The Waterside

The Waterside is MPO's landmark development in downtown Macau, comprising 59 luxury residential apartments for lease. As of the end of 2021, around 30% of The Waterside's units were occupied, and the average rent stood at US$2.3 per square foot per month.

Leasing demand for luxury property in Macau remains subdued due to ongoing travel restrictions. COVID-19 outbreaks and three rounds of city-wide COVID testing in H2 2021 have also affected sentiment towards the territory's economy. Market conditions have challenged efforts to secure the sale of this asset. There remains active investor interest, however, aided by the fact that each apartment has a separate strata title.

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.

The sale of the last remaining standard-type unit was completed for HK$11.8 million (US$1.5 million, in line with its latest valuation) in August 2021, bringing to an end the divestment of all 36 standard units at the property.

There are six remaining units. Reconfiguration work on the two duplex units has commenced and is now expected to be largely complete in Q1 2022. In this regard, there have been additional unexpected requests from the authorities which resulted in a longer than planned work schedule. Once completed, three new smaller, more marketable units and two new parking spaces will be available for sale, with sales activity expected to commence in April. We are also continuing to market the property's four villas.

Penha Heights

Penha Heights is a prestigious, colonial-style villa with a gross floor area of approximately 12,000 sq ft perched above the exclusive residential enclave of Penha Hill and surrounded by lush greenery.

A series of enhancement works to refresh the property's external and internal features was undertaken during the pandemic-induced quiet period. The Manager has also completed additional enhancements including roof-tiling, waterproofing, paint work, as well as upgrading the electric front gates for added privacy and aesthetics. Positive feedback regarding these works has been received.

Despite increased sales and marketing efforts, the potential pool of buyers currently remains limited, a situation that will persist as long as travel restrictions continue to inhibit viewings of the property by potential investors from outside Macau. Nevertheless, ongoing viewings are taking place and we will continue to work with specialist agents to explore all possible channels for an optimal exit from the asset.

MACROECONOMIC OUTLOOK

Macau manages threat posed by new COVID-19 variants

In H2 2021, many countries across the globe grappled with the COVID-19 challenges posed by the highly transmissible Delta and Omicron variants, facing record-breaking cases and deaths which threatened to overwhelm healthcare systems. Nevertheless, the successful deployment of COVID vaccines and boosters have emboldened many countries to begin shifting towards the new normal of "living with COVID".

In stark contrast, since the beginning of the pandemic, Macau has recorded a total of 79 COVID-19 cases and no deaths. As of the end of 2021, around 75% of Macau's population had been fully vaccinated against the virus, and around 80% had received at least one vaccine dose. Booster shots have been available since early November.

Zero-COVID strategy

Macau's remarkable COVID numbers are the result of its zero-COVID strategy which mirrors that of mainland China and Hong Kong, where the authorities are determined to control outbreaks by deploying all tools available in the public health arsenal including strict travel restrictions, mass testing and lockdowns. This approach has been decried by critics as being futile against highly transmissible variants like Omicron. Furthermore the draconian measures have caused economic disruptions and uncertainty, labour shortages, as well as mental health issues among the wider population.

Macau authorities had on three occasions during this reporting period instituted city-wide mass testing and closed non-gaming entertainment outlets in response to local clusters, which were contained. Quarantine-free travel requirements for mainland Chinese visitors from COVID hotspots were also periodically tightened to manage risks. Notably, the Golden Week in October, a peak travel period, was impacted by such restrictions. In January 2022, all incoming flights to Macau were halted for 14 days, except for those from mainland China after several travellers tested positive for COVID-19 while undergoing hotel quarantine in the territory.

In mainland China, efforts to contain the virus were ramped up ahead of the Beijing Winter Olympics in February. Among the drastic steps taken were locking down cities such as Xian, Tianjin, Dalian, Shenzhen and Ningbo. Such measures inevitably impacted and may continue to affect visitor numbers to Macau.

The proposed travel bubble involving mainland China, Macau and Hong Kong is also a casualty of the zero-COVID strategy as it has been postponed several times as Hong Kong struggled to manage its COVID cases. The latest postponement at the end of 2021 was particularly disappointing for Macau businesses as advanced preparations for its launch were in progress, including a new health code to facilitate travel by Hong Kong residents to mainland China and Macau.

