2007
Outlook
2007 is proving to be the most significant year yet in the transformation of
Macau into a world-class gaming and leisure destination, culminating with the
recent opening of the Venetian Macao in August. With a stream of new casino/
resorts opening over the next few years and continued strength in all economic
indicators, the outlook for the Macau property market continues to look
positive.
The principal drivers of the residential and commercial property markets in
Macau remain solidly intact, and the long-anticipated surge in the working
population, combined with rapidly rising local disposable incomes and continued
investor interest, all bode well for demand and price appreciation across the
local residential and commercial property markets in Macau.
As the new generation of international quality construction projects begins to
reach completion across the territory, the polarisation between the new and
older properties will become ever more apparent and will almost certainly
provide further impetus to the performance of new properties, particular those
at the top end of the market. This phenomenon, combined with the rapid growth in
expatriate rental demand, will add further fuel to investor interest in Macau
and is positive for the performance of the Company's portfolio of high-end
properties.
The Company's key focus remains on acquiring attractively valued and
well-positioned assets and development projects, which exhibit clear
differentiation against other projects as well as sustainability of future
demand. With a strong pipeline of sites under review, the Company remains on
track to be substantially invested by year-end.
Since admission to trading on AIM, MPO has capitalised on its early mover
advantage to secure its position as a leading investor in the Macau property
market. Looking ahead, the Company continues to identify a strong flow of
investment opportunities which should further contribute to NAV growth and build
on the Company's initial success in this market.
Tom Ashworth/Martin Tacon
Principals
Sniper Capital Limited
Directors' Report
The Directors present their report and audited financial statements of the
Company for the period from incorporation on 18 May 2006 to 30 June 2007.
Principal activities
The Company is a Guernsey-registered closed-end investment fund traded on AIM,
the market of that name operated by the London Stock Exchange. During the period
its principal activities were property development and investment in Macau and
Greater China.
Business review
A review of the business during the period, together with likely future
developments, is contained in the Chairman's statement on pages 6 to 7 and in
the Manager's report on pages 8 to 29.
Results and dividend
The results for the period are set out in the financial statements on pages 35
to 49.
The Directors have not recommended the payment of a dividend in respect of the
period to 30 June 2007.
Directors
Biographies of the Directors who served during the period are detailed on page
30.
At the first Annual General Meeting of the Company all the Directors shall
retire from office, and at each Annual General Meeting thereafter one third by
number of the Directors shall retire from office in accordance with the Articles
of Association.
A retiring Director shall be eligible for reappointment. No Director shall be
required to vacate his office at any time by reason of the fact that he has
attained any specific age.
Directors' interests
Directors who held office during the period and had interests in the shares of
the Company as at 30 June 2007 were:
ORDINARY SHARES OF US$0.01
Held at Held at
30-Jun-07 5-Jun-06
David Hinde 30,000 20,000
Thomas Ashworth 750,000 525,000
Richard Barnes 25,000 25,000
Alan Clifton 50,000 50,000
Timothy Henderson 25,000 25,000
Significant shareholdings
As at 30 June 2007, a total of seven shareholders held more than 3% each of the
issued ordinary shares of the Company, accounting for a total amount of
74,269,871 shares or 70.7% of the issued shared capital. Full details are
available on page 27 of the Manager's report.
Directors' remuneration
During the period the Directors received the following emoluments in the form of
Directors' fees from the Company:
US$
David Hinde 85,848
Thomas Ashworth -
Richard Barnes 53,655
Alan Clifton 64,360
Timothy Henderson 53,655*
Total 257,518
* as disclosed in note 13 on page 49, Tim Henderson also received Director's
fees of US$13,000 from subsidiaries.
Statement of Directors' responsibilities
The Directors are responsible for preparing financial statements for each
financial period which give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period and are in
accordance with applicable laws. In preparing those financial statements the
Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed
subject to any material departures disclosed and explained in the financial
statements;
• prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors confirm that they have complied with the above requirements in
preparing the financial statements.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and which enable them to ensure that the financial statements comply
with the Companies (Guernsey) Law, 1994. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Independent Auditors
PricewaterhouseCoopers CI LLP have agreed to offer themselves for reappointment
as Auditors of the Company and a resolution proposing their reappointment and
authorising the Directors to determine their remuneration will be presented at
the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company shall be held at 2.30 pm on 2 November
2007 at the Registered Office of the Company, Polygon Hall, Le Marchant Street,
St Peter Port, Guernsey.
