Despite a very positive recovery in Macau's gaming and tourism sectors, the territory's property market faced headwinds linked to weak sentiment in mainland China's property market, in tandem with a series of interest rate hikes that brought rates to their highest levels in 16 years, dampening investor sentiment across much of the real estate sector.

Despite the challenging operating environment, we continued to make progress on the divestment of the portfolio and, since the commencement of apartment sales at The Waterside began approximately 20 months ago, the Company has sold more than one-third of the units at the landmark development. It has walked a tightrope, striking a delicate balance between closing sales and maintaining price levels that will protect the value of the portfolio and maximise returns to Shareholders.

The Waterside

The Waterside is the Company's landmark luxury residential apartment development in central Macau. The asset originally comprised 59 units for lease and sale, but at the time of this report's publication, 22 units, or 37.3% had been sold, with 37 units (62.7%) remaining available for sale.

During the second half of 2023, the Company signed agreements for the sale of a further seven apartments - all standard units located primarily on mid-to low floors. The seven units were sold at an average value of 51% above cost, or approximately HK$8,299 (US$1,061) per square foot of gross floor area, an average discount of 11% to their latest average valuations.

To date, of the 22 sale transactions, 18 have been completed, with the Company receiving total gross proceeds of HK$395 million (US$49.3 million). Deploying the sales proceeds, the Company reduced its debt by HK$75 million (c. US$9.6 million) during the second half of 2023, and the remaining will be used for interest payment and working capital to cover the Company's operating cost.

At the end of 2023, the occupancy rate at The Waterside was 50%, based on the gross floor area of the unsold units. This reflects the Manager's more selective leasing approach to maximise the sales potential of the units, based on purchasers' indicated preferences for vacant units.

The Fountainside

The Fountainside is a low-density, freehold residential development originally comprising 42 homes and 30 car-parking spaces in Macau's popular Penha Hill district. All 36 standard units have been sold, but seven homes - four villas and three smaller reconfigured units converted from two duplexes - and two car parking spaces remain available for sale.

The sale process for the three smaller units was delayed due to additional alterations requested by the Macau authorities at a very late stage when the issuance of occupancy permits had been anticipated. Nevertheless, once the construction permits were obtained in November 2023, alteration works began immediately and are now completed. The next stage of approval will be subject to further government inspection. Thereafter, sales and marketing efforts will commence.

The Company is maintaining a flexible sales approach for the four villas and will entertain both individual and en bloc offers.

Penha Heights

Penha Heights is a prestigious, colonial-style villa with a gross floor area of approximately 12,000 square feet, located in the exclusive residential enclave of Penha Hill and surrounded by lush greenery. The Company is exploring a variety of new marketing opportunities for this trophy home as interest in the property picked up in 2023 after Macau's pandemic-related travel restrictions were lifted.

Although the number of inquiries and viewings has increased, it will nevertheless take time to identify a buyer for the property, given its value and unique status as one of very few large, detached houses in Macau.

MACROECONOMIC OUTLOOK

Economy: Recovering to double-and triple-digit growth

Macau's economy continued its robust growth in the second half of 2023, with GDP expanding 116.1% YoY in Q3 2023. During the first three quarters of 2023, the territory's GDP grew 78% YoY, and full-year 2023 growth is expected to be 75% YoY.

Driving these impressive growth numbers is the rapid recovery of the territory's twin economic engines - tourism and gaming - which roared back to life aided by post-pandemic "revenge travel" in the Greater China region. However, Macau's economic recovery has been uneven, with other businesses - such as small and medium-sized enterprises and local retail businesses - adversely affected by changes in spending patterns among local residents. As the Macau-China border becomes increasingly easy to cross, Macau residents can travel more readily and frequently between the territory and neighbouring cities in China, and many have taken to making regular trips to buy consumer goods at significantly lower prices in Zhuhai and other mainland Chinese cities.

Despite the rebound in growth seen during 2023, Macau still needs more time to reach the economic performance it enjoyed before the pandemic. The territory's GDP is currently at approximately 77% of its 2019 level, and although its per capita GDP ranks fifth globally, at approximately US$125,000, it is still 30% below its 2019 level. Key economic indicators, such as visitor arrivals and GGR, which have also registered strong growth, are still lagging pre-pandemic levels, with visitor arrivals at 70% of their 2019 level and GGR at 62%. Macau's unemployment rate has continued to improve, with full-year 2023 general unemployment falling to 2.6%, a 1% decline YoY. As airline traffic and other means of travel return to pre-COVID capacity, Macau's government has estimated a target of 33 million visitor arrivals for 2024, a 17% increase on arrivals in 2023 and 84% of 2019's peak levels.