The absence of an exit strategy from zero-COVID and plans on "living with COVID" in Macau and mainland China is concerning as Macau's economic engines - gaming and tourism - can only approach pre-pandemic levels when cross-border travel within Greater China is fully restored. There is speculation that the strategy may continue beyond the Winter Olympics until the Chinese Communist Party's 20th National Party Congress which is scheduled for the autumn of 2022.

Economy hit by zero-COVID

The return of mainland Chinese tourists since Q3 2020 has driven a gradual recovery of the territory's economy, but this has been subject to setbacks throughout H2 2021 as ongoing COVID flare ups in mainland China and Hong Kong affected the ease of travel to Macau. While gross domestic product (GDP) is forecast by Fitch Ratings to grow by 25% for FY 2021, GDP remains well below pre-pandemic levels. 

Policy Address continues to emphasise integration into the Greater Bay Area

Macau Chief Executive, Ho Iat Seng, delivered his annual Policy Address in November. He emphasised the policies of mainland China, including the diversification of Macau's economy to integrate with the Greater Bay Area. He also highlighted the priority placed on managing the pandemic and stabilising Macau's economic recovery. These themes also featured prominently in his New Year address.

A turbulent period for gaming

Macau's gross gaming revenue (GGR) grew 43.7% YoY for FY2021 to MOP86.86 billion (US$10.82 billion). However, this was approximately 20% of pre-pandemic GGR in 2019.

The industry faced several challenges in H2 2021. There were disruptions as the Macau authorities tightened their border control measures in response to COVID-19 outbreaks in mainland China.

In addition, the industry was rocked by the arrest of the CEO of Suncity, Macau's largest junket operator, in November. It was particularly concerning as the allegations of illegality were centred on activities considered to be in the ordinary course of business for junket operators. This was followed by a regulatory ban on junkets extending credit to clients, which led to the closure of junket operations throughout Macau's casinos. Although VIP gaming had been in decline for several years, its abrupt end will see a loss of approximately 30% of GGR for the industry.

The public consultation on the new gaming laws for Macau caused a stir as the government put forward several proposals, including appointing government delegates to the boards of concessionaires. This would have required casino operators to obtain prior government approval before paying dividends. Gaming tax increases were also proposed. Nevertheless, industry concerns were addressed as the government published the results of the public consultation and its responses, which indicated that the three contentious proposals would be dropped from the draft bill. It also suggested that there is likely to be a maximum of six concessions available for tender for a period of ten years, with possible extensions for a further three years. Industry players had commented positively on the transparency of the public consultation and clarification provided by the government.

Tourism began to recover following the relaxation in travel and visa restrictions for mainland Chinese

Despite the disruptions caused by the prevailing zero-COVID strategy in Macau, and mainland China being its main source of in-bound tourists, Macau's tourist arrivals grew 31% YoY in 2021 to 7.7 million, which is approximately 20% of pre-pandemic 2019 numbers.

Mainland Chinese accounted for 7 million visitors, with 4.1 million arriving from the nine main cities in the Greater Bay Area. The visitors from the Greater Bay Area had leapt 60% YoY in 2021.

The average length of stay increased by 0.2 of a day YoY to 1.6 days, with overnight visitors recording longer stays of 3.2 days, up by an average of 0.4 of a day compared to 2020. There were nearly 3.7 million overnight visitors, a 31% YoY increase, accounting for 48% of total visitors.

The pipeline of new resorts continues to expand with Melco Resorts and Entertainment Ltd's plans to open Macau's first W Hotel on Cotai as part of its expansion of its Studio City property. Targeting a December 2022 launch, the hotel will offer premium facilities including 557 guest rooms and 11,840 square feet of event and meeting space.

PROPERTY MARKET OVERVIEW

Impacted by renewed concerns over COVID created by the outbreaks and mass testing, Macau's residential property market remained relatively quiet in Q4 2021, with a total of 1,173 transactions - a decline of 26% YoY and the luxury end of the market remained stagnant affected by external factors and muted by current sentiment. For the full year, a total of 5,970 residential units were transacted, down 7% YoY. Overall, prices remained largely stable at US$1,170 per square foot. First-time buyers accounted for 83% of all transactions, second time buyers accounted for 14%, and the remaining 3% were buyers purchasing residential properties for at least the third time.

