TIDMMCAU
RNS Number : 5160E
Speymill Macau Property Company PLC
07 April 2011
7 April 2011
Speymill Macau Property Company plc
("Speymill Macau" or the "Company")
Annual Results for the Year Ended 31 December 2010
Speymill Macau Property Company plc (MCAU.L), the Macau focused
property investment company listed on AIM, announces its final
results for the year ended 31 December 2010.
Highlights of the year
Balance sheet 31 Dec 2010 31 Dec 2009
-------------------------------- ------------ ------------
Net assets (US$'000) 130,714 142,704
Net assets per share (US$) 1.21 1.22
Headline* net assets (US$'000) 134,326 143,828
Headline* net assets per
share (US$) 1.25 1.23
Total assets (US$'000) 222,917 328,057
Property assets (US$'000) 159,884 282,104
-------------------------------- ------------ ------------
*Excluding provision for deferred income tax and goodwill.
Income statement 31 Dec 2010 31 Dec 2009
------------------------------- ------------ ------------
Gross rental income (US$'000) 7,962 8,641
Valuation gains/(losses)
(US$'000) - 22,219
(Loss)/profit after tax
(US$'000) (5,152) 15,251
Basic (losses)/earnings
per share
(US cents per share) (4.61) 13.05
Diluted (losses)/earnings
per share
(US cents per share) (4.61) 13.05
------------------------------- ------------ ------------
Business highlights
-- Property valuation consistent with a year earlier, on a
like-for-like basis.
-- Headline NAV of US$1.25 per share as of 31 December 2010, up
1.6% from the previous year.
-- A return of capital of US 30 cents per share to be paid in
April 2011.
-- Loss after tax of US$5.15m; loss per share of US$0.05 per
share, compared to a gain of US$15.3m (gain per share of US$0.13
per share) for the previous year, due mainly to IFRS required
changes in the method of calculating the tax provisions for the AIA
Tower following the adoption of the revised investment policy,
which is to dispose of the investments in an orderly manner.
-- 8,992,671 shares purchased for cancellation at an average
price of US$0.75 representing a discount of 40% to 31 December 2010
headline NAV
-- AIA Tower, the only property with a covenant on its debt,
reporting an LTV of 48%, well within the 70% covenant. This debt
was successfully refinanced subsequent to the year end until
September 2013 with LTV of 46% comfortably within a revised
covenant of 65%.
-- Small decrease in rents at AIA Tower in 2010 due to the
bankruptcy of a large tenant resulting in a slight net reduction in
the overall occupancy rate.
-- Riviera development successfully exited realising a small
loss of US$0.7 million (after all associated selling expenses) on
2009 fair value. This has successfully removed the liability to the
developer of US$92 million from the balance sheet. Net receivables
of US$16 million as of 31 December 2010 have been collected in full
subsequent to the year end.
-- Rafael properties disposed of at book value subsequent to
year end leaving AIA tower as the only real estate asset as at 6
April 2011.
Matrix Corporate Capital Speymill Property Group (Far
LLP East) Limited
(Nominated Adviser/Broker) (Investment Adviser)
Paul Fincham Terri Tsang
Jonathan Becher +852 2514 6104
+44 20 7131 4000
Galileo Fund Services
(Administrator)
Ian Dungate
+44 1624 692600
Chairman's statement
Your Board has been very active in the period since last
writing, making several trips to Macau and Hong Kong in order to
meet with all relevant local service providers such as the property
managers, attorneys, auditors and property consultants.
One of the more important results of the Board's work was to
significantly de-leverage the balance sheet during the year.
Subsequent to the year end, the only financing in place at the
time of writing is the US$71.3 million (HK$555 million) mortgage on
the AIA Tower. In regard to this debt, during the year and
subsequently, your Company was able to utilize excess income from
AIA Tower to pay a total of US$5.8 million to the bank in order to
lower the total amount of debt financing. The Board then
successfully negotiated an extension of the lowered outstanding
facility from March 2011 to September 2013. This mortgage was
reduced from HK$580 million to its current HK$555 million and the
property now has an LTV of 46% against a maximum loan covenant of
65%. We were also able to negotiate no prepayment penalty for this
loan in the event of a sale of the property or the SPV holding the
loan.
During the past year we were able to exit the entire Riviera
investment at a small loss of US$0.7 million as against its
valuation in the 2009 annual report after recognising associated
selling costs (commissions and discounts) of US$3.9 million (the
gross sales price being at a small premium of US$3.2 million to the
valuation in the 2009 annual report). The forward funding
commitment of US$92 million was settled in full and all of the
outstanding proceeds (i.e. the excess of payments received less
finance commitments and associated selling costs) of US$28.7
million have now been received in cash, US$15.9 million of this
subsequent to the year end.
The property portfolio in the Rafael joint venture was
successfully divested during and after December at its full 2009
valuation of US$5.6 million and the associated bank financing of
US$1.5 million was all repaid in February 2011. This will free up
additional funds as we are able to legally liquidate that SPV.
The policy of providing liquidity to shareholders whilst
increasing the NAV for the remaining shareholders has been
maintained with the continuation of the share buyback programme. We
were able to buy back a total of 8,992,671 shares during the period
at an average price of US$0.75 per share, meaning a 40% discount to
NAV. The benefits of this program to shareholders are clear.
We undertook a careful review of service providers and contracts
in order to identify and implement cost savings given the changes
in the portfolio and investing policy. The major result of this
review was for the Board to serve a one year termination notice on
the manager so that its contract will now expire in June 2011,
saving the Company over USD$2.7 million annually. The Board expects
to be able to manage the divestment of the AIA Tower itself and
during the last trip to Hong Kong and Macau we made arrangements
for the local accounts and records and local administrative
responsibilities to be maintained following June 2011.
In the accompanying financial report you will see that the
Company reported a pre-tax loss of US$2.3 million. This amount
needs a bit of explanation. This loss includes US$0.8 million paid
to the Directors in accordance with the Directors' incentive plan
approved at the Extraordinary General Meeting held on 19 November
2010, and the loss of $0.7 million on the disposal of the Riviera
properties. In addition, there is a total taxation charge of US$2.9
million, which includes an increase in the provision for deferred
tax of US$2.5 million due to IFRS required changes in the method of
calculating the tax provisions for the AIA Tower following the
adoption of the revised investment policy, which is to dispose of
the investments in an orderly manner.
Following the successful divestments from the Joint Venture and
Riviera, and since the refinancing of the AIA Tower was successful,
the Board has determined that it can begin to return the capital to
the shareholders. Accordingly, the Board is declaring a return of
capital of 30 US cents per share to be paid in April 2011.
The Board is actively examining how to achieve the maximum
return for shareholders on the divestment of the AIA Tower. We are
working closely with various entities and remain committed to only
executing a sale when the terms are favourable in all aspects and
when the maximum price can be achieved.
Sincerely yours,
Howard Golden
7 April 2011
Report of the Manager and the Investment Adviser
BUSINESS OVERVIEW
The Company's NAV per share decreased from US$1.22 per share in
2009 to US$1.21 per share in 2010 mainly due to the change in the
manner of calculating the tax provisions. Speymill Macau generated
cash flow of US$2.09 million in 2010 (US$6.13 million in 2009).
Significant cash movements in the year 2010 were from the sale of
the Riviera units and the share buyback programme. Subsequent to
the year end, additional proceeds from the sale of the Riviera
development totalling US$15.9 million have been received. The
Company reported an after tax loss of US$5.2 million, or 4.61 US
cents per share for the year ended 31 December 2010 which included
US$0.8 million paid to the Directors under the Directors' incentive
plan and a deferred tax charge of US$2.5 million due to a change in
the method of calculating the tax provisions for the AIA Tower
following the adoption of the revised investment policy, which is
to dispose of the investments in an orderly manner. This compares
to a profit of US$15.3 million (13.05 US cents per share) for the
same period in 2009 after taking account of valuation gains on
investment property of US$22.2 million. As of the year end, the
Company had available cash of US$38.5 million.
At the time of writing, the Company's only remaining property
asset is the AIA Tower, a Grade-A commercial and office building in
the Macau CBD. The Company has only one covenant, a 65%
Loan-to-Value covenant on AIA Tower. As at 31 December 2010, the
AIA Tower had an LTV of 48.3%, well within the covenant level.
The Company launched sales of its units at the Riviera
development in 2010. As of 18 March 2011, all the proceeds from the
sale of the Company's 259 Riviera units were received. The Company
achieved a total sales price of HK$973.8 million (US$124.9
million), an average selling price of HK$3,594 psf. The property is
now fully divested, as of the time of writing.
The Rafael JV is in the process of being wound up following the
successful sale of the JV properties in October 2010 at their last
NAV prior to the sale. The sales proceeds of HK$43.9 million
(US$5.64 million) were fully received on 23 February 2011.
VALUATION
Investments held as of 6 April 2011
Valuation Valuation
as of 31 as of 31 Valuation
Investment Dec 10 Dec 09 increase
Properties Sector Type Status (US$m) (US$m)* / decrease
------------ ------------- ------------ ----------- ---------- ---------- ------------
Office
AIA Tower / Retail Grade-A Operating 154.2 154.2 (0.00)%
Properties
divested in Sales Valuation
the period Price as of 31 Valuation
to 6 April (US$m) Dec 09 increase
2011 Sector Type Status ** (US$m) / decrease
------------ ------------- ------------ ----------- ---------- ---------- ------------
Riviera Residential High-end Divested 124.9 121.3 2.55%
------------ ------------- ------------ ----------- ---------- ---------- ------------
Houston Commercial/
Court Residential Mid-market Divested 2.8 2.8 0.00%
------------ ------------- ------------ ----------- ---------- ---------- ------------
Pink Palace Residential Mid-market Divested 1.9 1.9 0.00%
------------ ------------- ------------ ----------- ---------- ---------- ------------
Wan Keng Residential Mid-market Divested 0.8 0.8 0.00%
------------ ------------- ------------ ----------- ---------- ---------- ------------
Entry
Ribas 5B Residential market Divested 0.2 0.2 0.00%
TOTAL 284.8 281.2 1.28%
====================================================== ========== ========== ============
* On a consistent exchange rate basis.
