First Tractor Company Limited — Proxy Solicitation & Information Statement 2009

Sep 28, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the actions to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Galaxy Entertainment Group Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

GALAXY ENTERTAINMENT GROUP LIMITED

銀 河 娛 樂 集 團 有 限 公 司

(incorporated in Hong Kong with limited liability)

(Stock Code: 27)

MAJOR TRANSACTION

ACQUISITION OF LAND IN COTAI, MACAU

29 September 2009

CONTENTS

			Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			3
APPENDIX I	—	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . .	8
APPENDIX II	—	ADDITIONAL FINANCIAL INFORMATION OF THE GROUP . . . . . . . . .	77
APPENDIX III	—	VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80
APPENDIX IV	—	GENERAL INFORMATION ABOUT THE GROUP . . . . . . . . . . . . . . . . . . . .	86

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DEFINITIONS

In this circular unless the context requires otherwise the following terms have the meanings set opposite them:

• ‘‘Board’’ the Board of Directors of the Company; ‘‘Company’’ Galaxy Entertainment Group Limited, a company incorporated with limited liability in Hong Kong, the shares of which are listed on the Main Board of the Stock Exchange;

• ‘‘Concession Contract’’ the contract between the Grantor, the Grantee and GCSA (which is made a party to undertake obligations as stipulated in the Macau gaming concession it holds) for the grant of the Property to the Grantee, which will be concluded upon the same being published in the Official Gazette of Macau;

• ‘‘Directors’’ the directors of the Company; ‘‘Dr. Lui’’ Dr. Lui Che Woo, the Chairman and an executive Director of the Company;

• ‘‘GCSA’’ Galaxy Casino, S.A., a company incorporated in Macau and a subsidiary of the Company in which the Company is interested in 90% of its voting shares carrying 100% of its economic interest, which holds a Macau gaming concession and is authorized to carry out casino games of chance in Macau;

• ‘‘Grantee’’ New Galaxy Entertainment Company Limited, a company incorporated in Macau and a subsidiary of the Company in which the Company is interested in 100% of its economic interest;

• ‘‘Grantor’’ the Government of Macau; ‘‘Group’’ the Company and its subsidiaries; ‘‘HK$’’ Hong Kong dollar(s), the lawful currency of Hong Kong; ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of The People’s Republic of China;

• ‘‘Latest Practicable Date’’ 25 September 2009, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

• ‘‘Land Grant’’ the grant of the Property to the Grantee by the Grantor pursuant to the Concession Contract;

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DEFINITIONS

‘‘Listing Rules’’	the Rules Governing the Listing of Securities	on the Stock
	Exchange;
‘‘Macau’’	the Macau Special Administrative Region of	The People’s
	Republic of China;
‘‘MOP’’	Macau Patacas, the lawful currency of Macau;
‘‘Premium’’	MOP2,924,020,005 (equivalent to	approximately
	HK$2,838,854,374);
‘‘Property’’	a piece of land located at Estrada da Baía de Nossa
	Senhora da Esperança and Avenida Marginal	Flor de Lótus
	— Reclaimed Area between Taipa and Coloane in Cotai,
	Macau, which is the subject of the Land Grant;
‘‘SFO’’	the Securities and Futures Ordinance (Cap 571 of the Laws
	of Hong Kong);
‘‘Shareholders’’	holders of Shares of the Company;
‘‘Shares’’	shares of HK$0.10 each in the capital of the Company; and
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited.

Sums denominated in MOP have been translated into HK$ for the purpose of this circular at the rate of HK$1 = MOP1.03.

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LETTER FROM THE BOARD

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GALAXY ENTERTAINMENT GROUP LIMITED

銀 河 娛 樂 集 團 有 限 公 司

(incorporated in Hong Kong with limited liability)

(Stock Code: 27)

Executive Directors:

Dr. Lui Che Woo, GBS, MBE, JP, LLD, DSSc, DBA (Chairman)

Mr. Francis Lui Yiu Tung (Deputy Chairman) Mr. Joseph Chee Ying Keung Ms. Paddy Tang Lui Wai Yu, JP

Non-Executive Directors:

Registered Office:

Room 1606, 16th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong

Mr. Anthony Thomas Christopher Carter Dr. Martin Clarke

Mr. Guido Paolo Gamucci

Independent Non-Executive Directors:

Mr. James Ross Ancell

• Dr. William Yip Shue Lam, LLD

• Dr. Patrick Wong Lung Tak, JP

29 September 2009

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION ACQUISITION OF LAND IN COTAI, MACAU

1. INTRODUCTION

It was stated in the Company’s announcement dated 10 September 2009 that to enable GCSA to fulfill its commitments and obligations under the Macau gaming concession to, among other things, build and develop resort-hotel-casino facilities in Macau, the Macau Government has issued to the Grantee (a subsidiary of the Company in which the Company is interested in 100% of the economic interest) and GCSA the final draft Concession Contract in respect of the Property, being a piece of land located at Estrada da Baía de Nossa Senhora da Esperança and Avenida Marginal Flor de Lótus — Reclaimed Area between Taipa and Coloane in Cotai, Macau with a site area of approximately 440,248 square metres, which can be developed into hotel, hotel-apartment, gaming, entertainment, leisure and other related facilities with a total buildable

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LETTER FROM THE BOARD

gross floor area of 1,703,714 square metres and landscaping area of 292,985 square metres, subject to, among other things, the payment of the Premium of MOP2,924,020,005 (equivalent to approximately HK$2,838,854,374) and on 10 September 2009, the Grantee accepted the terms of the final draft Concession Contract which will, upon the same being published in the Official Gazette of Macau, confer the leasehold title of the Property upon the Grantee. On the same day, the Grantee paid the initial instalment of the Premium in the sum of MOP1,161,000,000 (equivalent to approximately HK$1,127,184,466).

This circular contains further details of the Land Grant as required under the Listing Rules.

2. PRINCIPAL TERMS OF THE LAND GRANT

Grantee: New Galaxy Entertainment Company Limited, a company incorporated in Macau and a wholly-owned subsidiary of GCSA, which in turn is a subsidiary of the Company in which the Company is interested in 90% of its voting shares carrying 100% of its economic interest Grantor: the Macau Government, which is an independent third party not connected with the Company, any director, chief executive or substantial shareholder of the Company or any of its subsidiaries or their respective associates as defined in the Listing Rules to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries

Grantor:

Property:

The Property is a piece of land located at Estrada da Baía de Nossa Senhora da Esperança and Avenida Marginal Flor de Lótus — Reclaimed Area between Taipa and Coloane in Cotai, Macau.

The Property has a site area of approximately 440,248 square metres, which can be developed into hotel, hotel-apartment, gaming, entertainment, leisure and other related facilities with a total buildable gross floor area of 1,703,714 square metres and landscaping area of 292,985 square metres. The Property is the site on which the Group is building an integrated mega resort development in Cotai. Pursuant to the terms of the Concession Contract, the development on the Property shall be completed within eight years from the date on which the Concession Contract is published in the Official Gazette of Macau, which is expected to be in or around October 2009.

The Property was valued as raw land at MOP3,090,000,000 (equivalent to approximately HK$3,000,000,000) as at 31 August 2009 by Vigers Appraisal and Consulting Limited, an independent valuer, the valuation report of which is set out in Appendix III to this circular.

The Property has a lease term of 25 years commencing from the date on which the Concession Contract is published in the Official Gazette of Macau, which is renewable pursuant to applicable laws in Macau.

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LETTER FROM THE BOARD

The Land Grant will confer a leasehold title of the Property onto the Grantee which will be final upon compliance with the conditions contained in the Concession Contract which include the payment in full of the Premium, according to the payment schedule as set out below.

Premium and Payment Schedule:

The Premium is MOP2,924,020,005 (equivalent to approximately HK$2,838,854,374) and the payment schedule is as follows:

• (i) it is deemed that an amount of MOP97,258,700 (equivalent to approximately HK$94,425,922) has been paid by the Grantee, which is equivalent to the expenses borne by the Grantee (representing the reclamation expenses paid by the Grantee and off-set by the expenses for the building of certain infrastructure and foundation facilities by the Grantor);

• (ii) an initial instalment of MOP1,161,000,000 (equivalent to approximately HK$1,127,184,466) has been paid by the Grantee upon the acceptance of the conditions of the Concession Contract set out in the draft to be accepted by the Chief Executive of Macau; and

• (iii) the balance of MOP1,665,761,305 (equivalent to approximately HK$1,617,243,985), plus interest at an interest rate of 5% per annum, shall be payable by the Grantee in eight equal half-yearly installments of MOP232,319,308 (equivalent to approximately HK$225,552,726) each, the first of which shall be paid within six months from the date on which the Concession Contract is published in the Official Gazette of Macau.

The Premium was arrived at in accordance with the provisions of Administrative Regulation No.16/2004 as varied by Despatch of the Chief Executive No.267/2007 of the laws of Macau.

The Group intends to finance the Premium from internal resources.

The Land Grant will result in an amount of approximately HK$2,838,854,374 (which is equal to the Premium) booked as leasehold land in the Group’s consolidated total assets. The cash and bank balances have been reduced by HK$1,127,184,466 (which represented the initial instalment of MOP1,161,000,000 paid on 10 September 2009). As the Group intends to finance the Premium from internal resources, the balance of the Premium together with the interest payable of approximately HK$1,804,421,808 will be recorded as deferred purchase price and will increase the Group’s consolidated total liabilities by the same amount.

As the Group is building its resort development on the Property and the Property also provides a future landbank to the Group, hence no rental income will be generated from the Property. It is expected that the transaction will not have any direct material impact on the

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LETTER FROM THE BOARD

earnings of the Group. We would, however, wish to draw your attention to the long term benefit of the transaction as explained under paragraph 4 (Reasons for and benefits of the Land Grant) below.

3. INFORMATION ON THE COMPANY

The Group’s principal business is the development and operation of casino and gaming and gaming related facilities and related leisure and entertainment facilities in Macau. It also has businesses in the manufacture, sale and distribution of construction materials and quarrying in Hong Kong, Macau and mainland China.

4. REASONS FOR AND BENEFITS OF THE LAND GRANT

The Land Grant represents an important milestone for the Group as part of its long term development strategy. The Property is strategically located in the centre of Cotai, Macau and is the site on which the Group is building an integrated mega resort development, including two hotel towers, gaming and gaming related facilities and related leisure and entertainment facilities. Apart from the existing resort development being built, the Property also provides a landbank for the development of further phases. This ensures that the Group has the flexibility and sufficient capacity to align its future development with the prevailing local market conditions as well as the global economic environment. The Group is committed to continue its investment in Macau, meeting future demand and supporting the Macau community.

5. LISTING RULES IMPLICATION

As an applicable percentage ratio (as defined under the Listing Rules) in respect of the Property is more than 25% but less than 100%, the Land Grant constitutes a major transaction of the Company and is subject to the notification, publication and shareholders’ approval requirements under Chapter 14 of the Listing Rules. So far as the Company is aware having made all reasonable enquiries, no Shareholder is required to abstain from voting on the Land Grant. Pursuant to Rule 14.44 of the Listing Rules, Dr. Lui holding 10,097,632 Shares, together with companies held by him (Super Focus Company Limited holding 106,716,107 Shares, Mark Liaison Limited holding 9,660,855 Shares, Premium Capital Profits Limited holding 13,308,179 Shares, Best Chance Investments Ltd. holding 80,387,837 Shares and Favor Right Investments Limited holding 22,500,000 Shares), City Lion Profits Corp. (a company held by a discretionary family trust set up by Dr. Lui holding 1,313,887,206 Shares), Mr. Lui Yiu Tung Francis (Dr. Lui’s son holding 1,448,896 Shares), Recurrent Profits Limited (a company wholly owned by Mr. Lui Yiu Tung Francis holding 114,504,039 Shares), Ms. Lui Wai Yu Paddy (Dr. Lui’s daughter holding 5,539,722 Shares), Netfinity Assets Corporation (a company wholly owned by Mr. Lui Yiu Nam Lawrence, Dr. Lui’s son and holding 161,066,521 Shares) and Sutimar Enterprises Limited (a wholly owned subsidiary of K. Wah International Holdings Limited, a company listed on the Stock Exchange and held as to approximately 57% by Dr. Lui as at 10 September 2009 and holding 162,484,047 Shares), being a closely allied group of Shareholders holding approximately 50.8% of the total issued share capital of the Company have given written consent to the Land Grant in lieu of a Shareholders’ meeting being convened to approve the Land Grant.

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LETTER FROM THE BOARD

6. GENERAL

The Directors consider that the terms of the Land Grant are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Your attention is drawn to the other information set out in this circular and the appendices to it.

Yours faithfully For and on behalf of the Board of GALAXY ENTERTAINMENT GROUP LIMITED Dr. Lui Che Woo Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

Set out below is a summary of the audited financial information of the Group for the three years ended 31 December 2008.