Ratings agency Moody's downgraded Macau's credit outlook from "stable" to "negative" in December 2023, in tandem with its downgrade of mainland China's credit outlook, based on the tight institutional, economic and financial linkages between the territory and the mainland. This assessment appears to be at variance with Macau's overall pace of economic recovery. Fitch Ratings' assessment remains unchanged at "AA" with a stable outlook.

Gaming: FY2023 performance was stronger than expected

Macau's 2023 GGR stood at MOP183 billion (around US$23 billion), an increase of 333.8% YoY. The sum is significant as it exceeds the MOP180 billion threshold set by Macau's government that obliges gaming concessionaires to make additional commitments of up to 20% to non-gaming and overseas marketing spend over and above their total commitment of MOP109 billion (approximately US$13 billion).

Following the near-20-year lows of 2022, when GGR amounted to US$5.3 billion, a paltry 14% of 2019's pre-pandemic level, the remarkable recovery in GGR demonstrates the strong demand for Macau's tourism and gaming offerings, particularly among visitors from mainland China and Hong Kong. For perspective, Macau's GGR in 2023 amounted to approximately 62% of 2019's pre-pandemic level, and Morgan Stanley predicts that in 2024, GGR will grow a further 24% YoY to approximately US$28 billion - 80% of 2019's level.

Tourism: Recovery to 70% of peak arrivals

Macau welcomed more than 28 million visitors in 2023, in stark contrast to 2022, when the total number fell short of 6 million. Visitor arrivals in 2023 were 70% of 2019's pre-pandemic peak of more than 39 million.

Most visitors to Macau in 2023 originated from mainland China and Hong Kong, accounting for 68% and 26% of total arrivals, respectively. International visitors comprised only 5% of the total. Compared to 2019 levels, visitor arrivals from Hong Kong recovered to 98% of 2019's level, but the number of mainland Chinese and international visitors hovered at 68% and 48% of 2019's level, respectively.

Overnight visitors and day trippers were roughly equal in number, and the average length of stay shortened YoY by 0.2 days to 1.3 days.

PROPERTY MARKET OVERVIEW

Economic recovery has yet to flow into the property sector

Macau's residential property market improved marginally in 2023. In terms of sales activity, 2,879 transactions were recorded during the year, an increase of 2% YoY on the same period in 2022, when market activity hit a 40-year low. Prices held steady at around HK$5,800 per square foot in 2023, less than 1% lower than prices in 2022.

In the luxury residential segment, of which the Company's assets are a part, only 136 transactions were recorded involving homes with usable floor areas of more than 150 square metres during 2023, a decrease of 2% YoY by volume. Luxury residential sales accounted for only 5% of all sales transactions in the residential market. Average prices in the luxury residential segment increased by 3% YoY in 2023. The increase was mainly driven by new developments in Taipa and Coloane, which generally have a smaller size in comparison to the units in the Waterside.

According to Macau's Land and Urban Construction Bureau, at the end of Q4 2023, a total of 9,023 units were in the development pipeline, 71% of which were at the design stage, 25% of which were under construction, and around 4% of which had been completed. The vast majority of developers' new units are in the affordable segment and include properties such as one-bedroom homes or studios aimed at first-time buyers and, as such, are not competing with the Company's portfolio properties.

A potential boost from policy initiatives

The poor performance of Macau's property market prompted calls for the government to ease measures put in place over the past decade to curb speculation. Citing policy initiatives introduced in mainland China to boost the country's troubled property sector, Macau property players urged the government to consider similar measures.

In a boost to the sector, Macau's government announced a package of measures to rekindle investor interest in property, taking effect from January 2024. Two of the measures are particularly relevant to the Company's portfolio properties: the removal of stamp duty for second home ownership and an increase in the maximum LTV ratio to 70% for residential properties valued above MOP8 million (around US$1 million).

Before the policy changes, measures to curb real estate speculation in Macau included the imposition of additional ad valorem stamp duty of up to 20% if a property was resold within two years of purchase, buyer's stamp duty of 10% for properties purchased by companies or non-residents, and an additional stamp duty of up to 10% for those owning more than one residential property. The residential mortgage lending ratio for buyers was tightened in 2018, resulting in maximum financing levels of only 40-50% of purchase prices for properties valued above MOP8 million.

These policy revisions are the first such moves to roll back years of measures to curb speculation, and may provide a much-needed and timely boost to market sentiment in the luxury segment in 2024. They follow a similar relaxation of policies seen in Hong Kong which have just been further augmented.