** The Sales price is stated before deduction of discounts,
commissions paid and marketing expenses which totalled US$3.9
million
In the 12 month period ended 31 December 2010, the Company
successfully disposed of the Riviera development at a slight
premium to the 2009 valuation (before deduction of selling costs).
As of 18 March 2011, all of the proceeds have been received from
the Riviera sales and the property is fully divested as of the time
of writing. In February 2011, the entire property portfolio of the
Rafael Joint-Venture was sold at the 2009 valuation.
The Company has one remaining property asset - the AIA Tower, a
Grade-A commercial and office tower located in Macau's CBD and
principally tenanted by AIA Group, the largest independent publicly
listed pan-Asian life insurance group in the world.
AIA TOWER
The AIA Tower is a 22-storey Grade-A commercial and office tower
located in Macau's central business district. The building provides
296,437 sq ft of office space and 76,722 sq ft of retail and
commercial space, along with 186 car parking spaces. The AIA Tower
was valued by Jones Lang LaSalle at HK$1.2 billion (US$154.2
million) as of period end, unchanged from the previous year. With a
contractual monthly rental income of HK$4.6 million, the valuation
yield on the building was 4.6%.
During the 12 months to 31 December 2010, a total of 13 new
leases (43,322 sq ft) were signed with an additional 12 leases
(36,821 sq ft) being renewed. In April 2010, VIVA Macau, a budget
airline operator and significant tenant occupying 17,804 sq ft of
office space went into administration, which had a negative effect
on the occupancy rate of the building. VIVA Macau had 5 months of
outstanding arrears in rent and service charges. The amount due had
been set off against the 2 months deposit of the tenant. The
Company successfully attained the necessary court permission to
repossess the space in September 2010 and the space is now being
actively marketed to prospective tenants. Separately, a gym
operator was secured as a tenant for the entire fourth floor. The
gym is now expected to open in late April or early May. As of 31
December 2010, the overall occupancy rate for the building was
78.9%, with occupancy rates of 84.5% and 57.3% in the office and
commercial space, respectively.
The overall rent in the building increased to HK$ 14.95 psf as
of period end, compared to HK$ 14.68 psf in the previous year.
Since acquisition, overall rents in the building have grown by
10.1%. To date, a total of 22 new leases covering 64,418 sq ft, or
17.3% of space, have been secured while an additional 32 leases
covering 151,199 sq ft, or 40.52% of space, have been successfully
reviewed and renewed. Total space due for renewal or review in 2011
is 79,375 sf.
Tenants at the AIA Tower include AIA, Bank of Communications,
Starbucks, Toni & Guy, Circle K, Gucci and Pfizer, amongst
other globally recognised names. The principal tenant of the
building is AIA, who pay for the naming rights of the building.
Embedded image removed - please refer to the Company's website
www.speymillmacau.com for a pie chart depicting AIA Tennant mix by
Sector.
As of 31 December 2010, the AIA Tower had an LTV ratio of 48.3%,
comfortably within the 70% LTV covenant. On 4 March 2011, the
HK$580 million (US$74.5 million) outstanding debt on the AIA Tower
was refinanced with Banco Weng Hang. The term of the loan was
extended for a period of 30 months, with the loan facility amount
being reduced to HK$555 million (US$71.3 million). The LTV covenant
has been revised to 65% and interest payable is now 205 basis
points above the 3-month HIBOR. Loan amortization takes place
through an annual cash flow sweep with a contractual minimum amount
of HK$5.0 million to be paid in June 2011 and June 2012. The cash
flow sweep allows for up to HK$10.0 million to be retained for
capital expenditures on the AIA Tower. The debt is structured
non-recourse to the Company.
RIVIERA
The Riviera is a residential development consisting of two
towers situated between the Inner Harbour and Sai Van Lake in Macau
peninsula. The development has a total of 518 units, of which the
Company owned 259 units, . The Riviera sales programme was
initiated on 18 March 2010 and as of 18 March 2011, all the Riviera
units were sold and proceeds received. The total sales price
achieved for all of the units was HK$973.8 million (US$124.9
million), or an average selling price of HK$3,594 psf.
Buyers were offered two payment options: Plan A and Plan B. Plan
A buyers were given a discount of 4% on the listed sales price for
the unit and were required to complete the sale within a period of
4 weeks. An upfront deposit of 10% of the sales price was required
upon signing of the Sales and Purchase Agreement for the unit. Plan
B buyers received no discount and were required to complete the
sale within a period of 2 weeks after the occupation permit is
granted on the building. An upfront deposit of 10% of the sales
price was required upon signing of the Sales and Purchase Agreement
for the unit, with an additional 10% within 4 weeks of the signing
and a further 10% within 12 weeks of the signing.
On 19 November 2010 the Board decided to sell the remaining
unsold units back to the developer and therefore a Second Addendum
to the Promise Agreement of Purchase and Sale was signed whereby
the HK$651.4 million (US$83.7 million) outstanding amount due to
the developer at that date was paid down in full, and additional
sales proceeds of HK$100.3 million (US$12.9 million) returned to
the Company. At the time of signing, there were further proceeds of
HK$131.9 million (US$17.0 million) due to the Company from the Plan
B units.
As of 18 March 2011, all of the HK$131.9 million (US$17.0
million) due to the Company has been received.
The overall sales price achieved on the Riviera represents a
minor uplift of 2.6% on the December 2009 valuation. Costs
associated with the sale of the apartments was US$3.9 million,
resulting in a net loss of
US$0.7 million compared to the 2009 valuation.
RAFAEL JV
The Company owns an 87% stake in Rafael (Macau) Limited, a
subsidiary company formed following a joint venture agreement with
a Macau based boutique property advisory firm. The enterprise was
formed with the aim of acquiring and repositioning existing
residential and commercial properties in the older, historical
parts of Macau, allowing the Company to gain exposure to the more
affordable end of the market.
In June 2010, the Speymill Macau Board decided to wind up the
Rafael JV. As of 7 October 2010, a buyer was confirmed and a
HK$43.9 million (US$5.64 million) offer was received for all of the
JV's properties. This offer was equivalent to the December 2009
valuation.
As of 23 February 2011, the JV properties are fully disposed.
The JV Company is in the process of being wound up as of the time
of writing and the proceeds will be distributed as per the
shareholding of the JV.
OUTLOOK
On 28 June 2010, Speymill Property Group Limited ("SPG"), the
Manager, was served a 12-month notice from Speymill Macau Property
Company plc ("Speymill Macau") to terminate the investment
management agreement dated 26 November 2006 between Speymill Macau
and SPG.
On 19 November 2010, the Company shareholders voted to change
the investment mandate. Under the new mandate, the Company would
cease new investment activity and seek to realise the Company's
remaining investments.
As of the time of writing, the Company has one remaining
property asset - the AIA Tower.
Denham Eke
For the Manager
Speymill Property Group Limited
Huang Khoo
For the Investment Adviser
Speymill Property Group (Far East) Limited
7 April 2011
Directors' report
The Directors hereby submit their annual report together with
the audited consolidated financial statements of Speymill Macau
Property Company plc (the "Company") for the financial year ended
31 December 2010.
The Company
The Company is incorporated in the Isle of Man and has been
established to invest in the high quality residential and
commercial real estate market in Macau.
Results and dividends
The results and position of the Company at the year-end are set
out on pages 16 to 22 of the financial statements.
At the Extraordinary General Meeting held on 19 November 2010
shareholders approved a revised Investing Policy as follows
The Company shall cease making new investments and shall, as
soon as is considered reasonably practicable by the Directors of
the Company in their sole discretion, dispose of all of its
investments in an orderly manner and return the net proceeds
generated to Shareholders.
In accordance with the shareholders resolution, the Directors
declared an interim return of capital of 30 cents per share as
follows.
Ex Dividend date 13 April, 2011
Record date 15 April, 2011
Payment date Estimated 28 April, 2011
Directors
The Directors during the year and up to the date of this annual
report were as follows. There has been no change to the
constitution of the Board during the year.
Date Appointed
Howard I Golden 21 July 2009
Filip Montfort 21 July 2009
Yarden Mariuma 21 July 2009
Harald Gerhard Wengust 7 September 2009
Directors' interests in the shares of the Company
The interests of the Directors in the share capital of the
Company as at 31 December 2010 are set out below:
Director No. of shares
Harald Gerhard Wengust 148,000
Howard I Golden** 29,350,000
Yarden Mariuma** 29,350,000
Filip Montfort** 29,350,000
----------------------- --------------
** Messrs. Golden, Mariuma and Montfort are principals of Terra
Partners Group; the Investment Manager to Worldwide Opportunities
Fund (Cayman) Limited which holds 29,350,000 shares in the
Company.
Director's interests
None of the Directors had any interest during the year in any
material contract for the provision of services which was
significant to the business of the Company, other than the
Directors' incentive plan approved by the Shareholders on 19
November 2011.
Independent Auditors
KPMG Audit LLC have expressed their willingness to continue in
office in accordance with Section 12 (2) of the Companies Act
1982.
Corporate governance
Although the Company is not obliged by the listing rules to do
so, the Board intends, where appropriate for a Company of its size,
to comply with the main provisions of the principles of good
governance and code of best practice set out in the Combined Code
('the Code').
Responsibilities of the Board
The Board of Directors is responsible for the determination of
the investment policy of the Company and for its overall
supervision via the investment policy and objectives that it has
set out. The Board is also responsible for the Company's day-to-day
operations; however, since the Board members are all non-executive,
in order to fulfil these obligations, the Board has delegated
operations through arrangements with the Manager, the Investment
Adviser and the Administrator.
At each of the regular Board meetings held, the financial
performance of the Company and its portfolio assets are reviewed.
The Board also receives regular property asset performance reports
from the Manager and the Investment Adviser.
In addition the Board have made regular trips to Macau during
the year to make site visits to the properties and meet with the
local service providers such as the property managers, local
attorneys, auditors and consultants.
