15th Feb 2008 07:00
Macau Property Opportunities Fund15 February 2008 Macau Property Opportunities Fund Limited ("MPO" or the "Company") Interim Results for the six months ended 31 December 2007 Macau Property Opportunities Fund Limited is pleased to announce its interimresults for the six months ended 31 December 2007. The Company, which is managedby Sniper Capital Limited, develops and invests in property opportunitiesprimarily in Macau and also in the Western Pearl River Delta region of SouthernChina. Highlights • To date, the Company's property commitments total US$226.7 million which is equivalent to approximately 120% of the total equity of US$200 million (£105 million) raised in June 2006 • Adjusted NAV per share is US$2.60 (130.1p), representing a 17% uplift over the corresponding Adjusted NAV per share as at 30 June 2007 • 22% uplift in property portfolio valuations for the six month period ended 31 December 2007 • Strong pipeline of potential investment opportunities with 11 sites (value of c.US$550 million) currently under negotiation David Hinde, Chairman, said: "These interim results reflect the successful execution of Sniper Capital'sinvestment strategy of targeting niche and strategically positioned assets inthe region. With an exciting portfolio of current projects and a healthypipeline of attractive sites, I am confident that the Company will continue tobenefit from Macau's dynamic property market and generate strong returns for theshareholders." For further information: Website: www.mpofund.com Public RelationsHogarth Partnership LimitedAndrew Jaques / Sarah RichardsonTel: +44 20 7357 9477 Nominated Adviser and Joint BrokerCollins Stewart Europe LimitedHugh FieldTel: +44 20 7523 8325 Joint BrokerShore Capital Stockbrokers LimitedDru DanfordTel: +44 20 7408 4090 Company Secretary & AdministratorHeritage International Fund Managers LimitedMark Huntley / Laurence McNairnTel: +44 1481 716000 ManagerSniper Capital LimitedCorporate and Investor CommunicationsDaisy TangTel: +852 2292 6700Email: [email protected] Stock Codes: Bloomberg: MPO LNReuters: MPO.L Macau Property Opportunities Fund Limited (MPO) is a closed-end investment fundregistered in Guernsey and traded on the Alternative Investment Market (AIM) ofthe London Stock Exchange. The Company's investment policy is to provide shareholders with an attractivetotal return through investing in property opportunities in one of the world'sfastest growing and most dynamic regions - Macau and the Western Pearl RiverDelta of Southern China. The Fund is managed by Sniper Capital Limited, an independent investment managerspecialising in property investment opportunities in niche, undervalued anddeveloping markets. Chairman's Statement I am delighted to report on the further successful progress of Macau PropertyOpportunities Fund Limited in the six months ended 31 December 2007. In only its second full year of operation, MPO has continued to demonstrateencouraging progress in the execution of its investment strategy whilst adheringto the key disciplines which are essential to astute investment in a rapidlydeveloping and highly competitive marketplace. During the six months to 31December 2007, further investments totalling US$78.5 million were made by theCompany, bringing the total amount invested or committed to US$226.7 million,equivalent to approximately 120% of the total equity raised at AIM Admission. MPO has continued to generate significant value for shareholders. During theperiod, the value of the Company's properties increased by US$50.6 million or22.1% resulting in an Adjusted NAV* as at 31 December 2007 of US$272.8 million,equivalent to US$2.60 or 130.1p per share. This represents a 17.1% uplift overthe corresponding Adjusted NAV per share as at 30 June 2007 and an increase of44.4% in US dollar terms and 35.2% in sterling terms over the NAV per share onAdmission to AIM. These figures reflect the high quality and strategicpositioning of the Company's portfolio, as well as the positive effect ofdeploying additional capital. The high degree of selectivity demonstrated in the choice of investments to dateclearly illustrates our adherence to stringent and disciplined investmentprocesses in acquiring well positioned assets within targeted market segments. Iam satisfied that the Board continues to receive well researched, high qualityinvestment proposals from the Manager, Sniper Capital, which should enable theCompany to pursue its investment strategy successfully. With an exciting portfolio of existing projects and a healthy pipeline ofattractive sites on which negotiations are progressing, I look forward withconfidence to the continued development of the Company and to creating furthervalue for shareholders. David Hinde Chairman Macau Property Opportunities Fund Limited *Adjusted Net Asset Value is shown after accruing for the performance fee and iscalculated by taking the NAV per share calculated under IFRS and adjusting interalia to include the properties owned by the Company at net realisable valuerather than at the lower of cost or net realisable value. Manager's Report Overview In the six months to the end of December 2007, the Company successfully built onthe foundations laid in its first full year of operation. Acquisitions havefurther contributed to the Company's existing portfolio of niche andstrategically placed properties in key market segments, leaving