Higher interest rates dampened investor interest

In July 2023, the Monetary Authority of Macau raised interest rates by 25 basis points to 5.75%, in tandem with interest rate hikes by the US Federal Reserve and the Hong Kong Monetary Authority. It was the 11th rate increase since March 2022, despite inflation in Macau holding steady at 0.94% in 2023 and 1.04% in 2022. The resulting increase in borrowing costs contributed to a dampening of investor interest in Macau property.

Although elevated US inflation remains a concern, a general consensus exists that the Federal Reserve will hold rates steady for a period while it considers lowering them during the course of 2024. Stable or lower interest rates should provide an additional boost for Macau's property sector.

China's property sector woes affected regional markets

China's property market, which accounts for about one-third of the country's economy, has been engulfed by a severe debt crisis. The government's efforts to deleverage the sector, which began in 2020, coupled with the economic impact of zero-COVID measures, resulted in the sector as a whole and some of its largest developers struggling to cope with the challenging operating environment. This led to several headline events in H2 2023, including bankruptcy filings and debt defaults by some of China's biggest property companies.

As a result of the turmoil in China's property sector, home sales growth and home prices have remained sluggish. There is a risk of the crisis spilling over into the banking sector, as approximately 40% of all bank loans in the country are linked to property. Coupled with a pronouncement by the country's National Administration of Financial Regulation that approximately RMB3.2 trillion in loans held by commercial banks in China are underperforming, these issues have adversely impacted investors' views of, and sentiment towards, Macau's real estate market.

To address the adverse impact of the property sector on China's economy, the People's Bank of China (PBOC), the country's central bank, has announced easing measures. The PBOC cut its reserve requirement ratio by 50 basis points from February 2024 onwards to allow banks to hold smaller cash reserves, potentially releasing RMB1 trillion (approximately US$140 billion) in long-term capital into the market. This move is regarded as a significant shift towards more proactive policy support for the country's flagging economy. On the same day, the PBOC and the National Administration of Financial Regulation announced measures to encourage banks to lend to qualified developers, further signalling the government's commitment to revitalising its real estate market.

Despite these efforts, concerns persist about mainland China's sluggish economy and the need for fundamental reforms. New reports suggest that the government is considering a further RMB2 trillion (US$278 billion) stimulus package as part of its ongoing efforts to address the country's economic challenges.

In February 2024, Beijing announced further policy initiatives to boost the property sector in the Greater Bay Area, including allowing Hong Kong and Macau residents to bypass daily remittance limits for funds to purchase property in the region. Removing that pain point associated with property investment in mainland China puts properties in the Greater Bay Area on the radar of investors in Hong Kong and Macau seeking to take advantage of their weak prices. This added competition may negatively impact Macau's property sector as investors from the Hong Kong and Macau special administrative regions now have a wider range of options to consider.

Looking Ahead

Macau's economic outlook became more buoyant during the course of 2023 as confidence grew that the territory's recovery was sustainable and represented a genuine transition from the pandemic era to a period of more diversified and sustainable economic growth in 2024 and beyond.

The Economic Intelligence Unit has revised its outlook for Macau's economy, suggesting that the territory is on track to reach 2019's pre-pandemic level of economic performance by late 2024, and it forecasts that gaming revenues will hit 2019 levels by the middle of the year. Macau's government has announced a target of 33 million visitor arrivals for 2024, a 17% increase to reach 84% of 2019's figure.

These are positive indicators for the overall health of Macau's economy. They will help to improve investor sentiment towards the territory as a whole and rekindle investor interest in making long-term investments. Coupled with the new policy initiatives to reignite interest in Macau property and a more stable interest rate environment, these developments should aid the Company's divestment programme by expediting further sales, lowering debt, and returning capital to Shareholders.

Directors' Statement of Responsibilities

The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations.

The Directors confirm that to the best of their knowledge:

?   the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting; and

?   the Chairman's Message and Manager's Report meet the requirements of an interim management report, and include a fair review of the information required by:

a.  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the interim condensed consolidated financial statements; and a description of the principal risks and uncertainties for the year to date and the remaining six months of the year; and

b.  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

Mark Huntley

Chairman

1 March 2024

Interim Condensed Consolidated Statement of Financial Position (Unaudited)

As at 31 December 2023

The interim condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 1 March 2024.

The notes form part of these interim condensed consolidated financial statements.

