Macau Property Regulatory News (MPO)

21 Sep 2009 07:00



Macau Property Opportunities Fund Limited

("MPO" or the "Company")

Final Results for the period ended 30 June 2009

Macau Property Opportunities Fund Limited announces its results for the year ended 30 June 2009. 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

Adjusted NAV per share is US$2.25 or 136p*, representing a fall of 20% and 3.37% in dollar terms and sterling terms, respectively, during the twelve-month period.

Since December 2008, the Adjusted NAV per share has increased by 5.8%, reflecting the recent recovery in the Macau property market.

Total Adjusted NAV is US$236 million, representing a 25% increase since Admission in 2006.

US$82 million loan facility secured for financing MPO's final obligation in One Central Residences. Overall loan-to-value is 25.5% following drawdown of the credit facility.

New investments during the period:

Zhuhai Logistics Centre, MPO's first acquisition in the warehousing & logistics sector and mainland China worth US$45 million in total commitment value.

US$3.8 million of smaller property assets.

Investment property:

Handover of One Central Residences' Tower Six completed in August 2009.

Active asset management programmes for One Central and Zhuhai Logistic Centre now under way.

Development properties: 

Steady progress with the design and planning for four key development properties during the year. 

Commenting on the period under review, David Hinde, the Company's Chairman, said:

"Our third year's trading has been marked by the first decrease in MPO's Adjusted Net Asset Value, reflecting the difficult economic environment we have been experiencing. 

Nevertheless, over the last year, we have progressed the development of our investments into a balanced portfolio of tangible assets. Our prudent cash management and borrowing policies have also secured the financial strength needed to deal with any further economic uncertainties.

 

While we remain cautious about the prospects for a sustained global economic recovery, we believe that our strategically well-positioned portfolio, combined with Macau's uniquely resilient qualities, will continue to generate sustainable long-term growth for our investors."

*based on a Dollar/Sterling exchange rate of 1.652 as at 30 June 2009

About Macau Property Opportunities Fund

Macau Property Opportunities Fund Limited, which raised £105 million in a placing and commenced trading on AIM in 2006, is a closed-end investment fund registered in Guernsey. 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.

Key Contacts:

Public Relations

Hogarth Partnership Limited

Andrew Jaques / Anna Keeble

Tel: +44 20 7357 9477

Nominated Adviser & Joint Broker

Collins Stewart Europe Limited

David Yovichic / Helen Goldsmith

Tel: +44 20 7523 8350

Joint Broker

Shore Capital Stockbrokers Limited

Dru Danford

Tel: +44 20 7408 4090

Manager

Sniper Capital Limited

Daisy Tang, Corporate & Investor Communications 

Tel: +852 2292 6700

Email: info@snipercapital.com www.snipercapital.com

For further information, please visit the Company's website at www.mpofund.com

Stock Codes: Bloomberg: MPO LN

Reuters: MPO.L

CHAIRMAN'S STATEMENT

The publication of our third annual report marks the first reported decrease in Macau Property Opportunities Fund's Adjusted Net Asset Value. Down 20% year-on-year, this fall directly reflects the difficult economic environment we have been experiencing. Nevertheless, over the last year, we have progressed the development of our investments into a balanced portfolio of tangible assets while our prudent cash management and borrowing policies have secured the financial strength needed to deal with any further economic uncertainties. Moreover, Macau has recently shown promising signs of recovery, as reflected in the 5.8% rise in our Adjusted NAV since December 2008.

There is no doubt the recent financial crisis has been the worst for decades, with full confidence in the markets likely to take some time to recover.

The downgrading of property stocks worldwide and, in Macau, the fall in valuations and the decline in the territory's domestic growth rates, albeit from previously overextended levels, have understandably made investors nervous.

Nevertheless, the strength of Macau's unique long-term growth drivers and the strategic positioning of our investments should ensure that both our progress and our prospects remain positive in an uncertain global environment.

Having acquired our first investment in mainland China - the Zhuhai Logistics Centre - we have increased the existing buildings' occupancy rate and overall rental income. The open land on the remainder of the site will be developed to provide state-of-the-art logistics facilities that will meet the needs of the Chinese government's local infrastructure and regeneration plans. 

We have also made steady progress with our three Macau redevelopment projects - Rua da Penha, Senado Square and Rua do Laboratório - all of which are on schedule in terms of planning and other associated activities. 

Our investment in One Central Residences, Macau's most prestigious development, has been secured by a US$82 million loan facility agreed with a consortium of international banks led by HSBC. This not only confirms the project's excellent quality and positioning, but also underlines the strength of our relationships in the banking community.

Throughout the year, we have been assessing ways - including share buy-backs - that will narrow the discount to Adjusted Net Asset Value at which our shares trade. While we are not averse to buy-backs in appropriate circumstances, we currently believe our focus should be on preserving our capital base and executing our investment and development strategy. 

As a mark of its confidence in our future, Sniper Investments Limited - an investment vehicle associated with our Manager - has increased its holding, to the point where it is now our fifth largest shareholder. 

We have also successfully attracted a number of new investors to the share register, many of whom are not only convinced by the Macau story but also commend our strategically positioned portfolio and our Manager's execution skills. 

In line with our commitment to long-term capital growth, no dividend will be paid in respect of the trading period under review.

Looking ahead, the election of Dr Fernando Chui Sai-on as Macau's second Chief Executive bodes well for the future. Dr Chui is expected to introduce measures designed to reduce Macau's dependence on the gaming industry and boost the wider economy.

Our own intention is to focus on the progression of our four development projects whilst implementing our asset management strategy for One Central Residences.

While we remain cautious about the prospects for a sustained global economic recovery, we believe that our strategically well-positioned portfolio, combined with Macau's uniquely resilient qualities, will continue to generate sustainable long-term growth for our investors.

David Hinde

Chairman

Macau Property Opportunities Fund Limited

PROPERTY PORTFOLIO

Valuation US$275m*

Change (current period) -16%

One Central

Valuation: US$158,844,000

Sector: Residential (high-end)

Change (current period): -25%

Change (since acquisition): +14%

Rua da Penha

Valuation: US$21,934,000

Sector: Residential (niche)

Change (current period): -1%

Change (since acquisition): +172%

Senado Square

Valuation: US$33,160,000

Sector: Mixed-use

Change (current period): +3%

Change (since acquisition): +106%

Rua do Laboratório

Valuation: US$38,192,000

Sector: Residential (entry level)

Change (current period): -3%

Change (since acquisition): +78%

Zhuhai Logistics Centre

Valuation: US$12,903,000

Sector: Warehousing & Logistics

Change (current period): +19%

Change (since acquisition): +19%

Other Property Assets

Valuation: US$10,265,000

Change (current period): -8%

Change (since acquisition): +42%

*Based on independent valuations of the Company's portfolio properties by Savills (Macau) Limited.

One Central (high-end residential)

Created by developers Hongkong Land and Shun Tak Holdings, One Central Residences comprises seven high-quality residential towers, a five star Mandarin Oriental Hotel and a luxury shopping centre aimed at the upper end of the market.

We have invested in the whole of Tower Six and a number of other well-located residential units, which we are currently preparing for leasing.

The financing for this investment was secured by a US$82 million loan facility arranged with a consortium of international banks led by HSBC.

• Macau's premier mixed-used development

• Acquired Tower Six and 25 individual units

• Current status: Fitting out & pre-leasing

• Exit strategy: Lease & asset manage

Total Commitment:	US$138 million
Type	Investment
Location	Macau Peninsula
Acquisition Date	November 2006
Gross Floor Area	201,000 ft2 / 18,700 m2
Handover	August 2009

Rua da Penha (Niche market residential)

Rua da Penha will provide attractively designed residential accommodation in a highly popular, well-located area.

• Low-level residential block

• Positioned towards local residents 

• Current status: Advanced planning 

• Exit strategy: Pre-sell and sell

Total Commitment:	US$20 million
Acquisition Cost:	US$8.6 million
Projected Development Cost:	US$11.4 million
Type	Development
Location	Macau Peninsula
Acquisition Date	October 2006
Projected Gross Floor Area	80,000 ft2 / 7,430 m2
Estimated Completion Date	2010

Senado Square (Mixed-use development)

Located at the heart of Macau's tourist district, Senado Square will offer a creative mix of high quality retail space.

