MACAU SUCCESS LIMITED 澳門實德有限公司 * (Incorporated in Bermuda with limited liability) Stock Code: 00487 Second Interim Report 2008 (1 October 2007 to 30 September 2008) * 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 7 Condensed Consolidated Cash Flow Statement 8 Notes to the Condensed Financial Statements 9 Report on Review of Interim Financial Report 36 Management Discussion and Analysis 38 Disclosure of Interests 46 Purchase, Sale or Redemption of the Company’s Listed Securities 49 Compliance with Code on Corporate Governance Practices 49 Compliance with Model Code for Securities Transactions by Directors 50 Audit Committee 50 Review of Second Interim Results 50 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 Qualified Accountant 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 2 Macau Success Limited Second Interim Report 2008 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 Fulcrum Group (Bermuda) Limited (formerly known as Butterfield Fund Services (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 OPERATIONAL HIGHLIGHTS Unaudited second interim results for the twelve months ended 30 September 2008 ‧ The total turnover increased tremendously to approximately HK$328.2 million ‧ Turnover of the cruise business remained stable, with a segment profit of approximately HK$18.7 million ‧ Turnover of the travel business surged to approximately HK$232.2 million due to the acquisition of the Jade Travel Group, with a segment loss of approximately HK$0.2 million ‧ Project Ponte 16 incurred a loss attributable to the Company of approximately HK$124.0 million ‧ Loss attributable to equity shareholders of the Company amounted to approximately HK$34.2 million ‧ Casino of Ponte 16 and Sofitel Macau At Ponte 16 commenced operation in February and August 2008 respectively The board of directors (the “Board”) of Macau Success Limited (the “Company”) presents the unaudited condensed consolidated financial statements of the Company and its subsidiaries (collectively the “Group”) for the twelve months ended 30 September 2008 together with the comparative figures for the corresponding period in 2007. This second interim report is prepared due to the change of the financial year end date of the Company from 30 September to 31 December, which enabled the Group as well as the associates of the Company relating to the Group’s flagship investment project, Ponte 16, to have a coterminous year end date. CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE TWELVE MONTHS ENDED 30 SEPTEMBER 2008 For the twelve months ended 30 September 2008 2007 Note HK$’000 HK$’000 (Unaudited) (Audited) TURNOVER Cost of sales 3 328,206 (225,100) 103,754 (8,069) Gross profit Other revenue Gain on partial disposal of a subsidiary Change in fair value of derivative financial instruments Administrative expenses 22 14 103,106 10,458 116,992 (389) (138,457) 95,685 30,693 – – (92,309) PROFIT FROM OPERATIONS Finance costs Share of results of associates 4 91,710 (552) (123,990) 34,069 (1,675) (15,450) (LOSS)/PROFIT BEFORE TAXATION Income tax 5 (32,832) (1,172) 16,944 (672) (LOSS)/PROFIT FOR THE PERIOD (34,004) 16,272 ATTRIBUTABLE TO: Equity shareholders of the Company Minority interests (34,159) 155 2,314 13,958 (LOSS)/PROFIT FOR THE PERIOD (34,004) 16,272 (LOSS)/EARNINGS PER SHARE – Basic 6 (HK$1.42 cents) HK$0.11 cents – Diluted N/A N/A 4 Macau Success Limited Second Interim Report 2008 Note At 30 September 2008 HK$’000 (Unaudited) At 30 September 2007 HK$’000 (Audited) NON-CURRENT ASSETS Property, plant and equipment Goodwill Intangible assets Interest in associates Deferred tax assets 8 9 10 11 21 89,710 8,332 41,553 1,101,539 848 87,945 1,313 – 886,930 – CURRENT ASSETS Inventories Trade and other receivables Tax recoverable Pledged bank deposits Cash and bank balances 12 1,241,982 1,251 129,872 1,301 7,712 161,283 976,188 1,323 18,398 – 751 200,719 CURRENT LIABILITIES Bank overdrafts Trade and other payables Tax payable Derivative financial instruments Profit guarantee liabilities 13 14 17 301,419 257 49,301 1,352 1,077 10,617 221,191 – 106,422 961 – – 62,604 107,383 NET CURRENT ASSETS 238,815 113,808 At At 30 September 30 September 2008 2007 Note HK$’000 HK$’000 (Unaudited) (Audited) TOTAL ASSETS LESS CURRENT LIABILITIES 1,480,797 1,089,996 NON-CURRENT LIABILITIES Loans payables Due to a related company Deferred tax liabilities Financial guarantee contract Profit guarantee liabilities Other financial liabilities 15 16 21 27 17 18 169,339 20,158 83 47,250 34,883 44,513 – – 83 63,000 – – 316,226 63,083 NET ASSETS 1,164,571 1,026,913 CAPITAL AND RESERVES Share capital Reserves 19 20 24,390 1,084,428 21,995 954,935 EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY Minority Interests 20 1,108,818 55,753 976,930 49,983 TOTAL EQUITY 1,164,571 1,026,913 FOR THE TWELVE MONTHS ENDED 30 SEPTEMBER 2008 Attributable to equity shareholders of the Company Capital Property Share Share Distributable redemption revaluation Exchange Retained Minority Total capital premium reserve reserve reserve reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 October 2006 21,395 612,516 52,333 976 187,065 – 52,331 926,616 40,304 966,920 Allotment of consideration shares (note 19) 600 47,400 – – – – – 48,000 – 48,000 Profit for the year – – – – – – 2,314 2,314 13,958 16,272 Interim dividend declared during the year – – – – – – – – (4,279) (4,279) At 30 September 2007 (Audited) 21,995 659,916 52,333 976 187,065 – 54,645 976,930 49,983 1,026,913 At 1 October 2007 21,995 659,916 52,333 976 187,065 – 54,645 976,930 49,983 1,026,913 Allotment of shares (note 19) 2,200 231,440 – – – – – 233,640 – 233,640 Allotment of consideration shares (note 19) 195 21,645 – – – – – 21,840 – 21,840 Share issuance costs – (4,216) – – – – – (4,216) – (4,216) Exchange adjustment – – – – – (82) – (82) – (82) Share of associates’ net loss recognised directly in equity – – – – (85,135) – – (85,135) (9,670) (94,805) Partial disposal of a subsidiary – – – – – – – – 17,215 17,215 Acquisition of interests in subsidiaries – – – – – – – – 4,820 4,820 (Loss)/profit for the period – – – – – – (34,159) (34,159) 155 (34,004) Dividend paid to minority shareholders – – – – – – – – (6,750) (6,750) At 30 September 2008 (Unaudited) 24,390 908,785 52,333 976 101,930 (82) 20,486 1,108,818 55,753 1,164,571 7 For the twelve months ended 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Net cash (used in)/generated from operating activities (34,957) 112,244 Net cash used in investing activities (233,608) (369,391) Net cash generated from/(used in) financing activities 228,872 (11,010) Net decrease in cash and cash equivalents (39,693) (268,157) Cash and cash equivalents at beginning of the period 200,719 468,876 Cash and cash equivalents at end of the period 161,026 200,719 Analysis of balances of cash and cash equivalents Cash and bank balances 161,026 200,719 1. BASIS OF PREPARATION These 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, including compliance with Hong Kong Accounting Standard (“HKAS”) 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants. On 31 October 2008, the Board passed an ordinary resolution to change the financial year end date of the Company. The reason for the change is to enable the Company, its subsidiaries and associates to have a coterminous year end date, thereby facilitating the preparation of the Group’s consolidated financial statements and saving audit costs accordingly. As a result, the current financial period covers a 15-month period from 1 October 2007 to 31 December 2008. Accordingly, the Company prepared the second unaudited consolidated financial statements of the Group for a 12-month period from 1 October 2007 to 30 September 2008. 