Dear Shareholders,

Macau began a long-awaited recovery in the second half of 2016, which saw positive gaming revenue growth and an expansion in quarterly gross domestic product – the first time in two years.

This positive momentum has boosted public sentiment, which in turn has stabilised property prices and enhanced transactions in the lower value end of the domestic market.

With two additional mega-resorts and major new infrastructure projects scheduled for completion in the next couple of years, Macau’s competitiveness should be further enhanced despite increasing competition from the region.

Financial Performance

For the period under review, MPO’s portfolio of properties was valued at US$405.0 million, an increase of 2.9% since 30 June 2016. Adjusted NAV as at 31 December 2016 stood at US$231.2 million, translating to US$3.03 (245 pence) per share.

The IFRS NAV increased 4.2% to US$111.1 million, with an IFRS NAV per share of US$1.45 (118 pence).

We have continued to focus on achieving an optimal debt profile with a view to maintaining a sufficient cash balance while maximising returns for shareholders. Total borrowings stood at US$178.4 million, translating to a loan-to-value ratio of 42%.

As of 31 December 2016, MPO’s share price was 120.75 pence, reflecting a 50.7% discount to Adjusted NAV per share.

Maintaining Asset Value

Against the backdrop of a challenging macroeconomic landscape, our Company has withstood the downturn. We have shifted our focus to asset enhancement to sustain the value of our portfolio.

Our marketing efforts and rental adjustments have delivered results for The Waterside, where occupancy had reached 49% at the period’s end and has further risen to 58% as of end February 2017. Asset
enhancement and marketing initiatives continue to strengthen the position of the property and support rental income.

Sales of mid-market to high-end residential properties have remained challenging amid the government’s anti-speculation policies. Nevertheless, concerted efforts have been made to generate awareness and buyer interest in the The Fountainside, although a pickup in sales will depend very much on the economic recovery being sustained.

Estrada da Penha remains an exceptional property, given that detached houses of significant size and in such a prime location are scarce in Macau. The territory’s real estate market is showing signs of stabilising,
however, investors for such an asset in the premium residential segment are still adopting a wait-and-see approach.

We have made encouraging progress on Senado Square. The approval of the architectural concept plan in December has increased the appeal of the asset for disposal.

The Future For Macau

Improving gross gaming revenues and supportive new policies from China’s central government should help to stabilise Macau’s economy further.

Efforts to attract more families and casual gamblers have borne fruit, with the number of overnight visitors in 2016 rising 9.8% year-on-year. This momentum is likely to continue, supported by the opening of another two new multi-billion dollar integrated resorts – the MGM Cotai in the second half of 2017 and the Grand Lisboa Palace in 2018 – which will attract more visitors and entice them to stay longer.

The VIP gaming segment has surprisingly shown some signs of a recovery, helped largely by a combination of better Chinese macroeconomic conditions and improved player confidence.

There remain uncertainties and risks. Continued rises in US interest rates and any new measures enacted by China’s central government to curb capital outflows, in addition to any further property cooling measures, could subdue Macau’s recovery. Nonetheless, barring unforeseen economic or political circumstances, we expect a continued improvement in property values in the short term. The Company will look to realise assets into the recovery and eventually return cash to shareholders over the next two years.

Chris Russell