Consolidated Profit and Loss Statement

Year Ended 31 December

Revenue Cost of sales Gross profit Other income Impairment of gaming licence Administrative expenses Other operating expenses Operating (loss)/profit Finance income/(costs), net Share of profits less losses of Jointly controlled entities Associated companies Loss before taxation Taxation credit/(charge) Loss for the year Attributable to: Shareholders Minority interests Loss per share Basic Diluted	2008 HK$’000 10,496,657 (9,447,353) 1,049,304 279,643 (12,330,305) (1,073,619) (1,114,522) (13,189,499) 79,290 51,885 — (13,058,324) 1,503,093 (11,555,231) (11,390,368) (164,863) (11,555,231) HK cents (289.3) (289.3)	2007 HK$’000 13,035,439 (11,383,472) 1,651,967 415,732 — (928,304) (1,058,113) 81,282 (557,395) 52 — (476,061) (26,172) (502,233) (466,200) (36,033) (502,233) HK cents (13.8) (13.8)	2006 HK$’000 4,669,495 (4,255,222) 414,273 262,325 — (683,422) (1,025,623) (1,032,447) (522,226) 29,623 (612) (1,525,662) (5,848) (1,531,510) (1,531,546) 36 (1,531,510) HK cents (46.5) (46.5)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 December

ASSETS Non-current assets Property, plant and equipment Investment properties Leasehold land and land use rights Intangible assets Jointly controlled entities Associated company Derivative financial instruments Other non-current assets Current assets Inventories Debtors and prepayments Amounts due from jointly controlled entities Taxation recoverable Other investments Cash and bank balances Total assets EQUITY Share capital Reserves Shareholders’ funds Minority interests Total equity	2008 HK$’000 6,480,783 64,500 1,540,529 1,488,039 832,629 730 1,522 290,211 10,698,943 94,022 1,607,505 191,621 1,999 15,574 6,042,300 7,953,021 18,651,964 393,817 6,617,467 7,011,284 262,616 7,273,900	2007 HK$’000 4,731,187 62,500 1,580,777 14,520,665 506,193 730 1,155 599,602 22,002,809 90,449 1,039,336 339,168 1,299 57,768 8,230,362 9,758,382 31,761,191 393,564 18,013,088 18,406,652 531,791 18,938,443	2006 HK$’000 3,882,504 62,500 1,621,917 15,520,486 386,520 730 47,072 904,625
			22,426,354
			94,522 689,085 174,053 2,546 39,241 5,783,197
			6,782,644
			29,208,998
			329,612 13,303,187
			13,632,799 490,700
			14,123,499

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

LIABILITIES Non-current liabilities Borrowings Deferred taxation liabilities Derivative financial instruments Provisions Current liabilities Creditors and accruals Provision for claims from contractors Amount due to a jointly controlled entity Borrowings Taxation payable Total liabilities Total equity and liabilities	2008 HK$’000 6,275,958 267,224 17,805 115,553 6,676,540 3,979,776 274,757 348 435,903 10,740 4,701,524 11,378,064 18,651,964	2007 HK$’000 6,010,571 1,781,500 477,531 135,622 8,405,224 3,901,630 — 2,177 495,247 18,470 4,417,524 12,822,748 31,761,191	2006 HK$’000 8,439,965 1,778,588 573,109 120,151
			10,911,813
			3,633,551 — 294 532,888 6,953
			4,173,686
			15,085,499
			29,208,998

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

The following is a reproduction of the text of the audited consolidated financial statements of the Group together with the accompanying notes contained in the annual report of the Company for the year ended 31 December 2008.

Consolidated Profit and Loss Statement

For the year ended 31 December 2008

Notes Revenue 7 Cost of sales 8a Gross profit Other income 8b Impairment of gaming licence 18 Administrative expenses Other operating expenses Operating (loss)/profit 8c Finance income/(costs), net 10 Share of profits less losses of jointly controlled entities Loss before taxation Taxation credit/(charge) 11 Loss for the year Attributable to: Shareholders 31 Minority interests Loss per share 13 Basic Diluted	2008 HK$’000 10,496,657 (9,447,353) 1,049,304 279,643 (12,330,305) (1,073,619) (1,114,522) (13,189,499) 79,290 51,885 (13,058,324) 1,503,093 (11,555,231) (11,390,368) (164,863) (11,555,231) HK cents (289.3) (289.3)	2007 HK$’000 13,035,439 (11,383,472) 1,651,967 415,732 — (928,304) (1,058,113) 81,282 (557,395) 52 (476,061) (26,172) (502,233) (466,200) (36,033) (502,233) HK cents (13.8) (13.8)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 December 2008

Notes ASSETS Non-current assets Property, plant and equipment 15 Investment properties 16 Leasehold land and land use rights 17 Intangible assets 18 Jointly controlled entities 20 Associated company 21 Derivative financial instruments 22 Other non-current assets 23 Current assets Inventories 24 Debtors and prepayments 25 Amounts due from jointly controlled entities 26 Taxation recoverable Other investments 27 Cash and bank balances 28 Total assets EQUITY Share capital 29 Reserves 31 Shareholders’ funds Minority interests Total equity	2008 HK$’000 6,480,783 64,500 1,540,529 1,488,039 832,629 730 1,522 290,211 10,698,943 94,022 1,607,505 191,621 1,999 15,574 6,042,300 7,953,021 18,651,964 393,817 6,617,467 7,011,284 262,616 7,273,900	2007 HK$’000 4,731,187 62,500 1,580,777 14,520,665 506,193 730 1,155 599,602
		22,002,809
		90,449 1,039,336 339,168 1,299 57,768 8,230,362
		9,758,382
		31,761,191
		393,564 18,013,088
		18,406,652 531,791
		18,938,443

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes LIABILITIES Non-current liabilities Borrowings 32 Deferred taxation liabilities 33 Derivative financial instruments 22 Provisions 34 Current liabilities Creditors and accruals 35 Provision for claims from contractors 5j Amount due to a jointly controlled entity 26 Borrowings 32 Taxation payable Total liabilities Total equity and liabilities	2008 HK$’000 6,275,958 267,224 17,805 115,553 6,676,540 3,979,776 274,757 348 435,903 10,740 4,701,524 11,378,064 18,651,964	2007 HK$’000 6,010,571 1,781,500 477,531 135,622
		8,405,224
		3,901,630 — 2,177 495,247 18,470
		4,417,524
		12,822,748
		31,761,191

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company Balance Sheet

As at 31 December 2008

Notes ASSETS Non-current assets Subsidiaries 19 Current assets Debtors and prepayments 25 Taxation recoverable Cash and bank balances 28 Total assets EQUITY Share capital 29 Reserves 31 Shareholders’ funds LIABILITIES Non-current liabilities Borrowings 32 Derivative financial instruments 22 Current liabilities Creditors and accruals 35 Borrowings 32 Total liabilities Total equity and liabilities	2008 HK$’000 8,550,455 651 339 726,059 727,049 9,277,504 393,817 7,062,150 7,455,967 1,433,585 6,820 1,440,405 6,132 375,000 381,132 1,821,537 9,277,504	2007 HK$’000 15,212,438
		21,378 339 4,548,722
		4,570,439
		19,782,877
		393,564 17,172,132
		17,565,696
		1,320,525 468,858
		1,789,383
		30,198 397,600
		427,798
		2,217,181
		19,782,877

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2008

Notes Cash flows from operating activities Cash (used in)/generated from operations 36(a) Hong Kong profits tax paid Mainland China income tax and Macau complementary tax paid Interest paid Income from cashflow hedges Net cash (used in)/from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of leasehold land and land use rights Purchase of intangible assets Proceeds from sale of property, plant and equipment Proceeds from disposal of a subsidiary Proceeds from partial disposal of jointly controlled entities Step up acquisition of additional interest in a subsidiary 37(a) Acquisition of subsidiaries, net of cash acquired 37(b)(c) Investments in jointly controlled entities and an associated company Decrease/(increase) in amounts due from jointly controlled entities and an associated company Deferred expenditure Decrease in deferred receivable Decrease in finance lease receivable Decrease in non-current investments Proceeds from disposal of listed investments Proceeds from disposal of non-current investments Interest received (Increase)/decrease in restricted bank deposits Dividends received from jointly controlled entities Dividends received from unlisted and listed investments Net cash used in investing activities	2008 HK$’000 (440,083) (9,560) (8,815) (461,981) 23,747 (896,692) (1,526,219) — (12,633) 7,667 — 44,113 (11,080) (9,613) (184,679) 20,742 (432) 1,785 56,796 725 — 8,273 166,263 (2,890) 10,905 13,038 (1,417,239)	2007 HK$’000 1,267,776 (4,017) (6,477) (646,454) 27,298 638,126 (1,303,467) (104) (4,268) 18,022 49,217 102,257 — — (110,686) (157,423) (13,232) 2,730 38,419 7,212 49,902 5,509 205,357 209,153 21,504 17,018 (862,880)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cash flows from financing activities Issue of new shares New bank loans Repayment of bank loans Repayment of fixed rate notes Capital element of finance lease payments Contribution from minority interests Dividends paid to minority interests Net cash from financing activities Net (decrease)/increase in cash and bank balances Cash and bank balances at beginning of year Changes in exchange rates Cash and bank balances at end of year	2008 HK$’000 670 636,561 (533,357) — (3,990) 25,703 (1,724) 123,863 (2,190,068) 8,230,362 2,006 6,042,300	2007 HK$’000 3,948,508 135,063 (240,460) (1,187,939) (3,282) 13,584 (4,582) 2,660,892 2,436,138 5,783,197 11,027 8,230,362

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2008

At 1 January 2007 Change in fair value of non-current investments Exchange differences Change of fair value of cash flow hedges Net (loss)/income recognised directly in equity Loss for the year Total recognised loss for the year Injection of minority interests Issue of new shares Issue of shares upon exercise of share options Dividend paid to minority interests At 31 December 2007 Change in fair value of non-current investments Disposal of non-current investments Exchange differences Change of fair value of cash flow hedges Net (loss)/income recognised directly in equity Loss for the year Total recognised loss for the year Injection of minority interests Acquisition of minority interests Issue of shares upon exercise of share options Fair value of share options Dividend paid to minority interests At 31 December 2008	Share capital HK$’000 329,612 — — — — — — — 63,019 933 — 393,564 — — — — — — — — — 253 — — 253 393,817	Reserves HK$’000 13,303,187 (14,938) 47,995 (61,802) (28,745) (466,200) (494,945) — 5,167,851 36,995 — 18,013,088 (88,384) (3,363) 42,429 12,013 (37,305) (11,390,368) (11,427,673) — — 417 31,635 — 32,052 6,617,467	Shareholders’ funds HK$’000 13,632,799 (14,938) 47,995 (61,802) (28,745) (466,200) (494,945) — 5,230,870 37,928 — 18,406,652 (88,384) (3,363) 42,429 12,013 (37,305) (11,390,368) (11,427,673) — — 670 31,635 — 32,305 7,011,284	Minority interests HK$’000 490,700 1,817 8,562 (316) 10,063 (36,033) (25,970) 71,643 — — (4,582) 531,791 (363) — 7,343 259 7,239 (164,863) (157,624) 33,253 (143,080) — — (1,724) (111,551) 262,616	Total HK$’000 14,123,499 (13,121) 56,557 (62,118) (18,682) (502,233) (520,915) 71,643 5,230,870 37,928 (4,582) 18,938,443 (88,747) (3,363) 49,772 12,272 (30,066) (11,555,231) (11,585,297) 33,253 (143,080) 670 31,635 (1,724) (79,246) 7,273,900

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

1. GENERAL INFORMATION

Galaxy Entertainment Group Limited (the ‘‘Company’’) is a limited liability company incorporated in Hong Kong and has its listing on the Main Board of The Stock Exchange of Hong Kong Limited. The address of its registered office and principal place of business is Room 1606, 16th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong.

The principal activities of the Company and its subsidiaries (together the ‘‘Group’’) are operation in casino games of chance or games of other forms, provision of hospitality and related services in Macau, and the manufacture, sale and distribution of construction materials in Hong Kong, Macau and Mainland China.

These consolidated financial statements have been approved for issue by the Board of Directors on 24 April 2009.

2. BASIS OF PREPARATION

The Group meets its day to day working capital requirements and capital commitments mainly through revenue from its operations, cash at banks as well as credit facilities from banks. The tougher visa restrictions on Mainland China visitors to Macau and the global financial turmoil in late 2008 have brought adverse impact on the macro economic environment. The current economic conditions create uncertainties particularly over the number of tourists visiting Macau, and hence, the number of players in the Group’s gaming and entertainment properties. In addition, competition in the Macau gaming market has continued to intensify.

The Group has prepared the projected cash flows for the period up to 30 April 2010. Key assumptions of the cash flow projections include expected revenues generated from the gaming and entertainment and construction materials operations to be at a similar level of 2008, HK$1.9 billion further capital expenditure (note 38) and HK$1.3 billion for repayment of borrowings, of which HK$0.9 billion has been used to early repay some of guaranteed notes and convertible notes (note 43(a) and (c)). If there were unexpected adverse changes in general economic conditions which results in a decrease in the projected revenue, the Group has a number of alternative plans to mitigate the negative impact on cash inflow, including rescheduling the development program of the Galaxy Macau resort at Cotai. The Group will enhance the cash inflow from operations by implementing additional cost control measures and bringing in players from other Asian countries. The Group has continued discussions with banks to explore opportunities to expand its credit facilities thereby strengthening its financial resources.

Actual net gaming wins of StarWorld Casino for the first quarter of 2009 is approximately HK$1.9 billion, increased by approximately 10% as compared with that of the first quarter of 2008. The cash at banks at 31 March 2009 was approximately HK$5 billion, after early repayment of guaranteed notes of approximately HK$1.3 billion principal amount in January 2009 (note 43(a)). The Group considers its liquidity and financial position as a whole is healthy and has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, it continues to adopt the going concern basis in preparing the consolidated financial statements.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) under the historical cost convention as modified by the revaluation of investment properties, non-current investments, financial assets and financial liabilities (including derivative financial instruments), which are carried at fair values.

The preparation of consolidated financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the Group. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 5 below.

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APPENDIX I

(a) The adoption of new/revised HKFRS

In 2008, the Group adopted the following new interpretations of HKFRS issued by the HKICPA which are effective for the accounting periods beginning on or after 1 January 2008 and relevant to its operations.

HK(IFRIC)-Int 11 HKFRS 2 — Group and Treasury Share Transactions HK(IFRIC)-Int 13 Customer loyalty programmes

The Group has assessed the impact of the adoption of these new interpretations and considered that there was no significant impact on the Group’s results and financial position nor any substantial changes in the Group’s accounting policies and presentation of the financial statements.