Corporate governance
Guernsey does not have its own corporate governance regime and as an AIM-listed
Guernsey-registered company, the Company is not required to comply with the
Combined Code on Corporate Governance ('the Code'). However, the Directors of
the Company support best practice in Corporate Governance and its practical
application to the Company's structure and decision-making processes as is
appropriate to its size and current stage of development.
The Board of Directors
The Company is led and controlled by a Board comprising five
non-executive Directors. The role of Chairman is held by David Hinde.
The Board determines the overall strategic direction of the Company and is
responsible for the following:
1) reviewing objectives for the Company and setting the Company's strategy for
fulfilling those objectives;
2) reviewing and approving investments, disposals and significant capital
expenditure made by the Company;
3) reviewing the capital structure of the Company and ensuring necessary
resources are in place for the Company to meet its objectives;
4) reviewing and monitoring the performance of the Manager, Administrator and
other service providers to the Company;
5) reviewing key elements of the Company's performance.
Board meetings
The Board meets at least quarterly and as required from time to time to consider
specific issues including all potential acquisitions and disposals.
The Board receives regular reports and papers prior to each board meeting to
allow it to perform its duties. Prior to each of its quarterly meetings the
Board receives reports from the Manager covering activities during the period,
performance of relevant property markets, performance of the Company's assets,
financing, compliance matters, working capital position and other areas of
relevance to the Board. The Board also considers reports provided from time to
time by the Administrator and other service providers.
The table opposite shows the attendance of Directors at quarterly Board meetings
during the period to 30 June 2007:
Maximum
possible Actual
attendance attendance
David Hinde 3 3
Thomas Ashworth 3 3
Richard Barnes 3 3
Alan Clifton 3 3
Timothy Henderson 3 3
In addition to its regular quarterly meetings, the Board has also met on a
number of occasions during the period to approve property acquisitions and for
various other matters.
Audit Committee
The Board has operated an Audit Committee throughout the period under review.
The Audit Committee is chaired by Mr Alan Clifton and meets not less than twice
a year and is responsible for reviewing the interim and annual financial
statements and reviewing with the auditors the results and effectiveness of the
audit before their submission to the Board.
Management agreement
The Company has entered into an agreement with the Manager. This sets out the
Manager's key responsibilities, which include proposing the property investment
strategy to the Board, identifying property investments to recommend for
acquisition and arranging appropriate financing to facilitate the transaction.
The Manager is also responsible to the Board for all issues relating to property
asset management.
Shareholder relations
Shareholder communications are a high priority of the Board. Management and
staff of the Manager make themselves available at all reasonable times to meet
with key shareholders and analysts. Feedback is provided by the Manager to
Directors at quarterly Board meetings.
In addition, the Board is also kept fully appraised of all market commentary on
the Company by the Manager and other professional advisors.
Through this process the Board seeks to monitor investor relations and to ensure
that the Company's investor communication programme is effective.
Risk management
Each Director is aware of the risks inherent in the Company's business and
understands the importance of identifying and evaluating these risks. The Board
has adopted procedures and controls that enable it to manage these risks within
acceptable limits and to meet all its legal and regulatory obligations.
On behalf of the Board
David Hinde
14 September 2007
Independent Auditors' Report
to the Members of Macau Property Opportunities Fund Limited
We have audited the consolidated financial statements of Macau Property
Opportunities Fund Limited for the period ended 30 June 2007 which comprise the
consolidated and company balance sheets, consolidated and company income
statements, consolidated and company statements of changes in equity,
consolidated and company cash flow statements and the related notes. These
financial statements have been prepared under the accounting policies set out
therein.
Respective responsibilities of Directors and Auditors
The Directors' responsibilities for preparing the financial statements in
accordance with applicable Guernsey law and International Financial Reporting
Standards are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland). This report, including the opinion, has been prepared
for and only for the Company's members as a body in accordance with Section 64
of The Companies (Guernsey) Law, 1994 and for no other purpose. We do not, in
giving this opinion, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come,
save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with The Companies
(Guernsey) Law, 1994. We also report to you whether in our opinion the
information given in the Directors' Report is consistent with the financial
statements.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records or if we have not received all the information and
explanations we require for our audit.
