(Incorporated in Bermuda with limited liability) Stock Code: 00487 Interim Report TRAVEL ‧ CRUISE ‧ GAMING & ENTERTAINMENT 2009 SUCCESS UNIVERSE GROUP LIMITED Interim Report 2009 Page Corporate Information 02 Operational Highlights 03 Condensed Consolidated Income Statement 04 Condensed Consolidated Statement of Comprehensive Income 05 Condensed Consolidated Statement of Financial Position 06 Condensed Consolidated Statement of Changes in Equity 08 Condensed Consolidated Statement of Cash Flows 09 Notes to the Condensed Consolidated Financial Statements 10 Report on Review of Interim Financial Report 37 Management Discussion and Analysis 39 Disclosure of Interests 44 Disclosure under Rules 13.20 and 13.22 of the Listing Rules 47 Purchase, Sale or Redemption of the Company’s Listed Securities 48 Compliance with Code on Corporate Governance Practices 48 Compliance with Model Code for Securities Transactions by Directors 48 Audit Committee 48 Review of Interim Results 48 CORPORATE INFORMATION Directors Executive Directors Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Ma Ho Man, Hoffman (Deputy Chairman) Non-executive Director Mr. Choi Kin Pui, Russelle Independent Non-executive Directors Mr. Luk Ka Yee, Patrick Mr. Yim Kai Pung Ms. Yeung Mo Sheung, Ann Company Secretary Ms. Chiu Nam Ying, Agnes Financial Controller Mr. Wong Chi Keung, Alvin Authorised Representatives Mr. Ma Ho Man, Hoffman Ms. Chiu Nam Ying, Agnes Audit Committee Mr. Yim Kai Pung (Chairman) Mr. Choi Kin Pui, Russelle Mr. Luk Ka Yee, Patrick Ms. Yeung Mo Sheung, Ann Remuneration Committee Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Choi Kin Pui, Russelle Mr. Luk Ka Yee, Patrick Mr. Yim Kai Pung Ms. Yeung Mo Sheung, Ann Executive Committee Mr. Yeung Hoi Sing, Sonny (Chairman) Mr. Ma Ho Man, Hoffman Auditors CCIF CPA Limited Legal Advisors on Hong Kong Law Iu, Lai & Li Legal Advisors on Bermuda Law Conyers Dill & Pearman Principal Bankers Chong Hing Bank Limited Fubon Bank (Hong Kong) Limited The Bank of East Asia, Limited The Hongkong and Shanghai Banking Corporation Limited Principal Share Registrar and Transfer Agent in Bermuda Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke, HM 08 Bermuda Branch Share Registrar and Transfer Office in Hong Kong Tricor Tengis Limited 26th Floor Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head Office and Principal Place of Business Suite 1601-2 & 8-10, 16/F. Great Eagle Centre 23 Harbour Road Wanchai Hong Kong Share Listing The Stock Exchange of Hong Kong Limited Stock Code: 00487 Website www.successug.com OPERATIONAL HIGHLIGHTS Unaudited interim results for the six months ended 30 June 2009 ‧ Total turnover increased to approximately HK$593.6 million despite challenging operating conditions ‧ Turnover of travel business amounted to approximately HK$556.6 million despite the global spread of the H1N1 virus; the segment posted a loss of approximately HK$7.9 million ‧ Turnover of cruise business decreased to HK$37.0 million on lower leasing income; segment profit amounted to approximately HK$2.3 million ‧ Project Ponte 16 incurred a narrower loss attributable to the Company of approximately HK$59.3 million as operations started to attain critical mass ‧ Casino of Ponte 16 generated a stable monthly gross gaming revenue; Sofitel Macau At Ponte 16 showed a steady increase in hotel occupancy rate ‧ Loss attributable to equity shareholders of the Company amounted to approximately HK$87.2 million The board of directors (the “Board”) of Success Universe Group Limited (the “Company”) presents the unaudited condensed consolidated financial statements of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2009 together with the comparative figures as follows: CONDENSED CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2009 Unaudited For the six months ended Notes 30/6/2009 31/3/2008 (Restated) HK$’000 HK$’000 Turnover 593,595 50,202 Cost of sales (540,331 ) (2,429 ) Gross profit 53,264 47,773 Other revenue 14,512 15,666 Administrative expenses (75,241 ) (63,409 ) Other operating expenses (13,255 ) (9,450 ) Loss from operations (20,720 ) (9,420 ) Finance costs (7,228 ) – Share of results of associates (59,256 ) (64,346 ) Loss before taxation 5 (87,204 ) (73,766 ) Income tax 6 (29 ) – Loss for the period (87,233 ) (73,766 ) Attributable to: Equity shareholders of the Company (87,182 ) (79,709 ) Non-controlling interests (51 ) 5,943 Loss for the period (87,233 ) (73,766 ) Loss per share 8 – Basic (3.57) HK cents (3.34) HK cents – Diluted (3.57) HK cents (3.34) HK cents The notes on pages 10 to 36 form part of this condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2009 Unaudited For the six months ended 30/6/2009 31/3/2008 (Restated) HK$’000 HK$’000 Loss for the period (87,233 ) (73,766 ) Other comprehensive income for the period (after tax and reclassification adjustments) Exchange differences on translation of: – Group – Non-controlling interests Share of associates’ net profit recognised directly in equity 1,131 238 2,765 –– – Total comprehensive income for the period (83,099 ) (73,766 ) Attributable to: Equity shareholders of the Company Non-controlling interests (83,286 ) 187 (79,709 )5,943 Total comprehensive income for the period (83,099 ) (73,766 ) The notes on pages 10 to 36 form part of this condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2009 Unaudited Audited At At Notes 30/6/2009 31/12/2008 HK$’000 HK$’000 NON-CURRENT ASSETS Property, plant and equipment Goodwill Intangible assets Interest in associates Deposit for acquisition of properties Deposit for acquisition of a company Deferred tax assets 9 10 11 12 13 14 CURRENT ASSETS Inventories Trade and other receivables Tax recoverable Pledged bank deposits Cash and cash equivalents 15 16 16 CURRENT LIABILITIES Trade and other payables Deferred income Profit guarantee liabilities Financial guarantee contract Tax payable 17 18 21 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred income Profit guarantee liabilities Loans payables Long-term payables Due to a related company Deferred tax liabilities Financial guarantee contract Loans from a director and controlling shareholder 18 19 20 21 NET ASSETS 1,317,062 1,311,798 77,429 107,149 55,640 50,724 21,789 56,425 1,338,851 1,368,223 – 490,791 437,064 848,060 931,159 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued) As at 30 June 2009 Notes Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 CAPITAL AND RESERVES Share capital 22 24,390 24,390 Reserves 777,162 860,448 TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY 801,552 884,838 NON-CONTROLLING INTERESTS 46,508 46,321 TOTAL EQUITY 848,060 931,159 The notes on pages 10 to 36 form part of this condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2009 Attributable to equity shareholders of the Company Retained Capital Property profits/(acc- Non– Share Share Distributable redemption revaluation Exchange umulated controlling Total capital premium reserve reserve reserve reserve losses) Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 October 2007 21,995 659,916 52,333 976 187,065 – 54,645 976,930 49,983 1,026,913 Allotment of subscription shares 2,200 231,440 – – – – – 233,640 – 233,640 Share issuance costs – (4,216) – – – – – (4,216) – (4,216) Total comprehensive income for the period – – – – – – (79,709) (79,709) 5,943 (73,766) Dividend paid to shareholders of non-controlling interests – – – – – – – – (6,750) (6,750) At 31 March 2008 24,195 887,140 52,333 976 187,065 – (25,064) 1,126,645 49,176 1,175,821 At 1 January 2009 24,390 908,785 52,333 976 86,248 (4,235) (183,659) 884,838 46,321 931,159 Total comprehensive income for the period – – – – 2,765 1,131 (87,182) (83,286) 187 (83,099) At 30 June 2009 24,390 908,785 52,333 976 89,013 (3,104) (270,841) 801,552 46,508 848,060 The notes on pages 10 to 36 form part of this condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2009 Unaudited For the six months ended Notes 30/6/2009 31/3/2008 (Restated) HK$’000 HK$’000 Net cash generated from/(used in) operating activities 5,845 (432,085 ) Net cash used in investing activities (58,684 ) (60,887 ) Net cash generated from financing activities 33,227 371,965 Net decrease in cash and cash equivalents (19,612 ) (121,007 ) Cash and cash equivalents at beginning of period 16 66,675 200,719 Effect of foreign exchange rate changes (554 ) – Cash and cash equivalents at end of period 16 46,509 79,712 The notes on pages 10 to 36 form part of this condensed consolidated financial statements. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30 June 2009 1. Organisation and Principal Activities The Company was incorporated as an exempted company with limited liability in Bermuda on 27 May 2004 under the Companies Act 1981 of Bermuda and is listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The principal activity of the Company is investment holding. Pursuant to a special resolution passed by the shareholders of the Company at the Company’s annual general meeting on 26 May 2009, the English name of the Company has been changed from “Macau Success Limited” to “SUCCESS UNIVERSE GROUP LIMITED” and the new Chinese name “實德環球有限公司” has been adopted as the Company’s secondary name both effective from 27 May 2009. The Company has thereafter ceased to use the Chinese name “澳門實德有限公司” for identification purpose only. 2. Basis of Preparation (a) Statement of compliance The condensed consolidated financial statements for the six months ended 30 June 2009 have been prepared in accordance with the applicable disclosure provision of the Rules Governing the Listing of Securities on the Stock Exchange, including compliance with Hong Kong Accounting Standard 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 period ended 31 December 2008, except for the adoption of the new Hong Kong Financial Reporting Standards (“HKFRSs”) and Hong Kong Accounting Standards (“HKAS”) as disclosed in note 3 below. The condensed consolidated financial statements do not include all the information and disclosures required for an annual financial statements, and should be read in conjunction with the financial statements of the Group for the period ended 31 December 2008 as contained in the Company’s Annual Report 2008 (the “Annual Report 2008”). 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 are denominated in Hong Kong Dollar (“HK$”). Unless otherwise specifically stated, all amounts are presented in thousand. 2. Basis of Preparation (Continued) (b) Change of accounting period Effective from the period ended 31 December 2008, the Company changed its financial year end date from 30 September to 31 December, in order to in line with that of certain subsidiaries and associates of the Company and therefore facilitating the preparation of the Group’s consolidated financial statements. Accordingly, the current interim report covers the six months from 1 January 2009 to 30 June 2009, whereas the previous interim period represented the six months from 1 October 2007 to 31 March 2008. 3. Significant Accounting Policies As mentioned in the section headed “Management Discussion and Analysis” as contained in the Company's Annual Report 2008, the directors of the Company made a critical accounting judgement that all the risks and rewards of ownership of the 10.2% equity interest in World Fortune Limited (“World Fortune”), a subsidiary of the Company, had not been substantially transferred to Maruhan Corporation (“Maruhan”). Accordingly, the Group retains substantially all the risks and rewards of ownership of the 10.2% equity interest in World Fortune and therefore accounts for World Fortune as a wholly-owned subsidiary of the Company. Accordingly, the consideration received has been recognised as liabilities and classified under long-term payables in the consolidated statement of financial position. As a result, the net gain on partial disposal of a subsidiary in the amount of approximately HK$116,992,000 for the six months ended 31 March 2008 have been reclassified as long-term payables in the consolidated statement of financial position and the effects are to decrease the retained earnings as at 31 March 2008 by approximately HK$124,595,000 and the condensed consolidated income statement for the six months ended 31 March 2008 was restated accordingly. The Group has adopted, for the first time, the following new HKFRSs and HKASs which are effective for the Group’s financial year beginning on 1 January 2009. HKFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009) HKFRS 8 requires segment disclosure to be based on the way that the Group’s chief operating decision maker regards and manages the Group, with the amounts reported for each reportable segment being the measures reported to the Group’s chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters. This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Group’s financial statements into segments based on related products and services and on geographical areas. The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Group’s most senior executive management, and has resulted in additional reportable segments being identified and presented. As this is the first period in which the Group has presented segment information in accordance with HKFRS 8, additional explanation has been included in the interim financial report which explains the basis of preparation of the information (see note 4). Corresponding amounts have also been provided on a basis consistent with the revised segment information. 3. Significant Accounting Policies (Continued) HKAS 1 (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009) As a result of the adoption of HKAS 1 (revised 2007), details of changes in equity during the period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expense are presented in the consolidated income statement, if they are recognised as part of profit or loss for the period, or otherwise in a new primary statement, the consolidated statement of comprehensive income. The new format for the consolidated statement of comprehensive income and the consolidated statement of changes in equity has been adopted in this interim financial report and corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented. The adoption of the following new and revised standards, amendments and interpretations did not have any significant impact on the accounting policies, financial position or performance of the Group: HKAS 23 (Revised) Borrowing Costs HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligation Arising on Liquidation HKFRS 1 and HKAS 27 Cost of an Investment in a Subsidiary, Jointly (Amendments) Controlled Entity or Associate HKFRS 2 (Amendments) Vesting Conditions and Cancellations HKFRS 7 (Amendments) Improving Disclosures about Financial Instruments HK(IFRIC) – Int 13 Customer Loyalty Programmes HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation 3. Significant Accounting Policies (Continued) The Group has not early applied the new standards, amendments or interpretations that have been issued but are not yet effective. HKFRSs (Amendments) Amendments to HKFRS 5 as Part of the Improvements to HKFRSs Issued in 20081 HKFRSs (Amendments) Improvements to HKFRSs Issued in 20092 HKAS 27 (Revised 2008) Consolidated and Separate Financial Statements1 HKAS 39 (Amendments) Eligible Hedged Items1 HKFRS 1 (Amendments) Additional Exemptions for First-time Adopters3 HKFRS 2 (Amendments) Group Cash-settled Share-based Payment Transactions3 HKFRS 3 (Revised 2008) Business Combinations1 HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners1 HK(IFRIC) – Int 18 Transfers of Assets from Customers4 1 Effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate 3 Effective for annual periods beginning on or after 1 January 2010 4 Effective for transfers on or after 1 July 2009 HKAS 27 (Revised 2008) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary that do not result in loss of control of the subsidiary. Changes in the Group’s ownership interest that do not result in loss of control of the subsidiary will be accounted for as equity transactions. 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. 4. Segment Reporting The Group manages its businesses by business lines. On first-time adoption of HKFRS 8, “Operating Segments” and in a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has identified the following two reportable segments: – Cruise leasing and management business: the leasing of cruise and the provision of management services to the cruise. – Travel business: the provision of travel-related agency services. (a) Segment results and assets In accordance with HKFRS 8, segment information disclosed in this interim financial report has been prepared in a manner consistent with the information used by the Group’s most senior executive management for the purposes of assessing segment performance and allocating resources among segments. In this regard, the Group’s senior executive management monitors the results and assets attributable to each reportable segment on the following bases: Segment assets include non-current assets and current assets with the exception of interest in associates and certain assets unallocated to an individual reportable segment. Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments. The reportable segment profit is measured from “adjusted profit from operation” (“adjusted EBITDA”) which excluded those items not specifically attributed to an individual reportable segment, such as corporate administrative expenses. To arrive at reportable segment profit, the management additionally provided the segment information concerning interest income, finance costs and major non-cash items such as depreciation, amortisation and impairment losses derived from reportable segments. Inter-segment sales are priced with reference to prices charged to external parties for similar orders. Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance for the period is set out below: 4. Segment Reporting (Continued) (a) Segment results and assets (Continued) For the period ended 30 June 2009 Cruise leasing and management Travel Total HK$’000 HK$’000 HK$’000 Revenue from external customers 37,000 556,595 593,595 Inter-segment revenue – 268 268 Reportable segment revenue 37,000 556,863 593,863 Segment profit from operation (adjusted EBITDA) 5,854 322 6,176 Interest income 1 13 14 Finance cost – (347 ) (347 ) Depreciation and amortisation (3,528 ) (915 ) (4,443 ) Impairment losses on – intangible assets – (4,441 ) (4,441 ) – goodwill – (2,514 ) (2,514 ) Reportable segment profit/(loss) before taxation 2,327 (7,882 ) (5,555 ) Income tax – (29 ) (29 ) Reportable segment profit/(loss) after taxation 2,327 (7,911 ) (5,584 ) At 30 June 2009 Cruise leasing and management Travel Total HK$’000 HK$’000 HK$’000 Reportable segment assets 97,566 69,702 167,268 4. Segment Reporting (Continued) (a) Segment results and assets (Continued) For the period ended 31 March 2008 (Restated) Cruise leasing and management Travel Total HK$’000 HK$’000 HK$’000 Revenue from external customers 48,000 2,202 50,202 Inter-segment revenue – 405 405 Reportable segment revenue 48,000 2,607 50,607 Segment profit/(loss) from operation (adjusted EBITDA) 17,108 (317 ) 16,791 Interest income 22 11 33 Depreciation and amortisation (3,653 ) (7 ) (3,660 ) Reportable segment profit/(loss) before taxation 13,477 (313 ) 13,164 Income tax – – – Reportable segment profit/(loss) after taxation 13,477 (313 ) 13,164 At 31 December 2008 Cruise leasing and management Travel Total HK$’000 HK$’000 HK$’000 Reportable segment assets 95,394 72,175 167,569 4. Segment Reporting (Continued) (b) Reconciliation of reportable segment revenue, profit or loss and assets Unaudited For the six months ended 30/6/2009 31/3/2008 (Restated) HK$’000 HK$’000 Revenue Reportable segment revenue 593,863 50,607 Elimination of inter-segment revenue (268 ) (405 ) Consolidated turnover 593,595 50,202 (Loss)/profit Reportable segment (loss)/profit after taxation and derived from Group’s external customers (5,584 ) 13,164 Share of results of associates (59,256 ) (64,346 ) Unallocated corporate income 9,829 15,600 Depreciation and amortisation (1,506 ) (1,261 ) Finance costs (6,881 ) – Unallocated corporate expenses (23,835 ) (36,923 ) Consolidated loss after taxation (87,233 ) (73,766 ) Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Assets Reportable segment assets 167,268 167,569 Interest in associates 1,132,668 1,119,892 Unallocated corporate assets 94,555 131,486 Consolidated total assets 1,394,491 1,418,947 5. Loss Before Taxation Loss before taxation is arrived at after charging: (a) Finance costs Unaudited For the six months ended 30/6/2009 31/3/2008 HK$’000 HK$’000 Interest expenses on other borrowings wholly repayable within five years Effective interest on long-term payables 479 6,749 – – Total interest expenses on financial liabilities not at fair value through profit or loss 7,228 – (b) Staff costs Unaudited For the six months ended 30/6/2009 31/3/2008 HK$’000 HK$’000 Salaries, wages and other benefits (including directors’ emoluments) 30,735 19,859 Contributions to defined contribution retirement plan 378 373 31,113 20,232 5. Loss Before Taxation (Continued) (c) Other items Unaudited For the six months ended 30/6/2009 31/3/2008 HK$’000 HK$’000 Auditors’ remuneration – audit services 551 – – other services 325 295 Depreciation on owned fixed assets 5,702 4,921 Amortisation on intangible assets 247 – Operating lease rentals – properties 4,106 1,654 – plant and machinery 258 20 Impairment losses on – intangible assets * 4,441 – – goodwill * 2,514 – – interest in associates * 6,300 9,450 * These amounts are included in “other operating expenses” on the face of the condensed consolidated income statement. 6. Income Tax in the Consolidated Income Statement No Hong Kong profits tax, in which the subsidiaries operate, has been provided for the six months ended 30 June 2009 as the Group has no estimated assessable profits for the period (for the six months ended 31 March 2008: Nil). Taxation arising in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions. 7. Dividends The directors of the Company do not recommend the declaration of any interim dividend for the period (for the six months ended 31 March 2008: Nil). No dividend payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the period. 8. Loss Per Share (a) Basic loss per share The calculation of basic loss per share is based on the loss for the period attributable to equity shareholders of the Company of approximately HK$87,182,000 (for the six months ended 31 March 2008 (restated): approximately HK$79,709,000) and on the weighted average number of approximately 2,438,964,000 ordinary shares (for the six months ended 31 March 2008: approximately 2,389,410,000 ordinary shares) in issue during the period. (b) Diluted loss per share Diluted loss per share equals to the basic loss per share as there were no potential dilutive ordinary shares outstanding for the period presented. 9. Property, Plant and Equipment HK$’000 Net book value as at 31 December 2008 85,711 Additions 3,373 Disposals (58 ) Depreciation (5,702 ) Exchange alignment 203 Net book value as at 30 June 2009 (Unaudited) 83,527 SUCCESS UNIVERSE GROUP LIMITED 21 Interim Report 2009 10. Goodwill HK$’000 Cost At 1 October 2007 1,313 Acquisition of subsidiaries 7,019 At 31 December 2008 and 30 June 2009 (Unaudited) 8,332 Accumulated impairment losses At 1 October 2007 – Impairment loss (609 ) At 31 December 2008 (609 ) Impairment loss (2,514 ) At 30 June 2009 (Unaudited) (3,123 ) Carrying amount At 30 June 2009 (Unaudited) 5,209 At 31 December 2008 7,723 Goodwill is allocated to the Group’s cash-generating units (“CGUs”) identified according to business segment as follows: Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Cruise management CGU 1,313 1,313 Travel CGU 3,896 6,410 5,209 7,723 The discount rates reflect specific risk relating to the relevant segment. 10. Goodwill (Continued) The recoverable amount of the cash-generating unit (“CGU”) is determined on value in use calculations. These calculations use cash flow projections based on the financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. Key assumptions used for value in use calculations: Travel CGU Cruise management CGU 30/6/2009 31/12/2008 30/6/2009 31/12/2008 % % % % – Growth rate 3 4 Zero Zero – Discount rate 13 11.8 5 5 Management determined the budgeted operating profit margin based on past performance and its expectation for market development. The discount rates used are pre-tax and reflect specific risks relating to the relevant segment. The goodwill of approximately HK$7,019,000 was arising on the acquisition of 100% interest in Smart Class Enterprises Limited (“Smart Class”), which indirectly holds 80% equity interest in the Jade Travel Group (as defined in the sub-section headed “Results” under the section headed “Management Discussion and Analysis”, in July 2008. Based on the impairment tests performed, the carrying amount of the goodwill of approximately HK$3,896,000 allocated to the travel CGU has been impaired by approximately HK$3,123,000 as at 30 June 2009 (31 December 2008: approximately HK$609,000) because the market condition of the travel agent business still under depressed economy in the first half of 2009. The recoverable amount of the cruise management CGU is higher than its carrying amount based on value in use calculations. Accordingly, no impairment loss is recognised for the period (31 December 2008: Nil). Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cruise management CGU. SUCCESS UNIVERSE GROUP LIMITED 23 Interim Report 2009 11. Intangible Assets Trademark Client list Total HK$’000 HK$’000 HK$’000 Cost At 1 October 2007 – – – Acquisition of subsidiaries 33,044 9,238 42,282 Exchange alignment (5,301 ) (1,482 ) (6,783 ) At 31 December 2008 27,743 7,756 35,499 Exchange alignment 1,367 382 1,749 At 30 June 2009 (Unaudited) 29,110 8,138 37,248 Accumulated amortisation and impairment losses At 1 October 2007 – – – Charge for the period – (215 ) (215 ) Impairment loss – (676 ) (676 ) At 31 December 2008 – (891 ) (891 ) Charge for the period – (247 ) (247 ) Impairment loss (3,490 ) (951 ) (4,441 ) Exchange alignment – (45 ) (45 ) At 30 June 2009 (Unaudited) (3,490 ) (2,134 ) (5,624 ) Carrying amount At 30 June 2009 (Unaudited) 25,620 6,004 31,624 At 31 December 2008 27,743 6,865 34,608 The trademark and client list were purchased as part of the business combination of Smart Class. The amortisation charge for the period is included in the “administrative expenses” of consolidated income statement. The Group’s titles to these intangible assets are not restricted and they are not pledged as securities for liabilities. 11. Intangible Assets (Continued) Trademark In accordance with HKAS 36 “Impairment of Assets”, the Group completed its interim impairment test for the trademark by comparing its recoverable amount to its carrying amount as at 30 June 2009. The Group has conducted a valuation of the trademark based on the value in use calculations. With reference to the valuations carried out by Roma Appraisal Limited (“Roma”), an independent professional valuer, who has among their staff, fellow members of the Hong Kong Institute of Surveyors, the recoverable amount of trademark has been impaired by approximately HK$3,490,000 because the market condition of the travel agent business still under depressed economy in the first half of 2009. The valuation of the trademark uses cash flow projections based on financial estimates covering a five-year period, the expected sales deriving from the trademark in the travel CGU and a discount rate of 14.9%. The cash flows beyond the five-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long term average growth rate for travel markets in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. Client list The directors of the Company assessed that the client list having 15 years of useful lives from the date of acquisition. The Group has completed its interim impairment test for the client list by comparing the recoverable amount of the client list to its carrying amount as at 30 June 2009. The Group has conducted a valuation of the client list based on the value in use calculations. With reference to the valuations carried out by Roma the carrying amount of client list of approximately HK$6,004,000 has been impaired by approximately HK$951,000 because the market condition of the travel agent business still under depressed economy in the first half of 2009. The valuation of the client list is based on the contributory charge method and uses cash flow projections based on financial estimates covering a five-year period, the expected sales deriving from the client list in the travel CGU and a discount rate of 15%. The cash flows beyond the five-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long-term average growth rate for travel markets in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. 12. Interest in Associates Group Unauidted Audited At At Notes 30/6/2009 31/12/2008 HK$’000 HK$’000 Share of net assets Deemed capital contributions Goodwill 21(b) 98,143 84,400 19,409 154,634 63,000 19,409 Amounts due from associates (c) 201,952 955,916 237,043 901,749 Less: Impairment loss (d) 1,157,868 (25,200 ) 1,138,792 (18,900 ) 1,132,668 1,119,892 (a) The following list contains only the particulars of associates, all of which are unlisted corporate entities, which principally affected the results or assets of the Group: Particulars Proportion of ownership interest Place of of issued Group’s Held by incorporation/ and paid effective the Held by a Name of associate operation up capital interest Company subsidiary Principal activities Pier 16 – Macau 2 shares of 49% – 49% Provision of Entertainment MOP24,000 management services Group Corporation and MOP1,000 for casino operations Limited respectively Pier 16 – Macau/ 2 shares of 49% – 49% Hotel operations Management Limited Hong Kong MOP24,000 and MOP1,000 respectively Pier 16 – Property Macau 100,000 shares Development Limited of MOP100 each 49% – 49% Property holding (“Pier 16 – Property Development”) 12. Interest in Associates (Continued) (b) Goodwill Because goodwill included in the carrying amount of the interest in associates not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing in HKAS 36 “Impairment of Assets”. Instead, the entire carrying amount of the interest in associates is tested for impairment as set out in note 12(d) below. (c) The amounts due from associates are unsecured, interest free and have no fixed terms of repayment. Their carrying amounts are not materially different from their fair value. (d) Impairment test for interest in associates The Group completed its interim impairment test for interest in associates by comparing the recoverable amount of the interest in associates to its carrying amount as at 30 June 2009. The Group has conducted a valuation of the interest in associate as at 30 June 2009 based on the value in use calculations. The carrying value of the interest in associates is written down by HK$25.2 million (31 December 2008: HK$18.9 million). This valuation uses cash flow projections based on financial estimates covering a five-year period, and a discount rate of 13%. The cash flows beyond the five-year period are extrapolated using a steady 4% growth rate. This growth rate does not exceed the long term average growth rate for the casino and hotel industries in which the Group operates. Management has considered the above assumptions and valuation and also taken into account the business plan going forward. (e) The following is the summary of aggregate amounts of assets, liabilities, revenues and the results of the Company’s associates: At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Assets Liabilities Equity 3,500,503 3,305,855 194,648 3,654,950 3,339,370 315,580 Period ended 30/6/2009 HK$’000 Period ended 31/3/2008 HK$’000 Revenues 169,228 37,418 Loss (120,931 ) (131,318 ) 13. Deposit for Acquisition of Properties On 28 February 2008, Jade Travel Ltd., a 80% owned subsidiary of the Company, entered into a sale and purchase agreement to purchase the properties located in Richmond Hill, Ontario, Canada for a total consideration of approximately CAD2,364,000 (equivalent to approximately HK$16,019,000). The properties will be used as office by the subsidiary of the Company. As at 30 June 2009, deposits of approximately HK$2,402,000 had been paid and the outstanding balance of approximately HK$13,617,000 was disclosed as a capital commitment in note 24. The purchase of the said properties will be completed on or before 31 October 2009. 14. Deposit for Acquisition of a Company This represented a deposit of HK$60 million paid to上海永德投資有限公司 (“上海永德”), an independent third party, upon signing of a letter of intent and a confidentiality agreement on 10 January 2008 for the proposed acquisition by a wholly-owned subsidiary of the Company of at least 10% and not more than 51% of the entire issued share capital of 重慶林科物業發展有限公司, a 90% owned subsidiary of 上海永德. A letter agreement has been signed on 31 March 2009 to further extend the long stop date for entering into a formal agreement to 30 September 2009. 15. Trade and Other Receivables Included in trade and other receivables, the ageing analysis for trade debtors is as follows: Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Current 7,297 14,979 31 to 60 days overdue 922 6,239 61 to 90 days overdue 1,136 178 Over 90 days overdue 368 335 Trade receivables 9,723 21,731 Other receivables 1,782 2,790 Prepayments and deposits 9,575 6,662 21,080 31,183 All of the trade and other receivables are expected to be recovered within one year. The Group normally allows a credit period of 60 days to customers of cruise leasing and management business (31 December 2008: 60 days) and 30 days to customers of travel business (31 December 2008: 30 days). 