MACAU SUCCESS LIMITED 澳門實德有限公司* (Incorporated in Bermuda with limited liability) (於百慕達註冊成立之有限公司) Stock Code 股份代號：00487 * For identi. cation purpose only 僅供識別 Contents 01 Our Vision 03 Corporate Information 04 Financial Highlights 05 Group Structure 06 Chairman’s Statement 09 Business Highlights 10 Management Discussion and Analysis 26 Corporate Governance Report 33 Report of Directors 41 Biographical Details of Directors and Senior Management 43 Report of Auditors 45 Consolidated Income Statement 46 Consolidated Balance Sheet 48 Balance Sheet 49 Consolidated Statement of Changes in Equity 50 Consolidated Cash Flow Statement 52 Notes to the Financial Statements 117 Five-year Financial Summary Our Vision To become a major player in the gaming, entertainment and tourist-related industries in the Asia-Paci.c region, and to create value for our shareholders, customers and employees while committing to attain a high standard of corporate governance. 2 Corporate Information DIRECTORS Executive Directors Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Ma Ho Man, Hoffman (Deputy Chairman) Non-executive Director Mr. Choi Kin Pui, Russelle Independent Non-executive Directors Mr. Luk Ka Yee, Patrick Mr. Yim Kai Pung Ms. Yeung Mo Sheung, Ann COMPANY SECRETARY Ms. Chiu Nam Ying, Agnes FINANCIAL CONTROLLER Mr. Wong Chi Keung, Alvin AUTHORISED REPRESENTATIVES Mr. Ma Ho Man, Hoffman Ms. Chiu Nam Ying, Agnes AUDIT COMMITTEE Mr. Yim Kai Pung (Chairman) Mr. Choi Kin Pui, Russelle Mr. Luk Ka Yee, Patrick Ms. Yeung Mo Sheung, Ann REMUNERATION COMMITTEE Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Choi Kin Pui, Russelle Mr. Luk Ka Yee, Patrick Mr. Yim Kai Pung Ms. Yeung Mo Sheung, Ann EXECUTIVE COMMITTEE Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Ma Ho Man, Hoffman AUDITORS CCIF CPA Limited LEGAL ADVISORS ON HONG KONG LAW Iu, Lai & Li LEGAL ADVISORS ON BERMUDA LAW Conyers Dill & Pearman PRINCIPAL BANKERS Chong Hing Bank Limited Fubon Bank (Hong Kong) Limited The Bank of East Asia, Limited The Hongkong and Shanghai Banking Corporation Limited PRINCIPAL SHARE REGISTRAR AND TRANSFER AGENT IN BERMUDA Butter.eld Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke, HM 08, Bermuda BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG Tricor Tengis Limited 26th Floor Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong REGISTERED OFFICE Clarendon House 2 Church Street Hamilton HM 11, Bermuda HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS Suite 1601-2 & 8-10, 16/F. Great Eagle Centre 23 Harbour Road Wanchai, Hong Kong SHARE LISTING The Stock Exchange of Hong Kong Limited Stock Code: 00487 WEBSITE www.macausuccess.com Financial Highlights Fifteen months ended Year ended 31 December 30 September 2008 2007 2006 HK$’000 HK$’000 HK$’000 Result Turnover Cruise leasing and management 118,000 95,901 95,717 Travel 509,254 7,853 7,813 627,254 103,754 103,530 (Loss)/pro.t from operations (67,592 ) 34,069 48,917 (Loss)/pro.t attributable to equity shareholders of the Company (238,304 ) 2,314 28,380 Balance sheet Total assets 1,418,947 1,197,379 978,395 Total liabilities 487,788 170,466 11,475 Net assets 931,159 1,026,913 966,920 Group Structure Macau Success Limited Hong Kong Listed Company with a focus on Gaming, Entertainment and Tourist-Related Businesses Travel Success (Macau) Limited Integrated Casino-resort Jade Travel Group (Canada & New York) Chairman’s Statement The Group achieved a number of milestones during the period under review; our three-pronged strategy had brought us closer to becoming a major player in the gaming, entertainment and tourist-related industries in the Asia-Paci.c region. Chairman’s Statement To Our Shareholders: On behalf of the board of directors (the “Board” or “Directors”) of Macau Success Limited (“Macau Success” or the “Company”), I am pleased to present the annual report of the Company and its subsidiaries (collectively the “Group”) for the .fteen months ended 31 December 2008. 2008 was a year of progress for the Group. Despite the global .nancial crisis and concerns over the economic downturn in Asia had posed challenges to the gaming industry in Macau, the Group continued to adopt its three-pronged strategy based on travel, cruise, gaming and entertainment-related businesses and achieved a number of major milestones during the period under review. Our .agship project, Ponte 16, a world-class integrated casino-entertainment resort, of.cially launched its casino operation in February 2008, followed by the opening of So.tel Macau At Ponte 16 and the high-limit betting area in August and September respectively in the same year. As the only integrated casino-entertainment resort featuring historical and cultural elements in the Inner Harbour of Macau, Ponte 16 has been well-received by tourists from all over the world with an improving performance since its opening. During the period, the Group took on new initiatives to build a stronger platform for creating synergies among the Group’s core businesses. In July 2008, the Group further strengthened the international network of its travel business by acquiring 80% equity interest in certain companies in Canada and the United States of America (“US”) which conduct the business of air travel consolidator, travel agent, tour provider and provider of related services in Canada and US (the “Jade Travel Group”) with extensive of.ce network in Canada and US. While we have already established presence in the travel industry in Asia, the acquisition of the Jade Travel Group enables our business to extend its reach to North America. Such acquisition not only has enhanced our travel business platform, it also facilitates cross-selling with Ponte 16, thereby broadening the customer base of the integrated casino-entertainment resort. In August 2008, the Group established a strategic partnership with SBI Macau Holdings Limited (“SBI Macau”), a wholly-owned subsidiary of SBI Holdings, Inc. (“SBI Holdings”), one of the largest venture capital .rms and the largest online securities company in Japan through its subsidiaries. That is the latest strategic alliance the Company has formed after that with Maruhan Corporation (“Maruhan”) in 2007. These alliances have effectively created a strong regional business network for the Group’s future growth in the gaming, entertainment and tourist-related businesses in the Asia-Paci.c region. The Group’s next step would be to leverage on its extensive experience and the connection of its Japanese partners to extend its footprint in Japan and Taiwan’s travel and gaming markets. In line with the Macau government’s plan to preserve and revitalise the neighbourhood of Ponte 16, the Group will continue to actively participate in initiatives that transform the Inner Harbour into a tourist attraction, and to launch a wide range of events at Ponte 16 in tandem with different festivals to make Ponte 16 a landmark for people to gather during festive occasions. Chairman’s Statement OPERATIONAL HIGHLIGHTS FOR THE PERIOD UNDER REVIEW Travel Business With the acquisition of the Jade Travel Group in July 2008, the Group now has travel network that spans across Asia and North America. The Jade Travel Group conducts the business of air travel consolidator, travel agent, tour provider and provider of related services with extensive of.ce network in Canada and US. The Jade Travel Group is expected to bring synergetic bene.ts to the Ponte 16 project and our cruise business. Cruise Business The leasing and management of the Group’s cruise ship, M.V. Macau Success will continue to play a role in developing our gaming, entertainment and tourist-related businesses of the Group. Investment Project – Ponte 16 As the only world-class integrated casino-entertainment resort situated in Macau’s Inner Harbour, part of “The Historic Center of Macao” which is a designated UNESCO World Heritage Site, Ponte 16 enjoys a unique positioning relative to other casinos in the enclave. Despite the volatile economic environment, the efforts we have put in to building a stronger and more integrated business platform have begun to pay off. So.tel Macau At Ponte 16 has recorded continued growth in occupancy rates since its opening in August 2008. We also see a diversifying customer mix and an increasing number of visitors from overseas. OUTLOOK For Macau, 2008 was a year of mix blessings. In the face of volatile business environment, Macau continued to demonstrate resilience. The statistics from the Statistics and Census Service of the Macau government show that the gross gaming revenue of Macau grew by approximately 30% from 2007 to reach MOP 109.8 billion in 2008. Thanks to the Macau government’s effort in promoting tourism, Macau also recorded an approximately 11.8% growth in the number of visitor arrivals in 2008 compared to the previous year, and at the same time, successfully diversi.ed its source market with the number of visitors from Southeast Asian countries increasing signi.cantly during the past year, offsetting part of the effect brought by the tightening of Individual Visit Scheme (IVS). The Group remains cautiously optimistic about the future of Macau’s gaming industry. Macau is the only Chinese city that permits casino gaming, and its central location in Asia makes it a convenient destination for visitors from countries in the region. The Group believes Macau will maintain its position as the leading leisure and gaming destination in Asia. With the construction works of the Hong Kong-Zhuhai-Macau Bridge expected to commence in late 2009, the bridge is expected to boost traf.c between Hong Kong, Macau and Zhuhai and improve tourism among the cities upon its completion. In addition to the “Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020)” promulgated in January 2009 by the Central People’s Government of the People’s Republic of China, the governments of Hong Kong, Guangdong and Macau in February 2009 had proposed to expand Shenzhen’s IVS to the entire Guangdong province. Such initiatives are expected to facilitate Macau’s closer co-operation with Hong Kong and Guangdong province and promote Macau’s economy. Looking ahead, the Group will continue to adopt its three-pronged strategy in travel, cruise, gaming and entertainment businesses and explore opportunities not only in Macau but also beyond the enclave to the Asia-Paci.c region to fuel its growth. Ponte 16 has unique competitive advantages such as its partnership with Sociedade de Jogos de Macau, S.A., our extensive management experience in casinos and VIP halls, its central location in Macau’s historical district, and its world-class architectural design with a unique European theme; while the travel business enjoys a network that spans across Asia and North America. Together, the gaming and travel businesses are expected to drive the Group’s future revenue growth, while the cruise business will continue to contribute stable revenue. The Group believes the future holds considerable opportunities. The execution of our three-pronged business strategy has brought us closer to our goal of becoming a major player in the gaming, entertainment and tourist-related industries in the Asia-Paci.c region. Our strong platform has prepared us to seize further opportunities and to face challenges ahead. We will continue to leverage on strengths to deliver valuable returns to our shareholders. APPRECIATION Last but not least, I would like to extend my sincere gratitude to our employees for their dedication and hard work. I would also like to thank our customers, shareholders and business partners for their strenuous support. Yeung Hoi Sing, Sonny Chairman Hong Kong 16 April 2009 Business Highlights ‧ Commenced the operations of the casino of Ponte 16 and its hotel So.tel Macau At Ponte 16. ‧ Recruited Maruhan a leading player in the pachinko industry in Japan, as a shareholder of Macau Success and a strategic partner in Ponte 16. ‧ Formed strategic partnership with SBI Macau, a wholly-owned subsidiary of SBI Holdings and entered into a letter of intent with SBI Holdings in relation to any future investment or carrying on of any casino and related entertainment, resort business and real estate business in Japan. ‧ Acquisition of the entire issued share capital of Smart Class Enterprises Limited (“Smart Class”), being a company indirectly owns 80% equity interest in certain companies in Canada and US, which conduct the business of air travel consolidator, travel agent, tour provider and provider of related services, with extensive of.ce network in Canada and US. Management Discussion And Analysis The year 2008 marks a number of milestones for the Group as it continued to deliver results on its three-pronged strategy by leveraging on synergies among its core businesses: travel, cruise, gaming and entertainment. Management Discussion and Analysis The year 2008 marks a number of milestones for Macau Success Limited (“Macau Success” or the “Company”) and its subsidiaries (collectively the “Group”) as the Group continued to deliver results on its three-pronged strategy by leveraging on synergies among its core businesses: travel, cruise, gaming and entertainment. The Group of.cially commenced the casino operations and the hotel operations of its .agship investment project Ponte 16 in February 2008 and August 2008 respectively. The Group also embarked on a number of strategic initiatives and successfully paved the way for future growth. During the reporting period, the Board resolved to change the .nancial year end date of the Company from 30 September to 31 December in order to enable the Group, as well as the associates of the Company relating to the Group’s .agship investment project, Ponte 16 (the “Associates”) to have a coterminous year end date. Accordingly, the .nancial period under review covered the .fteen months from 1 October 2007 to 31 December 2008, which may not be comparable with the results of the Group for the twelve months ended 30 September 2007 (the “last corresponding year”). The following discussion should be read in conjunction with the consolidated .nancial statements and the related notes included in this annual report. RESULTS For the .fteen months ended 31 December 2008, the turnover of the Group was approximately HK$627.3 million, compared to the last corresponding year of approximately HK$103.8 million. Gross pro.t was approximately HK$134.6 million (2007: approximately HK$95.7 million). Loss attributable to equity shareholders of the Company amounted to approximately HK$238.3 million, compared to a pro.t attributable to equity shareholders of the Company of approximately HK$2.3 million in the last corresponding year. Loss per share for the reporting period was 9.87 HK cents (earnings per share in 2007: 0.11 HK cents). The substantial increase in turnover of the Group for the period under review was mainly attributable to the contribution from the Jade Travel Group (as de.ned below under sub-section headed “Travel Business”) in which 80% equity interest was acquired by the Group in July 2008. The loss incurred during the period under review was mainly attributable to loss incurred by the cruise business which has been adversely affected by high fuel oil and operating costs and impairment of other receivables, as well as the loss shared by the Group from the Associates. The loss shared by the Group from the Associates for the period under review amounted to approximately HK$170.3 million (2007: approximately HK$15.5 million), which was mainly attributable to the depreciation charges and high operating costs in the initial stage of operation of the business of Ponte 16. The Company issued a pro.t warning announcement on 20 February 2009 to convey these messages to its shareholders and potential investors. On 29 October 2007, the Company through its wholly-owned subsidiary, Golden Sun Pro.ts Limited (“Golden Sun”), disposed to Maruhan Corporation (“Maruhan”) of 10.2% of the entire issued share capital of, and related shareholder’s loan to, World Fortune Limited (“World Fortune”) for a consideration of approximately HK$208.5 million. World Fortune mainly owns a 49% equity interest in Pier 16 – Property Development Limited (“Pier 16 – Property Development”). Management Discussion and Analysis In connection with preparing the unaudited interim results for the six months ended 31 March 2008 and the twelve months ended 30 September 2008, the Directors referred to the valuation report issued for the put option, valued at HK$198,000, the option of which was granted to Maruhan at the date of completion of the disposal on 29 October 2007. The Directors considered that the fair value of the put option to be nominal and therefore made a critical accounting judgement that substantially all the risks and rewards of ownership of the 10.2% equity interest in World Fortune had been transferred to Maruhan. Accordingly, the Group recognized a gain of HK$116,992,000 on partial disposal of World Fortune for the six months ended 31 March 2008 and the twelve months ended 30 September 2008. However, in connection with preparing the .nancial statements for the period ended 31 December 2008, the directors took into consideration the state of economy which was highly volatile. The updated valuation for the put option on completion date was HK$3,599,000 and was used by the auditors of the Company for audit purpose. The updated valuation and the volatile economy point to the possibility of Maruhan exercising the put option to be not remote. In view of the above matters, the Directors therefore made a critical accounting judgement that all the risks and rewards of ownership of the 10.2% equity interest in World Fortune had not been substantially transferred to Maruhan. Accordingly, the Group retains substantially all the risks and rewards of ownership of the 10.2% equity interest in World Fortune and therefore accounts for World Fortune as a wholly-owned subsidiary of the Group. Accordingly, the consideration received has been recognised as liabilities and classi.ed under long-term payables in the consolidated balance sheet. DIVIDENDS No interim dividend was paid during the period under review (2007: Nil). The Directors do not recommend any payment of a .nal dividend for the .fteen months ended 31 December 2008 (2007: Nil). Macau Success Limited Annual Report 2008 13 Management Discussion and Analysis Travel Business The Group’s travel business spans across Asia and North America, building a stronger platform to create synergies among the Group’s core businesses. Management Discussion and Analysis Travel Business The Group’s travel business spans across Asia and North America. In addition to Travel Success Limited and Travel Success (Macau) Limited which Macau Success owns and operates in Hong Kong and Macau respectively, the Group also owns 80% of the equity interest in certain companies in Canada and the United States of America (“US”) which conduct the business of air travel consolidator, travel agent, tour provider and provider of related services in Canada and US (the “Jade Travel Group”) following the completion of the acquisition of the Jade Travel Group in July 2008. With an extensive of.ce network in Vancouver, Calgary, Toronto, Montreal in Canada and also New York in US, the Jade Travel Group offers sophisticated travel plans and tailor-made inbound and outbound tour packages to customers. Through these companies, the Group is able to provide one-stop travel services to local and multinational corporations and up-market leisure travelers. REVIEW OF OPERATIONS The Group’s travel business became the major contributor to the Group’s total turnover during the period under review, accounting for 81.2%, or approximately HK$509.3 million, of the Group’s total turnover. That represents a surge of approximately HK$501.4 million, or 6,384.8% over the last corresponding year. Segment pro.t from travel business was approximately HK$2.7 million (2007: loss of approximately HK$0.5 million). The tremendous growth in turnover for the period under review was mainly attributable to the contribution from the Jade Travel Group, in which 80% equity interest was acquired by the Group in July 2008. In line with the Group’s strategy to build a stronger platform to create synergies among the Group’s core businesses, the Group acquired the Jade Travel Group through its acquisition of the entire issued share capital of Smart Class Enterprises Limited (“Smart Class”), which owns as to 80% equity interest in the Jade Travel Group, a major air travel consolidator, travel agent, tour provider and provider of related services with extensive of.ce network in Canada and US. The acquisition of the Jade Travel Group not only has enhanced the Group’s travel business platform with inbound and outbound tours to and from North America, but also facilitates cross-selling with Ponte 16, thereby broadening the customer base of the integrated casino-entertainment resort and the Group’s cruise ship, M.V. Macau Success. The Group has a very clear focus on providing high-end customers with a wide range of one-stop travel services. Moreover, the travel agencies provide the Group a platform to promote and offer exclusive packages on Ponte 16 and the cruise trips. Going forward, the Group will heighten its effort in tour packages promotions for growth potential. Management Discussion and Analysis Cruise Business Macau Success engages in the cruise business through leasing and management of the Group’s cruise ship, M.V. Macau Success. During the reporting period, the cruise business continued to contribute stable turnover to the Group. Management Discussion and Analysis Cruise Business Macau Success engages in the cruise business through leasing and management of the Group’s cruise ship, M.V. Macau Success, a luxury cruise ship with world-class casino and various entertainment facilities. The cruise has 230 passenger rooms and can accommodate as many as 512 passengers. The cruise ship operates on a daily basis from Hong Kong to international waters. REVIEW OF OPERATIONS During the reporting period, the cruise business continued to contribute stable turnover to the Group. For the .fteen months ended 31 December 2008, turnover from the cruise business amounted to approximately HK$118.0 million (2007: approximately HK$95.9 million), accounting for 18.8% of the Group’s total turnover. Segment loss from the cruise business was approximately HK$1.7 million (2007: pro. t of approximately HK$32.0 million), which was mainly due to the increase in fuel oil and operating costs and impairment of other receivables during the period under review. Management Discussion and Analysis Investment Project – Ponte 16 The casino operation of Ponte 16 of.cially commenced in February 2008. Its .ve-star hotel So.tel Macau At Ponte 16 and the high-limit betting area also opened in August and September in the same year respectively. Management Discussion and Analysis Investment Project – Ponte 16 Ponte 16 is a world-class integrated casino-entertainment resort located in the Inner Harbour of Macau, comprising a .ve-star luxury hotel – So.tel Macau At Ponte 16, a casino, a shopping arcade, and food and beverage facilities. Featuring a unique European theme infused with Chinese elements, Ponte 16 situates on the original location of Pier 16, which has been in operation since the early 20th century and is now one of Macau’s historical landmarks. Ponte 16 is the only resort situated in Macau’s Inner Habour just across a .ve-minute ferry ride to Wanzai, Zhuhai and with close proximity to Gongbei bridge border crossing, making it conveniently accessible to tourists. As the Group’s .agship project, Ponte 16 achieved a number of milestones during the period under review. The casino operation of Ponte 16 of.cially commenced in February 2008. Its .ve-star hotel So.tel Macau At Ponte 16 and the high-limit betting area also opened in August and September in the same year respectively. As the only integrated casino-entertainment resort featuring historical and cultural elements in the Inner Harbour of Macau, Ponte 16 has been well-received by tourists from all over the world. REVIEW OF OPERATIONS As at 31 December 2008, the casino had 97 gaming tables, eight of which were high-roller tables, plus 278 slot machines. During the period under review, the average number of visitors per day since the opening of Ponte 16 was around 10,000 with the highest number of visitors recorded in one single day amounted to 30,000 during the Chinese New Year period in 2008. Average daily mass drop during the period under review was approximately HK$13 million. With the opening of the VIP hall of the casino and the VIP mansion The Mansion At So.tel at So.tel Macau At Ponte 16 in the second half of 2009, management of the Company (the “Management”) expects the performance of the casino to be improved further. Managed by the world-renowned hotel management group, the Accor Group, So.tel Macau At Ponte 16 has 408 guest rooms, including 363 guest rooms, 26 suites and an exclusive block of The Mansion at So.tel with 19 units. Since its opening, So.tel Macau At Ponte 16 has attracted high-end guests with its top-class services and high-end hotel facilities, with a steady growth in its occupancy rate. The Management expects occupancy rate to be improved further with the opening of more new amenities in the future. To tie-in the launch of Ponte 