• First mixed-use property

• Multi-storey retail complex

• Current status: Advanced planning 

• Exit strategy: Lease and sell

Total Commitment:	US$33 million
Acquisition Cost:	US$16 million
Projected Development Cost:	US$17 million
Type	Development
Location	Macau Peninsula
Acquisition Date	October 2007
Projected Gross Floor Area	70,000 ft2/ 6,500 m2
Estimated Completion Date	2011

Rua do Laboratório (Entry level residential)

Designed specifically for the entry level market, Rua do Laboratório is well-placed to serve the needs of the city's working population.

• High-rise residential block 

• Targeting local first-time buyers

• Current status: Planning 

• Exit strategy: Pre-sell and sell

Total Commitment:	US$50 million
Acquisition Cost:	US$20.6 million
Projected Development Cost:	US$29.4 million
Type	Development
Location	Macau Peninsula
Acquisition Date	November 2006
Projected Gross Floor Area	220,000 ft2 / 20,440 m2
Estimated Completion Date	2011

Zhuhai Logistics Centre (Warehousing and logistics)

Located in a government supported development area in China, this is our first investment in the logistics sector.

• First acquisition in mainland China 

• Phase 2 pending development approvals

• Current status: Leasing and planning

• Exit strategy: Sell with long-term leases

Total Commitment:	US$45 million
Acquisition Cost:	US$11 million
Projected Development Cost:	US$34 million
Type	Development
Location	Zhuhai, China
Acquisition Date	August 2008
Projected Gross Floor Area	1.6m ft2 / 150,000 m2
Estimated Completion Date	2011/2012

All information is based on the latest indicated zoning, plot ratios and construction costs and is subject to final planning approval.

MANAGER'S REPORT

The past year will be remembered not just for the unprecedented turmoil in the world's financial markets, but also for the economic downturn that followed. Yet Macau - with its unique growth drivers - has shown greater resilience and more encouraging signs of recovery than most other markets.

Clearly our progress during the past year was hampered by the global downturn, as evidenced by the fall in the Company's Adjusted Net Asset Value. While confidence in the markets is likely to remain fragile, we nevertheless firmly believe in the Macanese economy's potential for further growth over the coming years.

Despite the unwelcome fall in our Adjusted Net Asset Value and the reversal in the Macau property market, we believe our carefully chosen investments remain well positioned to bear fruit in the future. The progress we have made on the development front fits well with Macau's current economic climate. Not only has the pace of growth in the territory slowed to a more sustainable level, we have also begun to experience the benefits of significantly reduced labour and material costs. At the same time - as local incomes continue to rise - the demand for high quality properties in sought-after locations remains undiminished.

Prestigious development comes on stream

Located on a prime waterfront site, One Central is Macau's most prestigious development. With sweeping views across the Nam Van Lake, it features a total of seven exceptionally high quality, luxury apartment towers, a five star Mandarin Oriental Hotel and an exclusive shopping centre aimed at the upper end of the market.

We have invested in the whole of Tower Six and a number of other well-located apartments in other towers. Since the handover of Tower Six in August 2009, we have appointed an interior designer, tasked with styling and furnishing the apartments in a manner that will reflect the unique qualities and premium positioning of this major development.

Breaking new ground in mainland China

In our 2008 report, we announced that we had broken new ground with our first investment in mainland China. Zhuhai Logistics Centre is also our first foray into the important warehousing and logistics sector.

Located just minutes from the Macau border and close to the landing point for the proposed Hong Kong-Zhuhai-Macau bridge, this project is perfectly placed to take advantage of the increasing interconnectivity between the three cities. The local authorities have also identified the surrounding area as an ideal site for both scientific research facilities and technological industries. A tourism hub, with a theme park and other attractions, is also planned on nearby Hengqin Island.

Since acquisition, we have upgraded the existing buildings and increased the occupancy rate from 52% to almost 60%. We have also increased rental income by 18% despite a challenging leasing market.

Our plans for the longer-term include the development of the adjacent land and the provision of accommodation for local and Macanese workers. We believe the potential value of this scheme will be further enhanced by planned developments in Zhuhai and Hengqin Island, including the recently proposed move of the University of Macau to the area.

Progress at development sites

The past year has seen us making progress on the practical aspects of our development sites, as outlined below. 

Government permission for the demolition of the existing buildings at Rua da Penha is anticipated later this year, with construction of a low-rise apartment block for local residents due to start soon thereafter. Located in a popular neighbourhood in an architecturally sensitive area, Rua da Penha's value has already increased by over 170% since its acquisition in 2006. Our planned apartments are designed to meet the growing demand for quality accommodation fuelled by the desire of locals to upgrade their lifestyle.

Senado Square, our mixed-use development in the heart of Macau's World Heritage district, is in the advanced planning stage, with final approval expected imminently. Our aim is to create a multi-storey retail complex that will attract both tourists and locals. We have completed our preliminary research into the appropriate merchandising and tenant mix and are currently in discussions with a number of potentially interested parties. In the meantime, Macau's shop rentals, capital values and pedestrian footfall are likely to keep on rising, which augurs well for the project.

Rua do Laboratório, our entry level development in the north of the city, is also progressing through the planning stage. We are in discussion with architects specialising in Hong Kong's mass-market sector whose ideas match our ambitions for a suitable high-rise residential block. We expect this project to benefit not only from the government's recently confirmed incentives for first-time buyers, but also from its location close to the proposed light rapid transit system link with the rest of Macau.

An eye for future opportunities

As part of our ongoing strategy, we are always on the lookout for new investment opportunities that will add value to the Company's portfolio. Our priorities focus on viable, up-and-coming locations offering opportunities for capital growth through either consolidation, refurbishment or redevelopment in niche or undervalued market segments.

Movements in valuations

The Company's financial statements as at 30 June 2009 have been prepared in accordance with International Financial Reporting Standards. Development properties classified as inventories are included in the financial statements at the lower of cost and net realisable value; properties classified as investment properties are carried at fair value. This results in a Net Asset Value per share of US$1.48 as at 30 June 2009, compared with an NAV per share of US$1.63 as at 30 June 2008.

Valuation of the Company's entire portfolio was performed by Savills (Macau) Limited, in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards. The open market valuation as reported by Savills and detailed in the portfolio summary of this report was US$275.3 million. This represents an uplift of US$71.2 million or 35% over the cost of the properties and has resulted in an Adjusted Net Asset Value per share of US$2.25 or 136p as at 30 June 2009. This represents a fall in the Adjusted NAV per share in the past year of 20% and 3.37% in US$ and Sterling terms, respectively.

The final audited results are summarised below:

	30 June 2009		30 June 2008
	US$	£1	US$	£1
NAV	$155.51m	£94.13m	$170.69m	£85.55m
Adjusted NAV2	$236.45m	£143.12m	$295.56m	£148.12m
NAV per share	$1.48	89.65p	$1.63	81.47p
Adjusted NAV per share2	$2.25	136.31p	$2.81	141.07p
Changes in Adjusted NAV
Since Admission3	25.10%	41.68%	56.37%	46.63%
YoY	-20.00%	-3.37%	26.96%	27.32%

 

1 Based on US$/£ exchange rate of 1.652 at 30 June 2009 and 1.995 at 30 June 2008

2  Adjusted Net Asset Value is shown after accruing for the performance fee (if any) and is calculated by taking the NAV per share calculated under IFRS and adjusting inter alia to include the properties owned by the Company at fair value rather than at the lower of cost and net realisable value.

3 Based on NAV per share at Admission on 5 June 2006 of US$1.80 (96.21 pence)

As at 30 June 2009, the Company's total assets stood at US$241.0 million, comprising US$181.0 million of development properties, US$12.9 million of investment property and cash of US$47.0 million. If development properties were included in the balance sheet at open market value, as reported by Savills and as used for the Adjusted NAV, total assets would be US$322.4 million. The Company's total liabilities as at 30 June 2009 were US$85.5 million. 