Interim Condensed Consolidated Statement of Comprehensive Income (Unaudited)

For the six-month period from 1 July 2023 to 31 December 2023

All items in the above statement are derived from continuing operations.

The notes form part of these interim condensed consolidated financial statements.

Interim Condensed Consolidated Statement of Changes in Equity (Unaudited)

Movement for the six-month period from 1 July 2023 to 31 December 2023 (unaudited)

Movement for the six-month period from 1 July 2022 to 31 December 2022 (unaudited)

Movement for the year from 1 July 2022 to 30 June 2023 (audited)

The notes form part of these interim condensed consolidated financial statements.

Interim Condensed Consolidated Statement of Cash Flows (Unaudited)

For the six-month period from 1 July 2023 to 31 December 2023

The notes form part of these interim condensed consolidated financial statements.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

For the six-month period from 1 July 2023 to 31 December 2023

General information

Macau Property Opportunities Fund Limited (the "Company") is a Company incorporated and registered in Guernsey under The Companies (Guernsey) Law, 1994. This law was replaced by the Companies (Guernsey) Law, 2008 on 1 July 2008. The Company is an authorised entity under the Authorised Closed-Ended Investment Schemes Rules 2008 and is regulated by the Guernsey Financial Services Commission. The address of the registered office is given below.

The interim condensed consolidated financial statements for the six months ended 31 December 2023 comprise the interim financial statements of the Company and its subsidiaries (together referred to as the "Group"). The Group invests in residential property in Macau.

There has been a change to one of the Group's principal risks and uncertainties in the six-month period to 31 December 2023. The Board note that, while the impact of COVID-19 on Macau's real estate market has now receded, the Group faces a significant risk in realising its assets at appropriate values to meet debt repayment due dates and to reduce its current liabilities. The Manager provides the Board with regular reports and updates on key local developments and on divestment updates. Detailed working capital requirements and analysis of loan to value covenants are regularly reported to the Board for monitoring. Principal risks and uncertainties are further discussed in the Annual Report.

The interim condensed consolidated financial statements are presented in US Dollars ("US$") and are rounded to the nearest thousand ($'000).

These interim condensed consolidated financial statements were approved for issue by the Board of Directors on 1 March 2024.

1.  Significant accounting policies

Basis of accounting

The annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"); applicable legal and regulatory requirements of Guernsey Law and under the historical cost basis, except for financial assets and liabilities held at fair value through profit or loss ("FVPL") and investment properties that have been measured at fair value. The accounting policies and valuation principles adopted are consistent with those of the previous financial year.

The interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting. The same accounting policies and methods of computation are followed in the interim financial statements as compared with the annual financial statements. The interim condensed consolidated financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as of 30 June 2023.

New and amended standards and interpretations applied

The following amendments to existing standards and interpretations are effective for the year ended 30 June 2024 and therefore were applied in the current period but did not have a material impact on the Group:

?   Amendment to IFRS 17: Insurance Contracts (effective 1 January 2023)

?   Amendment to IAS 1: Presentation of Financial Statements (effective 1 January 2023)

?   Amendment to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 1 January 2023)

?   Amendment to IAS 12: Income Taxes (effective 1 January 2023)

Going concern

The Group continues to meet its capital requirements and day-to-day liquidity needs through the Group's cash resources. As part of their assessment of the going concern of the Group as at 31 December 2023, the Directors have reviewed the comprehensive cash flow forecasts prepared by management which make assumptions based upon current and expected future market conditions, including predicted future sales of properties taking into consideration current market circumstances. It is the Directors' belief that, based upon these forecasts and their assessment of the Group's committed banking facilities, it is appropriate to prepare the financial statements of the Group on a going concern basis.

The Directors, after the continuation resolution was passed at the Annual General Meeting of the Company on 21 December 2023 extending the Fund's life until the 2024 Annual General Meeting, assessed whether the continuation vote before the end of 2024 gives rise to a material uncertainty that might cast significant doubt on the Fund's ability to continue as a going concern. The Directors have also considered the going concern assumption outside the primary going concern horizon. The Directors currently expect to receive continuation support from major shareholders and over 50% of shareholder support is required in December 2024 to ensure continuation; it is likely that returns from the sale of properties could well be significantly lower if the Fund was forced to sell as a result of discontinuation and it is therefore commercially rational for the Fund to continue in business. Therefore, the Directors believe it is appropriate to prepare the financial statements of the Group on the going concern basis based upon existing cash resources, the forecasts described above, the extension of the life of the Company until the 2024 Annual General Meeting agreed at the Annual General Meeting on 21 December 2023 and the Directors' assessment of the Group's committed banking facilities and expected continuing compliance with related covenants.

