MONETARY AND FOREIGN EXCHANGE
AUTHORITY OF MACAU
(AMCM)
Rua Pedro Nolasco da Silva, n.� 45, Macau.
*Phone: +853 325416 * Fax: +853 325432/3 * Telex: 88480 AMCRP OM

panchao
"Panchao in the opening ceremony."
"Father Teixeira is the author of an interesting article entitled "HOSPITAL S. RAFAEL", published in 1939, where he says that the original building is dated of 1569 and was set up by order of the bishop Melchior Carneiro."

AMCM's ANNUAL REPORT FOR 1995
REPORT AND FINANCIAL STATEMENTS FOR 1995
INDEX
1. Functions of AMCM
2. Monetary and exchange rate survey
3. Activity of AMCM
3.1. Broad guidelines
3.2. Exercise of functions
3.2.1. Regulation and supervision of Macau's financial market
3.2.2. Safeguard of the local currency and boost to the interbank market
3.2.3. Management of foreign exchange reserves
3.2.4. Issue of currency and of commemorative coins
3.3. Internal organization and management
3.3.1. Structure and organization
3.3.2. Human resources
3.3.3. Training and representation
3.4. Cooperation with other institutions
4. Financial statements
4.1. Analysis of balance sheet
4.1.1. Changes in assets
4.1.2. Changes in liabilities
4.1.3. Developments in capital reserves
4.2. Analysis of income
4.2.1. Operating profit and loss
4.2.2. Other income and costs
4.3. Proposal for the appropriation of profits
5. Statement of the Audit Committee

1. Functions of the AMCM

AMCM statutory functions are laid down in Decree-Law No. 14/96/M of 11 March.
Stress is laid on the following:

a) Assist the Governor in the information and conduct of the monetary, financial, exchange-rate, and insurance policies, by reporting and issuing recommendations on the matters referred to its consideration;

b) Guide, coordinate and monitor the money, financial, foreign-exchange and insurance markets, providing for their smooth operation and supervising the relevant operators, in accordance with its statutes and the regulations governing those activities;

c) Watch over the internal monetary stability and the external solvency of the local currency, ensuring its full convertibility, within the monetary, financial and exchange-rate policies;

d) Act as central depository and manager of foreign exchange reserves and other foreign assets;

e) Provide for the stability of the financial system.

2. Monetary and exchange rate survey

1995 continued to witness the major trends recorded by the monetary sector of Macau's economy since the beginning of the preceding year, thus maintaining its usual pattern.

Indeed, while banks proceeded with their traditional strategy of external relations, the levels of liquidity in the economy increased, bank credit to firms and individuals decelerated, and the balance of payments remained in the black.

After having steadily increased in the first half-year, the broad liquidity aggregate M2 (M1 plus quasi-monetary liabilities) started to slowdown with some swings - within 66.5 and 66.2 billion patacas - to resume regular growth rates in the last quarter. Thus, while by mid-year the M2 aggregate showed an annual year-on-year growth rate of 15% and in September of just 11%, in December such rate reached 13.5%, i.e. 69.3 billion patacas.

In turn the narrow liquidity aggregate M1 (currency circulation plus demand and savings deposits), under the influence of the gradual decrease in interest rates throughout 1995, and despite the shift from demand into time deposits, reversed, albeit slightly, the gradual weakening trend recorded until the outset of the year, shifting from a negative year-on-year growth rate of 11.9% in January to +1.1% in December.

Despite the contribution provided by the M1 aggregate, the improved trend of time deposits - with an average growth rate slightly above the previous year figure - explains the better relative performance of the M2 aggregate.

The behaviour of liquidity aggregates, in a small widely open economy such as Macau, results, to a large extent, from the external position of the monetary sector, reflected in the change in net foreign assets (NFA). Particularly important are also the domestic counterparts, such as bank credit to firms and individuals (CFI) and public sector deposits (all the more because credit to the public sector, beside being relatively modest, continued to shrink from 0.2 to 0.1 billion patacas).