Audit Committee
The Audit Committee is a sub-committee of the Board and makes
recommendations to the Board which retains the right of final
decision. The Audit Committee has primary responsibility for
reviewing the financial statements and the accounting policies,
principles and practice underlying them, liaising with the external
auditors and reviewing the effectiveness of internal controls. The
Audit Committee maintains a risk register to help it identify,
evaluate, monitor and control risks.
The terms of reference of the Audit Committee covers the
following:
-- The composition of the Committee, quorum and who else attends
meetings.
-- Appointment and duties of the Chairman.
-- Duties in relation to external reporting, including reviews
of financial statements, shareholder communications and other
announcements.
-- Duties in relation to the external auditors, including
appointment / dismissal, approval of fee, discussion of the
audit.
-- Duties in relation to internal systems, procedures and
controls.
On behalf of the Board
Howard I. Golden
Chairman
7 April 2011
Statement of Directors' Responsibilities in Respect of the
Directors' Report and the Financial Statements
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year, which meet the requirements of
Isle of Man company law. In addition, the Directors have elected to
prepare the financial statements in accordance with International
Financial Reporting Standards.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and Parent Company
and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether they have been prepared in accordance with
International Financial Reporting Standards; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Parent
Company will continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and to enable
them to ensure that its financial statements comply with the
Companies Acts 1931 to 2004. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation governing the preparation and
dissemination of financial statements may differ from one
jurisdiction to another.
On behalf of the Board
Howard I. Golden
Chairman
7 April 2011
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Speymill Macau Property Company plc
We have audited the financial statements of Speymill Macau
Property Company plc for the year ended 31 December 2010 which
comprise the Group Income Statement, the Group Statement of
Comprehensive Income, the Group and Parent Company Balance Sheets,
the Group Statement of Cash Flows and the Group and Parent Company
Statement of Changes in Equity and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs).
This report is made solely to the Company's members, as a body,
in accordance with Section 15 of the Companies Act 1982. Our audit
work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditors
As explained more fully in the Directors' Responsibilities
Statement set out on page 13, the Directors are responsible for the
preparation of financial statements that give a true and fair view.
Our responsibility is to audit, and express an opinion on, the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's and
Parent Company's affairs as at 31 December 2010 and of the Group's
loss for the year then ended;
-- have been properly prepared in accordance with IFRSs; and
-- have been properly prepared in accordance with the provisions
of Companies Acts 1931 to 2004.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Acts 1931 to 2004 require us to report to you
if, in our opinion:
-- proper books of account have not been kept by the Parent
Company and proper returns adequate for our audit have not been
received from branches not visited by us; or
-- the Parent Company's balance sheet and income statement are
not in agreement with the books of account and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
7 April 2011
Consolidated income statement
For the year For the year
ended 31 ended 31
December December
Notes 2010 2009
US$'000 US$'000
--------------------------- ------------------- ------------- -------------
Rent and related income 7,962 8,641
Direct expenses (3,134) (3,457)
---------------------------
Net rent and related
income 4,828 5,184
--------------------------- ------------------- ------------- -------------
Valuation gains on
investment property 13 - 22,219
Loss on disposal of
investment property 13 (666) (3,611)
--------------------------- ------------------- ------------- -------------
Manager's fees 11.3 (2,751) (2,599)
Audit and professional
fees 11.5 (252) (569)
Other expenses 11.1,11.2,11.4, 22 (1,789) (1,260)
Administrative and other
expenses (4,792) (4,427)
--------------------------- ------------------- ------------- -------------
Net operating
(loss)/profit before net
financing expense (630) 19,364
--------------------------- ------------------- ------------- -------------
Finance income 96 94
Finance cost (1,762) (2,506)
--------------------------- ------------------- ------------- -------------
Net finance cost 8 (1,666) (2,412)
--------------------------- ------------------- ------------- -------------
(Loss)/profit before tax (2,296) 16,952
Taxation 23, 24 (2,862) (1,636)
(Loss)/profit for the year (5,158) 15,316
--------------------------- ------------------- ------------- -------------
Attributable to:
Owners of the Company (5,152) 15,251
Non-controlling interest (6) 65
(5,158) 15,316
--------------------------- ------------------- ------------- -------------
Basic (loss)/earnings per
share (cents per share)
for loss attributable to
the owners of the Company
during the year 17 (4.61) 13.05
--------------------------- ------------------- ------------- -------------
Diluted (loss)/earnings
per share (cents per
share) for loss
attributable to the
owners of the Company
during the year 17 (4.61) 13.05
--------------------------- ------------------- ------------- -------------
Consolidated statement of comprehensive income
For the year For the year
ended 31 December 2010 ended 31 December 2009
US$'000 US$'000
-------------------------- ------------------------ ------------------------
Loss/(profit) for the
year (5,158) 15,316
Other comprehensive
income
Currency translation
differences (119) 5
Other comprehensive
(loss)/income for the
year (119) 5
-------------------------- ------------------------ ------------------------
Total comprehensive
(loss)/income for the
year (5,277) 15,321
-------------------------- ------------------------ ------------------------
Total comprehensive
(loss)/income
attributable to:
Owners of the company (5,267) 15,256
Non-controlling interest (10) 65
-------------------------- ------------------------ ------------------------
Total comprehensive
(loss)/income for the
year (5,277) 15,321
-------------------------- ------------------------ ------------------------
Consolidated balance sheet
Note 31 December 2010 31December 2009
US$'000 US$'000
---------------------------------- ----- ----------------- ----------------
Intangible assets 12 6,451 6,451
Investment property 13 159,884 282,104
Plant and equipment 14 1,121 1,277
Total non-current assets 167,456 289,832
---------------------------------- ----- ----------------- ----------------
Trade and other receivables 15 16,943 1,627
Cash and cash equivalents 16 38,518 36,598
Total current assets 55,461 38,225
---------------------------------- ----- ----------------- ----------------
Total assets 222,917 328,057
---------------------------------- ----- ----------------- ----------------
Issued share capital 18 10,783 11,682
Share premium 62,356 62,356
Retained earnings 55,029 66,904
Other reserves 19 2,553 1,654
Foreign currency translation
reserve (7) 108
Equity attributable to owners of
the parent 130,714 142,704
---------------------------------- ----- ----------------- ----------------
Non-controlling interest 1,217 1,227
---------------------------------- ----- ----------------- ----------------
Total equity 131,931 143,931
---------------------------------- ----- ----------------- ----------------
Interest-bearing loans and
borrowings 20 - 76,249
Deferred income tax 24 10,063 7,575
Total non-current liabilities 10,063 83,824
---------------------------------- ----- ----------------- ----------------
Interest-bearing loans and
borrowings 20 76,022 2,880
Trade and other payables 21 4,901 97,422
Total current liabilities 80,923 100,302
---------------------------------- ----- ----------------- ----------------
Total liabilities 90,986 184,126
---------------------------------- ----- ----------------- ----------------
Total equity & liabilities 222,917 328,057
---------------------------------- ----- ----------------- ----------------
Net asset value per share 9 1.21 1.22
---------------------------------- ----- ----------------- ----------------
Company balance sheet
Note 31 December 2010 31 December 2009
US$'000 US$'000
--------------------------------- ----- ----------------- -----------------
Trade and other receivables 15 20 45
Cash and cash equivalents 16 14,038 12,707
Intercompany balances 6 116,798 130,386
--------------------------------- ----- ----------------- -----------------
Total current assets 130,856 143,138
--------------------------------- ----- ----------------- -----------------
Total assets 130,856 143,138
--------------------------------- ----- ----------------- -----------------
Issued share capital 18 10,783 11,682
Share premium 62,356 62,356
Retained earnings 55,022 67,012
Other reserves 19 2,553 1,654
Total equity 130,714 142,704
--------------------------------- ----- ----------------- -----------------
Trade and other payables 21 142 434
Total current liabilities 142 434
--------------------------------- ----- ----------------- -----------------
Total liabilities 142 434
--------------------------------- ----- ----------------- -----------------
Total equity & liabilities 130,856 143,138
--------------------------------- ----- ----------------- -----------------
Net asset value per parent
company share 9 1.21 1.22
--------------------------------- ----- ----------------- -----------------
The loss made by the Company for the year ended 31 December 2010
was US$5,267,000 (year ended 31 December 2009, profit
15,256,000).
Consolidated statement of changes in equity
Foreign Total
Share Capital currency Total equity
Share Share Retained option redemption translation parent Non-controlling 31
capital premium earnings reserves reserve reserves equity Interest December
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- -------- -------- --------- --------- ----------- ------------ -------- ---------------- ---------
Balance at 1
January 2009 11,682 62,356 51,653 336 1,318 103 127,448 1,162 128,610
Profit for the
year - - 15,251 - - - 15,251 65 15,316
Other
comprehensive
income
Foreign
exchange
translation
differences - - - - - 5 5 - 5
--------------- -------- -------- --------- --------- ----------- ------------ -------- ---------------- ---------
Total
comprehensive
income for
the year - - 15,251 - - 5 15,256 65 15,321
Balance at 31
December
2009 11,682 62,356 66,904 336 1,318 108 142,704 1,227 143,931
Loss for the
year - - (5,152) - - - (5,152) (6) (5,158)
Other
comprehensive
income
Foreign
exchange
translation
differences - - - - (115) (115) (4) (119)
--------------- -------- -------- --------- --------- ----------- ------------ -------- ---------------- ---------
Total
comprehensive
loss for the
year - - (5,152) - - (115) (5,267) (10) (5,277)
--------------- -------- -------- --------- --------- ----------- ------------ -------- ---------------- ---------
Transactions
with owners:
Shares
cancelled
following
market
purchases/
transfer to
capital
redemption
reserve (899) - (6,723) - 899 - (6,723) - (6,723)
Balance at 31
December
2010 10,783 62,356 55,029 336 2,217 (7) 130,714 1,217 131,931
--------------- -------- -------- --------- --------- ----------- ------------ -------- ---------------- ---------
.
