MACAU SUCCESS LIMITED 澳門實德有限公司 * (Incorporated in Bermuda with limited liability) (Stock Code: 0487) * For identification purpose only CONTENTS Page Corporate Information 2 Operational Highlights 3 Condensed Consolidated Income Statement 4 Condensed Consolidated Balance Sheet 5 Condensed Consolidated Statement of Changes in Equity 6 Condensed Consolidated Cash Flow Statement 7 Notes to the Condensed Financial Statements 8 Independent Review Report 22 Management Discussion and Analysis 23 Disclosure of Interests 28 Purchase, Sale or Redemption of the Company’s Listed Securities 31 Compliance with Code on Corporate Governance Practices 31 Compliance with Model Code for Securities Transactions by Directors 31 Audit Committee 32 Review of Interim Results 32 CORPORATE INFORMATION Directors Executive Directors Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Lee Siu Cheung (Deputy Chairman) Mr. Ma Ho Man, Hoffman 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 Qualified Accountant Mr. Luk Sai Wai, Simon Authorised Representatives Mr. Lee Siu Cheung 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. Lee Siu Cheung Mr. Ma Ho Man, Hoffman Auditors Messrs. CCIF CPA Limited Legal Advisors on Hong Kong Law Messrs. Iu, Lai & Li, Solicitors Legal Advisors on Bermuda Law Messrs. Conyers Dill & Pearman Principal Bankers Chong Hing Bank Limited Dah Sing Bank Limited Fubon Bank (Hong Kong) Limited Public 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 Butterfield Fund Services (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke, HM 08 Bermuda Branch Share Registrar and Transfer Office in Hong Kong 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: 0487 Website www.macausuccess.com OPERATIONAL HIGHLIGHTS Unaudited results for the six months ended 31 March 2007 ‧ Net profit attributable to equity shareholders was approximately HK$6.7 million ‧ The Group’s turnover increased slightly to approximately HK$52.8 million ‧ Turnover from the cruise business was approximately HK$47.9 million, with a segment profit of approximately HK$19.6 million ‧ Turnover from the travel business increased 48.5% to approximately HK$4.9 million ‧ The first phase of the Group’s flagship project – Ponte 16 is targeted to commence operation in the second half of 2007 ‧ The second phase of Ponte 16 is expected to commence operation by the first half of 2008 CONDENSED CONSOLIDATED INCOME STATEMENT For the six months ended 31 March 2007 (Unaudited) For the six months ended 31 March 2007 2006 Notes HK$’000 HK$’000 TURNOVER 2 52,845 50,941 Cost of sales (5,083) (3,292) Gross profit 47,762 47,649 Other revenue 10,504 10,275 58,266 57,924 Administrative expenses (42,278) (33,558) PROFIT FROM OPERATIONS 3 15,988 24,366 Share of results of associates (607) 17 Profit before taxation 15,381 24,383 Income tax 4 – – PROFIT FOR THE PERIOD 15,381 24,383 ATTRIBUTABLE TO: Equity shareholders of the Company 6,700 13,757 Minority interests 8,681 10,626 PROFIT FOR THE PERIOD 15,381 24,383 INTERIM DIVIDEND 5 – 3,209 EARNINGS PER SHARE – Basic 6 HK0.31 cents HK0.72 cents – Diluted N/A N/A CONDENSED CONSOLIDATED BALANCE SHEET At 31 March 2007 (Unaudited) (Audited) 31 March 30 September 2007 2006 Notes HK$’000 HK$’000 NON-CURRENT ASSETS Property, plant and equipment 7 91,614 91,536 Goodwill 8 1,313 1,313 Available-for-sale investment 9 25,239 25,239 Interest in associates 10 800,686 376,015 918,852 494,103 CURRENT ASSETS Inventories 1,353 1,178 Trade and other receivables 11 16,202 13,509 Pledged bank deposits 740 729 Cash and bank balances 107,046 468,876 125,341 484,292 CURRENT LIABILITIES Trade and other payables 12 8,464 6,047 Tax payable 157 157 8,621 6,204 NET CURRENT ASSETS 116,720 478,088 TOTAL ASSETS LESS CURRENT LIABILITIES 1,035,572 972,191 NON-CURRENT LIABILITIES Loans from minority shareholders 13 5,056 5,056 Deferred tax liabilities 215 215 5,271 5,271 NET ASSETS 1,030,301 966,920 CAPITAL AND RESERVES Share capital 14 21,995 21,395 Reserves 15 959,321 905,221 EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY 981,316 926,616 Minority Interests 15 48,985 40,304 TOTAL EQUITY 1,030,301 966,920 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 31 March 2007 (Unaudited) Share capital HK$’000 Attributable to equity shareholders of the Company Capital Property Share Distributable redemption revaluation Retained premium reserve reserve reserve profits HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Total HK$’000 Minority interests HK$’000 Total equity HK$’000 At 1 October 2005 19,045 362,920 52,333 976 187,065 27,160 649,499 31,235 680,734 Net profit for the period – – – – – 13,757 13,757 10,626 24,383 At 31 March 2006 19,045 362,920 52,333 976 187,065 40,917 663,256 41,861 705,117 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 14(a)) 600 47,400 – – – – 48,000 – 48,000 Net profit for the period – – – – – 