Managing cash balances

As at 30 June 2009, the Company had a cash balance equivalent to US$47.0 million. The majority of the cash reserves are invested in short-term HK$ fixed deposits across a number of international banks in Guernsey, Hong Kong and Macau, which helps to both mitigate the credit risk and expand our banking relationships.

The Company continues to adopt a prudent cash management policy whilst closely monitoring its capital requirements. As most of the Company's assets are denominated in US$ and HK$, the exposure to the risk of foreign exchange fluctuations can be considered minimal.

A major financing success

As reported earlier, the Company secured a US$82 million loan facility with a consortium of international and Macanese banks led by HSBC, which is being used to meet our obligations in connection with One Central Residences. Drawdown of the loan coincided with the handover of the property in August 2009. This facility extends until mid 2012, at an interest rate of 3-month HIBOR plus 2.4% per annum. Following drawdown of the credit facility, the Company has an overall loan-to-value ratio of 25.5%.

Our strong relationships with several of the region's financial institutions - as evidenced by the above facility - put us in a healthy position with regard to securing construction financing for our various redevelopment projects.

Trading the Company's shares

In common with other London-listed property stocks, the Company's share price suffered throughout the year from generally weak sentiment in the sector, with the shares trading at a substantial discount to the Adjusted Net Asset Value per share. Nevertheless, the shares did outperform Oriel Securities' overseas property fund sector over the year, which reflects Macau's strong fundamentals and the potential of the Company's portfolio.

More recently, the Company's long-term investors' consolidation of their holdings, and purchases by several new institutional investors, have boosted trading volumes and helped strengthen the share price. Furthermore, over the past year Sniper Investments Limited, an investment vehicle associated with the Company's Manager, has established a holding of 4.175 million shares or 3.98% of the Company's issued share capital, making it the fifth largest shareholder.

While we have been encouraged by the recent narrowing of the discount between the Company's share price and its Adjusted NAV, we still believe the current share price does not fairly reflect the value of the Company and its future prospects. As a result, we are working closely with our brokers and advisers to heighten awareness of the Company amongst a wider range of investors.

Significant shareholders*

Name of Shareholder	Number of shares	%
Amvescap (including Invesco & Aim)	30,828,244	29.36%
Insight Investment Management	17,306,157	16.48%
Midas Capital Partners	13,740,000	13.08%
Universities Superannuation Scheme	10,500,000	10.00%
Sniper Investments Limited	4,175,000	3.98%
Other	28,450,599	27.10%
	105,000,000	100.00%

* As at 30 June 09

The resilience of Macau

There is no doubt that Macau has felt the impact of the global financial crisis, particularly during the latter part of 2008, with the territory reporting negative growth in GDP for the first half of 2009.

The government's response to the situation has been to prioritise the diversification of the economy, press ahead with its infrastructure plans and do whatever it can to keep the territory's negative growth within single digit parameters.

On the positive side, unemployment levels remained at a relatively low level (3.6% at Q2 2009), which compares favourably with most neighbouring economies.

Bridging the trade divide

On the infrastructure front, the government has increased its expenditure to some US$1.3 billion.

As well as the construction of the domestic light rapid transit system designed to serve the needs of Macau's citizens, the Chinese government is committed to the Hong Kong-Zhuhai-Macau bridge, which will improve connections between the three cities. The construction of this project, which is expected to take six years, is due to begin at the end of 2009.

Although plans for the expansion of the territory's international airport are currently on hold, the construction of the new Taipa Ferry Terminal continues apace, with a target date set for its opening in 2011.

The continued development of China's Pearl River Delta and Zhuhai region also supports Macau's determination to work its way through the global recession, as does the ambitious plan for the creation of a tourism hub on Zhuhai's Hengqin Island.

All these initiatives are likely to be boosted by the election of Dr Fernando Chui Sai-on as Macau's new Chief Executive. Dr Chui comes from a prominent pro-Beijing family and, in his election statement, said that China will continue to provide backing for Macau and inject continued dynamism into the territory's development.

Gaming hedges its bets

Dr Chui is also committed to diversifying Macau's predominantly gaming-driven economy, which must be seen as a positive development, even though the industry will always be a vital source of revenue for the government. Although gaming revenues have fallen since late 2008, they outperformed those of Las Vegas Strip and Nevada State over the same period and have shown signs of stabilising in the last few months. 

Confidence in the industry did take a knock last year when it became known that Las Vegas Sands Corporation had called a temporary halt to its developments on Cotai Strip. This was overcome when the group announced its intention to restart operations by the end of 2009.

There was reassuring evidence of Macau's dynamic potential when Malaysian gaming group Genting acquired a 3.2% stake in US casino operator MGM Mirage, co-owner of the MGM Grand Macau. Elsewhere, the markets' interest in plans for Hong Kong IPOs announced by Las Vegas Sands and Wynn Resorts for their Macau-based assets - totalling up to US$3.5 billion - should lend to renewed overseas investment in the territory. 

At an administrative level, the government recently approved a "VIP Junket Commission Cap" designed to regularise the payments casino operators make to agents who bring many high-roller gamblers to the territory. This move has been welcomed by the gaming industry as it offers operators a level playing field and is likely to increase their overall revenues. 

Tourists drawn to the Strip

Just as gaming felt the effects of the financial crisis, tourism also caught a chill as enthusiasm for travel was dampened by the global downturn and the unfortunate international outbreak of human swine flu. Macau's visitor numbers did continue to rise during 2008 but they have since dropped, with figures for the first half of 2009 down 11% compared with the previous year. Nevertheless, according to Morgan Stanley, visitors' expenditure per capita since the second quarter of 2009 has risen boosted by a combination of increasing consumer confidence and the wider choice of attractions being offered by Macau.

The recently-opened US$2.1 billion City of Dreams, the only major casino/hotel resort to have opened in Macau since 2007, received 1.2 million visitors during its first month of operation. With a total of 420,000 sq ft of casino space, this obviously popular destination features three luxury hotels - the Hard Rock Hotel, Crown Towers and the Grand Hyatt Macau - a wealth of dining facilities and an array of attractive shops. 

Property bottoms out

Macau's property sector seems to be matching tourism with its own brand of resilience. By early 2009, property transaction volumes and values had fallen to levels not seen since 2003 and 2006, respectively.

However, since then, the situation has improved significantly, with average property prices increasing by as much as 30% since March and residential transaction volumes increasing by 680% between January and June. This upturn owes as much to the government's housing subsidies as it does to the general economic recovery.

At the high-end of the market, capital values in the second quarter of 2009 outstripped rental values, with a rebound of 10.2% compared to the first quarter, according to figures from Jones Lang LaSalle.

The leasing market was also affected by the downturn. The temporary halt in the Las Vegas Sands Cotai development and the tightening of the rules relating to employment visas helped, in part, to cause a fall in the number of expatriates working in the territory. The figure stood at 83,700 as at June 2009. A year earlier the figure was 98,500. However, the opening of City of Dreams and the expected resumption of the Las Vegas Sands project are expected to drive an upturn in demand.

In the retail sector, capital value and rental value dropped by 11.8% and 4.6% respectively in the last quarter of 2008. They have recovered since the turn of the year, boosted by new retail openings in the second half of 2008. With more projects due to open in the near future, including the luxury shopping centre at One Central Residences, the sector seems to have bottomed out, with signs of growth returning in areas such as Senado Square, where we have committed US$33 million.

Overall, the prospects for Macau's property sector continue to look promising. The territory's economic growth may have slowed, but the demand for high quality property in select areas - where there are genuine end-users as opposed to short-term speculators - remains undimmed. As we constantly maintain, strategic and well-thought-out positioning is vital for the generation of attractive long-term investment returns. We believe our present niche market investments are well-located. We will continue our policy of avoiding sectors that are already overcrowded.

Building on underlying strengths

We continue to believe in Macau. It is not only one of the world's most dynamic and exciting cities, it is also one of the most resiliently enterprising.

As the territory celebrates its tenth anniversary as a Special Administrative Region of the People's Republic of China, and prepares for life under a new Chief Executive, we believe it remains well positioned to weather any further challenges the global economy may have to face.