Seasonal and cyclical variations

The Group does not operate in an industry where significant or cyclical variations as a result of seasonal activity are experienced during the financial year.

2.  Segment reporting

The Chief Operating Decision Maker (the "CODM") in relation to Macau Property Opportunities Fund Limited is deemed to be the Board itself. The factors used to identify the Group's reportable segments are centred on asset class, differences in geographical area and differences in regulatory environment. Furthermore, foreign exchange and political risk are identified, as these also determine where resources are allocated.

Based on the above and a review of information provided to the Board, it has been concluded that the Group is currently organised into one reportable segment based on the single geographical sector, Macau.

This segment refers principally to residential properties. Furthermore, there are multiple individual properties that are held within each property type. However, the CODM considers, on a regular basis, the operating results and resource allocation of the aggregated position of all property types as a whole, as part of their on-going performance review. This is supported by a further breakdown of individual property groups only to help support their review and investment appraisal objectives.

3.  Investment property

Valuation losses (fair value adjustment) from investment property are recognised in profit and loss for the period and are attributable to changes in unrealised losses relating to investment property held at the end of the reporting period.

The valuation process is initiated by the Investment Adviser with the Board consent and approval, who appoints a suitably qualified valuer to conduct the valuation of the investment property. The results are overseen by the Investment Adviser. Once satisfied with the valuations based on their expectations, the Investment Adviser reports the results to the Board. The Board periodically meets with the valuer and reviews the latest valuations based on their knowledge of the property market and compare these to previous valuations.

The Group's investment properties were revalued at 31 December 2023 by an independent, professionally-qualified valuer: Savills (Macau) Limited ("Savills"). The valuation has been carried out in accordance with the current Royal Institution of Chartered Surveyors (RICS) Appraisal and Valuation Standards to calculate the market value of the investment properties in their existing state and physical condition, with the assumptions that:

?   The owner sells the property in the open market without any arrangement, which could serve to affect the value of the property.

?   The property is held for investment purposes.

?   The property is free from encumbrances, restrictions and outgoings of any onerous nature which could affect its value.

The fair value of investment property is independently determined by Savills, using recognised valuation techniques. The technique deployed was the income capitalisation method. The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.

See Note 11 in relation to deferred tax liabilities on investment property.

During the current period, 5 residential units of The Waterside were sold with net losses on disposal against 30 June 2023 valuations of US$1,616,000 recognised. During the year ended 30 June 2023, 13 units were sold at The Waterside with net losses on disposal of investment properties against 30 June 2022 valuations of US$1,909,000 recognised. During the period ended 31 December 2022, 5 residential units at The Waterside were sold for a total consideration of US$17.3 million against a total cost of US$10.2 million which resulted in a net profit of US$7.1 million after all associated fees and transaction costs but before financing and other related holding costs.

Capital expenditure on property relates to fit-out costs for The Waterside.

Rental income arising from The Waterside of US$709,000 (6 months ended 31 December 2022: US$539,000, 12 months ended 30 June 2023: US$1,114,000) was received during the period. Direct operating expenses of US$354,000 (6 months ended 31 December 2022: US$389,000, 12 months ended 30 June 2023: US$772,000) arising from rented units were incurred during the six-month period. Direct operating expenses during the period arising from vacant units totalled US$93,000 (6 months ended 31 December 2022: US$134,000, 12 months ended 30 June 2023: US$279,000).

The table below shows the assumptions used in valuing the investment properties which are classified as Level 3 in the fair value hierarchy:

The fair value of The Waterside is determined using the income approach, more specifically a term and reversion analysis, where a property's fair value is estimated based on the rent receivable and normalised net operating income generated by the property, which is divided by the capitalisation (discount) rate. The difference between gross and net rental income includes the same expense categories as those for the discounted cash flow method with the exception that certain expenses are not measured over time, but included on the basis of a time weighted average, such as the average lease up costs. Under the income capitalisation method, over and under-rent situations are separately capitalised (discounted).

If the estimated reversionary rent increased/decreased by 5%, (and all other assumptions remained the same), the fair value of The Waterside would increase by US$6.3 million (6 months ended 31 December 2022: US$7.8 million, 12 months ended 30 June 2023: US$6.9 million) or decrease by US$6.3 million (6 months ended 31 December 2022: US$7.8 million, 12 months ended 30 June 2023: US$6.9 million).