6,700 6,700 8,681 15,381 At 31 March 2007 21,995 659,916 52,333 976 187,065 59,031 981,316 48,985 1,030,301 CONDENSED CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 March 2007 (Unaudited) For the six months ended 31 March 2007 2006 HK$’000 HK$’000 Net cash (used in)/generated from operating activities (213,002) 18,078 Net cash (used in)/generated from investing activities (148,828) 939 Net cash used in financing activities – (10,802) Net (decrease)/increase in cash and cash equivalents (361,830) 8,215 Cash and cash equivalents at beginning of the period 468,876 189,965 Cash and cash equivalents at end of the period 107,046 198,180 Analysis of balances of cash and cash equivalents Cash and bank balances 107,046 198,180 NOTES TO THE CONDENSED FINANCIAL STATEMENTS For the six months ended 31 March 2007 1. BASIS OF PREPARATION The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure provision of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and compliance with Hong Kong Accounting Standard (“HKAS”) 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The condensed consolidated financial statements have been prepared in accordance with the same accounting policies adopted in the annual financial statements for the year ended 30 September 2006. The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”), which term collectively includes all applicable individual Hong Kong Financial Reporting Standards, HKASs and interpretations issued by the HKICPA, that are effective for accounting periods beginning on or after 1 October 2006. The adoption of these new and revised HKFRSs did not result in significant changes to the accounting policies applied by the Company and the Group in the condensed consolidated financial statements for the period presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 21). The preparation of the condensed consolidated financial statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. The condensed consolidated financial statements contain selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group and the Group’s interest in associates since the annual financial statements for the year ended 30 September 2006. The condensed consolidated financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with HKFRSs. 2. TURNOVER AND SEGMENT INFORMATION The Group’s turnover and results for the six months ended 31 March 2007 analysed by business segments and geographical segments are as follows: a) Business segments For the six months ended 31 March 2007 Cruise leasing and management Travel Consolidated HK$’000 HK$’000 HK$’000 Turnover 47,901 4,944 52,845 Other revenue 27 26 53 47,928 4,970 52,898 Segment results 19,609 (354) 19,255 Unallocated corporate income 10,451 Unallocated corporate expenses (13,718) Profit from operations 15,988 Share of results of associates (607) Profit before taxation 15,381 2. TURNOVER AND SEGMENT INFORMATION (Continued) a) Business segments (Continued) For the six months ended 31 March 2006 Cruise leasing and management Travel Consolidated HK$’000 HK$’000 HK$’000 Turnover 47,660 3,281 50,941 Other revenue 26 35 61 47,686 3,316 51,002 Segment results 23,973 (203) 23,770 Unallocated corporate income 10,214 Unallocated corporate expenses (9,618) Profit from operations 24,366 Share of results of associates 17 Profit before taxation 24,383 b) Geographical segments For the six months ended 31 March Turnover Segment results 2007 2006 2007 2006 HK$’000 HK$’000 HK$’000 HK$’000 Hong Kong 4,944 3,281 (348) (192) South China Sea, other than in Hong Kong 47,901 47,660 19,609 23,973 Macau – – (6) (11) 52,845 50,941 19,255 23,770 3. PROFIT FROM OPERATIONS Profit from operations is arrived at after (crediting)/charging the following: For the six months ended 31 March 2007 2006 HK$’000 HK$’000 Crediting: Dividend from available-for-sale investment (1,133) (1,133) Interest income (6,922) (8,177) Charging: Auditor’s remuneration 110 97 Depreciation 4,131 3,435 Loss on disposal of property, plant and equipment 23 2 Operating lease rentals – land and buildings 1,588 694 – plant and machinery 20 10 Staff costs (including contribution of retirement scheme of HK$297,000 (2006: HK$229,000)) 17,375 14,272 4. INCOME TAX IN THE INCOME STATEMENT No Hong Kong profits tax and taxation arising in other jurisdiction, in which the subsidiaries operate, has been provided for the six months ended 31 March 2007 as the Group has no estimated assessable profits for the period (for the six months ended 31 March 2006: HK$Nil). 5. DIVIDEND The directors of the Company do not recommend any payment of interim dividend for the six months ended 31 March 2007 (2006: HK0.15 cents per share). No dividend payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the interim period. 