The analysis of the said sources of money creation shows that the M2 growth in 1995, such as in the year before, was chiefly determined by the favourable performance of NFA, that rose by 6.7 billion patacas between end-1994 and end-1995. Indeed, although public sector deposits (whose increase has a contractionary effect on residents' deposit) fell by about 14.9%, the CFI contribution was very reduced, as it rose by only 1.9 billion patacas (4.9% up on 1994).

Therefore CFI pursued the slowdown started at the outset of the previous year (when it still recorded high growth rates, close to 40%), despite having shown slight swings, in absolute terms, throughout the year.

If the overall performance of CFI suggests some slowdown in the pace of Macau's economic activity throughout 1995, the sectorial distribution of credit seems to point in the same direction.

Indeed, the less favourable performance of CFI is explained by the annual 7.8% reduction in credit to manufacturing industry and by the also negative trend of credit to individuals, which decreased by 4.8% as a result of the decline in its components: housing (-1.9%) and "other purposes" (-12.3%). Although credit to construction and public works rose by 19.7%, the crisis which the sector is undergoing suggests that such growth is largely due to the rescheduling of former loans.

The greater liquidity derived from the behaviour of the major counterparts of the money stock, induced a substantial increase in placements on monetary bills (MB) issued by the Monetary Authority, which thus raised their share in money creation.

Therefore, on account of the fall in public sector deposits, Mbs, which rose relatively fast up to July and tended to stabilise at around 11.4% billion patacas until year-end, became the major factor behind official exchange reserves.

In turn the larger buoyancy of banks' NFA versus the slower rise in their liabilities, brought about a growth of OMI net foreign assets on the order of 26%, clearly above the previous year figure.

With this behaviour, banks consolidated their traditional foreign relations pattern (resumed a year earlier), which had been thoroughly changed in 1993, on account of a larger-than-usual increase in net capital outflows, that gave rise to an unprecedent balance-of-payments deficit.

Due to the monetary and currency framework prevailing in Hong Kong and Macau, local interest rates moved broadly in line with US rates. In this context, indicative rates set by the Macau Association of Banks (ABM) rose in the wake of the key rates of the Federal Reserve in February, and declined in December, also in response to the downward movement of US leading rates. thus ABM indicative rates for savings deposits and for deposits at seven-days notice, fell by 0.25% to 3.75% and 4.5%, respectively.

Note that the Macau Association of Banks, in accordance with a similar measure adopted by its Hong Kong counterpart, ceased to issue indicative rates for time deposits, thus conferring on banks total freedom in this domain as well as more transparent competition rules to the market. Nevertheless, the analysis of rates on local time deposits shows slight decreases throughout the year.

Lending rates showed an entirely different performance, with very modest rises in the first half-year and with small adjustments thereafter. Thus the last quarter witnessed a modest decrease from the previous quarter in prime rates on credit at 90 days and on housing credit, which even thus remained around 9% and 11%, respectively.

On account of the link that closely ties the Hong Kong and Macau currencies to the American dollar, the trend of the pataca in 1995 was affected by the behaviour of the USD, that underwent two distinct periods. The first half-year witnesses a strong depreciation of the American currency both against the European currencies and the Japanese yen. The second half saw the US currency reverse such trend, in view of moderately favourable USA macroeconomics indicators, recovering part of the losses recorded in the first half.

In line with its trend of recent years, the pataca strengthened once again its share in broad money M2, both in demand and in time deposits. The proportion of the local currency in bank credit also increased significantly by over 3.6 percentage points to 24.5% of the total.

In 1995 the nominal effective exchange rate index, that stands for the value of the pataca against the currencies of its major trading partners and measures somehow the impact of the exchange rate trend in the real economy of the Territory, declined by 1.27 p.p. to 106.61. However this reduction was much smaller than was to be expected from the behaviour of the pataca, in line with the determinant share in Macau's overall foreign trade held by the economies of Hong Kong, USA and China, whose currencies showed a very reduced structural variability against the pataca.