(b) Standards, amendments and interpretations to existing standards which are not yet effective

The following new standard, interpretations and amendments to existing standards, which have been published and are relevant to the Group’s operations and consolidated financial statements, are mandatory for the accounting periods beginning on or after 1 January 2009 or later periods but which the Group has not early adopted:

Effective from 1 January 2009

HKAS 1 (Revised) Presentation of Financial Statements HKAS 23 (Revised) Borrowing Costs HKAS 32 (Amendment) and Financial instruments: Presentation of financial statements — HKAS 1 (Amendment) Puttable financial instruments and obligations arising on liquidation HKAS 39 (Amendment) Financial instruments: Recognition and measurement — Eligible hedged item HKFRS 2 (Amendment) Share-based Payment HKFRS 8 Operating Segments Effective from 1 July 2009 HKAS 27 (Revised) Consolidated and Separate Financial Statements HKFRS 3 (Revised) Business Combinations HK(IFRIC)-Int 17 Distributions of non-cash assets to owners HK(IFRIC)-Int 18 Transfers of Assets from Customers

Improvements to HKFRS published in October 2008 effective for accounting periods beginning on or after 1 January 2009.

HKAS	1 (Amendment)	Presentation of financial statements
HKAS	16 (Amendment)	Property, plant and equipment
HKAS	19 (Amendment)	Employee benefits
HKAS	23 (Amendment)	Borrowing costs
HKAS	28 (Amendment)	Investments in associates
HKAS	27 (Amendment)	Consolidated and separate financial statements
HKAS	31 (Amendment)	Interests in Joint Venture
HKAS	36 (Amendment)	Impairment of asset
HKAS	38 (Amendment)	Intangible assets
HKAS	39 (Amendment)	Financial instruments: Recognition and measurement
HKAS	40 (Amendment)	Investment property

The Group has already commenced an assessment of the impact of the above standards, interpretations and amendments but is not yet in a position to state whether substantial changes to the Group’s accounting policies and presentation of the consolidated financial statements will be resulted.

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APPENDIX I

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented.

3.1 Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December and the share of post acquisition results and reserves of its jointly controlled entities and associated companies attributable to the Group.

Results attributable to subsidiaries, jointly controlled entities and associated companies acquired or disposed of during the year are included in the consolidated profit and loss statement from the date of acquisition or to the date of disposal as applicable.

The profit or loss on disposal of subsidiaries, jointly controlled entities or associated companies is calculated by reference to the share of net assets at the date of disposal including the attributable amount of goodwill not yet written off.

3.2 Subsidiaries

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a direct or indirect shareholding of more than one half of the voting power. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the share of the identifiable net assets acquired by the Group is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit and loss statement.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the balance sheet of the Company, investments in subsidiaries are carried at cost together with advances by the Company which are neither planned nor likely to be settled in the foreseeable future, less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividend income.

3.3 Minority interests

Minority interests represent the interest of outside shareholders in the operating results and net assets of subsidiaries.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals of equity interests to minority interests result in gains and losses for the Group that are recorded in the profit and loss statement. Purchases of equity interests from minority interests result in goodwill, being the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary being acquired.

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3.4 Jointly controlled entities and jointly controlled operations

A jointly controlled entity is a joint venture in respect of which a contractual arrangement is established between the participating venturers and whereby the Group together with the venturer undertake an economic activity which is subject to joint control and none of the venturers has unilateral control over the economic activity.

The share of post-acquisition profits or losses of jointly controlled entities attributable to the Group is recognised in the profit and loss statement, and the share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the share of losses of the Group in a jointly controlled entity equals or exceeds its interest in the jointly controlled entity, including any other unsecured receivable, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the jointly controlled entity.

In the balance sheet of the Company, investments in jointly controlled entities are stated at cost less provision for impairment losses. The results of jointly controlled entities are accounted for by the Company on the basis of dividend income.

Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the interest in the jointly controlled entities held by the Group. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the jointly controlled entities have been changed where necessary to ensure consistency with the policies of the Group.

Interests in unincorporated jointly controlled operations are accounted for using the proportionate consolidation method under which the share of individual assets and liabilities, income and expenses and cash flows of jointly controlled operations is included in the relevant components of the consolidated financial statements.

3.5 Associated companies

An associated company is a company, not being a subsidiary or a joint venture, in which an equity interest is held for the long-term and significant influence is exercised in its management, generally accompanying a shareholding of between 20% to 50% of the voting rights.

Investments in associated companies are accounted for under the equity method of accounting and are initially recognised at cost. The investments in associated companies of the Group include goodwill, net of any accumulated impairment loss, identified on acquisition.

The share of post-acquisition profits or losses of associated companies attributable to the Group is recognised in the profit and loss statement, and the share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the share of losses of the Group in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivable, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the interest in the associated companies held by the Group. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to ensure consistency with the policies of the Group.

3.6 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the share of the net identifiable assets of the acquired subsidiary, jointly controlled entity and associated company attributable to the Group at the effective date of acquisition, and, in respect of an increase in holding in a subsidiary, the excess of the cost of acquisition and the carrying amount of the proportion of the minority interests acquired. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

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Goodwill on acquisition of subsidiaries is included in intangible assets while goodwill on acquisition of jointly controlled entities and associated companies is included in investments in jointly controlled entities and associated companies. Goodwill is tested for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

If the cost of acquisition is less than the fair value of the net assets acquired or the carrying amount of the proportion of the minority interests acquired, the difference is recognised directly in the profit and loss statement.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.

3.7 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. All other repairs and maintenance costs are expensed in the profit and loss statement during the financial period in which they are incurred.

No depreciation is provided on assets under construction until it is completed and is ready in use. Depreciation of other property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives as follows:

Leasehold improvement	Over the remaining period of the lease
Buildings	50 years
Plant and machinery	4 to 20 years
Gaming equipment	3 to 5 years
Other assets	2 to 10 years

The residual values and useful lives of the assets are reviewed and adjusted if appropriate, at each balance sheet date. Where the carrying amount of an asset is greater than its recoverable amount, it is written down immediately to its estimated recoverable amount.

Gains and losses on disposal is determined as the difference between the net sales proceed and the carrying amount of the relevant asset, and is recognised in the profit and loss statement.

3.8 Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Group, is classified as investment property. Investment property comprises freehold land, land held under operating leases and buildings held under finance leases. Land held under operating leases is classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value. Fair value is based on valuations carried out annually by external valuers. Changes in fair values are recognised in the profit and loss statement.

Subsequent expenditure is charged to the carrying amount of the asset only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. All other repairs and maintenance costs are expensed in the profit and loss statement during the financial period in which they are incurred.

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APPENDIX I

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes. Property that is being constructed or developed for future use as investment property is classified as properties under development and carried at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property.

If a property becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this property at the date of transfer is recognised in equity as revaluation of property, plant and equipment. However, if the fair value gives rise to a reversal of the previous impairment loss, this write-back is recognised in the profit and loss statement.

3.9 Gaming licence

Gaming licence is carried at cost less accumulated amortization and impairment losses. It has a finite useful life and is amortised over its estimated useful life of 17 years on a straight-line basis.

3.10 Computer software

Costs incurred to acquire and bring to use the specific computer software licences are capitalised and are amortised over their estimated useful lives of three years on a straight line basis. Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

3.11 Impairment of investments in subsidiaries, associated companies and non-financial assets

Assets that have an indefinite useful life or have not yet available for use are not subject to amortisation and tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the fair value of an asset less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

3.12 Deferred expenditure

Quarry site development represents costs of constructing infrastructure at the quarry site to facilitate excavation. Overburden removal costs are incurred to bring the quarry site into a condition ready for excavation. Quarry site improvements represent estimated costs for environmental restoration and any changes in the estimates are adjusted in the carrying value of the quarry site improvements. These costs are amortised over the estimated useful lives of the quarries and sites concerned using the straight-line method.

Pre-operating costs are expensed as they are incurred.

3.13 Financial assets

The Group classifies its financial assets in the categories of financial assets at fair value through profit or loss (including other investments), loans and receivable, and available-for-sale financial assets. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the investments were acquired and re-evaluates this designation at every balance sheet date.

(a) Financial assets at fair value through profit or loss (including other investments)

Financial assets at fair value through profit or loss are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Financial assets carried at fair value through profit or loss are initially recognised at fair value and subsequently carried at fair value. Transaction costs are expensed in the profit and loss statement.

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(b) Loans and receivable

Loans and receivable are non-derivative financial assets with fixed or determinable payment terms that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months after the balance sheet date, which are classified as non-current assets. Loans and receivable are carried at amortised cost using the effective interest method.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in the balance sheet under non-current investments unless management intends to dispose of the investment within twelve months of the balance sheet date. Available-for-sale financial assets are initially recognised at fair value plus transaction cost and subsequently carried at fair value.

Regular way purchases and sales of investments are recognised on trade-date, which is the date on which the Group commits to purchase or sell the asset. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Realised and unrealised gains and losses arising from changes in fair value of the financial assets at fair value through profit or loss are included in the profit and loss statement. Unrealised gains and losses arising from changes in fair value non-monetary available-for-sale investments are recognised in equity. When available-for-sale investments are sold or impaired, the accumulated fair value adjustments are included in the profit and loss statement as gains or losses from investments.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active and for unlisted securities, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, refined to reflect the specific circumstances of the issuer.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of available-for-sale investments, a significant or prolonged decline in the fair value of the investment below its cost is considered as an indicator in determining whether the investments are impaired. If any such evidence exists for available-for-sale investments, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the profit and loss statement is removed from equity and recognised in the profit and loss statement. Impairment losses recognised in the profit and loss statement on available-for-sale investments are not reversed through the profit and loss statement.

3.14 Derivative financial instruments

Derivative financial instruments, including put option of shares and embedded derivative liability of convertible notes, are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

The fair value of hedging derivative is classified as a non-current asset or liability where the remaining maturity of the hedge item is more than twelve months, and as a current asset or liability, where the remaining maturity of the hedged item is less than twelve months. Trading derivatives are classified as a current asset or liability.

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APPENDIX I

For fair value hedge, where the instruments are designated to hedge fair value of recognised assets or liabilities, changes in the fair value of these derivatives and the changes in the fair value of the hedged assets or liabilities attributable to the hedged risk are recognised in the profit and loss statement as finance costs. When the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which effective interest method is used is amortised to profit or loss over the period to maturity.

For cash flow hedge, where instruments are designated to hedge against the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss statement within finance costs. Amounts accumulated in equity are recycled in the profit and loss statement in the financial period when the hedged item affects profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Changes in fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the profit and loss statement.

3.15 Debtors and prepayments

Debtors and prepayments are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment, which is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivable. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of debtors is reduced through the use of an allowance account and the amount of the provision is recognised in the profit and loss statement within other operating expenses. When a debtor is uncollectible, it is written off against the allowance account for debtors. Subsequent recoveries of amounts previously written off are credited to the profit and loss statement against other operating expenses.

3.16 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost of construction materials is calculated on the weighted average basis, comprising materials, direct labour and an appropriate proportion of production overhead expenditure. Cost of playing cards is determined using the first-in, first-out method and food and beverages using the weighted average method. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

3.17 Cash and cash equivalents

Cash and cash equivalents comprise cash and bank balances, deposits with banks and financial institutions repayable within three months from the date of placement less bank overdrafts.

3.18 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

When the Company re-purchases its equity share capital, the consideration paid, including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the equity holders and the shares are cancelled.

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APPENDIX I

3.19 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the profit and loss statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

3.20 Convertible notes

(a) Convertible notes with equity component

Convertible notes that can be converted to equity share capital at the option of the holders, where the number of shares that would be issued on conversion and the value of the consideration that would be received do not vary, are accounted for as compound financial instruments which contain both a liability component and an equity component.

At initial recognition, the liability component of the convertible notes is determined using a market interest rate for an equivalent non-convertible note. The remainder of the proceeds is allocated to the conversion option as equity component. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components in proportion to the allocation of proceeds.

The liability component is subsequently carried at amortised cost, calculated using the effective interest method, until extinguished on conversion or maturity. The equity component is recognised in equity, net of any tax effects.

When the note is converted, the relevant equity component and the carrying amount of the liability component at the time of conversion are transferred to share capital and share premium for the shares issued. When the note is redeemed, the relevant equity component is transferred to retained profit.

(b) Convertible notes without equity component

All other convertible notes which do not exhibit the characteristics mentioned in (a) above are accounted for as hybrid instruments consisting of an embedded derivative and a host debt contract.

At initial recognition, the embedded derivative of the convertible notes is accounted for as derivative financial instruments and is measured at fair value. Any excess of proceeds over the amount initially recognised as the derivative component is recognised as a liability under the contract. Transaction costs that relate to the issue of the convertible notes are allocated to the liability under the contract.

The derivative component is subsequently carried at fair value and changes in fair value are recognised in the profit and loss statement. The liability under the contract is subsequently carried at amortised cost, calculated using the effective interest method, until extinguished on conversion or maturity.

When the note is converted, the carrying amount of the liability under the contract together with the fair value of the relevant derivative component at the time of conversion are transferred to share capital and share premium as consideration for the shares issued. When the note is redeemed, any difference between the redemption amount and the carrying amounts of both components is recognised in the profit and loss statement.

3.21 Leases

Leases that substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased assets or the present value of the minimum lease payments. Each lease payment is allocated between the capital and finance charges so as to achieve a constant rate on the remaining lease liability. The

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APPENDIX I

corresponding lease obligations, net of finance charges, are included under current and non-current liabilities. The finance charges are charged to the profit and loss statement over the lease periods. Assets held under finance leases are depreciated over the shorter of their estimated useful lives or the lease periods.

Assets leased to third parties under agreements that transfer substantially all the risk and rewards incident to ownership of the relevant assets to the lessees are classified as investments in finance leases. The present value of the lease payments is recognised as a receivable in the balance sheet. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Gross earnings under finance leases are recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return on the net investment in the leases.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals payable under operating leases, net of any incentives received from the lessors, are charged to the profit and loss statement on a straight line basis over the period of the leases. The upfront prepayments made for leasehold land and land use rights are amortised on a straight-line basis over the period of the lease or where there is impairment, the impairment is expensed in the profit and loss statement. The amortisation of the leasehold land and land use rights is capitalised under the relevant assets when the property on the leasehold land is under construction.