6. EARNINGS PER SHARE The calculation of the basic earnings per share attributable to the equity shareholders of the Company is based on the following data: For the six months ended 31 March 2007 2006 HK$’000 HK$’000 Earnings Earnings for the purpose of basic earnings per share 6,700 13,757 For the six months ended 31 March 2007 2006 Number of shares Weighted average number of the shares for the purpose of basic earnings per share 2,149,684,013 1,904,464,233 There was no dilution effect on the basic earnings per share for the six months ended 31 March 2007 and 31 March 2006 respectively as there were no dilutive instruments outstanding during both periods. 7. PROPERTY, PLANT AND EQUIPMENT HK$’000 Net book value as at 1 October 2006 Additions Disposal Depreciation charge for the period 91,536 4,232 (23) (4,131) Net book value as at 31 March 2007 91,614 8. GOODWILL HK$’000 Net book value as at 1 October 2006 and 31 March 2007 1,313 9. AVAILABLE-FOR-SALE INVESTMENT 31 March 2007 HK$’000 30 September 2006 HK$’000 Unlisted shares, at cost 25,239 25,239 On 13 July 2005, Top Region Assets Limited (“Top Region”), an indirect wholly-owned subsidiary of the Company, entered into an agreement with two independent third parties for the acquisition of 8.13% interest in the then issued share capital of Triumph Up Investments Limited (“Triumph Up”), a company incorporated in the British Virgin Islands, for a consideration of HK$22,800,000. Including the acquisition expenses, the total investment cost was approximately HK$25,239,000. The unlisted investment in Triumph Up are measured at cost less accumulated impairment losses because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that the fair value cannot be measured reliably. 10. INTEREST IN ASSOCIATES 31 March 2007 HK$’000 30 September 2006 HK$’000 Share of net assets 439,948 283,738 Goodwill on acquisition 19,409 4,581 Due from associates 341,329 87,696 800,686 376,015 The amounts due from associates are unsecured, interest free and have no fixed terms of repayment. Particulars of the associates as at 31 March 2007 are as follows: Particulars of Proportion of ownership interest Place of issued and Group’s Held by incorporation paid up effective the Held by Name of associate and operation capital interest Company a subsidiary Principal activities Pier 16 – Property Development Limited Macau 100,000 shares of MOP100 each 49% – 49% Investment, development and operation of an integrated hotel resort project “Ponte 16” Pier 16 – Management Limited Macau 2 shares of MOP24,000 and MOP1,000 respectively 49% – 49% Provision of management services for development of an integrated hotel resort project “Ponte 16” Pier 16 – Resort Hotel Management Limited* Macau 2 shares of MOP24,000 and MOP1,000 respectively 49% – 49% Provision of management services for an integrated hotel resort project “Ponte 16” * The Chinese name of this company has been changed from “ ” to “ ” since 14 May 2007. 10. INTEREST IN ASSOCIATES (Continued) The following is a summary of aggregate amounts of assets, liabilities, revenues and results of the Group’s associates: 31 March 2007 HK$’000 30 September 2006 HK$’000 Assets 1,729,359 1,084,329 Liabilities 831,506 312,252 Equity 897,853 772,077 Revenues – – Loss (1,506) (1,051) 11. TRADE AND OTHER RECEIVABLES 31 March 30 September 2007 2006 HK$’000 HK$’000 Trade receivables 670 1,972 Deposits, prepayment and other receivables 15,532 11,537 16,202 13,509 All of the trade and other receivables are expected to be recovered within one year. 11. TRADE AND OTHER RECEIVABLES (Continued) Included in trade and other receivables are trade debtors with the following aging analysis as at the balance sheet date: 31 March 2007 HK$’000 30 September 2006 HK$’000 Current to 30 days 580 1,924 31 to 60 days 47 4 61 to 90 days 13 9 Over 90 days 30 35 670 1,972 The Group normally allows a credit period of 30 days (2006: 30 days). 12. TRADE AND OTHER PAYABLES 31 March 30 September 2007 2006 HK$’000 HK$’000 Trade payables 399 229 Other payables and accruals 8,065 5,818 8,464 6,047 All of the trade and other payables are expected to be settled within one year. Included in trade and other payables are trade creditors with the following aging analysis as at the balance sheet date: 31 March 30 September 2007 2006 HK$’000 HK$’000 Current to 30 days 387 217 31 to 60 days – 1 61 to 90 days – – Over 90 days 12 11 399 229 13. LOANS FROM MINORITY SHAREHOLDERS The loans are unsecured, non-interest bearing and have no fixed repayment terms. In the opinion of the directors, the loans will not be repaid within the next twelve months and the carrying value approximated the fair value. 