16, considerable effort had been put in marketing and promotion. Coupled with higher operating costs incurred in the initial stage of operation and depreciation charges, the loss incurred by Ponte 16 shared by the Group during the period under review amounted to approximately HK$170.3 million. The six-month delay in obtaining the hotel license for So.tel Macau At Ponte 16 also had a negative impact on Ponte 16’s pro.tability during the reporting period. Nonetheless, the Management believes the unique attractions of Ponte 16 and the marketing efforts of both Ponte 16 and the Accor Group would stand Ponte 16 in good stead for growth and become the Group’s primary growth driver in the foreseeable future. Management Discussion and Analysis Others During the period under review, the Group had made several strategic moves to build a stronger business platform for its future development. Management Discussion and Analysis Others FINANCIAL REVIEW Liquidity, Financial Resources and Gearing As at 31 December 2008, the Group had net current assets of approximately HK$56.4 million (30 September 2007: approximately HK$101.2 million) and had net assets of approximately HK$931.2 million (30 September 2007: approximately HK$1,026.9 million). As at 31 December 2008, the Group did not have any interest-bearing bank borrowings and .nancial lease obligations (30 September 2007: Nil). As at 31 December 2008, the Group had interest-bearing loan from a related company of approximately HK$17.6 million (30 September 2007: Nil). The loan is unsecured and charged with interest at the rate of 4% per annum on the principal amount and have no .xed terms of repayment. As at 31 December 2008, there were loans from minority shareholders of approximately HK$8.7 million (30 September 2007: Nil) and other loan payable of approximately HK$159.2 million (30 September 2007: Nil). The loans are interest-free, unsecured and will not be repaid within the next twelve months. Equity attributable to equity shareholders of the Company as at 31 December 2008 was approximately HK$884.8 million (30 September 2007: approximately HK$976.9 million). Accordingly, the gearing ratio, which was measured on the basis of the interest-bearing borrowings of the Group over equity attributable to equity shareholders of the Company, was 1.99% as at 31 December 2008 (30 September 2007: Nil). Pledge of Assets As at 31 December 2008, the Group pledged the time deposits of approximately HK$6.8 million (30 September 2007: approximately HK$0.8 million) to certain banks for issuance of several bank guarantees of approximately HK$8.4 million (30 September 2007: approximately HK$0.8 million) for operation of the Group. As at 31 December 2008, the Company pledged the time deposits of CAD0.9 million (equivalent to approximately HK$6.0 million) (30 September 2007: Nil) to a bank for issuance of a standby letter of credit facility of up to CAD1.2 million (equivalent to approximately HK$7.7 million) (30 September 2007: Nil) for operation of Jade Travel Ltd. (Canada). As at 31 December 2008, World Fortune pledged all (30 September 2007: 100%) of its shares in Pier 16 – Property Development to a bank, for and on behalf of the syndicate of lenders, in respect of the syndicated loan facilities granted to Pier 16 – Property Development. Contingent Liabilities As at 31 December 2008, the Group gave the following undertaking: Syndicated loan facilities granted to an associate held by a subsidiary of the Company was HK$1,600 million (30 September 2007: HK$1,600 million). The maximum guarantee amount borne by the Company was HK$860 million (30 September 2007: HK$860 million). The total loan outstanding for the syndicated loan facilities of the associate at the balance sheet date was HK$1,260 million (30 September 2007: HK$1,010 million). As at 31 December 2008, the Company issued a guarantee of HK$7,749,000 in favor of a bank for banking facilities of HK$7,749,000 granted to a subsidiary. The maximum guarantee amount borne by the Company was HK$7,749,000. The directors do not consider it probable that a claim will be made against the Company. Human Resources As at 31 December 2008, the Group had a total of 440 employees. Remuneration is determined on the basis of quali.cation, experience, responsibility and performance. Management Discussion and Analysis Others (Continued) Apart from the basic remuneration, staff bene.ts include medical insurance and retirement bene.ts under the Mandatory Provident Fund Scheme. Share options might also be granted to eligible employees of the Group as a long-term incentive. CORPORATE INITIATIVES During the period under review, the Group had made several strategic moves to build a stronger business platform for its future development. Partnership with Maruhan On 29 October 2007, the Company through its wholly-owned subsidiary, Golden Sun, disposed to Maruhan of 10.2% of the entire issued share capital of, and related shareholder’s loan to, World Fortune for a consideration of approximately HK$208.5 million. World Fortune mainly owns a 49% equity interest in Pier 16 – Property Development. Yet, after taking into consideration the state of economy which is highly volatile, the updated valuation of the put option on completion date was HK$3,599,000 and was used by the auditors of the Company for audit purpose, this indicates the possibility of Maruhan exercising the put option is not remote. Therefore, the above transaction, together with the option granted, does not constitute a disposal as the Group still retains substantially all the risks and rewards of ownership of the sale shares after completion of this transaction. Accordingly, the Group shall continue to recognise the 10.2% equity interest in World Fortune after completion of this transaction. The Company and Maruhan also entered into a subscription agreement in October 2007, pursuant to which Maruhan has subscribed for and the Company has allotted and issued 220 million new shares of the Company at a subscription price of HK$1.062 each. Besides, Maruhan also acquired 220 million shares of the Company from the market in October 2007. Consequently, Maruhan currently holds approximately 18% interest in the Company and has become a strategic investor of the Company. Maruhan, a leading Japanese company in the pachinko industry with more than 1 million memberships and extensive business network in Japan, is expected to bring more Japanese and Korean customers to Ponte 16. Acquisition of the Jade Travel Group On 31 July 2008, the Company acquired the entire issued share capital of Smart Class for CAD2.9 million (equivalent to approximately HK$22.6 million), which was settled by the allotment and issue of 19.5 million new shares of the Company at an agreed issue price of HK$1.16 per share on the same date pursuant to a conditional sale and purchase agreement dated 5 May 2008. The fair value of the shares allotted on 31 July 2008 was HK$1.12 per share. The principal asset of Smart Class is its 80% equity interest in the Jade Travel Group. Since then, the Company has indirectly held 80% equity interest in the Jade Travel Group. Management Discussion and Analysis Others (Continued) With the extensive of.ce network of the Jade Travel Group in Vancouver, Calgary, Toronto, Montreal in Canada and New York in US, the Group’s international network in the travel business has been strengthened substantially, paving the way for the Company to create synergies for other business segments by cross-selling integrated casino-entertainment resort and tour packages. Partnership with SBI Macau On 7 July 2008, the Company entered into a letter of intent with SBI Holdings, Inc. (“SBI Holdings”) in relation to the future investment or carrying on of any casino and related entertainment and resort business as well as real estate business in Japan. On 8 August 2008, the Company through its wholly-owned subsidiary, Favor Jumbo Limited, sold and assigned to SBI Macau Holdings Limited (“SBI Macau”), a wholly-owned subsidiary of SBI Holdings, 4.55% of the entire issued share capital of, and related shareholder’s loan to, Golden Sun for a total consideration of HK$130 million, pursuant to a conditional sale and purchase agreement dated 7 July 2008. Yet, according to HKAS 39, this transaction, together with the option granted, does not constitute a disposal as the Group still retains substantially all the risks and rewards of ownership of the sale shares after completion of this transaction. Accordingly, the Group shall continue to recognise the 4.55% equity interest in Golden Sun after completion of this transaction. SBI Holdings and its subsidiaries are principally engaged in asset management, brokerage and investment banking, housing and real estate businesses and the provision of other .nancial services. The Company will bene.t from SBI Macau’s extensive experience in asset management and real estate development and SBI Holdings can provide funding and investment recommendations to Ponte 16. Management Discussion and Analysis Prospects The Board is upbeat on the prospects of the Group. With an enhanced and diversi.ed platform, the Group is in a good position to weather the challenges ahead and to seize upcoming opportunities. Management Discussion and Analysis Prospects Looking ahead, despite the uncertain global economic environment, the Group, with its enhanced platform, is prepared to take on challenges and opportunities ahead. In 2009, the Group will continue to adopt its three-pronged strategy to maximise its growth potential. The Group will focus on developing its travel business into a unique platform to create synergies among the core businesses of the Group. With an extensive network in Canada and US, the Jade Travel Group is expected to bring synergetic bene.ts to the Ponte 16 project. The next step for the Group would be to leverage on the extensive experience and connection of its Japanese partners to expand the Group’s travel and gaming businesses to Japan and Taiwan markets in the future. The expanded travel platform and network can enrich customer mix of Ponte 16. As Ponte 16 is the .agship project of the Group, Macau Success will take proactive measures to increase traf.c to Ponte 16. Maruhan’s involvement will induce ample sources of Japanese and Korean visitors and further broaden our customer base. With the construction works of the Hong Kong-Zhuhai-Macau Bridge expected to commence in late 2009 and the tighter collaboration among Hong Kong, Guangdong and Macau governments, such initiatives are expected to boost traf.c and tourism in these cities. Ponte 16 will also bene.t from the Macau government’s policies and plans to preserve and revitalize the neighborhoods of Ponte 16 which is Macau’s historical centre. The Group is also dedicated to promote Ponte 16 as a distinctive landmark for celebration in festive seasons through organizing various events. Amid the challenging operating environment, the Management will strengthen the cost control on the operation of the Ponte 16 project and enhance ef.ciency to improve operating margins. Leveraging on the strategic partnerships with Maruhan and SBI Holdings, the Group will further explore gaming and entertainment business opportunities in the Asia-Paci.c region. This initiative will accelerate the Group’s future growth in the region and bring it closer to its goal of becoming a major player in the gaming, entertainment and tourist-related businesses in the Asia-Paci.c region. The Board is upbeat on the prospects of the Group. The Group will stay on track and continue to execute its three-pronged strategy. Amid the global economy slowdown, the Management would be prudent in the formation and implementation of corporate strategies. With an enhanced and diversi.ed platform which comprises travel, cruise, gaming and entertainment businesses, the Group is in a good position to weather the challenges ahead and to seize upcoming opportunities. Corporate Governance Report Macau Success Limited (the “Company”) is committed to maintain high corporate governance standard and procedures to ensure the integrity, transparency and quality of disclosure in order to enhance the shareholders’ value. CORPORATE GOVERNANCE PRACTICES In the opinion of the directors of the Company (“Director(s)”), the Company has applied the principles and complied with all the code provisions as set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) during the .fteen months ended 31 December 2008. DIRECTORS’ SECURITIES TRANSACTIONS The Company has adopted a code of conduct regarding securities transactions by Directors (the “Code of Conduct”) on terms no less exacting than the required standard of the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules. Having made speci.c enquiry of all Directors, each of whom has con.rmed his/her compliance with the required standard set out in the Code of Conduct and the Model Code throughout the .fteen months ended 31 December 2008. BOARD OF DIRECTORS The board of Directors (the “Board”), led by its chairman (the “Chairman”), Mr. Yeung Hoi Sing, Sonny, is responsible for overseeing the management of the business and affairs, considering and approving strategic plans and major corporate matters, as well as reviewing operational and .nancial performance. The Board is committed to make decisions in the best interests of both the Company and its shareholders. The Board currently consists of six members, including two executive Directors, namely Mr. Yeung Hoi Sing, Sonny (Chairman) and Mr. Ma Ho Man, Hoffman (Deputy Chairman); a non-executive Director, namely Mr. Choi Kin Pui, Russelle (the “NED”); and three independent non-executive Directors, namely Mr. Luk Ka Yee, Patrick, Mr. Yim Kai Pung and Ms. Yeung Mo Sheung, Ann (“INEDs”). The Directors’ biographical information is set out on pages 41 and 42 under the heading “Biographical Details of Directors and Senior Management”. The roles of the Chairman and the Deputy Chairman of the Board (“Deputy Chairman”) who performs the function of chief executive of.cer are segregated and assumed by separate individuals to strike a balance of power and authority so that power and job responsibilities are not concentrated in any one individual of the Board. The Chairman, Mr. Yeung Hoi Sing, Sonny, is responsible for overseeing the function of the Board and formulating overall strategies and policies of the Company, while the Deputy Chairman, Mr. Ma Ho Man, Hoffman, is responsible for managing the Group’s business and overall operations. The functions and responsibilities between the Chairman and the Deputy Chairman are clearly segregated. Corporate Governance Report During the period under review, Mr. Lee Siu Cheung, a former executive Director and Deputy Chairman performed, in addition to Mr. Ma Ho Man, Hoffman, the function of the chief executive of.cer before his resignation on 1 June 2008. Save as Mr. Ma Ho Man, Hoffman is the nephew of Mr. Yeung Hoi Sing, Sonny, to the best knowledge of the Directors, there is no .nancial, business, family and/or other material/relevant relationship among members of the Board and between the Chairman and the Deputy Chairman who performs the function of chief executive of.cer. The Board includes three INEDs and one of them, Mr. Yim Kai Pung, is an associate member of Hong Kong Institute of Certi.ed Public Accountants and a fellow member of The Association of Chartered Certi.ed Accountants of the United Kingdom. He has over 18 years of experience in auditing, taxation and provision of .nance consultancy services for companies in Hong Kong and the People’s Republic of China. The Company has received from each of the INEDs an annual con.rmation of his/her independence pursuant to Rule 3.13 of the Listing Rules and considers all of the INEDs to be independent. During the period under review, the NED and all INEDs have entered into service contracts with the Company for a term of one year. None of the NED and INEDs has entered into any service contracts with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation. In March 2009, the NED and all INEDs have entered into new service contracts with the Company for a term of period from 30 March 2009 to 31 December 2009, and each of the NED and INEDs is entitled to a director’s fee of approximately HK$79,685 (being the proportional amount of the annual director’s fee determined by the Board, i.e. HK$105,000) for the period of appointment under the new service contract. Pursuant to the Bye-laws of the Company, all Directors appointed by the Board shall hold of.ce until the next following general meeting of the Company (in case of .lling a casual vacancy) or until the next following annual general meeting of the Company (in case of an addition to the number of Directors) after their appointment and the retiring Director shall be eligible for re-election. In addition, at each annual general meeting of the Company, one-third of the Directors shall retire from of.ce by rotation such that all Directors should be subject to retirement by rotation at least once every three years. The Board meets regularly throughout the .fteen months period ended 31 December 2008 as and when required. Notices of at least 14 days are given to all Directors for all regular Board meetings. The company secretary of the Company assists the Chairman in preparing the agenda for the meetings and all Directors are consulted to include any matters in the agenda. Agenda and accompanying board papers are given to all Directors in a timely manner and at least 3 days before the appointed date of meeting. Corporate Governance Report During the period under review, .ve regular Board meetings and four non-regular Board meetings were held. Details of the Directors’ attendance at the said Board meetings are set out below: Number of Board meetings Directors attended/held Executive Directors Mr. Yeung Hoi Sing, Sonny (Chairman) 7/9 Mr. Lee Siu Cheung (Deputy Chairman) 4/4 (resigned with effect from 1 June 2008) Mr. Ma Ho Man, Hoffman (Deputy Chairman) 9/9 Non-executive Director Mr. Choi Kin Pui, Russelle 9/9 Independent non-executive Directors Mr. Luk Ka Yee, Patrick 8/9 Mr. Yim Kai Pung 9/9 Ms. Yeung Mo Sheung, Ann 9/9 The Board has agreed on a procedure to enable the Directors to seek independent professional advice in appropriate circumstances, at the Company’s expense, to assist them to discharge their duties. Adequate, complete and reliable information is provided to the Directors in a timely manner to keep them abreast of the Group’s latest developments and any major changes to the relevant rules and regulations and thus can assist them in discharging their duties. DELEGATION BY THE BOARD The Board has established three Board committees, namely the audit committee (the “Audit Committee”), the remuneration committee (the “Remuneration Committee”) and the executive committee (the “Executive Committee”) to oversee particular aspects of the Company’s affairs and to assist in sharing the Board’s responsibilities. The Board has reserved for its decision or consideration on matters covering corporate strategy, annual and interim results, changes of members of the Board and its committees, major acquisitions, disposals and capital transactions, and other signi.cant operational and .nancial matters. All the Board committees have clear written terms of reference and have to report to the Board regularly on their decisions and recommendations. The day-to-day running of the Company, including implementation of the strategies and plans adopted by the Board and its committees, is delegated to management with divisional heads responsible for different aspects of the business. Corporate Governance Report AUDIT COMMITTEE The Company formulated written terms of reference for the Audit Committee in accordance with the requirements of the Listing Rules, full text of which is available on the Company’s website. The Audit Committee currently consists of the NED and all INEDs and is chaired by Mr. Yim Kai Pung who possesses appropriate professional accounting quali.cation as required under the Listing Rules. The primary duties of the Audit Committee include, inter alia, monitoring integrity of the .nancial statements of the Company and ensuring objectivity and credibility of .nancial reporting, reviewing the internal control system of the Group as well as overseeing the relationship with the external auditors of the Company. During the period under review, .ve Audit Committee meetings were held and several resolutions in writing were passed by all members of the Audit Committee. Details of attendance of the Audit Committee members at the said Audit Committee meetings are set out below: Number of Audit Committee Audit Committee members meetings attended/held Mr. Yim Kai Pung (Chairman of the Audit Committee) 5/5 Mr. Choi Kin Pui, Russelle 5/5 Mr. Luk Ka Yee, Patrick 4/5 Ms. Yeung Mo Sheung, Ann 5/5 During the period under review, the Audit Committee had considered, reviewed and/or discussed (1) the auditing and .nancial reporting matters; (2) the appointment of external auditors including the terms of engagement; (3) the annual and interim results; (4) the effectiveness of the internal control system of the Group; (5) the change of .nancial year end date of the Company; and (6) the .nancial performance of the Group as well as its associates. Each member of the Audit Committee has unrestricted access to the external auditors and all senior staff of the Group. REMUNERATION COMMITTEE The Company formulated written terms of reference for the Remuneration Committee in accordance with the requirements of the Listing Rules, full text of which is available on the Company’s website. The Remuneration Committee currently consists of the Chairman of the Board, the NED and all INEDs with Mr. Yeung Hoi Sing, Sonny acts as the chairman of the Remuneration Committee. The major responsibilities of the Remuneration Committee are to make recommendation to the Board on the Company’s policy and structure for remuneration of the Directors and senior management of the Company (the “Senior Management”) and on the establishment of a formal and transparent procedure for developing remuneration policy and to determine speci.c remuneration packages of all executive Directors and the Senior Management. The Remuneration Committee takes into consideration on factors such as salaries paid by comparable companies, time commitment and responsibilities of the Directors and the Senior Management. Corporate Governance Report During the period under review, one Remuneration Committee meeting was held and several resolutions in writing were passed by all members of the Remuneration Committee for, inter alia, reviewing the remuneration policy and structure for all Directors and the Senior Management, and reviewing and/or determining remuneration packages of certain executive Directors and the Senior Management respectively. Details of attendance of the Remuneration Committee members at the said Remuneration Committee meeting are set out below: Number of Remuneration Committee Remuneration Committee members meeting attended/held Mr. Yeung Hoi Sing, Sonny (Chairman of the Remuneration Committee) 1/1 Mr. Choi Kin Pui, Russelle 1/1 Mr. Luk Ka Yee, Patrick 1/1 Mr. Yim Kai Pung 1/1 Ms. Yeung Mo Sheung, Ann 1/1 EXECUTIVE COMMITTEE The Executive Committee was established by the Board with speci.c written terms of reference in November 2006. It currently consists of all executive Directors, namely Mr. Yeung Hoi Sing, Sonny and Mr. Ma Ho Man, Hoffman with Mr. Yeung Hoi Sing, Sonny acts as the chairman of the Executive Committee. The Executive Committee is responsible for reviewing and approving, inter alia, any matters concerning the day-to-day management, business and operation affairs of the Company, and any matters to be delegated to it by the Board from time to time. NOMINATION OF DIRECTORS The Company did not establish a nomination committee and the Board is responsible for reviewing its size, structure and composition (including the skills, knowledge and experience of its members) from time to time as appropriate to ensure that the Board has a balance of skills and experience appropriate for the business of the Company. Besides, the Board is responsible for considering any appointment of its own members and making recommendations to the shareholders of the Company (the “Shareholders”) on Directors standing for re-election at the general meeting following their appointments and retirement by rotation. During the period under review, no new member was appointed to the Board. The Board has recommended the re-appointment of the Directors standing for re-election at the annual general meeting of the Company held on 28 February 2008 (“2008 Annual General Meeting”), and has also considered the appointment of Mr. Ma Ho Man, Hoffman as the Deputy Chairman in replacement of Mr. Lee Siu Cheung. Corporate Governance Report INTERNAL CONTROLS The Board is responsible for ensuring that the Group maintains sound and effective internal control system so as to safeguard the investment of the Company’s shareholders and the assets of the Group. The Company has annually engaged an independent professional .rm (“Independent Professional Firm”) to review the internal control system of the Group which cover all material controls, including .nancial, operational and compliance controls as well as risk management