3.22 Creditors and accruals

Trade creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

3.23 Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where a provision is expected to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, before any tax effects, that reflect current market assessments of the time value of money and the risk specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

3.24 Current and deferred taxation

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company, its subsidiaries, jointly controlled entities and associated companies operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred taxation assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries, jointly controlled entities and associated companies, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

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APPENDIX I

3.25 Employee benefits

(a) Employees entitlement, benefits and bonus

Contributions to publicly or privately administered defined contribution retirement or pension plans on a mandatory, contractual or voluntary basis are recognised as employee benefit expense in the financial period when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

Provisions for bonus plans due wholly within twelve months after the balance sheet date are recognised when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(b) Share-based compensation

The fair value of the employee services received in exchange for the grant of the options under the equity-settled, share-based compensation plan is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, estimates of the number of options that are expected to become exercisable are revised. The impact of the revision of original estimates, if any, is recognised in the profit and loss statement over the remaining voting period with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options are exercised.

3.26 Borrowing costs

Interest and related costs on borrowings directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to complete and prepare the assets for its intended use or sale are capitalised as part of the cost of that asset. All other borrowing costs are charged to the profit and loss statement in the financial period in which they are incurred.

3.27 Revenue recognition

Revenue comprises the fair value of the consideration for the sale of goods and services provided in the ordinary course of the activities of the Group. Revenue is shown, net of value-added tax, returns, rebates and discounts, allowance for credit and other revenue reducing factors.

Revenue is recognised when the amount can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria for each of the activities have been met. Estimates are based on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement.

(a) Gaming operations

Revenue from gaming operations, representing the net gaming wins, is recognised when the relevant services have been rendered and is measured at the entitlement of economic inflows of the Group from the business.

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(b) Hotel operations

Revenue from hotel room rental and food and beverages sales is recognised when the relevant services have been rendered.

(c) Construction materials

Sales of construction materials are recognised when the goods are delivered and legal title is transferred to customers.

(d) Rental income

Rental income, net of any incentives given to the lessee, is recognised over the periods of the respective leases on a straight-line basis.

(e) Administrative fee

Administrative fee is recognised when the services have been rendered.

(f) Interest income

Interest income is recognised on a time proportion basis using the effective interest method, taking into account the principal amounts outstanding and the interest rates applicable.

(g) Dividend income

Dividend income is recognised when the right to receive payment is established.

3.28 Foreign currencies

Transactions included in the consolidated financial statements of each of the entities in the Group are measured using the currency of the primary economic environment in which the Group operates (the ‘‘functional currency’’). The consolidated financial statements are presented in Hong Kong dollar, which is the functional and presentation currency of the Company.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rates ruling at the balance sheet date are recognised in the profit and loss statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Translation differences on non-monetary financial assets held at fair value through profit or loss is reported as part of the fair value gain or loss. Translation difference on non-monetary available-for-sale investments is included in equity.

The results and financial position of all the entities in the Group that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (i) assets and liabilities for each balance sheet presented are translated at the exchange rate ruling at the date of that balance sheet;

• (ii) income and expenses for each profit and loss statement are translated at average exchange rates; and

• (iii) all resulting exchange differences are recognised as a separate component of equity.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is partially disposed of or sold, such exchange differences are recognised in the profit and loss statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rates ruling at the balance sheet date.

3.29 Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

3.30 Dividend distribution

Dividend distribution to the shareholders of the Company is recognised as a liability in the consolidated financial statements in the financial period in which the dividend payable becomes legal and constructive obligations of the Company.

4. FINANCIAL RISK MANAGEMENT

The major financial instruments of the Group include trade and other receivables, amounts due from related parties, cash and bank balances, restricted bank deposits, non-current and other investments, trade and other creditors, amounts due to related parties and borrowings. Details of these financial instruments are disclosed in respective notes. The activities of the Group expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk, and other price risk), credit risk and liquidity risk. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

The Group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. It does not enter into or trade derivative financial instruments for speculative purpose. The management of the Group identifies, evaluates and manages significant financial risks in the individual operating units of the Group.

Due to a number of factors affecting a slowdown in global economies and contracting credit markets, the Group is exposed to higher credit risk in respect of its receivables from customers of the construction material business and gaming counterparties and bank deposits with financial institutions; higher interest rate risks in respect of its floating rate borrowings; higher counterparty risk in respect of its service providers and gaming counterparties; and liquidity risk in respect of obligations to financial liabilities and commitments for development projects.

4.1 Financial risk factors

(a) Market risk

• (i) Foreign exchange risk

The Group operates in Hong Kong, Macau and Mainland China and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Macau Patacas. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities, which are denominated in a currency that is not the functional currency of the Group.

Foreign currency exposures are covered by forward contracts and cross-currency interest rate swap contracts whenever appropriate.

As at 31 December 2008, the Group had entered into cross-currency interest rate swap contracts, which were designated as cash flow hedges and fair value hedges to hedge the foreign currency risk on the Guaranteed Notes (see note 32(a)).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Price risk

The Group is exposed to equity price changes arising from equity investments held by the Group classified on the consolidated balance sheet either as other investments (see note 27) or noncurrent investments (see note 23(a)). Other than unquoted securities held for strategic purposes, all of these investments are listed. The Group is not exposed to commodity price risk.

All of the Group’s unquoted investments are held for long term strategic purposes. Their performance is assessed at least bi-annually against performance of similar listed entities, based on the information available to the Group, together with an assessment of their relevance to the Group’s long term strategic plans.

The Group is also exposed to equity price risk arising from changes in the Company’s own share price to the extent that the Company’s own equity instruments underlie the fair values of derivatives or other financial liabilities of the Group. As at 31 December 2008, the Group was exposed to this risk through the conversion rights attached to the Convertible Notes issued by the Company as disclosed in note 32(b).

The following table shows the approximate effect on the Group’s loss after tax if the Company’s own share price (for the conversion option of certain convertible notes) were 5% (2007: 5%) higher or lower with all other variables held constant.

If the market price of the Company’s own share price were 5% (2007: 5%) higher with all other variables held constant Loss after tax for the year increased by If the market price of the Company’s own share price were 5% (2007: 5%) lower with all other variables held constant Loss after tax for the year decreased by	2008 HK$’000 853 1,240	2007 HK$’000 43,000 41,000

(iii) Interest rate risk

The Group is exposed to interest rate risk through the impact of changes in the rates on interest bearing liabilities and assets. The Group follows a policy of developing long-term banking facilities to match its long-term investments in Hong Kong, Macau and Mainland China. The policy also involves close monitoring of interest rate movements and replacing and entering into new banking facilities when favourable pricing opportunities arise.

As the Group has no significant interest bearing assets, other than deposits and cash at banks, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The interest rate risk of the Group arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

At 31 December 2008, if interest rates on borrowings at that date had been 0.5% higher or lower with all other variables held constant, loss after tax for the year would have been HK$3,562,000 (2007: HK$3,056,000) higher or lower, mainly as a result of higher or lower interest expense on floating rate borrowings.

At 31 December 2008, if interest rates on deposits and cash at banks at that date had been 0.5% higher or lower with all other variables held constant, loss after tax for the year would have been HK$26,000,000 (2007: HK$37,234,000) lower or higher.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Credit risk

Credit risk arises from derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions, and the gaming counterparties and premium players of gaming. Cash and bank balances are deposited in banks and financial institutions with sound credit ratings to mitigate the risk.

The Group has policies and guidelines in place to assess the credit worthiness of customers and gaming counterparties to ensure that credits are made to parties with an appropriate credit history and a good history of performance records. The top five debtors of the Group contribute to approximately 39% (2007: 19%) of the total trade, advances to gaming counterparties and other receivables. The Group monitors the issuance of credit on an ongoing basis to minimise the exposure to credit risk. The activities of individual credit account are monitored regularly for management to decide if the credit facility should be continued, changed or cancelled. Management regularly evaluates the allowance for doubtful receivables by reviewing the collectability of each balance based upon the age of the balance, the customer’s financial condition, collection history and any other known information. Details of debtors are disclosed in note 25.

The maximum exposure at 31 December 2008 to financial assets represents the unimpaired carrying amounts of respective financial assets.

(c) Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its current obligations when they fall due. The Group measures and monitors its liquidity through the maintenance of prudent ratios regarding the liquidity structure of the overall assets, liabilities, loans and commitments of the Group.

The Group also maintains a conservative level of liquid assets to ensure the availability of sufficient cash flows to meet any unexpected and material cash requirements in the course of ordinary business.

The contractual maturity of the Group and the Company for its financial liabilities, drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company is required to pay and include both interest and principal, is set out below.

Group

At 31 December 2008 Bank loans Guaranteed notes Convertible notes Other borrowings Derivative financial instruments Creditors and accruals At 31 December 2007 Bank loans Guaranteed notes Convertible notes Other borrowings Derivative financial instruments Creditors and accruals	Within one year HK$’000 434,539 409,743 — 4,389 — 3,625,318 589,828 461,248 — 3,990 — 3,523,414	Between one to two years HK$’000 262,660 2,347,293 — — 10,985 292,460 3,267 461,248 — 4,389 60 62,921	Between two to five years HK$’000 7,656 3,248,303 1,860,048 — 6,820 61,955 9,157 5,680,423 1,403,142 — 477,471 1,889	Over five years HK$’000 12,990 — — — — 43 16,477 — — — — 313,406	Total HK$’000 717,845 6,005,339 1,860,048 4,389 17,805 3,979,776
					618,729 6,602,919 1,403,142 8,379 477,531 3,901,630

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

At 31 December 2008 Bank loans Convertible notes Derivative financial instruments Creditors and accruals At 31 December 2007 Bank loans Convertible notes Derivative financial instruments Creditors and accruals	Within one year HK$’000 375,955 — — 6,132 397,891 — — 30,198	Between one to two years HK$’000 — — — — — — — —	Between two to five years HK$’000 — 1,860,048 6,820 — — 1,403,142 468,858 —	Total HK$’000 375,955 1,860,048 6,820 6,132
				397,891 1,403,142 468,858 30,198

The table below analyses the Group’s cross-currency swap contracts which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 31 December 2008 Cross-currency swap contracts Outflow Inflow At 31 December 2007 Cross-currency swap contracts Outflow Inflow	Within one year HK$’000 (3,112,858) 3,122,313 (427,888) 461,248	Between one to two years HK$’000 (2,079,517) 2,079,427 (3,144,888) 3,191,248	Between two to five years HK$’000 — — (2,111,548) 2,141,661	Total HK$’000 (5,192,375 5,201,740
				(5,684,324 5,794,157

4.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group will consider the macro economic conditions, prevailing borrowing rate in the market and adequacy of cash flows generating from operations and may raise funding through capital market or bank borrowings as necessary. The Group may also return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total assets less cash and bank balances. Net debt is calculated as total borrowings (including ‘‘current and noncurrent borrowings’’ as shown in the consolidated balance sheet) less cash and bank balances. The Group intends to make use of excess funds to improve its capital structure through early repayment of borrowings to achieve finance cost saving in the future.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The gearing ratios at 31 December 2008 and 2007 were as follows.

Total borrowings (note 32) Less: cash and bank balances (note 28) Net (debt)/cash Total assets less cash and bank balances Gearing ratio	2008 HK$’000 (6,711,861) 6,042,300 (669,561) 12,609,664 5%	2007 HK$’000 (6,505,818) 8,230,362 1,724,544 23,530,829 N/A

4.3 Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

In assessing the fair value of non-trading securities, other financial assets and embedded financial liabilities, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date.

The fair values of long-term borrowings are estimated using the expected future payments discounted at market interest rates.

The nominal values less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year (including debtors, cash and bank balances, creditors and current borrowings) are assumed to approximate their fair values.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements used in preparing the consolidated financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

(a) Impairment of non-financial assets other than goodwill

When there is indication for impairment, the Group tests whether the assets within a cash generating unit has suffered any impairment. The recoverable amount has been determined based on the higher of fair value less cost to sell and value-in-use. The methodologies are based upon estimates of future results, assumptions as to income and expenses of the business, future economic conditions on growth rates and estimation of the future returns.

An impairment charge of HK$12.3 billion arose in the gaming and entertainment division cash generating unit during 2008, resulting in the carrying amount of the gaming licence being written down to its recoverable amount. If the annual growth rate for each of all the coming years used in the fair value calculation had been 1% lower or higher than management’s estimates at 31 December 2008, the impairment of gaming licence would have increased or decreased by approximately HK$500 million, details of which are disclosed in note 18. If the discount rate is increased or decreased by 1%, the impairment of gaming licence would have increased or decreased by approximately HK$600 million.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 3.6. The recoverable amounts of cash generating units in the construction materials division have been determined based on value-in-use calculations. These calculations require the use of estimates, details of which are disclosed in note 18.

(c) Useful lives of property, plant and equipment

The management determines the estimated useful lives and residual values for its property, plant and equipment. Management will revise the depreciation charge where useful lives are different from previous estimates, or it will write-off or write-down obsolete or non-strategic assets that have been abandoned or sold.

(d) Impairment of available-for-sale financial assets

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The fair value also reflects the discounted cash flows that could be expected from the ultimate sale after deducting the estimated expenses directly associated with the sale. The Group determines whether an investment is impaired by evaluating the duration and extent to which the fair value of an investment is less than its cost.

(e) Fair value of derivative financial instruments

The fair value of derivative financial instruments is with reference to the valuation performed by an independent valuer by reference to the Binomial model. In making the judgement, consideration has been given to assumptions that are mainly based on market conditions existing at the balance sheet date.

(f) Provisions

The Group carries out environmental restoration for its quarry sites. Management estimates the related provision for future environmental restoration based on an estimate of future expenditure for the restoration. These provisions require the use of different assumptions, such as discount rates for the discounting of non-current provision due to time value of money, the timing and extents of cash outflows.

(g) Share-based payments

The fair value of option granted is estimated by independent professional valuers based on the various assumptions on volatility, life of options, dividend paid out rate and annual risk-free interest rate, excluding the impact of any non-market vesting conditions, which generally represent the best estimate of the fair value of the share options at the date of granting the options.

(h) Taxation

The Group is subject to taxation in Hong Kong, Macau and Mainland China. Significant judgement is required in determining the provision for taxation for each entity in the Group. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for potential tax exposures based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred taxation provisions in the financial period in which such determination is made.