it positivelyexposed to the remarkable on-going economic transformation of Macau. We believe that the Company's strategic positioning in the premium luxuryresidential sector through its investment purchase in One Central Residences,along with the niche positioning and significant redevelopment potential of itsother three redevelopment projects, render it well positioned to generatecontinuing strong returns for shareholders. The investment pipeline currently being negotiated by the Company, consists of11 sites totalling approximately US$550 million in combined acquisition value.In selecting suitable investments for MPO, we continue to avoid sectors which webelieve are susceptible to oversupply, instead focusing on the core areas whichare likely to deliver the greatest value to shareholders in Macau's rapidlydeveloping property markets. These include: • Premium luxury residential accommodation in prime locations • Entry-level/affordable residential accommodation • Retail space in areas of high footfall • Leisure/commercial facilities in strategic locations • Hotel and serviced apartments in key locations • Industrial/warehouse space With negotiations continuing to advance steadily on a number of key pipelinesites, we remain confident in our ability to commit the Company's remaining cashreserves of US$95 million efficiently and profitably within our target two yearinvestment period. Current Investments The Company continued to make steady progress in its investment strategy duringthe first half of this financial year. In the six months to the end of December2007, further acquisitions amounting to US$78.5 million were completed orsecured, bringing the total amount committed to US$226.7 million orapproximately 120% of the Company's total equity. Of these new investments,US$26.7 million relates to a mixed-use redevelopment project (known as Property4), comprising an acquisition price of US$16 million and an estimatedredevelopment cost of US$10.7 million. The acquisition of Property 4 brings to aclose almost two years of negotiations and successfully converts a key pipelinesite which was referred to in the Company's AIM Admission Document. The remaining acquisitions since 30 June 2007 comprised a number of separatesmaller transactions. These form part of an on-going, opportunistic strategy ofacquiring well located and attractively priced smaller property assets which theCompany believes offer significant capital appreciation as investment propertiesin their own right or through consolidation, refurbishment or redevelopment. Thetotal amount invested to date in such properties amounts to US$51.8 million. Of this amount, US$48.3 million has been spent on acquiring 24 well locatedunits in One Central Residences, the residential portion of the premiummixed-use One Central development, in which the Company purchased a luxuryresidential tower (Tower 6) in November 2006 for US$86.6 million. Theseadditional units, all situated on well positioned floors with superior aspects,increase the Company's total combined gross floor area in One Central Residencesby 34% to a total of approximately 200,000 square feet. This represents 12% ofthe total residential floor space in the development at an average acquisitioncost of approximately US$680 per square foot. This compares favourably toSavills' most recent average valuation of US$980 per square foot for theproperties, representing an increase over total cost of 44%. For clarity, theseadditional units will henceforth be amalgamated with Tower 6 and jointlyreferred to as Property 2 of the Company's portfolio. The Company continues to believe in the unprecedented quality and positioning ofOne Central, which is due for completion in 2009. The project's unique natureand value is further enhanced by the fact that other premium luxury residentialdevelopments currently being planned in Macau continue to experience delays inobtaining the necessary planning permission and/or construction permits. We,therefore, believe that demand for residential units in One Central will remainstrong and possibly escalate further as the project nears completion and thesurrounding area continues to be transformed. The remaining US$3.5 million invested was deployed under the smaller propertiesacquisitions scheme. The Company's other three property assets are all redevelopment sites whichremain at various stages of planning or consolidation and are fully summarisedin the following pages. Property Portfolio To date, MPO's property commitments total US$226.7 million in combinedacquisition and projected development costs. Property 1 Sector: Residential (Luxury)Valuation: US$16,784,000Uplift (current period): +15.1%Uplift (since acquisition): +107.1% Property 2 (One Central) Sector: Residential (Premium luxury)Valuation: US$194,945,000Uplift (current period): +17.3%Uplift (since acquisition): +43.9% Property 3 Sector: Residential (Entry-level)Valuation: US$30,622,000Uplift (current period): +7.8%Uplift (since acquisition): +43.1% Property 4 Sector: Mixed-useValuation: US$30,109,000Uplift (current period): +88.4%Uplift (since acquisition): +88.4% Other Assets Sector: VariousValuation: US$6,791,000Uplift (current period): +93.6%Uplift (since acquisition): +93.6% Portfolio Summary Valuation: US$279,251,000Uplift (current period): +22.1%Uplift (since acquisition): +51.4% Property 1 Property 1 represents a 100% interest in a prime residential