Burdened chiefly by the slowdown of economic activity, the profitability of Macau banks fell below its previous levels. Indeed the gross intermediation margin, assumed to be one of the overall indicators of bank profitability, recorded an annual negative growth rate of 3.3%. This was derived from the modest increase in total income and from the significant rise in operating costs, in turn determined by the high provisioning levels.

If the overall bank performance was favourable as regards employment, that grew by 2.6%, the same cannot be said of its contribution to GDP, as shown by the 4.8% yearly drop in the GVA of the sector. These two indicators jointly point to a decrease, supposedly cyclical, in the productivity of the sector.

3. Activity of AMCM.

3.1. Broad guidelines.

The government guidelines for 1995 envisaged the following groundwork for AMCM's action within the overall financial system and the monetary and exchange-rate policy:

a) Pursuance of the action related to the modernisation and elaboration of the regulatory framework governing the overall financial system of Macau and supervision thereof.

Within the banking sector, the preparation and implementation of specific legal and regulatory frameworks aimed at the creation of new institutions, viz. for financial intermediation, and for the issue of pataca-denominated credit cards, as well as the revision of the regulations governing venture capital companies and offshore banking activity.

As to the increase sector, revision of the legal and regulatory framework of the insurance activity and start of the preparation of the legal systems of insurance contracts and of welfare funds and private pension funds, as well as the rules of conduct for insurance companies and agents.

b) As regards the monetary and exchange-rate policy, the pursuance of action to ensure exchange-rate stability and to maintain the prevailing link of the pataca to the Hong Kong dollar.

Undertaking of action related to the new system of banknote issue by Banco Nacional Ultramarino and by Banco da China.

3.2. Exercise of functions

Taking into account the above guidelines as well as its statutory functions and duties, AMCM undertook a number of activities in 1995, whose main features are summarised below:

3.2.1. Regulation and supervision of Macau's financial system

a) Banking sector

Upon the consolidation of the new Legal Framework of the Financial System, approved by Decree-Law No. 32/93/M of 5 July, the capability of financial institutions to adjust to the new set of regulations, was analysed in 1995, to pursue the effort of additional guidance and regulation.

As to the supervision of the system, regular action pursued to monitor institutions through on-site inspections and remote control.

In view of the interest which Macau's financial system continues to attract, two new licenses were granted in 1995 for the establishment of subsidiaries of credit institutions based abroad.

The enlargement of the branch network (5 more than in 1994) and of ATMs (+12) permitted the strengthening of the banking coverage of the Territory. Foreign exchange counters also rose (+4).

Within the regulatory framework, AMCM continued to develop new projects, among which Law No. 3/95/M of 13 March providing for the merger and splitting of financial institutions, and Decree-Law No. 54/95/M of 16 October, that regulated the setting up and activity of venture capital companies.

A draft ordinance was also completed and submitted for approval to the top-level authorities providing for the legal system of forex companies.

Noteworthy are also Decree-Law No. 7/95/M of 30 January that lays down the ground rules of the currency issue system in the territory of Macau and Decree-Law No. 16/95/M of 3 April, that revised the measures of support to the local currency, by making compulsory the use of the pataca in payments effected with credit cards and similar instruments.

Furthermore start was made of the process for the revision of the system governing the Territory's offshore banking activity.

b) Insurance sector

As regards this sector, a policy was pursued aimed at the constant safeguard of the interests of the insured and third parties, as well as at the smooth operation of the market, through the co-ordination and control of financial guarantees and of the clauses of insurance policies. Thus, besides the preparation and publication of the notices providing for the setting up of assets to guarantee technical provisions, for the solvency margin, and for the establishment fund of insurance companies, 1995 witnessed the following developments:

- Entry into force, on 1 January, of Decree-Law No. 57/94/M, of 28 November, that laid down the new rules for compulsory public liability car insurance;

- Start, also on 1 January, of the new conditions of the car insurance standard policy and of the relevant premium tariff and conditions, laid down in executive orders Nos. 249/94/M and 250/94/M both of 28 November;

- Publication of Decree-Law No. 40/95/M of 14 August to prevail as of 1 September, providing for the legal system governing the compensation of damages arising out of industrial injuries and occupational diseases;

- Entry into force, also as of 1 September, of executive orders Nos. 236/95/M and 237/95/M, both of 14 August, that laid down the premium tariff and conditions of employers' liability insurance and the conditions of the relevant policy, respectively;

- Publication of Executive Order No. 244/95/M of 28 August, providing for the premium tariff and conditions of the compulsory public liability insurance policy of travel and tourism agencies and of tourist travel agencies;

- Completion of the draft for the revision of regulations governing the insurance business.