functions. During the period under review, an Independent Professional Firm has conducted a review of the internal control system of the Group for the year ended 30 September 2007 and the relevant review report has been considered by the Audit Committee for conducting its review on the effectiveness of the said internal control system. The Board, through the reviews made by the Independent Professional Firm and the Audit Committee, has assessed the effectiveness of the Group’s internal control system and considered that the Group’s internal control system for the year ended 30 September 2007 has been implemented effectively. A review of the effectiveness of the internal control system of the Group for the .fteen months ended 31 December 2008 was conducted by the Independent Professional Firm and the Audit Committee and subsequently reported to the Board in April 2009. The Board considered that the Group’s internal control system has been implemented effectively. DIRECTORS’ AND AUDITORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS The Directors acknowledge their responsibilities for the preparation of the .nancial statements of the Group and ensure that the .nancial statements are in accordance with statutory requirements and applicable accounting standards. The Directors also ensure the timely publication of the .nancial statements of the Group. The statement of the external auditors of the Company, CCIF CPA Limited, about their reporting responsibilities on the .nancial statements of the Group is set out in the Report of Auditors on page 43. The Directors con.rm that, to the best of their knowledge, information and belief, having made all reasonable enquiries, they are not aware of any material uncertainties relating to events or conditions that may cast signi.cant doubt upon the Company’s ability to continue as a going concern. AUDITORS’ REMUNERATION For the .fteen months ended 31 December 2008, the amounts paid to the external auditors of the Group in respect of the following services provided to the Group are as follows: 31 December HK$’000 Audit services 1,267 Taxation advisory services 38 Other advisory services 1,647 2,952 Corporate Governance Report COMMUNICATION WITH SHAREHOLDERS The annual general meeting provides a useful forum for shareholders to exchange views with the Board. At the 2008 Annual General Meeting, the Chairman as well as the chairmen of the Audit Committee and the Remuneration Committee were present to answer the Shareholders’ questions. Separate resolutions are proposed at general meetings on each substantially separate issues, including the election of individual Directors. Details of the poll voting procedures and the rights of shareholders to demand a poll were included in the circular to the Shareholders regarding, inter alia, the notice of 2008 Annual General Meeting. The said circular also contained relevant details of the proposed resolutions, including biographical details of each Director standing for re-election. At the 2008 Annual General Meeting, all the resolutions were dealt with on a show of hands and were passed by the Shareholders. The Company also maintains its own website at www.macausuccess.com, being updated in a timely manner, as a channel to provide information on the Group to the Shareholders. In addition to sending hard copies to the Shareholders, the Company also posts annual and interim reports as well as other publications on the Company’s website for the Shareholders and the potential investors to access the soft copies of such publications. Report of Directors The directors (“Director(s)”) of Macau Success Limited (the “Company”) present their annual report together with the audited .nancial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the .fteen months ended 31 December 2008 (the “Period”). CHANGE OF FINANCIAL YEAR END DATE Pursuant to a resolution passed by the board of Directors (the “Board”) on 31 October 2008, the .nancial year end date of the Company was changed from 30 September to 31 December, which enabled the Group as well as the associates of the Company relating to the Group’s .agship investment project, Ponte 16, to have a coterminous year end date. Accordingly, the consolidated .nancial statements of the Group presented for the Period cover the .fteen months from 1 October 2007 to 31 December 2008. PRINCIPAL ACTIVITIES The Company is an investment holding company. Its subsidiaries are principally engaged in the leasing and management of the 55% owned cruise and tourist-related businesses. During the Period, the Company acquired the entire certain issued share capital of Smart Class Enterprises Limited (“Smart Class”), being a company indirectly owns 80% equity interest in the travel agency companies located in Canada and the United States of America (the “Jade Travel Group”). There was no signi.cant change in the nature of the Group’s principal activities during the Period. Particulars of the Company’s subsidiaries as at 31 December 2008 are set out in note 19 to the .nancial statements. RESULTS AND APPROPRIATIONS The results of the Group for the Period are set out in the consolidated income statement on page 45. No interim dividend was paid during the Period (2007: Nil). The Directors do not recommend any payment of a .nal dividend for the Period (2007: Nil). SEGMENT INFORMATION An analysis of the Group’s performance for the Period by business and geographical segments is set out in note 6 to the .nancial statements. FIVE-YEAR FINANCIAL SUMMARY A .nancial summary of the Group for the past .ve .nancial years is set out on page 117. SHARE CAPITAL Details of the movements in the share capital of the Company during the Period are set out in note 34 to the .nancial statements. Report of Directors RESERVES Details of the movements in the reserves of the Group during the Period are set out in the consolidated statement of changes in equity on page 49 of this annual report and other details of the reserves of the Group are set out in note 36 to the .nancial statements. PROPERTY, PLANT AND EQUIPMENT Details of the movements in the property, plant and equipment of the Group during the Period are set out in note 16 to the .nancial statements. DIRECTORS The Directors who held of.ce during the Period and up to the date of this report were: Executive Directors: Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Ma Ho Man, Hoffman (Deputy Chairman) Mr. Lee Siu Cheung (resigned with effect from 1 June 2008) Non-executive Director: Mr. Choi Kin Pui, Russelle Independent Non-executive Directors: Mr. Luk Ka Yee, Patrick Mr. Yim Kai Pung Ms. Yeung Mo Sheung, Ann In accordance with bye-law no. 87 of the Bye-laws of the Company, Mr. Choi Kin Pui, Russelle and Mr. Yim Kai Pung shall retire by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting of the Company (the “Annual General Meeting”). DIRECTORS’ SERVICE CONTRACTS None of the Directors proposed for re-election at the Annual General Meeting has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation. Report of Directors CONNECTED TRANSACTIONS AND DIRECTORS’ AND CONTROLLING SHAREHOLDERS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE (A) On 5 May 2008, the Company as purchaser entered into an agreement (“Agreement”) with Star Spangle Corporation (“Star Spangle”) as vendor, being a company bene.cially wholly-owned by Mr. Yeung Hoi Sing, Sonny (“Mr. Yeung”), an executive Director and a controlling shareholder of the Company. Pursuant to the Agreement, the Company acquired the entire issued share capital of Smart Class, which indirectly owns 80% equity interest in the Jade Travel Group, from Star Spangle at an agreed consideration of CAD2.9 million (equivalent to approximately HK$22.6 million) which was settled by the allotment and issue of 19.5 million shares of the Company at an agreed issue price of HK$1.16 per share (the “Acquisition”). The relevant consideration shares were allotted and issued to Silver Rich Macau Development Limited (which is wholly-owned by a discretionary trust, the bene.ciaries of which are family members of Mr. Yeung) on 31 July 2008, being the completion date of the Acquisition; and (B) On 1 December 2008, the Company as borrower entered into an unsecured term loan facility agreement (the “Facility Agreement”) with Mr. Yeung as lender. Pursuant to the Facility Agreement, Mr. Yeung provided a facility of up to HK$200 million (the “Loan Facility”) to the Company. The rate of interest on the entire principal amount drawn and outstanding under the Loan Facility was the prime rate quoted for Hong Kong dollars loans by The Hongkong and Shanghai Banking Corporation Limited. The Loan Facility was available to the Company during the period from 1 December 2008 until whichever is the earlier of (a) the date falling 1 month before the .nal repayment date, ie on or before 30 June 2010; and (b) the date on which the Loan Facility is reduced to zero. Details of the connected transaction/contract of signi.cance as mentioned under paragraph (A) above are disclosed in compliance with the requirements of Chapter 14A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). Save as disclosed above, there were no other connected transactions under Chapter 14A of the Listing Rules and no contracts of signi.cance to which the Company or any of its subsidiaries was a party and in which any of the Director or controlling shareholder or its subsidiaries had a material interest, whether directly or indirectly, subsisted at the end of the Period or at any time during the Period. MANAGEMENT CONTRACTS No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or subsisted during the Period. Report of Directors DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES As at 31 December 2008, the Directors or chief executive of the Company and/or any of their respective associates had the following interests and short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571) of the Laws of Hong Kong (the “SFO”)) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise, noti.ed to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules: Interest in the shares of the Company (“Share(s)”) Approximate Long position/ Number of percentage of Name of Director Short position Nature of interest Shares held shareholding % Mr. Yeung (Note) Long position Corporate interest 1,010,953,432 41.45 Note: Mr. Yeung, an executive Director and the Chairman of the Company, is deemed to have corporate interest in 1,010,953,432 Shares by virtue of the interest of the Shares held by Silver Rich Macau Development Limited, which is wholly-owned by a discretionary trust, the bene.ciaries of which are family members of Mr. Yeung. Save as disclosed above, as at 31 December 2008, none of the Directors or chief executive of the Company, or their respective associates, had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise, noti.ed to the Company and the Stock Exchange pursuant to the Model Code. SHARE OPTION SCHEME AND DIRECTORS’ AND CHIEF EXECUTIVE’S RIGHTS TO ACQUIRE SHARES OR DEBENTURES Details of the share option scheme are set out in note 35(b) to the .nancial statements. At no time during the Period was the Company or any of its subsidiaries, a party to any arrangements to enable the Directors to acquire bene.ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Report of Directors SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SECURITIES As at 31 December 2008, the following persons (other than a Director or chief executive of the Company) had, or were deemed or taken to have, interests or short positions in the Shares and underlying Shares as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO: Interest in the Shares Approximate Name of Long position/ Number of percentage of substantial shareholder Short position Capacity Shares held shareholding % Silver Rich Macau Long position Bene.cial owner 1,010,953,432 41.45 Development Limited Trustcorp Limited Long position Trustee 1,010,953,432 41.45 (Note 1) Newcorp Ltd. Long position Interest of 1,010,953,432 41.45 (Note 1) controlled corporation Newcorp Holdings Ltd. Long position Interest of 1,010,953,432 41.45 (Note 1) controlled corporation Mr. David Henry Christopher Hill Long position Interest of 1,010,953,432 41.45 (Note 1) controlled corporation Mr. David William Roberts Long position Interest of 1,010,953,432 41.45 (Note 1) controlled corporation Mrs. Rebecca Ann Hill Long position Interest of spouse 1,010,953,432 41.45 (Note 2) Ms. Liu Siu Lam, Marian Long position Interest of spouse 1,010,953,432 41.45 (Note 3) Maruhan Corporation Long position Bene.cial owner 440,000,000 18.19 Notes: As at 31 December 2008: 1. The entire issued share capital of Silver Rich Macau Development Limited was held by Trustcorp Limited, being a trustee of a discretionary trust, the bene.ciaries of which are family members of Mr. Yeung. Trustcorp Limited was a wholly-owned subsidiary of Newcorp Ltd., which was in turn wholly-owned by Newcorp Holdings Ltd., Newcorp Holdings Ltd. was owned as to 35% by each of Mr. David Henry Christopher Hill and Mr. David William Roberts. Accordingly, each of Trustcorp Limited, Newcorp Ltd., Newcorp Holdings Ltd., Mr. David Henry Christopher Hill and Mr. David William Roberts was deemed to be interested in 1,010,953,432 Shares held by Silver Rich Macau Development Limited. 2. Mrs. Rebecca Ann Hill, being the spouse of Mr. David Henry Christopher Hill, was deemed to be interested in 1,010,953,432 Shares in which Mr. David Henry Christopher Hill had a deemed interest. 3. Ms. Liu Siu Lam, Marian, being the spouse of Mr. Yeung, was deemed to be interested in 1,010,953,432 Shares in which Mr. Yeung had a deemed interest. Report of Directors Save as disclosed above, as at 31 December 2008, no other person (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the Shares and underlying Shares which were recorded in the register required to be kept by the Company under Section 336 of the SFO. DISCLOSURE UNDER RULES 13.20 AND 13.22 OF THE LISTING RULES Based on the disclosure obligations under Rules 13.20 and 13.22 of the Listing Rules, the .nancial assistance, which was made by the Group by way of the shareholder’s loan provided by World Fortune Limited (“World Fortune”), an indirect subsidiary of the Company, and a corporate guarantee given by the Company in respect of the payment obligation of Pier 16 – Property Development Limited (“Pier 16 – Property Development”, a 49%-owned associate of World Fortune) (the “Financial Assistance”) under a loan facility granted to Pier 16 – Property Development, continued to exist as at 31 December 2008. Pier 16 – Property Development is principally engaged in the investment, development and, through its subsidiaries, operation of Ponte 16, a world-class integrated casino-entertainment resort located in Macau. The Financial Assistance is mainly used for the development and operation of Ponte 16. The amounts of the Financial Assistance as at 31 December 2008 were set out below: Aggregate Financial Name of associate Shareholder’s loan Corporate guarantee Assistance HK$’million HK$’million HK$’million Pier 16 – Property Development 900.5 860.0 1,760.5 The shareholder’s loan provided by World Fortune is unsecured, interest-free and has no .xed term of repayment. Further details are set out in notes 20 and 38 to the .nancial statements. Set out below is a combined balance sheet of Pier 16 – Property Development and the Group’s attributable interests in this associate according to its latest audited consolidated .nancial statements: Group’s Combined attributable balance sheet interests HK$’000 HK$’000 Non-current assets 2,538,331 1,243,782 Current assets 455,049 222,974 Current liabilities 411,320 201,547 Non-current liabilities 2,929,024 1,435,221 Report of Directors CONVERTIBLE SECURITIES, OPTIONS, WARRANTS OR SIMILAR RIGHTS The Company had no outstanding convertible securities, options, warrants or other similar rights as at 31 December 2008. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES During the Period, there was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the listed securities of the Company. MAJOR SUPPLIERS AND CUSTOMERS During the Period, the .ve largest customers of the continuing operations of the Group accounted for 36.6% of total turnover of the continuing operations of the Group of which the largest customer accounted for approximately 18.8% and the .ve largest suppliers of the continuing operations of the Group accounted for 97.2% of total purchases of the continuing operations of the Group, of which the largest supplier accounted for approximately 85.4%. None of the Directors or any of their associates or any shareholders (which, to the best knowledge of the Directors, owns more than 5% of the Company’s issued share capital) had any bene.cial interest in the above .ve largest customers or .ve largest suppliers. CHARITABLE CONTRIBUTIONS During the Period, the Group made charitable and other donations totalling approximately HK$546,000 (2007: Nil). POST BALANCE SHEET EVENTS On 14 April 2009, the Company as borrower and Mr. Yeung as lender also entered into an agreement to increase the Loan Facility up to HK$290 million. In addition, Mr. Yeung undertakes not to demand early repayment of the loan and all other sums owing to Mr. Yeung before 30 June 2010. In the opinion of the Directors, the borrowing of the Loan Facility was for the bene.t of the Company and on normal commercial terms where no security over the assets of the Company was granted. PRE-EMPTIVE RIGHTS There is no provision for pre-emptive rights under the Bye-laws of the Company which would oblige the Company to offer new Shares on a pro-rata basis to its existing shareholders. SUFFICIENCY OF PUBLIC FLOAT As at the date of this report, the Company has maintained a suf.cient public .oat as prescribed under the Listing Rules, based on the information that is publicly available to the Company and within the knowledge of the Directors. Report of Directors EMOLUMENT POLICY The remuneration committee of the Board (the “Remuneration Committee”) is responsible for determining speci.c remuneration packages of all executive Directors and senior management of the Company (the “Senior Management”). Besides, the Remuneration Committee makes recommendation to the Board for its determination on the remuneration of the non-executive Director and the independent non-executive Directors. Factors such as salaries paid by comparable companies, quali.cations, experience, time commitment and responsibilities of the Directors and the Senior Management are considered by the Remuneration Committee for determining/making proposals on remuneration of the relevant Directors and the Senior Management. The remuneration packages of employees of the Group (other than the executive Directors and the Senior Management) are determined and reviewed periodically on the basis of their respective quali.cations, experience, responsibilities and performances. In addition to salaries, the Company offers staff bene.ts which include medical insurance and retirement bene.ts under the Mandatory Provident Fund Scheme. The Group also operates a share option scheme pursuant to which share options might be granted as a long-term incentive to its directors and employees. CORPORATE GOVERNANCE The Company has published its Corporate Governance Report, details of which are set out on pages 26 to 32 of this annual report. AUDITORS The consolidated .nancial statements have been audited by CCIF CPA Limited who shall retire at the Annual General Meeting and, being eligible, will offer themselves for re-appointment. On behalf of the Board Yeung Hoi Sing, Sonny Chairman Hong Kong, 16 April 2009 Biographical Details of Directors and Senior Management EXECUTIVE DIRECTORS Mr. Yeung Hoi Sing, Sonny, aged 54, joined the Group in 2003. He is an executive director and the Chairman of the Company as well as a director of the subsidiaries of the Company. He is also the chairman of the remuneration committee (the “Remuneration Committee”) and the executive committee (the “Executive Committee”) of the Company. Mr. Yeung is responsible for the overall corporate planning and business development of the Group. He has been a member of the National Committee of the Chinese People’s Political Consultative Conference, the People’s Republic of China (the “PRC”) since 1993 and has over 25 years of experience in .nance industry in Hong Kong. Prior to joining the Group, Mr. Yeung held managerial roles in several .nancial service sectors such as leveraged foreign exchange trading, and securities and futures brokerage. He is presently the sole bene.cial owner of Success Securities Limited, which is a licensed corporation under the Securities and Futures Ordinance (the “SFO”) as well as a participant of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), principally engaged in the provision of securities brokerage services. Mr. Yeung has certain private investments in property development businesses in Hong Kong and Canada. He is also a director of Silver Rich Macau Development Limited, being a substantial shareholder of the Company. Mr. Yeung is an uncle of Mr. Ma Ho Man, Hoffman, an executive director and the Deputy Chairman of the Company. Mr. Ma Ho Man, Hoffman, aged 35, joined the Group in 2005. He is an executive director and the Deputy Chairman of the Company as well as a director of the subsidiaries of the Company. Mr. Ma is also a member of the Executive Committee. He is responsible for managing the Group’s business and overall operations. Mr. Ma joined Success Securities Limited (“SSL”) in 2000 and has been a director of SSL since November 2008. He has been responsible for overseeing the marketing affairs of SSL, which is a licensed corporation under the SFO as well as a participant of the Stock Exchange and is bene.cially wholly-owned by Mr. Yeung Hoi Sing, Sonny (“Mr. Yeung”), being an executive director and the Chairman of the Company. Mr. Ma has over 12 years of experience in the .nancial industry and years of managerial experience. He is a nephew of Mr. Yeung. NON-EXECUTIVE DIRECTOR Mr. Choi Kin Pui, Russelle, aged 54, joined the Group in 2003. He is a non-executive director of the Company and a member of the audit committee of the Company (the “Audit Committee”) and the Remuneration Committee. Mr. Choi graduated from St. Pius X High School in 1976. He has over 15 years of management experience in the telecommunication industry in Hong Kong and the United States (the “US”). Mr. Choi established Elephant Talk Limited in 1994, a wholly-owned subsidiary of an American corporation, Elephant Talk Communications Inc. (“ETCI”), whose securities are quoted on the Over-The-Counter Bulletin Board in the US and engages in the provision of telecommunications services in Hong Kong and the US. Mr. Choi was a director of ETCI from 2002 to 2008 as well as the president and the chief executive of.cer of ETCI from 2002 to 2006 and was responsible for the planning of the overall strategy of ETCI. He also served as the chairman of ET Network Services Limited, a company incorporated in Hong Kong with limited liability and engages in the provision of internet access and outsourcing services in the PRC and Hong Kong. Mr. Choi is presently an executive director of Mintel Inc., a licensed carrier in the PRC. Biographical Details of Directors and Senior Management INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. Luk Ka Yee, Patrick, aged 47, joined the Group in 2003. He is an independent non-executive director of the Company and a member of the Audit Committee and the Remuneration Committee. Mr. Luk obtained a Law Degree in England in 1986. Throughout his tenure of career, Mr. Luk has been appointed to serve in various senior management positions which involved corporate/legal and property development as well as property management aspects. He is presently the consultant to Paci.c Rich Management & Consultants Limited, a company providing property and facilities management in Hong Kong. Mr. Yim Kai Pung, aged 44, joined the Group in 2004. He is an independent non-executive director of the Company, the chairman of the Audit Committee and a member of the Remuneration Committee. Mr. Yim holds a Bachelor degree of Accountancy with honours from City University of Hong Kong in 1993 and is an associate member of Hong Kong Institute of Certi.ed Public Accountants and a fellow member of The Association of Chartered Certi.ed Accountants of the United Kingdom. He has over 18 years of experience in auditing, taxation and provision of .nance consultancy services for companies in Hong Kong and the PRC. Mr. Yim is presently a sole proprietor of David Yim & Co., Certi.ed Public Accountants. He is currently an executive director of Sanyuan Group Limited, a company listed on the Main Board of the Stock Exchange, and was an independent non-executive director of Magician Industries (Holdings) Limited, a company listed on the Main Board of the Stock Exchange, and an executive director of Tiger Tech Holdings Limited (now known as Heng Xin China Holdings Limited), a company listed on the Growth Enterprise Market of the Stock Exchange. Ms. Yeung Mo Sheung, Ann, aged 44, joined the Group in 2004. She is an independent non-executive director of the Company and a member of the Audit Committee and the Remuneration Committee. Ms. Yeung holds a Bachelor degree of Retail Marketing