16. Pledged Bank Deposits / Bank Balances Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Cash and bank balances 20,862 59,106 Non-pledged bank deposits 25,647 7,569 Pledged bank deposits 8,062 6,762 54,571 73,437 Less: Pledged bank deposits (8,062 ) (6,762 ) Cash and cash equivalents in the statement of cash flows 46,509 66,675 17. Trade and Other Payables Included in trade and other payables, the ageing analysis for trade creditors is as follows: Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Current 8,667 4,918 31 to 60 days 600 881 61 to 90 days 280 444 Over 90 days 657 1,016 Trade payables 10,204 7,259 Accrued charges and other payables 13,746 16,198 Financial liabilities measured at amortised cost 23,950 23,457 All of the trade and other payables are expected to be settled within one year. SUCCESS UNIVERSE GROUP LIMITED 29 Interim Report 2009 18. Profit Guarantee Liabilities HK$’000 Carrying amount At 1 October 2007 Profit guarantee issued to SBI Macau Holdings Limited (“SBI Macau”) during the period At 31 December 2008 Distribution of the profit guarantee At 30 June 2009 (Unaudited) – 45,500 45,500 (3,792 ) 41,708 Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Current liabilities 9,100 12,892 Non-current liabilities 32,608 32,608 41,708 45,500 As mentioned in note 28 of the Annual Report 2008, in August 2008, Favor Jumbo Limited (“Favor Jumbo”), a wholly-owned subsidiary of the Company, guaranteed that SBI Macau shall be entitled to a return of not less than HK$9.1 million (“Guaranteed Amount”) for each full fiscal year for a period of sixty successive months immediately after the date of completion of the Golden Sun Disposal (as defined in note 5(b)(iii) of the Annual Report 2008) (“Relevant Period”). In the event the amounts received by SBI Macau from the distribution of the profits of Golden Sun Profits Limited (“Golden Sun”), a subsidiary of the Company, for any fiscal year during the Relevant Period falls short (“Shortfall”) of the higher of the return (“Return”) as stipulated in the Golden Sun Shareholders’ Agreement (as defined in note 5(b)(iii) of the Annual Report 2008) or the Guaranteed Amount (pro-rated, if necessary), Favor Jumbo shall pay to SBI Macau such Shortfall within six months from the end of the relevant fiscal year during the Relevant Period. 18. Profit Guarantee Liabilities (Continued) If the aggregate of the Return and the Shortfall payments received by SBI Macau from Golden Sun and/or Favor Jumbo in respect of the Relevant Period exceeds the total Guaranteed Amount (pro-rated, if necessary) for the Relevant Period (the “Excess”), SBI Macau shall refund and pay to Favor Jumbo the lesser of (a) the aggregate amount of the Shortfall paid by Favor Jumbo to SBI Macau during the Relevant Period; and (b) the Excess, within three months upon notice from Favor Jumbo the amount payable by SBI Macau after the expiry of the Relevant Period. 19. Loans Payables Notes Unauidted At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Loans from shareholders of non-controlling interests – Mrs. Yung Yuen Ping Kwok – SABC Holdings Ltd. (i) (ii) 2,358 6,791 2,247 6,472 Loan from Maruhan Loan from SBI Macau (iii) (iv) 9,149 124,749 39,486 8,719 119,752 39,486 173,384 167,957 Notes: (i) Mrs. Yung Yuen Ping Kwok is a shareholder of non-controlling interests of a 80% owned subsidiary of the Company, namely 665127 British Columbia Ltd.. The loan was arising upon the acquisition of Smart Class and its subsidiaries. (ii) SABC Holdings Ltd. is a shareholder of non-controlling interests of a 80% owned subsidiary of the Company, namely 665127 British Columbia Ltd.. The loan was arising upon the acquisition of Smart Class and its subsidiaries. (iii) As mentioned in note 29 of the Annual Report 2008, the amount represented the shareholder’s loan of approximately HK$66,468,000 due by World Fortune to Golden Sun taken up by Maruhan upon the completion of the World Fortune Disposal (as defined in note 5(b)(ii) of the Annual Report 2008) and further shareholder’s loan of approximately HK$58,281,000 (31 December 2008: approximately HK$53,284,000) advanced by Maruhan to World Fortune pursuant to the World Fortune Shareholders’ Agreement (as defined in note 5(b)(ii) of the Annual Report 2008). (iv) As mentioned in note 5(b)(iii) of the Annual Report 2008, pursuant to a deed of assignment dated 8 August 2008, Favor Jumbo assigned the loan of approximately HK$39,486,000 due by Golden Sun to SBI Macau. All the above loans are unsecured, interest free and not expected to be settled within one year. 20. Long-term Payables Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Present value of liabilities of – Maruhan Put Option 142,035 142,035 – SBI Macau Put Option 51,762 45,013 193,797 187,048 As mentioned in note 5(b) of the Annual Report 2008, the directors of the Company considered that after the completion of the Golden Sun Disposal and the World Fortune Disposal, the Group still retains substantially all the risks and rewards of the Sale Shares and the World Fortune Sale Shares. Therefore, the Group accounts for Golden Sun and World Fortune as wholly-owned subsidiaries of the Company. The consideration received has been recognised as liabilities and classified under profit guarantee liabilities (note 18), the loans payables (note 19) and long-term payables (note 20) in the consolidated statement of financial position. As the Group does not have the unconditional rights to avoid settlement under both the Maruhan Put Option and the SBI Macau Put Option (as defined in note 5(b) of the Annual Report 2008), the Group has to recognise the relevant financial liabilities at the amount of the present value of the estimated future cash outflow when it is required to acquire the Sale Shares and the World Fortune Sale Shares. 21. Financial Guarantee Contract HK$’000 Carrying amount At 1 October 2007 63,000 Amortisation for the period (18,900 ) At 31 December 2008 44,100 At 1 January 2009 44,100 Provision for financial guarantee contract 21,400 Amortisation credit to income statement for the period (6,300 ) At 30 June 2009 (Unaudited) 59,200 21. Financial Guarantee Contract (Continued) Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Current liabilities 19,733 12,600 Non-current liabilities 39,467 31,500 59,200 44,100 As at 30 June 2009, the Company gave a corporate guarantee to a bank in respect of syndicated loan facilities of HK$1,600 million (31 December 2008: HK$1,600 million) granted to an associate. The maximum guarantee amount borne by the Company was HK$860 million (31 December 2008: HK$860 million). The total loan outstanding for the syndicated loan facilities of the associate as at 30 June 2009 was HK$1,160 million (31 December 2008: HK$1,260 million). Based on the valuation performed by an independent firm of valuer, the directors of the Company considered that the fair value of the financial guarantee contract was approximately HK$59,200,000 as at 30 June 2009. 22. Share Capital 22. Share Capital (Continued) Number Nominal Notes of shares value ’000 HK$’000 Authorised: Ordinary shares of HK$0.01 each At 1 October 2007 and 31 December 2008 160,000,000 1,600,000 At 1 January 2009 and 30 June 2009 160,000,000 1,600,000 Issued and fully paid: Ordinary shares of HK$0.01 each At 1 October 2007 2,199,464 21,995 Allotment of subscription shares and consideration shares (a) (b) 239,500 2,395 At 31 December 2008 and 30 June 2009 2,438,964 24,390 Notes: The movement in the issued share capital of the Company were as follows: (a) 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. (b) On 5 May 2008, the Company as purchaser entered into an agreement for the acquisition of the entire issued share capital of Smart Class at an agreed consideration of CAD2.9 million (equivalent to approximately HK$22.6 million). The consideration was settled by 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$21.8 million, which represented the amount of consideration settled for the acquisition. 