Within the supervision of the sector, a constant control over insurance companies continued to be undertaken, through the analysis of their quarterly and annual accounts, and through inspections to market operators, particularly insurance agents.

3.2.2. Safeguard of the local currency and boost to the interbank market

The furtherance and defense of the local currency is statutory attributed to AMCM. This is a rather difficult task in view of the reduced size of the Territory, the wide openness of its economy and the easy conditions of full convertibility.

Nevertheless the results of the action undertaken in 1995 may be considered very fruitful: the share of the pataca in monetary aggregates reached unprecedented figures by year-end: 38.5% of M1 and 29.0% of the broadest (and hence more significant) aggregate M2. As regards credit, the pataca - denominated component also increased in absolute and relative terms.

This favourable trend is explained, at least partially, by the flexibility of the pataca money market provided by the instruments made available by AMCM: on the one hand, monetary bills that allow banks to invest their excess liquidity in patacas (unwarranting its conversion into other currencies); on the other hand, foreign exchange operations and currency swaps that enable smaller banks (which depositors are not enough to feed their funding in patacas) to obtain the local currency from AMCM. At the same time, the possibility of temporary sales of monetary bills to AMCM by banks (repos in Mbs) ensures the immediate realisation of funds by banking institutions in the Territory, which have an occasional need to strengthen their liquidity positions.

The success of AMCM's intervention in the interbank market of the pataca is clearly obvious by the remarkable increase in monetary bills that recorded an annual growth close to 30% - approximately 2.6 billion patacas. This is all the more noteworthy as it followed upon a year (1994) that had already witnessed a substantial growth in demand for the same instruments.

Bearing in mind the financing requirements (namely in patacas) of some infrastructure investment project, AMCM allows Macau banks involved in such projects to effect, under concessionaire conditions, medium and long term currency swaps, that enable those institutions to manage appropriately and with flexibility their foreign exchange exposure.

3.2.3. Management of foreign exchange reserves

In 1995 the foreign exchange reserve of the Territory continued to increase, pursuing the upward path which has been characterising the behaviour of this aggregate during the 90es. By end-December it stood at approximately 18 billion patacas (2.3 billion up on the year before), accounting for an annual increase of approximately 15%.

Like as in previous years, the major factor behind this increase were monetary bills, which, albeit denominated in patacas, permit to stabilise the volume of the foreign exchange reserve, by neutralising the effects of the adjustment recorded on the banking system.

Contrary to recent years, the second major contribution to the growth of the exchange reserve was the increase in "own resources and results", since, leaving aside monetary bills, the other components of AMCM liabilities that support the exchange reserve showed modest or negative trends.

Despite the maintenance, and even strengthening, of the prudential rules for the management of the exchange reserve (which were reflected in a very stable intra-annual profile of the results achieved), the strategy adopted sought to profit from the favourable performance of capital markets (debts securities), boosted by the slow and disinflationary growth prevailing in industrialised economies.

In this context, the first two quarters of 1995 witnessed a reshuffling of financial investments out of the exchange reserve, that focused on the capital market (chiefly government securities of major world economies), which permitted to achieve interesting yields. The late months of the year saw strategic shifts in the composition of investments, and thus by end-1995 its structure showed again a clear predominance of money market instruments.

3.2.4. Issue of currency and of commemorative coins

As regards currency issue, 1995 was an important year.

In fact, the year under review saw the publication of Decree-Law No. 7/95/M of 30 January that laid down the ground rules for currency issue. Under this Decree-Law, the Territory concluded on 13 October agency contracts with Banco Nacional Ultramarino and with Banco da China for the issuance of banknotes. On the 16th of the same month the banknotes issued by the latter bank entered into circulation, as authorised by Decree-Law No. 8/95/M of 30 January.