Within the Greater Bay Area, luxury home sales in Hong Kong were unabated amid the pandemic and achieved a few record highs in 2021. The value of transactions involving properties worth more than HK$100 million (US$12.8 million) in the first 11 months of the year reached HK$46.4 billion (US$5.95 billion), 60% higher than the value for full-year 2020. This is remarkable against a backdrop of closed borders and global economic uncertainties. Such demand is largely underpinned by founders and senior executives of Chinese companies in the "new economies" segment recently listed on Hong Kong's stock exchange.

Given Macau's track record on public health, alongside infrastructure and connectivity improvements, investors may look to the territory's luxury property market, prices of which are at a five-year low, as they return to the Greater Bay Area and economic activity in the region resumes more fully.

Looking Ahead

Macau, Hong Kong and mainland China are maintaining stringent zero-COVID policies that are expected to remain in place for some time. Macau's economy will remain vulnerable to disruption by COVID outbreaks on the Chinese mainland and locally, as seen in H2 2021, and more recently in January 2022, with the 14-day ban on international flights to Macau to curb the spread of the Omicron variant.

On the overall economy, as noted by the Economist Intelligence Unit, beneath Macau's current growth rates lies economic fragility as COVID-19 has decimated its two main economic activities - inbound tourism and gaming - and as such, Macau's economy will not be able to return to pre-COVID levels until 2023 at the earliest. It has nonetheless forecast that Macau's GDP will expand by 21% YoY in 2022.

In terms of gaming, Fitch Ratings expects Macau's GGR to pick up in 2022, particularly if the travel bubble with Hong Kong goes into operation. This would boost the gaming and tourism industry and contribute to a potential spill-over into the retail and the property sectors. Morgan Stanley's forecast for GGR in 2022 and 2023 are, respectively, 42% and 70% of 2019's pre-pandemic numbers. These numbers are lower than previous forecasts, with 2022 numbers cut by 30% and 2023 cut by 20% based on a recovery described as "choppy".

Tourism is also set to grow incrementally, with the Macau Government Tourism Office forecasting 10 million arrivals in 2022. However, the underlying assumptions - the launch of a travel bubble with Hong Kong and the resumption of the e-visa programme for mainland Chinese visitors - are likely to take a backseat in the coming months given the current escalation of COVID-19 outbreaks in both Hong Kong and mainland China.

Nevertheless, the Macau government has warned that the economic conditions are expected to remain challenging in 2022 and a recovery from the pandemic will take time. It has consistently also outlined specific plans for Macau's role within the Greater Bay Area to diversify its economy away from gaming and turn the territory into the area's technology and tourism hub. Although the plan is still in its early stages, the potential for the property market to gain from such measures is clear.

Restrictions on travellers from other countries will, however, limit the number of potential buyers of the Company's properties and continue to disrupt the Company's divestment plan in the near term. We will continue to pursue a variety of strategies for divestment of the remaining assets on acceptable terms and within current market conditions. A reduction of debt followed by a return of capital to Shareholders in the shortest possible timeframe remains the primary objective.

INTERIM FINANCIAL STATEMENTS

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 as adopted by the European Union; 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

25 February 2022

Interim Condensed Consolidated Statement of Financial Position (Unaudited)

As at 31 December 2021

The interim condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 25 February 2022.

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 2021 to 31 December 2021

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 2021 to 31 December 2021 (unaudited)

Movement for the six-month period from 1 July 2020 to 31 December 2020 (unaudited)

Movement for the year from 1 July 2020 to 30 June 2021 (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 2021 to 31 December 2021

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 2021 to 31 December 2021

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 in the Directors and Company Information section.

The interim condensed consolidated financial statements for the six months ended 31 December 2021 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 have been no changes to the Group's principal risks and uncertainties in the six-month period to 31 December 2021 and the Board of Directors does not anticipate any changes to the principal risks and uncertainties in the second half of the year. Principal risks and uncertainties are further discussed in the Manager's 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 have been approved for issue by the Board of Directors on 25 February 2022.

1   Significant accounting policies

Basis of accounting

The annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union; 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 2021.