Following the huge investments made in its tiny economy over the past decade, growth in the territory had probably reached unsustainable levels in recent times. As Macau enters its next phase of growth, progress is likely to be sustained at a more realistic level, while still continuing to outperform mainland China.

We have made steady progress since our Company's formation in 2006. Our focus now must continue to be on the immediate task of turning our initial investments into tangible, profitable assets. We believe we have the professional skills, drive and enthusiasm needed to build on the underlying strengths of our portfolio as a platform for rewarding our shareholders and fulfilling our long-term objectives.

Sniper Capital Limited

Manager

Consolidated Balance Sheet

As at 30 June 2009

	NNote	2009 US$’000		2008 US$’000
ASSETS
Non-current assets
Investment property	6	12,903		-
		12,903		-
Current assets
Inventories	5	181,047		104,599
Trade and other receivables	7	37		27
Prepayments		20		26
Cash and cash equivalents		47,010		80,555
		228,114		185,207
Total assets		241,017		185,207
EQUITY
Capital and reserves attributable to the Company’s equity-holders
Share capital	10	1,050		1,050
Distributable reserves		187,960		187,960
Accumulated losses		(33,527)		(18,310)
Foreign exchange on consolidation		23		(14)
Total equity		155,506		170,686
LIABILITIES
Current liabilities
Trade and other payables	8	85,511		14,521
Total liabilities		85,511		14,521
Total equity and liabilities		241,017		185,207

The consolidated financial statements on pages 33 to 58 were approved by the Board of Directors and authorised for issue on 18 September 2009.

Company Balance Sheet

As at 30 June 2009

	Note	2009 US$’000		2008 US$’000
ASSETS
Non-current assets
Investment in subsidiaries	9	-		-
Current assets
Loans to subsidiaries	14	133,137		125,539
Trade and other receivables	7	11,411		5,928
Prepayments		19		25
Cash and cash equivalents		33,049		60,282
		177,616		191,774
Total assets		177,616		191,774
EQUITY
Capital and reserves attributable to the Company’s equity-holders
Share capital	10	1,050		1,050
Distributable reserves		187,960		187,960
Accumulated losses		(21,242)		(18,329)
Total equity		167,768		170,681
LIABILITIES
Current liabilities
Investment in subsidiaries	9	9,611		6,772
Trade and other payables	8	237		14,321
Total liabilities		9,848		21,093
Total equity and liabilities		177,616		191,774

The consolidated financial statements on pages 33 to 58 were approved by the Board of Directors and authorised for issue on 18 September 2009.

Consolidated Income Statement

As at 30 June 2009

	Note	2009 US$’000		2008 US$’000
Income
Bank and other interest		511		3,640
Rental income		233		-
Unrealised gain on investment property	6	1,811		-
Gains/(losses) on foreign currency exchange		1,138		(711)
		3,693		2,929
Expenses
Management fee	15	5,154		5,153
Performance fee	15	-		14,043
Non-executive Directors’ fees		200		251
Auditors’ remuneration		116		107
Unrealised loss on inventories	5	12,296		-
General and administration expenses	11	1,144		1,161
		(18,910)		(20,715)
Loss for the year		(15,217)		(17,786)
Attributable to:
Equity-holders of the Company		(15,217)		(17,786)

		2009 US$		2008 US$
Basic and diluted loss per Ordinary Share attributable to the equity-holders of the Company during the year	13	(0.1449)		(0.1694)

The accompanying notes on pages 41 to 58 are an integral part of these consolidated financial statements. 

Company Income Statement As at 30 June 2009	Note	2009 US$’000		2008 US$’000
Income
Bank and other interest		5,923		9,453
Gains/(losses) on foreign currency exchange		283		(378)
		6,206		9,075
Fair value adjustment of subsidiaries	9	(2,839)		(6,517)
Expenses
Management fee	15	5,154		5,153
Performance fee	15	-		14,043
Non-executive Directors’ fees		200		251
Auditors’ remuneration		96		97
General and administration expenses	11	830		850
		(6,280)		(20,394)
Loss for the year		(2,913)		(17,836)
Attributable to:
Equity-holders of the Company		(2,913)		(17,836)

The accompanying notes on pages 41 to 58 are an integral part of these consolidated financial statements. 

Consolidated Statement of Changes in Equity

As at 30 June 2009

2009 Movements during the year	Share capital US$'000	Accumulated losses  US$'000	Distributable reserves US$'000	Foreign exchange on consolidation US$'000	Total US$'000
Balance brought forward at 1 July 2008	1,050	(18,310)	187,960	(14)	170,686
Foreign exchange on consolidation	-	-	-	37	37
Loss for the year	-	(15,217)	-	-	(15,217)
Balance carried forward at 30 June 2009	1,050	(33,527)	187,960	23	155,506
2008 Movements during the year	Share capital US$'000	Accumulated losses  US$'000	Distributable reserves US$'000	Foreign exchange on consolidation US$'000	Total US$'000
Balance brought forward at 1 July 2007	1,050	(524)	187,960	(247)	188,239
Foreign exchange on consolidation	-	-	-	233	233
Loss for the year	-	(17,786)	-	-	(17,786)
Balance carried forward at 30 June 2008	1,050	(18,310)	187,960	(14)	170,686

The accompanying notes on pages 41 to 58 are an integral part of these consolidated financial statements. 

Consolidated Statement of Changes in Equity

As at 30 June 2009

2009 Movements during the year	Share capital US$'000	Accumulated losses US$'000	Distributable reserves US$'000	Total US$'000
Balance brought forward at 1 July 2008	1,050	(18,329)	187,960	170,681
Loss for the year	-	(2,913)	-	(2,913)
Balance carried forward at 30 June 2009	1,050	(21,242)	187,960	167,768

2008 Movements during the year		Share capital US$'000	Accumulated losses  US$'000	Distributable reserves US$'000	Total US$'000
Balance brought forward at 1 July 2007		1,050	(493)	187,960	188,517
Loss for the year		-	(17,836)	-	(17,836)
Balance carried forward at 30 June 2008		1,050	(18,329)	187,960	170,681

The accompanying notes on pages 41 to 58 are an integral part of these consolidated financial statements. 

Consolidated Cash Flow Statement As at 30 June 2009	Note	2009 US$'000		2008 US$'000
Net cash used in operating activities	12	(24,464)		(63,975)
Cash flows from investing activities
Acquisition of subsidiary		(9,118)		-
Net cash used in investing activities		(9,118)		-
Net decrease in cash and cash equivalents		(33,582)		(63,975)
Cash and cash equivalents at beginning of year		80,555		144,297
Effect of foreign exchange rate changes		37		233
Cash and cash equivalents at end of year		47,010		80,555

The accompanying notes on pages 41 to 58 are an integral part of these consolidated financial statements. 

Company Cash Flow Statement As at 30 June 2009	Note		2009 US$'000		2008 US$'000
Net cash used in operating activities	12		(19,635)		(6,424)
Cash flows from investing activities
Loans to subsidiaries			(7,598)		(71,084)
Net cash used in investing activities			(7,598)		(71,084)
Net decrease in cash and cash equivalents			(27,233)		(77,508)
Cash and cash equivalents at beginning of year			60,282		137,790
Cash and cash equivalents at end of year			33,049		60,282

The accompanying on pages 41 to 58 notes are an integral part of these consolidated financial statements. 

Notes to the Consolidated Financial Statements

As at 30 June 2009

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 Committee. The address of the registered office is given on the inside back cover.

 

The consolidated financial statements for the year ended 30 June 2009 comprise the financial statements of the Company and its subsidiaries (together referred to as the "Group").

 

The Group invests in commercial property and property-related ventures primarily in Macau and in the Western Pearl River Delta region.

These consolidated financial statements have been approved for issue by the Board of Directors on 18 September 2009.

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 to all the periods presented, unless otherwise stated.

Basis of preparation

The financial statements have been prepared on a historical cost basis, with the exception of investment properties which are measured at fair value, and in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, interpretations issued by the International Financial Reporting Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law.

Interpretations effective in 2008/2009 but not relevant for the Group's operations 

The following interpretations to published standards are mandatory for accounting periods beginning on or after 1 July 2008 but they are not relevant to the Group's operations:

IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction' (effective from 1 January 2008); and

IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008).