redevelopmentproject located in a popular and well established neighbourhood. The Companyintends to develop Property 1 into mid-rise residential flats targeted at localmiddle income residents seeking to improve the quality of their existingaccommodation. The project's conceptual design comprises a courtyard style residential buildinglaid out around an internal garden. Site investigations are now underway and thedemolition of the existing structure is scheduled to commence once necessaryGovernment approvals have been received. Completion is scheduled by the end of2009. The Company's current intention is to sell all of the residential units in thisproject either on a pre-sale basis or on completion of the project. Acquisition Date October 2006Sector ResidentialLocation South Western Macau PeninsulaCurrent Status Design processTitle FreeholdLand Area 13,000 ft2/1,200 m2Acquisition Cost US$8.6 millionProjected Development Cost US$7.1 millionTotal Commitment US$15.7 millionValuation Uplift Since Acquisition 107.1%Positioning Local middle income residentsProposed Development Apartment block with car parkingEstimated Completion Date End 2009 Property 2 (One Central) The Company has acquired a total of 198,900 square feet of residential space inOne Central Residences, the residential portion of the premium mixed-usedevelopment, One Central. This represents approximately 12% of the total 1.63million square feet of floor area over the 7 residential towers in the project.MPO's investment comprises an entire 40 storey luxury residential tower (Tower6) purchased in November 2006 and 24 well positioned individual units in variousother towers, which were purchased as a series of individual transactions in thesecond half of 2007. The completion date for all the residential towers isexpected during the course of 2009. One Central is being jointly developed by two of the region's leadingdevelopers, Hongkong Land and Shun Tak Holdings. It consists of a 300,000 squarefoot premier shopping complex, a 210-room, 6-star Mandarin Oriental Hotel and a50,000 square foot clubhouse and health spa for the exclusive use of residents. Acquisition Date November 2006Sector ResidentialLocation Central Macau PeninsulaCurrent Status Under constructionTitle LeaseholdGross Floor Area 198,900 ft2/18,480 m2Acquisition Cost: Tower 6 US$86.6 millionAcquisition Cost: other units (24) US$48.3 millionTotal Commitment US$134.8 millionValuation Uplift Since Acquisition 43.9%Positioning Premium luxuryProposed Development High-rise apartment tower in prime mixed-use projectEstimated Completion Date 2009 Property 3 Property 3 is a 100% interest in a site located in the rapidly regeneratingnorthern part of Macau Peninsula. The Company intends to redevelop the site intoaffordable high-rise apartments catering to the increasing demand forentry-level accommodation from local residents. The surrounding area is undergoing widespread redevelopment and urban renewal.Furthermore, the recent high profile sale of two nearby sites by public tenderhas added further impetus to the regeneration of this part of Macau.Negotiations are continuing to consolidate adjacent sites in this area beforecommencing with the planning process and redevelopment of the property. Acquisition Date November 2006Sector ResidentialLocation Northern Macau PeninsulaCurrent Status Consolidating adjacent sitesTitle LeaseholdLand Area 20,000 ft2/1,860 m2Acquisition Cost US$20.6 millionProjected Development Cost US$25.4 millionTotal Commitment US$46.0 millionValuation Uplift Since Acquisition 43.1%Positioning Entry-levelProposed Development High-rise apartment blockEstimated Completion Date End 2009 Property 4 Property 4 was acquired in October 2007, bringing to a close almost two years ofnegotiations and successfully converting a key pipeline site which was referredto in the Company's AIM Admission Document. The 10,500 square foot freehold site is located adjacent to Senado Square, oneof the most popular tourist destinations on Macau Peninsula, which, due to itsrich Macanese architectural legacy, forms part of the Territory's World Heritagedistrict. The area's increasing local and tourist pedestrian traffic hasresulted in strong demand for retail outlets in the vicinity, driving retailproperty prices and rents to amongst the highest in Macau. In order to capitalise on the excellent location of Property 4, a mixed-useredevelopment is proposed incorporating prime retail and entertainmentfacilities. Acquisition Date October 2007Sector Mixed-useLocation Macau PeninsulaCurrent Status PlanningTitle FreeholdLand Area 10,500 ft2/975 m2Acquisition Cost US$16.0 millionProjected Development Cost US$10.7 millionTotal Commitment US$26.7 millionValuation Uplift Since Acquisition 88.4%Positioning Retail/TourismProposed Development Six storey retail & entertainment complexEstimated Completion Date End 2010 Other Assets Various additional properties have been purchased by MPO as part of the on-goingstrategy of acquiring well located and attractively priced smaller propertyassets which the Company believes offer the prospect of significant capitalappreciation as investment properties in their own right or throughconsolidation, refurbishment or redevelopment. The total amount invested to datein such properties now amounts to US$3.5 million. Property Market Macau's property market continues to be driven by the spectacular transformationcurrently