New and amended standards and interpretations applied

The following amendments to existing standards and interpretations are effective for the year ended 30 June 2022 and therefore were applied in the current period but did not have a material impact on the Group:

•   Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39- IBOR reform

•   Amendments to IFRS 16 - COVID-19 rent concessions

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 2021, 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 22 December 2021 extending the Fund's life until 22 December 2022, assessed whether the continuation vote before the end of 2022 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 2022 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 December 2022 agreed at the Annual General Meeting on 22 December 2021 and the Directors' assessment of the Group's committed banking facilities and expected continuing compliance with related covenants.

The continuing impact of the COVID-19 pandemic has had a negative effect on the valuation of the Group's investment portfolio. A sale transaction completed in the current period. The pandemic has not had a significant impact on the loan covenants held by the Group. The overall uncertainty brought about by COVID-19 and its impact on the Group is continuing to be closely monitored by the Board.

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 ordinarily meets with the valuer and reviews the latest valuations based on their knowledge of the property market and compare these to previous valuations. These meetings have been suspended since 2019.

The Group's investment properties were revalued at 31 December 2021 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 12 in relation to deferred tax liabilities on investment property.

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

Rental income arising from The Waterside of US$566,000 (6 months ended 31 December 2020: US$670,000, 12 months ended 30 June 2021: US$1,230,000) was received during the period. Direct operating expenses of US$451,000 (6 months ended 31 December 2020: US$481,000, 12 months ended 30 June 2021: US$956,000) arising from rented units were incurred during the six-month period. Direct operating expenses during the period arising from vacant units totalled US$200,000 (6 months ended 31 December 2020: US$197,000, 12 months ended 30 June 2021: US$395,000).

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$10 million (6 months ended 31 December 2020: US$10 million, 12 months ended 30 June 2021: US$10 million) or decrease by US$10 million (6 months ended 31 December 2020: US$10 million, 12 months ended 30 June 2021: US$10 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$9 million (6 months ended 31 December 2020: US$10 million, 12 months ended 30 June 2021: US$10 million) or increase by US$10 million (6 months ended 31 December 2020: US$11 million, 12 months ended 30 June 2021: US$10 million).

The same valuation method was deployed in June 2021 and December 2021.

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

Deposits with lenders represent deposits that are restricted as to usage pursuant to the terms of the banking facilities granted to the Group. Deposits amounting to US$6.4 million (31 December 2020: US$6.7 million, 30 June 2021: US$6.8 million) were associated with long-term banking facilities and classified as non-current assets, of which US$2.9 million (31 December 2020: US$1.4 million, 30 June 2021: $1.4 million) represented a six-month interest reserve pledged as collateral for credit facilities. The remainder of the balance represents a deposit from which any withdrawal for payment of operating costs is subject to consent from the lender. There are no other significant terms and conditions associated with these pledged bank balances.

5.  Cash and cash equivalents

In addition to cash and cash equivalent balances of US$531,000, additional deposits with lenders of US$3.5 million are available to meet operating costs, subject to lender approval (see Note 4).

6.  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 2021 amounts to US$34,725,000 (6 months ended 31 December 2020: US$35,592,000, 12 months ended 30 June 2021: US$34,924,000). Net realisable value as at 31 December 2021 as determined by the independent, professionally-qualified valuer, Savills, was US$62,319,000 (6 months ended 31 December 2020: US$66,848,000, 12 months ended 30 June 2021: US$65,114,000).

During the period ended 31 December 2021, one residential unit of The Fountainside was sold for a total consideration of US$1.5 million (HK$11.8 million) against a total cost of US$0.5 million (HK$4.1 million) which resulted in a net profit of US$1.0 million (HK$7.7 million) after all associated fees and transaction costs.

During the year ended 30 June 2021, four residential units and one car parking space of The Fountainside and one individual unit of One Central Residences were sold for a total consideration of US$9.9 million (HK$76.5 million) against a total cost of US$4.8 million (HK$37.1 million) which resulted in a net profit of US$5.1 million (HK$39.4 million) after all associated fees and transaction costs.