2. CHANGES IN ACCOUNTING POLICIES 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 2007, except for the adoption of the following Hong Kong Financial Reporting Standards (“HKFRSs”), which are adopted for the first time in the current period’s financial statements. HKAS 1 (Amendments) HKFRS 7 HK(IFRIC)-Int 10 HK(IFRIC)-Int 11 HKAS 39 & HKFRS 7 (Amendments) HK(IFRIC)-Int 12 HK(IFRIC)-Int 14 Capital Disclosures Financial Instruments: Disclosures Interim Financial Reporting and Impairment HKFRS 2 – Group and Treasury Share Transactions Reclassification of Financial Assets Service Concession Arrangements HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The adoption of these new and revised HKFRSs does not have significant impact on the Group’s operating results or financial position. The Group has not applied any new and revised interpretation that is not yet effective for the current accounting period (see note 30). Second Interim Report 2008 Macau Success Limited 9 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 2007. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with HKFRSs. 3. TURNOVER AND SEGMENT INFORMATION The Group’s turnover and results for the twelve months ended 30 September 2008 analysed by business segments and geographical segments are as follows: a) Business segments Cruise leasing and management Travel Consolidated 2008 2007 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) Revenue Turnover 96,000 95,901 232,206 7,853 328,206 103,754 Other revenue 214 184 1,327 72 1,541 256 Total revenue 96,214 96,085 233,533 7,925 329,747 104,010 Results Segment results 18,720 32,035 (211) (513) 18,509 31,522 Interest income 4,619 10,048 Gain on partial disposal of a subsidiary 116,992 – Gain of disposal of securities – 4,391 Gain on disposal of available for sale investment – 10,330 Other income 4,298 5,668 Unallocated operating expenses (52,708) (27,890) Profit from operations 91,710 34,069 Finance costs (552) (1,675) Share of results of associates (123,990) (15,450) (Loss)/profit before taxation (32,832) 16,944 Income tax (1,172) (672) (Loss)/profit for the period (34,004) 16,272 For the twelve months ended 30 September Turnover Segment results 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Unaudited) (Audited) Hong Kong 4,309 7,853 (455) (471) South China Sea, other than in Hong Kong 96,000 95,901 18,720 32,035 North America 227,897 – 282 – Macau – – (38) (42) 328,206 103,754 18,509 31,522 4. PROFIT FROM OPERATIONS Profit from operations is arrived at after (crediting)/charging the following: For the twelve months ended 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Crediting: Gain on disposal of property, plant and equipment (275) – Gain on partial disposal of a subsidiary (note 22) (116,992) – Gain on disposal of securities – (4,391) Gain on disposal of available-for-sale investment – (10,330) Dividend from available-for-sale investment – (1,133) Interest income (4,699) (10,197) Charging: Auditors’ remuneration 1,665 947 Change in fair value of derivative financial instruments (note 14) 389 – Depreciation 10,343 8,710 Operating lease rentals – land and buildings 4,123 4,398 – plant and machinery 142 40 Staff costs (including contribution of retirement scheme of HK$775,000 (2007: HK$629,000)) 47,028 36,023 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Current tax – Hong Kong 1,172 804 Deferred taxation – (132) Tax expenses 1,172 672 The provision for Hong Kong profits tax is calculated at 16.5% (for the twelve months ended 30 September 2007: 17.5%) of the assessable profits arising in Hong Kong for the period. Taxation for overseas subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant countries. 6. (LOSS)/EARNINGS PER SHARE a) Basic (Loss)/Earnings per share The calculation of the basic (loss)/earnings per share is based on the (loss)/profit for the period attributable to the equity shareholders of the Company of approximately HK$34,159,000 (for the twelve months ended 30 September 2007: HK$2,314,000) and on weighted average number of 2,407,655,000 ordinary shares (for the twelve months ended 30 September 2007: 2,174,642,000 ordinary shares) in issue during the both periods. Weighted average number of ordinary shares ’000 Issued ordinary shares at 1 October 2006 2,139,464 Effect of allotment of consideration shares 35,178 Weighted average number of ordinary shares at 30 September 2007 2,174,642 Issued ordinary shares at 1 October 2007 2,199,464 Effect of allotment of subscription shares 204,932 Effect of allotment of consideration shares 3,259 Weighted average number of ordinary shares at 30 September 2008 2,407,655 b) Diluted (loss)/earnings per share There was no dilution effect on the basic (loss)/earnings per share for the twelve months ended 30 September 2008 and 30 September 2007 respectively as there were no dilutive instruments outstanding during both periods. 7. DIVIDENDS The directors of the Company do not recommend the declaration of any interim dividend for the period (for the twelve months ended 30 September 2007: Nil). No dividend payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the interim period. 8. PROPERTY, PLANT AND EQUIPMENT HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) Net book value as at 1 October 2007 Currency realignment Acquisition of subsidiaries Additions Disposals Depreciation 87,945 (151) 7,131 6,241 (1,113) (10,343) 9. Net book value as at 30 September 2008 (Unaudited) GOODWILL Cruise management service HK$’000 At 1 October 2007 1,135 Acquisition of subsidiaries (note 23) – Travel HK$’000 178 7,019 89,710 Total HK$’000 1,313 7,019 At 30 September 2008 (Unaudited) 1,135 7,197 8,332 Cost Acquisition of subsidiaries 33,044 9,238 42,282 Currency realignment (626) – (626) At 30 September 2008 32,418 9,238 41,656 Accumulated amortisation Charge for the period – 103 103 At 30 September 2008 – 103 103 Carrying amount At 30 September 2008 32,418 9,135 41,553 The trademark is assessed as having indefinite useful lives. The recoverable amount of the trademark has been assessed based on income based approach calculation performed by an independent professional valuer, Norton Appraisals Limited. The client list is assessed as having 15 years useful lives. The recoverable amount of the client list has been assessed based on contributory charge method performed by an independent professional valuer, Norton Appraisals Limited. 11. INTEREST IN ASSOCIATES (a) At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Share of net assets Goodwill (d) 206,949 19,409 425,696 19,409 Amounts due from associates Financial guarantee contract (note 27) 226,358 827,931 47,250 445,105 378,825 63,000 1,101,539 886,930 14 Macau Success Limited Second Interim Report 2008 (b) The amounts due from associates are unsecured, interest-free and have no fixed terms of repayment. Particulars of the principal associates as at 30 September 2008 are as follows: Proportion of ownership interest Held by a Place of Particulars of Group’s Held non wholly– Name of incorporation issued and effective by the owned Principal associate and operation paid up capital interest Company subsidiary activities Pier 16 – Entertainment Macau 2 shares of MOP24,000 44% – 49% Operation of casino Group Corporation and MOP1,000 and promotion of Limited respectively entertainment products and activities Pier 16 – Management Macau 2 shares of MOP24,000 44% – 49% Provision of Limited (also operated and MOP1,000 management in Hong Kong) respectively services for development of an integrated casino-resort project “Ponte 16” Pier 16 – Property Macau 100,000 shares of 44% – 49% Investment, Development Limited MOP100 each development and operation of an integrated casino-resort project “Ponte 16” Pier 16 – Resort Hotel Macau 2 shares of MOP24,000 44% – 49% Provision of Management Limited (also operated and MOP1,000 management in Hong Kong) respectively services for an integrated casino-resort project “Ponte 16” (c) On 1 October 2007, Golden Sun Profits Limited (“Golden Sun”), a then 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”), a then independent third party, as purchaser for the disposal of 10.2% interest in the entire issued share capital of, and related shareholder’s loan to, World Fortune Limited (“World Fortune”), a then wholly-owned subsidiary of the Company. Upon completion of the disposal, the Group’s effective interest in the associates relating to Ponte 16 decreased from 49% to approximately 44%. (c) (Continued) 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 for the disposal and assignment of 4.55% interest in the entire issued share capital of, and related shareholder’s loan to, Golden Sun, a then wholly-owned subsidiary of the Company, respectively. However, according to HKAS 39, this transaction together with the option granted to SBI Macau (see note 14), does not constitute a disposal and the Company shall continue to recognise the 4.55% equity interest in Golden Sun after completion of this transaction. (d) Goodwill 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) At 1 October 19,409 4,581 Further acquisition of 12.25% interest in Pier 16 – Property Development Limited – 14,828 At 30 September 19,409 19,409 On 30 November 2006, World Fortune as purchaser entered into an agreement with an independent third party, Joy Idea Investments Limited for the purchase of 12.25% equity interest in and the related loan to Pier 16 – Property Development Limited (“Pier 16 – Property Development”), an associate of the Company, for an aggregate consideration of HK$200 million. On the date of acquisition, the fair value of Pier 16 – Property Development was approximately HK$157 million. The consideration excluding the sale loan of approximately HK$29 million was approximately HK$171 million. By excluding acquisition expenses of approximately HK$0.8 million, the goodwill for this acquisition was approximately HK$14.8 million. (e) The following is a summary of aggregate amounts of assets, liabilities, revenues and results of the Group’s associates: At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) 12. TRADE AND OTHER RECEIVABLES At 30 September 2008 HK$’000 (Unaudited) At 30 September 2007 HK$’000 (Audited) All of the trade and other receivables are expected to be recovered within one year. Included in deposits, prepayment and other receivables is a deposit of HK$60 million paid to 上海永德投資有限公司 (“上海永德”), an independent third party, upon signing of a letter of intent and a confidentiality agreement on 10 January 2008 for the proposed acquisition by a wholly-owned subsidiary of the Company of at least 10% and not more than 51% of the entire issued share capital of 重慶林科物業發展有限公司, a then 90% owned subsidiary of 上海永德. Included in trade and other receivables are trade debtors with the following aging analysis as at the balance sheet date: At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Current to 30 days 10,954 727 31 to 60 days 2,352 165 61 to 90 days 620 – Over 90 days 1,794 104 15,720 996 The Group normally allows a credit period of 30 days to customers of cruise leasing and management (for the twelve months ended 30 September 2007: 30 days) and 30 days to customers of traveling business (for the twelve months ended 30 September 2007: 30 days). 13. TRADE AND OTHER PAYABLES At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Trade payables 17,772 163 Accrued charges and other payables 31,529 106,259 49,301 106,422 All of the trade and other payables are expected to be settled within one year. At 30 September 2007, included in accrued charges and other payables is a deposit of HK$100 million received from a purchaser for the Group’s disposal of 10.2% equity interest in World Fortune. The amount was applied as part of consideration upon completion of the disposal on 29 October 2007. Included in trade and other payables are trade creditors with the following aging analysis as at the balance sheet date: At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Current to 30 days 5,430 149 31 to 60 days 4,384 1 61 to 90 days 2,175 – Over 90 days 5,783 13 17,772 163 Grant of put options, at fair value 688 – Loss from change in fair value during the period 389 – At 30 September 1,077 – a) On 29 October 2007, Golden Sun, World Fortune and the Company entered into a shareholders’ agreement with Maruhan relating to World Fortune upon completion of the disposal of 10.2% interest in the entire issued share capital of, and related shareholder’s loan to, World Fortune. Pursuant to the terms of the shareholders’ agreement, 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 the entire equity interest owned by Maruhan in World Fortune and the entire amount of shareholder’s loan provided by Maruhan to World Fortune. The option shall be exercised at any time on any business day during the period commencing from the fifth anniversary of the said shareholders’ agreement and ending on the day falling six months thereafter subject to conditions. The option purchase price shall be determined based on Maruhan’s effective interest in the properties held by Pier 16 – Property Development and with reference to a 30% discount to the then prevailing market value of the said properties to be determined by an independent professional valuer to be agreed by the shareholders of World Fortune. The option was initially recognised as derivative financial liability in the balance sheet based on the valuation performed by Norton Appraisals Limited. b) On 7 July 2008, Favor Jumbo, a wholly-owned subsidiary of the Company, as vendor, SBI Macau, an independent third party, as purchaser and the Company as Favor Jumbo’s guarantor entered into a sale and purchase agreement (the “S&P Agreement”), pursuant to which Favor Jumbo conditionally agreed to sell and assign, and SBI Macau conditionally agreed to purchase the sale shares (being 4.55% of the entire issued share capital of Golden Sun legally and beneficially owned by Favor Jumbo) and to accept the assignment of all rights, title, interests and benefits of and in the sale loan (being 4.55% of the entire amount of the interest-free shareholder’s loan owing by Golden Sun to Favor Jumbo upon completion of this transaction). For further details, please refer to note 18. b) (Continued) On 8 August 2008, being the completion date of the said transaction, Favor Jumbo, the Company, SBI Macau, SBI Holdings, Inc. (SBI Macau’s holding company) and Golden Sun also entered into a shareholders’ agreement (the “Shareholders’ Agreement”). Pursuant to the terms of the 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 loan owing by Golden Sun to SBI Macau as at completion of the option at the option purchase price. The option can be exercised at any time on any business day during the period commencing from the fifth anniversary of the entering into of the Shareholders’ Agreement and ending on the day falling two months thereafter. The option purchase price is the sum of HK$99,465.77 per ordinary share in the share capital of Golden Sun held by SBI Macau as at completion of the option plus the face value of the entire amount of the shareholder’s loan owing by Golden Sun to SBI Macau as at completion of the option, and the reserve. The option was initially recognised as derivative financial liability in the balance sheet at fair value based on the valuation performed by Norton Appraisals Limited. The option is remeasured at fair value as estimated by the valuer using the Black-Scholes-Merton Option Pricing Model. 