In co-operation with the aforesaid issuing banks, studies were undertaken for the issue of the 20 patacas banknote to enter into circulation on 1 September 1996. At the same time, AMCM took a similar initiative for the minting of the 10 patacas metal coin, which is expected to start circulating on the 1997 Lunar Year.

As to commemorative coins, 1995 continued to witness the traditional launching of a coins to commemorate the corresponding Lunar Year. Furthermore, a commemorative coin was minted to mark the opening event of Macau International Airport.

3.3. Internal organisation and management

3.3.1. Structure and organisation

No changes occurred in the structure and organisational chart.

3.3.2. Human resources

Pursuing the human resources policy implemented in previous years, investment continued to be made in the improvement of the employees' qualifications, particularly as regards the technical staff.

The number of personnel remained virtually unchanged, but this stability reflects a great incentive to training and improvement of the labour conditions within AMCM.

T.I.1 Trend of human resources in AMCM
1993 1994 1995
Employees at year-end 123 122 124
- Managers 12 12 13
- Middle-managers 19 19 17
- Technical staff 34 35 41
- Assistants 6 5 4
- Administrative staff 36 36 34
- Auxiliary staff 16 15 15
Average number of employees 121,5 122,9 124,2

3.3.3. Training and representation

Personal advancement and the acquisition of new technical and vocational knowledge by its employees continued to be the most important factors for the institution, and thus AMCM paid for training courses in and out of the Territory.

In 1995 there were 355 attendees at training courses organised by AMCM Training Centre and by local and foreign institutions, accounting for an increase of 128 courses (+56.4%) over the year before.

The participation of AMCM personnel in training abroad focused chiefly on the foreign, banking supervision and data processing fields. Furthermore, AMCM Training Centre held courses in the Portuguese language and in Mandarin which were fairly attended.

Co-operation was maintained in the training area with the Hong Kong Institute of Bankers, with Portugal's Bank Training Institute and with Portugal's Insurance Institute.

Besides the subsidies to the employees who attend university, AMCM continued to grant, in co-operation with the Education Department, annual scholarship to high school students who distinguish themselves and wish to attend college.

Like as in previous years, noteworthy is also the participation of AMCM senior staff in international meetings of interest to the institution and to Macau, namely the annual meeting of the Asian Development Bank in Auckland, of the World Bank/IMF in Washington, the SEANZA forum on banking supervision at Karachi and the annual conference of the International Association of Insurance Fraud Agencies in Saint Louis.

3.4. Co-operation with other institutions

1995 continued to witness the excellent co-operation provided by the financial operators subject to AMCM supervision, as well as by their associations, namely the Association of Macau Insurance Companies and the Association of Macau Insurance Agents.

Note also the operational support and the collaboration extended by the two banks of issue - Banco Nacional Ultramarino and Banco da China. The latter sponsored the first institutional visit to Peking and to Shanghai of a delegation of representatives of credit institutions licensed to operate in the Territory, headed by AMCM.

Within mutual co-operation, it is further worthy of mention the traditional collaboration pursued with AMCM foreign counterparts, particularly the Banco de Portugal, Portugal's Insurance Institute, Hong Kong's Monetary Authority and Insurance Commissioner and finally the Basle Committee.

4. FINANCIAL STATEMENTS

4.1. Analysis of the balance sheet

T.I.2. Trend of the balance sheet
(106 Patacas)
ITEMS 31.12.94 31.12.95 VARIATION
AMOUNT %
ASSETS 17.338,6 20.062,2 2.723,6 15,7
- Foreign exchange reserves 15.677,8 17.978,4 2.300,6 14,7
- Domestic credit and related items 1.237,5 1.681,4 433,9 35,9
- Other 423,3 402,4 (20,9) (4,9)
LIABILITIES 16.267,4 18.496,6 2.229,2 13,7
- Deposits 5.260,1 4.378,9 (881,2) (16,8)
- Certificates of indebtedness 1.254,4 1.400,0 145,6 11,6
- Monetary bills 8.686,0 11.242,0 2.556,0 29,4
- Other 1.066,9 1.475,7 408,8 38,3
CAPITAL RESERVES 1.071,2 1.565,6 494,4 46,2
- Capital endowment 705,6 982,5 276,9 39,2
- Provisions 365,6 583,1 217,5 59,5