underway in the Territory's gaming industry. Substantial investment innew casino-related projects is continuing to have a significant and far reachingimpact on all segments of the domestic property market, both from demand andsupply side perspectives. Demand from end-users, investors and developers for quality residentialproperties has continually outpaced supply across all areas of Macau. For mostof 2007, this resulted in consistent price appreciation which has been furtherboosted by booming regional stock markets and negative real mortgage rates.Meanwhile, the sub-prime mortgage crisis in the US, which has dampened manymarkets around the world, has so far had limited impact on lending or localmarket sentiment in Macau. Sales activity was brisk during the first three quarters of 2007, with 11,274real estate sales and purchase contracts being executed with a total value ofUS$1.511 million, up by 14% and 42% respectively year-on-year. Despite thisrapid growth in sales activity, the shortage of quality developments on thehorizon, combined with planning delays for a number of larger residentialprojects, continued to drive prices higher, particularly at the top end of themarket, with overall prices reportedly increasing by 30% and more during theyear. We believe that upward pressure on both prices and rentals is unlikely to abatein the coming year for a number of reasons, both demographic and economic: • High levels of population influx: Immigrant workers exceeded 85,000 in 2007, representing a 25+% year-on-year growth rate, against a 5% growth in the overall population of Macau • Rising household incomes as new casinos continue to vie for employees in a tight labour market • Rapid household formation as local inhabitants capitalise on their new-found disposable incomes • Limited supply of quality projects across Macau • Increasing Government incentives to local home buyers In December, as part of the Government's move towards greater transparency inthe land disposal process, two plots of land in north west Macau Peninsula wereoffered for sale by public tender, the first to be sold in this way since thehandover from Portugal in 1999. The tender closed in January 2008 and the sites,zoned for residential development, sold for about nine times the opening bid.The sites in question are located near to the Company's Property 3, which weexpect to benefit from valuation uplift if these tender results have a generalmarket impact on the prices of neighbouring properties. The Government has also moved to appease local disquiet over escalating propertyprices and rising costs of living for lower income earners. Various measureswere announced recently, including the reduction of estate tax, waiving of stampduty for first-time home buyers of properties valued below US$385,000, and lowincome mortgage interest relief measures. This is not only positive for thedomestic residential property market overall, but also for MPO's "entry-level"projects. Retail Supply of high quality casino retail space has grown rapidly in the last 12months, driven largely by the opening of the 1.2 million square foot VenetianMacao retail shopping facilities on the Cotai Strip in August 2007. Bycomparison, local and tourist retail space has seen no significant new additionsduring the year due to the very limited availability of appropriate sites.Cumulative retail sales grew very strongly during the year, reaching US$1.25billion in the first three quarters of 2007. This strong performance, combinedwith the shortage of quality retail premises outside the casino/hotel locations,has driven up demand for prime retail properties which has, in turn, had anupward impact on values and rents across most of Macau. Against this positive backdrop, however, it should be noted that a significantnumber of new casino/hotel and retail properties are due to be completed overthe next two to three years. In the near term, this scale of development islikely to dampen overall growth rates in the retail property market until thenew supply is fully absorbed. Over the longer term, however, we believe thatthese developments will bode well for values and rents across the prime retailproperty sector by ensuring Macau's place as a major Asian retail destinationoffering the entire complement of international and luxury brand names. Gaming The principal measure of the performance of Macau's economy is gaming revenueswhich, for 2007, rose by 46.6% to US$10.4 billion. Concerns have been voiced insome quarters relating to the relative performance of individual casinooperators, particularly with respect to VIP market share. However, the clearconsensus is that growth in gaming revenues as a whole will continue to bestrong into the foreseeable future. In December 2007, Macau witnessed the high profile launch of MGM Grand Macau,US-listed MGM Mirage's first project in Asia. All six gaming concessions inMacau are now finally in operation. SJM, owned by local casino tycoon StanleyHo, has announced it will be building a new hotel on the site of its originalflagship and Macau's oldest casino, the Lisboa Hotel. Redevelopment is expectedto begin following the full opening of the neighbouring Grand Lisboa Hotel in2008. In the future, the Cotai Strip is likely to emerge as the Territory's integratedbusiness, leisure and gaming destination with upscale casino-resort-hotelsincreasingly dominating the landscape. The