15. LOANS PAYABLES At At 30 September 30 September 2008 2007 HK$’000 HK$’000 Notes (Unaudited) (Audited) Loans from minority shareholders (i) 129,853 – Other loan payable (ii) 39,486 – 169,339 – (i) On 1 October 2007, Golden Sun as vendor and the Company as Golden Sun’s guarantor entered into a sale and purchase agreement with Maruhan as purchaser for the disposal of 10.2% interest in the entire issued share capital of, and related shareholder’s loan of approximately HK$66.5 million to, World Fortune. On 29 October 2007, Golden Sun, Maruhan, the Company and World Fortune entered into a shareholders’ agreement relating to World Fortune. Pursuant to the terms of the shareholders’ agreement, Maruhan agreed to provide further shareholder’s loan of approximately HK$116 million according to its shareholding in World Fortune which will on-lend the same to Pier 16 – Property Development for the purpose of financing and completing the development of the integrated casino-resort project “Ponte 16”. During the period, Maruhan advanced approximately HK$53.3 million. The loan is interest-free and unsecured. During the period, Mrs. Yung Yuen Ping Kwok, a shareholder of 665127 British Columbia Ltd. which is a 80% owned subsidiary of the Company, advanced approximately HK$2.6 million. The loan is interest-free and unsecured. During the period, SABC Holdings Ltd., a shareholder of 665127 British Columbia Ltd. which is a 80% owned subsidiary of the Company, advanced approximately HK$7.5 million. The loan is interest-free and unsecured. In the opinion of the directors of the Company, the loans will not be repaid within the next twelve months and the carrying value approximated the fair value. (ii) Other loan payable of HK$39.5 million represented the sale loan portion under the S&P Agreement dated 7 July 2008. The loan is unsecured, interest-free and will not be repaid within the next twelve months. (Also see note 18) 16. DUE TO A RELATED COMPANY The amount due to a related company, which is an investment holding company beneficially wholly-owned by Mr. Yeung Hoi Sing, Sonny, a director and a controlling shareholder of the Company, is unsecured and charged with interest at the rate of 4% per annum and have no fixed terms of repayment. 17. PROFIT GUARANTEE LIABILITIES HK$’000 (Unaudited) At 30 September 2008 45,500 Less: amount included under “current liabilities” (10,617) 34,883 Pursuant to the S&P Agreement, Favor Jumbo conditionally agreed to sell and assign, and SBI Macau conditionally agreed to purchase the sale shares (being 4.55% of the entire issued share capital of Golden Sun legally and beneficially owned by Favor Jumbo) and to accept the assignment of all rights, title, interests and benefits of and in the sale loan (being 4.55% of the entire amount of the interest-free shareholder’s loan owing by Golden Sun to Favor Jumbo upon completion of this transaction). Moreover, Favor Jumbo guaranteed that SBI Macau shall be entitled to a return of not less than HK$9.1 million for each full fiscal year for a period of sixty successive months immediately after the date of completion of the said transaction. For details, please refer to note 18. 18. OTHER FINANCIAL LIABILITIES On 8 August 2008, the Company through its wholly-owned subsidiary, Favor Jumbo, completed the disposal and assignment to SBI Macau of 4.55% of the entire issued share capital of, and related shareholder’s loan to, Golden Sun respectively pursuant to the S&P Agreement. Notwithstanding that the transaction is a sale of 4.55% equity interest in Golden Sun by Favor Jumbo to SBI Macau with the option granted to SBI Macau pursuant to the terms of the S&P Agreement and the Shareholders’ Agreement, 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 according to HKAS 39. Accordingly, the Group shall continue to recognise the 4.55% equity interest in Golden Sun after completion of this transaction, and would recognise the received consideration and the profit guarantee. On 8 August 2008, the received consideration was approximately HK$44.5 million and booked as other financial liabilities. Upon completion of this transaction, Favor Jumbo guaranteed that SBI Macau shall be entitled to a return (the “Return”) of not less than HK$9.1 million (“Guaranteed Amount”) for each full fiscal year for a period of sixty successive months immediately after the date of completion of this transaction (“Relevant Period”). In the event the amounts received by SBI Macau from the distribution of the profits of Golden Sun for any fiscal year during the Relevant Period falls short (“Shortfall”) of the higher of 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 fiscal year during the Relevant Period. (Also see note 17) 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. 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 to purchase of the entire equity interest in Golden Sun and the entire amount of the shareholder’s loan owing by Golden Sun to SBI Macau as at completion of the option, at the option purchase price, which is HK$99,465.77 per ordinary share in the capital of Golden Sun held by SBI Macau as at completion of the option plus the face value of the entire amount of the shareholder’s loan owing by Golden Sun to SBI Macau as at completion of the option, and the reserve, subject to and on the terms set out in the Shareholders’ Agreement. The option can be exercised at any time on any business day during the period commencing from the fifth anniversary of the entering into of the Shareholders’ Agreement and ending on the day falling two months thereafter. (Also see note 14) Number of Nominal Note shares value ’000 HK$’000 The movement in the issued share capital of the Company was as follows: Authorised: Ordinary shares of HK$0.01 each At 30 September 2007 160,000,000 1,600,000 At 1 October 2007 and 30 September 2008 160,000,000 1,600,000 Issued and fully paid: Ordinary shares of HK$0.01 each At 1 October 2006 Allotment of consideration shares (a) 2,139,464 60,000 21,395 600 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 30 September 2008 2,438,964 24,390 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 entire issued share capital of Smart Class Enterprises Limited (“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$21.8 million, which represented the amount of consideration settled for the acquisition. 20. RESERVES Attributable to equity shareholders of the Company Capital Property Share Distributable redemption revaluation Exchange Retained Minority Total premium reserve reserve reserve reserve profits Total interests equity HK$’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 19) 47,400 – – – – – 47,400 – 47,400 Profit 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 (Audited) 659,916 52,333 976 187,065 – 54,645 954,935 49,983 1,004,918 At 1 October 2007 659,916 52,333 976 187,065 – 54,645 954,935 49,983 1,004,918 Allotment of shares (note 19) 231,440 – – – – – 231,440 – 231,440 Allotment of consideration shares (note 19) 21,645 – – – – – 21,645 – 21,645 Share issuance costs (4,216) – – – – – (4,216) – (4,216) Exchange adjustment – – – – (82) – (82) – (82) Share of associate’s net loss recognised directly in equity – – – (85,135) – – (85,135) (9,670) (94,805) Partial disposal of a subsidiary – – – – – – – 17,215 17,215 Acquisition of interests in subsidiaries – – – – – – – 4,820 4,820 (Loss)/profit for the period – – – – – (34,159) (34,159) 155 (34,004) Dividend paid to minority shareholders – – – – – – – (6,750) (6,750) At 30 September 2008 (Unaudited) 908,785 52,333 976 101,930 (82) 20,486 1,084,428 55,753 1,140,181 (a) The deferred tax assets of HK$0.8 million represented the deferred tax arising from related depreciation in excess depreciation allowances. The deferred tax assets for tax loss carry forward are recognised to the extent that the realisation of the related tax benefit through utilisation against future taxable profits is probable. At 30 September 2008, the Group had tax losses of approximately HK$117 million (30 September 2007: HK$86 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. (b) The deferred tax liabilities of HK$0.08 million represented the deferred tax arising from depreciation allowances in excess related depreciation. 