4.1.1. Change in assets

Foreign exchange reserves, which account for 89.6% of AMCM total assets, recorded an annual growth rate of 14.7%, having reached approximately 18 billion patacas by end-December 1995. This development stood behind the 15.7% increase in assets, which for the first time rose above 20 billion patacas.

As to the other items under assets, note the 35.9% rise of domestic credit and related items, partly due to a foreign currency fund set up in the year before.

4.1.2. Changes in liabilities

Monetary bills continued to be the major component of liabilities, with 60.8%, having increased by 29.4%. Currency issue, divided between Banco Nacional Ultramarino and Banco da China as of 16 October 1995, recorded a moderate rate (+11,6%).

The other liability items - "deposits" (banks' compulsory deposits with AMCM and excess public sector deposits) and "other" - showed different performances; indeed while the former fell by nearly 17%, the residual item recorded the largest growth under liabilities, with 38.3%, reflecting the counterpart of the foreign currency fund.

4.1.3. Developments in capital reserves

Income generated in 1995 permitted a significant increase of 59.5% in provisions for general risks (47 million patacas above the provisions utilised in 1994), as well as in the capital endowment (+39.2%) which covers the net profit for the fiscal year.

4.2. Analysis of income

T.I.3. STATEMENT OF INCOME FOR 1995
(106 Patacas)
ITEMS 1994 1995 VARIATION
AMOUNT %
- Operating profit and loss (170,5) 429,4 599,9 351,8
- Administrative income 145,2 168,1 22,9 15,8
- Administrative costs 76,2 97,1 20,9 27,4
- Appropriations for provisions 48,0 217,4 169,4 352,9
- Other income 2,5 4,7 2,2 88,0
- Other costs 0,7 0,8 0,1 14,3
- Appropriations for the Welfare Fund 10,0 10,0 - -
- Results for previous fiscal years 170,5 (0,2) (170,5) (100,0)
NET PROFIT 12,8 276,9 264,1 2.063,3

4.2.1. Operating profit and loss

AMCM operating profits and losses reflect two distinct components: on the one hand, the income from the exchange reserve management, and on the other hand, the costs of remunerating the compulsory liquidity reserves of banks operating in Macau and the monetary bills held by the same institutions. Such costs ultimately reflect the AMCM charges with the support of the local currency.

(106 Patacas)
- Exchange reserve management operations 1.070,2
- Operations in patacas (640,8)
OPERATING PROFIT 429,4

In 1995 income from the exchange reserve was rather favourable (1.1 billion patacas), thanks to the increase in the exchange reserve volume and to the earnings derived from the capital market (debt securities). Conversely, the second half-year saw cuts in the short-term interest rates of Hong Kong and US dollars, which reduced the return on investments in these money markets.

The costs of operations in patacas (remuneration of liquidity deposits and of monetary bills) increased remarkably (from 311.8 to 640.8 million patacas), due to the fact that 1995 was the first complete year in which such deposits were remunerated and to the significant increase in the volume of monetary bills issued (particularly in the second half-year).

Despite the increased costs, operating profits achieved in 1995 (429.4 million patacas) account for an increase of 351.8% over the year before.

4.2.2. Other income and costs

Administrative income was 15.8% up on 1994 reflecting the increase in gross profit from the related activities; in turn, and such as in the previous year, the growth of administrative costs (covering personnel charges, costs with external supplies and services, and appropriations for depreciations) overstepped the increase in administrative income, since their growth rate stood at 27.4% chiefly on account of the costs, supported by AMCM, of the currency issue by Banco da China.

As to the other items, note once again the increase in provisions in view of the profits obtained. The policy of consolidation of the financial capacity of the institution was pursued and the financial assets of the Welfare Fund were increased.