Four Seasons and Shangri-La hotelsare due to open in 2008 followed by Galaxy's "Mega Resort", Melco/PBL's "City ofDreams" and "Macau Studio City" backed by eSun Holdings. MGM Grand Macau hasrecently announced that it has secured funding for its expansion onto the CotaiStrip. Further announcements are expected in the months ahead. Milestone opening of new hotels/casinos(from Jun-Dec 07 and forecast openings) Aug 07 Grand opening of Venetian Macao-Resort-HotelSep 07 Harrah's Entertainment Inc. acquire Oriental golf course on CotaiDec 07 Opening of Wynn Macau Phase IIDec 07 Launch of MGM Grand MacauEarly 08 Opening of Ponte 16Mid 08 Four Seasons and Shangri-La hotels are expected to open Tourism & MICE Macau's tourism industry continues to expand and flourish as it increasinglyrepositions itself as an international destination with growing numbers ofMeeting, Incentive, Convention and Exhibition (MICE) events and Las Vegas-styleattractions. Visitor numbers in 2007 rose by 22.8% over the previous year toover 27 million, setting new records for the city. By the fourth quarter of 2007, the total number of guest rooms available in thehotel sector had increased by 3,321 year-on-year to 15,740 (+26.7%). In October,a total of 490,271 guests checked into hotels and similar establishments,representing a year-on-year growth of 18.9%. With the attraction of severalmajor MICE events held in that month, the average hotel occupancy rate soared by5.7% to 79.3%, with 3-star hotels leading at 82.4%. In addition, the importantmeasure of average length of stay of hotel guests extended substantially by 0.43nights to 1.62. The majority of guests came from Mainland China (46.3%) and HongKong (27.9%). The total number of hotel guests in the first ten months of 2007was 4,706,089, up 25.3% over the same period of 2006. Government Policy In his eighth policy address delivered in November, Macanese Chief ExecutiveEdmund Ho reiterated the Government's continued commitment to developing thegaming and tourism industries, whilst also maintaining the fight againstcorruption and crime. In addition, he outlined several new policies designed toimprove the city's political and socio-economic fabric. Amongst them was theconstruction of subsidised housing and other support measures for lower incomeearners, including mortgage interest relief and the abolition of stamp duty forfirst-time home buyers. The move towards greater Government transparency wasalso demonstrated by the announcement of the tender of two plots of land at theend of the year. Infrastructure On-going rapid property development and the growth in visitor numbers continueto place considerable pressure on the Territory's transport infrastructure. Inorder to cope with these pressures, the Government has instigated a number ofinitiatives: • Lotus Bridge - now completed, connecting Macau's Cotai Strip and Zhuhai for road traffic. Soon to open for 24 hour operation for passenger and cargo traffic • Hong Kong-Zhuhai-Macau Bridge (planned) - a 35km bridge connecting the three cities and linking up the East and West Pearl River Delta for passenger and cargo traffic • Light Rail System - studies have been finalised and optimal routes chosen for this high speed passenger system running through Macau and Taipa. Construction due to commence in 2008 with completion planned by end 2011 • Taxi licences - additional taxi licences were issued to help alleviate taxi queues and increase use of public transport • Second ferry pier in Taipa - temporary second pier opened in 2007 with the full size permanent terminal due to be completed in 2009. Cotaijet ferry service connecting Macau with Hong Kong Airport, Hong Kong Central, Shenzhen Airport and other Pearl River Delta cities is now resumed. Economy Macau's rapid economic growth continues to be accompanied by a surge of foreigninvestment. Government statistics indicate that gross fixed capital formationgrew by 38.3% year-on-year, helping to drive GDP growth to 30.9% in the thirdquarter of 2007. This has placed the local labour market under significantpressure with unemployment falling to 3.1%, pushing wage inflation to over 20%.Gaming revenues, one of the principal drivers of Macau's GDP, continue to growexponentially exceeding US$10 billion in 2007, a rise of 46.6% on the previousyear. Visitor numbers also set new records, hitting 27 million in 2007, up 22.8%year-on-year. Infrastructure pressure from the continued development of casinosand resorts is also reflected in consumption of electricity which, in the thirdquarter, registered the largest growth among all energy, up by 25.9% from theprevious quarter and 30% year-on-year. Key Economic Statistics 2007 Figure YoY%Unemployment rate FY 3.1% -0.7%CPI FY 114.46 +5.6%Visitor arrivals FY 27 m +22.8%Gaming revenues FY US$10.4 bn +46.6%Retail sales value (est.) FY US$1.67 bn +30%Median monthly income Q3 US$983 +15.5%Real GDP Q3 US$4.79 bn +30.9% Source: DSEC Financial Review During the second half of 2007, the Company committed a further US$78.5 millionon property acquisitions and as at 31 December 2007 had a total commitment,including estimated redevelopment costs, of US$226.7 million, representingapproximately 120% of equity raised. In accordance with International Financial Reporting Standards (IFRS) and theCompany's valuation policy, all properties have been valued by Savills (Macau)Limited as at 31 December 2007 and