14. SHARE CAPITAL Note Number of shares ’000 Nominal value HK$’000 Authorised: At 30 September 2006 160,000,000 1,600,000 At 1 October 2006 and 31 March 2007 160,000,000 1,600,000 Issued and fully paid: At 1 October 2005 Share placement 1,904,464 235,000 19,045 2,350 At 30 September 2006 2,139,464 21,395 At 1 October 2006 Allotment of consideration shares a 2,139,464 60,000 21,395 600 At 31 March 2007 2,199,464 21,995 The movement in the issued share capital of the Company was as follows: a) World Fortune Limited, an indirect wholly-owned subsidiary of the Company, entered into an agreement on 30 November 2006 to purchase 12.25% of the entire issued share capital of and the related loan to Pier 16 – Property Development Limited at an aggregate consideration of HK$200 million. The consideration was settled by cash of HK$152 million and by allotment and issue of 60,000,000 shares of the Company at an agreed issued price of HK$0.80 per share. The Company allotted and issued the consideration shares on 28 February 2007. 15. RESERVES (Unaudited) Attributable to equity shareholders of the Company Capital Property Share Distributable redemption revaluation Retained Minority premium reserve reserve reserve profits Total interests Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 October 2005 362,920 52,333 976 187,065 27,160 630,454 31,235 661,689 Net profit for the period – – – – 13,757 13,757 10,626 24,383 At 31 March 2006 362,920 52,333 976 187,065 40,917 644,211 41,861 686,072 At 1 October 2006 612,516 52,333 976 187,065 52,331 905,221 40,304 945,525 Allotment of consideration shares (note 14(a)) 47,400 – – – – 47,400 – 47,400 Net profit for the period – – – – 6,700 6,700 8,681 15,381 At 31 March 2007 659,916 52,333 976 187,065 59,031 959,321 48,985 1,008,306 16. DEFERRED TAXATION Deferred tax assets are recognised for tax loss carry forward to the extent that the realisation of the related tax benefit through utilisation against future taxable profits is probable. At 31 March 2007, the Group had tax losses of approximately HK$76 million (30 September 2006: HK$70 million) that are available to carry forward indefinitely for offsetting against future taxable profits. No deferred tax asset has been recognised in relation to tax losses as it is not probable that taxable profit will be available against which the tax losses can be utilised. 17. OPERATING LEASE COMMITMENTS At the balance sheet date, the Group had the following commitments for future lease payment under non-cancellable operating leases which fall due as follows: 31 March 30 September 2007 2006 HK$’000 HK$’000 Within one year 4,478 2,390 In the second to fifth years, inclusive 3,659 1,959 8,137 4,349 18. RELATED PARTY TRANSACTIONS Apart from those disclosed elsewhere in the condensed financial statements, the Group also had the following transactions with the related parties during the period: For the six months ended Notes 31 March 2007 HK$’000 2006 HK$’000 Travel service income received and receivable from – Associates – Key management personnel – Close family members of key management personnel i,ii ii ii 411 346 163 45 328 164 920 537 Management service income received and receivable from – Associates i,iii 2,436 741 31 March 2007 HK$’000 30 September 2006 HK$’000 Trade receivables from travel service as at the balance sheet date – Associates 159 243 – Key management personnel 105 – – Close family members of key management personnel – – 264 243 Trade receivable from management service income as at the balance sheet date – Associates 283 – 18. RELATED PARTY TRANSACTIONS (Continued) i) The Company’s directors, Mr. Yeung Hoi Sing, Sonny and Mr. Lee Siu Cheung, are the directors of the associates. ii) The travel agent service fee was charged according to prices and conditions similar to those offered to other customers. iii) The management service income was charged according to the terms stated in the management service agreement. 19. PLEDGE OF ASSETS As at 31 March 2007, the Group pledged the time deposits of approximately HK$0.7 million (30 September 2006: HK$0.7 million) to certain banks for issuance of several bank guarantees of approximately HK$0.7 million (30 September 2006: HK$0.7 million) for operations of the Group. 20. NON-ADJUSTING POST BALANCE SHEET EVENTS a) On 13 June 2006, Top Region, as vendor, entered into a sale and purchase agreement (the “Agreement”) with an independent third party, China Star Entertainment Limited (“China Star”, a company listed on The Stock Exchange of Hong Kong Limited), as purchaser, and the Company, as guarantor, for the disposal of 8.13% interest in the issued share capital of Triumph Up for a consideration of HK$36,112,763.57 to China Star. The consideration was determined after arm’s length negotiations and with reference to an independent valuer on an open market basis as at 8 June 2006. On 31 October 2006 and 28 February 2007, the parties entered into deeds of variation to, inter alia, extend the long stop date under the Agreement. The long stop date was extended to 31 May 2007. The transaction was completed on 30 May 2007. b) On 11 April 2007, Valuegood Limited, being an indirect wholly-owned subsidiary of the Company, as borrower (the “Borrower”), entered into an agreement with an independent third party, Onshine Finance Limited, as lender (the “Lender”), and the Company, as guarantor, for a loan facility of HK$250 million. On 15 May 2007, HK$130 million was drawn down at the interest rate of 8.25% per annum. 