We read the other information contained in the Annual Report and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. The other information
comprises only the Chairman's Statement, the Manager's Report, the Directors'
Report and the Directors and Company information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
• the financial statements give a true and fair view, in accordance
with International Financial Reporting Standards, of the state of the Company's
affairs as at 30 June 2007 and of its loss and cash flows for the period then
ended;
• the financial statements have been properly prepared in accordance
with The Companies (Guernsey) Law, 1994; and
• the information given in the Directors' Report is consistent with the
financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
14 September 2007
Consolidated Balance Sheet
As at 30 June 2007
2007
Notes US$'000
ASSETS
Current assets
Inventories 5 56,084
Trade and other receivables 6 458
Prepayments 54
Cash and cash equivalents 144,297
200,893
Total assets 200,893
EQUITY
Capital and reserves attributable to the Company's equity-holders
Share capital 8 1,050
Distributable reserves 187,960
Revaluation reserves -
Retained earnings/(accumulated losses) -524
Foreign exchange on consolidation -247
Total equity 188,239
LIABILITIES
Current liabilities
Trade and other payables 7 12,654
Total liabilities 12,654
Total equity and liabilities 200,893
The financial statements were approved by the Board of Directors and authorised
for issue on 14 September 2007.
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Company Balance Sheet
As at 30 June 2007
2007
Notes US$'000
ASSETS
Non-current assets
Investment in subsidiaries -256
Loans to subsidiaries 54,455
54,199
Current assets
Trade and other receivables 6 455
Prepayments 54
Cash and cash equivalents 137,790
138,299
Total assets 192,498
EQUITY
Capital and reserves attributable to the Company's equity-holders
Share capital 8 1,050
Distributable reserves 187,960
Revaluation reserves -256
Retained earnings/(accumulated losses) -237
Total equity 188,517
LIABILITIES
Current liabilities
Trade and other payables 7 3,981
Total liabilities 3,981
Total equity and liabilities 192,498
The financial statements were approved by the Board of Directors and authorised
for issue on 14 September 2007.
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Consolidated Income Statement
Period ended 30 June 2007
18 May 06-30
June 07
Notes US$'000
Revenue
Bank and other interest 8,876
Gains on foreign currency exchange 18
8,894
Expenses
Management fee 4,319
Performance fee 3,807
Non-Executive Directors' fees 338
Auditors' remuneration 52
General and administration expenses 10 902
-9,418
Loss before tax -524
Tax -
Loss for the period -524
Attributable to:
Equity-holders of the Company -524
-524
18 May 06-30
June 07
US$
Basic and diluted loss per share for loss attributable
to the equity-holders of the Company during the period 12 -0.005
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Company Income Statement
Period ended 30 June 2007
18 May 06- 30
June 07
Notes US$'000
Revenue
Bank and other interest 8,815
Gains on foreign currency exchange 16
8,831
Expenses
Management fee 4,319
Performance fee 3,807
Non-Executive Directors' fees 258
Auditors' remuneration 52
General and administration expenses 10 632
-9,068
Loss before tax -237
Tax -
Loss for the period -237
Attributable to:
Equity-holders of the Company -237
-237
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Consolidated Statement of Changes in Equity
Period ended 30 June 2007
Retained
earnings/ Foreign
Share Share (accumulated Distributable exchange on
capital premium losses) reserves consolidation Total
Movements during the Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
period
Issue of shares 1,050 195,410 - - - 196,460
Cancellation of share 9 - -195,410 - 195,410 - -
premium
Placing fees and - - - -7,450 - -7,450
formation costs
Foreign exchange on - - - - -247 -247
consolidation
Loss for the period - - -524 - - -524
Balance carried forward 1,050 - -524 187,960 -247 188,239
at 30 June 2007
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Company Statement of Changes in Equity
Period ended 30 June 2007
Retained
earnings/
Share Share (accumulated Distributable Revaluation
capital premium losses) reserves reserves Total
Movements during the Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
period
Issue of shares 1,050 195,410 - - - 196,460
Cancellation of share 9 - -195,410 - 195,410 - -
premium
Placing fees and - - - -7,450 - -7,450
formation costs
Loss on investment in - - - - -256 -256
subsidiaries
Loss for the period - - -237 - - -237
Balance carried forward 1,050 - -237 187,960 -256 188,517
at 30 June 2007
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Consolidated Cash Flow Statement
Period ended 30 June 2007
18 May 06- 30
June 07
Notes US$'000
Net cash used in operating activities 11 -5,434
Cash flows from investing activities
Expenditure on inventories -47,468
Interest received 8,418
Net cash used in investing activities -39,050
Cash flows from financing activities
Proceeds on issue of shares 196,460
Placing fees and formation costs -7,450
Net cash generated from financing activities 189,010
Net increase in cash and cash equivalents 144,526
Cash and cash equivalents at beginning of period -
Effect of foreign exchange rate changes -229
Cash and cash equivalents at end of period 144,297