included in the financial statements at thelower of cost and net realisable value. This results in a reported NAV per shareof US$1.69. The open market valuation of MPO's interests in these properties, as reported bySavills and as detailed in the Portfolio Summary of this report, was US$279.3million. This is an uplift in the portfolio valuations during the period underreview of US$50.6 million (which represents a 22.1% increase) and of US$94.8million over the cost of the properties (equivalent to a 51.4% increase sinceacquisition). The Company's Adjusted NAV per share has exceeded the basicperformance hurdle of 10%, the super performance hurdle of 25% (both calculatedon a compounding basis) and the high watermark resulting in an Adjusted NAV pershare after accruing for performance fees of US$2.60 or 130.09p per share. Thisrepresents a respective 17.2% and 17.4% increase from 30 June 2007 and arespective 44.3% and 35.2% increase from the NAV per share on admission to AIM. As at 31 December 2007, MPO's total assets stood at US$198.2 million, made up ofUS$102.9 million of development properties and cash of US$95.1 million. Ifdevelopment 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 beUS$374.6 million. Total liabilities of the Company as at 31 December 2007 wereUS$10.6 million comprising mainly payments due for acquired properties and feesaccruals. In line with MPO's stated objective of delivering an attractive total returnprimarily from capital appreciation, payment of a dividend is not recommended. Cash Management As at 31 December 2007, the Company had a cash balance equivalent of US$95.1million. Cash balances are held in both US$ and HK$ fixed deposits and insavings and current accounts with international banks located in Guernsey, HongKong and Macau. The majority of the cash balances are held with a United Kingdombank which holds an Aaa rating from Moody's. Unaudited results are summarised below: 31-Dec-07 30-Jun-07 US$ £1 US$ £1 NAV $177.92m £89.08m $188.24m £94.08m Adjusted NAV2 $272.81m £136.59m $232.81m £116.34m NAV per share $1.69 84.84p $1.79 89.60p Adjusted NAV per share2 $2.60 130.09p $2.22 110.80p Uplift in Adjusted NAV Since Admission3 44.34% 35.21% 23.17% 15.16% Since 30 June 2007 17.19% 17.41% n/a n/a 1 Based on US$/£ exchange rate of 1.997 at 31 Dec 2007 and 2.001 at 30 Jun 2007 2 Adjusted Net Asset Value is shown after accruing for the performance fee 3 Based on NAV per share at Admission on 5 June 2006 of US$1.80 (96.21 pence) Outlook Over the period, MPO has consolidated its position as one of the leadinginvestors in the Macau property market. As the Macanese economy continues togrow dynamically, the period ahead will see the Company focusing on committingall remaining funds to the acquisition of further attractive pipeline assets aswell as progressing current development projects. Our priorities for the coming half-year are as follows: • commit all remaining capital • progress design and approvals of development projects • secure competitive bank financing for existing projects • continue to widen MPO investor base with an emphasis on retail participation • expansion of media coverage to a wider investor audience We believe that the Company's current portfolio of strategically located, nicheproperties in clearly differentiated market segments is well positioned tobenefit from the continuing expansion and transformation being experienced inthe Macau market. Tom Ashworth/Martin Tacon Principals Sniper Capital Limited Consolidated Balance Sheet (Unaudited) As at 31 December 2007 31 Dec 07 31 Dec 06 30 Jun 07 Note US$'000 US$'000 US$'000Assets Non-current assets - - - - - - Current assetsInventories 3 102,894 56,376 56,084Trade and other receivables 179 575 458Prepayments 22 30 54Cash and cash equivalents 95,106 148,706 144,297 198,201 205,687 200,893Total assets 198,201 205,687 200,893 EQUITY Capital and reserves attributable to the Company's equity holders Share capital 1,050 1,050 1,050Distributable reserve 187,960 187,960 187,960Retained earnings/(accumulated (10,723) 2,584 (524)losses)Foreign exchange on (365) - (247)consolidation Total equity 177,922 191,594 188,239 LIABILITIES Current liabilitiesTrade and other payables 20,279 14,093 12,654Total liabilities 20,279 14,093 12,654Total equity and liabilities 198,201 205,687 200,893 The financial statements were approved by the Board of Directors and authorisedfor issue on 14 February 2008. Consolidated Income Statement (Unaudited) For the period from 1 July 2007 to 31 December 2007 1 Jul 07- 18 May 06 - 18 May 06 - 31 Dec 07 31 Dec 06 30 Jun 07 Note US$'000 US$'000 US$'000RevenueBank and other interest 2,901 5,290 8,876Gains on foreign currency exchange - 41 18 2,901 5,331 8,894 ExpensesManagement fee 2,313 2,142 4,319Performance fee 9,663 - 3,807Non-Executive Directors' fees 126 139 338Auditors' remuneration 29 11 52General and administration expenses 588 455 902Losses on foreign currency exchange 381 - - (13,100) (2,747) (9,418)Net profit/(loss) for the period (10,199) 2,584 (524) Attributable to:Equity holders of the Company (10,199) 2,584 (524) (10,199) 2,584 (524) 1 Jul 07- 18 May 06 - 18 May 06 - 31 Dec 07 31 Dec 06 30 Jun 07 US$ US$ US$Basic and diluted earnings/(losses) per share for profit/(loss)attributable to the equity holders of the Company during theperiod 5 (0.0971) 0.0246 (0.0050) Consolidated Statement of Changes in Equity (Unaudited)For