Company statement of changes in equity
Total
Share Capital equity
Share Share Retained option redemption 31
capital premium earnings reserves reserve December
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
January 2009 11,682 62,356 51,756 336 1,318 127,448
Profit for the
year - - 15,256 - - 15,256
--------------- -------- -------- --------- --------- ----------- ---------
Total
comprehensive
income for
the year - - 15,256 - - 15,256
--------------- -------- -------- --------- --------- ----------- ---------
Balance at 31
December
2009 11,682 62,356 67,012 336 1,318 142,704
Loss for the
year - - (5,267) - - (5,267)
--------------- -------- -------- --------- --------- ----------- ---------
Total
comprehensive
loss for the
year - - (5,267) - - (5,267)
--------------- -------- -------- --------- --------- ----------- ---------
Transactions
with owners:
Shares
cancelled
following
market
purchases/
transfer to
capital
redemption
reserve (899) - (6,723) - 899 (6,723)
--------------- -------- -------- --------- --------- ----------- ---------
Balance at 31
December
2010 10,783 62,356 55,022 336 2,217 130,714
--------------- -------- -------- --------- --------- ----------- ---------
Consolidated statement of cash flows
For the year ended For the year ended
Note 31 December 2010 31December 2009
US$'000 US$'000
------------------------ ----- ------------------- ------------------------
Operating activities
Group profit/(loss)
before tax (2,296) 16,952
Adjustments for:
Revaluation of
investment property 13 - (22,219)
Loss on disposal of
investment property 13 666 3,611
Depreciation 710 515
Interest income 8 (96) (94)
Interest expense 8 1,735 2,473
Operating income before
changes in working
capital 719 1,238
Decrease in trade and
other receivables 559 631
Increase/(decrease) in
trade and other
payables 18 (692)
Cash generated from
operations 1,296 1,177
Interest received 96 94
Interest paid (1,735) (2,376)
Income tax paid (626) (521)
Cash flows used in
operating activities (969) (1,626)
------------------------ ----- ------------------- ------------------------
Investing activities
Acquisition of
investment property 13 - (1,214)
Sale of investment
property 12,903 26,085
Purchase of fixed
assets (554) (918)
Cash flows generated
from investing
activities 12,349 23,953
------------------------ ----- ------------------- ------------------------
Financing activities
Cost of Ordinary Shares
purchased (6,723) -
New secured bank loans - 1,985
Repayments of secured
bank loans (2,564) (18,179)
------------------------ ----- ------------------- ------------------------
Cash flows used in
financing activities (9,287) (16,194)
------------------------ ----- ------------------- ------------------------
Net increase/(decrease)
in cash and cash
equivalents 2,093 6,133
Cash and cash
equivalents at
beginning of year 36,598 30,457
Difference on foreign
exchange (173) 8
------------------------ ----- ------------------- ------------------------
Cash and cash
equivalents at end of
year 16 38,518 36,598
------------------------ ----- ------------------- ------------------------
Notes to the consolidated financial statements
1 The Company
Speymill Macau Property Company plc (the "Company") was
incorporated and registered in the Isle of Man under the Isle of
Man Companies Acts 1931 to 2004 on 31 October 2006 as a public
company with registered number 118202C.
The annual report of the Company as at and for the year ended 31
December 2010 comprises the Company and its subsidiaries (together
referred to as the "Group").
At the Extraordinary General Meeting held on 19 November 2010 it
was resolved that; The Company shall cease making new investments
and shall, as soon as is considered reasonably practicable by the
Directors of the Company in their sole discretion, dispose of all
of its investments in an orderly manner and return the net proceeds
generated to Shareholders.
2 Basis of preparation
2.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs).
The consolidated financial statements were authorised for issue
by the Board of Directors on 7 April 2011.
2.2 Basis of measurement
These consolidated financial statements have been prepared on
the historical cost basis except for investment properties, which
are stated at fair value.
2.3 Functional and presentation currency
These consolidated financial statements are presented in United
States Dollars, which is the Company's presentation currency. The
Hong Kong Dollars is the currency of the primary economic
environment in which the entity operates ("the functional
currency").
2.4 Use of estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
The most significant area requiring estimation and judgement by
the Directors is the valuation of investment property, see note 13.
The Company uses independent professionally qualified valuers,
Jones Lang LaSalle, to value the property portfolio on a
semi-annual basis.
2.5 Adoption of new and revised International Financial
Reporting Standards (IFRSs)
Standards affecting amounts reported in the current period
(and/or prior periods)
The following revised Standards have been adopted in the current
period and have affected only the presentation and disclosure of
the amounts reported in these financial statements.
Effective for
accounting periods
beginning on or
after
Amendments to IFRS 8, 1 January 2010
Segment reporting
Amendments to IAS 1 1 January 2010
Presentation of financial
statements
Amendments to IAS 7 1 January 2010
Statement of cash flows
Amendments to IAS 36 1 January 2010
Impairment to assets
Amendments to IAS 39 1 January 2010
Financial instruments:
Recognition and
Measurement
Amendments to IAS 32 1 January 2010
Financial instruments:
Presentation -
Classification of rights
issues
Standards and interpretations in issue not yet adopted
A number of new standards, amendments to standards and
interpretations are not yet effective for the year ended 31
December 2010, and have not been applied in preparing these
consolidated financial statements:
New/revised International Accounting Standards / Effective
International Financial Reporting Standards (IAS/IFRS) date
(accounting
periods
commencing
after)
IAS 32 Financial Instruments: Presentation - Classification 1 February
of Rights Issues 2010
-------------
IFRS 1 First-time Adoption of International Financial 1 July 2010
Reporting Standards - Limited Exemption from Comparative
IFRS 7 Disclosures for First-time Adopters
-------------
IFRS 3 Business Combination 1 July 2010
-------------
IAS 27 Consolidated and Separate Financial Statements 1 July 2010
-------------
IFRS 1 First-time Adoption of International Financial 1 January
Reporting 2011
-------------
IFRS 7 Financial Instruments: Disclosures 1 January
2011
-------------
IAS 1 Presentation of Financial Statements 1 January
2011
-------------
IAS 34 Interim Financial Reporting 1 January
2011
-------------
IFRS 7 Disclosures - Transfers of Financial Assets 1 July 2011
-------------
IFRS 1 Severe Hyperinflation and Removal of Fixed 1 July 2011
Dates for First-time Adopters
-------------
IAS 12 Deferred Tax: Recovery of Underlying Assets 1 January
2012
-------------
IAS 24 Related Party Disclosures (revised 2009) 1 January
2011
-------------
IFRS 9 Financial Instruments 1 January
2013
-------------
IFRIC Interpretation
-------------
IFRIC 14 IAS 19 - The Limit on a Defined Benefit 1 January
Assets, Minimum Funding Requirements and their Interaction 2011
-------------
IFRIC 13 Customer Loyalty Programmes 1 January
2011
-------------
IFRIC 19 Extinguishing Financial Liabilities with 1 July 2010
Equity Instruments
-------------
None of these standards or interpretations are expected to have
a significant effect on the financial statements.
3. Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by Group
entities.
3.1 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company.
Control exists where the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
effectively commences until the date that control effectively
ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
3.2 Foreign currency
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each group entity are expressed in United
States Dollars, which is the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing at the dates of the transactions. At
the end of each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing at
the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the subsidiaries are expressed in
United States Dollars using exchange rates prevailing at the end of
the reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income and accumulated in equity (attributed to non-controlling
interests as appropriate).
3.3 Financial instruments
(i) Non-derivative financial assets
The Group initially recognises receivables and deposits on the
date that they are originated.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred. Any interest
in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the balance sheet when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a
net basis or to realise the asset and settle the liability
simultaneously.
The Group has the following non-derivative financial assets:
receivables and cash and cash equivalents.
Receivables comprise trade and other receivables. Such assets
are recognised initially at cost. Subsequent to initial
recognition, receivables are measured at cost less any impairment
losses.
Cash and cash equivalents comprise cash balances and call
deposits with original maturities of three months or less. Bank
overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as a component of cash
and cash equivalents for the purpose of the statement of cash
flows.
(ii) Non-derivative financial liabilities
The Group initially recognises financial liabilities on the date
at which the Group becomes a party to the contractual provisions of
the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount
presented in the balance sheet when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a
net basis or to realise the asset and settle the liability
simultaneously.
The Group has the following non-derivative financial
liabilities: loans and borrowings and trade and other payables.
Loans and borrowings are recognised initially at fair value plus
any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised
cost using the effective interest method.
Trade and other payables are stated at their cost.
(iii) Share capital
Ordinary Shares
Ordinary Shares are classified as equity. Incremental costs
directly attributable to the issue of Ordinary Shares and share
options are recognised as a deduction from equity, net of any tax
effects.
3.4 Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation (including property under
construction for such purposes), is measured initially at its cost,
including transaction costs. Subsequent to initial recognition,
investment property is measured at fair value. Gains and losses
arising from changes in the fair value of investment property are
included in profit or loss in the period in which they arise.
Gains or losses on disposal are recognised in the period in
which they arise and represent the difference between the carrying
amount of an investment property at the beginning of the period and
its sale price less selling costs.
3.5 Plant and equipment
Recognition and measurement
Items of plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses. Cost
includes expenditure that is directly attributable to the
acquisition of the asset. All other repairs and maintenance are
charged to the consolidated income statement during the financial
period in which they are incurred.
When parts of an item of plant and equipment have different
useful lives, they are accounted for as separate items (major
components) of plant and equipment.
Gains and losses on disposal of an item of plant and equipment
are determined by comparing the proceeds from disposal with the
carrying amount of plant and equipment, and are recognised net
within other income in profit or loss.
Subsequent costs
The cost of replacing a part of an item of plant and equipment
is recognised in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will
flow to the Group, and its cost can be measured reliably. The
carrying amount of the replaced part is derecognised. The costs of
the day-to-day servicing of plant and equipment are recognised in
profit or loss as incurred.