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Company Cash Flow Statement
Period ended 30 June 2007
18 May 06- 30
June 07
Notes US$'000
Net cash used in operating activities 11 -5,141
Cash flows from investing activities
Loans to subsidiaries -54,455
Interest received 8,360
Net cash used in investing activities -46,095
Cash flows from financing activities
Proceeds on issue of shares 196,460
Placing fees and formation costs -7,450
Net cash generated from financing activities 189,010
Net increase in cash and cash equivalents 137,774
Cash and cash equivalents at beginning of period -
Effect of foreign exchange rate changes 16
Cash and cash equivalents at end of period 137,790
The notes on pages 43 to 49 are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
Period ended 30 June 2007
General information
Macau Property Opportunities Fund Limited is a company incorporated and
registered in Guernsey under the Companies (Guernsey) Law, 1994 (as amended) on
18 May 2006. The address of the registered office is given on the inside back
cover. The consolidated financial statements for the period ended 30 June 2007
comprise the financial statements of Macau Property Opportunities Fund Limited
and its subsidiaries (together referred to as the 'Group'). The Group invests in
commercial property and property-related ventures primarily in Macau and
potentially in the Western Pearl River Delta region. These consolidated
financial statements have been approved for issue by the Board of Directors on
14 September 2007.
1. 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 throughout the current period, unless otherwise stated.
Basis of accounting
These financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). The financial statements have been
prepared on the historical cost basis.
IFRS requires management to make judgements, estimates and assumptions that
affect the application of the reported amounts in these financial statements.
Complex areas involving a higher degree of judgement, or areas where assumptions
and estimates are significant to the consolidated financial statements, are
disclosed in Note 3.
The Directors have opted for the early adoption of IFRS7 - Financial
Instruments: Disclosures, and the complementary Amendment to IAS1, Presentation
of Financial Statements - Capital Disclosures which is in issue for companies
with an accounting period beginning on or after 1 January 2007.
Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and special-purpose entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has the power to govern the
financial and operating policies of a special-purpose entity so as to obtain
benefits from its activities. The financial statements of subsidiaries are
included in the consolidated financial statements from the date control
commences until the date control ceases.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Segmental 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. The Group invests
in commercial property and property-related ventures primarily in Macau and
potentially in the Western Pearl River Delta region.
Foreign currency translation
a) Functional and 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 financial statements are
presented in US Dollars, which is the Company's functional and presentational
currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the date of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
c) Group companies
The results and financial position of all the Group entities that have a
functional currency different from the presentation currency are translated into
the presentation currency as follows:
i) Assets and liabilities for each balance sheet are presented at the closing
rate at the date of that balance sheet;
ii) Income and expenses for each income statement are translated at average
exchange rates; and
iii) All resulting exchange differences are recognised as a separate component
of equity.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities are taken to shareholders' equity.
Inventories
Properties and land that are being held or developed for future sale are
classified as inventories at their deemed cost. They are 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 cost to complete redevelopment and
selling expenses. Deemed cost is the acquisition cost together with subsequent
capital expenditure incurred, including capitalised interest where relevant.
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 income statement. When a trade receivable is uncollectable, it
is written off against the allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are credited in the income
statement.
Cash and cash equivalents
Cash and cash equivalents in the balance sheets comprise cash at banks and on
hand and demand deposits 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, with an original maturity of three
months or less. For the purpose of the cash flow statements, cash and cash
equivalents consist of cash and cash equivalents as defined above.
Provisions
Provisions for legal claims 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 at the amount of 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 income from property trading.
Financial asset interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount.
Expenses
Property and contract expenditure, including bid costs, incurred prior to the
exchange of a contract is expensed as incurred, with the exception of
expenditure on long-term development contracts.