23. Related Party Transactions (a) The Group had the following transactions with the related parties during the period: Unaudited For the six months ended Notes 30/6/2009 31/3/2008 HK$’000 HK$’000 Travel service income received and receivable from – an associate – key management (i) (ii)(i) (ii) 13 – 792 136 Management fee income received and receivable from – associates (i) (iii) 3,437 2,112 Interest expenses paid and payable to a related company (iv) 347 – Interest expenses paid and payable to a director and controlling shareholder (v) 132 – 23. Related Party Transactions (Continued) (a) (Continued) Notes: (i) Mr. Yeung Hoi Sing, Sonny (“Mr. Yeung”), a director of the Company, was the director of the associates during the six months periods ended 31 March 2008 and 30 June 2009. The former director of the Company, Mr. Lee Siu Cheung (“Mr. Lee”) resigned as the director of the Company and the said associates with effect from 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 and continued to hold office since 1 June 2008. (ii) The travel agent service fee was charged according to prices and conditions comparable to those offered to other customers. (iii) The management fee was charged on actual cost incurred by the Group for provision of management and technical services. (iv) The interest was charged at 4% per annum on the amount due to a related company, Star Spangle Corporation which is owned by Mr. Yeung. As at 30 June 2009, the outstanding balance amounted to approximately HK$18,800,000 (31 December 2008: approximately HK$17,574,000), which is unsecured, bearing interest at the rate of 4% per annum and not expected to be settled within one year. (v) On 1 December 2008, the Company as borrower and Mr. Yeung, a director and a controlling shareholder of the Company, as lender entered into a letter agreement regarding HK$200 million unsecured term loan facility (the “Loan Facility”). 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. On 14 April 2009, the Company and Mr. Yeung also entered into a letter agreement to increase the principal amount of the Loan Facility up to HK$290 million. In addition, Mr. Yeung undertook not to demand early repayment of the loan and all other sums owing to Mr. Yeung under the revised Loan Facility before 30 June 2010 (the ”Final Repayment Date”). Besides, on 25 June 2009, the Company and Mr. Yeung entered into another letter agreement to extend the Final Repayment Date of the said loan to 30 June 2011. As at 30 June 2009, the outstanding loan amounted to HK$32,500,000 (31 December 2008: Nil). In the opinion of the directors of the Company, the borrowing of the said loan from Mr. Yeung was for the benefit of the Company and on normal commercial terms where no security over the assets of the Company was granted. (b) The outstanding balances with related parties at 30 June 2009 and 31 December 2008 are as follows: Notes Unaudited At 30/6/2009 HK$’000 Audited At 31/12/2008 HK$’000 Amounts due from associates 12 955,916 901,749 Due to a related company 23(a)(iv) 18,800 17,574 Loans from a director and controlling shareholder 23(a)(v) 32,500 – 23. Related Party Transactions (Continued) (c) Key management personnel compensation Compensation for key management personnel, including amounts paid to the Company’s directors is as follows: Unaudited For the six months ended Notes 30/6/2009 31/3/2008 HK$’000 HK$’000 Directors’ fee Salaries, other allowances and benefits in kind Retirement scheme contributions 210 2,091 30 200 1,945 30 Total emoluments are included in “staff costs” 5(b) 2,331 2,175 24. Commitments (a) Capital commitments outstanding at 30 June 2009 not provided for in the financial statements were as follows: Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Authorised but not contracted for – – Contracted but not provided for – acquisition of properties 13,617 12,975 – acquisition of plant and machinery – 2,602 – shareholder loan to an associate 9,000 – 22,617 15,577 (b) At 30 June 2009, the total future minimum lease payments under non-cancellable operating leases are payable as follows: Unaudited Audited At At 30/6/2009 31/12/2008 HK$’000 HK$’000 Within one year 5,165 2,001 In the second to fifth years, inclusive 4,713 4,445 9,878 6,446 The Group lease certain office premises under operating leases. The leases typically run for periods ranging from one to two years. None of the leases includes contingent rentals. 25. Contingent Liabilities As at 30 June 2009, the Group gave the following undertakings: (a) Syndicated loan facilities granted to an associate held by a subsidiary of the Company was HK$1,600 million (31 December 2008: HK$1,600 million). The maximum guarantee amount borne by the Company was HK$860 million (31 December 2008: HK$860 million) (note 21). The total loan outstanding for the syndicated loan facilities of the associate as at 30 June 2009 was HK$1,160 million (31 December 2008: HK$1,260 million); and (b) The Company issued a guarantee of approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million) in favor of a bank for banking facilities of approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million) granted to a subsidiary of the Company. The maximum guarantee amount borne by the Company was approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million). The Company’s directors do not consider that a claim will probably be made against the Company. 26. Pledge of Assets (a) As at 30 June 2009, the Group pledged the time deposits of approximately HK$8.1 million (31 December 2008: approximately HK$6.8 million) to certain banks for the issuance of several bank guarantees and standby letter of credit facility of approximately HK$9.8 million (31 December 2008: approximately HK$8.4 million) for the operations of the Group. (b) As at 30 June 2009, World Fortune pledged all (31 December 2008: 100%) of its shares in Pier 16 – Property Development to a bank, for and on behalf of the syndicate of lenders, in respect of syndicated loan facilities granted to Pier 16 – Property Development. 27. Seasonality The turnover of the Group’s travel business is subject to seasonal fluctuations, with peak demand during the holiday season whereas the Group’s cruise leasing and management business is subject to a relatively lower degree of seasonal volatility. REPORT ON REVIEW OF INTERIM FINANCIAL REPORT TO THE BOARD OF DIRECTORS OF SUCCESS UNIVERSE GROUP LIMITED (Incorporated in Bermuda with limited liability) Introduction We have reviewed the interim financial report set out on pages 4 to 36 which comprise the condensed consolidated statement of financial position of Success Universe Group Limited (the “Company”) and its subsidiaries (together the “Group”) as at 30 June 2009 and the related condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, a summary of significant accounting policies and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited requires the preparation of an 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. Scope of Review We conducted our review in accordance with Hong Kong Standard on Review Engagement 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 as at 30 June 2009 is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. CCIF CPA Limited Certified Public Accountants Hong Kong, 16 September 2009 Alvin Yeung Sik Hung Practising Certificate Number P05206 MANAGEMENT DISCUSSION AND ANALYSIS Results The operating environment in the first six months of 2009 remained challenging for the Group. The markets in which the Group operates continued to be impacted in varying degrees by the financial crisis that broke out last year. Nevertheless, Ponte 16, the Group’s flagship project in Macau, managed to deliver an improving operating performance during the period under review. The Group’s travel business, however, was adversely affected by the economic downturn in its core market of North America. For the period under review, the Group’s turnover was approximately HK$593.6 million, compared with approximately HK$50.2 million in the last corresponding period. Gross profit was approximately HK$53.3 million (2008: approximately HK$47.8 million). Loss attributable to equity shareholders of the Company amounted to approximately HK$87.2 million, compared with loss attributable to equity shareholders of approximately HK$79.7 million (restated) in 2008. Loss per share was 3.57 HK cents for the reporting period (loss per share in 2008 (restated): 3.34 HK cents). Turnover from travel business surged approximately HK$554.4 million from the last corresponding period on acquisition of 80% equity interest in certain companies incorporated in Canada and the United States of America (the “US”) which conduct the business of providing travel service therein (the “Jade Travel Group”) on 31 July 2008. The loss during the reporting period was due to lower profit contribution from the cruise business as a result of lower leasing income. The Group’s shared loss of the associates relating to Ponte 16 (the “Associates”) during the period under review amounted to approximately HK$59.3 million (2008: approximately HK$64.3 million), which was due