Depreciation
Depreciation is calculated over the depreciable amount, which is
the cost of an asset, or other amount substituted for cost, less
its residual value. Depreciation is recognised in profit or loss on
a straight-line basis over the estimated useful lives of each part
of an item of plant and equipment, since this most closely reflects
the expected pattern of consumption of the future economic benefits
embodied in the asset.
The estimated useful lives for the current and comparative
periods are as follows:
Plant and machinery 5 years
Office equipment 3 - 5 years
Furniture and fixtures 5 years
Leasehold improvements 3 years
Depreciation methods, useful lives and residual values are
reviewed at each financial year-end and adjusted if
appropriate.
3.6 Goodwill
Goodwill that arises upon the acquisition of subsidiaries is
included in intangible assets and is measured at cost less
accumulated impairment losses.
3.7 Revenue recognition
Rental income and expenses
Rental income from the investment properties leased out under
operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Related direct
costs are accounted for on an accrual basis. Lease incentives
granted are recognised as an integral part of the total rental
income, over the term of the lease.
Finance income and expenses
Finance income comprises interest income on funds invested and
changes in the fair value of financial assets at fair value through
profit or loss. Interest income is recognised as it accrues in
profit or loss.
Finance costs comprise interest expense on borrowings. Interest
expense is recognised as it accrues in profit or loss.
Foreign currency gains and losses are reported on a net
basis.
3.8 Impairment
Financial assets
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
Losses are recognised in profit or loss and reflected in an
allowance account against receivables. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other
than investment property are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is
estimated. For goodwill, the recoverable amount is estimated each
year at the same time. The recoverable amount of an asset or
cash-generating unit is the greater of its value in use and its
fair value less costs to sell.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
3.9 Income tax expense
Income tax expense comprises current and deferred tax. Income
tax expense is recognised in the consolidated income statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognised using the balance sheet method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not recognised
for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit,
and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that they probably will not
reverse in the foreseeable future. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary
differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which temporary differences can be utilised. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realised.
3.10 Earnings per share
The Group presents basic and diluted earnings per share (EPS)
data for its Ordinary Shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of Ordinary Shares
outstanding during the period, adjusted for own shares held.
Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average
number of Ordinary Shares outstanding, adjusted for own shares
held, for the effects of all dilutive potential Ordinary
Shares.
3.11 Dividends
Dividends are recognised as a liability in the period in which
they are declared and approved.
3.12 Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. The
operating result of the single operating segment is reviewed
regularly by the Group's Board of Directors to make decisions about
resources to be allocated and assess its performance.
4. Determination of fair values
Fair values have been determined for measurement and disclosure
of investment property based on the following method.
An external, independent valuation company, having appropriate
recognised professional qualifications and recent experience in the
location and category of property being valued, values the Group's
investment property portfolio every six months.
The fair values are based on market values, being the estimated
amount for which a property could be exchanged on the date of the
valuation between a willing buyer and a willing seller in an arm's
length transaction after proper marketing wherein the parties had
each acted knowledgeably and willingly.
5. Financial risk management
Overview
The Group has exposure to the following risks from its use of
financial instruments:
-- credit risk
-- liquidity risk
-- market risk
-- foreign exchange risk
-- operational risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's activities.
The Group aims to develop a disciplined and constructive control
environment.
The Group Audit Committee oversees how management monitors
compliance with the Group's risk management policies and
procedures, and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's financial assets.
Cash and cash equivalents
The Group limits its exposure to credit risk by investing only
with counterparties that have high credit ratings. Management
actively monitors credit ratings and does not expect any
counterparty to fail to meet its obligations.
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. However, management
also considers the demographics of the Group's customer base,
including the default risk of the industry and country in which
customers operate, as these factors may have an influence on credit
risk, particularly in the current economic circumstances.
Management has established a credit policy under which each new
tenant is analysed individually for creditworthiness before the
Group's standard payment terms and conditions are offered. The
Group's review includes external ratings, when available, and in
some cases bank references.
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade and
other receivables. The main components of this allowance are a
specific loss component that relates to individually significant
exposures, and a collective loss component established for groups
of similar assets in respect of losses that have been incurred but
not yet identified. The collective loss allowance is determined
based on historical data of payment statistics.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. The Group manages liquidity risk by
maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and
actual cash flows, and by matching the maturity profiles of
financial assets and liabilities.
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. The Group's market risks arise from open positions
in (a) foreign currencies and (b) interest-bearing assets and
liabilities, to the extent that these are exposed to general and
specific market movements.
The Group sets limits on the exposure to currency and interest
rate risk that may be accepted, which are monitored on a regular
basis. However, the use of this approach does not prevent losses
outside of these limits in the event of more significant market
movements.
Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk, primarily with respect to the US Dollar and HK
Dollar. Foreign exchange risk arises in respect of those recognised
monetary financial assets and liabilities, income and expense that
are not in the functional currency of the Group.
The Hong Kong Monetary Authority operates a linked exchange rate
system for the Hong Kong Dollar: US Dollar exchange rate.
Therefore, the Group considers foreign exchange risk to be
minimal.
Operational risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Group's
processes, service providers, technology and infrastructure, and
from external factors other than credit, market and liquidity risks
such as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour. Operational
risks arise from all of the Group's operations.
The Group's objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the Group's
reputation with overall cost effectiveness. The Group has developed
standards for the management of operational risk in the following
areas:
-- requirements for appropriate segregation of duties
-- requirements for the reconciliation and monitoring of
transactions
-- compliance with regulatory and other legal requirements
-- documentation of controls and procedures
-- requirements for the periodic assessment of operational risks
faced, and the adequacy of controls and procedures to address the
risks identified
-- ethical and business standards.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business.
The capital structure of the Group consists of net debt
(borrowings as detailed in notes 20 and 25 offset by cash and bank
balances) and equity of the Group (comprising issued capital,
reserves, retained earnings and non-controlling interests as
detailed in notes 18 and 19). The Board reviews the capital
structure of the Group on a semi-annual basis.
The Board of Directors monitors the net asset value per share,
which the Group defines as the total shareholders' equity divided
by the total number of shares in issue. The Board of Directors also
monitors the level of dividends to ordinary shareholders.
The Board seeks to maintain a balance between the higher returns
that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position. There
were no changes in the Group's approach to capital management
during the year. Neither the Company nor any of its subsidiaries
are subject to externally imposed capital requirements.
6 The subsidiaries
At the end of the year, the Company owned a controlling interest
in the following subsidiaries:
Percentage of shares
Country of incorporation held
------------------------- ------------------------- ------------------------
Armando Global Limited
(intermediate holding
company) British Virgin Islands 100%
Carlos Associates
Limited British Virgin Islands 100%
Rafael Limited British Virgin Islands 100%
Quim Limited British Virgin Islands 100%
Toninho (Macau) Limitada Macau 100%
Rafael (Macau) Limitada Macau 87%
Quim (Macau) Limitada Macau 100%
Speymill Property I
(Macau) Limitada Macau 100%
Golden Jade Investments
Limitada Macau 100%
Turbo Ventures Ltd Cayman Islands 100%
Inter-company loans from the Company to subsidiaries are
interest free, unsecured and repayable on demand.
The following dormant subsidiaries were either wound up or
allowed to lapse during the year
Percentage of shares
Country of incorporation held
------------------------- ------------------------- ------------------------
Benedita Services
Limited British Virgin Islands 100%
Surecom Limited British Virgin Islands 100%
Trevino Limited British Virgin Islands 100%
Domingo Overseas Limited British Virgin Islands 100%
Aspirow Limited British Virgin Islands 100%
Fabiana Group Limited British Virgin Islands 100%
Pedro Limited British Virgin Islands 100%
Ofelio Limited British Virgin Islands 100%
Mariana Limited British Virgin Islands 100%
Lauran Limited British Virgin Islands 100%
Jaime Limited British Virgin Islands 100%
Gilleston Holdings
Limited British Virgin Islands 100%
Benedita Services
(Macau) Limitada Macau 100%
Teodora Developments
(Macau) Limitada Macau 100%
Natalia Developments
(Macau) Limitada Macau 100%
Domingo Overseas (Macau)
Limitada Macau 100%
Gilberto Group (Macau)
Limitada Macau 100%
Fabiana Group (Macau)
Limitada Macau 100%
7 Segment reporting
The Group has one segment focusing on disposing of all of the
Companies investments and returning the proceeds to shareholders.
No additional disclosure is included in relation to segment
reporting as the Group's activities are limited to one business and
geographic segment.
8 Net finance cost
31 December
2010 31 December 2009
US$'000 US$'000
----------------------------- ------------ -----------------
Interest income on bank
balances 96 94
----------------------------- ------------ -----------------
Finance income 96 94
----------------------------- ------------ -----------------
Interest expense on bank
loans (1,575) (2,313)
Bank charges (27) (33)
Amortised financial charges (160) (160)
Finance cost (1,762) (2,506)
----------------------------- ------------ -----------------
Net finance cost (1,666) (2,412)
----------------------------- ------------ -----------------
9 Net asset value per share
The net asset value per share as at 31 December 2010 is US$1.21
based on 107,828,910 Ordinary Shares in issue as at that date
(2009: US$1.22 based on 116,821,581 shares).
10 Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
Details of transactions between the Group and other related parties
are disclosed below.
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the party making financial or operational
decisions.
No director had any interest during the year in any material
contract for the provision of services which was significant to the
business of the Group, except for the Directors Incentive plan as
noted below.
At the Extraordinary General Meeting held on 19 November 2010,
Shareholders approved The Directors' Incentive Plan (payments under
which are to be divided between the Directors as they determine).
The Plan comprised two parts:
-- an immediate payment of $817,770 (representing 0.6 per cent.
of the announced NAV as at 30 June 2010) to reflect the substantial
amount of time, over and above that which would normally be
expected of Non-Executive Directors, that the Board has been
required to devote to the affairs of the Company; and
-- 0.6 per cent. of any future Distributions made by the Company
during its life, payable at the time of the Distribution.
"Distribution" is defined widely to include share buy backs, all
forms of return of capital and distributions in specie.