22. PARTIAL DISPOSAL OF A SUBSIDIARY The disposal of 10.2% equity interest in World Fortune by Golden Sun was completed on 29 October 2007. Gain on partial disposal of World Fortune of approximately HK$117 million was recognised for the twelve months ended 30 September 2008. (being a company indirectly owns 80% equity interest in the travel agency companies located in Canada and the United States of America) at a total consideration of approximately HK$24.8 million which was calculated by aggregation of the fair value of the 19.5 million consideration shares allotted and issued on the same date, being HK$1.12 per share, and other costs. The net assets acquired in the transaction and the goodwill arising are as follows: Acquiree’s carrying amount before Fair value combination adjustment Fair value (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 Net assets acquired: Property, plant and equipment 5,460 1,670 7,130 Client list – 9,238 9,238 Trademark 22,845 10,199 33,044 Trade receivables 15,538 (15) 15,523 Other receivables and deposits 17,218 – 17,218 Cash and cash equivalents 8,004 – 8,004 Trade payables (17,003) 40 (16,963) Other payables (50,001) – (50,001) Deferred tax liabilities – (568) (568) 2,061 20,564 22,625 Shared by minority interest (4,863) Goodwill 7,019* Consideration 24,781 Total consideration satisfied by: Fair value of the consideration shares at the issue price of HK$1.12 per share at the completion date (note 19(c)) 21,840 Other costs 2,941** 24,781 * The goodwill represents the benefits of enhanced efficiency and the expected synergies arising from interaction between the Group’s existing travel business after the Company’s acquisition of Smart Class and its subsidiaries. ** As at 30 September 2008, other costs of HK$301,000 has not yet been settled by cash and included in other payables. subsidiaries: HK$’000 Total consideration settled in cash (2,640) Cash and cash equivalents in subsidiaries acquired 8,004 5,364 Smart Class and its subsidiaries contributed revenue of approximately HK$229.6 million and profit of approximately HK$0.3 million to the Group’s loss for the period between the date of acquisition, i.e. 31 July 2008, and the balance sheet date. If the acquisition had been completed on 1 October 2007, total group revenue for the period would have been approximately HK$1,653.8 million, and loss for the period would have been approximately HK$36.4 million. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of the Group that actually would have been achieved had the acquisition been completed on 1 October 2007, nor is it intended to be a projection of future results. 24. COMMITMENTS (a) Capital commitments outstanding at 30 September 2008 not provided for in the financial statements were as follows: At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Contracted for 15,032 – (b) At the balance sheet date, the Group had the following commitments for future lease payment under non-cancellable operating leases which fall due as follows: At At 30 September 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Within one year 3,609 3,757 In the second to fifth years, inclusive 4,969 1,575 After fifth years 43 – 8,621 5,332 The turnover of the Group’s travel agent business is subject to seasonal fluctuations, with peak demand during the holiday season whereas the Group’s cruise leasing business is subject to a relatively lower degree of seasonal volatility. 26. SIGNIFICANT RELATED PARTY TRANSACTIONS For the twelve months ended 30 September 2008 2007 Notes HK$’000 HK$’000 (Unaudited) (Audited) a) Travel service income received and receivable from – Associates – Key management personnel (i)(ii) (ii) 1,178 288 1,466 1,150 641 1,791 b) Management service income received and receivable from – Associates (i)(iii) 4,295 4,534 c) Loan interest paid and payable to – Related company (iv) 141 At 30 September 2008 HK$’000 (Unaudited) – At 30 September 2007 HK$’000 (Audited) d) Receivables from travel service as at the balance sheet date – Associates 130 344 e) Receivable from management service as at the balance sheet date – Associates 830 354 f) Loan payable for operation as at the balance sheet date – Related company 20,158 – The key management personnel of the Group are the directors of the Company. The remuneration of directors during the twelve months ended 30 September 2008 was as follows: For the twelve months ended 30 September 2008 2007 HK$’000 HK$’000 (Unaudited) (Audited) Directors’ fee 410 400 Salaries, allowances and benefits in kind 1,395 1,099 Retirement scheme contribution 20 18 1,825 1,517 h) On 5 May 2008, the Company as purchaser entered into an agreement for the acquisition of entire issued share capital of Smart Class at an agreed consideration of CAD2.9 million (equivalent to approximately HK$22.6 million) from Star Spangle Corporation, an investment holding company beneficially wholly-owned by Mr. Yeung Hoi Sing, Sonny, a director and a controlling shareholder of the Company. 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. The details of the transaction are set out in note 23 to the condensed financial statements. Notes: i) Mr. Yeung Hoi Sing, Sonny was the director of the associates during the twelve months’ periods ended 30 September 2007 and 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 office during the period from 1 June 2008 to 30 September 2008. 26. SIGNIFICANT RELATED PARTY TRANSACTIONS (Continued) ii) The travel agent service fee was charged according to prices and conditions similar to those offered to other customers. iii) The management fee was charged on actual cost incurred by the Group for providing the services. iv) The related company is an investment holding company beneficially wholly-owned by Mr. Yeung Hoi Sing, Sonny, a director and a controlling shareholder of the Company, during the twelve months’ period ended 30 September 2008. The interest was charged at the rate of 4% per annum. 