4.3. Proposal for the appropriation of profits

In view of the preceding and of the provisions of AMCM Statutes, the Board of Directors recommends that the net profit for 1995, to the amount of MOP276,950,808.54 (two hundred and seventy-six million, nine hundred and fifty thousand, eight hundred and eight patacas and fifty-four avos) be appropriated as follows:

- MOP92,316,932.20 (ninety-two million, three hundred and sixteen thousand, nine hundred and thirty-two patacas and twenty avos), for the Territory;

- MOP184,633,876.34 (one hundred and eighty-four million, six hundred and thirty-three thousand, eight hundred and seventy-six patacas and thirty-four avos) for incorporation into account 712, accumulated profit, AMCM capital endowment.

4.3.1 Or�amento global de explora��o

4.3.1.1. Evolu��o real

Milh�es de Patacas
RUBRICAS REALIZA��O VARIA��O
1994 1995 Valor (%)
- Proveitos totais 147,6 602,2 454,6 308,0
- Custos totais 134,8 325,3 190,5 141,3
- RESULTADO L�QUIDO 12,8 276,9 264,1 2.063,3

Autoridade Monet�ria e Cambial de Macau, aos 26 March 1996.

THE BOARD OF DIRECTORS

JOS� CARLOS RODRIGUES NUNES
Chairman

ANT�NIO JOS� F�LIX PONTES
Member of the Board

ANT�NIO DOS SANTOS RAMOS
Member of the Board


5.STATEMENT OF THE AUDIT COMMITTEE

In the exercise of the powers conferred by Article 18 No. 6 of Decree-Law No. 14/96/M of 11 March, the Audit Committee monitored the development of the management activity of Autoridade Monet�ria e Cambial de Macau in the course of the 1995 fiscal year.

Such monitoring was carried out by means of the monthly accounting statements duly forwarded by AMCM. The Audit Committee obtained from the Board of Directors all the enlightenment requested.

The analysis carried out, namely of the balance sheet and the profit and loss account for the fiscal year ended on 31 December 1995, shows the following:

1. The major accounting aggregates recorded the figures and developments (in million patacas):

DESCRIPTION 31.12.95 31.12.94 GROWTH RATE (%)
- Total Net Assets 20.062 17.339 15,7
- Total Capital Reserves 1.566 1.071 46,2
- Total Income 1.447 849 70,4
- NET PROFIT FOR THE YEAR 277 13 2.130,8

2. Between 1994 and 1995 the growth rate of administrative costs reached 27.5%, chiefly due to an increase in the items "Supplies and services from third parties".

3. The Provision for General Risks was increased by 217.4 million patacas, a 59.5% growth as compared to the amount set up last year.

4. As opposite to 1994 when it experienced a negative growth, the cash-flow (which includes net profit, provisions, amortisations and depreciations) exceeded slightly by 500 million patacas.

5. The primary cover rate (ratio between the Exchange Reserve, less foreign liabilities under one year, and liabilities in patacas) reached 105.62%, a figure above the legal requirement (90%), and thus, showing a more favourable trend as compared to the previous year.

In view of the preceding, the Audit Committee, as its meeting held on 26th March 1996, in the exercise of the powers conferred by Article 18 No. 6 e) of Decree-Law No. 14/96/M of the 11 March, decided to:

a) Put on record the efficient and timely way in which, within AMCM, the accounting data and the requested explanations were provided.

b) Consideration as clear and enlightening the accounting data appearing in the Balance Sheet and Profit and Loss Account as at 31 December 1995 as regards AMCM's asset and financial position, the cover of the currency issue, and the composition of the exchange reserve.

c) Congratulate for the positive evolution of the financial situation of AMCM, as shown in the documents of presentation of the 1995 accounts.

d) Consider, accordindly, the annual accounts for the fiscal year 1995 deserve the appropriate approval.


Macau, 26 March 1996

LEONEL ALBERTO ALVES
Chairman

PAUL TSE
Member

HERN�NI MACHADO DUARTE
Member

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