Payments under the Plan are in addition to the existing
Non-Executive Directors fees payable to the Directors and represent
separate remuneration for management and advisory services
performed outside the ordinary duties of the Directors.
The Manager held Nil Ordinary Shares in the Company as at 31
December 2010 (2009: 1,055,118 Ordinary Shares). The shares which
formed part of the shares bought back by the Company during the
year were originally acquired in order to satisfy the terms of the
Investment Management Agreement following payment of the
performance fee for the year ended 31 December 2007. In addition,
key personnel of the Manager and closely related companies held Nil
Ordinary Shares in the Company as at 31 December 2010 (2009:
3,078,000 Ordinary Shares).
The Investment Manager, Investment Adviser and Property Adviser
are considered to be related parties - see note 11 regarding fees
payable to these companies.
11 Charges and fees
11.1 Nominated adviser fees
As nominated adviser to the Company for the purposes of the AIM
rules, the Nominated Adviser is entitled to receive an annual fee
of GBP30,000 payable quarterly in advance.
The Nominated Adviser received additional fees during 2010 in
respect of special projects amounting to US$8,366 (2009:
US$113,344). Total advisory fees payable to the Nominated Adviser
for the year ended 31 December 2010 amounted to US$63,406 (2009:
US$175,518).
11.2 Placing agent and broker fees
In accordance with the terms of the original placing, the
Placing Agent was entitled to receive from the Company commission
equal to 4% of the aggregate value of funds raised. In addition,
the Placing Agent was entitled to receive from the Company
commission of between 2.5% and 3.0% of the aggregate value of funds
raised.
Under the terms of an option agreement dated 13 November 2006
and in consideration of the broker agreeing to act as broker and
provide services under the Placing Agreement, the broker was
granted an option to acquire 1,600,000 shares at an option price of
US$1.00 per share. The option exercise period is a period from the
date of the option agreement to the fifth anniversary of admission
to trading on AIM.
The option has been independently valued using a Black-Scholes
model giving a fair value of US$336,000 which has been charged to
Share Premium as a share issue expense.
As broker to the Company, the Broker is entitled to receive an
annual fee of GBP50,000, payable semi-annually in advance.
Broker fees payable for the year ended 31 December 2010 amounted
to US$96,040 (year ended 31 December 2009: US$93,289). The increase
being attributable to movements in exchange rates.
11.3 Manager's fees
Annual fees
The Manager receives a management fee of 2% per annum of the net
asset value of the Company from Admission, payable monthly in
arrears.
Management fees payable for the year ended 31 December 2010
amounted to US$2,751,310 (31 December 2009: US$2,598,768). The
increase being due to the uplift in market values at 31 December
2009.
40% of the management fee is paid directly to the Property
Adviser. The Manager is also responsible for the payment of fees to
the Investment Adviser.
On 28 June 2010, the Manager, was served a 12-month notice from
the Company to terminate the investment management agreement dated
26 November 2006.
Performance fee
The Manager is entitled to a performance fee from the Company of
an amount equal to 20% of the excess of the Net Asset Value per
Ordinary Share (with dividends and other distributions added back
and ignoring any accrued performance fee) as at the end of each
performance fee period of the Company over the benchmark multiplied
by the time weighted average number of Ordinary Shares in issue
during that period. Such performance fee shall accrue on a Net
Asset Value per Ordinary Share basis but shall only be paid out of
realised profits.
For these purposes, the benchmark shall be equal to the Placing
Price increased at a compound rate of 10% per annum or, where a
performance fee has been paid, the Net Asset Value per Ordinary
Share (ignoring the effect of the relevant performance fee paid)
which gave rise to the payment of the most recent performance fee
increased at a rate of 10% per annum compound. On payment of the
performance fee for the period ended 31 December 2007 the benchmark
was reset to the Net Asset Value per Ordinary Share of US$1.41 at
the commencement of the new period.
The first performance fee period commenced on the 17 November
2006 (the date on which the Ordinary Shares were admitted to
trading on AIM) and terminated on 31 December 2007. Each subsequent
performance fee period commenced on 1 January and terminated on 31
December in the same calendar year.
If the Manager is entitled to a performance fee in respect of a
performance fee period, the Company shall only be required to
settle such liability to the Manager in respect of any performance
fee accrued to the extent that, and only when and if, the Company
has realised profit(s) from any investment(s) available for such
payment. Any such fees shall be paid within 14 days of such
realised profits becoming available.
Performance fees accrued for the year ended 31 December 2010
amounted to US$Nil (31 December 2009: US$Nil).
11.4 Administrator and Registrar fees
The Administrator is entitled to receive a fee of 10 basis
points per annum of the net assets of the Company between GBP0 and
GBP100m and 7.5 basis points of the net asset value of the Company
in excess of GBP100m, subject to a minimum monthly fee of GBP4,000,
and a maximum monthly fee of GBP11,250 payable quarterly in
arrears.
The Administrator assists in the preparation of the financial
statements of the Company for which it receives a fee of GBP1,750
per set and provides general secretarial services to the Company
for which it receives a minimum annual fee of GBP5,000.
Administration fees payable for the year ended 31 December 2010
amounted to US$157,757, (31 December 2009: US$151,620), secretarial
fees US$13,462 (2009: US$9,534), financial statement preparation
fees US$8,473 (2009: US$15,268), and Crest fees US$5,577 (2008:
US$8,878).
11.5 Audit and professional fees
Audit fees for the year ended 31 December 2010 amounted to
US$133,195, (31 December 2009: US$106,379), with US$58,125 still
due at 31 December 2010 (2009: US$31,826).
Professional fees for the year ended 31 December 2010 amounted
to US$119,289 (31 December 2009: US$463,063).
12 Intangible assets
The Group's intangible assets as at 31 December 2010 comprise
goodwill arising from the acquisition of 100% of the ordinary share
capital of Turbo Ventures Ltd, which with its wholly owned
subsidiary, Speymill Property I (Macau) Limitada, comprise an
investment property group, which owns the AIA Tower building in
Macau.
Goodwill Total
US$'000 US$'000
----------------------------- --------- --------
Cost
----------------------------- --------- --------
Balance at 31 December
2009 and 31 December
2010 8,050 8,050
----------------------------- --------- --------
Amortisation and impairment
loss
----------------------------- --------- --------
Balance at 31 December
2009 and 31 December
2010 1,599 1,599
----------------------------- --------- --------
Carrying amounts
----------------------------- --------- --------
31 December 2009 6,451 6,451
----------------------------- --------- --------
31 December 2010 6,451 6,451
----------------------------- --------- --------
The goodwill is attributable to the property group owning the
AIA Tower building and is reviewed for impairment at least
annually. The Group assessed the recoverable amount of goodwill at
31 December 2010. As a result of the impairment test, it was
determined that no impairment charge arose.
The recoverable amount of the goodwill was reviewed by reference
to the property's fair value less costs to sell at 31 December
2010. The fair value of the building was assessed based on reports
by external valuers (see note 13).
13 Investment property
Riviera 31 31
(formerly known Rafael December December
Group as Lorcha) AIA Tower properties 2010 2009
US$'000 US$'000 US$'000 US$'000 US$'000
------------ ---------------- ---------- ----------- ---------- ---------
At
beginning
of year 121,704 154,739 5,661 282,104 288,455
Additions - - - - 1,214
Disposal (121,704) - - (121,704) (29,695)
Fair value
adjustment - - - - 22,219
Exchange
difference - (497) (19) (516) (89)
------------ ---------------- ---------- ----------- ---------- ---------
Balance at
end of
year - 154,242 5,642 159,884 282,104
------------ ---------------- ---------- ----------- ---------- ---------
The AIA Tower was revalued at 31 December 2010 by independent
professionally qualified valuers, Jones Lang LaSalle ("JLL"), based
on current prices in an active market.
The fair values are based on market values, being the estimated
amount for which property could be exchanged on the date of
valuation between a willing buyer and a willing seller in an arm's
length transaction after property marketing wherein parties had
each acted knowledgeably, prudently and without compulsion.
In the course of preparing the valuation JLL have adopted Direct
Comparison Approach and Income Capitalisation Approach.
The Direct Comparison Approach is based on comparing the
property to be valued directly with other comparable properties,
which have recently been subject to transfer of legal ownership.
However, given differences between individual real estate
properties, appropriate adjustments are usually required to allow
for any qualitative and quantitative differences that may affect
the price likely to be achieved for the property under
consideration.
The Income Capitalisation Approach is based on the
capitalisation of the fully leased, current passing rental income
and potential reversionary income of the property from the date of
valuation at appropriate investment yields to arrive at a capital
value. The rental value and capitalisation rate adopted are derived
from analysis of market transactions and/or JLL's interpretation of
investors' requirements or expectations.
Specific assumptions adopted in the valuation of AIA are as
follows
-- that the design, layout, construction, user and gross floor
area of the property are in compliance with the local laws and
regulations and have been approved by relevant Government
departments.
-- that no onerous conditions are contained within the
Government land lease for the lot on which AIA is erected.
-- that good title is held to the property and there is no
outstanding land premium payable for the property (if any).
-- that the property is free of encumbrance and can be freely
assigned in the market and if any consent to sell or consent to
assign is required, such consent is assumed to be available as at
the date of valuation.
The Rafael properties have been disposed of subsequent to the
year end at their carrying values.
.
The Riviera properties have all been sold during the year for
gross proceeds of US$124.9 million. Costs associated with selling
the properties amounted to US$3.9 million resulting in a loss of
US$0.7 million as compared to the fair value at 31 December
2009.
14 Plant and Equipment
The Group's Plant and Equipment is all owned by Speymill
Property I (Macau) Limitada, a company which was acquired by the
Group on 5 September 2008.