27. CONTINGENT LIABILITIES At the balance sheet date, the Group gave the following undertakings: A syndicated loan facility granted to an associate held by a non wholly-owned 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 facility of the associate at the balance sheet date was HK$1,310 million (30 September 2007: HK$1,010 million). Based on the valuation performed by BMI Appraisals Limited, the directors of the Company considered that the fair value of the financial guarantee contract for the associate is HK$63 million. The carrying amounts of the financial guarantee contract recognised in the condensed balance sheet and income statement were approximately HK$47.2 million (30 September 2007: HK$63 million) and HK$15.8 million (for the twelve months ended 30 September 2007: Nil) respectively. As at 30 September 2008, Jade Travel Ltd. (Canada) obtained a letter of guarantee from the bank amounted to CAD1.4 million (equivalent to approximately HK$10.2 million) (30 September 2007: Nil) in favour of various airlines of secure payment of airline ticket purchases. (a) As at 30 September 2008, the Group pledged the time deposits of approximately HK$0.8 million (30 September 2007: HK$0.8 million) to certain banks for issuance of several bank guarantees of approximately HK$0.8 million (30 September 2007: HK$0.8 million) for operation of the Group. (b) As at 30 September 2008, the Company pledged the time deposits of CAD0.9 million (equivalent to approximately HK$6.9 million) (30 September 2007: Nil) to a bank for issuance of standby letter of credit facility of up to CAD1.2 million (equivalent to approximately HK$9.2 million) (30 September 2007: Nil) for operation of Jade Travel Ltd. (c) As at 30 September 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 a syndicated loan facility granted to Pier 16 – Property Development. 29. POST BALANCE SHEET EVENT On 1 December 2008, the Company entered into an unsecured term loan facility agreement (the “Facility Agreement”) with Mr. Yeung Hoi Sing, Sonny (“Mr Yeung”, being a director and a controlling shareholder of the Company). 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 final repayment date, ie on or before 30 June 2010; and (b) the date on which the Loan Facility is reduced to zero. In the opinion of the directors of the Company, the borrowing of the Loan Facility was for the benefit of the Company on normal commercial terms where no security over the assets of the Company was granted. 30. POSSIBLE IMPACT OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE PERIOD ENDED 30 SEPTEMBER 2008 The Group has not early applied the following new standards, amendments and interpretations that have been issued but are not yet effective. 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 significant impact on the Group’s results of operations and financial position. HKAS 1 (Revised) Presentation of Financial Statements 1 HKAS 23 (Revised) Borrowing Costs 1 HKAS 27 (Revised) Consolidated and Separate Financial Statements 2 HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation 1 HKAS 39 (Amendments) Eligble Hedged Items 2 HKFRS 1 & HKAS 27 Cost of Investment in a Subsidiary, Jointly Controlled (Amendments) Entities or Associates 1 HKFRS 2 (Amendments) Vesting Conditions and Cancellations 1 HKFRS 3 (Revised) Business Combinations 2 HKFRS 8 Operating Segments 1 HK(IFRIC)-Int 13 Customer Loyalty Programmes 4 HK(IFRIC)-Int 15 Agreement for the Construction of Real Estate 1 HK(IFRIC)-Int 16 Hedges of a Net Investment in a Foreign Operation 5 1 Effective for annual periods beginning on or after 1 January 2009 2 Effective for annual periods beginning on or after 1 July 2009 3 Effective for annual periods beginning on or after 1 January 2008 4 Effective for annual periods beginning on or after 1 July 2008 5 Effective for annual periods beginning on or after 1 October 2008 TO THE BOARD OF DIRECTORS OF MACAU SUCCESS LIMITED (Incorporated in Bermuda with limited liability) Introduction We have reviewed the interim financial report set out on pages 4 to 35, which comprises the condensed consolidated balance sheet of Macau Success Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 September 2008 and the related condensed consolidated income statement, the condensed consolidated statement of changes in equity and the condensed consolidated cash flow statement for the twelve-month period then ended, and explanatory notes. The Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited requires the preparation of a report on interim financial report to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial report in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial report based on our review, 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 another person for the contents of this report. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial report consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial report is not prepared, in all material respects, in accordance with the Hong Kong Accounting Standard 34 “Interim Financial Reporting”. CCIF CPA Limited Certified Public Accountants Hong Kong, 18 December 2008 Delores Teh Practising Certificate Number P03207 MANAGEMENT DISCUSSION AND ANALYSIS Results For the period under review, the Group’s turnover was approximately HK$328.2 million, representing a tremendous increase of approximately 216% as compared to the last corresponding period (2007: approximately HK$103.8 million). Gross profit was approximately HK$103.1 million (2007: approximately HK$95.7 million). Loss attributable to equity shareholders of the Company amounted to approximately HK$34.2 million, compared to a profit attributable to equity shareholders of approximately HK$2.3 million in 2007. As a result, HK1.42 cents was recorded as the loss per share for the period (earnings per share in 2007: HK0.11 cents). The turnover for travel business and hence the Group’s consolidated turnover surged due to the acquisition of the business of the Jade Travel Group (as defined below under sub-section headed “Acquisition of the Jade Travel Group”) on 31 July 2008. As for the cruise business, its turnover remained stable; its performance, however, deteriorated. The loss incurred during the period under review was attributable to the loss of the Company’s associates relating to the Group’s flagship project in Macau, Ponte 16 (the “Associates”), shared by the Group and the lower profit contribution of cruise business. The loss shared by the Group from the Associates for the period under review was approximately HK$124.0 million compared with the loss of HK$15.5 million in the corresponding period of the previous year. The loss for the twelve months ended 30 September 2008 was mainly attributable to the depreciation charges and high operating costs in the initial stage of operation of the business of Ponte 16. This loss more than offset the Group’s gain on disposal of approximately 5% effective interest in Ponte 16 to Maruhan Corporation (“Maruhan”), which amounted to approximately HK$117 million. The Group’s cruise business for the period under review has also been adversely affected by high fuel oil and operating costs resulting in a decrease in its contribution to the Group’s results. The Company issued a profit warning announcement on 24 September 2008 to convey these messages to its shareholders and potential investors. The directors of the Company (the “Director(s)”) do not recommend the declaration of any interim dividend for the twelve months ended 30 September 2008 (2007: Nil). Review of Operations Cruise Business During the period under review, leasing and management of the Group’s cruise ship, M.V. Macau Success (in which the Group has 55% interest) continued to contribute stable turnover to the Group. Yet, it ceased to be the major turnover contributor. Turnover from the cruise business was approximately HK$96.0 million (2007: approximately HK$95.9 million), accounting for approximately 29.3% of the Group’s total turnover. In 2007, it accounted for 92.4% of the Group’s total turnover. Such a change is driven by the significant increase in the turnover of the travel business, which was explained in the above section headed “Results”. Segment profit from this business decreased by 41.6% to approximately HK$18.7 million compared with approximately HK$32.0 million in the corresponding period in 2007. This reduction in profitability stemmed from a surge in fuel and operating costs. Travel