the period from 1 July 2007 to 31 December 2007 Foreign Share Share Accumulated Distributable exchange on capital premium losses reserve consolidated Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 July 2007 1,050 - (524) 187,960 (247) 188,239Foreign exchange on consolidation - - - - (118) (118)Net loss for the period - - (10,199) - - (10,199)Balance carried forward at 31 December 2007 1,050 - (10,723) 187,960 (365) 177,922 For the period from 18 May 2006 to 31 December 2006 Foreign exchange on Share Share Retained Distributable consolidation capital premium earnings reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Issue of shares 1,050 195,410 - - - 196,460Cancellation of share premium - (195,410) - 195,410 - -Placing fees & formation costs - - - (7,450) - (7,450)Net profit for the period - - 2,584 - - 2,584Balance carried forward at 1,050 - 2,584 187,960 - 191,59431 December 2006 For the period from 18 May 2006 to 30 June 2007 Foreign exchange on Share Share Accumulated Distributable consolidation capital premium losses reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Issue of shares 1,050 195,410 - - - 196,460Cancellation of share premium - (195,410) - 195,410 - -Placing fees & formation costs - - - (7,450) - (7,450)Foreign exchange on consolidation - - - - (247) (247)Net loss for the period - - (524) - - (524)Balance carried forward at 1,050 - (524) 187,960 (247) 188,23930 June 2007 Consolidated Cash Flow Statement (Unaudited)For the period from 1 July 2007 to 31 December 2007 1 Jul 07 - 18 May 06 - 18 May 06 - 31 Dec 07 31 Dec 06 30 Jun 07 Note US$'000 US$'000 US$'000Net cash used in operating activities 6 (6,836) (2,546) (5,434)Cash flows from investing activitiesExpenditure on inventories (45,036) (42,522) (47,468)Interest received 3,180 4,723 8,418Net cash used in investing activities (41,856) (37,799) (39,050)Cash flows from financing activitiesProceeds on issue of shares - 196,460 196,460Placing fees and formation costs - (7,450) (7,450)Net cash generated from financing activities - 189,010 189,010Net increase/(decrease) in cash and cash equivalents (48,692) 148,665 144,526Effect of foreign exchange rate changes (499) 41 (229)Cash and cash equivalents at beginning of period 144,297 - -Cash and cash equivalents at end of period 95,106 148,706 144,297 Notes to the Consolidated Financial Statements (Unaudited)For the period from 1 July 2007 to 31 December 2007 General information Macau Property Opportunities Fund Limited is a company incorporated andregistered in Guernsey under the Companies (Guernsey) Law, 1994 (as amended) on18 May 2006. The address of the registered office is given on the inside backcover. The consolidated financial statements for the period ended 31 December2007 comprise the financial statements of Macau Property Opportunities FundLimited and its subsidiaries (together referred to as the "Group"). The Groupinvests in commercial property and property-related ventures primarily in Macauand potentially in the Western Pearl River Delta region. These consolidatedfinancial statements have been approved for issue by the Board of Directors on14 February 2008. 1. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The annual financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) under the historical costconvention. The interim financial statements have been prepared in accordance with theInternational Accounting Standard (IAS) 34, Interim Financial Reporting. Thesame accounting policies and methods of computation are followed in the interimfinancial statements as compared with the annual financial statements. Thepresentation of the interim financial statements is consistent with the annualfinancial statements. The Group operates in an industry where significant seasonal or cyclicalvariations in total income are not experienced during the financial year. Consolidation The consolidated financial statements incorporate the financial statements ofthe Company and special purpose entities controlled by the Company (itssubsidiaries). Control is achieved where the Company has the power to govern thefinancial and operating policies of a special purpose entity so as to obtainbenefits from its activities. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Segmental reporting The Directors are of the opinion that the Group is engaged in a single segmentof business, being property investment and related business. The Group investsin commercial property and property related ventures primarily in Macau andpotentially in the Western Pearl River Delta region. 2. SUBSIDIARIES All special purpose vehicles are owned 100% by Macau Property Opportunities FundLimited. The following subsidiaries have a year end of 31 December to coincidewith the Macanese tax year: MPOF Macau (Site 1) Limited MPOF Macau (Site 2) LimitedMPOF Macau (Site 3) Limited MPOF Macau (Site 4) LimitedMPOF Macau (Site 5) Limited MPOF Macau (Site 6) LimitedMPOF Macau (Site 7) Limited MPOF Macau (Site 8) LimitedMPOF Macau (Site 9) Limited MPOF Macau (Site 10) Limited The consolidated financial statements include the financial statements of theCompany and the subsidiaries listed in the following table: Ownership IncorporationMPOF Macau (Site 1) Limited 100% MacauMPOF Macau (Site 2) Limited 100% MacauMPOF Macau (Site 3) Limited 100% MacauMPOF Macau (Site 4) Limited 100% MacauMPOF Macau (Site 5) Limited 100% MacauMPOF Macau (Site 6) Limited 