20. NON-ADJUSTING POST BALANCE SHEET EVENTS (Continued) c) On 19 January 2007, Better Talent Limited, being an indirect wholly-owned subsidiary of the Company, as subscriber (the “Subscriber”), entered into a subscription agreement with an independent third party, China Star, as issuer, in relation to the subscription by the Subscriber of the zero coupon unsecured convertible bonds with a principal amount of HK$12,500,000. The subscription price for the convertible bonds was HK$11,875,000, being 95% of the principal amount of the convertible bonds. On 18 May 2007, the subscription was completed and the subscription price of the convertible bonds of HK$11,875,000 was paid by the Subscriber. The convertible bonds were exercised on 1 June 2007. The convertible bonds were converted into 39,062,500 shares of China Star at a conversion price of HK$0.32 per share. The closing price of the shares of China Star was HK$0.48 per share as at 1 June 2007. 21. POSSIBLE IMPACT OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE PERIOD ENDED 31 MARCH 2007 The Board has not early applied the following new standards, amendments and interpretations that have been issued but are not yet effective. The Board anticipates that the application of these standards, amendments or interpretations will have no material impacts on the financial statements of the Board. HKAS 1 (Amendment) Capital Disclosures 1 HKFRS 7 Financial Instruments: Disclosures 1 HKFRS 8 Operating Segments 2 HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment 3 HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions 4 HK(IFRIC)-Int 12 Service Concession Arrangements 5 1 Effective for annual periods beginning on or after 1 January 2007 2 Effective for annual periods beginning on or after 1 January 2009 3 Effective for annual periods beginning on or after 1 November 2006 4 Effective for annual periods beginning on or after 1 March 2007 5 Effective for annual periods beginning on or after 1 January 2008 INDEPENDENT REVIEW REPORT TO THE BOARD OF DIRECTORS OF MACAU SUCCESS LIMITED (INCORPORATED IN BERMUDA WITH LIMITED LIABILITY) INTRODUCTION We have been instructed by the Company to review the interim financial report set out on pages 4 to 21. DIRECTORS’ RESPONSIBILITIES The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the relevant provisions thereof. The interim financial report is the responsibility of, and has been approved by, the directors of the Company. It is our responsibility to form an independent conclusion, based on our review, on the interim financial report and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. REVIEW WORK PERFORMED We conducted our review in accordance with the Statement of Auditing Standards 700 “Engagements to review interim financial reports” issued by the HKICPA. A review consists principally of making enquiries of group management and applying analytical procedures to the interim financial report and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the interim financial report. REVIEW CONCLUSION On the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the interim financial report for the six months ended 31 March 2007. CCIF CPA Limited Certified Public Accountants Hong Kong, 20 June 2007 Delores Teh Practising Certificate Number P03207 MANAGEMENT DISCUSSION AND ANALYSIS Results For the period under review, turnover of the Group was approximately HK$52.8 million, representing an approximately 3.7% increase as compared to the last corresponding period (2006: approximately HK$50.9 million). Gross profit was approximately HK$47.8 million (2006: approximately HK$47.6 million). Profit attributable to equity shareholders decreased by 51.4% to approximately HK$6.7 million (2006: approximately HK$13.8 million). Earnings per share for the period were HK0.31 cents (2006: HK0.72 cents). The Group’s core business continued to contribute stable income during the period under review. With a moderate growth in turnover, the performance of our cruise business remained stable. At the same time, our travel business also had a remarkable increase in turnover. The Group’s profitability was lower than that of the last corresponding period due to an increase in rental and staff costs. Interim Dividend The directors of the Company (the “Director(s)”) do not recommend the payment of interim dividend for the six months ended 31 March 2007 (2006: HK0.15 cents per share). Review of Operations Cruise Business During the period under review, our cruise business continued