(i) Provision for bad and doubtful debts

The policy of provision for bad and doubtful debts of the Group is based on the evaluation of collectability and ageing analysis of accounts and on management’s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

past collection history of each counterparty. The amount of provision made as at 31 December 2008 was HK$97,716,000 (2007: HK$54,400,000). If the financial conditions of counterparty of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

(j) Provision for claims from contractors

In view of the revised development schedule resulting from management’s decision to move the staged opening of the Galaxy Macau resort at Cotai beyond 2009, the Group has estimated the provision for claims from contractors based on the latest information available, and in the absence of such, the best estimates derived from reasonable assumptions, experience and judgement and with reference to the estimates prepared by an independent surveyor. The total claims received amount to approximately HK$500 million and the final outcome of the amount of claims to be settled will always depend on commercial negotiations, taking account of business goodwill, long-term partnering relationships, cash flow considerations, economic climates, etc. If the final settlement percentage is differed by 10% from the estimate, the loss for the year would increase or decrease by approximately HK$50 million.

6. SEGMENT INFORMATION

In accordance with the internal financial reporting and operating activities of the Group, the primary segment reporting is by business segments and the secondary segment reporting is by geographical segments.

Segment assets consist primarily of property, plant and equipment, investment properties, leasehold land and land use rights, intangible assets, other non-current assets, inventories, debtors and prepayments, and mainly exclude investments, derivative financial instruments, taxation recoverable and cash and bank balances. Segment liabilities comprise mainly creditors, accruals and provisions and mainly exclude tax liabilities and borrowings. There are no sales or trading transaction between the business segments.

(a) Business segments

Year ended 31 December 2008 Revenue Operating (loss)/profit (note) Finance income, net Share of profits less losses of jointly controlled entities Loss before taxation Taxation credit Loss for the year Capital expenditure Depreciation Amortisation Impairment of gaming licence Impairment of non-current investments Impairment of trade and other debtors	Gaming and entertainment HK$’000 8,893,583 (13,247,646) 1,192 (2,083,837) (290,073) (749,008) (12,330,305) (23,010) (37,000)	Construction materials HK$’000 1,603,074 86,813 50,693 (30,148) (58,774) (42,526) — — (6,032)	Unallocated HK$’000 — (28,666) — (2,579) (3,570) — — (982) —	Total HK$’000 10,496,657 (13,189,499) 79,290 51,885 (13,058,324) 1,503,093 (11,555,231) (2,116,564) (352,417) (791,534) (12,330,305) (23,992) (43,032)

Note: Results of the gaming and entertainment division include pre-opening expenses of HK$59,636,000 incurred for the Galaxy Macau resort.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Year ended 31 December 2007 Revenue Operating (loss)/profit (note) Finance costs, net Share of profits less losses of jointly controlled entities Loss before taxation Taxation charge Loss for the year Capital expenditure Depreciation Amortisation Impairment of non-current investments Impairment of property, plant and equipment Impairment of trade debtors	Gaming and entertainment HK$’000 11,481,227 (203,059) 174 (1,233,343) (248,491) (1,038,612) — — —	Construction materials HK$’000 1,554,212 74,898 (122) (32,413) (77,331) (45,731) — (27,457) (3,016)	Unallocated HK$’000 — 209,443 — (4,184) (2,458) — (4,569) — —	Total HK$’000 13,035,439
				81,282 (557,395 52
				(476,061 (26,172
				(502,233
				(1,269,940 (328,280 (1,084,343 (4,569 (27,457 (3,016

Note: Results of the gaming and entertainment division included pre-opening expenses of HK$22,199,000 incurred for the Galaxy Macau resort.

As at 31 December 2008 Segment assets Jointly controlled entities Associated company Total assets Segment liabilities As at 31 December 2007 Segment assets Jointly controlled entities Associated company Total assets Segment liabilities	Gaming and entertainment HK$’000 10,012,016 4,070 — 3,707,576 20,593,125 (2,595) — 3,153,545	Construction materials HK$’000 1,655,971 828,559 730 552,335 1,855,623 508,788 730 586,592	Unallocated HK$’000 6,150,618 — — 7,118,153 8,805,520 — — 9,082,611	Total HK$’000 17,818,605 832,629 730
				18,651,964
				11,378,064
				31,254,268 506,193 730
				31,761,191
				12,822,748

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

2008 Macau Hong Kong Mainland China 2007 Macau Hong Kong Mainland China	For the year ended 31 December Revenue Capital expenditure HK$’000 HK$’000 9,086,965 2,084,447 742,103 21,293 667,589 10,824 10,496,657 2,116,564 11,756,085 1,238,195 686,311 9,592 593,043 22,153 13,035,439 1,269,940	As at 31 December Total assets HK$’000 15,293,612 1,683,538 1,674,814
		18,651,964
		24,698,271 5,694,789 1,368,131
		31,761,191

7. REVENUE

Revenue comprises turnover from sales of construction materials, gaming operations and hotel operations.

Sales of construction materials Gaming operations Net gaming wins Contributions (note) Tips received Hotel operations Room rental Food and beverages Others	2008 HK$’000 1,603,074 8,431,001 116,828 16,808 153,576 88,072 87,298 10,496,657	2007 HK$’000 1,554,212 11,135,284 78,966 33,276 139,519 37,835 56,347
		13,035,439

Note: In respect of the operations of certain city club casinos (the ‘‘Certain City Club Casinos’’), the Group entered into certain agreements (the ‘‘Agreements’’) with third parties for a term equal to the life of the concession agreement with the Government of Macau Special Administrative Region (the ‘‘Macau Government’’) up to June 2022.

Under the Agreements, certain service providers (the ‘‘Service Providers’’) undertake for the provision of a steady flow of customers to the Certain City Club Casinos and for procuring and or introducing customers to these casinos. The Service Providers also agree to indemnify the Group against substantially all risks arising under the leases of the premises used by these casinos; and to guarantee payments to the Group of certain operating and administrative expenses. Revenue attributable to the Group is determined by reference to various rates on the net gaming wins after special gaming tax and other related taxes to the Macau Government. The remaining net gaming wins and revenue from gaming operations less all the relevant operating and administrative expenses belong to the Service Providers.

After analysing the risks and rewards attributable to the Group, and the Service Providers under the Agreements, revenue from the Certain City Club Casinos is recognised based on the established rates for the net gaming wins, after deduction of special gaming taxes and other related taxes to the Macau Government, which reflect the gross inflow of economic benefits to the Group. In addition, all relevant operating and administrative expenses relating to the operations of the Certain City Club Casinos are not recognised as expenses of the Group in the consolidated financial statements.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The revenue and expenses related to the gaming operations of the Certain City Club Casinos are summarised as follows:

Net gaming wins Other income Interest income Operating expenses Special gaming tax and other related taxes to the Macau Government Commission and allowances to gaming counterparties Employee benefit expenses Other operating expenses Contributions from gaming operations Contributions from the Service Providers Contributions attributable to the Group 8. COST OF SALES, OTHER INCOME AND OPERATING (LOSS)/PROFIT (a) Cost of sales Special gaming tax and other related taxes to the Macau Government Commission and allowances to gaming counterparties Cost of inventories sold Other direct costs (b) Other income Rental income Interest income Bank deposits Loan to jointly controlled entities (note 26a) Deferred receivable (note 23c) Administrative fees from gaming operations Dividend income from unlisted investments Dividend income from listed investments Realised gain on unlisted investments Realised and unrealised gain on listed investments Gain on partial disposal of jointly controlled entities Gain on deemed disposal of jointly controlled entities Gain on disposal of non-current investments Gain on disposal of a subsidiary Excess of fair value over consideration upon step up acquisition in a subsidiary (note 37a) Gross earnings on finance lease Foreign exchange gain Change in fair value of investment properties Others	2008 HK$’000 1,856,395 9,861 5,707 1,871,963 (744,390) (700,723) (241,756) (168,033) (1,854,902) 17,061 99,767 116,828 2008 HK$’000 3,382,448 3,248,754 1,358,540 1,457,611 9,447,353 4,843 132,893 11,776 499 23,463 11,227 1,811 4,500 — — 15,697 — 8,255 22,000 12,054 — 2,000 28,625 279,643	2007 HK$’000 1,730,121 11,242 9,527 1,750,890 (698,314) (615,260) (292,793) (84,770) (1,691,137) 59,753 19,213 78,966 2007 HK$’000 4,439,215 4,207,442 1,306,974 1,429,841 11,383,472 3,792 219,281 5,409 719 30,089 11,973 1,223 — 68,429 28,863 — 1,736 — — 14,514 1,146 — 28,558 415,732

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Operating (loss)/profit is arrived at after charging Depreciation Amortisation Gaming licence Computer software Overburden removal costs Quarry site improvements Quarry site development Leasehold land and land use rights Operating lease rental Land and buildings Plant and machinery Royalty Unrealised loss on listed investments Loss on disposal of property, plant and equipment Loss on disposal of a subsidiary Staff costs, including Directors’ remuneration (note) Impairment of gaming licence Impairment of non-current investments Impairment of property, plant and equipment Impairment of trade and other debtors Provision for claims from contractors Outgoing in respect of investment properties Foreign exchange loss Auditor’s remuneration Audit services Provision for the year (Over)/under-provision in prior year Non-audit services Provision for the year Under-provision in prior year	2008 HK$’000 352,417 706,987 7,494 20,599 15,057 917 40,480 68,099 444 2,067 42,194 8,267 — 1,418,312 12,330,305 23,992 — 43,032 274,757 463 4,926 6,739 (722) 711 9	2007 HK$’000 328,280 998,360 5,728 15,057 20,609 3,105 41,484 81,169 1,738 4,790 — 1,229 2,337 1,406,263 — 4,569 27,457 3,016 — 518 — 7,525 54 2,501 77

Note: Staff costs are stated after amount capitalised in assets under construction in the aggregate of HK$105,882,000 (2007: HK$92,210,000), and include share option expenses of HK$31,635,000 (2007: nil).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. MANAGEMENT REMUNERATION

(a) Directors’ remuneration

Executive Directors Dr. Lui Che Woo Mr. Francis Lui Yiu Tung Mr. Chan Kai Nang Mr. Joseph Chee Ying Keung Ms. Paddy Tang Lui Wai Yu Mr. William Lo Chi Chung Non-executive Directors Dr. Charles Cheung Wai Bun Dr. Moses Cheng Mo Chi Mr. James Ross Ancell Dr. William Yip Shue Lam Mr. Anthony Thomas Christopher Carter Dr. Martin Clarke Mr. Guido Paolo Gamucci Dr. Patrick Wong Lung Tak Total 2008 Total 2007	Fees HK$’000 120 150 100 100 100 — 570 240 180 180 140 70 — — — 810 1,380 1,201	Salary, allowance and benefit in kind HK$’000 3,308 12,127 1,047 2,793 — — 19,275 — — — — — — — — — 19,275 20,462	Discretionary bonuses HK$’000 3,000 5,000 — 636 — — 8,636 — — — — — — — — — 8,636 6,782	Pension scheme contributions HK$’000 166 606 34 247 — — 1,053 — — — — — — — — — 1,053 1,078	Share options (note d) HK$’000 2,150 3,117 — 142 1,247 — 6,656 — — — — — — — — — 6,656 —	2008 Total HK$’000 8,744 21,000 1,181 3,918 1,347 — 36,190 240 180 180 140 70 — — — 810 37,000	2007 Total HK$’000 6,408 15,254 2,767 3,183 80 1,079
							28,771
							217 160 160 117 98 — — —
							752
							29,523

The discretionary bonuses paid in 2008 were in relation to performance for 2007.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include two (2007: two) Directors whose emoluments are reflected in note (a) above. The emoluments of the remaining three individuals (2007: three) are as follows:

Salaries and other emoluments Discretionary bonuses Retirement benefits Share options (note d)	2008 HK$’000 13,822 4,634 547 4,239 23,242	2007 HK$’000 12,915 2,188 476 —
		15,579

The emoluments of these individuals fell within the following bands:

HK$4,500,001 – HK$5,000,000 HK$5,500,001 – HK$6,000,000 HK$6,000,001 – HK$6,500,000 HK$11,000,001 – HK$11,500,000	Number of individuals 2008 2007 — 2 1 1 1 — 1 — 3 3	Number of individuals 2008 2007 — 2 1 1 1 — 1 — 3 3
		3

(c) Retirement benefit schemes

In Hong Kong, the Group makes monthly contributions to the Mandatory Provident Fund (MPF) Scheme equal to 5% of the relevant income of the employees in compliance with the legislative requirement. In addition, the Group also makes defined top-up contributions to the same scheme or the Occupational Retirement Scheme Ordinance (ORSO) Scheme for employees depending on circumstance. For the top-up schemes, the Group’s contributions to the schemes may be reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of the Schemes are held separately from those of the Group in independently administered funds.

The Group also operates a defined contribution scheme which is a unitized scheme, for eligible employees in Macau. The Galaxy Staff Pension Fund Scheme is established and managed by an independent management company appointed by the Group. Both the Group and the employees make equal share of monthly contributions to the scheme.

Employees in Mainland China participate in various pension plans organised by the relevant municipal and provincial governments under which the Group is required to make monthly defined contributions to these plans at rates ranging from 10% to 22%, dependent upon the applicable local regulations. The Group has no other obligations for the payment of pension and other post-retirement benefits of employees other than the above payments.

The costs of the retirement benefit schemes charged to the profit and loss statement during the year comprise contributions to the schemes of HK$40,398,000 (2007: HK$43,298,000), after deducting forfeitures of HK$12,103,000 (2007: HK$27,571,000), leaving HK$5,516,000 (2007: HK$1,389,000) available to reduce future contributions.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Share options

The value of the share options granted to the Directors and employees under the share option scheme of the Company represents the fair value of these options charged to the profit and loss statement for the year according to their vesting periods.