100% MacauMPOF Macau (Site 7) Limited 100% MacauMPOF Macau (Site 8) Limited 100% MacauMPOF Macau (Site 9) Limited 100% MacauMPOF Macau (Site 10) Limited 100% MacauMPOF (Penha) Limited 100% GuernseyMPOF (Taipa) Limited 100% GuernseyMPOF (Jose) Limited 100% GuernseyMPOF (Sun) Limited 100% GuernseyMPOF (Senado) Limited 100% GuernseyMPOF (Domingos) Limited 100% GuernseyMPOF (Monte) Limited 100% GuernseyMPOF (Paulo) Limited 100% GuernseyMPOF (Guia) Limited 100% GuernseyMPOF (Antonio) Limited 100% GuernseyMPOF (6A) Limited 100% GuernseyMPOF (6B) Limited 100% GuernseyMPOF (7A) Limited 100% GuernseyMPOF (7B) Limited 100% GuernseyMPOF (8A) Limited 100% GuernseyMPOF (8B) Limited 100% GuernseyMPOF (9A) Limited 100% GuernseyMPOF (9B) Limited 100% GuernseyMPOF (10A) Limited 100% GuernseyMPOF (10B) Limited 100% GuernseyMPOF Mainland Company 1 Limited 100% BarbadosBream Limited 100% GuernseyCannonball Limited 100% GuernseyCivet Limited 100% GuernseyExtra Able International Limited 100% BVIGo Gain International Limited 100% BVISee Lucky Enterprises Limited 100% BVIAim Top Enterprises Limited 100% BVIManage Gain Investments Limited 100% BVIPoly Advance Management Limited 100% BVIFondue International Limited 100% BVIRichsville Investment Limited 100% BVIPhoenixville Holdings Limited 100% BVILucan Investments Limited 100% BVIMega League Investments Limited 100% BVIProminent Group Limited 100% BVITalent Empire International Limited 100% BVITycoon Villa International Limited 100% BVIYield Return Limited 100% BVIChampionway International Limited 100% BVISwift Link Limited 100% BVIMagic Bright International Limited 100% BVIMulti Gold International Limited 100% BVIRight Year International Limited 100% BVIGainsun Investments Limited 100% BVIHoneypot International Limited 100% BVIJin Mei International Limited 100% BVILucky Go International Limited 100% BVISmooth Run Group Limited 100% BVIHillsleigh Holdings Limited 100% BVIPacific Success Properties Limited 100% Hong KongMaxland Properties Limited 100% Hong KongQueensland Properties Limited 100% Hong KongUnion Century Properties Limited 100% Hong KongPacific Link Properties Limited 100% Hong KongPacific Asia Properties Limited 100% Hong KongGolden Properties Limited 100% Hong KongPlatinum Properties Limited 100% Hong KongVictory Star Properties Limited 100% Hong KongTop Faith Properties Limited 100% Hong KongChina City Properties Limited 100% Hong KongSky Century Properties Limited 100% Hong KongGolden City Properties Limited 100% Hong KongNewton Properties Limited 100% Hong KongOrient Land Properties Limited 100% Hong KongChina Crown Properties Limited 100% Hong KongWorld Pacific Properties Limited 100% Hong KongExcelsior Properties Limited 100% Hong KongGoldex Properties Limited 100% Hong KongWindex Properties Limited 100% Hong KongHonway Properties Limited 100% Hong KongGold Century Properties Limited 100% Hong KongNew Perfect Properties Limited 100% Hong KongTop Century Properties Limited 100% Hong KongWeltex Properties Limited 100% Hong KongEast Base Properties Limited 100% Hong Kong 3. INVENTORIES 31 Dec 07 31 Dec 06 30 June 07 US$'000 US$'000 US$'000 Cost of properties 102,894 56,376 56,084 102,894 56,376 56,084 Macau Property Opportunities Fund Limited is guarantor for its subsidiarycompany in respect of payments due on Tower 6 of One Central Residences. Thetotal of the guarantee is HK$471,370,716 (US$60,393,901) which is due oncompletion of the property development. During the period subsidiaries of Macau Property Opportunities Fund Limitedpurchased additional units within One Central Residences and there are furtherpayments of HK$163,955,883 (US$21,006,683) due by the subsidiaries on completionof the units. 4. BASIC AND DILUTED EARNINGS/(LOSSES) PER ORDINARY SHARE The basic and diluted profit/(loss) per equivalent Ordinary Share is based onthe profit/(loss) attributable to equity holders for the period of(US$10,199,000) (31 December 2006 US$2,584,000 and 30 June 2007 (US$524,000))and on 105,000,000 (31 December 2006 and 30 June 2007: 105,000,000) weightedaverage number of Ordinary Shares in issue during the period. 5. NET CASH USED IN OPERATING ACTIVITIES 1 July 07- 18 May 06 - 18 May 06 - 31 Dec 07 31 Dec 06 30 June 07 US$'000 US$'000 US$'000 Operating loss from continuing operations (12,719) (2,747) (9,418)Adjustments for:Increase/(decrease) in provisions - - -Operating cashflows before movements in working capital (12,719) (2,747) (9,418)Decrease/(increase) in receivables 32 (38) (54)Increase/(decrease) in payables 5,851 239 4,038Cash used in operations (6,836) (2,546) (5,434)Interest paid - - -Net cash used in operating activities (6,836) (2,546) (5,434) 6. RELATED PARTY TRANSACTIONS Tom Ashworth received no Director's fee from the Company. Tom Ashworth is a shareholder and Director of Sniper Capital Limited. SniperCapital Limited is the Manager of the Company and all management and performancefees, as detailed in the Consolidated Income Statement, are due to the Manager. Tom Ashworth is a shareholder and Director of Adept Capital Services Limited.Adept Capital Services Limited provides administrative services to the HongKong, BVI and Macanese SPVs and received fees during the period of US$40,000 ofwhich US$25,000 was outstanding at the period end (30 June 2007 US$42,000 ofwhich US$Nil was outstanding at the period end). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Macau Property