to be the major contributor for the Group’s revenue. The business had continuously generated a stable source of income for years. The leasing and management of our cruise, M.V. Macau Success, accounted for 90.7% of the Group’s total turnover. Turnover from the cruise business was approximately HK$47.9 million (2006: approximately HK$47.7 million). Segment profit from the business amounted to approximately HK$19.6 million (2006: approximately HK$24.0 million). In addition to providing a stable income to the Group, the cruise business also played a key role in our strategy to develop into a strong gaming and entertainment-related business group because of its synergy effect on our overall business. Travel Business During the period under review, turnover from the travel business recorded approximately HK$4.9 million, representing an increase of 48.5% (2006: approximately HK$3.3 million) and accounting for approximately 9.3% of the Group’s total turnover. Segment loss from the business was approximately HK$0.4 million (2006: approximately HK$0.2 million). Although this area is not a substantial part of the overall business within the Group, it is the Group’s strategy to continue to develop the travel business into a unique platform, providing professional travel services to high-end customers and direct traffic to the Group’s flagship cruise, M.V. Macau Success. Financial Review Pledge of Assets As at 31 March 2007, the Group has pledged time deposit of approximately HK$0.7 million (30 September 2006: approximately HK$0.7 million) to certain banks for issuance of several bank guarantees of approximately HK$0.7 million (30 September 2006: approximately HK$0.7 million) for operations of the Group. Contingent Liabilities As at 31 March 2007, the Group had no contingent liability (30 September 2006: HK$Nil). Liquidity, Financial Resources and Gearing As at 31 March 2007, the Group had net current assets of approximately HK$116.7 million (30 September 2006: approximately HK$478.1 million) and had net assets of approximately HK$1,030.3 million (30 September 2006: approximately HK$966.9 million). As at 31 March 2007, the Group did not have any interest-bearing borrowings and financial lease obligations (30 September 2006: HK$Nil). As at 31 March 2007, there were loans from minority shareholders of approximately HK$5.1 million (30 September 2006: approximately HK$5.1 million). The loans are interest-free, unsecured and do not have fixed repayment terms. The Group did not have any bank loan as at 31 March 2007 (30 September 2006: HK$Nil). Equity attributable to equity shareholders of the Company as at 31 March 2007 was approximately HK$981.3 million (30 September 2006: approximately HK$926.6 million). Accordingly, the gearing ratio which is measured on the basis of the interest-bearing borrowings of the Group over equity attributable to equity shareholders of the Company was not applicable for this period and last period. Acquisition of Additional Interest in Ponte 16 On 30 November 2006, the Group, through an indirect wholly-owned subsidiary of the Company, World Fortune Limited (“World Fortune”), entered into a Sale and Purchase Agreement with Joy Idea Investments Limited (“Joy Idea”) regarding the acquisition of 12.25% equity interest in and the related loan to Pier 16 – Property Development Limited, which is responsible for the development of the Group’s flagship project – Ponte 16 (“Ponte 16”), from Joy Idea at an aggregate consideration of HK$200 million. The consideration was settled by HK$152 million in cash from internal resources and HK$48 million from the allotment and issue of 60,000,000 new shares of the Company, at an agreed issued price of HK$0.80 per share. On 28 February 2007, the acquisition was completed and 60,000,000 shares of the Company had been issued to Joy Idea. Ponte 16 is now 51% and 49% owned by SJM – Investimentos Limitada and World Fortune respectively. Staffing As at 31 March 2007, the Group had approximately 360 employees. Remuneration is determined by reference to qualifications, experience, responsibility and performance. Apart from the basic remuneration, staff benefits include medical insurance and retirement benefits under the Mandatory Provident Fund Scheme. Share options might also be granted to eligible employees of the Group as a long-term incentive. Prospects The management is positive towards the Group’s future. In addition to the cruise and travel businesses which have been generating stable income for years, Ponte 16 is expected to bring substantial revenue when it opens in the second half of 2007. The management has great confidence on the future economic growth and the tourist industry of Macau as well as the opportunities brought by the enclave to the Group. According to the Macau SAR Government, the number of tourists visited Macau in the first