During the period ended 31 December 2020, three residential units and one car parking space of The Fountainside and one individual unit of One Central Residences were sold for a total consideration of US$8.2 million (HK$63.9 million) against a total cost of US$4.1 million (HK$32.3 million) which resulted in a net profit of US$4.1 million (HK$31.6 million) after all associated fees and transaction costs.

7.  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.

In September 2020, the Group executed a HK$540 million (US$69.7 million) five-year term loan facility (Tranche 7) to refinance previous tranches which were due for settlement in September 2020. In March 2021, the Group executed a HK$250 million (US$32.2 million) four-year term facility (Tranche 8) to refinance previous tranches which were due for settlement in March 2021.

As at 31 December 2021, three tranches remained outstanding. Tranche 6 had an outstanding balance of HK$108 million (US$13.8 million) (31 December 2020: HK$358 million (US$46.2 million), 30 June 2021: HK$108 million (US$13.9 million)); Tranche 7 had an outstanding balance of HK$512 million (US$65.7 million) (31 December 2020: HK$515 million (US$66.5 million), 30 June 2021: HK$515 million (US$66.4 million)); and Tranche 8 had an outstanding balance of HK$238 million (US$30.5 million) (31 December 2020: HK$nil (US$nil), 30 June 2021: HK$250 million (US$32.2 million)).

The interest rates applicable to Tranche 6 of the term loan is 1.9% per annum over the 1-, 2- or 3-month HIBOR rate. The interest rates applicable to Tranche 7 and Tranche 8 is 1.8% per annum over the 1-, 2-or 3-month HIBOR rate. The choice of rate is at the Group's discretion. Tranche 3, Tranche 4 and Tranche 5 were fully repaid in September 2020. Tranche 6 matures in September 2022 and the principal is to be repaid in half-yearly instalments commencing from September 2020, with 25% of the principal due upon maturity. Tranche 7 matures in September 2025 and the principal is to be repaid in nine instalments commencing from December 2020 with 58% of the principal due upon maturity. Tranche 8 matures in March 2025 and the principal is to be repaid in seven instalments commencing from December 2021 with 34% of the principal due upon maturity. The loan-to-value covenant is 60%. As at 31 December 2021, the loan-to-value ratio for the Hang Seng One Central facility was 55.97%. The facility is secured by means of a first registered legal mortgage over 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 Group has a loan facility for The Fountainside.

The Group has executed a loan facility with Hang Seng Bank to refinance the credit facility with the Industrial and Commercial Bank of China (Macau) Limited in relation to The Fountainside. The Facility amount is HK$96 million (US$12.3 million) divided into 2 tranches, with a tenor of 4 years to mature in March 2024. Tranche A is a facility for an amount of HK$89 million (US$11.4 million) for refinancing the loan facility with ICBC, which expired in March 2020. Tranche B is a facility for an amount of HK$7 million (US$0.9 million) for financing the alteration costs of The Fountainside. The facility of Tranche A was fully drawdown in March 2020 to repay the ICBC facility, while the facility of Tranche B in the amount of HK$3 million (US$0.4 million) was drawn down in October 2021. 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 choice of rate is at the Group's discretion. The principal of Tranche A is to be repaid half-yearly with remaining instalments commencing in September 2023 with 27% of the principal due upon maturity while repayment for Tranche B is due in full at maturity in June 2022. The loan-to-value covenant is 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 at the loan facility date 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 equal to six months' interest with the lender.

As at 31 December 2021, the facility had an outstanding balance of HK$42 million (US$5.4 million) (31 December 2020: HK$50.9 million (US$6.6 million), 30 June 2021: HK$39 million (US$5.0 million)). As at 31 December 2021, the loan-to-value ratio for this facility was 28.09%.

The Group has two loan facilities for Estrãda da Penha:

Banco Tai Fung

The loan facility with Banco Tai Fung originally had a term of two years and the facility amount was HK$70 million which expired in June 2021 and was subsequently renewed for another term of one year. Interest was revised to Prime Rate minus 2.25% per annum in June 2021. Repayment is due in full at maturity in June 2022. As at 31 December 2021, the facility had an outstanding balance of HK$70 million (US$9.0 million) (31 December 2020: HK$70 million (US$9.0 million), 30 June 2021: HK$70 million (US$9.0 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 monthly on this loan facility. As at 31 December 2021, the loan-to-value ratio for this facility was 44.87%. There is no loan-to-value covenant for this loan.