Furniture
Office and Plant & Leasehold
GROUP equipment fixtures machinery improvements Total
Year ended 31
December
2009 US$'000 US$'000 US$'000 US$'000 US$'000
-------------- ----------- ----------- ----------- ------------- --------
Cost
-------------- ----------- ----------- ----------- ------------- --------
At 1 January
2009 24 2 64 1,275 1,365
Additions 91 - - 827 918
Effect of
movements in
exchange
rates - - - (3) (3)
-------------- ----------- ----------- ----------- ------------- --------
At 31
December
2009 115 2 64 2,099 2,280
-------------- ----------- ----------- ----------- ------------- --------
Accumulated
depreciation
-------------- ----------- ----------- ----------- ------------- --------
At 1 January
2009 12 1 29 446 488
Charge for
year 5 - 13 497 515
Effect of
movements in
exchange
rates - - - - -
-------------- ----------- ----------- ----------- ------------- --------
At 31
December
2009 17 1 42 943 1,003
-------------- ----------- ----------- ----------- ------------- --------
Net book
value at 31
December
2009 98 1 22 1,156 1,277
-------------- ----------- ----------- ----------- ------------- --------
Year ended 31 December
2010
-------------------------- ---- --- ------ ------
Cost
-------------------------- ---- --- ------ ------
At 1 January 2010 115 2 64 2,099 2,280
Additions 16 - 1 537 554
Effect of movements
in exchange rates - - - - -
-------------------------- ---- --- ------ ------
At 31 December 2010 131 2 65 2,636 2,834
-------------------------- ---- --- ------ ------
Accumulated depreciation
-------------------------- ---- --- ------ ------
At 1 January 2010 17 1 42 943 1,003
Charge for year 38 1 14 657 710
Effect of movements
in exchange rates - - - - -
-------------------------- ---- --- ------ ------
At 31 December 2010 55 2 56 1,600 1,713
-------------------------- ---- --- ------ ------
Net book value at 31
December 2010 76 - 9 1,036 1,121
-------------------------- ---- --- ------ ------
15 Trade and other receivables
Group Company Group Company
31 December 31 December 31 December 31 December
2010 2010 2009 2009
US$'000 US$'000 US$'000 US$'000
---------------------- ------------ ------------ ------------ ------------
Prepayments and other
receivables 1,068 20 1,627 45
Receivable on
disposal of
investment property 15,875 - - -
---------------------- ------------ ------------ ------------ ------------
Total 16,943 20 1,627 45
---------------------- ------------ ------------ ------------ ------------
16 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and deposits
held at call with banks. All cash and bank balances are available
for operational use in the Group.
17 Basic and diluted (loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the
(loss)profit attributable to owners of the Company by the
weighted-average number of Ordinary Shares in issue during the
year.
31 December 2010 31 December 2009
---------------------------------------- ----------------- -----------------
(Loss)/gain attributable to owners of
the Company (US$'000) (5,152) 15,251
Weighted average number of Ordinary
Shares in issue (thousands) 111,637 116,822
---------------------------------------- ----------------- -----------------
Basic (loss)/earnings per share (cents
per share) (4.61) 13.05
---------------------------------------- ----------------- -----------------
Diluted (loss)/earnings per share
(cents per share) (4.61) 13.05
---------------------------------------- ----------------- -----------------
There is no difference between the basic and diluted loss per
share for the current and preceding year as the exercise of options
would be anti-dilutive.
18 Share capital
Ordinary Shares of US$0.10 each Number US$'000
------------------------------------------- ------------ --------
In issue at 31 December 2009 116,821,581 11,682
Repurchased and cancelled during the year (8,992,671) (899)
In issue at 31 December 2010 107,828,910 10,783
------------------------------------------- ------------ --------
The authorised share capital of the Company is US$40,000,000,
divided into 400,000,000 Ordinary Shares of US$0.10 each.
8,764,791 Ordinary shares were purchased during the year to be
held in treasury. These shares were cancelled on 15 November 2010.
In addition a further 227,880 shares were purchased during the year
for cancellation.
The holders of Ordinary Shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's assets.
19 Other reserves
Group and Company
Capital redemption
reserve Share option reserve Total
US'000 US$'000 US$'000
---------------------- --------------------- --------------------- --------
Balance at 31
December 2009 1,318 336 1,654
Transfer from
distributable
reserves on
cancellation of
shares 899 - 899
---------------------- --------------------- --------------------- --------
Balance at 31
December 2010 2,217 336 2,553
---------------------- --------------------- --------------------- --------
The capital redemption reserve was established on cancellation
of shares purchased in the open market.
The share option reserve represents the fair value of options
granted to the broker on admission to trading on AIM.
20 Interest-bearing loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings.
31 December 2010 31 December 2009
US$'000 US$'000
------------------------- ----------------- -----------------
Non-current liabilities
Secured bank loans - 76,249
------------------------- ----------------- -----------------
Current liabilities
Secured bank loans 76,022 2,880
------------------------- ----------------- -----------------
The Group has a term loan facility of HKD 580,000,000 (initially
HKD 600,000,000) with Banco Weng Hang SA which is secured by way of
a first legal mortgage against the AIA Tower property in Macau.
Under the terms of the financing agreement, following the audit of
the annual accounts, any surplus cash is swept up to the lender.
The loan is repayable at final maturity in March 2011. The loan
bears 1.85% interest per annum over the 3 month Hong Kong Inter
Bank Offered Rate (HIBOR).
On 4 March 2011, the Group refinanced its existing loan facility
for the AIA Tower with Banco Weng Hang SA. Pursuant to the terms of
the Supplemental Loan Agreement, the Group paid the Bank HK$ 25
million toward the outstanding principal due on the loan, in
addition to the previous repayment of HK$ 20 million, thereby
reducing the outstanding loan amount on the AIA Tower to HK$ 555
million. The Supplemental Loan Agreement extended the term of the
loan on AIA Tower for a period of thirty months, until September 5,
2013. The key terms of the refinanced loan are: Loan facility
amount of HK$ 555 million, secured solely by the AIA Tower and the
shares of the Speymill Property I (Macau) Limitada ("SPI") owned by
the Company. The loan is non-recourse to the Company. Interest on
the loan is 2.05% above the 3 month HIBOR. Loan amortization takes
place through an annual cash flow sweep with a contractual minimum
amount of HK$ 5 million to be paid in June of 2011 and 2012. This
minimum amount will be credited to the final sweep at year end. The
cash flow sweep allows for SPI to retain up to HK$ 10 million by
for capital expenditures on the AIA Tower. SPI paid an arrangement
fee of HK$2,775,000 to refinance the loan. There is no prepayment
penalty if the loan is paid in full upon the sale of the building,
however if the building is refinanced through another financial
institution prior to maturity, a 0.5% prepayment penalty will be
incurred.
The Group has a term loan facility of HKD 5,110,000 (initially
HKD 7,200,000) with Citic Ka Wah Bank Limited in Macau which is
secured by way of a first legal mortgage against the Houston Court
property in Macau. The loan is repayable by instalments with a
final payment of HKD 3,994,000 payable in October 2011. The loan
bears 2.6% interest per annum over the 3 month Hong Kong Inter Bank
Offered Rate (HIBOR). The loan was repaid on 24 February 2011
following the disposal of the Houston Court property.
The Group has a term loan facility of HKD 3,378,000 (initially
HKD 4,500,000) with Banco Weng Hang S.A in Macau which is secured
by way of a first legal mortgage against the Pink Palace property
in Macau. The loan is repayable by instalments with a final payment
of HKD 1,440,000 payable in September 2013. The loan bears 2.5%
interest per annum over the 1 month Hong Kong Inter Bank Offered
Rate (HIBOR). The loan was repaid on 18 February 2011 following the
disposal of the Pink Palace.
The Group has a term loan facility of HKD 2,966,000 (initially
HKD 3,700,000) with China Construction Bank in Macau which is
secured by way of a first legal mortgage against the Wan Keng
property in Macau. The loan will be repaid by instalments with the
final instalment payable in September 2022. The loan bears 0.7%
interest per annum over the 1 month Hong Kong Inter Bank Offered
Rate (HIBOR). The loan obligation was acquired by the purchaser of
the Wang Keng property who acquired all of the assets and
liabilities of Golden Jade Investments Limitada for consideration
equal to their net asset value.
21 Trade and other payables
Group Company 31 Group
31 December December 31 December Company 31
2010 2010 2009 December 2009
US$'000 US$'000 US$'000 US$'000
--------------- ------------- -------------- ------------- ---------------
Current
liabilities
Payable on
acquisition of
investment
property - - 92,260 -
Property taxes
payable 389 - 668 -
Sundry
creditors and
accruals 4,512 142 4,494 434
--------------- ------------- -------------- ------------- ---------------
Total 4,901 142 97,422 434
--------------- ------------- -------------- ------------- ---------------
The amount payable on acquisition of investment properties was
paid during the year on the sale of the relevant properties
(Riviera).
22 Directors' remuneration
The maximum amount of remuneration payable to the Directors
permitted under the Articles of Association is GBP200,000 per annum
(2009: GBP200,000).
Howard I Golden, Filip Montfort, Yarden Mariuma are each
entitled to receive an annual fee of GBP25,000. Harald Gerhard
Wengust is entitled to receive an annual fee of GBP 20,000.
The Directors are entitled to receive reimbursement of any
expenses in relation to their appointment. Total fees and expenses
payable to the Directors for the year ended 31 December 2010
amounted to fees of US$151,972 and expenses of US$57,005 (year
ended 31 December 2009: fees of US$166,629 and expenses of
US$149,344).
In addition to the directors' fees a payment of US$817,771 was
paid to the directors under the terms of the Directors' incentive
plan approved at the Extraordinary General Meeting held on 19
November 2010. The payments made under the incentive plan to the
individual directors were US$223,933 to each of Howard I Golden,
Filip Montfort, Yarden Mariuma and US$145,972 to Harald Gerhard
Wengust.
Under the terms of the Directors incentive plan approved at the
Extraordinary General Meeting held on 19 November 2010 the
Directors are entitled to a payment of 0.6% of amounts distributed
to shareholders. If all of the Company's investments were to be
disposed of at their fair values as at 31 December 2010, and the
net proceeds returned to shareholders then the directors would be
entitled to a payment of approximately US$784,000.