quarter of 2007 reached 6,369,664, increased by 21.4% over the corresponding period in 2006. As over 50% of the tourists are from the mainland, the economic development in China will further enhance Macau’s economy. Gaming revenue reached MOP17.9 billion for the first quarter of 2007. The booming economy and flourishing tourism in Macau is going to provide a favourable environment for the development of Ponte 16. Ponte 16 Ponte 16 is a world-class integrated resort comprising a five-star hotel, casino (subject to Macau SAR Government’s approval), shopping arcade, food and beverage functions as well as recreational facilities. Featuring a unique Southern European theme, the development is located at Pier 16, which commenced operation in the beginning of the last century and has now become a famous historical landmark. Also, the two-minute ferry connection between Ponte 16 and Zhuhai has provided a convenient alternative for tourists. The Group has accomplished a number of milestones since the debut of the project. In October 2005, the preliminary design of Ponte 16 was confirmed. The Jerde Partnership, Inc., an internationally renowned architecture firm, was appointed to manage the overall planning and design of Ponte 16. In February 2006, AAPC Hong Kong Limited (trading as “Accor Asia Pacific”) (“Accor”), a well-known French hotel management company, was appointed to manage the hotel facilities of the Ponte 16 complex under Accor’s deluxe brand “Sofitel”. The name of the new hotel was confirmed to be “Sofitel Macau at Ponte 16”. In April 2006, the Group announced the approval of an increase of the gross floor area from 63,584 square metres to 126,500 square metres by the Macau SAR Government, which has raised the business value of the venture as well as the Group. The total development cost of the project is expected to be approximately HK$2.4 billion. The first phase of Ponte 16, including the casino (subject to Macau SAR Government’s approval) and most of the hotel facilities, was topped out in April 2007. It is expected to commence operation in the second half of 2007, while the rest of the Ponte 16 complex will be completed by the first half of 2008. Conclusion The steady business growth of the Group’s core businesses plus the substantial business value of its project under development allow the Group to ascertain its optimistic future. With a vision to become one of the leading gaming and entertainment-related companies in the region, the management will seek every business opportunity in Macau and beyond in order to strengthen the synergies of the Group. DISCLOSURE OF INTERESTS Interests of Directors As at 31 March 2007, the Directors or chief executives 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”)) which were recorded in the register required to be kept under section 352 of the SFO; or which were otherwise required to be notified 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 Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”): Number of Approximate Long position/ Nature shares of the percentage of Name of Director Short position of interest Company held shareholding Mr. Yeung Hoi Sing, Long position Corporate 987,841,432 44.91% Sonny (Note) interest Note: Mr. Yeung Hoi Sing, Sonny is deemed to have corporate interest in 987,841,432 shares of the Company by virtue of the interest of the shares held by Silver Rich Macau Development Limited, which is wholly-owned by a discretionary trust, the beneficiaries of which are family members of Mr. Yeung Hoi Sing, Sonny. Save as disclosed above, as at 31 March 2007, none of the Directors or chief executives of the Company, or their 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) which were recorded in the register required to be kept under section 352 of the SFO, or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code. Share Option Scheme and Directors’ and Chief Executives’ Rights to Acquire Shares or Debentures Pursuant to the share option scheme adopted by the shareholders of the Company on 20 August 2004 (the “Share Option Scheme”), the board of Directors (the “Board”) may for a consideration of HK$1 offer to selected eligible persons to subscribe for shares of the Company as incentive or rewards for their contribution to the Group. The subscription price will be determined by the Board at its absolute discretion, but in any event shall not be less than the highest of the nominal value for the time being of each share of the Company; the average closing price of the Company’s shares as stated in the daily quotation sheets of the Stock Exchange for the five trading days immediately preceding the date on which the relevant option is granted; and the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotation sheet on the date on which the relevant option is granted. The maximum number of shares in respect of