If the term and reversionary yield or discount rate increased/decreased by 5%, (and all other assumptions remained the same), the fair value of The Waterside would decrease by US$6 million (6 months ended 31 December 2022: US$7.6 million, 12 months ended 30 June 2023: US$6.5 million) or increase by US$6.5 million (6 months ended 31 December 2022: US$8.2 million, 12 months ended 30 June 2023: US$7.3 million).

The same valuation method was deployed in June 2023 and December 2023.

The Waterside is currently valued at its highest and best use. There is no extra evidence available to suggest that it has an alternative use that would provide a greater fair value measurement.

There have been no transfers between levels during the period or any change in valuation technique since the last period.

4.  Deposits with lenders

Pledged bank balances represent cash deposits pledged to the banks to secure the banking facilities granted to the Group. Deposits amounting to US$0.3 million (31 December 2022: US$1.9 million, 30 June 2023: US$1.2 million) have been pledged to secure long-term banking facilities and are, therefore, classified as non-current assets. There are no other significant terms and conditions associated with these pledged bank balances.

5.  Inventories

Additions include capital expenditure, development costs and capitalisation of financing costs.

Under IFRS, inventories are valued at the lower of cost and net realisable value. The carrying amounts for inventories as at 31 December 2023 amounts to US$34,933,000 (6 months ended 31 December 2022: US$34,872,000, 12 months ended 30 June 2023: US$34,775,000). Net realisable value as at 31 December 2023 as determined by the independent, professionally-qualified valuer, Savills, was US$56,829,000 (6 months ended 31 December 2022: US$58,932,000, 12 months ended 30 June 2023: US$57,718,000).

During the period ended 31 December 2023, no units of The Fountainside were sold.

During the year ended 30 June 2023 and the period ended 31 December 2022, no units of The Fountainside were sold.

6.  Interest-bearing loans

There are interest-bearing loans with three banks:

Hang Seng Bank

The Group has a term loan facility with Hang Seng Bank for The Waterside.

As at 31 December 2023, outstanding loan balance was HK$601 million (US$77.0 million) (31 December 2022: HK$734.6 million (US$94.0 million); 30 June 2023: HK$661 million (US$84.3 million)). The interest rate is 1.8% per annum over the

1-, 2-or 3-month HIBOR rate. The Manager determines the interest period upon assessing funding and market conditions prevailing at each interest rate fixing date. The loan-to-value covenant for The Waterside facility is 60%, which is assessed on aggregate basis to include The Fountainside facility. As at 31 December 2023, the loan-to-value ratio for The Waterside was 58.7% and the aggregated loan-to-value ratio including The Fountainside was 54.4%. The facility is secured by means of a first registered legal mortgage over all unsold units of The Waterside as well as a pledge of all income from the units. The Company is the guarantor for the credit facility. In addition, the Group is required to maintain a cash reserve equal to six months'interest with the lender. The principal is to be repaid in half yearly instalments with HK$75 million (US$9.6 million) due in March 2024; HK$90 million (US$11.5 million) due in September 2024; HK$125 million (US$16.0 million) due in March

2025; and the remaining HK$311 million (US$39.8 million) due upon maturity in September 2025.

The Group has a loan facility with Hang Seng Bank for The Fountainside.

The facility consists of a term loan maturing in March 2024 ("Tranche A") and a HK$7 million (US$0.9 million) revolving facility ("Tranche B"). As at 31 December 2023, outstanding loan balance was HK$29.2 million (US$3.7 million) (31 December 2022: HK$43.9 million (US$5.6 million); 30 June 2023: HK$43.9 million (US$5.6 million)). The interest rates applicable to Tranche A and Tranche B are 2.8% per annum and 3.3% per annum, respectively over the 1-, 2- or 3-month

HIBOR rate. The Manager determines the interest period upon assessing funding and market conditions prevailing at each interest rate fixing date. The loan-to-value covenant is 55%. As at 31 December 2023, the loan-to-value ratio was 21.55%. The facility is secured by means of a first registered legal mortgage over all unsold units and car parking spaces of The Fountainside as well as a pledge of all income from the units and the car parking spaces. The Company is the guarantor for the credit facility. In addition, the Group is required to maintain a cash reserve equals to six months' interest with the lender. The outstanding loan balance of HK$24 million (US$3.1 million) for Tranche A is due in full at maturity whereas loan balance of HK$5.2 million (US$0.6 million) for Tranche B is subject to annual renewal.