to the high depreciation and amortisation charges during the period. However, Ponte 16 gradually picked up its business and opportunities from casino to deliver a positive EBITDA* during the period. Interim Dividend The directors of the Company (“Director(s)”) do not recommend the declaration of any interim dividend for the six months ended 30 June 2009 (for the six months ended 31 March 2008: Nil). Review of Operations Travel Business During the period under review, turnover from the travel business increased to approximately HK$556.6 million (2008: approximately HK$2.2 million). Segment loss from this business was approximately HK$7.9 million (2008: approximately HK$0.3 million), which was mainly due to impairment of intangible assets and goodwill. Still, the operating environment was challenging as a result of the global spread of the H1N1 virus, particularly in North America from where most of the Jade Travel Group’s business originates. That and a depressed economy in the US have discouraged travels among individual leisure travelers and corporate incentive trips. * EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortisation Review of Operations (Continued) Travel Business (Continued) Despite the challenges ahead, the Group remains optimistic about the long-term prospect of its business model, which leverages the strength of its travel business to attract high-end customers worldwide to Ponte 16 and the cruise operations. Cruise Business During the period under review, turnover from the cruise ship, M.V. Macau Success (in which the Group has a 55% interest), dropped to HK$37.0 million (2008: HK$48.0 million) as a result of lower leasing income, which accounted for 6.23% of the Group’s total turnover. Segment profit from this business decreased by 83% to approximately HK$2.3 million, compared with approximately HK$13.5 million for the six months ended 31 March 2008. Segment profit was also down as a result of lower leasing income. Investment Project – Ponte 16 Featuring a unique European theme infused with Chinese elements, Ponte 16 is a world-class integrated casino-entertainment resort located in the Inner Harbour of Macau. It comprises a five-star luxury hotel – Sofitel Macau At Ponte 16, a casino, a shopping arcade as well as food and beverage facilities. Ponte 16 is situated at the original site of Pier 16, which has been in operations since the early 20th century and is now one of the Macau’s historical landmarks. The only resort situated in Macau’s Inner Harbour, Ponte 16 lies in close proximity to the Gongbei bridge border crossing and is separated from Wanzai, Zhuhai by just a five-minute ferry ride, making it conveniently accessible to tourists. For the six months ended 30 June 2009, the number of visitors to Macau totaled approximately 10.4 million, representing a decrease by approximately 11% compared to the first half year of 2008. The tourism industry in Macau has been under pressure since May last year when The Central People’s Government of the People’s Republic of China (the “Chinese Government”) imposed visa restrictions on Mainlanders traveling to Macau. The depressed global economy has also added considerable pressure to the industry. In spite of the challenging operating environment, Ponte 16 managed to sustain continued improvement in both its casino and hotel operations during the period under review. Number of visitors per day to Ponte 16 since its opening averaged around 10,000. The casino and Sofitel Macau At Ponte 16 respectively commenced operations in February and August last year. During the period under review, the executive team at Ponte 16, with its business network and experience, has helped the casino to achieve steady performance in the average daily mass drop, which amounted to approximately HK$13 million. The business performance of Ponte 16 steadily improved in addition to the opening of high-limit betting area with eight tables in September 2008. With a spacious outdoor piazza capable of holding 20,000 people, Ponte 16 is designed to be a site for celebrations on festive occasions. Its distinct setting and location make it an ideal venue for events such as countdowns, music concerts and fairs, which help boosting the number of visitors. Review of Operations (Continued) Investment Project – Ponte 16 (Continued) Key performance indicators such as the number of visitors to casino at Ponte 16 and the occupancy rate have made steady improvement although Macau’s visitor numbers dropped in the reporting period. Despite the unfavourable operating environment, Ponte 16 successfully established itself as a premier resort destination thanks to the joint efforts of Ponte 16 and the Accor Group, which also manages Sofitel Macau At Ponte 16. Ponte 16 has been named “Premier Service Macau Resort” by a Hong Kong leisure magazine in 2009. Financial Review Liquidity, Financial Resources and Gearing As at 30 June 2009, the Group had net current assets of approximately HK$21.8 million (31 December 2008: approximately HK$56.4 million) and net assets of approximately HK$848.1 million (31 December 2008: approximately HK$931.2 million). The Company entered into a HK$200 million term loan facility agreement with Mr. Yeung Hoi Sing, Sonny (“Mr. Yeung”), a Director and a controlling shareholder of the Company, on 1 December 2008. The move is expected to strengthen the Group’s capital base, improve its liquidity and cash flows, and sustain the Group as a going concern. The loan is unsecured and charged with interest at the prime rate quoted for Hong Kong dollars loans by The Hongkong and Shanghai Banking Corporation Limited. On 14 April 2009, the Company and Mr. Yeung entered into a letter agreement to increase the principal amount of the credit facility to up to HK$290 million. In addition, Mr. Yeung undertook not to demand early repayment of the loan and all other sums owing to Mr. Yeung under the revised credit facility before 30 June 2010 (the “Final Repayment Date”). Besides, on 25 June 2009, the Company also entered into another letter agreement with Mr. Yeung to extend the Final Repayment Date to 30 June 2011. During the period under review, the Company had utilised the credit facility in the amount of HK$32.5 million (31 December 2008: Nil). Apart from the aforesaid loan from Mr. Yeung, as at 30 June 2009, the Group had interest-bearing loan from a related company of approximately HK$18.8 million (31 December 2008: approximately HK$17.6 million). The loan is unsecured and charged with interest at the rate of 4% per annum and has no fixed terms of repayment. As at 30 June 2009, there were loans from shareholders of non-controlling interests of approximately HK$9.1 million (31 December 2008: approximately HK$8.7 million) and other loans payables of approximately HK$164.2 million (31 December 2008: approximately HK$159.2 million). The loans are interest-free, unsecured and will not be repaid within the next twelve months. Total equity attributable to equity shareholders of the Company as at 30 June 2009 was approximately HK$801.6 million (31 December 2008: approximately HK$884.8 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 6.40% as at 30 June 2009 (31 December 2008: 1.99%). Financial Review (Continued) Provision of Further Financial Assistance Reference was made to the circular dated 8 May 2009 issued by the Company to its shareholders, an additional shareholders’ loan in the amount of approximately HK$430 million mainly to finance the construction cost and the repayment on the bank loan by Pier 16 – Property Development Limited (“Pier 16 – Property Development”) is required from its shareholders for the period up to 31 December 2009, of which 49% sharing by a subsidiary of the Company, World Fortune Limited (“World Fortune”), would be approximately HK$210.7 million (“Further Financial Assistance”). Approved by the Board on 16 April 2009, and by the shareholders at the special general meeting of the Company held on 26 May 2009, such provision of Further Financial Assistance will be financed by the Company’s internal resources and/or external borrowings. Pledge of Assets As at 30 June 2009, the Group pledged the time deposits of approximately HK$8.1 million (31 December 2008: approximately HK$6.8 million) to certain banks for the issuance of several bank guarantees and standby letter of credit facility of approximately HK$9.8 million (31 December 2008: approximately HK$8.4 million) for the operations of the Group. As at 30 June 2009, World Fortune pledged all (31 