Business During the period under review, turnover from the travel business increased tremendously to approximately HK$232.2 million (2007: approximately HK$7.9 million). The travel business accounted for approximately 70.7% of the Group’s total turnover and became the major turnover contributor (2007: approximately 7.6% of the Group’s total turnover). Segment loss from this business narrowed to approximately HK$0.2 million (2007: approximately HK$0.5 million) due to the profit contributed from the Jade Travel Group. It is the Group’s strategy to develop the travel business as a unique platform, providing professional travel services to high-end customers worldwide and to direct traffic to the Group’s cruise business and Ponte 16. Investment Project – Ponte 16 Ponte 16 is a world-class integrated casino-entertainment resort comprising a five-star luxury hotel – Sofitel Macau At Ponte 16, a casino, a shopping arcade and food and beverage facilities. Featuring a unique European theme infused with Chinese elements, the development project is located at Pier 16, which has been in operation since the beginning of the last century and is now a famous historical landmark. A five-minute ferry connection between Ponte 16 and Zhuhai provides a convenient access for tourists. For the twelve months’ period ended 30 September 2008, the total number of visitor arrivals in Macau totalled 29.9 million, representing an increase of 17.2% year-on-year. However, with various restrictive measures imposed on the mainland visitors travelling to Macau since May 2008 and the breakout of global financial tsunami in August 2008, the growth in Macau tourism has slowed down. Growth in gaming revenue has also slowed down in the quarter ended 30 September 2008. The overall operating environment in Macau was less favourable than a year before. During the period under review, Ponte 16 has started operation in several stages. Casino of Ponte 16 commenced operation in February 2008 with a grand opening ceremony. Key local government officials and celebrities were invited to be the guests of the event and it turned out to be widely covered in the Hong Kong and Macau media. Sofitel Macau At Ponte 16 was opened to the public in August 2008 and a marketing campaign was launched at its soft opening stage. In September 2008, the high-limit betting area also started operation. There was a six-month delay in obtaining the hotel license for Sofitel Macau At Ponte 16, which exerted negative impact on the Group’s planning. However, after the opening of the hotel in August 2008, against the backdrop of less favourable market environment, the key operation indicators including the number of visitors to casino at Ponte 16 and the occupancy rate have improved steadily over time. Ponte 16 is one of the popular destinations for the locals and tourists. The highest number of visitors recorded in one single day amounted to 30,000 during the Chinese New Year period. The average number of visitors per day since the opening of Ponte 16 is around 10,000. Average daily mass drop during the period under review was approximately HK$13 million. The business performance of Ponte 16 has improved with more new facilities coming on-stream. Investment Project – Ponte 16 (Continued) However, as the project was still in its early stage of operation, the operating costs including staff costs, training costs as well as marketing and promotion expenses were higher. Coupled with the depreciation charges, the loss incurred by Ponte 16 shared by the Group during the period under review amounted to approximately HK$124.0 million. Yet, we believe the unique advantages of Ponte 16 and the marketing efforts of Ponte 16 together with the Accor Group (the group managing the operation of Sofitel Macau At Ponte 16) helped offset the negative impact of the unfavourable market environment. Financial Review Liquidity, Financial Resources and Gearing As at 30 September 2008, the Group had net current assets of approximately HK$238.8 million (30 September 2007: approximately HK$113.8 million) and had net assets of approximately HK$1,164.6 million (30 September 2007: approximately HK$1,026.9 million). As at 30 September 2008, the Group had bank overdrafts of approximately HK$0.3 million (30 September 2007: Nil) and did not have any financial lease obligations (30 September 2007: Nil). As at 30 September 2008, the Group had interest-bearing loan from a related company of approximately HK$20.2 million (30 September 2007: Nil). The loan is unsecured and charged with interest at the rate of 4% per annum and have no fixed terms of repayment. As at 30 September 2008, there were loans from minority shareholders of approximately HK$129.9 million (30 September 2007: Nil) and other loan payable of approximately HK$ 39.5 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 30 September 2008 was approximately HK$1,108.8 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 1.8% for the twelve months ended 30 September 2008 (30 September 2007: Nil). Pledge of Assets As at 30 September 2008, the Group pledged the time deposits of approximately HK$0.8 million (30 September 2007: approximately HK$0.8 million) to certain banks for issuance of several bank guarantees of approximately HK$0.8 million (30 September 2007: approximately HK$0.8 million) for operation of the Group. As at 30 September 2008, the Company pledged the time deposits of CAD0.9 million (equivalent to approximately HK$6.9 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$9.2 million) (30 September 2007: Nil) for operation of Jade Travel Ltd. As at 30 September 2008, World Fortune Limited (“World Fortune”) pledged all (30 September 2007: 100%) of its shares in Pier 16 – Property Development Limited (“Pier 16 – Property Development”) to a bank, for and on behalf of the syndicate of lenders, in respect of a syndicated loan facility granted to Pier 16 – Property Development. Contingent Liabilities At the balance sheet date, the Group gave the following undertaking: Syndicated loan facilities granted to an associate held by a non wholly-owned 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$1,310 million (30 September 2007: HK$1,010 million). As at 30 September 2008, Jade Travel Ltd. (Canada) obtained a letter of guarantee from the bank which amounted to CAD1.4 million (equivalent to approximately HK$10.2 million) (30 September 2007: Nil) in favour of various airlines of secure payment of airline ticket purchases. As at 30 September 2008, the Group had a total of 433 employees. Remuneration is determined on the basis of qualification, 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. Corporate Initiatives During the period under review, the Group has made several strategic moves to accelerate the future development of the Group. Partnership with Maruhan In October 2007, the Company through its then wholly-owned subsidiary, Golden Sun Profits Limited (“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. 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 through its equity interest in the Company and World Fortune, Maruhan currently has an effective interest of about 13% in Pier 16 – Property Development and has become a strategic investor of the Group. 