2. Financial risk management
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 provide 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
a) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the US Dollar
and the HK Dollar. 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 table below summarises the Group's exposure to foreign currency risk as at
30 June 2007. The Group's assets and liabilities at carrying amounts are
included in the table, categorised by the currency at their carrying amount.
As at 30 June 2007 US$'000 £'000 HK$'000 Total
Inventories - - 56,084 56,084
Trade and other receivables 458 - - 458
Prepayments - 54 - 54
Cash and cash equivalents 123,570 192 20,535 144,297
Total assets 124,028 246 76,619 200,893
Trade and other payables 3,841 197 8,616 12,654
Total liabilities 3,841 197 8,616 12,654
Net assets 120,187 49 68,003 188,239
The table above presents financial assets and liabilities denominated in foreign
currencies held by the Group as at 30 June 2007 and can be used to monitor
foreign currency risk as at that date. If the US Dollar weakened/strengthened by
10% against the HK Dollar with all other variables held constant, the post-tax
loss for the period would have been US$6,800,000 higher/lower. If the US Dollar
weakened/strengthened by 10% against Sterling with all other variables held
constant, the post-tax loss for the period would have been US$5,000 higher/
lower.
The above sensitivity analysis does not take into consideration the effect of
exchange rate movements on the shareholder equity if measured in Sterling.
b) Price risk
The Group is exposed to property price risk. The Group is not exposed to market
risk with regard to financial instruments as it does not hold equity
instruments.
c) Cash flow and fair value interest rate risk
The Group has significant interest-bearing assets in the form of bank deposits.
Its income and operating cash flows are substantially independent of market
interest rates.
Credit risk
The Group is not exposed to significant credit risk, as the income of the Group
is derived from bank deposits only through the use of high credit quality
financial institutions.
Liquidity risk
The Group adopts a prudent approach to liquidity management and maintains
sufficient cash reserves to meet its obligations. The Group maintains sufficient
cash reserves to meet its current property development liabilities.
2007
US$'000
Financial liabilities - current
Trade and other payables - maturity within one year 12,654
12,654
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.
3. Critical accounting estimates and assumptions
Management makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related 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 as follows:
Net realisable value is 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.
4. Subsidiaries
All special-purpose vehicles are owned 100% by Macau Property Opportunities Fund
Limited. The following subsidiaries have a year end of
31 December to coincide with the Macanese tax year:
MPOF Macau (Site 1) Limited MPOF Macau (Site 2) Limited MPOF Macau (Site 3) Limited
MPOF Macau (Site 4) Limited MPOF Macau (Site 5) Limited MPOF Macau (Site 6) Limited
MPOF Macau (Site 7) Limited MPOF Macau (Site 8) Limited MPOF Macau (Site 9) Limited
MPOF Macau (Site 10) Limited
The consolidated financial statements include the financial statements of Macau
Property Opportunities Fund Limited and the subsidiaries listed in the following
table:
Ownership Incorporation
MPOF Macau (Site 1) Limited 100% Macau
MPOF Macau (Site 2) Limited 100% Macau
MPOF Macau (Site 3) Limited 100% Macau
MPOF Macau (Site 4) Limited 100% Macau
MPOF Macau (Site 5) Limited 100% Macau
MPOF Macau (Site 6) Limited 100% Macau
MPOF Macau (Site 7) Limited 100% Macau
MPOF Macau (Site 8) Limited 100% Macau
MPOF Macau (Site 9) Limited 100% Macau
MPOF Macau (Site 10) Limited 100% Macau
MPOF (Penha) Limited 100% Guernsey
MPOF (Taipa) Limited 100% Guernsey
MPOF (Jose) Limited 100% Guernsey
MPOF (Sun) Limited 100% Guernsey
MPOF (Senado) Limited 100% Guernsey
MPOF (Domingos) 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
5. Inventories
2007
US$'000
Cost of properties 56,084
56,084
Cost of properties includes payments due on Tower Six of One Central Residences
in the next 12 months totalling HK$67,339,000 (US$8,616,000). Macau Property
Opportunities Fund Limited is guarantor for its subsidiary company in respect of
this property. The total of the guarantee is HK$572,379,000 (US$73,233,000), of
which HK$67,339,000 (US$8,616,000) is due within the next 12 months, and the
balance is due on completion of the property development. As at 30 June 2007,
HK$33,669,500 (US$4,308,000) is due to subsidiaries from the Company.