The Group has two loan facilities for Penha Heights:

Banco Tai Fung

The loan facility with Banco Tai Fung has a term of seven years and the facility amount is HK$70 million. Interest was Prime Rate minus 2.25% per annum. The principal is to be repaid in 28 quarterly instalments of HK$2.5 million (US$320,133) each, commencing in September 2022. As at 31 December 2023, the facility had an outstanding balance of HK$60.0 million (US$7.7 million) (31 December 2022: HK$67.5 million (US$8.6 million), 30 June 2023: HK$60 million (US$7.7 million)). This facility is secured by a first legal mortgage over the property as well as a pledge of all income from the property. The Company is the guarantor for this term loan. Interest is paid quarterly for the first six month and monthly thereafter on this loan facility. As at 31 December 2023, the loan-to-value ratio for this facility was 40.82%. There is no loan-to-value covenant for this loan.

Banco Comercial de Macau, S.A. ("BCM Bank")

During the period, BCM Bank renewed the loan facility of HK$63 million (US$8.1 million) for another term of two years until September 2025. Interest was revised from 2.55% to 2.75% per annum over 3-month HIBOR rate. The principal of HK$3 million is to be repaid in January 2024, March 2025 and June 2025 respectively, with the rest due upon maturity. As at 31 December 2023, the facility had an outstanding balance of HK$63 million (US$8.1 million) (31 December 2022: HK$70 million (US$9.0 million), 30 June 2023: HK$63 million (US$8 million)). This facility is secured by a first legal mortgage over the property as well as a pledge of all income from the property. The Company is the guarantor for this term loan. In addition, the Group is required to maintain a cash reserve equal to six months' interest with the lender. Interest is paid monthly on this loan facility. The loan-to-value covenant is 45%. As at 31 December 2023, the loan-to-value ratio for this facility was 36.00%.

Bank Loan Interest

Bank loan interest paid during the period was US$3,373,000 (6 months ended 31 December 2022: US$2,555,000, 12 months ended 30 June 2023: US$5,440,000). As at 31 December 2023, the carrying amount of interest-bearing loans included unamortised prepaid loan arrangement fee of US$415,000 (31 December 2022: US$688,000, 30 June 2023: US$524,000).

Fair Value

Interest-bearing loans are carried at amortised cost. The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates for similar financial instruments.

The estimated fair value of fixed interest bearing loans is based on discounted cash flows using prevailing market interest rates for debts with similar credit risk and maturity. As at 31 December 2023, the fair value of the financial liabilities was US$222,000 higher than the carrying value of the financial liabilities (31 December 2022: US$727,000 higher than the carrying value of the financial liabilities, 30 June 2023: US$100,000 higher than the carrying value of the financial liabilities).

The Group's interest-bearing loans have been classified within Level 2 as they have observable inputs from similar loans. There have been no transfers between levels during the period or a change in valuation technique since last period.

7.  Basic and diluted loss per Ordinary Share

Basic and diluted loss per equivalent Ordinary Share is based on the following data:

8.  Net asset value reconciliation

*?US$:GBP rates as at relevant period/year end

The NAV per share is arrived at by dividing the net assets as at the date of the consolidated statement of financial position, by the number of Ordinary Shares in issue at that date.

Under IFRS, inventories are carried at the lower of cost and net realisable value. The Adjusted NAV includes the uplift of inventories to their market values before any tax consequences or adjustments.

The Adjusted NAV per share is derived by dividing the Adjusted NAV as at the date of the consolidated statement of financial position, by the number of Ordinary Shares in issue at that date.

There are no potentially dilutive instruments in issue.

9.  Cash flows from operating activities

Cash and cash equivalents (which are presented as a single class of assets on the face of the interim condensed consolidated statement of financial position) comprise cash at bank and other short-term, highly-liquid investments with a maturity of three months or less.

10. Related party transactions

Directors of the Company are all Non-Executive and by way of remuneration, receive only an annual fee which is denominated in Sterling.

The Directors are considered to be the key management personnel (as defined under IAS 24) of the Company. Directors' fees outstanding as at 31 December 2023 were US$44,000 (31 December 2022: US$41,000, 30 June 2023: US$43,000).

Sniper Capital Limited is the Manager to the Group and received management fees during the period as detailed in the Interim Condensed Consolidated Statement of Comprehensive Income. Management fees are paid quarterly in advance and amounted to US$600,000 (6 months ended 31 December 2022: US$600,000, 12 months ended 30 June 2023: US$1,200,000) at a quarterly fixed rate of US$300,000 per annum. Management fees outstanding as at 31 December 2023 were US$500,000 (31 December 2022: US$300,000, 30 June 2023: US$200,000).