Standards and interpretation to existing standards that are not yet effective and have not been early adopted by the Group

The following standards and interpretation to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 July 2009 or later periods, which the Group has not early adopted :

IAS 1 (Revised), "Presentation of financial statements" (effective from 1 January 2009);

IAS 16 (Amendment), "Property, plant and equipment" (effective from 1 January 2009);

IAS 23 (Amendment), "Borrowing costs" (effective from 1 January 2009);

IAS 27 (Amendment), "Consolidated and separate financial statements" (effective from 1 January 2009);

IAS 27 (Revised), "Consolidated and separate financial statements" (effective from 1 July 2009);

IAS 28 (Amendment), "Investments in associates" (effective from 1 January 2009);

IAS 32 (Amendment), "Financial instruments: Presentation", and IAS 1 (Amendment), "Presentation of financial statements" - "Puttable financial instruments and obligations arising on liquidation" (effective from 1 January 2009);

IAS 36 (Amendment), "Impairment of assets" (effective from 1 January 2009);

IAS 39 (Amendment), "Financial instruments: Recognition and measurement" (effective from 1 January 2009); 

IAS 40 (Amendment), "Investment property" (effective from 1 January 2009);

IFRIC 15, "Agreements for construction of real estates" (effective from 1 January 2009);

IFRS 3 (Revised), "Business combinations" (effective from 1 July 2009); and

IFRS 8, "Operating segments" (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'.

Standards that are not yet effective and not relevant for the Group's operations

The following standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 July 2009 or later periods but are not relevant for the Group's operations: 

IAS 19 (Amendment), "Employee benefits" (effective from 1 January 2009);

IAS 20 (Amendment), "Accounting for government grants and disclosure of government assistance" (effective from 1 January 2009);

IAS 29 (Amendment), "Financial reporting in hyperinflationary economies" (effective from 1 January 2009);

IAS 31 (Amendment), "Interests in joint ventures" (effective from 1 January 2009);

IAS 38 (Amendment), "Intangible assets" (effective from 1 January 2009); 

IAS 41 (Amendment), "Agriculture" (effective from 1 January 2009);

IFRS 1 (Amendment), "First time adoption of IFRS", and IAS 27 "Consolidated and separate financial statements" (effective from 1 January 2009);

IFRS 2 (Amendment), "Share-based payment" (effective from 1 January 2009); and

IFRS 5 (Amendment), "Non-current assets held-for-sale and discontinued operations" (effective from 1 July 2009).

The Directors anticipate that the adoption of these standards and interpretations in future periods will not have material impact on the financial statements of the Company or the Group.

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.

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all 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 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 consolidated financial statements are presented in US Dollars, which is the Company's functional and presentation currency.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the 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.

Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property.

Investment property is measured initially at its cost, including related transaction costs.

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Valuations are prepared semi-annually by Savills (Macau) Limited. Investment property that is being redeveloped for continuing use as investment property continues to be measured at fair value.

Subsequent expenditure is charged to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Changes in fair values are recorded in the income statement. 

Inventories

Properties and land that are being held or developed for future sale are classified as inventories. They are individually carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less costs to complete redevelopment and selling expenses. Cost is the acquisition cost together with subsequent capital expenditure incurred, including capitalised interest where relevant.

Investment in subsidiaries

Investments in subsidiaries are designated at fair value through profit or loss. Gains and losses arising from changes in fair value are included in the income statement.

Loans to subsidiaries

Loans to subsidiaries are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The loans accrue interest at the six month US$ LIBOR interest rate plus 1.5%, the rate is fixed every six months. The loans are repayable on demand.

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 or the Company 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 uncollectible, 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 sheet comprise cash at bank 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 statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

 

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. Shares issued by the Company are recorded based upon the proceeds received, net of incremental costs directly attributable to the issue of new shares.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and includes rental income and income from property trading.

Rental income from operating leases is recognised in income on a straight-line basis over the lease term. When the Group provides incentives to its customers, the cost of incentives are recognised over the lease term, on a straight-line basis, as a reduction of rental income.

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 which are capitalised.

Taxation

The Company is exempt from taxation in Guernsey under the provisions of The Income Tax (Exempt Bodies) (Guernsey) Ordinances, 1989 to 1992, and is charged an annual exemption fee of £600 (US$832).

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 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.

Financial instruments by category
The accounting polices for financial instruments have been applied to the line items below:
Group
		Loans and
As at 30 June 2009		receivables			Total
		US$'000			US$'000
Assets as per balance sheet
Trade and other receivables		37			37
Cash and cash equivalents		47,010			47,010
Total		47,047			47,047
		Other financial
		liabilities			Total
		US$'000			US$'000
Liabilities as per balance sheet
Trade and other payables		85,511			85,511
Total		85,511			85,511
		Loans and
		receivables			Total
As at 30 June 2008		US$'000			US$'000
Assets as per balance sheet
Trade and other receivables		27			27
Cash and cash equivalents		80,555			80,555
Total		80,582			80,582
		Other financial
		liabilities			Total
		US$'000			US$'000
Liabilities as per balance sheet
Trade and other payables		14,521			14,521
Total		14,521			14,521
Company
		Loans and
As at 30 June 2009		receivables				Total
		US$'000				US$'000
Assets as per balance sheet
Loans to subsidiaries		133,137				133,137
Trade and other receivables		11,411				11,411
Cash and cash equivalents		33,049				33,049
Total		177,597				177,597
		Other financial
		liabilities				Total
		US$'000				US$'000
Liabilities as per balance sheet
Trade and other payables		237				237
Total		237				237
		Loans and
		receivables				Total
As at 30 June 2008		US$'000				US$'000
Assets as per balance sheet
Loans to subsidiaries		125,539				125,539
Trade and other receivables		5,928				5,928
Cash and cash equivalents		60,282				60,282
Total		191,749				191,749
		Other financial
		liabilities				Total
		US$'000				US$'000
Liabilities as per balance sheet
Trade and other payables		14,321				14,321
Total		14,321				14,321

Market risk

Market risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual financial instrument or all factors affecting all financial instruments traded in the market including foreign exchange risk, price risk and cash flow interest rate risk as detailed below.

The Group's market risk is managed by the Manager in accordance with policies and procedures in place. The Group's overall market positions are monitored on a quarterly basis by the Board of Directors.

a) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.

The Group's policy is not to enter into any currency hedging transactions.

The table below summarises the Group's exposure to foreign currency risk as at 30 June 2009 and 30 June 2008. The Group's assets and liabilities are included in the table, categorised by their currency at their carrying amount in US$'000.

Group

	As at 30 June 2009	US$'000	£'000	HK$'000	MOP'000	RMB'000		Total
	Trade and other  receivables	-	-	37	-	-		37
	Cash and cash equivalents	1,944	59	44,908	3	96		47,010
	Total financial assets	1,944	59	44,945	3	96		47,047
	Trade and other payables	71	166	85,272	2	-		85,511
	Total financial liabilities	71	166	85,272	2	-		85,511
	On balance sheet financial position	1,873	(107)	(40,327)	1	96		(38,464)
	As at 30 June 2008	US$'000	£'000	HK$'000	MOP'000	RMB'000		Total
	Trade and other receivables	22	-	5	-	-		27
	Cash and cash equivalents	2,445	147	77,962	1	-		80,555
	Total financial assets	2,467	147	77,967	1	-		80,582
	Trade and other payables	14,136	166	219	-	-		14,521
	Total financial liabilities	14,136	166	219	-	-		14,521
	On balance sheet financial position	(11,669)	(19)	77,748	1	-		66,061

The table above presents financial assets and liabilities denominated in foreign currencies held by the Group as at 30 June 2009 and 30 June 2008 and can be used to monitor foreign currency risk as at that date. 

If the US Dollar weakened/strengthened by 10% against Sterling with all other variables held constant, the post-tax loss for the year would have been US$10,700 higher/lower (2008: US$1,900 higher/lower).

If the US Dollar weakened/strengthened by 10% against the HK Dollar with all other variables held constant, the post-tax loss for the year would have been US$4,032,700 higher/lower (2008: US$7,774,800 lower/higher). 