6. Trade and other receivables
2007 2007
US$'000 US$'000
Company Group
Interest receivable 455 458
455 458
Other receivables do not carry any interest and are short-term in nature, and
are accordingly stated at their nominal value.
7. Trade and other payables
2007 2007
US$'000 US$'000
Company Group
Payments due for acquired property - 8,616
Payable to the Manager 3,801 3,801
Trade and other payables 180 237
3,981 12,654
The trade payable for acquired property represents contractual instalments of
HK$67,339,000 (US$8,616,000) that are due within the next 12 months on the
purchase of Tower Six of One Central Residences.
Other payables principally comprise amounts outstanding for ongoing costs. The
Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
8. Share capital
2007 2007
US$'000 US$'000
Company Group
Authorised:
300 million Ordinary Shares of US$0.01 each 3,000 3,000
Issued and fully paid:
105 million Ordinary Shares of US$0.01 each 1,050 1,050
The Company has one class of Ordinary Shares which carry no right to fixed
income.
9. Share premium
In accordance with the Listing prospectus and under Guernsey Statute, on 7 June
2006 an application was made to the Royal Court of Guernsey to have the share
premium cancelled and re-designated as a distributable reserve. As such the
share premium account was reduced by US$195.41 million and a distributable
reserve created for this amount.
10. General and administration expenses
18 May 06- 30 18 May 06- 30
June 07 June 07
US$'000 US$'000
Company Group
Legal and professional 225 237
Holding Company administration 208 208
Guernsey SPV administration - 99
Macau SPV administration - 42
Insurance costs 40 40
Other operating expenses 159 276
General and administration expenses 632 902
11. Net cash used in operating activities
18 May 06- 30 18 May 06- 30
June 07 June 07
US$'000 US$'000
Company Group
Operating loss from continuing operations -9,068 -9,418
Adjustments for:
Increase/(decrease) in provisions - -
-9,068 -9,418
Operating cash flows before movements in working capital
(Increase) in receivables -54 -54
Increase in payables 3,981 4,038
Cash used in operations -5,141 -5,434
Interest paid - -
Net cash used in operating activities -5,141 -5,434
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.
12. Basic and diluted loss per Ordinary Share
The basic and diluted loss per equivalent Ordinary Share is based on the loss
attributable to equity-holders for the period of US$(524,000) and on the
105,000,000 weighted average number of Ordinary Shares in issue during the
period.
Loss attributable US$'000 Weighted average no. of EPS US$
shares '000s
Basic -524 105,000 -0.0050
Diluted -524 105,000 -0.0050
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
On 8 March 2007 Tim Henderson was appointed as a Director of all of the Guernsey
incorporated subsidiaries of Macau Property Opportunities Fund Limited. In the
period to 30 June 2007 Directors' fees of US$80,000 were paid by the Guernsey
incorporated subsidiaries, of which Mr Henderson received US$13,000.
18 May 06- 30 June 07 18 May 06- 30 June
07
US$'000 US$'000
Company Group
Directors' fees 258 258
Subsidiary Directors' fees - 80
258 338
Tom Ashworth received no Directors' fees from the Company.
Tom Ashworth is a shareholder and Director of Sniper Capital Limited. Sniper
Capital Limited is the Manager to the Company and received fees in the period as
detailed in the Income Statement.
Tom Ashworth is a shareholder and Director of Adept Capital Services Limited.
Adept Capital Services Limited provides administrative services to the Macanese
SPVs and received fees in the period as detailed in Note 10.
14. Material contracts
Under the terms of an appointment made by the Board of Directors of Macau
Property Opportunities Fund Limited on 23 May 2006, Sniper Capital Limited was
appointed as Manager to the Company. The Manager is paid quarterly in advance a
fee of 2.0% of the Net Asset Value, as adjusted to reflect the Property
Investment Valuation Basis. In addition, Sniper Capital Limited is entitled to
receive a Performance Fee of 20% of any return above the Basic Performance
Hurdle as stated in the prospectus. A further 15% Super Performance Fee is
payable if the Super Performance Hurdle is met, as stated in the Prospectus.
The first calculation period ends on 30 June 2007 and the amounts accrued in the
financial statements are as follows:
US$
Performance Fee 3,807,300
Super Performance Fee Nil
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