which options may be granted under the Share Option Scheme and any other schemes of the Company must not, in aggregate, exceed 30% of the total number of shares of the Company in issue from time to time. The Share Option Scheme became effective on 8 November 2004 and, unless otherwise cancelled or amended, will remain in force for ten years from that date. No options under the Share Option Scheme had been granted to any person since its adoption. At no time during the period were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any Director or their respective spouses or children under 18 years of age, or were any such rights exercised by them; nor was the Company or any of its subsidiaries a party to any arrangement to enable the Directors to acquire such rights in any other body corporate. Interests of Substantial Shareholders As at 31 March 2007, the following persons (other than the Directors or chief executives of the Company) had interests or short positions in the shares and underlying shares of the Company, being 5% or more of the Company’s issued share capital, as recorded in the register required to be kept under section 336 of the SFO: Number of Name Silver Rich Macau Development Limited Penta Investment Advisers Ltd Mr. John Zwaanstra Joy Idea Investments Limited Long position/ Short position Long position Long position Long position Long position shares/underlying shares of the Capacity Company held Beneficial owner 987,841,432 Investment manager 188,414,000 (Note 1) Interest in controlled 188,414,000 corporation (Note 2) Beneficial owner 180,000,000 Approximate percentage of shareholding 44.91% 8.81% 8.81% 8.41% Mr. Li Chi Keung (Note 3) Ms. Wong Hoi Ping (Note 3) Mr. Li Chu Kwan (Note 3) Ms. Lau Man Wing, Catherine (Note 4) Long position Long position Long position Long position Interest in controlled 180,000,000 corporation Interest in controlled 180,000,000 corporation Interest in controlled 180,000,000 corporation Family interest 180,000,000 8.41% 8.41% 8.41% 8.41% Notes: 1) These include (i) an interest in 153,414,000 shares of the Company; and (ii) an interest in unlisted cash settled derivatives, giving rise to an interest in 35,000,000 underlying shares of the Company. 2) Penta Investment Advisers Ltd is wholly-owned by Mr. John Zwaanstra and therefore he was deemed to have the same interests in 153,414,000 shares of the Company and a total of 35,000,000 underlying shares of the Company held by Penta Investment Advisers Ltd. 3) Joy Idea Investments Limited is owned as to one-third by each of Mr. Li Chi Keung, Ms. Wong Hoi Ping and Mr. Li Chu Kwan and therefore they were deemed to have interest in 180,000,000 shares of the Company. 4) Ms. Lau Man Wing, Catherine is the spouse of Mr. Li Chu Kwan. Save as disclosed above, as at 31 March 2007, no other person had, or was deemed or taken to have, interests or short positions in the shares and underlying shares of the Company which were recorded in the register required to be kept under section 336 of the SFO. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES During the six months ended 31 March 2007, there was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the listed securities of the Company. COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES In the opinion of the Directors, the Company has complied with all the code provisions as set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Listing Rules during the six months ended 31 March 2007. COMPLIANCE WITH MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS 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 as set out in Appendix 10 of the Listing Rules. Having made specific enquiry with all Directors, each of whom has confirmed compliance with the required standard set out in the Code of Conduct and the Model Code. AUDIT COMMITTEE The Audit Committee of the Company comprises the non-executive Director, Mr. Choi Kin Pui, Russelle, and the three independent non-executive Directors, Mr. Luk Ka Yee, Patrick, Mr. Yim Kai Pung and Ms. Yeung Mo Sheung, Ann, with terms of reference prepared in accordance with the requirements of the Listing Rules. The Audit Committee is chaired by Mr. Yim Kai Pung who possesses appropriate professional accounting qualification. The principal duties of the Audit Committee are to ensure the objectivity and credibility of financial reporting and internal control procedures as well as to maintain an appropriate relationship with the external auditors of the Company. REVIEW OF INTERIM RESULTS The unaudited interim results for the six months ended 31 March 2007 have been reviewed by the Audit Committee and Messrs. CCIF CPA Limited, the auditors of the Company, which were of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosures have been made. On behalf of the Board Yeung Hoi Sing, Sonny Chairman Hong Kong, 20 June 2007