The Macanese Pataca is fixed to the HK Dollar at a rate of MOP:HK$ of 1.03, due to the low level of assets held in this currency 10% change in value would not have a significant affect on the financial statements.

If the US Dollar weakened/strengthened by 10% against Chinese Yuan with all other variables held constant, the post-tax loss for the year would have been US$9,600 (2008: Nil) lower/higher.

 

Company 

At the year end date the Company has substantial net assets denominated in HK Dollar totalling HK$33,064,000 (2008: nil). If the US Dollar weakened/strengthened by 10% against the HK Dollar with all other variables held constant, the post-tax loss for the year would have been US$3,306,400 lower/higher (2008: nil). 

All other net balances of financial instruments denominated in other currancies at the year end date were immaterial.

b) Price risk

The Group is not exposed to the market risk with regards to financial instruments as it does not hold equity instruments.

c) Cash flow interest rate risk

The success of any investment is affected by general economic conditions which may affect the level and volatility of interest rates and the extent and timing of investor participation in the asset markets. Unexpected volatility or illiquidity in the markets in which the Group holds positions can impair the Group's ability to conduct its business or cause it to incur losses.

The Group's interest rate risk is managed by the Manager in accordance with policies and procedures in place. The Group's overall positions and exposures are monitored on a quarterly basis by the Board of Directors.

 

Group

The Group has entered into a credit facility agreement for a club loan facility of HK$642.82m (US$82.94m). This facility will be used to finance the remaining consideration of the One Central Residences apartments held in Tower 6 and the individual apartments upon handover of the project in the second half of 2009. As at 30 June 2009, the Group has not utilised this credit facility Subsequently on 27 August 2009, the Group has made drawdown on the credit facility as detailed in note 16.

The following table details the Group's exposure to interest rate risks: 

	As at 30 June 2009		Interest bearing		Non-interest bearing		Total
			US$'000		US$'000		US$'000
	Trade and other receivables		-		37		37
	Cash and cash equivalents		47,010		-		47,010
	Total financial assets		47,010		37		47,047
	Trade and other payables		-		85,511		85,511
	Total financial liabilities		-		85,511		85,511

	As at 30 June 2008		Interest bearing		Non-interest bearing		Total
			US$'000		US$'000		US$'000
	Trade and other receivables		-		27		27
	Cash and cash equivalents		80,555		-		80,555
	Total financial assets		80,555		27		80,582
	Trade and other payables		-		14,521		14,521
	Total financial liabilities		-		14,521		14,521

An increase of 100 basis points in interest rates as at the reporting date would have increased the net assets attributable to the Group's equity-holders and changes in net assets attributable to the Group's equity-holders by US$470,100 (2008: US$805,550). A decrease of 100 basis points would have had an equal but opposite effect.

Company

The Company has an exposure to interest rate risks as the loans to its subsidiaries are determined in accordance with agreements which have a variable interest rate based on the 6 months US Dollar LIBOR plus 1.5%. The loans are held as due on demand.

The following table details the Company's exposure to interest rate risks:

 

	As at 30 June 2009		Interest bearing		Non-interest bearing		Total
			US$'000		US$'000		US$'000
	Loans to subsidiaries		133,137		-		133,137
	Trade and other receivables		-		11,411		11,411
	Cash and cash equivalents		33,049		-		33,049
	Total financial assets		166,186		11,411		177,597
	Trade and other payables		-		(237)		(237)
	Total financial liabilities		-		(237)		(237)

	As at 30 June 2008		Interest bearing		Non-interest bearing		Total
			US$'000		US$'000		US$'000
	Loans to subsidiaries		125,539		-		125,539
	Trade and other receivables		-		5,928		5,928
	Cash and cash equivalents		60,282		-		60,282
	Total financial assets		185,821		5,953		191,749
	Trade and other payables		-		(14,321)		(14,321)
	Total financial liabilities		-		(14,321)		(14,321)

An increase of 100 basis points in interest rates as at the reporting date would have increased the net assets attributable to the Company's equity-holders and changes in net assets attributable to the Company's equity-holders by US$1,661,860 (2008: US$1,858,210). A decrease of 100 basis points would have had an equal but opposite effect.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group. 

The Group is 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. 

The Group has deposits with the below banks:

Bank	Credit Rating*
HSBC	AA
Barclays Bank plc	AA-
The Royal Bank of Scotland plc	A+
The Royal Bank of Scotland International**	A+
CITIC Ka Wah Bank Limited	BBB+
*From Standard & Poor's / Fitch
**A subsidiary of The Royal Bank of Scotland plc

 

The Company has intercompany loans of US$133,137,000 (2008: US$125,539,000) due from its subsidiaries. During the year interest income of US$5,490,000 (2008: US$5,901,000) was accrued on these loans. Accrued interest income of US$11,391,000 (2008: US$5,901,000) was outstanding at the year end date.

 

The Directors have considered the recoverability of these intercompany loans and the related accrued interest and do not consider there will be any issue surrounding their recoverability due to the assets held by the Group companies.

Interest receivable per Note 7 is split into two categories, bank interest and interest due on inter-company loans. The bank interest related to accrued interest on fixed deposits held at the year end which have now matured. The inter-company loan interest is repayable on demand with the loan, no loans have been called for repayment.

Liquidity risk

The Group adopts a prudent approach to liquidity management and maintains sufficient cash reserves and borrowings to meet its obligations. The Group maintains sufficient cash and obtains funding through credit facilities to meet its current property development liabilities. The Group has entred into a credit facility agreement for a club loan facility of HK$642.82m (US$82.94m). This facility will be used to finance the remaining consideration of the One Central Residences apartments held in Tower 6 and the individual apartments upon handover of the project in the second half of 2009. The amount outstanding on these properties that were due as at 30 June 2009 was US$82.94m (2008: US$82.46m). The outstanding amount on these properties was paid on 27 August 2009.

The Group's liquidity position is monitored by the Manager and is reviewed quarterly by the Board of Directors.

 

The table below analyses the Group's financial assets and liabilities into relevant maturity profiles based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Group

	2009 US$'000		2008 US$'000
Financial assets - current
Trade and other receivables - maturity less than 1 year	37		27
Cash and cash equivalents - maturity less than 1 year	47,010		80,555
	47,047		80,582
Financial liabilities - current
Trade and other payables - maturity less than 1 year	85,511		14,521

Company

	2009 US$'000		2008 US$'000
Financial assets - current
Loans to subsidiaries	133,137		125,539
Trade and other receivables - maturity less than 1 year	11,411		5,928
Cash and cash equivalents - maturity less than 1 year	33,049		60,282
	177,597		191,749
Financial liabilities - current
Trade and other payables - maturity less than 1 year	237		14,321

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 

During the year ended 30 June 2009 there were no borrowings other than trade and other payables and the Group had a credit facility in place as well as sufficient cash and cash equivalents to pay these as they fell due. 

The Group has entered into a credit facility agreement for a club loan facility of HK$642.82m (US$82.94m) to finance the remaining consideration of the One Central Residences apartments as detailed in Note 5. 

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 below:

a) Fair value of the investment property, net realisable value and adjusted net asset value are based on the current market valuation provided by Savills (Macau) Limited, an independent valuer. Savills are required to make assumptions on establishing the current market valuation.

b) The performance fees, management fees and administration fees are based on adjusted net asset value.