10. FINANCE (INCOME)/COSTS, NET

Interest expenses Guaranteed fixed rate notes and floating rate notes wholly repayable within five years Amount capitalised in assets under construction Interest expenses Fixed rate notes wholly repayable within five years Convertible notes wholly repayable within five years Bank loans and overdrafts Obligations under finance leases wholly payable within five years Change in fair value of derivative under the convertible notes Net gain from cross-currency swap contracts for hedging Other borrowing costs Finance (income)/costs, net TAXATION (CREDIT)/CHARGE Current taxation Hong Kong profits tax Mainland China income tax Macau complementary tax Deferred taxation (note 33) Taxation (credit)/charge	2008 HK$’000 466,815 (194,180) 272,635 — 122,272 10,036 838 (461,994) (38,216) 15,139 (79,290) 2008 HK$’000 8,786 2,021 376 (1,514,276) (1,503,093)	2007 HK$’000 493,842 (104,120) 389,722 123,141 111,630 35,792 1,227 (105,924) (14,174) 15,981 557,395 2007 HK$’000 7,660 11,965 3,635 2,912 26,172

11. TAXATION (CREDIT)/CHARGE

Hong Kong profits tax has been provided at the rate of 16.5% (2007: 17.5%) on the estimated assessable profits for the year after setting off available taxation losses brought forward. Taxation assessable on profits generated outside Hong Kong has been provided at the rates of taxation prevailing in the countries in which those profits arose, these rates range from 12% to 25% (2007: 12% to 33%).

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The taxation on the loss before taxation of the Group differs from the theoretical amount that would arise using the applicable taxation rate being the weighted average of rates prevailing in the countries in which the Group operates, is as follows:

Loss before taxation Share of profits less losses of jointly controlled entities Tax calculated at applicable tax rate Income under tax relief Income not subject to tax Profit exempted from Macau Complementary Tax (Note) Expenses not deductible for tax purpose Utilisation of previously unrecognised tax losses Tax losses not recognised Over/(under) provision of tax Change of tax rate in Hong Kong Mainland China withholding tax Taxation credit/(charge)	2008 HK$’000 (13,058,324) (51,885) (13,110,209) 1,563,882 556 95,686 59,992 (165,804) 5,070 (53,373) 667 1,204 (4,787) 1,503,093	2007 HK$’000 (476,061) (52) (476,113) 73,925 527 20,607 97,881 (163,216) 1,257 (56,653) (500) — — (26,172)

Note: Pursuant to the Despatch No. 249/2004 issued by the Chief Executive of the Macau Government on 30 September 2004, the Company is exempt from Macau Complementary Tax on its gaming activities for five years effective from the 2004 year of assessment till year 2008. Pursuant to the Despatch No. 326/2008 issued by the Chief Executive of the Macau Government on 20 November 2008, the Company is exempt from Macau Complementary Tax on its gaming activities for the five years effective from the 2009 year of assessment till year 2013.

12. LOSS ATTRIBUTABLE TO SHAREHOLDERS

The loss attributable to shareholders is dealt with in the financial statements of the Company to the extent of HK$10,142,034,000 (2007: loss of HK$25,886,000).

13. LOSS PER SHARE

The calculation of basic loss per share is based on the loss attributable to shareholders of HK$11,390,368,000 (2007: HK$466,200,000) and the weighted average of 3,937,281,082 shares (2007: 3,373,065,022 shares) in issue during the year.

The diluted loss per share for 2008 and 2007 equals to the basic loss per share since the exercise of the outstanding share options or conversion of convertible notes would not have a dilutive effect on the loss per share.

14. DIVIDENDS

The Board of Directors has resolved not to declare any dividend for the year ended 31 December 2008 (2007: nil).

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT

Group

Cost At 31 December 2007 Exchange differences Acquisition of a subsidiary Additions Transfer Disposal of a subsidiary Disposals At 31 December 2008 Accumulated depreciation and impairment At 31 December 2007 Exchange differences Charge for the year Transfer Disposal of a subsidiary Disposals At 31 December 2008 Net book value At 31 December 2008	Buildings HK$’000 1,863,868 2,541 — 2,718 (262,322) (18,457) (5,646) 1,582,702 89,717 1,467 36,437 (26,602) (18,457) (741) 81,821 1,500,881	Leasehold improvements HK$’000 54,559 180 7,596 23,980 — — (5,506) 80,809 43,322 179 12,437 — — (5,372) 50,566 30,243	Plant and machinery HK$’000 1,149,085 12,774 — 87,517 262,461 (32,639) (84,857) 1,394,341 583,673 6,765 147,223 26,602 (19,642) (81,750) 662,871 731,470	Gaming equipment and other assets HK$’000 960,091 10,675 9,731 94,774 (139) (1,117) (34,765) 1,039,250 370,185 8,074 156,320 — (1,117) (26,977) 506,485 532,765	Assets under construction HK$’000 1,790,481 — — 1,894,943 — — — 3,685,424 — — — — — — — 3,685,424	Total HK$’000 5,818,084 26,170 17,327 2,103,932 — (52,213) (130,774) 7,782,526 1,086,897 16,485 352,417 — (39,216) (114,840) 1,301,743 6,480,783

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cost At 31 December 2006 Exchange differences Additions Transfer Disposal of a subsidiary Disposals At 31 December 2007 Accumulated depreciation and impairment At 31 December 2006 Exchange differences Charge for the year Disposal of a subsidiary Disposals Impairment At 31 December 2007 Net book value At 31 December 2007	Buildings HK$’000 1,694,939 2,933 173,268 376 (5,294) (2,354) 1,863,868 21,652 488 57,280 (2,498) (986) 13,781 89,717 1,774,151	Leasehold improvements HK$’000 53,251 6 4,989 (1,434) — (2,253) 54,559 35,368 100 6,697 — (706) 1,863 43,322 11,237	Plant and machinery HK$’000 1,246,604 19,608 38,964 (60,395) (51,719) (43,977) 1,149,085 511,403 8,872 99,430 (9,156) (38,461) 11,585 583,673 565,412	Gaming equipment and other assets HK$’000 866,015 12,788 42,939 61,453 (1,341) (21,763) 960,091 208,187 8,823 164,873 (983) (10,943) 228 370,185 589,906	Assets under construction HK$’000 798,305 — 992,176 — — — 1,790,481 — — — — — — — 1,790,481	Total HK$’000 4,659,114 35,335 1,252,336 — (58,354) (70,347) 5,818,084 776,610 18,283 328,280 (12,637) (51,096) 27,457 1,086,897 4,731,187

• (a) Other assets comprise barges, furniture and equipment, operating equipment and motor vehicles.

• (b) The net book amount of other equipment held under finance leases amounts to HK$3,851,000 (2007: HK$7,702,000).

• (c) During the year, borrowing costs of HK$194,180,000 (2007: HK$104,120,000) arising on financing specifically entered into for the construction of a building, have been capitalised and included in assets under construction. A capitalisation rate of 5.16% (2007: 3.84%) was used, representing the effective finance costs of the loans used to finance the assets under construction.

• (d) Building with net book values of HK$17,084,000 (2007: HK$19,109,000) has been pledged as securities for the bank borrowings (note 32).

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. INVESTMENT PROPERTIES

At valuation Beginning of the year Change in fair value End of the year	Group 2008 2007 HK$’000 HK$’000 62,500 62,500 2,000 — 64,500 62,500	Group 2008 2007 HK$’000 HK$’000 62,500 62,500 2,000 — 64,500 62,500
		62,500

Investment properties are held under leases of 10 to 50 years in Hong Kong and were valued on an open market value basis by Vigers Appraisal & Consulting Limited, independent professional valuers.

17. LEASEHOLD LAND AND LAND USE RIGHTS

Net book value at beginning of the year Exchange differences Additions Amortisation Net book value at end of the year Cost Accumulated amortisation Net book value Leases of between 10 to 50 years Macau Hong Kong Mainland China	Group 2008 2007 HK$’000 HK$’000 1,580,777 1,621,917 232 240 — 104 (40,480) (41,484 1,540,529 1,580,777 1,766,509 1,766,277 (225,980) (185,500 1,540,529 1,580,777 1,309,564 1,344,091 227,571 233,503 3,394 3,183 1,540,529 1,580,777	Group 2008 2007 HK$’000 HK$’000 1,580,777 1,621,917 232 240 — 104 (40,480) (41,484 1,540,529 1,580,777 1,766,509 1,766,277 (225,980) (185,500 1,540,529 1,580,777 1,309,564 1,344,091 227,571 233,503 3,394 3,183 1,540,529 1,580,777
		1,580,777
		1,766,277 (185,500
		1,580,777
		1,344,091 233,503 3,183
		1,580,777

Leasehold land with net book values of HK$215,610,000 (2007: HK$222,173,000) has been pledged as securities for the bank borrowings (note 32).

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTANGIBLE ASSETS

Group

Cost At 31 December 2006 Additions Disposals At 31 December 2007 Additions Disposals At 31 December 2008 Accumulated amortisation and impairment At 31 December 2006 Charge for the year Disposals At 31 December 2007 Charge for the year Disposals Impairment charge At 31 December 2008 Net book value At 31 December 2008 At 31 December 2007	Goodwill (note a) HK$’000 33,014 — — 33,014 — — 33,014 — — — — — — — — 33,014 33,014	Gaming licence (note b) HK$’000 16,887,329 — — 16,887,329 — — 16,887,329 1,416,851 998,360 — 2,415,211 706,987 — 12,330,305 15,452,503 1,434,826 14,472,118	Computer software HK$’000 18,201 4,268 (2) 22,467 12,633 (456) 34,644 1,207 5,728 (1) 6,934 7,494 17 — 14,445 20,199 15,533	Total HK$’000 16,938,544 4,268 (2) 16,942,810 12,633 (456) 16,954,987 1,418,058 1,004,088 (1) 2,422,145 714,481 17 12,330,305 15,466,948 1,488,039 14,520,665

• (a) Goodwill is allocated to the Group’s cash-generating units identified according to country of operation and business segment. Goodwill with carrying amount of HK$28,524,000 (2007: HK$28,524,000) and HK$4,490,000 (2007: HK$4,490,000) is allocated to the construction materials segment in Macau and Hong Kong respectively. The recoverable amount of the business unit is determined based on value-in-use calculations. The key assumptions used in the value-in-use calculations are based on the best estimates of growth rates and discount rates of the respective segments.

• (b) Gaming licence represents the fair value of licence acquired on the acquisition of Galaxy Casino, S.A. in 2005 and has been amortised on a straight line basis over the remaining term of the gaming licence which will expire in June 2022.

In the face of a weakening global economy and the tightening of Mainland China’s policy on visa issuance to the PRC nationals to visit Macau, visitor growth in Macau has slowed down which also adversely affected the Macau gaming market. Keen competition from the other five concession/sub-concession holders together with the rising labour and operating costs in Macau has exerted pressure on the Group’s gaming operation net margin. Taking into account the presently available indicators, the Group performed an impairment assessment on the net assets of the gaming business which is regarded as a cash-generating unit. This assessment indicated an impairment on the gaming licence as at 31 December 2008.

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

With reference to a valuation carried out by an independent professional valuer, American Appraisal China Limited, the carrying value of the gaming licence is written down by approximately HK$12.3 billion to the recoverable amount of HK$1.4 billion at 31 December 2008. The recoverable amount of the gaming licence has been determined based on its fair value less cost to sell which the Group considers to be higher than the value-in-use. It is calculated using the cash flow projections derived from the financial forecasts for the remaining concession tenure in respect of a normal market participant.

Key assumptions adopted in the valuation are as follows:

Market growth rate in 2009, 2010, 2011 and 2012	–9%, 9%, 18%, –1%
Market share	16.67%
Customer mix (VIP : Mass)
2009	64% : 36%
2010	62% : 38%
2011	66% : 34%
2012	65% : 35%
Discount rate	16%

The market growth rate projections beyond four years are extrapolated at a rate of 3% per annum. Other key assumptions for the fair value calculation relating to the estimated cash flows include gross margin which is estimated based on the gaming division’s past performance, management’s expectations for the market development, and industry information. The average growth rates used are consistent with the forecasts included in industry reports. The discount rate used reflects specific risks relating to the gaming and entertainment segments.

Taking into account the corresponding release of approximately HK$1.3 billion in deferred taxation liability, the net amount of write-down is approximately HK$11.0 billion.

19. SUBSIDIARIES

Unlisted shares, at cost Loans receivable from subsidiaries Amounts due from subsidiaries Provision Amounts due from subsidiaries, less provision	Company 2008 2007 HK$’000 HK$’000 1 1 3,921,679 381,208 15,140,848 14,831,229 (10,512,073) — 4,628,775 14,831,229 8,550,455 15,212,438	Company 2008 2007 HK$’000 HK$’000 1 1 3,921,679 381,208 15,140,848 14,831,229 (10,512,073) — 4,628,775 14,831,229 8,550,455 15,212,438
		14,831,229
		15,212,438

The loans receivable are unsecured, interest free and have no fixed terms of repayment, except for a loan of HK$3.83 billion (2007: nil) which is repayable at the subsidiary’s discretion after the repayment of the Guaranteed Notes (Note 32(a)).

The amounts receivable are unsecured, interest free and have no fixed term of repayment.

Details of the subsidiaries which, in the opinion of the Directors, materially affect the results and/or net assets of the Group are given in note 45(a).

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. JOINTLY CONTROLLED ENTITIES

Share of net assets	Group 2008 2007 HK$’000 HK$’000 832,629 506,193

(a) The share of assets, liabilities and results of the jointly controlled entities attributable to the Group is summarised below:

Non-current assets Current assets Current liabilities Non-current liabilities Income Expenses	2008 HK$’000 835,630 378,784 (327,258) (54,527) 832,629 630,969 (579,084) 51,885	2007 HK$’000 814,795 443,256 (540,202) (211,656
		506,193
		469,028 (468,976
		52

(b) Details of the jointly controlled entities which, in the opinion of the Directors, materially affect the results and/or net assets of the Group are given in note 45(b).