with honours in the United Kingdom and a Diploma in Marketing from The Chartered Institute of Marketing. She pursued her further study on legal course and has been awarded a Diploma in Legal Practice in the United Kingdom in 1998 and is presently a partner of Messrs. Fung & Fung, Solicitors, a legal .rm in Hong Kong. Ms. Yeung was an independent non-executive director of Fast Systems Technology (Holdings) Limited, a company listed on the Growth Enterprise Market of the Stock Exchange, and a non-executive director of Zhong Hua International Holdings Limited, a company listed on the Main Board of the Stock Exchange. COMPANY SECRETARY Ms. Chiu Nam Ying, Agnes, aged 35, joined the Group in 2003. She is the company secretary of the Company and is responsible for overseeing all legal matters of the Group. Ms. Chiu is a quali.ed solicitor and an associate member of The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators. She holds a Master degree of Laws from The University of Shef.eld, United Kingdom in 1997. Before joining the Group, Ms. Chiu was a practicing solicitor in a local law . rm and possessed solid experience in banking and .nance as well as property related matters. FINANCIAL CONTROLLER Mr. Wong Chi Keung, Alvin, aged 46, joined the Group in 2008. He is the .nancial controller of the Group as well as the quali.ed accountant of the Company, and is responsible for .nancial and accounting matters of the Group. Mr. Wong is a fellow member of the Hong Kong Institute of Certi.ed Public Accountants and The Association of Chartered Certi.ed Accountants and an associate member of The Chartered Institute of Management Accountants. He is currently an independent non-executive director as well as the chairman of both the audit committee and the remuneration committee of ITC Properties Group Limited, a company listed on the Main Board of the Stock Exchange. He has over 21 years of experience in accounting and corporate .nance gained in property development, construction and manufacturing companies. Report of Auditors INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF MACAU SUCCESS LIMITED (INCORPORATED IN BERMUDA WITH LIMITED LIABILITY) We have audited the consolidated .nancial statements of Macau Success Limited (the “Company”) set out on pages 45 to 116, which comprise the consolidated and Company balance sheets as at 31 December 2008, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash .ow statement for the period from 1 October 2007 to 31 December 2008, and a summary of signi.cant accounting policies and other explanatory notes. DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation and the true and fair presentation of these .nancial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certi.ed Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of .nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these .nancial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certi.ed Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the .nancial statements are free from material misstatement. Report of Auditors An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the .nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the .nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the .nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the .nancial statements. We believe that the audit evidence we have obtained is suf.cient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated .nancial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2008 and of the Group’s loss and cash .ows for the period from 1 October 2007 to 31 December 2008 in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. CCIF CPA Limited Certi.ed Public Accountants Hong Kong, 16 April 2009 Alvin Yeung Practising Certi.cate Number P05206 The notes on pages 52 to 116 form part of these .nancial statements. Consolidated Income Statement For the period from 1 October 2007 to 31 December 2008 Period from 1.10.2007 to Year ended 31.12.2008 30.9.2007 Notes HK$’000 HK$’000 Turnover 6, 7 627,254 103,754 Cost of sales (492,697 ) (8,069 ) Gross pro.t 134,557 95,685 Other revenue 8 34,817 15,972 Other net income 8 298 14,721 Administrative expenses (194,316 ) (92,309 ) Other operating expenses (42,948 ) – (Loss)/pro. t from operations (67,592 ) 34,069 Finance costs 9(a) (335 ) (1,675 ) Share of results of associates (170,292 ) (15,450 ) (Loss)/pro. t before taxation 9 (238,219 ) 16,944 Income tax 10 (859 ) (672 ) (Loss)/pro. t for the period/year (239,078 ) 16,272 Attributable to: Equity shareholders of the Company (238,304 ) 2,314 Minority interests (774 ) 13,958 (Loss)/pro. t for the period/year (239,078 ) 16,272 Dividends payable to equity shareholders of the Company attributable to the period/year 14 – – (Loss)/earnings per share 15 – Basic (9.87) HK cents 0.11 HK cents – Diluted (9.87) HK cents 0.11 HK cents Consolidated Balance Sheet As at 31 December 2008 At At 31.12.2008 30.9.2007 Notes HK$’000 HK$’000 NON-CURRENT ASSETS Property, plant and equipment 16 85,711 87,945 Goodwill 17 7,723 1,313 Intangible assets 18 34,608 – Interest in associates 20 1,119,892 886,930 Deposit for acquisition of properties 21 2,290 – Deposit for acquisition of a company 22 60,384 – Deferred tax assets 32(b) 1,190 – 1,311,798 976,188 CURRENT ASSETS Inventories 23 1,160 1,323 Trade and other receivables 24 31,183 18,398 Tax recoverable 1,369 – Pledged bank deposits 25 6,762 751 Cash and cash equivalents 25 66,675 200,719 107,149 221,191 CURRENT LIABILITIES Trade and other payables 26 23,457 106,422 Deferred income 27 807 – Pro.t guarantee liabilities 28 12,892 – Financial guarantee contract 33 12,600 12,600 Tax payable 32(a) 968 961 50,724 119,983 NET CURRENT ASSETS 56,425 101,208 TOTAL ASSETS LESS CURRENT LIABILITIES 1,368,223 1,077,396 NON-CURRENT LIABILITIES Deferred income 27 294 – Pro.t guarantee liabilities 28 32,608 – Loans payables 29 167,957 – Long-term payables 30 187,048 – Due to a related company 31 17,574 – Deferred tax liabilities 32(b) 83 83 Financial guarantee contract 33 31,500 50,400 437,064 50,483 NET ASSETS 931,159 1,026,913 Consolidated Balance Sheet As at 31 December 2008 At At 31.12.2008 30.9.2007 Notes HK$’000 HK$’000 CAPITAL AND RESERVES Share capital 34 24,390 21,995 Reserves 36 860,448 954,935 TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY 884,838 976,930 MINORITY INTERESTS 36 46,321 49,983 TOTAL EQUITY 931,159 1,026,913 Approved and authorised for issue by the board of directors on 16 April 2009 On behalf of the board Yeung Hoi Sing, Sonny Ma Ho Man, Hoffman Director Director The notes on pages 52 to 116 form part of these .nancial statements. Balance Sheet As at 31 December 2008 At At 31.12.2008 30.9.2007 Notes HK$’000 HK$’000 NON-CURRENT ASSETS Investments in subsidiaries 19 1,072,805 687,244 CURRENT ASSETS Deposits, prepayments and other receivables 24 373 209 Pledged bank deposits 25 5,996 – Cash and cash equivalents 25 7,309 181,045 13,678 181,254 CURRENT LIABILITIES Other payables and accruals 26 65,937 51,659 Financial guarantee contract 33 12,600 12,600 78,537 64,259 NET CURRENT (LIABILITIES)/ASSETS (64,859 ) 116,995 TOTAL ASSETS LESS CURRENT LIABILITIES 1,007,946 804,239 NON-CURRENT LIABILITIES Financial guarantee contract 33 31,500 50,400 NET ASSETS 976,446 753,839 CAPITAL AND RESERVES Share capital 34 24,390 21,995 Reserves 36 952,056 731,844 TOTAL EQUITY 976,446 753,839 Approved and authorised for issue by the board of directors on 16 April 2009. On behalf of the board Yeung Hoi Sing, Sonny Ma Ho Man, Hoffman Director Director The notes on pages 52 to 116 form part of these .nancial statements. Consolidated Statement of Changes in Equity For the period from 1 October 2007 to 31 December 2008 Attributable to equity shareholders of the Company Retained Capital Property pro. ts/ Share Share Distributable redemption revaluation Exchange (accumulated) Minority Total capital premium reserve reserve reserve reserve losses) Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 October 2006 21,395 612,516 52,333 976 187,065 – 52,331 926,616 40,304 966,920 Allotment of consideration shares (note 34(a)) 600 47,400 – – – – – 48,000 – 48,000 Pro.t for the year – – – – – – 2,314 2,314 13,958 16,272 Interim dividend declared during the year – – – – – – – – (4,279) (4,279) At 30 September 2007 21,995 659,916 52,333 976 187,065 – 54,645 976,930 49,983 1,026,913 At 1 October 2007 21,995 659,916 52,333 976 187,065 – 54,645 976,930 49,983 1,026,913 Allotment of subscription shares (note 34(b)) 2,200 231,440 – – – – – 233,640 – 233,640 Allotment of consideration shares (note 34(c)) 195 21,645 – – – – – 21,840 – 21,840 Share issuance costs – (4,216) – – – – – (4,216) – (4,216) Exchange differences on translation of .nancial statements of subsidiaries – – – – – (4,235) – (4,235) (1,001) (5,236) Share of associates’ net loss recognized directly in equity – – – – (100,817) – – (100,817) – (100,817) Acquisition of subsidiaries – – – – – – – – 4,863 4,863 Loss for the period – – – – – – (238,304) (238,304) (774) (239,078) Dividend paid to minority shareholders – – – – – – – – (6,750) (6,750) At 31 December 2008 24,390 908,785 52,333 976 86,248 (4,235) (183,659) 884,838 46,321 931,159 The notes on pages 52 to 116 form part of these .nancial statements. Consolidated Cash Flow Statement For the period from 1 October 2007 to 31 December 2008 Notes Period from 1.10.2007 to 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 OPERATING ACTIVITIES (Loss)/pro.t before taxation (238,219 ) 16,944 Adjustments for: Interest income (4,851 ) (10,197 ) Finance costs 335 1,675 Depreciation 13,459 8,710 Amortisation of intangible assets 215 – Amortisation of .nancial guarantee contract (18,900 ) – Share of results of associates 170,292 15,450 Impairment loss on – goodwill 609 – – client list 676 – – other receivables 22,763 – – interest in associates 18,900 – Write back of trade payables (3,858 ) – Dividend from available-for-sale investment – (1,133 ) Gain on disposal of securities – (4,391 ) Exchange alignment (1,482 ) – (Gain)/loss on disposal of property, plant and equipment (298 )Gain on disposal of available-for-sale investment – (10,330 ) Gain on write off of a subsidiary under voluntary liquidation (13 ) – OPERATING (LOSS)/PROFIT BEFORE CHANGES IN WORKING CAPITAL (40,372 ) 16,903 Decrease/(increase) in inventories 163 (145 ) Increase in trade and other receivables (10,445 ) (4,889 ) (Decrease)/increase in trade and other payables (108,680 ) 100,375 Increase in deferred income 540 – Increase in due to a related company 292 – CASH (USED IN)/GENERATED FROM OPERATIONS (158,502 ) 112,244 Income tax paid – Hong Kong pro.ts tax paid (1,694 ) – – Overseas tax refund 38 – NET CASH (USED IN)/GENERATED FROM OPERATING ACTIVITIES (160,158 ) 112,244 Consolidated Cash Flow Statement For the period from 1 October 2007 to 31 December 2008 Notes Period from 1.10.2007 to 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 INVESTING ACTIVITIES Payment for purchase of property, plant and equipment (6,256 ) (5,337 ) Proceeds from disposal of property, plant and equipment 1,272 Payment of deposit for acquisition of properties (2,290 ) – Payment of deposit for acquisition of a company (60,384 ) – Payment for subscription of convertible bonds – (11,875 ) Net proceeds from disposal of securities from exercise of convertible bonds – 16,266 Further acquisition of 12.25% interest in associates – (153,231 ) Net cash in.ow from acquisition of subsidiaries 41(b) 5,063 – Increase in amounts due from associates (522,971 ) (262,134 ) Net proceeds from disposal of available-for-sale investment – 35,569 Increase in pledged bank deposits (6,011 ) (22 ) Interest income 4,851 10,197 Dividend from available-for-sale investment – 1,133 NET CASH USED IN FROM INVESTING ACTIVITIES (586,726 ) (369,391 ) FINANCING ACTIVITIES Net proceeds from issue of shares 229,424 – Proceeds from loans payables 29 159,238 – Proceeds from long-term payables 30 187,048 – Proceeds from pro.t guarantee liabilities 28 45,500 – Proceeds of loan from a .nancial institution – 130,000 Repayment of loan from a .nancial institution – (130,000 ) Finance costs (335 ) (1,675 ) Repayments of loans from minority shareholders – (5,056 ) Dividend paid to minority interests (6,750 ) (4,279 ) NET CASH GENERATED/(USED IN)FROM FINANCING ACTIVITIES 614,125 (11,010 ) NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD/YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES (132,759 )200,719 (1,285 ) (268,157 ) 468,876 – CASH AND CASH EQUIVALENTS AT END OF PERIOD/YEAR 66,675 200,719 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 25 66,675 200,719 Non-cash transaction The principal non-cash transaction is the issue of consideration shares for the transaction disclosed in note 34(c). The notes on pages 52 to 116 form part of these .nancial statements. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 1. ORGANISATION AND PRINCIPAL ACTIVITIES The Company was incorporated as an exempted company with limited liability in Bermuda on 27 May 2004 under the Companies Act (1981) of Bermuda and is listed on The Stock Exchange of Hong Kong Limited. The principal activity of the Company is investment holding. The principal activities of its subsidiaries are set out in note 19 to the .nancial statements. 2. SIGNIFICANT ACCOUNTING POLICIES a) Statement of Compliance These .nancial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certi.ed Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These .nancial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the signi.cant accounting policies adopted by the Group is set out below. The HKICPA has issued certain new and revised HKFRSs, amendments and interpretations which are or have become effective. It has also issued certain new and revised HKFRSs which are .rst effective or available for early adoption for the current accounting period of the Group and the Company. Note 3 provides information on initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods re.ected in these .nancial statements. b) Basis of Preparation of the Financial Statements (i) Going Concern The consolidated .nancial statements for the period ended 31 December 2008 comprise the Company, its subsidiaries and the Group’s interest in associates. The Group incurred a loss attributable to equity shareholders of the Company of approximately HK$238,304,000 and net decrease in cash and cash equivalents of approximately HK$132,759,000 for the period ended 31 December 2008. In preparing these .nancial statements, the directors of the Company have given careful consideration to the impact of the current and anticipated future liquidity of the Group and the ability of the Group to attain pro.table and positive cash .ow operations in the immediate and longer term. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) b) Basis of Preparation of the Financial Statements (continued) (i) Going Concern (continued) In order to strengthen the capital base of the Group and to improve the Group’s liquidity and cash .ows in the immediate foreseeable future, and to sustain the Group as a going concern, the Company has entered into a term loan facility agreement with Mr. Yeung Hoi Sing, Sonny (“Mr. Yeung”), a director and the controlling shareholder of the Company, on 1 December 2008. Pursuant to the facility agreement, Mr. Yeung agreed to provide a credit facility of up to HK$200 million to the Company. The credit facility is available to the Company during the period from 1 December 2008 until the earlier of (i) the date falling one month before the .nal repayment date, i.e. on or before 30 June 2010; and (ii) the date on which the credit facility is reduced to zero. On 14 April 2009, the Company and Mr. Yeung has entered into an agreement to increase the credit facility up to HK$290 million. In addition, Mr. Yeung undertakes not to demand an early repayment of the loan and all other sums owing to Mr. Yeung before 30 June 2010. After the balance sheet date and up to the date of approval of these .nancial statements, the Company had utilized the credit facility amounted to HK$3.5 million. In the opinion of the directors, taking into account of the credit facility and .nancial undertaking from Mr. Yeung, the Group will have suf.cient working capital for its current requirements. Accordingly, the directors consider that it is appropriate to prepare the .nancial statements on a going concern basis. Should the Group be unable to continue as a going concern, adjustments would have to be made to restate the values of assets to their recoverable amounts, to provide for any further liabilities which might arise and to classify non-current assets and liabilities as current assets and liabilities, respectively. The effects of these potential adjustments have not been re.ected in the .nancial statements. (ii) Change of .nancial year end date The consolidated .nancial statements for the current period cover the 15-month period ended 31 December 2008. The corresponding comparative amounts shown for the consolidated income statement, consolidated statements of changes in equity, consolidated cash .ow statement and related notes cover a 12-month year ended 30 September 2007 and therefore may not be comparable with amounts shown for the current period. The period covered by the 2008 consolidated .nancial statements was greater than twelve months because the directors of the Company determined to bring the balance sheet date in line with that of the subsidiaries and associates and therefore facilitating the preparation of the Group’s consolidated .nancial statements. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) b) Basis of Preparation of the Financial Statements (continued) (iii) Basis of measurement The measurement basis used in the preparation of the .nancial statements is the historical cost basis except for derivative .nancial instruments which are stated at their fair value explained in the accounting policies set out below. The preparation of .nancial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of HKFRSs that have signi.cant effect on the .nancial statements and estimates with a signi.cant risk of material adjustment in the next year are discussed in note 5. c) Subsidiaries and Minority Interests Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the .nancial and operating policies of an entity so as to obtain bene.ts from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. An investment in a subsidiary is consolidated into the consolidated .nancial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised pro.ts arising from intra group transactions are eliminated in full in preparing the consolidated .nancial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent there is no evidence of impairment. Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, minority interests are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total pro.t or loss for the year between minority interests and the equity shareholders of the Company. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c) Subsidiaries and Minority Interests (continued) Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports pro.ts, the Group’s interest is allocated all such pro.ts under the minority’s share of losses previously absorbed by the Group has been recovered. Loans from holders of minority interest and other contractual obligations towards these holders are presented as .nancial liabilities in the consolidated balance sheet in accordance with note 2(n). In the Company’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses (see note 2(k)). d) Associates An associate is an entity in which the Group has signi.cant in.uence, but not control over its management, including participation in the .nancial and operating policy decisions. An investment in an associate is accounted for in the consolidated .nancial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the associate’s net assets, unless it is classi.ed as held for sale (or included in a disposal group that is classi.ed as held for sale). The consolidated income statement includes the Group’s share of the post-acquisition, post-tax results of the associates for the year, including any impairment loss on goodwill relating to the investment in associates for the year (see notes 2(f) and (k)). When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Group’s interest in the associate is the carrying amount of the investment under the equity method together with the Group’ long-term interests that in substance form part of the Group’s net investment in the associate. Unrealised pro.ts and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associate, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in pro.t or loss. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) e) Business combinations The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identi.able assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classi.ed as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identi.able assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identi.able assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in pro.t or loss. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. f) Goodwill Goodwill represents the excess of the cost of a business combination or an investment in an associate over the Group’s interest in the net fair value of the acquiree’s identi.able assets, liabilities and contingent liabilities. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see note 2(k)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the interest in the associates. Any excess of the Group’s interest in the net fair value of the acquiree’s identi.able assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate is recognised immediately in pro.t or loss. On disposal of a cash-generating unit or an associate, any attributable amount of purchased goodwill is included in the calculation of the pro.t or loss on disposal. g) Financial instruments Financial assets and .nancial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and .nancial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of .nancial assets and .nancial liabilities (other than .nancial assets and .nancial liabilities at fair value through pro.t or loss) are added to or deducted from the fair value of the .nancial assets or .nancial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of .nancial assets or .nancial liabilities at fair value through pro.t or loss are recognised immediately in pro.t or loss. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial instruments (continued) Financial assets The Group’s .nancial assets are classi.ed into one of the four categories, including .nancial assets at fair value through pro.t or loss (“FVTPL”), loans and receivables, held-to-maturity investments and available-for-sale .nancial assets. All regular way purchases or sales of .nancial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of .nancial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Effective interest method The effective interest method is a method of calculating the amortised cost of a .nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the .nancial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those .nancial assets designated as at FVTPL, of which interest income is included in net gains or losses. Financial assets at fair value through pro.t or loss Financial assets at FVTPL has two subcategories, including .nancial assets held for trading and those designated as at FVTPL on initial recognition. A .nancial asset is classi.ed as held for trading if: ‧ it has been acquired principally for the purpose of selling in the near future; or ‧ it is a part of an identi.ed portfolio of .nancial instruments that the Group manages together and has a recent actual pattern of short-term pro.t-taking; or ‧ it is a derivative that is not designated and effective as a hedging instrument. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial Instruments (continued) Financial assets at fair value through pro.t or loss (continued) A .nancial asset other than a .nancial asset held for trading may be designated as at FVTPL upon initial recognition if: ‧ such designation eliminates or signi.cantly reduces a measurement or recognition inconsistency that would otherwise arise; or ‧ the .nancial asset forms part of a group of .nancial assets or .nancial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or ‧ it forms part of a contract containing one or more embedded derivatives, and permits the entire combined contract (asset or liability) to be designated as at FVTPL. At each balance sheet date subsequent to initial recognition, .nancial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in pro.t or loss in the period in which they arise. The net gain or loss recognised in pro.t or loss includes any dividend or interest earned on the .nancial assets. Loans and receivables Loans and receivables are non-derivative .nancial assets with .xed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade receivables, loan receivables, other receivables, pledged bank deposits, bank balances and cash, amount due from directors and .nance lease receivables) are carried at amortised cost using the effective interest method, less any identi.ed impairment losses (see accounting policy in respect of impairment loss on .nancial assets below). Held-to-maturity investments Held-to-maturity investments are non-derivative .nancial assets with .xed or determinable payments and .xed maturities that the Group’s management has the positive intention and ability to hold to maturity. The Group designated certain debt securities as held-to-maturity investments. At each balance sheet date subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less any identi.ed impairment losses (see accounting policy in respect of impairment loss on .nancial assets below). Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial Instruments (continued) Available-for-sale .nancial assets Available-for-sale .nancial assets are non-derivatives that are either designated or not classi.ed as .nancial assets at FVTPL, loans and receivables or held-to-maturity investments. In addition to equity investments, the Group has also designated certain debt securities as available-for-sale .nancial assets. At each balance sheet date subsequent to initial recognition, available-for-sale .nancial assets are measured at fair value. Changes in fair value are recognised in equity, until the .nancial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in pro.t or loss (see accounting policy in respect of impairment loss on .nancial assets below). For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identi.ed impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy in respect of impairment loss on .nancial assets below). Impairment of .nancial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the .nancial asset, the estimated future cash .ows of the .nancial assets have been impacted. For an available-for-sale equity investment, a signi.cant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment. For all other .nancial assets, objective evidence of impairment could include: ‧ signi.cant .nancial dif.culty of the issuer or counterparty; or ‧ default or delinquency in interest or principal payments; or ‧ it becoming probable that the borrower will enter bankruptcy or .nancial re-organisation. For certain categories of .nancial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, observable changes in national or local economic conditions that correlate with default on receivables. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial Instruments (continued) Impairment of .nancial assets (continued) For .nancial assets carried at amortised cost, an impairment loss is recognised in pro.t or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash .ows discounted at the original effective interest rate. For .nancial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash .ows discounted at the current market rate of return for a similar .nancial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the .nancial asset is reduced by the impairment loss directly for all .nancial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in pro.t or loss. When a trade receivable is considered as uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to pro.t or loss. For .nancial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through pro.t or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Impairment losses on available-for-sale equity investments will not be reversed in pro.t or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity. For available-for-sale debt investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. Financial liabilities and equity Financial liabilities and equity instruments issued by a group entity are classi.ed according to the substance of the contractual arrangements entered into and the de.nitions of a .nancial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s .nancial liabilities are generally classi.ed into .nancial liabilities at FVTPL and other .nancial liabilities. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial Instruments (continued) Effective interest method The effective interest method is a method of calculating the amortised cost of a .nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the .nancial liability, or, where appropriate, a shorter period. Interest expense is recognised on an effective interest basis other than those .nancial liabilities designated as at FVTPL, of which the interest expense is included in net gains or losses. Financial liabilities at fair value through pro.t or loss Financial liabilities at FVTPL has two subcategories, including .nancial liabilities held for trading and those designated as at FVTPL on initial recognition. A .nancial liability is classi.ed as held for trading if: ‧ it has been incurred principally for the purpose of repurchasing in the near future; or ‧ it is a part of an identi.ed portfolio of .nancial instruments that the Group manages together and has a recent actual pattern of short-term pro.t-taking; or ‧ it is a derivative that is not designated and effective as a hedging instrument. A .nancial liability other than a .nancial liability held for trading may be designated as at FVTPL upon initial recognition if: ‧ such designation eliminates or signi.cantly reduces a measurement or recognition inconsistency that would otherwise arise; or ‧ the .nancial liability forms part of a group of .nancial assets or .nancial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or ‧ it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL. At each balance sheet date subsequent to initial recognition, .nancial liabilities at FVTPL are measured at fair value, with changes in fair value recognised directly in pro.t or loss in the period in which they arise. The net gain or loss recognised in pro.t or loss includes any interest paid on the .nancial liability. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Financial Instruments (continued) Other .nancial liabilities Other .nancial liabilities (including bank and other borrowings, trade payables and other payables) are subsequently measured at amortised cost, using the effective interest method. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in pro.t or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Derivative .nancial instruments Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in pro.t or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in pro.t or loss depends on the nature of the hedge relationship. h) Property, Plant and Equipment Property, plant and equipment are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see note 2(k)). Gain or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds on disposal and the carrying amount of the item and are recognised in pro.t or loss on the date of retirement or disposal. Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows: Freehold land and building 2.5% Cruise 5% Leasehold improvements Over lease terms Plant and machinery 20% Furniture, .ttings and of.ce equipment 20% – 33 1/3% Motor vehicles 30% – 33 1/3% Motor yacht 20% Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) h) Property, Plant and Equipment (continued) Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually. i) Intangible Assets (Other than Goodwill) Intangible assets, other than goodwill, identi.ed on business combinations are capitalised on their fair values. They represent mainly trademarks and relationship with customers. Subsequent to initial recognition, intangible assets with .nite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation for intangible assets with .nite useful lives is provided a straight-line basis from the date of acquisition over their estimated useful lives as follows: Client list 15 years The asset’s useful lives and their amortisation method are reviewed annually. Intangible assets with inde.nite useful lives are not amoritsed. The intangible asset and its status are reviewed annually to determine whether events and circumstances continue to support inde.nite useful life. Should the useful life of an intangible asset change from in.nite to .nite, the change would be accounted for prospectively from the date of change and in accordance with the policy for amortisation of intangible assets with .nite lives as set out above. j) Operating Lease Charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to pro.t or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of bene.ts to be derived from the leased asset. Lease incentives received are recognised in pro.t or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to pro.t or loss in the accounting period in which they are incurred. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Impairment of Assets i) Impairment of investments in debt and equity securities and other receivables Investments in debt and equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classi.ed as available-for-sale securities are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, any impairment loss is determined and recognised as follows: – For unquoted equity securities and current receivables that are carried at cost, the impairment loss is measured as the difference between the carrying amount of the .nancial asset and the estimated future cash .ows, discounted at the current market rate of return for a similar .nancial asset where the effect of discounting is material. Impairment losses for current receivables are reversed if in a subsequent period the amount of the impairment loss decreases. Impairment losses for equity securities are not reversed. – For .nancial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash . ows, discounted at the . nancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets). If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through pro.t or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years. – For available-for-sale securities, the cumulative loss that had been recognised directly in equity is removed from equity and is recognised in pro.t or loss. The amount of the cumulative loss that is recognised in pro.t or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in pro.t or loss. Impairment losses recognised in pro.t or loss in respect of available-for-sale equity securities are not reversed through pro.t or loss. Any subsequent increase in the fair value of such assets is recognised directly in equity. Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in pro.t or loss. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Impairment of Assets (continued) ii) Impairment of other assets Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased: – property, plant and equipment; – intangible assets; – investments in subsidiaries and associates; and – goodwill If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment. – Calculation of recoverable amount The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash .ows are discounted to their present value using a pre-tax discount rate that re.ects current market assessments of time value of money and the risks speci.c to the asset. Where an asset does not generate cash in.ows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash in.ows independently (i.e. a cash-generating unit). – Recognition of impairment losses An impairment loss is recognised in pro.t or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated .rst to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable. – Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to pro.t or loss in the year in which the reversals are recognised. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) l) Inventories Inventories are carried at the lower of cost and net realizable value. Cost is calculated using the .rst-in, .rst-out formula and comprises all costs of purchase in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. When inventories are consumed, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write down of inventories to net realizable value and all losses of inventories are recognised as an expense in the period the write down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. m) Trade and Other Receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less impairment losses for bad and doubtful debts (see note 2(k)), except where the receivables are interest-free loans made to related parties without any .xed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts (see note 2(k)). n) Trade and Other Payables Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost. o) Cash and Cash Equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other .nancial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insigni.cant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash .ow statement. p) Employee Bene. ts i) Short term employee bene.ts and contributions to de.ned contribution retirement plans. Salaries, annual bonuses, paid annual leave, contributions to de.ned contribution plans and the cost of non-monetary bene.ts are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) p) Employee Bene. ts (continued) ii) Termination bene.ts Termination bene.ts are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide bene.ts as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal. q) Income Tax Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in pro.t or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for .nancial report purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable pro.ts will be available against which the asset can be utilised, are recognised. Future taxable pro.ts that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in period into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized. The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable pro.t (provided they are not part of a business combination), and temporary differences related to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reserve in the future. The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) q) Income Tax (continued) The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that suf.cient taxable pro.ts will be available to allow the related tax bene.t to be utilised. Any such reduction is reversed to the extent that it becomes probable that suf.cient taxable pro.ts will be available. Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised. Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met: – in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or – in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either; – the same taxable entity; or – different taxable entities, which, in each future period in which signi.cant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously. r) Financial Guarantees Issued, Provisions and Contingent Liabilities i) Financial guarantees issued Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make speci.ed payments to reimburse the bene.ciary of the guarantee (the “holder”) for a loss the holder incurs because a speci.ed debtor fails to make payment when due in accordance with the terms of a debt instrument. Where the Group issues a .nancial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in pro.t or loss on initial recognition of any deferred income. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) r) Financial Guarantees Issued, Provisions and Contingent Liabilities (continued) i) Financial guarantees issued (continued) The amount of the guarantee initially recognised as deferred income is amortised in pro.t or loss over the term of the guarantee as income from .nancial guarantees issued. In addition, provisions are recognised in accordance with note 2(r)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation. ii) Other provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an out.ow of economic bene.ts will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an out.ow of economic bene.ts will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of out.ow of economic bene.ts is remote. Possible obligations, whose existence will only be con.rmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of out.ow of economic bene.ts is remote. s) Revenue Recognition Provided it is probable that the economic bene.ts will .ow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in pro.t or loss as follows: i) Cruise Leasing and management fee income – Cruise leasing income is recognised on an accrual basis in accordance with the terms of the leasing agreement. – Cruise management fee income, revenue from travel agent services and management income is recognised when the management services, travel agent services are rendered. ii) Travel-related agency services fee income – Revenue from sale of airline ticket is recognized when the tickets are issued. – Revenue from the sale of tour package is recognized when travel arrangements have been booked and con.rmed with customers. Deposits from customers are reported as liabilities. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) s) Revenue Recognition (continued) ii) Travel-related agency services fee income (continued) – Revenue from the sale of group tour is recognized at the point of group departure. Deposits from customers are reported as liabilities until the tour departs. – Other income consists of revenue earned based on volume sales through various on-line ticket processing systems. Other income is recognised when it is measurable and all contractual obligation have been ful. lled. iii) Management fee income is recognised when the amounts are measurable and the ultimate collections are reasonably assumed. iv) Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is established. v) Interest income is recognised as it accrues using the effective interest method. vi) Services income are recognised when services provided. t) Translation of Foreign Currencies Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and loses are recognised in pro.t or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined. The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Balance sheet items, including goodwill arising on consolidation of foreign operations acquired on or after 1 January 2005, are translated into Hong Kong dollars at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity. Goodwill arising on consolidation of a foreign operation acquired before 1 January 2005 is translated at the foreign exchange rate that applied at the date of acquisition of the foreign operation. On disposal of a foreign operation, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is included in the calculation of the pro.t or loss on disposal. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) u) Borrowing Costs Borrowing costs are expensed in pro.t or loss in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete. v) Related Parties For the purposes of these .nancial statements, a party is considered to be related to the Group if: i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise signi.cant in.uence over the Group in making .nancial and operating policy decisions, or has joint control over the Group; ii) the Group and the party are subject to common control; iii) the party is an associate of the Group or a joint venture in which the Group is a venturer; iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or signi.cant in.uence or such individuals; v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or signi.cant in.uence of such individuals; or vi) the party is a post-employment bene.t plan which is for the bene.t of employees of the Group or of any entity that is a related party of the Group. Close family members of an individual are those family members who may be expected to in.uence, or be in.uenced by, that individual in their dealings with the entity. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) w) Segment Reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. In accordance with the Group’s internal .nancial reporting, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these .nancial statements. Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, trade receivables and property, plant and equipment. Segment revenue, expenses, assets, and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between Group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties. Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period. Unallocated items mainly comprise .nancial and corporate assets, interest-bearing loans, borrowings, tax balances, corporate and .nancing expenses. 3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) In the current period, the Company has where applicable applied the following amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certi.ed Public Accountants (“HKICPA”) which are or have become effective. HKFRS 7 Financial Instruments: Disclosures HKAS 1 Amendment Presentations of Financial Statements: Capital Disclosures The amendment to HKAS 1 introduces additional disclosure requirements to provide information about the level of capital and the Group’s and the Company’s objectives, policies and process for managing capital. These new disclosures are set out in below. HKAS 39 & HKFRS 7 Reclassi.cation of Financial Assets (Amendments) HK(IFRIC) – Int 11 HKFRS 2: Group and Treasury Share Transactions HK(IFRIC) – Int 12 Service Concession Arrangements HK(IFRIC) – Int 14 HKAS 19 – The Limit on a De.ned Bene.t Asset, Minimum Funding Requirements and their interaction Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED) As a result of the adoption of HKFRS 7, the .nancial statements include expanded disclosure about the signi.cant of the Group’s .nancial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by HKAS 32, Financial Instruments: Disclosure and Presentation. These disclosures are provided throughout these .nancial statements, in particular in note 4. The application of the new HKFRSs had no material effect on how the results and .nancial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior adjustment is required. The Group has not early applied any of the following new and revised standards, amendments or interpretations which have been issued but are not yet effective for annual periods beginning on 1 January 2008. The Group is in the process of making an assessment of the impact of these new standards, amendments and interpretations upon initial application but is not yet in a position to state whether these new standards, amendments and interpretations would have a signi.cant impact on the group’s results of operations and .nancial position. HKFRSs (Amendments) Improvements to HKFRSs 1 HKAS 1 (Revised) Presentation of Financial Statements 2 HKAS 23 (Revised) Borrowing Costs 2 HKAS 27 (Revised) Consolidated and Separate Financial Statements 3 HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligation Arising on Liquidation 2 HKAS 39 (Amendment) Eligible hedged items 3 HKFRS 1 and HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 2 (Amendments) HKFRS 1 (Revised) First-time Adoption of Hong Kong Financial Reporting Standard 3 HKFRS 2 (Amendments) Vesting Conditions and Cancellations 2 HKFRS 3 (Revised) Business Combinations 3 HKFRS 8 Operating Segments 2 HK(IFRIC) – Int 13 Customer Loyalty Programmes 4 HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate 2 HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation 5 HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners 3 HK(IFRIC) – Int 18 Transfer of Assets from Customers 6 1 Effective for annual periods beginning on or after 1 January 2009 except for the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 January 2009 3 Effective for annual periods beginning on or after 1 July 2009 4 Effective for annual periods beginning on or after 1 July 2008 5 Effective for annual periods beginning on or after 1 October 2008 6 Effective for transfer of assets from customers received on or after 1 July 2009 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED) The application of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the .rst annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary. 4. FINANCIAL RISK MANAGEMENT a) Financial risk factors The Group has exposure to credit risk, liquidity risk and market risk (including currency risk and interest rate risk) from its use of .nancial instruments. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. (i) Credit risk Credit risk is the risk of .nancial loss to the Group if a customer or counterparty to a .nancial instrument fails to meet its contractual obligations, and the Group’s credit risk is primarily attributable to the trade and other receivables and cash and cash equivalents. Management has a credit policy in a place and the exposures to these credit risks are monitored on an ongoing basis. The management has established a credit policy under which credit evaluations are performed on all customers requiring credit. Trade receivables are normally due within 30 days from the date of billing. Debtors with balances that are more than 3 months are requested to settle all outstanding balance before any further credit is granted. Normally, the Group does not obtain collateral from customers. The Group’s exposure to credit risk is in.uenced mainly by the individual characteristics of each customer. At the balance sheet date, the Group has a certain concentration of credit risk as 38.8% (2007: 3.3%) of the total trade and other receivables was due from the Group’s largest customer. The maximum exposure to credit risk without taking account of any collateral held is represented by the carrying amount of each .nancial asset, including derivative .nancial instruments, in the consolidated balance sheet after deducting any impairment allowance. Except for the .nancial guarantees given by the Company as set out in notes 33 to 38, the Group does not provide any other guarantees which would expose the Group or the Company to credit risk, The maximum exposure to credit risk in respect of this .nancial guarantee at the Company’s balance sheet is disclosed in notes 33 to 38. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 24. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 4. FINANCIAL RISK MANAGEMENT (CONTINUED) a) Financial risk factors (continued) (ii) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its .nancial obligations as they fall due. The Group’s policy is to regularly monitor its current and expected liquidity requirement and its compliance with lending covenants, to ensure that it maintains suf.cient reserves of cash and adequate committed lines of funding from major .nancial institutions to meet its liquidity requirements in the short and longer term. The following table details the remaining contractual maturities at the balance sheet date of the Group’s .nancial liabilities, which are based on the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash .ows (including interest payments computed using contractual rates or, if .oating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay: Group At 31.12.2008 More than More than Total 1 year but 2 years but contractual Within 1 year less than less than undiscounted Carrying or on demand 2 years 5 years cash . ow amount HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Trade and other payables 23,457 – – 23,457 23,457 Pro. t guarantee liabilities 3,792 9,100 32,608 45,500 45,500 Loans payables – 128,471 39,486 167,957 167,957 Long-term payables – – 295,632 295,632 187,048 Due to a related company – 18,277 – 18,277 17,574 27,249 155,848 367,726 550,823 441,536 Group At 30.9.2007 More than More than Total Within 1 year or on demand HK$’000 1 year but less than 2 years HK$’000 2 years but less than 5 years HK$’000 contractual undiscounted cash .ow HK$’000 Carrying amount HK$’000 Trade and other payables 106,422 – – 106,422 106,422 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 4. FINANCIAL RISK MANAGEMENT (CONTINUED) a) Financial risk factors (continued) (ii) Liquidity risk (continued) Company At 31.12.2008 More than More than Total 1 year but 2 years but contractual Within 1 year less than less than undiscounted Carrying or on demand 2 years 5 years cash . ow amount HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Trade and other payables 65,937 – – 65,937 65,937 Within 1 year or on demand HK$’000 More than 1 year but less than 2 years HK$’000 At 30.9.2007 More than 2 years but less than 5 years HK$’000 Total contractual undiscounted cash .ow HK$’000 Carrying amount HK$’000 Trade and other payables 51,659 – – 51,659 51,659 Group As at 31 December 2008, it was not probable that the counter parties to the .nancial guarantee will claim under the contracts. Consequently, the carrying amount of the .nancial guarantee contract of HK$44,100,000 (2007: HK$63,000,000) has not been presented above. At 31.12.2008 At 30.9.2007 HK$’000 Expiry period HK$’000 Expiry period Guarantee given to a bank in respect of banking facilities granted to an associate 860,000 2012 860,000 2012 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 4. FINANCIAL RISK MANAGEMENT (CONTINUED) a) Financial risk factors (continued) (iii) Currency risk Presently, there is no hedging policy with respect to the foreign exchange exposure. The Group’s transactional currency are Hong Kong dollars, Canadian dollars and United States dollars as substantially all the turnover are in Hong Kong dollars, Canadian dollars and United States dollars. The Group’s and the Company’s transactional foreign exchange exposure was insigni.cant. (iv) Interest rate risk The Group’s exposure to market risk for changes in interest rates. Interest rate risk arises primarily from the amount due to a related company. Borrowings issued at variable rates and . xed rates exposure the Group to cash .ow interest rate risk and fair value interest rate risk respectively. The Group does not use .nancial derivatives to hedge against the interest rate risk. The Company has no signi.cant exposure to interest rate risk. At 31 December 2008, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would increase/decrease the Group’s loss before tax by approximately HK$176,000 (2007: N/A). The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for the .nancial liabilities in existence at that date. The 100 basis points increase or decrease represents management’s assessment of reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed, on the same basis for 2007. b) Capital risk management The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and bene.ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 4. FINANCIAL RISK MANAGEMENT (CONTINUED) b) Capital risk management (continued) The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher level of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions. The Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose, the Group de.nes net debt as total debt (which includes interest bearing bank and other borrowings) less bank deposits and cash. Adjusted capital comprises all components of equity less unaccrued proposed dividends. During the period ended 31 December 2008, the Group’s strategy, which was unchanged from 2007, was to maintain the net debt-to-adjusted capital ratio as low as feasible. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. As at 31 December 2008 and 30 September 2007, the Group did not have net debt. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. c) Fair value The fair values of the Group’s .nancial assets and .nancial liabilities are determined in accordance with generally accepted pricing models based on discounted cash .ow analysis using prices or rates from observable current market transactions. The directors consider that the carrying amounts of the .nancial assets and .nancial liabilities recorded at amortised cost in the consolidated .nancial statements are not materially different from their fair values as at 31 December 2008 and 30 September 2007. 5. ACCOUNTING ESTIMATES AND JUDGEMENTS a) Key sources of estimation uncertainty In the process of applying the Group’s accounting policies which are described in note 2, management has made certain key assumptions concerning the future, and other key sources of estimated uncertainty at the balance sheet date, that may have a signi.cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next .nancial year, as discussed below. i) Impairment of property, plant and equipment and freehold land and buildings The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash .ows are discounted to their present value using a pre-tax discount rate that re.ects current market assessments of the time value of money and the risks speci.c to the asset, which requires signi.cant judgement relating to the level of revenue and the amount of operating costs. The Group uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of revenue and operating costs. Changes in these estimates could have a signi.cant impact on the carrying amount of the assets and could result in additional impairment charge or reversal of impairment in future periods. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 5. ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) a) Key sources of estimation uncertainty (continued) ii) Impairment of receivables The Group maintains impairment allowance for doubtful accounts based upon evaluation of the recoverability of the trade receivables and other receivables, where applicable, at each balance sheet date. The estimates are based on the aging of the trade receivables and other receivables balances and the historical write-off experience, net of recoveries. If the .nancial condition of the debtors were to deteriorate, additional impairment allowance may be required. iii) Impairment of intangible assets The Group performs annual test on whether there has been impairment of intangible assets in accordance with the accounting policy stated in note 2(k). The recoverable amounts of cash-generating units are determined based on value-in-use calculations. These calculation require the use of estimates and assumptions made by management on the future operation of the business, pre-tax discount rates, and other assumptions underlying the value-in-use calculations. iv) Amortisation of intangible assets Intangible assets are amortised on a straight-line basis over their estimated useful lives. The determination of the useful lives involves management’s estimation. The Group reassesses the useful life of the intangible assets and if the expectation differs from the original estimate, such a difference may impact the amortisation in the year and the estimate will be changed in the future period. b) Critical accounting judgements in applying the Group’s accounting policies In determining the carrying amounts of some assets and liabilities, the Group makes assumptions for the effects of uncertain future events on those assets and liabilities at the balance sheet date. These estimates involve assumptions about such items as cash .ows and discount rates used. The Group’s estimates and assumptions are based on historical experience and expectations of future events and are reviewed periodically. In addition to assumptions and estimations of future events, judgements are also made during the process of applying the Group’s accounting policies. i) Going concern As mentioned in note 2(b)(i) to the .nancial statements, the directors are satis.ed that the Group will be able to meet its .nancial obligations in full as and when they fall due in the foreseeable future. As the directors are con.dent that the Group will be able to continue in operational existence in the foreseeable future, the .nancial statements have been prepared on a going concern basis. If the going concern basis is not appropriate, adjustment would have to be made to provide for any further liabilities which might arise. Such adjustments may have a signi.cant consequential effect on the loss for the period and net assets of the Group. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 5. ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) b) Critical accounting judgements in applying the Group’s accounting policies (Continued) (ii) Maruhan Put Option On 1 October 2007, Golden Sun, a wholly-owned subsidiary of the Company as vendor and the Company as Golden Sun’s guarantor entered into a sale and purchase agreement with Maruhan Corporation (“Maruhan”), an independent third party, as purchaser to dispose of (i) 10.2% interest in the entire issued share capital (the “World Fortune Sale Shares”) of World Fortune Limited (“World Fortune”), a wholly-owned subsidiary of Golden Sun; and (ii) the shareholder’s loan of approximately HK$66,468,000 due by World Fortune to Golden Sun for a total consideration of approximately HK$208,501,000 (the “World Fortune Disposal”). The World Fortune Disposal was completed on 29 October 2007. On the date of completion of the World Fortune Disposal, Golden Sun, the Company and Maruhan entered into a shareholders’ agreement (the “World Fortune Shareholders’ Agreement”). Pursuant to the terms of the World Fortune Shareholders’ Agreement, (i) Golden Sun, in consideration of HK$1 paid by Maruhan, granted to Maruhan the right to require Golden Sun to purchase or procure the purchase of Maruhan’s entire equity interest in World Fortune and the entire amount of shareholder’s loans provided by Maruhan to World Fortune (the “Maruhan Put Option”) and (ii) Maruhan shall advance to World Fortune a further sum of approximately HK$116,369,000 by way of shareholder’s loan to World Fortune which will on-lend the same to Pier 16 – Property Development Limited (“Pier 16-Property Development”) for the purpose of .nancing and completing the development of the integrated casino-resort project “Ponte 16”. The Maruhan Put Option shall be exercised at any time on any business day during the period commencing from the .fth anniversary of 29 October 2007 and ending on the day falling six months thereafter. The Maruhan Put Option purchase price shall be determined based on Maruhan’s effective interest of 4.998% in the properties held by Pier 16-Property Development (the “Property”) and with reference to a 30% discount to the then prevailing market value of the Property to be determined by an independent professional valuer to be agreed by the shareholders of World Fortune. If the value of the Property as determined by the valuer after taking into account a 30% discount exceeds HK$6,500 million or is below HK$3,900 million, the Maruhan Put Option purchase price shall be HK$6,500 million or HK$3,900 million (as the case may be). The directors considered that after the completion of the World Fortune Disposal, the Group still retains substantially all the risks and rewards of ownership of the World Fortune Sale Shares. Therefore, the Group continues to account for World Fortune as a wholly-owned subsidiary of the Group. The consideration of approximately HK$208,501,000 received has been recognised as liabilities and classi.ed under loans payables (note 29) and long–term payables (note 30) in the consolidated balance sheet. As the Group does not have the unconditional rights to avoid settlement under the Maruhan Put Option, the Group has to recognise the relevant .nancial liabilities at the amount of the present value of the estimated future cash out.ows when it is required to acquire the World Fortune Sale Shares. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 5. ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) b) Critical accounting judgements in applying the Group’s accounting policies (Continued) (iii) SBI Macau Put Option On 7 July 2008, Favor Jumbo Limited (“Favor Jumbo”), a wholly-owned subsidiary of the Company, as vendor and the Company as Favor Jumbo’s guarantor entered into a sale and purchase agreement with SBI Macau Holdings Limited (“SBI Macau”), an independent third party, as purchaser to (i) dispose of 910 shares (the “Sale Shares”) of Golden Sun Pro.ts Limited (“Golden Sun”), being 4.55% of the entire issued share capital of Golden Sun, a wholly-owned subsidiary of Favor Jumbo; and (ii) assign all the rights, title, interests and bene.ts of 4.55% of the entire amount of the interest free shareholder’s loan amounted to approximately HK$39,486,000 due by Golden Sun to SBI Macau at face value (collectively “the Golden Sun Disposal”). The total consideration for the Golden Sun Disposal was HK$130,000,000. In addition, Favor Jumbo guaranteed that SBI Macau shall be entitled to a return of not less than HK$9,100,000 for each full .scal year for a period of sixty successive months immediately after the date of completion of the Golden Sun Disposal. The details of the pro. t guarantee have been set out in note 28 to the .nancial statements. The Golden Sun Disposal was completed on 8 August 2008. On the date of completion of the Golden Sun Disposal, Favor Jumbo, the Company, SBI Macau, SBI Holdings, Inc. (SBI Macau’s holding company) and Golden Sun entered into a shareholders’ agreement (the “Golden Sun Shareholders’ Agreement”). Pursuant to the terms of the Golden Sun Shareholders’ Agreement, Favor Jumbo, in consideration of HK$1 paid by SBI Macau, granted to SBI Macau the right to require Favor Jumbo to purchase or procure the purchase of the entire equity interest in Golden Sun and the entire amount of the shareholder’s loans owing by Golden Sun to SBI Macau (the “SBI Macau Put Option”). The SBI Macau Put Option purchase price shall be HK$99,465.77 per ordinary share in the share capital of Golden Sun held by SBI Macau as at completion of the SBI Macau Put Option plus the face value of the entire amount of the shareholder’s loan owing by Golden Sun to SBI Macau as at completion of the SBI Macau Put Option, and the reserve as calculated in accordance with the terms of the Golden Sun Shareholders’ Agreement. The SBI Macau Put Option can be exercised at any time on any business day during the period commencing from the .fth anniversary of 8 August 2008, the date of entering into the Golden Sun Shareholders’ Agreement and ending on the day falling two months thereafter. The directors of the Company considered that after the completion of the Golden Sun Disposal, the Group still retains substantially all the risks and rewards of ownership of the Sale Shares. Therefore, the Group accounts for Golden Sun as a wholly-owned subsidiary of the Group. The consideration of HK$130,000,000 received has been recognised as liabilities and classi.ed under pro.t guarantee liabilities (note 28), the loans payables (note 29) and long-term payables (note 30) in the consolidated balance sheet. As the Group does not have the unconditional rights to avoid settlement under the SBI Macau Put Option, the Group has to recognise the relevant .nancial liabilities at the amount of the present value of the estimated future cash out.ow when it is required to acquire the Sale Shares. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 6. SEGMENT REPORTING Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment. a) Business segment The Group’s operating business are structured and managed separately according to the nature of their operations and the products and services provided. Each of the Group’s business segments represents a strategic business unit that offers: – Cruise leasing and management business: the leasing of cruise and the provision of management services to the cruise. – Travel business: the provision of travel-related agency services. Cruise leasing and management Travel Consolidated Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended30.9.2007 HK$’000 Revenue Turnover Other revenue 118,000 225 95,901 184 509,254 4,917 7,853 72 627,254 5,142 103,754 256 Total revenue 118,225 96,085 514,171 7,925 632,396 104,010 Results Segment results Interest income Gain on disposal of property, plant and equipment Gain on disposal of securities Gain on disposal of available- for-sale investment Unallocated operating income Unallocated operating expenses (Loss)/pro. t from operations Finance costs Share of results of associates (Loss)/pro. t before taxation Income tax (Loss)/pro. t for the period/year (1,703 ) 32,035 2,707 (513 ) 1,004 4,851 298 – – 24,824 (98,569 )(67,592 )(335 )(170,292 )(238,219 )(859 )(239,078 ) 31,522 10,048 – 4,391 10,330 5,668 (27,890 34,069 (1,675 (15,450 16,944 (672 16,272 Balance SheetAssets At 31.12.2008 At 30.9.2007 Segment assets Interest in associates Unallocated assets Consolidated total assets Liabilities 95,394 119,204 72,175 1,432 167,569 1,119,892 131,486 1,418,947 120,636 886,930 189,813 1,197,379 Segment liabilities Unallocated liabilities Consolidated total liabilities 5,671 5,603 41,578 170 47,249 440,539 487,788 5,773 164,693 170,466 ) ) ) ) Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 6. SEGMENT REPORTING (CONTINUED) a) Business segment (continued) Cruise leasing and management Travel Unallocated Consolidated Period ended Year ended Period ended Year ended Period ended Year ended Period ended Year ended 31.12.2008 30.9.2007 31.12.2008 30.9.2007 31.12.2008 30.9.2007 31.12.2008 30.9.2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Other information: Amortisation of intangible assets – – 215 – – – 215 – Impairment loss on – goodwill – – 609 – – – 609 – – intangible assets – – 676 – – – 676 – – other receivables 22,763 – – – – – 22,763 – – interest in associates – – – – 18,900 – 18,900 – Depreciation 9,142 7,325 837 20 3,480 1,365 13,459 8,710 Capital expenditure 117 25 7,305 1 5,964 5,311 13,386 5,337 b) Geographical segment The Group’s business is managed on a worldwide basis, but participates in four principal economic environments. The cruise leasing and management income is mainly derived from South China Sea, other than in Hong Kong. In Hong Kong, the main business is the provision of travel-related agency services. The income from North America mainly derived from sale of air tickets and tour packages. In presenting information on the basis of geographical segment, segment revenue is based on the geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets. South China Sea, other than in Hong Kong Hong Kong Macau North America Consolidated Period Year Period Year Period Year Period Year Period Year ended ended ended ended ended ended ended ended ended ended 31.12.2008 30.9.2007 31.12.2008 30.9.2007 31.12.2008 30.9.2007 31.12.2008 30.9.2007 31.12.2008 30.9.2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment revenue Turnover 118,000 95,901 5,121 7,853 – – 504,133 – 627,254 103,754 Segment assets 94,259 119,211 134,003 190,689 1,121,165 887,479 69,520 – 1,418,947 1,197,379 Capital expenditure 117 25 5,633 5,312 – – 7,636 – 13,386 5,337 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 7. TURNOVER The principal activities of the Group are leasing and management of cruise and tourist-related business. Turnover represents cruise leasing and management fee income and travel-related agency services fee income. The amount of each signi.cant category of revenue recognised in turnover during the period/year is as follows: Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Cruise leasing and management fee income Travel–related agency services fee income – sale of air tickets – travel and related service fee income 118,000 470,409 38,845 509,254 627,254 95,901 – 7,853 7,853 103,754 8. OTHER REVENUE AND OTHER NET INCOME Other revenue Interest income on bank deposits Period ended 31.12.2008 HK$’000 4,851 Year ended 30.9.2007 HK$’000 10,197 Total interest income on .nancial assets not at fair value through pro.t or loss Commission income Dividend from available-for-sale investment Management fee income from an associate Write back of trade payables# Amortisation of .nancial guarantee contract Other income 4,851 74 – 5,919 3,858 18,900 1,215 34,817 10,197 45 1,133 4,534 – – 63 15,972 # This amount represents write back of long-outstanding trade payables Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 8. OTHER REVENUE AND OTHER NET INCOME (CONTINUED) Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Other net income Gain on disposal of securities (note) – 4,391 Gain on disposal of available-for-sale investment – 10,330 Gain on disposal of property, plant and equipment 298 – 298 14,721 Note: During the year ended 30 September 2007, Better Talent Limited, an indirect wholly-owned subsidiary of the Company, as subscriber, entered into a subscription agreement with an independent third party, China Star Entertainment Limited (“China Star”), a company listed on the Stock Exchange, for the subscription of China Star’s zero coupon unsecured convertible bonds at the subscription price of approximately HK$11.9 million. The convertible bonds were exercised and converted into ordinary shares of China Star and such shares were subsequently disposed in the open market during the year ended 30 September 2007. The net proceeds received were approximately HK$16.3 million. 9. (LOSS)/PROFIT BEFORE TAXATION (Loss)/pro.t before taxation is arrived at after charging/(crediting): a) Finance costs Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Interest expenses on other borrowings wholly repayable within .ve years – 1,675 Interest expenses paid to a related company 335 – Total interest expenses on .nancial liabilities not at fair value through pro.t or loss 335 1,675 b) Staff costs Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Salaries, wages and other bene.t (including directors’ emoluments) Contribution to de.ned contribution retirement plan 59,928 990 35,394 629 60,918 36,023 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 9. (LOSS)/PROFIT BEFORE TAXATION (CONTINUED) c) Other items Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Auditors’ remuneration – audit services 1,267 837 – other services 590 110 Depreciation on owned .xed assets 13,459 8,710 Gain on write off of a subsidiary under voluntary liquidation (13 ) – Amortisation of intangible assets 215 – Operating lease rentals – properties 6,365 4,398 – plant and machinery 272 40 Net exchange loss/(gain) 546 (37 ) Cost of inventories# 36,044 17,044 Impairment loss on – goodwill* 609 – – intangible assets* 676 – – other receivables*^ 22,763 – – interest in associates* 18,900 – # Included within administrative expenses * These amounts are included in “other operating expresses” on the face of the consolidated income statement. ^ This represents impairment on debts due by a debtor which has been long-outstanding. The directors considered that the amounts due could not be recovered. Therefore, full impairment has been made (note 24(d)). Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 10. INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT a) Taxation in the consolidated income statement represents: Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Current tax-Hong Kong Pro.ts Tax – charge for the period/year 1,708 804 – over-provision in respect of prior years (25 ) – 1,683 804 Current tax-Overseas Pro.ts Tax – over-provision in respect of prior years (327 ) – 1,356 804 Deferred taxation relating to the origination and reversal of temporary differences (note 32 (b)) (497 ) (132 ) 859 672 On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 and reduced corporate pro.ts tax rate from 17.5% to 16.5% which is effective from the year of assessment 2008/2009. Hong Kong Pro.ts Tax is calculated at 16.5% (2007: 17.5%) of the estimated assessable pro.t for the period/year. Taxation arising in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions. b) Reconciliation between tax expense and accounting (loss)/pro. t at applicable tax rates: Period ended Year ended 31.12.2008 30.9.2007 HK$’000 HK$’000 (Loss)/pro. t before taxation (238,219 ) 16,944 Notional tax on (loss)/pro.t before taxation, calculated at the rates applicable to (loss)/pro.t in the countries concerned (10,495 ) 5,669 Tax effect of share of results of associates (28,098 ) (2,730 ) Tax effect of non-deductible expenses 9,607 3,976 Tax effect of non-taxable revenue (4,052 ) (9,280 ) Tax effect of unrecognised tax losses 32,944 3,319 Unrecognised temporary differences 1,881 (282 ) Tax effect on utilisation of previously unrecognised tax losses (576 ) – Overprovision for tax in prior years (352 ) – Tax charge 859 672 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 11. DIRECTORS’ REMUNERATION Directors’ remuneration disclosed pursuant to Section 161 of the Hong Kong Companies Ordinance is as follows: Salaries, allowances Retirement scheme Performance related Directors’ fees and bene. ts in kind contributions incentive payment (note) Total Name Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Executive Directors Yeung Hoi Sing, Sonny Lee Siu Cheung (resigned on 1 June 2008) Ma Ho Man, Hoffman (appointed on 20 March 2007) Non-executive Director Choi Kin Pui, Russelle Independent Non-executive Directors Luk Ka Yee, Patrick Yim Kai Pung Yeung Mo Sheung, Ann – – – 129 129 129 129 – – – 100 100 100 100 – 360 970 – – – – – 889 210 – – – – – 8 15 – – – – – 12 6 – – – – – 187 112 – – – – – – – – – – – – 555 1,097 129 129 129 129 – 901 216 100 100 100 100 516 400 1,330 1,099 23 18 299 – 2,168 1,517 Note: The performance related incentive payment is determined by reference to the individual performance of the directors and approved by remuneration committee. 12. INDIVIDUALS WITH HIGHEST EMOLUMENTS The .ve individuals with the highest emoluments, one (2007: one) is a director whose emoluments is disclosed in note 11. The aggregate of the emoluments in respect of the other four (2007: four) individuals are as follows: Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Salaries, allowances and bene.ts in kind Performance related incentive payment Retirement bene.t scheme contributions 3,171 118 52 2,272 – 45 3,341 2,317 The emoluments of the four (2007: four) individuals with the highest emoluments are within the following band: Number of individuals Period ended Year ended 31.12.2008 30.9.2007 HK$Nil – HK$1,000,000 4 4 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 13. (LOSS)/PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY The (loss)/pro.t attributable to equity shareholders of the Company includes a loss of approximately HK$28,657,000 (2007: pro.t HK$4,279,000) which has been dealt within the .nancial statements of the Company. 14. DIVIDENDS No interim dividend was paid during the period under review (2007: Nil). The Directors do not recommend any payment of a .nal dividend for the .fteen months ended 31 December 2008 (2007: Nil). 15. (LOSS)/EARNINGS PER SHARE a) Basic (loss)/earnings per share The calculation of basic (loss)/earnings per share is based on the (loss)/pro.t for the period/year attributable to equity shareholders of the Company of approximately HK$238,304,000 (2007: pro.t HK$2,314,000) and on the weighted average number of 2,414,012,000 (2007: 2,174,642,000) shares in issue during the period/year. b) Diluted (loss)/earnings per share Dilutive (loss)/earnings per share equals to the basic (loss)/earnings per share as there were no potential dilutive ordinary shares outstanding for the period/year presented. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 16. PROPERTY, PLANT AND EQUIPMENT Group Freehold land and building HK$’000 Leasehold Cruise improvements HK$’000 HK$’000 Plant and machinery HK$’000 Furniture, . ttings and of.ce equipment HK$’000 Motor vehicles HK$’000 Motor yacht HK$’000 Total HK$’000 Cost At 1 October 2006 – 93,600 2,796 9,853 3,923 230 – 110,402 Additions – – 2,798 – 938 1,601 – 5,337 Disposals – – (1,746 ) – (386 ) – – (2,132 ) At 30 September 2006 and 1 October 2007 – 93,600 3,848 9,853 4,475 1,831 – 113,607 Additions – – 59 – 713 784 4,700 6,256 Disposals (766 ) – (365 ) – (111 ) (230 ) – (1,472 ) Acquisition of subsidiaries 3,838 – 1,057 – 1,985 250 – 7,130 Write off of a subsidiary – – (226 ) – (113 ) – – (339 ) Exchange alignment (662 ) – (681 ) – (1,794 ) (185 ) – (3,322 ) At 31 December 2008 2,410 93,600 3,692 9,853 5,155 2,450 4,700 121,860 Accumulated depreciation At 1 October 2006 – 12,870 2,051 2,003 1,744 198 – 18,866 Charge for the year – 4,680 947 1,970 845 268 – 8,710 Written back on disposals – – (1,684 ) – (230 ) – – (1,914 ) At 30 September 2007 and 1 October 2007 – 17,550 1,314 3,973 2,359 466 – 25,662 Charge for the period 19 5,850 1,665 2,464 1,666 777 1,018 13,459 Written back on disposals – – (220 ) – (48 ) (230 ) – (498 ) Write off of a subsidiary – – (222 ) – (102 ) – – (324 ) Exchange alignment (14 ) – (512 ) – (1,479 ) (145 ) – (2,150 ) At 31 December 2008 5 23,400 2,025 6,437 2,396 868 1,018 36,149 Net book value At 31 December 2008 2,405 70,200 1,667 3,416 2,759 1,582 3,682 85,711 At 30 September 2007 – 76,050 2,534 5,880 2,116 1,365 – 87,945 The analysis of carrying amount of property is as follows: At At 31.12.2008 30.9.2007 HK$’000 HK$’000 Outside Hong Kong Freehold land 2,405 – Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 17. GOODWILL Group HK$’000 Cost At 1 October 2006 and 30 September 2007 1,313 At 1 October 2007 1,313 Acquisition of subsidiaries (note 40(a)) 7,019 At 31 December 2008 8,332 Accumulated impairment losses At 1 October 2006 and 30 September 2007 – At 1 October 2007 – Impairment loss (609 ) At 31 December 2008 (609 ) Carrying amount At 31 December 2008 7,723 At 30 September 2007 1,313 Goodwill is allocated to the Group’s cash-generating units (“CGUs”) identi.ed according to business segment as follows: At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 Cruise management CGU Travel CGU 1,313 6,410 1,313 – 7,723 1,313 The recoverable amount of the cash-generating unit (“CGU”) is determined on value-in-use calculations. These calculations use cash .ow projections based on the .nancial budgets approved by management covering a .ve-year period. Cash .ows beyond the .ve-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. Key assumptions used for value-in-use calculations: Travel CGU Cruise management CGU 2008 % 2007 % 2008 % 2007 % – Growth rate – Discount rate 4 11.8 N/A N/A zero 5 5 5 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 17. GOODWILL (CONTINUED) The discount rates re.ect speci.c risks relating to the relevant segment. The goodwill of HK$7,019,000 was arising on the acquisition of 100% interest in Smart Class Enterprises Limited (“Smart Class”) in July 2008. Based on the impairment tests performed, the carrying amount of the goodwill of HK$6,410,000 allocated to the travel CGU has been impaired by HK$609,000 as at 31 December 2008 because the market condition of the travel agent business changed signi.cantly subsequent to the .nancial crisis since the last quarter of 2008. The recoverable amount of the cruise management CGU is higher than its carrying amount based on value-in-use calculations. Accordingly, no impairment loss is recognised for the period (2007: Nil). Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cruise management CGU. 18. INTANGIBLE ASSETS Trademark Client list Total HK$’000 HK$’000 HK$’000 Cost At 1 October 2006 and 30 September 2007 – – – At 1 October 2007 – – – Acquisition of subsidiaries (note 41(a)) 33,044 9,238 42,282 Exchange alignment (5,301 ) (1,482 ) (6,783 ) At 31 December 2008 27,743 7,756 35,499 Accumulated amortisation and impairment losses At 1 October 2006 and 30 September 2007 – – – At 1 October 2007 – – – Charge for the period – (215 ) (215 ) Impairment loss – (676 ) (676 ) At 31 December 2008 – (891 ) (891 ) Carrying amount At 31 December 2008 27,743 6,865 34,608 At 30 September 2007 – – – The trademark and client list were purchased as part of the business combination of Smart Class. The amortisation charge for the period is included in the “administrative expenses” in the consolidated income statement. The Group’s titles to these intangible assets are not restricted and they are not pledged as securities for liabilities. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 18. INTANGIBLE ASSETS (CONTINUED) Trademark The Group classi.ed the acquired trademark as an intangible asset with in.nite life in accordance with HKAS 38 Intangible Assets. This is supported by the fact that the legal rights of the trademark are capable of being renewed inde.nitely at insigni.cant cost and are therefore perpetual in duration. Based on the anticipated future .nancial performance of the travel CGU, the trademark is expected to generate positive cash .ows inde.nitely. Under HKAS 38, the Group re-evaluates the useful life of the trademark each year to determine whether events or circumstances continue to support the view of the inde.nite useful life of the asset. The trademark will not be amortised until its useful life is determined to be .nite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired. In accordance with HKAS 36 Impairment of Assets, the Group completed its annual impairment test for the trademark by comparing its recoverable amount to its carrying amount as at 31 December 2008. The Group has conducted a valuation of the trademark based on the value in use calculations. With reference to the valuations carried out by Roma Appraisal Limited (“Roma”), an independent professional valuer, who has among their staff, fellow members of the Hong Kong Institute of Surveyors, the recoverable amount of the trademarks is higher than its carrying value, therefore, no impairment loss is recognized for the period. The valuation of the trademark uses cash .ow projections based on .nancial estimates covering a .ve-year period, the expected sales deriving from the trademark in the travel CGU and a discount rate of 14.8%. The cash .ows beyond the .ve-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long term average growth rate for travel markets in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. Client list The directors assessed that the client list having 15 years of useful lives. The Group has completed its annual impairment test for the client list by comparing the recoverable amount of the client list to its carrying amount as at 31 December 2008. The Group has conducted a valuation of the client list based on the value in use calculations With reference to the valuations carried out by Roma the carrying amount of client list of HK$6,865,000 has been impaired by HK$676,000 because the market condition of the travel agent business changed signi.cantly subsequent to the .nancial crisis since the last quarter of 2008. The valuation of the client list is based on the contributory charge method and uses cash .ow projections based on .nancial estimates covering a .ve-year period, the expected sales deriving from the client list in the travel CGU and a discount rate of 13.9%. The cash .ows beyond the .ve-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long-term average growth rate for travel markets in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 19. INVESTMENTS IN SUBSIDIARIES Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 Unlisted shares, at cost Deemed capital contributions (note 33) Amounts due from subsidiaries 40,655 63,000 1,012,031 15,874 63,000 608,370 Less: Impairment loss# 1,115,686 (42,881 ) 687,244 – 1,072,805 687,244 # During the period ended 31 December 2008, after considering the poor operating performance of the relevant subsidiaries, the directors are of the opinion that impairment loss of approximately HK$42,881,000 (2007: Nil) should be recognised. The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the Group. The class of share held is ordinary unless otherwise stated. All of these are controlled subsidiaries as de.ned under note 2(c) and have been consolidated into the Group .nancial statements. Proportion of Particulars ownership interest Place of of issued Group’s Held incorporation/ and paid up effective by the Held by Principal Name of subsidiary operation share capital interest Company subsidiaries activities Macau Success (Hong Kong) Limited Hong Kong 10,000,000 100 100 – Investment holding shares of HK$0.01 each Access Success Developments Limited British Virgin Islands 1 share of US$1 100 – 100 Investment holding Better Talent Limited British Virgin Islands 1 share of US$1 100 – 100 Investment holding Capture Success Limited British Virgin Islands/ 100 shares of 55 – 55 Cruise leasing South China Sea, US$1 each other than in Hong Kong Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 19. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Name of subsidiary Favor Jumbo Limited Place of incorporation/ operation British Virgin Islands Particulars of issued and paid up share capital 1 share of US$1 Proportion of ownership interest Group’s Held effective by the Held by interest Company subsidiaries 100 – 100 Principal activities Investment holding Golden Sun Pro.ts Limited British Virgin Islands 20,000 shares of US$1 each 100 – 100 Investment holding Hover Management Limited Hong Kong/ South China Sea, other than in Hong Kong 100 shares of HK$1 each 55 – 55 Provision of cruise management services Macau Success Management Services Limited Hong Kong 100 shares of HK$1 each 100 – 100 Provision of administration services Travel Success Limited Hong Kong 500,000 shares of HK$1 each 100 – 100 Travel agency Travel Success (Macau) Limited Macau 3 shares of MOP750,000, MOP749,000 and MOP1,000 respectively 100 – 100 Travel agency World Fortune Limited Hong Kong 1,000 shares of HK$1 each 100 – 100 Investment holding 665127 British Columbia Ltd. Canada 10,000 common shares with no par value and 1,400 Class A preferred shares with CAD0.01 par value (without voting right) 80 – 80 Investment holding Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 19. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Proportion of Particulars ownership interest Place of of issued Group’s Held incorporation/ and paid up effective by the Held by Principal Name of subsidiary operation share capital interest Company subsidiaries activities Jade Travel Ltd. (“Jade Travel Canada 7 common shares 80 – 80 Wholesale and retail Ltd. (Canada)”) with no par value business of selling airline tickets and tour package Jade Travel Ltd. (“Jade Travel Ltd. United States of 100 common shares 80 – 80 Wholesale and retail (New York)”) America with no par value business of selling airline tickets and tour packages Smart Class Enterprises Limited British Virgin Islands 50,000 ordinary shares 100 100 – Investment holding of US$1 each 20. INTEREST IN ASSOCIATES Group At At 31.12.2008 30.9.2007 Note HK$’000 HK$’000 Share of net assets 154,634 425,696 Deemed capital contributions 33 63,000 63,000 Goodwill (b) 19,409 19,409 237,043 508,105 Amounts due from associates (c) 901,749 378,825 1,138,792 886,930 Less: Impairment loss (d) (18,900 ) – 1,119,892 886,930 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 20. INTEREST IN ASSOCIATES (CONTINUED) (a) The following list contains only the particulars of associates, all of which are unlisted corporate entities, which principally affected the results or assets of the Group: Proportion of ownership interest Place of Particulars Group’s Held by incorporation/ of issued and effective the Held by Name of associate operation paid up capital interest Company a subsidiary Principal activities Pier 16 – Entertainment Group Macau 2 shares of MOP24,000 49% – 49% Provision of Corporation Limited and MOP1,000 management service respectively for casino operation Pier 16 – Management Limited Macau/ 2 shares of MOP24,000 49% – 49% Hotel operation Hong Kong and MOP1,000 respectively Pier 16 – Property Macau 100,000 shares of 49% – 49% Property holding Development Limited MOP100 each (b) Goodwill Because goodwill included in the carrying amount of the interest in associates not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing in HKAS 36 Impairment of assets. Instead, the entire carrying amount of the interest in associates is tested for impairment as set out in note 20(d) below. (c) The amounts due from associates are unsecured, interest free and have no .xed terms of repayment. Their carrying amounts are not materially different from their fair value. (d) Impairment test for interest in associates The Group completed its annual impairment test for interest in associates by comparing the recoverable amount of interest in associates to its carrying amount as at 31 December 2008. The Group has engaged Roma to carry out a valuation of the interest in associate as at 31 December 2008 based on the value-in-use calculations. The carrying value of the interest in associates is written down by approximately HK$18.9 million (2007: Nil). This valuation uses cash .ow projections based on .nancial estimates covering a .ve-year period, and a discount rate of 12.9%. The cash .ows beyond the .ve-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long-term average growth rate for the casino and hotel industries in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 20. INTEREST IN ASSOCIATES (CONTINUED) (e) The followings is summary of aggregate amounts of assets, liabilities, revenues, and results of the Group’s associates: 21. DEPOSIT FOR ACQUISITION OF PROPERTIES On 28 February 2008, Jade Travel Ltd., a 80% owned subsidiary of the Group entered into a sale and purchase agreement to purchase of properties located in Richmond Hill, Ontario, Canada for a total consideration of approximately CAD2,364,000 (equivalent to approximately HK$15,265,000). The properties will be used as of.ce by the subsidiary. As at 31 December 2008, deposits of HK$2,290,000 had been paid and the outstanding balance of HK$12,975,000 was disclosed as capital commitment in note 37. The purchase of the properties will be completed on or before 31 October 2009. 22. DEPOSIT FOR ACQUISITION OF A COMPANY This represented a deposit of HK$60 million paid to上海永德投資有限公司 (“上海永德”), an independent third party, upon signing of a letter of intent and a con.dentiality agreement on 10 January 2008 for the proposed acquisition by a wholly-owned subsidiary of the Company of at least 10% and not more than 51% of the entire issued share capital of 重慶林科物業發展有限公司, a 90% owned subsidiary of 上海永德. A letter agreement has been signed on 31 March 2009 to further extend the long stop date to 30 September 2009. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 23. INVENTORIES Group Fuel oil At 31.12.2008 HK$’000 1,160 At 30.9.2007 HK$’000 1,323 24. TRADE AND OTHER RECEIVABLES Group At 31.12.2008 Note HK$’000 At 30.9.2007 HK$’000 Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 Trade receivables (a), (b), (c) 21,731 996 – – Other receivables 25,553 17,402 79 209 Less: Impairment loss (d) (22,763 ) – – – 2,790 17,402 79 209 Trade and other receivables 24,521 18,398 79 209 Prepayment and deposits 6,662 – 294 – 31,183 18,398 373 209 All of the trade and other receivables are expected to be recovered within one year. (a) Aging analysis Included in trade and other receivables are trade debtors with the following aging analysis as at the balance sheet date: Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Current 31 to 60 days overdue 61 to 90 days overdue Over 90 days overdue 14,979 6,239 178 335 727 165 – 104 – – – – – – – – 21,731 996 – – The Group normally allows a credit period of 60 days to customers of cruise leasing and management (2007: 30 days) and 30 days to customers of travelling business (2007: 30 days). Macau Success Limited Annual Report 2008 99 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 24. TRADE AND OTHER RECEIVABLES (CONTINUED) (b) Impairment of trade receivables Impairment loss in respect of trade receivables are recorded using an allowance account unless the Group is satis.ed that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly (see note2(k)). As at 31 December 2008, there were no impairment loss on the trade receivables. (c) Trade receivables that are not impaired The aging analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows: Group At At 31.12.2008 30.9.2007 HK$’000 HK$’000 Neither past due nor impaired 14,979 727 Past due but not impaired – Less than 1 month past due 6,239 165 – 1 to 3 months past due 513 104 6,752 269 21,731 996 Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default. Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a signi.cant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances. (d) Other receivables Group HK$’000 Movement in the impairment on other receivables At 1 October 2006 and 30 September 2007 – At 1 October 2007 – Impairment loss recognised on other receivables (note 9(c)) 22,763 At 31 December 2008 22,763 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 25. PLEDGED BANK DEPOSITS/BANK BALANCES Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Cash and bank balances Non-pledged bank deposits Pledged bank deposits 59,106 7,569 6,762 19,314 181,405 751 664 6,645 5,996 541 180,504 – Less: Pledged bank deposits 73,437 (6,762 ) 201,470 (751 ) 13,305 (5,996 ) 181,045 – Cash and cash equivalents in cash .ow statement 66,675 200,719 7,309 181,045 26. TRADE AND OTHER PAYABLES Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Trade payables Consideration received for partial disposal of a subsidiary Accrued charges and other payables Amounts due to subsidiaries 7,259 – 16,198 – 163 100,000 6,259 – – – 1,802 64,135 – – 912 50,747 Financial liabilities measured at amortised cost 23,457 106,422 65,937 51,659 The amounts due to subsidiaries are interest free, unsecured and without .xed terms of repayment. All of the trade and other payables are expected to be settled within one year. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 26. TRADE AND OTHER PAYABLES (CONTINUED) Aging analysis Included in trade and other payables are trade creditors with the following aging analysis as of the balance sheet date: Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Current 31 to 60 days 61 to 90 days Over 90 days 4,918 881 444 1,016 149 1 – 13 – – – – – – – – 7,259 163 – – 27. DEFERRED INCOME Deferred revenue comprises of a sign-up bonus for an on-line ticket processing system and is recognised as revenue in accordance with the terms of the agreements. 28. PROFIT GUARANTEE LIABILITIES HK$’000 Carrying amount At 1 October 2006 and 30 September 2007 – At 1 October 2007 – Pro.t guarantee issued to SBI Macau during the period 45,500 At 31 December 2008 45,500 Current liabilities 12,892 Non-current liabilities 32,608 45,500 As mentioned in note 5(b) (iii), Favor Jumbo guaranteed that SBI Macau shall be entitled to a return of not less than HK$9.1 million (“Guaranteed Amount”) for each full .scal year for a period of sixty successive months immediately after the date of completion of the Golden Sun Disposal (the “Relevant Period”). In the event the amounts received by SBl Macau from the distribution of the pro.ts of Golden Sun for any .scal year during the Relevant Period falls short (“Shortfall”) of the higher of the return as stipulated in the Golden Sun Shareholder’s Agreement (the “Return”) or the Guaranteed Amount (pro-rated, if necessary), Favor Jumbo shall pay to SBI Macau such Shortfall within six months from the end of the relevant .scal year during the Relevant Period. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 28. PROFIT GUARANTEE LIABILITIES (CONTINUED) If the aggregate of the Return and the Shortfall payments received by SBI Macau from Golden Sun and/or Favor Jumbo in respect of the Relevant Period exceeds the total Guaranteed Amount (pro-rated, if necessary) for the Relevant Period (the “Excess”), SBI Macau shall refund and pay to Favor Jumbo the lesser of (a) the aggregate amount of the Shortfall paid by Favor Jumbo to SBI Macau during the Relevant Period; and (b) the Excess, within three months upon notice from Favor Jumbo the amount payable by SBI Macau after the expiry of the Relevant Period. 29. LOANS PAYABLES Note At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 Loans from minority shareholders – Mrs. Yung Yuen Ping Kwok (i) 2,247 – – SABC Holdings Ltd. (ii) 6,472 – 8,719 – Loan from Maruhan (iii) 119,752 – Loan from SBI Macau (iv) 39,486 – 167,957 – (i) Mrs. Yung Yuen Ping Kwok is the minority shareholder of a 80% owned subsidiary of the Group, namely 665127 British Columbia Ltd. The loan was arising upon the acquisition of Smart Class and its subsidiaries. (ii) SABC Holdings Ltd. is the minority shareholder of a 80% owned subsidiary of the Group, namely 665127 British Columbia Ltd. The loan was arising upon the acquisition of Smart Class and its subsidiaries. (iii) The amount represented the shareholder’s loan of approximately HK$66,468,000 due by World Fortune to Golden Sun taken up by Maruhan upon the completion of the World Fortune Disposal and further shareholder loan of approximately HK$53,284,000 advanced by Maruhan to World Fortune pursuant to the World Fortune Shareholders’ Agreement as disclosed in note 5(b)(ii) to the .nancial statements. (iv) Pursuant to a deed of assignment dated 8 August 2008, Favor Jumbo assigned the loan of approximately HK$39,486,000 due by Golden Sun to SBI Macau as disclosed in note 5(b)(iii) to the .nancial statements. All the above loans are unsecured, interest free and not expected to be settled within one year. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 30. LONG-TERM PAYABLES 31. DUE TO A RELATED COMPANY The amount due to a related company, which is an investment holding company bene.cially wholly-owned by Mr. Yeung Hoi Sing, Sonny, a director and a controlling shareholder of the Company is unsecured, bearing interest at the rate of 4% per annum and not expected to be settled within one year. 32. INCOME TAX IN THE CONSOLIDATED BALANCE SHEET At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 Present value of liabilities of – Maruhan Put Option (Note 5(b)(ii)) – SBI Macau Put Option (Note 5(b)(iii)) 142,035 45,013 – – 187,048 – a) Current taxation in the consolidated balance sheet represents: Group Period Year ended ended 31.12.2008 30.9.2007 HK$’000 HK$’000 Provision for Hong Kong Pro.ts tax for the period/year 1,708 672 Provisional Pro.ts Tax paid (1,694 ) – 14 672 Balance of Pro.ts tax provision relating to prior years – Hong Kong 936 289 – Overseas 18 – 968 961 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 32. INCOME TAX IN THE CONSOLIATED BALANCE SHEET (CONTINUED) b) Recognised deferred tax (assets)/liabilities The movements of deferred tax (assets)/liabilities during the period/year were as follows: Group Accelerated depreciation HK$’000 At 1 October 2006 215 Charged to the income statement (note 10(a)) (132 ) At 30 September 2007 83 At 1 October 2007 83 Arising from acquisition of subsidiaries (888 ) Credited to the income statement (note 10(a)) (497 ) Exchange alignment 195 At 31 December 2008 (1,107 ) At At 31.12.2008 30.9.2007 HK$’000 HK$’000 Net deferred tax assets recognsied on the consolidated balance sheet (1,190 ) – Net deferred tax liabilities recognised on the consolidated balance sheet 83 83 (1,107 ) 83 c) Unrecognised deferred tax assets Deferred income tax assets are recognised for tax loss carried forward to the extent that the realisation of the related tax bene.t through utilisation against future taxable pro.ts is probable. At 31 December 2008, the Group had tax losses of approximately HK$103 million (2007: HK$86 million) that are available to carry forward inde.nitely for offsetting against future taxable pro.ts. No deferred tax asset has been recognised in relation to tax losses as it is not probable that taxable pro.t will be available against which the tax losses can be utilised. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 33. FINANCIAL GUARANTEE CONTRACT HK$’000 Carrying amount At 1 October 2006 – Fair value of .nancial guarantee contract issued 63,000 At 30 September 2007 63,000 At 1 October 2007 63,000 Amortisation for the period (18,900 ) At 31 December 2008 44,100 Current liabilities 12,600 Non-current liabilities 31,500 44,100 At the balance sheet date, the Company gave a corporate guarantee to a bank in respect of syndicated loan facilities of HK$1,600 million (2007: HK$1,600 million) granted to an associate (note 38(a)). The maximum guarantee amount borne by the Company was HK$860 million (2007: HK$860 million). Total loan outstanding for the syndicated loan facilities of the associate as at the balance sheet date was HK$1,260 million (2007: HK$1,010 million). Based on the valuation performed by an independent .rm of valuer, the directors considered that the fair value of the .nancial guarantee contract was approximately HK$63,000,000 at the date of issuance of the .nancial guarantee contract. The carrying amount of the .nancial guarantee contract recognised in the Group’s and the Company’s balance sheets was in accordance with HKAS 39 and HKFRS 4 (Amendments). 34. SHARE CAPITAL Notes Number of shares Nominal value ’000 HK$’000 Authorised: Ordinary shares of HK$0.01 each At 1 October 2006 and 30 September 2007 160,000,000 1,600,000 At 1 October 2007 and 31 December 2008 160,000,000 1,600,000 Issued and fully paid: Ordinary shares of HK$0.01 each At 1 October 2006 2,139,464 21,395 Allotment of consideration shares (a) 60,000 600 At 30 September 2007 2,199,464 21,995 At 1 October 2007 2,199,464 21,995 Allotment of subscription shares and consideration shares (b), (c) 239,500 2,395 At 31 December 2008 2,438,964 24,390 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 34. SHARE CAPITAL (CONTINUED) The movement in the issued share capital of the Company was as follows: a) On 30 November 2006, World Fortune as purchaser entered into an agreement for the purchase of 12.25% equity interest in and the related loan to Pier 16 – Property Development at an aggregate consideration of HK$200 million. The consideration was settled partly by cash of HK$152 million and partly by the allotment and issue of 60 million shares of the Company at an agreed issued price of HK$0.80 per share. The Company allotted and issued the consideration shares on 28 February 2007. b) On 1 October 2007, the Company entered into a subscription agreement with Maruhan as subscriber for the subscription of 220 million shares of the Company at HK$1.062 each. The Company allotted and issued such shares on 26 October 2007. The gross proceeds from the issue were approximately HK$233.6 million and were used as general working capital. c) On 5 May 2008, the Company as purchaser entered into an agreement for the acquisition of the entire issued share capital of Smart Class at an agreed consideration of CAD2.9 million (equivalent to approximately HK$22.6 million). The consideration was settled by the allotment and issue of 19.5 million shares of the Company at an agreed issue price of HK$1.16 per share. The fair value of the shares allotted on 31 July 2008 was HK$1.12 per share. The gross proceeds from the issue were approximately HK$21.8 million, which represented the amount of consideration settled for the acquisition. 35. EMPLOYEE RETIRE BENEFITS a) De. ned contribution retirement plan The Group participates in a Mandatory Provident Fund Scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a de.ned contribution retirement plan administered by independent trustees. Under the MPF Scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the plan vest immediately. b) Share option scheme The Company participates in a share option scheme (the “Option Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Eligible participants of the Option Scheme include the Company’s directors and other employees of the Group. The Option Scheme became effective on 8 November 2004 and, unless otherwise cancelled or amended, will remain in force for 10 years from the date of adoption of the Option Scheme, i.e. 20 August 2004. Under the Option Scheme, the directors of the Company are authorised at their absolute discretion, to invite any employee, executive or of.cer of any member of the Group or any entity in which the Group holds any equity interest (including any directors) and any consultant, agent, adviser, vendor, supplier or customer who is eligible to participate in the Option Scheme, to take up options to subscribe for shares of the Company (the “Share(s)”). Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 35. EMPLOYEE RETIRE BENEFITS (CONTINUED) b) Share option scheme (continued) There is no provision in the Option Scheme to require a grantee to ful.ll any performance target or to hold the option for a certain period before exercising the option, but the Company may at its absolute discretion from time to time provide such requirements in the offer of grant of options. The maximum number of Shares which may be issued upon exercise of all options to be granted under the Option Scheme and any other share option schemes of the Company shall not in aggregate exceed 10 per cent. of the total number of Shares in issue as at the date of adoption of the Option Scheme. The Company may seek approval of the shareholders in general meeting for refreshing the 10 per cent. limit under the Option Scheme save that the total number of Shares which may be issued upon exercise of all options to be granted under the Option Scheme and any other share option schemes of the Company under the limit as “refreshed” shall not exceed 10 per cent. of the total number of Shares in issue as at the date of approval of the limit. Options previously granted under the Option Scheme and any other share option schemes of the Company (including those outstanding, cancelled, lapsed in accordance with the other scheme(s) or exercised options) will not be counted for the purpose of calculating the limit as “refreshed”. Notwithstanding aforesaid in above, the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Option Scheme and any other share option schemes of the Company must not exceed 30 per cent. of the total number of Shares in issue from time to time. The total number of Shares issued and to be issued upon exercise of the options granted to each participant (including both exercised and outstanding options) in any 12-month period shall not exceed 1 per cent. of the total number of Shares in issue. The exercise price in respect of any particular option shall be such price as determined by the board of directors of the Company in its absolute discretion at the time of the making of the offer but in any case the exercise price shall not be less than the highest of (i) the of.cial closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange on the date of offer, which must be a business day; (ii) the average of the of.cial closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange for the .ve business days immediately preceding the date of offer; and (iii) the nominal value of a share. The offer of a grant of share options must be accepted not later than 28 days after the date of offer, upon payment of a consideration of HK$1 by the grantee. The exercise period of the share options granted is determined by the board of directors of the Company, save that such period shall not be more than a period of ten years from the date upon which the share options are granted or deemed to be granted and accepted. As at the balance sheet date, no share options have been granted under the Option Scheme since its adoption. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 36. RESERVES Group Attributable to equity shareholders of the Company Retained Capital Property pro. ts/ Share Distributable redemption revaluation Exchange (accumulated Minority Total premium reserve reserve reserve reserve losses) Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 October 2006 612,516 52,333 976 187,065 – 52,331 905,221 40,304 945,525 Allotment of consideration shares (note 34(a)) 47,400 – – – – – 47,400 – 47,400 Pro.t for the year – – – – – 2,314 2,314 13,958 16,272 Interim dividend declared during the year – – – – – – – (4,279) (4,279) At 30 September 2007 659,916 52,333 976 187,065 – 54,645 954,935 49,983 1,004,918 At 1 October 2007 Allotment of subscription shares (note 34(b)) Allotment of consideration 659,916 231,440 52,333 – 976 – 187,065 – – – 54,645 – 954,935 231,440 49,983 – 1,004,918 231,440 shares (note 34(c)) Share issuance costs Exchange differences on translation of .nancial 21,645 (4,216) – – – – – – – – – – 21,645 (4,216) – – 21,645 (4,216) statements of subsidiaries Share of associates’ net loss – – – – (4,235) – (4,235) (1,001) (5,236) recognised directly in equity Partial disposal of a subsidiary Acquisition of additional interests in subsidiaries Dividend paid to minority shareholders Loss for the period – – – – – – – – – – – – – – – (100,817) – – – – – – – – – – – – – (238,304) (100,817) – – – (238,304) – – 4,863 (6,750) (774) (100,817) – 4,863 (6,750) (239,078) At 31 December 2008 908,785 52,333 976 86,248 (4,235 ) (183,659 ) 860,448 46,321 906,769 Reserves retained by Company and subsidiaries Associates 908,785 – 52,333 – 976 – – 86,248 (4,235) – 2,481 (186,140) 960,340 (99,892) 46,321 – 1,006,661 (99,892) At 31 December 2008 908,785 52,333 976 86,248 (4,235 ) (183,659 ) 860,448 46,321 906,769 At 30 September 2007 659,916 52,333 976 187,065 – 54,645 954,935 49,983 1,004,918 Company and subsidiaries 659,916 52,333 976 – – 70,493 783,718 49,983 833,701 Associates – – – 187,065 – (15,848) 171,217 – 171,217 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 36. RESERVES (CONTINUED) Group (continued) Nature and purpose of reserves a) Share premium The application of the share premium account reserve is governed by section 40 of the Companies Act 1981 of Bermuda. b) Property revaluation reserve The amount represents the Group’s share of revaluation surplus of a casino held by an associate. c) Exchange reserve The exchange reserve comprises all foreign exchange differences arising from the translation of the .nancial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 2(t). Company Share Retained premium pro. ts Total HK$’000 HK$’000 HK$’000 At 1 October 2006 612,516 67,649 680,165 Allotment of consideration shares (note 34(a)) 47,400 – 47,400 Pro.t for the year – 4,279 4,279 At 30 September 2007 659,916 71,928 731,844 At 1 October 2007 659,916 71,928 731,844 Allotment of subscription shares (note 34(b)) 231,440 – 231,440 Share issuance costs (4,216 ) – (4,216 ) Allotment of consideration shares (note 34(c)) 21,645 – 21,645 Loss for the period – (28,657 ) (28,657 ) At 31 December 2008 908,785 43,271 952,056 Distributability of reserves At 31 December 2008, the aggregate amount of reserves available for distribution to equity shareholders of the Company was HK$43,271,000 (2007: HK$71,928,000). Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 37. COMMITMENTS a) Capital commitments outstanding at 31 December 2008 not provided for in the .nancial statements were as follows: Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Authorised but not contracted for Contracted but not provided for – acquisition of properties (note 21) – acquisition of plant and machinery – 12,975 2,602 – – – – – – – – – 15,577 – – – b) At the balance sheet date, the total future minimum lease payments under non-cancellable operating leases are payable as follows: Group Company At 31.12.2008 HK$’000 At 30.9.2007 HK$’000 At 31.12.2008 HK$’000 At30.9.2007 HK$’000 Within one year In the second to .fth years, inclusive 2,001 4,445 3,757 1,575 – – – – 6,446 5,332 – – The Group lease certain of.ce premises under operating leases. The leases typically run for periods ranging from one to two years. None of the leases includes contingent rentals. 38. CONTINGENT LIABILITIES At the balance sheet date, the Company gave the following undertakings: (a) a corporate guarantee for syndicated loan facilities of HK$1,600 million (2007: HK$1,600 million) granted to an associate held by a wholly-owned subsidiary of the Company. The maximum guarantee amount borne by the Company was HK$860 million (2007: HK$860 million) (note 33). The total loan outstanding for the syndicated loan facilities of the associate at the balance sheet date was HK$1,260 million (2007: HK$1,010 million). (b) a guarantee of HK$7,749,000 in favor of a bank for banking facilities of HK$7,749,000 granted to a subsidiary. The maximum guarantee amount borne by the Company was HK$7,749,000. The directors do not consider it probable that a claim will be made against the Company. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 39. RELATED PARTY TRANSACTIONS a) The Group had the following transactions with the related parties during the period/year: Group Period ended Year ended 31.12.2008 30.9.2007 Note HK$’000 HK$’000 Travel service income received from – an associate (i) (ii) 1,237 1,150 – key management (i) (ii) 302 641 Management fee income received from – associates (i) (iii) 5,919 4,534 Interest expenses paid to a related company (iv) 335 – Notes: i) Mr. Yeung Hoi Sing, Sonny was the director of the associates during the year ended 30 September 2007 and the .fteen months ended 31 December 2008. The former director of the Company, Mr. Lee Siu Cheung, was the director of the said associates during the twelve months ended 30 September 2007 and he resigned as the director of the Company and the said associates on 1 June 2008. The director of the Company, Mr. Ma Ho Man, Hoffman, was appointed as the director of the said associates in place of Mr. Lee Siu Cheung and continued to hold of.ce during the period from 1 June 2008 to 31 December 2008. ii) The travel agent service fee was charged according to prices and conditions comparable to those offered to other customers. iii) The management fee was charged on actual cost incurred by the Group for provision of management and technical services. iv) The interest was charged at 4% per annum on the amount due to a related company, Star Spangle Corporation which is owned by Mr. Yeung Hoi Sing, Sonny. b) The outstanding balances with related parties at balance sheet date are as follows: At At 31.12.2008 30.9.2007 Note HK$’000 HK$’000 Amounts due from associates 20(c) 901,749 378,825 Due to a related company 31 17,574 – Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 39. RELATED PARTY TRANSACTIONS (CONTINUED) c) Key management personnel compensation Compensation for key management personnel, including amounts paid to the Company’s directors as disclosed in note 11 and certain of the highest paid employees as disclosed in note 12 is as follows: Group Note Period ended 31.12.2008 HK$’000 Year ended 30.9.2007 HK$’000 Salaries and other short-term employee bene.ts Retirement scheme contributions Termination bene.ts 6,243 90 258 3,771 63 – Total emoluments are included in “staff costs” 9(b) 6,591 3,834 d) On 1 December 2008, the Company as borrower entered into an unsecured term loan facility agreement (the “Facility Agreement”) with Mr. Yeung as lender. Pursuant to the Facility Agreement, Mr. Yeung provided a facility of up to HK$200 million (the “Loan Facility”) to the Company. The rate of interest on the entire principal amount drawn and outstanding under the Loan Facility was the prime rate quoted for Hong Kong dollars loans by The Hongkong and Shanghai Banking Corporation Limited. The Loan Facility was available to the Company during the period from 1 December 2008 until whichever is the earlier of (i) the date falling 1 month before the .nal repayment date, ie. on or before 30 June 2010; and (ii) the date on which the Loan Facility is reduced to zero. On 14 April 2009, the Company as borrower and Mr. Yeung as lender also entered into an agreement to increase the Loan Facility up to HK$290 million. In addition, Mr. Yeung undertakes not to demand an early repayment of the loan and all other sums owing to Mr. Yeung before 30 June 2010. In the opinion of the directors, the borrowing of the Loan Facility was for the bene.t of the Company and on normal commercial terms where no security over the assets of the Company was granted. 40. PLEDGE OF ASSETS a) As at 31 December 2008, the Group pledged the time deposits of approximately HK$6.8 million (2007: HK$0.8 million) to certain banks for bank facilities of approximately HK$8.4 million (2007: HK$0.8 million) granted to the Group. b) As at 31 December 2008 and 2007, World Fortune pledged all of its shares in Pier 16 – Property Development to a bank, for and on behalf of the syndicate of lenders, in respect of the syndicated loan facilities granted to Pier 16 – Property Development. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 41. BUSINESS COMBINATION a) On 31 July 2008, the Group acquired the entire issued share capital of Smart Class for a consideration of approximately HK$22.6 million from Star Spangle Corporation, a company bene.cially wholly-owned by Mr. Yeung. Smart Class is an investment holding company and is indirectly interested in 80% equity interest in a number of travel agency companies located in Canada and the United States of America (“US”) (collectively “Jade Travel Group”). Jade Travel Group has of.ces located in Vancouver, Calgary, Toronto and Montreal in Canada and New York in US and is engaged in the wholesale and retail of airline tickets and tour packages. Smart Class and its subsidiaries contributed revenue of approximately HK$504 million and pro.t of approximately HK$3.6 million to the Group for the period between the date of acquisition to 31 December 2008. If the acquisition had been completed on 1 October 2007, the Group revenue for the period would have been approximately HK$1,653.8 million, and loss for the period would have been approximately HK$36.4 million. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 October 2007, nor is it intended to be a projection of future results. Details of net assets acquired and goodwill are as follows: HK$’000 Purchase consideration Fair value of the 19,500,000 consideration shares at the closing market price of HK$1.12 per share at the date of completion 21,840 Direct costs relating to the acquisition 2,941 Total purchase consideration 24,781 Less: Fair value of net identi.ed assets acquired (17,762 ) Goodwill (Note) 7,019 Note: The goodwill represents the bene.ts of enhanced ef.ciency and the expected synergies arising from interaction between the Group’s existing travel business in Hong Kong and the travel agent business of Smart Class in Canada and US. Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 41. BUSINESS COMBINATION (CONTINUED) a) (continued) The consolidated assets and liabilities of Smart Class as of 31 July 2008 were as follows: Acquiree’s carrying amount Fair value before combination adjustment Fair value HK$’000 HK$’000 HK$’000 Property, plant and equipment 5,460 1,670 7,130 Client list – 9,238 9,238 Trademark 22,845 10,199 33,044 Trade and other receivables 29,961 (15 ) 29,946 Tax recoverable 1,338 – 1,338 Deferred tax assets 1,456 – 1,456 Trade and other payables (35,454 ) 40 (35,414 ) Due to a related company (20,585 ) – (20,585 ) Loans from minority shareholders (10,385 ) – (10,385 ) Deferred income (561 ) – (561 ) Tax payable (18 ) – (18 ) Deferred tax liabilities – (568 ) (568 ) Cash and cash equivalents 8,004 – 8,004 Total net assets Shared by minority shareholders Net assets acquired 2,061 20,564 22,625 (4,863 ) 17,762 b) Analysis of the net cash in.ow on acquisition of subsidiaries: HK$’000 Direct costs relating to the acquisition paid in cash Cash and cash equivalents in subsidiaries acquired Net cash in.ow on acquisition of subsidiaries (2,941 ) 8,004 5,063 Notes to the Financial Statements For the period from 1 October 2007 to 31 December 2008 42. WRITE OFF OF A SUBSIDIARY UNDER VOLUNTARY LIQUIDATION HK$’000 Net liabilities written off: Property, plant and equipment Trade and other receivables Trade and other payables 15 41 (69) Fair value of net liabilities (13) An analysis of the net out.ow of cash and cash equivalents in respect of the write off as follows: HK$’000 Cash and cash equivalents – 43. POST BALANCE SHEET EVENTS On 14 April 2009, the Company as borrower and Mr. Yeung as lender also entered into an agreement to increase the Loan Facility up to HK$290 million. In addition, Mr. Yeung undertakes not to demand an early repayment of the loan and all other sums owing to Mr. Yeung before 30 June 2010. In the opinion of the directors, the borrowing of the Loan Facility was for the bene. t of the Company and on normal commercial terms where no security over the assets of the Company was granted. 44. COMPARTIVE FIGURES As a result of adopting HKFRS 7, Financial instruments: Disclosures, and the amendments to HKAS 1, Presentation of . nancial statements: Capital disclosures, certain comparative .gures have been adjusted to conform with changes in disclosures in the current year and to show separately comparative amounts in respect of items disclosed for the .rst time in 2007. Further details of these developments are disclosed in note 4. Five-year Financial Summary RESULTS Fifteen months ended 31 December Year ended 30 September 2008 2007 2006 2005 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Turnover: Continuing operations 627,254 103,754 103,530 100,905 61,564 Discontinued operations – – – – 130,392 627,254 103,754 103,530 100,905 191,956 (Loss)/pro. t before taxation (238,219 ) 16,944 48,531 31,783 29,966 Income tax (859 ) (672 ) (372 ) – (642 ) (Loss)/pro.t for the period/year (239,078 ) 16,272 48,159 31,783 29,324 Attributable to: Equity shareholders of the Company (238,304 ) 2,314 28,380 12,291 15,442 Minority interests (774 ) 13,958 19,779 19,492 13,882 (Loss)/pro.t for the period/year (239,078 ) 16,272 48,159 31,783 29,324 (Loss)/earnings per share – Basic (9.87 HK cents ) 0.11 HK cents 1.41 HK cents 0.66 HK cents 0.98 HK cents – Diluted (9.87 HK cents ) 0.11 HK cents N/A N/A N/A ASSETS AND LIABILITIES Fifteen months ended 31 December 2008 HK$’000 2007 HK$’000 Year ended 30 September 2006 2005 HK$’000 HK$’000 2004 HK$’000 Total assets Total liabilities Minority interests 1,418,947 (487,788 ) (46,321 ) 1,197,379 (170,466 ) (49,983 ) 978,395 (11,475 ) (40,304 ) 712,094 (31,360 ) (31,235 ) 137,549 (39,636 ) (11,743 ) Total equity attributable to equity shareholders of the Company 884,838 976,930 926,616 649,499 86,170 MACAU SUCCESS LIMITED 澳門實德有限公司* Website 網頁 : www.macausuccess.com