23 Taxation
2010 2009
US$'000 US$'000
--------------------- -------- --------
Current tax charge 347 516
Deferred tax charge 2,515 1,120
Total 2,862 1,636
--------------------- -------- --------
Isle of Man taxation
The Company is resident in the Isle of Man for tax purposes and
pays income tax at 0%. The Company pays a corporate charge of
GBP250 to the Isle of Man Government for each tax year.
Macau taxation
The SPVs are liable to Macau Complimentary Tax at 12% in respect
of their operating profits, excluding rental income which is
subject to property tax. Property tax is chargeable at the higher
of 10% (2009: 16%) of any rent received or 10% of the official
rateable rentable value.
24 Deferred taxation
Deferred income tax is based on temporary differences between
the revalued amounts of investment property in the books of the
Company's Macau subsidiaries and their respective tax bases. The
deferred tax provision for the Macau subsidiaries is based on the
taxable profits rate of 12%.
Group
31 December 2010 31 December 2009
US$'000 US$'000
---------------------------------- ----------------- -----------------
At beginning of year 7,575 6,451
Acquired in business combination - -
Recognised in profit or loss 2,515 1,120
Exchange difference (27) 4
---------------------------------- ----------------- -----------------
At end of year 10,063 7,575
---------------------------------- ----------------- -----------------
25 Financial instruments
The Group's activities expose it to a variety of financial
risks: market price risk, foreign exchange risk, credit risk,
liquidity risk and cash flow interest rate risk.
All financial instruments are considered to be stated at amounts
which approximate their fair value.
Market price risk
The Group's strategy on the management of market price risk is
driven by the Group's investment objective. The Group has been
established to invest primarily in the high quality commercial
residential real estate market of Macau. The main objective of the
Group is to provide shareholders with an attractive overall return
to be achieved primarily through long-term capital growth. The
Group's market price risk is monitored by the Investment Adviser on
a day to day basis and by the Directors at Board meetings.
The Group is exposed to property price and property rental risk.
The Group is not exposed to the market risk with respect to
financial instruments as it does not hold any equity
securities.
Foreign exchange risk
The Group's operations are conducted in jurisdictions which
generate revenue, expenses, assets and liabilities in currencies
other than the Hong Kong Dollar (the Functional Currency). As a
result, the Group is subject to the effects of exchange rate
fluctuations with respect to these currencies. The currency giving
rise to this risk is primarily the US Dollar. The Hong Kong
Monetary Authority operates a linked exchange rate system for the
Hong Kong Dollar : US Dollar exchange rate and as a result the
Group considers currency risk to be minimal.
The Group's policy is not to enter into any currency hedging
transactions. At the reporting date the Group had the following
exposure:
31 December 31 December
Currency 2010 2009
% of Net % of Net
Assets Assets
----------- ------------ ------------
Hong Kong
Dollar 89.81 100.00
US Dollar 10.19 0.00
The following table sets out the Group's total exposure to
foreign currency risk and the net exposure to foreign currencies of
the monetary assets and liabilities:
Monetary Monetary Net
Assets Liabilities Exposure
31 December 2010 US$'000 US$'000 US$'000
Hong Kong Dollar 41,853 (80,841) (38,988)
US Dollar 13,608 (82) 13,526
55,461 (80,923) (25,462)
------------------ --------- ------------- ----------
31 December 2009
------------------ ------- ---------- ----------
Hong Kong Dollar 38,213 (176,117) (137,904)
US Dollar 12 (434) (422)
38,225 (176,551) (138,326)
------------------ ------- ---------- ----------
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 carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost, as they
have a short term maturity.
At the reporting date, the Group's financial assets exposed to
credit risk amounted to the following:
31 December 31 December
2010 2009
US$'000 US$'000
----------------------------- ------------ ------------
Trade and other receivables 16,943 1,627
Cash at bank 38,518 36,598
----------------------------- ------------ ------------
55,461 38,225
----------------------------- ------------ ------------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet.
The Group manages its credit risk by monitoring the
creditworthiness of counterparties regularly. Cash transactions and
balances are limited to high-credit-quality financial institutions.
Trade and other receivables relate mostly to rental and related
income and this is monitored by the active management of the
properties. The Investment Manager and the Board of Directors do
not expect any losses from non-performance by these
counterparties.
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash and the availability of funding through an adequate amount of
committed credit facilities. The Group's liquidity position is
monitored by the Manager and the Board of Directors. Residual
undiscounted contractual maturities of financial liabilities at the
reporting dates were:
Less than 3 months No stated
1 month 1-3 months to 1 year 1-5 years maturity
Financial
liabilities US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ---------- ----------- ----------- ---------- ----------
2010
Trade and other
payables 4,901 - - - -
Deferred income
tax - - - - 10,063
Bank loan - 76,022 - - -
---------------- ---------- ----------- ----------- ---------- ----------
4,901 76,022 - - 10,063
---------------- ---------- ----------- ----------- ---------- ----------
2009
Trade and other
payables 5,162 - 92,260 - -
Deferred income
tax - - - - 7,575
Bank loan - 2,656 224 76,249 -
---------------- ---------- ----------- ----------- ---------- ----------
5,162 2,656 92,484 76,249 7,575
---------------- ---------- ----------- ----------- ---------- ----------
Interest rate risk
Cash held by the Group is invested at short-term market interest
rates. The Group has four interest-bearing loans, with interest at
variable rates. As a result, the Company is not exposed to fair
value interest rate risk due to fluctuations in the prevailing
levels of market interest rates. However, it is exposed to interest
rate cash flow risk.
The table below summarises the Group's exposure to interest rate
risks at 31 December 2010. It includes the Groups' financial assets
and liabilities at the earlier of contractual re-pricing or
maturity date, measured by the carrying values of assets and
liabilities:
3
Less months
than 1 1-3 to 1 1-5 Non-interest
month months year years bearing Total
31 December
2010 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------- -------- --------- -------- --------- ------------- ----------
Financial
assets
Trade and
other
receivables - - - - 16,943 16,943
Cash 38,518 - - - - 38,518
------------- -------- --------- -------- --------- ------------- ----------
Total
financial
assets 38,518 - - - 16,943 55,461
------------- -------- --------- -------- --------- ------------- ----------
Financial
liabilities
Trade and
other
payables - - - - (4,901) (4,901)
Deferred
income tax - - - - (10,063) (10,063)
Bank loan - (76,022) - - - (76,022)
------------- -------- --------- -------- --------- ------------- ----------
Total
financial
liabilities - (76,022) - - (14,964) (90,986)
------------- -------- --------- -------- --------- ------------- ----------
Total
interest
rate
sensitivity
gap 38,518 (76,022) - -
------------- -------- --------- -------- --------- ------------- ----------
31 December
2009 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------- -------- --------- -------- --------- ------------- ----------
Financial
assets
Trade and
other
receivables - - - - 1,627 1,627
Cash - - - - 36,598 36,598
------------- -------- --------- -------- --------- ------------- ----------
Total
financial
assets - - - - 38,225 38,225
Financial
liabilities
Trade and
other
payables - - - - (97,422) (97,422)
Deferred
income tax - - - - (7,575) (7,575)
Bank loan - (2,656) (224) (76,249) - (79,129)
------------- -------- --------- -------- --------- ------------- ----------
Total
financial
liabilities - (2,656) (224) (76,249) (104,997) (184,126)
------------- -------- --------- -------- --------- ------------- ----------
Total
interest
rate
sensitivity
gap - (2,656) (224) (76,249)
------------- -------- --------- -------- --------- ------------- ----------
At 31 December 2010, should the interest rates have
increased/decreased by 100 basis points with all other variables
remaining constant, the increase/decrease in interest
(paid)/received for the year would amount to approximately
(US$760,000)/ US$385,000 (2009:(US$872,000)/US$335,000).
Fair Values
All financial assets and liabilities at 31 December 2010 and 31
December 2009 are considered to be stated at their fair values.
26 Post balance sheet events
Refinancing of AIA Tower
On 4 March 2011, the Group refinanced its existing loan facility
for the AIA Tower with Banco Weng Hang SA. Pursuant to the terms of
the Supplemental Loan Agreement, the Group paid the Bank HK$ 25
million toward the outstanding principal due on the loan, in
addition to the previous repayment of HK$ 20 million, thereby
reducing the outstanding loan amount on the AIA Tower to HK$ 555
million. The Supplemental Loan Agreement extended the term of the
loan on AIA Tower for a period of thirty months, until September 5,
2013. The key terms of the refinanced loan are: Loan facility
amount of HK$ 555 million, secured solely by the AIA Tower and the
shares of SPI owned by the Company. The loan is non-recourse to the
Company. Interest on the loan is 2.05% above the 3 month HIBOR.
Loan amortization takes place through an annual cash flow sweep
with a contractual minimum amount of HK$ 5 million to be paid in
June of 2011 and 2012. This minimum amount will be credited to the
final sweep at year end. The cash flow sweep allows for SPI to
retain up to HK$ 10 million by for capital expenditures on the AIA
Tower. SPI paid an arrangement fee of HK$2,775,000 to refinance the
loan. There is no prepayment penalty if the loan is paid in full
upon the sale of the building, however if the building is
refinanced through another financial institution prior to maturity,
a 0.5% prepayment penalty will be incurred.
Disposal of Rafael properties
On 23 February 2011 all the Rafael properties were disposed of
at their carrying values and the related loans repaid.
Receivable on disposal of investment property
The balance receivable on disposal of the Riviera properties
(US$15,875,000) at 31 December 2010 has been received in full
subsequent to the year end.
27 Contingent liabilities and Capital commitments
The Group had no outstanding capital commitments at 31 December
2010.
Under the terms of the Directors incentive plan approved at the
Extraordinary General Meeting held on 19 November 2010 the
Directors are entitled to a payment of 0.6% of amounts distributed
to shareholders. If all of the Company's investments were to be
disposed of at their fair values as at 31 December 2010, and the
net proceeds returned to shareholders then the directors would be
entitled to a payment of approximately US$784,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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