21. ASSOCIATED COMPANY

				Group
				2008	2007
				HK$’000	HK$’000
Share	of	net	assets	730	730

(a) The share of assets, liabilities and results of the associated company attributable to the Group is summarised as follows:

Non-current assets Current assets Current liabilities Non-current liabilities Income Expenses Share of results for the year	2008 HK$’000 9,847 13,963 (5,702) (17,378) 730 24,164 (24,164) —	2007 HK$’000 7,211 12,385 (4,700 (14,166
		730
		5,929 (5,929
		—

• (b) Details of the associated company are given in note 45(c).

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. DERIVATIVE FINANCIAL INSTRUMENTS

Cross-currency swaps for cash flow hedges (note a) Cross-currency swaps for cash flow and fair value hedges (note a) Derivative component of the Convertible Notes (note 32b)	Group 2008 2007 HK$’000 HK$’000 1,522 1,155 (10,985) (8,673 (6,820) (468,858 (17,805) (477,531	Group 2008 2007 HK$’000 HK$’000 1,522 1,155 (10,985) (8,673 (6,820) (468,858 (17,805) (477,531
		(477,531

• (a) In August 2006, the Group entered into fixed and floating rate cross-currency swaps to hedge the underlying interest and foreign currency risk on the Guaranteed Notes (note 32). Under the fixed rate swap agreements, the Group pays Hong Kong dollar borrowings at fixed interest rate in exchange for receipts in United States dollar at a fixed interest rate. Under the floating rate swap agreements, the Group pays Hong Kong dollar borrowings at floating rates based on HIBOR in exchange for receipts in United States dollar at a floating interest rate based on LIBOR.

The notional principal amounts of the fixed and floating cross-currency swaps are US$350 million and US$250 million, respectively (2007: US$350 million and US$250 million). The terms of the fixed and floating rate swaps are from August 2006 to December 2009 and December 2010, respectively.

At 31 December 2008, the fixed interest rates vary from 9.47% to 9.495% (2007: 9.47% to 9.495%). Gains and losses recognised in the hedging reserve in equity (note 31) on cross-currency swaps as of 31 December 2008 will be continuously released to the profit and loss statement until the repayment of the Guaranteed Notes (note 32).

23. OTHER NON-CURRENT ASSETS

Non-current investments (note a) Finance lease receivable (note b) Deferred expenditure Overburden removal costs Quarry site development Quarry site improvements Deferred receivable (note c) Restricted bank deposits (note d)	Group 2008 2007 HK$’000 HK$’000 38,626 256,257 80,049 137,438 36,609 51,538 15,518 15,867 63,034 83,675 3,485 4,827 52,890 50,000 290,211 599,602	Group 2008 2007 HK$’000 HK$’000 38,626 256,257 80,049 137,438 36,609 51,538 15,518 15,867 63,034 83,675 3,485 4,827 52,890 50,000 290,211 599,602
		599,602

(a) Non-current investments

Unlisted investments, at fair value Advances to investee companies Less: Provision for impairment	Group 2008 2007 HK$’000 HK$’000 38,626 123,256 23,010 133,001 (23,010) — 38,626 256,257	Group 2008 2007 HK$’000 HK$’000 38,626 123,256 23,010 133,001 (23,010) — 38,626 256,257
		256,257

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Advances to investee companies are unsecured, interest free and have no fixed terms of repayment. They are considered equity in nature.

(b) Finance lease receivable

Gross receivable Unearned finance income Current portion included in current assets	Group 2008 2007 HK$’000 HK$’000 135,272 204,435 (18,236) (30,603 117,036 173,832 (36,987) (36,394 80,049 137,438	Group 2008 2007 HK$’000 HK$’000 135,272 204,435 (18,236) (30,603 117,036 173,832 (36,987) (36,394 80,049 137,438
		173,832 (36,394
		137,438

Finance lease receivable represents reimbursement of gaming equipment from the Service Providers. There are no unguaranteed residual values accrued to the Group and no contingent income was recognised during the year.

The finance lease is receivable in the following years:

Within one year Between one to five years Over five years	Present 2008 HK$’000 36,987 80,049 — 117,036	value 2007 HK$’000 36,394 121,685 15,753 173,832	Minimum receipts 2008 2007 HK$’000 HK$’000 46,497 50,709 88,775 137,550 — 16,176 135,272 204,435	Minimum receipts 2008 2007 HK$’000 HK$’000 46,497 50,709 88,775 137,550 — 16,176 135,272 204,435
				204,435

• (c) Deferred receivable represents advances to various contractors. The advances are secured by assets provided by the contractors, carry interest at prevailing market rate and are repayable by monthly instalments up to 2012. The current portion of the receivable is included under other debtors.

• (d) At 31 December 2008, restricted bank deposits of HK$53 million (2007: HK$50 million) are pledged to secure banking facilities extended to the Company and the Group which comprise a guarantee amounting to HK$291 million for the period from 1 April 2007 to the earlier of 90 days after the expiry of the Concession Agreement or 31 March 2022 which is in favour of the Macau Government against the legal and contractual liabilities of the Group and the Company under the Concession Agreement.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. INVENTORIES

Construction materials Aggregates and sand Concrete products Cement Spare parts Consumables Gaming and entertainment Playing cards Food and beverages Consumables	Group 2008 2007 HK$’000 HK$’000 33,476 33,019 8,480 8,485 8,459 7,118 17,117 14,767 13,041 14,770 80,573 78,159 5,104 6,462 3,021 2,052 5,324 3,776 13,449 12,290 94,022 90,449	Group 2008 2007 HK$’000 HK$’000 33,476 33,019 8,480 8,485 8,459 7,118 17,117 14,767 13,041 14,770 80,573 78,159 5,104 6,462 3,021 2,052 5,324 3,776 13,449 12,290 94,022 90,449
		78,159
		6,462 2,052 3,776
		12,290
		90,449

25. DEBTORS AND PREPAYMENTS

Trade debtors, net of provision (note a) Advances to gaming counterparties (note b) Other debtors, net of provision (note c) Prepayments Amount due from an associated company (note d) Current portion of finance lease receivable (note 23(b))	Group 2008 2007 HK$’000 HK$’000 581,092 616,574 705,000 205,000 238,608 143,254 41,099 32,948 4,719 5,166 36,987 36,394 1,607,505 1,039,336	Company 2008 2007 HK$’000 HK$’000 — — — — 52 21,138 599 240 — — — — 651 21,378	Company 2008 2007 HK$’000 HK$’000 — — — — 52 21,138 599 240 — — — — 651 21,378
			21,378

(a) Trade debtors mainly arise from the sales of construction materials. The Group has established credit policies which follow local industry standards. The Group normally allows an approved credit period ranging from 30 to 60 days for customers in Hong Kong and Macau and 120 to 180 days for customers in Mainland China. These are subject to periodic reviews by management.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The aging analysis of trade debtors of the Group based on the invoice dates and net of provision for bad and doubtful debts is as follows:

Within one month Two to three months Four to six months Over six months	2008 HK$’000 157,768 180,289 117,859 125,176 581,092	2007 HK$’000 160,066 178,714 118,994 158,800
		616,574

The carrying amounts of trade debtors of the Group are denominated in the following currencies:

Renminbi Hong Kong dollar Macau Patacas	2008 HK$’000 383,502 161,700 35,890 581,092	2007 HK$’000 398,942 161,365 56,267
		616,574

Included in the Group’s trade debtors were debtors with a carrying amount of HK$349,634,000 (2007: HK$354,343,000) which were not yet due. Debtors with a carrying amount of HK$231,458,000 (2007: HK$262,231,000) which were past due over their credit terms for which the Group has not provided for impairment loss. The ageing analysis of these trade debtors based on due dates is as follows:

Overdue: Within one month Two to three months Four to six months Over six months	2008 HK$’000 66,050 74,239 44,990 46,179 231,458	2007 HK$’000 66,566 73,867 63,051 58,747
		262,231

Trade debtors that were overdue but not provided for impairment loss relate to a number of customers that have a good track record with the Group. Based on past experience, management believes that no impairment provision is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

As at 31 December 2008, trade debtors of the Group amounting to HK$60,716,000 (2007: HK$54,400,000) were impaired and fully provided for.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Movements in the provision for impairment of trade debtors are as follows:

Balance at 1 January Additional provision Receivables written off during the year as uncollectible Exchange differences Balance at 31 December	2008 HK$’000 54,400 6,032 (3,386) 3,670 60,716	2007 HK$’000 50,288 3,016 (3,133 4,229
		54,400

• (b) The Group provides advances denominated in Hong Kong dollar to gaming counterparties which are repayable on demand. These advances are granted with reference to their credit history and business volumes. Such advances are interest free and secured, and the Group has the right, pursuant to the relevant credit agreements, to set off the overdue advances with payables due from the Group to these entities.

• (c) Other debtors of HK$238,608,000 (2007: HK$143,254,000) are mainly denominated in Hong Kong dollars which are not yet due. As at 31 December 2008, other debtors of the Group amounting to HK$37,000,000 (2007: nil) were impaired and fully provided for.

• (d) Amount receivable is unsecured, interest free and repayable in accordance with agreed term. The amount is denominated in Hong Kong dollar.

26. AMOUNTS DUE FROM/(DUE TO) JOINTLY CONTROLLED ENTITIES

Amounts due from jointly controlled entities (note a) Amount due to a jointly controlled entity (note b)	Group 2008 2007 HK$’000 HK$’000 191,621 339,168 (348) (2,177	Group 2008 2007 HK$’000 HK$’000 191,621 339,168 (348) (2,177
		(2,177

• (a) Amounts receivable of HK$178,083,000 (2007: HK$187,226,000), of which HK$5,648,000 (2007: HK$5,648,000) are secured, carry interest at prevailing market rate and are repayable within one year. The remaining amounts receivable of HK$13,538,000 are unsecured, interest free and have no fixed terms of repayment. As at 31 December 2008, the amounts receivable are mainly denominated in US dollar.

• (b) The amount payable is unsecured, interest free and has no fixed terms of repayment. The amount payable is denominated in Macau Patacas.

27. OTHER INVESTMENTS

Equity securities listed in Hong Kong, at market value	Group 2008 2007 HK$’000 HK$’000 15,574 57,768

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. CASH AND BANK BALANCES

Cash at bank and on hand (note a) Short-term bank deposits (note a) Cash at a registered clearing agency (note b)	Group 2008 2007 HK$’000 HK$’000 1,142,293 1,339,154 4,231,005 6,891,208 669,002 — 6,042,300 8,230,362	Company 2008 2007 HK$’000 HK$’000 636 438 725,423 4,548,284 — — 726,059 4,548,722	Company 2008 2007 HK$’000 HK$’000 636 438 725,423 4,548,284 — — 726,059 4,548,722
			4,548,722

• (a) As at 31 December 2007, cash and bank balances of the Group of HK$1,934 million and of the Company of HK$1,577 million were restricted to specified uses in accordance with the note offering agreements as set out in note 32 (a) and (b). There was no such amount as at 31 December 2008.

• (b) As at 31 December 2008, cash at a registered clearing agency was designated to be used for the purchase of outstanding notes payable (Note 32a).

The carrying amounts of cash and bank balances are denominated in the following currencies:

Hong Kong dollar US dollar Macau Patacas Renminbi UK pound	Group 2008 2007 HK$’000 HK$’000 3,132,630 5,587,741 2,648,829 2,264,440 188,110 306,976 70,427 71,205 2,304 — 6,042,300 8,230,362	Company 2008 2007 HK$’000 HK$’000 723,753 2,647,691 2 1,901,031 — — — — 2,304 — 726,059 4,548,722	Company 2008 2007 HK$’000 HK$’000 723,753 2,647,691 2 1,901,031 — — — — 2,304 — 726,059 4,548,722
			4,548,722

The credit quality of cash and bank balances of the Group can be assessed by reference to external credit ratings (if available) as follows:

Counterparties with external credit rating (Standard & Poor’s or Moody’s) AAA AA– to AA+ A– to A+ BBB+ BBB Unrated and cash on hand	2008 HK$’000 669,002 1,131,712 852,584 2,640,075 256,780 492,147 6,042,300	2007 HK$’000 — 4,566,105 661,319 1,493,263 838,853 670,822
		8,230,362

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. SHARE CAPITAL

Authorised: At 31 December 2007 and at 31 December 2008 Issued and fully paid: At 31 December 2006 Issue of new shares Issue of shares upon exercise of share options At 31 December 2007 Issue of shares upon exercise of share options At 31 December 2008	Ordinary shares of HK$0.10 each 9,000,000,000 3,296,117,361 630,188,000 9,334,000 3,935,639,361 2,530,000 3,938,169,361	HK$’000 900,000
		329,612 63,019 933
		393,564 253
		393,817

30. SHARE OPTION SCHEME

The Company operates a share option scheme under which options to subscribe for ordinary shares in the Company are granted to selected qualifying grantees. The existing scheme was adopted on 30 May 2002 and the options granted under the previous schemes remain effective. Under the scheme, share options may be granted to, amongst others, Directors, senior executives or employees of the Company or its affiliates. Consideration to be paid by the grantee on acceptance of each grant of option is HK$1.00. The period within which the shares may be taken up under an option is determined by the Board at the time of grant, except that such period shall not expire later than ten years from the date of grant of the option.

Movements in the number of share options outstanding and their related weighted average exercise prices during the year are as follows:

At beginning of year Granted Exercised Lapsed At end of year Vested at end of year	2008 Average exercise price Number of share options HK$ 3.54 38,218,000 6.03 69,840,000 0.58 (2,530,000) 6.40 (8,244,000) 5.16 97,284,000 3.74 35,244,000	2007 Average exercise price Number of share options HK$ 3.64 47,552,000 — — 4.06 (9,334,000 — — 3.54 38,218,000 3.54 38,218,000	2007 Average exercise price Number of share options HK$ 3.64 47,552,000 — — 4.06 (9,334,000 — — 3.54 38,218,000 3.54 38,218,000
			38,218,000
			38,218,000

The weighted average share price at the date of exercise for share options exercised during the year was HK$5.69 (2007: HK$7.94).

The options outstanding at 31 December 2008 have exercise prices ranging from HK$0.5140 to HK$6.9720 (2007: HK$0.5140 to HK$4.5900) with weighted average remaining contractual life of 4.30 years (2007: 3.54 years).