4) Subsidiaries

All special-purpose vehicles (SPVs) are owned 100% by the Company. The following subsidiaries have a year end of 31 December to coincide with the Macanese tax year:

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 the Company and the subsidiaries listed below:

Ownership		Incorporation		Ownership		Incorporation
MPOF Macau (Site 1) Limited	100%	Macau		Magic Bright International Limited	100%	BVI
MPOF Macau (Site 2) Limited	100%	Macau		Manage Gain Investments Limited	100%	BVI
MPOF Macau (Site 3) Limited	100%	Macau		Mega League Investments Limited	100%	BVI
MPOF Macau (Site 4) Limited	100%	Macau		Multi Gold International Limited	100%	BVI
MPOF Macau (Site 5) Limited	100%	Macau		Phoenixville Holdings Limited	100%	BVI
MPOF Macau (Site 6) Limited	100%	Macau		Poly Advance Management Limited	100%	BVI
MPOF Macau (Site 7) Limited	100%	Macau		Prominent Group Limited	100%	BVI
MPOF Macau (Site 8) Limited	100%	Macau		Richsville Investment Limited	100%	BVI
MPOF Macau (Site 9) Limited	100%	Macau		Right Year International Limited	100%	BVI
MPOF Macau (Site 10) Limited	100%	Macau		See Lucky Enterprises Limited	100%	BVI
MPOF (Penha) Limited	100%	Guernsey		Smooth Run Group Limited	100%	BVI
MPOF (Taipa) Limited	100%	Guernsey		Swift Link Limited	100%	BVI
MPOF (Jose) Limited	100%	Guernsey		Talent Empire International Limited	100%	BVI
MPOF (Sun) Limited	100%	Guernsey		Tycoon Villa International Limited	100%	BVI
MPOF (Senado) Limited	100%	Guernsey		Worthy Way Limited	100%	BVI
MPOF (Domingos) Limited	100%	Guernsey		Yield Return Limited	100%	BVI
MPOF (Monte) Limited	100%	Guernsey		Capital Full Limited	100%	Hong Kong
MPOF (Paulo) Limited	100%	Guernsey		China City Properties Limited	100%	Hong Kong
MPOF (Guia) Limited	100%	Guernsey		China Crown Properties Limited	100%	Hong Kong
MPOF (Antonio) Limited	100%	Guernsey		East Base Properties Limited	100%	Hong Kong
MPOF (6A) Limited	100%	Guernsey		Eastway Properties Limited	100%	Hong Kong
MPOF (6B) Limited	100%	Guernsey		Elite Gain Limited	100%	Hong Kong
MPOF (7A) Limited	100%	Guernsey		Excelsior Properties Limited	100%	Hong Kong
MPOF (7B) Limited	100%	Guernsey		Glory Properties Limited	100%	Hong Kong
MPOF (8A) Limited	100%	Guernsey		Gold Century Properties Limited	100%	Hong Kong
MPOF (8B) Limited	100%	Guernsey		Golden City Properties Limited	100%	Hong Kong
MPOF (9A) Limited	100%	Guernsey		Golden Properties Limited	100%	Hong Kong
MPOF (9B) Limited	100%	Guernsey		Goldex Properties Limited	100%	Hong Kong
MPOF (10A) Limited	100%	Guernsey		Honway Properties Limited	100%	Hong Kong
MPOF (10B) Limited	100%	Guernsey		Maxland Properties Limited	100%	Hong Kong
MPOF Mainland Company 1 Limited	100%	Barbados		New Perfect Properties Limited	100%	Hong Kong
Bream Limited	100%	Guernsey		Newton Properties Limited	100%	Hong Kong
Cannonball Limited	100%	Guernsey		Orient Land Properties Limited	100%	Hong Kong
Civet Limited	100%	Guernsey		Pacific Asia Properties Limited	100%	Hong Kong
Aim Top Enterprises Limited	100%	BVI		Pacific Link Properties Limited	100%	Hong Kong
Championway International Limited	100%	BVI		Pacific Success Properties Limited	100%	Hong Kong
Extra Able International Limited	100%	BVI		Platinum Properties Limited	100%	Hong Kong
Fondue International Limited	100%	BVI		Queensland Properties Limited	100%	Hong Kong
Gainsun Investments Limited	100%	BVI		Sky Century Properties Limited	100%	Hong Kong
Go Gain International Limited	100%	BVI		Top Century Properties Limited	100%	Hong Kong
Gorey Hills International Limited	100%	BVI		Top Faith Properties Limited	100%	Hong Kong
Hillsleigh Holdings Limited	100%	BVI		Union Century Properties Limited	100%	Hong Kong
Honeypot International Limited	100%	BVI		Victory Star Properties Limited	100%	Hong Kong
Jin Mei International Limited	100%	BVI		Weltex Properties Limited	100%	Hong Kong
Lucan Investments Limited	100%	BVI		Windex Properties Limited	100%	Hong Kong
Lucky Go International Limited	100%	BVI		World Pacific Properties Limited	100%	Hong Kong
				*Sailing Logistics (Zhuhai Free Trade Zone) Co. Ltd.	100%	PRC
*New subsidiary was added during the year, other subsidiaries were part of the Group as at 30 June 2008

5. Inventories

	2009 US$'000		2008 US$'000
	Group		Group
Cost of properties brought forward	104,599		56,084
Additions	88,744		48,515
Write down to net realisable value	(12,296)		-
Cost of properties carried forward	181,047		104,599

Additions include new properties purchased, capital expenditure and development costs.

During the year there has been reduction in the values of the inventories held due to a general decline in the market value of properties in Macau. Write-down of inventories amounted US$12,296,372 has been recognised as an expense in the Consolidated Income Statement to bring the carrying value of inventories at the lower of costs and net realisable value. 

The Company is guarantor for its subsidiary company MPOF Macau (Site 5) Limited in respect of outstanding amounts due on Tower 6 of One Central Residences. The total of the guarantee was HK$471,370,716 (US$60,818,999) (2008: HK$471,370,716 (US$60,403,328)) and was paid on completion of the property on 27 August 2009.

Subsidiaries of the Company purchased additional units in One Central Residence and outstanding amount due on these units as at 30 June 2009 was HK$171,450,641 (US$22,121,590) (2008: HK$171,450,641 (US$21,970,370)).

Subsequent to the year end on 27 August 2009, the Group has utilised the credit facility to fund the remaining payments due on the One Central Residence properties. 

6. Investment property

	2009 US$'000	2008 US$'000
	Group	Group
Cost of investment properties	11,092	-
Unrealised gain from fair value adjustments on investment property	1,811	-
	12,903	-

During the year the Group acquired a subsidiary in Zhuhai, China which owns investment properties located in the Zhuhai Free Trade Zone. Rental income of US$233,256 was received during the year. Direct operating expenses of US$159,157 arising from investment properties that generated rental income were incurred during the year.

The Group's investment properties were revalued at 30 June 2009 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.

7. Trade and other receivables

	2009 US$'000	2009 US$'000		2008 US$'000	2008 US$'000
	Company	Group		Company	Group
Interest receivable	11	28		27	27
Inter-company loan interest	11,391	-		5,901	-
Other debtors	9	9		-	-
	11,411	37		5,928	27

The Directors believe the above amounts to be recoverable

8. Trade and other payables

	2009 US$'000	2009 US$'000		2008 US$'000	2008 US$'000
	Company	Group		Company	Group
Payments due for acquired property	-	82,941		-	-
Payable to the Manager	-	-		14,043	14,043
Trade and other payables	237	2,570		278	478
	237	85,511		14,321	14,521

Other payables principally comprise amounts outstanding for ongoing costs.

9. Investment in subsidiaries

		2009 US$'000		2008 US$'000
		Company		Company
Opening balance		(6,772)		(255)
Cost of subsidiaries		-		-
Fair value adjustment for elimination of subsidiary equity		-		(6,517)
Closing balance after elimination of subsidiary equity		(6,772)		-
Fair value adjustment of subsidiaries		(2,839)		(6,772)
Investment in subsidiaries		(9,611)		(6,772)

The cost of subsidiaries as at 30 June 2009 was US$91 (2008: US$91). The fair value adjustment for elimination of subsidiary equity is equal and opposite to the cost of the subsidiaries, the purpose of this adjustment is to show the investment as US$ nil as shown in non-current assets on the Company balance sheet. 

The fair value adjustment of subsidiaries is an adjustment to show the true negative value of the investment in subsidiaries as shown in current liabilities on the Company balance sheet.

The investment in subsidiaries is accounted for as stated in Note 1. The fair value is based on the net asset value of the Hong Kong, BVI, Macanese and Guernsey SPVs as at the year end date.

10. Share capital 

	2009 US$'000	2009 US$'000		2008 US$'000	2008 US$'000
	Company	Group		Company	Group
Authorised:
300 million Ordinary Shares of US$0.01 each	3,000	3,000		3,000	3,000
Issued and fully paid:
105 million Ordinary Shares of US$0.01 each	1,050	1,050		1,050	1,050

The Company has one class of Ordinary Share which carry no right to fixed income.