December 2008: 100%) of its shares in Pier 16 – Property Development to a bank, for and on behalf of the syndicate of lenders, in respect of syndicated loan facilities granted to Pier 16 – Property Development. Contingent Liabilities As at 30 June 2009, the Group gave the following undertakings: (a) Syndicated loan facilities granted to an associate held by a subsidiary of the Company was HK$1,600 million (31 December 2008: HK$1,600 million). The maximum guarantee amount borne by the Company was HK$860 million (31 December 2008: HK$860 million). The total loan outstanding for the syndicated loan facilities of the associate at 30 June 2009 was HK$1,160 million (31 December 2008: HK$1,260 million); and (b) The Company issued a guarantee of approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million) in favor of a bank for banking facilities of approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million), granted to a subsidiary of the Company. The maximum guarantee amount borne by the Company was approximately HK$8.1 million (31 December 2008: approximately HK$7.7 million). The Directors do not consider that a claim will probably be made against the Company. Human Resources As at 30 June 2009, the Group had a total of 420 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. Change of the Company’s Name To reflect the Group’s global approach and the expansion of its business activities which span from Asia to North America, the English name of the Company has been changed from “Macau Success Limited” to “SUCCESS UNIVERSE GROUP LIMITED” and the new Chinese name “實德環球有限公司” has been adopted as the Company’s secondary name both effective from 27 May 2009. The Company has thereafter ceased to use the Chinese name “澳門實德有限公司” for identification purpose. The new logo of the Company has also been adopted to reflect the said change of the Company’s name. The stock short name for trading in the shares on The Stock Exchange of Hong Kong Limited has been changed from “MACAU SUCCESS” to “SUCCESSUNIVERSE” in English and from “澳門實德” to “實德環球” in Chinese with effect from 29 June 2009. Prospects Looking forward, the Group is cautiously optimistic about the global economic environment in view of the following recent developments in the Asia Pacific region: an upward revision of China’s GDP growth by the World Bank, a relaxation in cross border travel restrictions by the Chinese Government, the pending issuance of gaming licences in Japan and Taiwan, plus initiatives from Macau Tourism Board on subsidising the gaming and entertainment industry. Since the launch of the casino operations in February 2008 and the opening of its high-limit betting area in September the same year, Ponte 16 has kept a steady average daily mass drop. Together with the launch of its VIP Halls in the third quarter of this year, the Group expects the performance of the casino operations of Ponte 16 to improve further on larger numbers of high-rollers. The operating margin of the cruise business continued to be influenced by fuel oil and operating costs during the period. To ensure operating efficiency, the Group will continue to monitor closely the macro environment and operating costs. For the fifteen months ended 31 December 2008, the Group’s travel business benefited from a network expansion in North America. Although business contribution from the Jade Travel Group during the period under review was less than expected as a result of the outbreak of the H1N1 virus, the management believes the expanded network is in the long-run beneficial to the Group’s tourist and entertainment-related businesses as it provides the Group with a more diverse customer base. A range of marketing programmes are underway to help unleashing the synergies between Ponte 16 and the Group’s travel business, and promote their unique advantages. The Group is committed to developing gaming and entertainment-related businesses in the Asia Pacific region. Leveraging its strategic partnerships with Maruhan Corporation and SBI Holdings, Inc., the Group is ready to enter Japan and Taiwan gaming markets pending the issuance of gaming licences. Although the operating environment in the first half of 2009 was challenging, the management believes the solid foundation that the Group has created for its business in the preceding years will help position the Group for opportunities that lie ahead when the market recovers. Moreover, the management will remain alert to any changes in the wider economy and adjust its business strategies accordingly. DISCLOSURE OF INTERESTS Directors’ and Chief Executive’s Interests in Securities As at 30 June 2009, 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 June 2009, 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. Share Option Scheme and Directors’ 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 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 30 June 2009. 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. Substantial Shareholders’ Interests in Securities As at 30 June 2009, 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 Name of Approximate substantial Long position/ Number of percentage of shareholder Short position Capacity Shares held shareholding % Silver Rich Macau Long position Beneficial 1,010,953,432 41.45 Development Limited owner Trustcorp Limited Long position Trustee 1,010,953,432 41.45 (Note 1) Newcorp Ltd. Long position Interest of 1,010,953,432 41.45 (Note 1) controlled corporation Ms. Liu Siu Lam, Marian Long position Interest of 1,010,953,432 41.45 (Note 2) spouse Maruhan Corporation Long position Beneficial 440,000,000 18.19 owner 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.. Accordingly, each of Trustcorp Limited and Newcorp Ltd. was deemed to be interested in 1,010,953,432 Shares held by Silver Rich Macau Development Limited. 2. 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 June 2009, no other person (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the Shares and underlying Shares which were recorded in the register required to be kept by the Company under Section 336 of the SFO. DISCLOSURE UNDER RULES 13.20 AND 13.22 OF THE LISTING RULES Based on the disclosure obligations under Rules 13.20 and 13.22 of the Listing Rules, the financial assistance, which was made by the Group by way of the shareholder’s loan provided by World Fortune Limited (“World Fortune”), a subsidiary of the Company, and a corporate guarantee given by the Company in respect of the payment obligation of Pier 16 – Property Development Limited (“Pier 16 – Property Development”, a 49%-owned associate of World Fortune) under syndicated loan facilities granted to Pier 16 – Property Development (the “Financial Assistance”), continued to exist as at 30 June 2009. Pier 16 – Property Development is principally engaged in the property holding and, through its subsidiaries, operating Ponte 16, being a world-class integrated casino-entertainment resort located in Macau. The Financial Assistance is mainly used for the development and operation of Ponte 16. The amounts of the Financial Assistance as at 30 June 2009 were set out below: Aggregate Shareholder’s Corporate Financial Name of associate loan guarantee Assistance HK$’million HK$’million HK$’million Pier 16 – Property Development 949.5 860.0 1,809.5 The shareholder’s loan provided by World Fortune is unsecured, interest-free and has no fixed term of repayment. Further details are set out in notes 12 and 21 to the condensed consolidated financial statements. Set out below is a combined balance sheet of Pier 16 – Property Development and the Group’s attributable interests in this associate according to its management account for the period ended 30 June 2009: Group’s Combined attributable balance sheet interests HK$’000 HK$’000 Non-current assets 2,434,460 1,192,885 Current assets 410,304 201,049 Current liabilities 448,711 219,869 Non-current liabilities 2,858,289 1,400,562 PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES During the six months ended 30 June 2009, 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 six months ended 30 June 2009. 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 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 six months ended 30 June 2009. 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 INTERIM RESULTS The unaudited interim results for the six months ended 30 June 2009 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 Ma Ho Man, Hoffman Deputy Chairman Hong Kong, 16 September 2009