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

During the period, the Group has executed a loan facility with BCM Bank to refinance the credit facility with the Industrial and Commercial Bank of China (Macau) Limited in relation to Estrãda da Penha. The facility amount is HK$70 million with a tenor of 2 years to mature in December 2023. The interest rate is 2.55% per annum over the 3-month HIBOR rate and repayment is due in full at maturity in December 2023. As at 31 December 2021, the facility had an outstanding balance of HK$70 million (US$9.0 million) (31 December 2020: HK$79 million (US$10.2 million), 30 June 2021: HK$79 million (US$10.2 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 50%. As at 31 December 2021, the loan-to-value ratio for this facility was 37.63%.

Bank Loan Interest

Bank loan interest paid during the period was US$1,404,000 (6 months ended 31 December 2020: US$1,737,000, 12 months ended 30 June 2021: US$3,230,000). As at 31 December 2021, the carrying amount of interest-bearing loans included unamortised prepaid loan arrangement fee of US$1,043,000 (31 December 2020: US$1,084,000, 30 June 2021: US$1,212,000).

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 2021, the fair value of the financial liabilities was US$79,000 lower than the carrying value of the financial liabilities (31 December 2020: US$184,000 lower than the carrying value of the financial liabilities, 30 June 2021: US$72,000 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.

8.  Basic and diluted loss per Ordinary Share

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

9.  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.

10. 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.

11. 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 2021 were US$46,000 (31 December 2020: US$41,000, 30 June 2021: US$47,000).

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 2020: US$736,000, 12 months ended 30 June 2021: US$1,336,000) at a quarterly fixed rate of US$300,000 per annum (fee of 1.0% per annum of the Net Asset Value until 31 December 2020, as adjusted to reflect the Property Investment Valuation Basis).

A realisation fee shall be payable on deals originated and secured by the Manager in 2020 and 2021 which shall be linked to the sales price achieved. 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. Realisation fees for the period totalled US$23,000 (6 months ended 31 December 2020: US$217,000, 12 months ended 30 June 2021: US$217,000). For the calendar year 2022, a realisation fee of 1.5 per cent. shall be payable on sales of assets above 80 per cent. of the Carrying Values and a management fee of US$300,000 per quarter shall be payable.

Additionally, in the event that divestments of all of the assets were secured by the Manager (either in one transaction or multiple transactions) prior to 31 December 2020, an extra incentive fee equal to 1 per cent. of the Net Proceeds of the assets was payable (the "Extra Incentive Fee"), subject to the aggregate sale price of those assets exceeding 80 per cent. of the Carrying Values of the relevant assets in aggregate. The time period for securing the realisation of all assets in order for the Manager to qualify for the Extra Incentive Fee may be extended for a further six month period subject to the satisfaction of certain conditions. In no circumstances will the 2020 Realisation fee and Incentive Fee exceed in aggregate US$5 million. The 2021 Realisation fee, active until 31 December 2021, (together with Incentive Fee (if any) during such period) shall not exceed in aggregate US$3.8 million. Incentive fees payable for the period totalled US$nil (6 months ended 31 December 2020: US$nil, 12 months ended 30 June 2021: US$nil).

A new agreement with the Manager was entered into with effect from 1 January 2022. A management fee of US$1,199,000 will be payable for 2022 with US$99,000 paid in January 2022 followed by monthly payments of US$100,000. A realisation fee shall be payable on the same terms as in 2021. In no circumstances will the aggregate of the 2022 management fee and realisation fee exceed US$1,780,000. Any realisation fees achieved on strata sales of units at The Waterside will be subject to the retention of 50% until all units have been sold. The Extra Incentive Fee is no longer applicable under the new agreement. Each aspect of these changes has been subject to a fair and reasonable assessment by Liberum. Any management fee proposals that may apply for 2023 will be included in resolutions to be put forward in the 2022 AGM.

All intercompany loans and related interest are eliminated on consolidation.

12. 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.

13. 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 has renewed this authority at the 2021 Annual General Meeting.

14. Subsequent events

Carmen Ling was appointed as a Director on 24 February 2022.

DIRECTORS AND COMPANY INFORMATION