A realisation fee shall be payable on deals originated and secured by the Manager which shall be linked to the sales price achieved. The realisation fee is currently active until 31 December 2023. The realisation fee is payable upon the sale of individual properties and becomes payable 10 business days after completion. Where the sale price of the asset is 90 per cent or more of the value of the relevant asset as at 30 September 2019 (the "Carrying Value") a fee of 2.5 per cent of net proceeds (net of debt, costs and taxes) ("Net Proceeds") shall be payable; where the sale price of an asset is more than 80 per cent but less than 90 per cent of the Carrying Value of the relevant asset, a realisation fee of 1.5 per cent of Net Proceeds shall be payable; and where the sale price of an asset is less than 80 per cent of the Carrying Value, no realisation fee shall be payable. In no circumstances will the aggregate of the 2023 management fee and realisation fee exceed US$1,780,000. Any realisation fee achieved on strata sales of units at The Waterside will be subject to the retention of 50% until all units have been sold. Realisation fees for the period totalled US$39,000 (6 months ended 31 December 2022: US$27,000, 12 months ended 30 June 2023: US$98,000).

For the calendar year 2024, a realisation fee of 2.5 per cent shall be payable on sales of assets above 90 per cent of the Carrying Values, while a realisation fee of 1.5 per cent shall be payable on assets above 80 per cent but less than 90 per cent of the Carrying Value. A management fee of US$300,000 per quarter shall be payable.

All intercompany loans and related interest are eliminated on consolidation.

11. Taxation provision

As at period-end, the following amounts are the outstanding tax provisions.

Deferred taxation

The Group has recognised the deferred tax liability for the taxable temporary difference relating to the investment property carried at fair value and has been calculated at a rate of 12%.

Provision for Macanese taxations

The Group has made provisions for property tax and complementary tax arising from its Macau business operations.

Tax Reconciliation

The differences between the taxation for the period and the movement in taxation provisions are due to the foreign exchange movements and Macanese taxation paid during the period.

12. Share capital

Ordinary shares

The Company has one class of ordinary shares which carries no rights to fixed income.

The Board has publicly stated its commitment to undertake share buybacks at attractive levels of discount of the share price to Adjusted NAV. In order to continue this strategy, the Board renewed this authority at the 2023 Annual General Meeting.

Currently cash reserves are applied to meet and repay debt obligations.

13. Subsequent events

Subsequent to the period end, the Company secured one further sale of unit at The Waterside at a consideration of HK$20.2 million (US$2.6 million), which is scheduled to complete in April 2024.?

DIRECTORS AND COMPANY INFORMATION

Directors

Mark Huntley (Chairman)

Alan Clifton

Carmen Ling

Audit and Risk Committee

Alan Clifton (Chairman)

Mark Huntley

Carmen Ling

Management Engagement Committee

Mark Huntley (Chairman)

Alan Clifton

Carmen Ling

Nomination and Remuneration Committee

Alan Clifton (Chairman)

Mark Huntley

Carmen Ling

Disclosure and Communication Committee

Mark Huntley (Chairman)

Alan Clifton

Manager

Sniper Capital Limited

Vistra Corporate Services Centre

Wickhams Cay II

Road Town, Tortola

VG1110

British Virgin Islands

Investment Adviser

Sniper Capital (Macau) Limited

Largo da Ponte,

Nos. 51 e 57, Taipa

Macau

Solicitors to the Group as to English Law

Norton Rose Fulbright LLP

3 More London Riverside

London SE1 2AQ

Advocates to the Group as to Guernsey Law

Carey Olsen

Carey House

Les Banques

St Peter Port

Guernsey GY1 4BZ

Corporate Broker

Liberum Capital Limited

Ropemaker Place, Level 12

25 Ropemaker Street

London EC2Y 9LY

Independent Auditor

Deloitte LLP

Regency Court

Glategny Esplanade

St Peter Port

Guernsey GY1 3HW

Property Valuers

Savills (Macau) Limited

Suite 1309-10

13/F Macau Landmark

555 Avenida da Amizade

Macau

Administrator & Company Secretary

Ocorian Administration (Guernsey) Limited

PO Box 286

Floor 2, Trafalgar Court

Les Banques

St Peter Port, Guernsey

Channel Islands GY1 4LY

Macau and Hong Kong Administrator

Adept Capital Partners Services Limited

Unit B1, 25/F, MG Tower

133 Hoi Bun Road

Kwun Tong, Kowloon

Hong Kong

Registered Office

PO Box 286

Floor 2, Trafalgar Court

Les Banques

St Peter Port, Guernsey

Channel Islands GY1 4LY