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 Enterprises Limited (“Smart Class”) for CAD2.9 million (equivalent to approximately HK$22.6 million) (the “Acquisition”), 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 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”). Since then, the Company has indirectly held 80% equity interest in the Jade Travel Group. With the extensive office network of the Jade Travel Group in Vancouver, Calgary, Toronto, Montreal and New York, the Group’s international network in the travel business has been strengthened substantially, paving the way for the Company to create synergies for the other business segments by cross-selling between the integrated casino-entertainment resort and the 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 financial services. The Company will benefit 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. Looking forward, the Group expects the global economic environment to remain challenging and at this stage, it is not feasible to predict how far and how long the financial tsunami would impact our operating environment. Cruise business will face further challenges due to the volatility of fuel price and the close link between fuel price and the operating margin of this business. We will continue to closely monitor the macro environment and constantly strive to improve our operating efficiency. The Group’s travel business is expected to develop steadily. After the acquisition of the Jade Travel Group, the expanded travel platform, which has better economies of scale and higher operational efficiency, can diversify our customer mix, promote traffic to Ponte 16 and create synergies among our core businesses. The unique platform will bolster the Group’s expansion in the gaming and entertainment-related business in the Asia-Pacific region. More marketing and branding programmes will be launched to promote the unique advantages of Ponte 16. In the long term, management is positive on the outlook of Ponte 16. Management believes that the recent policies taken by the Macau government will exert positive influence on Macau’s infrastructure and economy ultimately. The Group will continue to take proactive measures to increase traffic to Ponte 16. The expanded travel platform and network can diversify customer mix as well as boost inbound traffic from US and Canada to Macau. Ponte 16 is also well-equipped to serve customers from different destinations. The broadening of the customer base can alleviate the effect of the recent regulatory measures imposed on the mainland visitors by the Central People’s Government of the People’s Republic of China on the business of Ponte 16. In terms of corporate strategies, management is committed to developing tourist and entertainment-related businesses in the Asia-Pacific region. Leveraging on the strategic partnerships with Maruhan and SBI Holdings, the Company is well-positioned to enter Japan’s gaming market pending the issuance of gaming license there. Yet, facing the recent global economy slowdown, management would be more prudent in the formulation and implementation of corporate strategies. Directors’ and Chief Executive’s Interests in Securities As at 30 September 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, 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”): Interest in the shares of the Company (“Share(s)”) Approximate Long position/ Nature Number of percentage of Name of Director Short position of interest Shares held shareholding % Mr. Yeung Hoi Sing, Long position Corporate 1,010,953,432 41.45 Sonny (Note) interest Note: Mr. Yeung Hoi Sing, Sonny, 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 beneficiaries of which are family members of Mr. Yeung Hoi Sing, Sonny. Save as disclosed above, as at 30 September 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, notified to the Company and the Stock Exchange pursuant to the Model Code. Pursuant to the share option scheme adopted by the shareholders of the Company on 20 August 2004 (the “Share Option Scheme”), the Board may at a consideration of HK$1 offers to grant share options to selected eligible persons to subscribe for Shares as incentives or rewards for their contribution to the Group. The exercise price of any share option will be determined by the Board at its absolute discretion, but in any event shall not be less than the highest of (i) the official closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange on the date on which the relevant option is offered; (ii) the average of the official closing price of the 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 offered; and (iii) the nominal value of the Share. 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 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 10 years from the date of adoption of the Share Option Scheme, i.e. 20 August 2004. No options under the Share Option Scheme had been granted to any person since its adoption and up to the balance sheet date. 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 benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. As at 30 September 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 Interest in the Shares (Continued) Name of substantial shareholder Long position/ Short position Capacity Number of Shares held Approximate percentage of shareholding % Silver Rich Macau Development LimiTrustcorp Limited (Note 1) Newcorp Ltd. (Note 1) Newcorp Holdings Ltd. (Note 1) Mr. David Henry Christopher Hill (Note 1) Mr. David William Roberts (Note 1) Mrs. Rebecca Ann Hill (Note 2) Ms. Liu Siu Lam, Marian (Note 3) Maruhan Corporation Long position ted Long position Long position Long position Long position Long position Long position Long position Long position Beneficial owner Trustee Interest of controlled corporation Interest of controlled corporation Interest of controlled corporation Interest of controlled corporation Interest of spouse Interest of spouse Beneficial owner 1,010,953,432 1,010,953,432 1,010,953,432 1,010,953,432 1,010,953,432 1,010,953,432 1,010,953,432 1,010,953,432 440,000,000 41.45 41.45 41.45 41.45 41.45 41.45 41.45 41.45 18.19 Notes: 1. The entire issued share capital of Silver Rich Macau Development Limited is held by Trustcorp Limited, which is a trustee of a discretionary trust, the beneficiaries of which are family members of Mr. Yeung Hoi Sing, Sonny. Trustcorp Limited is a wholly-owned subsidiary of Newcorp Ltd., which is in turn wholly-owned by Newcorp Holdings Ltd., Newcorp Holdings Ltd. is 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 Hoi Sing, Sonny, was deemed to be interested in 1,010,953,432 Shares in which Mr. Yeung Hoi Sing, Sonny had a deemed interest. Save as disclosed above, as at 30 September 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. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES During the twelve months ended 30 September 2008, 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 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 Listing Rules during the twelve months ended 30 September 2008. 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 of all Directors, each of whom has confirmed his/her compliance with the required standard set out in the Code of Conduct and the Model Code throughout the twelve months ended 30 September 2008. AUDIT COMMITTEE The Audit Committee of the Company (the “Audit Committee”) 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 as required under the Listing Rules. The primary duties of the Audit Committee include, inter alia, monitoring integrity of the financial statements of the Company and ensuring objectivity and credibility of financial reporting, reviewing the internal control system of the Group as well as overseeing the relationship with the external auditors of the Company. REVIEW OF SECOND INTERIM RESULTS The unaudited second interim results for the twelve months ended 30 September 2008 have been reviewed by the Audit Committee and 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, 18 December 2008