11. General and administration expenses

 

	2009 US$'000 Company	2009 US$'000 Group		2008 US$'000 Company	2008 US$'000 Group
Legal and Professional	231	233		165	338
Holding Company administration	198	198		229	229
Guernsey SPV administration	99	99		114	114
BVI, HK, & Macau SPV administration	-	112		-	87
Insurance costs	30	30		42	42
Other operating expenses	272	472		300	351
General and administration expenses	830	1,144		850	1,161

Administration fees for the BVI, Hong Kong and Macanese SPVs are payable to Adept Capital Partners Services Limited in which Thomas Ashworth is a shareholder and Director.

12. Net cash used in operating activities

	2009 US$'000 Company	2009 US$'000 Group		2008 US$'000 Company	2008 US$'000  Group
Loss for the year	(2,913)	(15,217)		(17,836)	(17,786)
Adjustments for:
Unrealised gain on investment property	-	(1,811)		-	-
Unrealised loss on inventories	-	12,296		-	-
Fair value adjustment for investment in  subsidiaries	2,839	-		6,517	-
Operating cash flows before movements in working capital	(74)	(4,732)		(11,319)	(17,786)
Movement in receivables	(5,477)	(4)		(5,445)	459
Movement in payables	(14,084)	(13,971)		10,340	10,483
Expenditure on inventories	-	(5,757)		-	(57,131)
Net change in working capital	(19,561)	(19,732)		4,895	(46,189)
Net cash used in operating activities	(19,635)	(24,464)		(6,424)	(63,975)

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.

13. 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 year of US$(15,217,000) (2008: US$(17,786,000)) and on the 105,000,000 (2008: 105,000,000) weighted average number of Ordinary Shares in issue during the year.

 

	30 June 2009				30 June 2008
	Loss Attributable US$'000	Weighted Average No. of Shares '000s	EPS US$		Loss Attributable US$'000	Weighted Average No. of Shares '000s	EPS US$
Basic	(15,217)	105,000	(0.1449)		(17,786)	105,000	(0.1694)
Diluted	(15,217)	105,000	(0.1449)		(17,786)	105,000	(0.1694)

14. Related party transactions

In the year to 30 June 2009 Directors' fees of US$nil (2008: US$ nil) were paid by the Guernsey incorporated subsidiaries.

	2009 US$'000 Company	2009 US$'000 Group		2008 US$'000 Company	2008 US$'000  Group
Directors' Fees	200	200		251	251
	200	200		251	251

Tom Ashworth is a shareholder and Director of Sniper Capital Limited. Sniper Capital Limited is the Manager to the Company and received fees during the year as detailed in the income statement and in Note 15.

Tom Ashworth is a shareholder and Director of Adept Capital Partners Services Limited. Adept Capital Partners Services Limited provides administrative services to the Macanese, Hong Kong and British Virgin Islands SPVs and received fees during the year as detailed in Note 11.

The Company makes loans to its subsidiaries which are detailed in the table below:

 

	2009  US$'000		2008  US$'000
MPOF (Antonio) Limited	13,952		13,487
MPOF (Domingos) Limited	10,830		10,829
MPOF (Guia) Limited	13,952		13,487
MPOF (Jose) Limited	4,224		4,139
MPOF (Monte) Limited	48		48
MPOF (Paulo) Limited	48		48
MPOF (Penha) Limited	8,083		8,082
MPOF (Senado) Limited	10,830		10,829
MPOF (Sun) Limited	4,223		4,139
MPOF (Taipa) Limited	8,083		8,082
MPOF (6A) Limited	5,691		5,755
MPOF (6B) Limited	5,691		5,755
MPOF (7A) Limited	1,856		34
MPOF (7B) Limited	1,856		34
MPOF (8A) Limited	26		24
MPOF (8B) Limited	26		24
MPOF (9A) Limited	26		24
MPOF (9B) Limited	26		24
MPOF (10A) Limited	26		24
MPOF (10B) Limited	26		24
MPOF Mainland Company 1 Limited	9		6
Bream Limited	28,943		28,908
Cannonball Limited	3,572		3,536
Civet Limited	11,090		8,197
	133,137		125,539

During the year interest income of US$5,490,000 (2008: US$5,901,000) was accrued on these intercompany loans. Accrued interest income of US$11,391,000 (2008: US$5,901,000) was outstanding at the year end date.

15. Material contracts

Management Fee

Under the terms of an appointment made by the Board of Directors of Macau Property Opportunities Fund Limited on 23 May 2006, Sniper Capital Limited ("SCL") 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. Management fees paid for the year were US$5,154,000 (2008:US$5,153,000).

Performance Fee

In addition, the Manager will be entitled to a performance fee in certain circumstances. This fee is payable by reference to the increase in Adjusted NAV per Ordinary Share over the course of each calculation period.

The first calculation period began on Admission and ended on 30 June 2007, each subsequent performance period is a period of one financial year.

Payment of the performance fee is subject to:

(i) the achievement of a performance hurdle condition: Adjusted NAV per Ordinary Share at the end of the relevant performance period must exceed an amount equal to the US dollar equivalent of the Placing Price increased at a rate of 10 per cent. per annum on a compounding basis up to the end of the relevant performance period (the "Basic Performance Hurdle"); and

(ii) the achievement of a 'high watermark': Adjusted NAV per Ordinary Share at the end of the relevant performance period must be higher than the highest previously reported Adjusted NAV per Ordinary Share at the end of a performance period in relation to which a performance fee, if any, was last earned.

If the Basic Performance Hurdle is met, and the high watermark exceeded, the performance fee will be an amount equal to 20 per cent. of the excess of the Adjusted NAV per Ordinary Share at the end of the relevant performance period over the higher of (i) the Basic Performance Hurdle; (ii) the Adjusted NAV per Ordinary Share at the start of the relevant performance period; and (iii) the high watermark (in each case on a per share basis), multiplied by the time weighted average of the number of Ordinary Shares in issue in the performance period (or since Admission in the first performance period) (together, if applicable, with an amount equal to the VAT thereon).

In addition, the Manager will become entitled to a super performance fee in respect of a performance period if a further additional criterion is met, being the achievement of a super performance hurdle condition: Adjusted NAV per Ordinary Share at the end of the relevant performance period must exceed an amount equal to the US dollar equivalent of the Placing Price increased at a rate of 25 per cent. per annum on a compounding basis up to the end of the relevant performance period (the "Super Performance Hurdle").

If the Super Performance Hurdle is met and the high watermark exceeded, the super performance fee will be an amount equal to a further 15 per cent. of the excess of the Adjusted NAV per Ordinary Share at the end of the relevant performance period over the higher of (i) the Super Performance Hurdle; (ii) the Adjusted NAV per Ordinary Share at the start of the relevant performance period; and (iii) the high watermark (in each case on a per share basis), multiplied by the time weighted average of the number of Ordinary Shares in issue in the performance period (or since Admission in the first performance period) (together, if applicable, with an amount equal to the VAT thereon).

The amounts accrued in the financial statements are as follows:

2009 2008

Performance Fee US$ Nil US$14,043,700

Super Performance Fee US$ Nil  US$ Nil

In the year ended 30 June 2009, a performance fee of US$14,043,700 (2008: US$3,807,300) was paid by the Group.

16. Post Balance Sheet Event

On 27 August 2009 the Group paid the remaining amounts due on the One Central Residences apartments held in Tower 6 and the individual apartments for a total amount of US$82.46m. The payment was financed by a credit facility with a consortium of banks lead by HSBC (the "Lenders")

The credit facility is secured by means of a first registered legal mortgage over all the residential units owned by the Group at One Central Residences. The credit facility is to be repaid in four half-yearly instalments commencing on 27 November 2010 with 65% of the principal due on the final repayment date. The loan-to-value covenant is 55%. In addition, the Group is required to maintain a cash reserve equal to 6 months' interest with the Lenders.

Interest rate applicable to the credit facility is 2.4% per annum over the 3-month HIBOR, payable quarterly in arrears.

ENDFR CKFKBOBKDPCD