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Exercise price per share Exercise period HK$ Directors 20 May 1999 to 19 May 2008 0.5333 30 December 2000 to 29 December 2009 0.5216 1 March 2004 to 28 February 2013 0.5140 22 October 2005 to 21 October 2011 4.5900 22 October 2006 to 21 October 2011 4.5900 17 January 2010 to 16 January 2014 6.9720 17 January 2011 to 16 January 2014 6.9720 17 January 2012 to 16 January 2014 6.9720 18 August 2009 to 17 August 2014 3.3200 Employees and others 1 March 2004 to 28 February 2013 0.5140 22 October 2005 to 21 October 2011 4.5900 22 October 2006 to 21 October 2011 4.5900 17 January 2010 to 16 January 2014 6.9720 17 January 2011 to 16 January 2014 6.9720 17 January 2012 to 16 January 2014 6.9720 11 July 2010 to 10 July 2014 3.8420 11 July 2011 to 10 July 2014 3.8420 11 July 2012 to 10 July 2014 3.8420 18 August 2009 to 17 August 2014 3.3200 18 August 2010 to 17 August 2014 3.3200 18 August 2011 to 17 August 2014 3.3200 18 August 2012 to 17 August 2014 3.3200	Number of share options 2008 2007 — 2,500,000 3,400,000 3,400,000 3,870,000 3,980,000 14,200,000 14,200,000 2,340,000 2,860,000 2,612,500 — 2,612,500 — 5,225,000 — 383,000 — 110,000 — 9,400,000 9,400,000 1,924,000 1,878,000 8,552,000 — 8,552,000 — 17,104,000 — 750,000 — 750,000 — 1,500,000 — 4,911,000 — 2,272,000 — 2,272,000 — 4,544,000 — 97,284,000 38,218,000	Number of share options 2008 2007 — 2,500,000 3,400,000 3,400,000 3,870,000 3,980,000 14,200,000 14,200,000 2,340,000 2,860,000 2,612,500 — 2,612,500 — 5,225,000 — 383,000 — 110,000 — 9,400,000 9,400,000 1,924,000 1,878,000 8,552,000 — 8,552,000 — 17,104,000 — 750,000 — 750,000 — 1,500,000 — 4,911,000 — 2,272,000 — 2,272,000 — 4,544,000 — 97,284,000 38,218,000
		38,218,000

The fair values of the options granted during the year on 17 January 2008, 11 July 2008, 18 August 2008 and 18 August 2008 are estimated at HK$1.87, HK$1.12, HK$1.01 and HK$0.89 per option respectively based on the BlackScholes valuation model. The significant inputs into the model were share prices of HK$6.60, HK$3.70, HK$3.22 and HK$3.22 at the respective dates of grant, respective exercise prices of HK$6.972, HK$3.842, HK$3.32 and HK$3.32, standard deviation of expected share price returns of 39%, 39%, 41% and 41%, expected life of options of 3 to 6 years, expected dividend paid out rate of 2% and annual risk-free interest rate of 2.2% to 3.3%. The volatility measured at the standard deviation of expected share price returns is based on the historical share price movement of the Company in the past two years prior to the dates of grant. Changes in the subjective input assumptions could materially affect the fair value estimate.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. RESERVES

Group

At 1 January 2008 Exchange differences Change in fair value of cash flow hedges Issue of shares upon exercise of share options Fair value of share options Share options lapsed Change in fair value of non- current investments Disposal of non-current investments Transfer to legal reserve Loss for the year At 31 December 2008 At 1 January 2007 Exchange differences Change in fair value of cash flow hedges Issue of new shares Issue of shares upon exercise of share options Change in fair value of non- current investments Loss for the year At 31 December 2007	Share premium HK$’000 16,669,970 — — 445 — — — — — —	Capital reserve HK$’000 4,395 — — — — — — — — —	Capital redemption reserve HK$’000 70 — — — — — — — — —	Hedging reserve HK$’000 (14,730) — 12,013 — — — — — — —	Legal reserve (note a) HK$’000 — — — — — — — — 45,631 —	Investment reserve HK$’000 103,195 — — — — — (88,384) (3,363) — —	Share option reserve HK$’000 28,762 — — (28) 31,635 (417) — — — —	Exchange reserve HK$’000 100,397 42,429 — — — — — — — —	Revenue reserve HK$’000 1,121,029 — — — — 417 — — (45,631) (11,390,368)	Total HK$’000 18,013,088 42,429 12,013 417 31,635 — (88,384 (3,363 — (11,390,368
	16,670,415	4,395	70	(2,717)	45,631	11,448	59,952	142,826	(10,314,553)	6,617,467
	11,456,959 — — 5,167,851 45,160 — —	4,395 — — — — — —	70 — — — — — —	47,072 — (61,802) — — — —	— — — — — — —	118,133 — — — — (14,938) —	36,927 — — — (8,165) — —	52,402 47,995 — — — — —	1,587,229 — — — — — (466,200)	13,303,187 47,995 (61,802 5,167,851 36,995 (14,938 (466,200
	16,669,970	4,395	70	(14,730)	—	103,195	28,762	100,397	1,121,029	18,013,088

Note:

(a) A subsidiary of the Group, incorporated in Macau and limited by shares, is required under the Macau Commercial Code No. 432 to set aside a minimum of 10% of this subsidiary’s profit after taxation to the legal reserve until the balance of the reserve reaches a level equivalent to 25% of the subsidiary’s capital. Legal reserve is not distributable.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

At 1 January 2008 Issue of shares upon exercise of share options Fair value of share options Share options lapsed Loss for the year At 31 December 2008 At 1 January 2007 Issue of new shares Issue of shares upon exercise of share options Loss for the year At 31 December 2007	Share premium HK$’000 16,669,970 445 — — — 16,670,415 11,456,959 5,167,851 45,160 — 16,669,970	Capital reserve HK$’000 235,239 — — — — 235,239 235,239 — — — 235,239	Capital redemption reserve HK$’000 70 — — — — 70 70 — — — 70	Share option reserve HK$’000 28,762 (28) 31,635 (417) — 59,952 36,927 — (8,165) — 28,762	Revenue reserve HK$’000 238,091 — — 417 (10,142,034) (9,903,526) 263,977 — — (25,886) 238,091	Total HK$’000 17,172,132 417 31,635 — (10,142,034) 7,062,150 11,993,172 5,167,851 36,995 (25,886) 17,172,132

As at 31 December 2008, no reserves of the Company were available for distribution to shareholders (2007: HK$238,091,000).

32. BORROWINGS

Bank loans Secured Unsecured Other borrowings Guaranteed notes (note a) Convertible notes (note b) Bank loans and other borrowings Obligations under finance leases (note c) Total borrowings Current portion included in current liabilities Short term loan	Group 2008 2007 HK$’000 HK$’000 98,140 178,700 614,354 432,597 712,494 611,297 4,561,393 4,565,617 1,433,585 1,320,525 6,707,472 6,497,439 4,389 8,379 6,711,861 6,505,818 (26,549) (6,150) (409,354) (489,097) (435,903) (495,247) 6,275,958 6,010,571	Company 2008 2007 HK$’000 HK$’000 75,000 153,400 300,000 244,200 375,000 397,600 — — 1,433,585 1,320,525 1,808,585 1,718,125 — — 1,808,585 1,718,125 — — (375,000) (397,600) (375,000) (397,600) 1,433,585 1,320,525

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (a) On 14 December 2005, the Group, through its subsidiary, Galaxy Entertainment Finance Company Limited, issued guaranteed senior fixed rate and floating rate notes with aggregate principal amount of US$600 million (the ‘‘Guaranteed Notes’’). The fixed rate guaranteed senior notes with nominal value of US$350,000,000 carry fixed interest at 9.875% per annum and will be fully repayable on 15 December 2012. The floating rate guaranteed senior notes with nominal value of US$250,000,000 carry interest at sixmonth US Dollar London Inter-Bank Offering Rate plus 5% and are fully repayable on 15 December 2010. The Guaranteed Notes are listed on the Singapore Exchange Securities Trading Limited.

The proceeds from the notes are restricted to be used for the repayment of a specific bank loan, interest payments of the Guaranteed Notes, financing the construction and development of assets under construction, and for general corporate purpose (note 28).

• (b) On 14 December 2006, the Company issued zero coupon convertible notes (the ‘‘Convertible Notes’’) with an aggregate principal amount of US$240 million (approximately HK$1,872 million). The Convertible Notes are unsecured, do not carry any interest and have a maturity date of 14 December 2011. Subject to the terms of the Convertible Notes, the holders have the option to convert the Convertible Notes into ordinary shares of the Company at any time on or after 14 June 2007 up to the maturity date at the initial conversion price of HK$9.36 per share, subject to adjustment. The conversion price is subject to a reset mechanism pursuant to the terms of the Convertible Notes. Unless previously redeemed and cancelled, or converted, the Convertible Notes will be redeemed at 100% of their principal amount on the maturity date. The Group may, at its option at any time after 14 December 2007 and prior to the maturity date, redeem the Convertible Notes in whole or in part, at 100% of their principal amount subject to the terms of the Convertible Notes.

The proceeds from the Convertible Notes are restricted to be used for financing the construction and development of assets under construction, and for general corporate purpose (note 28).

The fair value of the derivative under the Convertible Notes was estimated at the issue date by reference to the Binomial model. The excess of net proceeds over the fair value of the derivative component is recognised as a liability.

The liability under the Convertible Notes and the derivative component recognised in the balance sheet are analysed as follows:

Liability under the Convertible Notes At beginning of the year Exchange difference Interest expense At end of the year	2008 HK$’000 1,320,525 (9,212) 122,272 1,433,585	2007 HK$’000 1,205,377 3,518 111,630
		1,320,525

Interest expense on the Convertible Notes is calculated using the effective interest method by applying the effective interest rate of 9.23% (2007: 9.23%).

Derivative component At beginning of the year Change in fair value Exchange difference At end of the year (note 22)	2008 HK$’000 468,858 (461,994) (44) 6,820	2007 HK$’000 573,109 (105,924 1,673
		468,858

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of the derivative component is determined by reference to the Binomial model. The significant assumptions used in the calculation of the fair values are as follows:

• (i) The valuation is based on the assumption that the Convertible Notes will continue without default, delay in payments and no earlier redemption.

• (ii) The expected volatility of 62% (2007: 45%) of the share price of the Company is based on the share price movements for the last three years.

• (iii) The risk free rate is based on the yield of Exchange Fund Notes as at the respective dates, with maturity in accordance with the life of the Convertible Notes.

• (iv) The expected dividend paid out rate is 0.1% (2007: 0.1%) during the life of the Convertible Notes.

• (c) Obligations under finance leases

The finance lease obligations are payable in the following years:

Within one year In the second year	Minimum payments 2008 2007 HK$’000 HK$’000 4,828 4,828 — 4,828 4,828 9,656	Present 2008 HK$’000 4,389 — 4,389	value 2007 HK$’000 3,990 4,389
			8,379

• (d) The borrowings are repayable as follows:

Bank loans 2008 2007 HK$’000 HK$’000 Within one year 431,514 491,257 Between one to two years 262,160 99,060 Between two to five years 6,480 6,480 Over five years 12,340 14,500 712,494 611,297 Bank 2008 HK$’000 Within one year 375,000 Between two to five years — 375,000	Group Guaranteed notes Convertible notes 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 — — — — 1,900,580 — — — 2,660,813 4,565,617 1,433,585 1,320,525 — — — — 4,561,393 4,565,617 1,433,585 1,320,525 Company loans Convertible notes 2007 2008 2007 HK$’000 HK$’000 HK$’000 397,600 — — — 1,433,585 1,320,525 397,600 1,433,585 1,320,525	Group Guaranteed notes Convertible notes 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 — — — — 1,900,580 — — — 2,660,813 4,565,617 1,433,585 1,320,525 — — — — 4,561,393 4,565,617 1,433,585 1,320,525 Company loans Convertible notes 2007 2008 2007 HK$’000 HK$’000 HK$’000 397,600 — — — 1,433,585 1,320,525 397,600 1,433,585 1,320,525
		1,320,525

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (e) Effective interest rates:

		2008			2007
	HK$	RMB	US$	HK$	RMB	US$
Bank loans	1.8%	5.5%	—	3.8%	5.8%	—
Fixed rate notes	—	—	—	5.7%	—	—
Guaranteed Notes	—	—	9.9%	—	—	10.9%
Convertible Notes	—	—	9.23%	—	—	9.23%

• (f) The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates or maturity (whichever is earlier) are as follows:

6 months or less 1 to 5 years	Group 2008 2007 HK$’000 HK$’000 2,617,463 2,513,637 4,094,398 3,992,181 6,711,861 6,505,818	Company 2008 2007 HK$’000 HK$’000 375,000 397,600 1,433,585 1,320,525 1,808,585 1,718,125	Company 2008 2007 HK$’000 HK$’000 375,000 397,600 1,433,585 1,320,525 1,808,585 1,718,125
			1,718,125

• (g) The carrying amounts and fair value of the borrowings are as follows:

Bank loans Guaranteed notes Convertible notes Other borrowings	Carrying 2008 HK$’000 712,494 4,561,393 1,433,585 4,389 6,711,861	Group amount Fair value 2007 2008 2007 HK$’000 HK$’000 HK$’000 611,297 712,494 611,297 4,565,617 2,126,461 4,661,763 1,320,525 1,191,654 1,183,827 8,379 4,162 8,425 6,505,818 4,034,771 6,465,312	Carrying 2008 HK$’000 375,000 — 1,433,585 — 1,808,585	Company amount Fair value 2007 2008 2007 HK$’000 HK$’000 HK$’000 397,600 375,000 397,600 — — — 1,320,525 1,191,654 1,183,827 — — — 1,718,125 1,566,654 1,581,427	Company amount Fair value 2007 2008 2007 HK$’000 HK$’000 HK$’000 397,600 375,000 397,600 — — — 1,320,525 1,191,654 1,183,827 — — — 1,718,125 1,566,654 1,581,427	Company amount Fair value 2007 2008 2007 HK$’000 HK$’000 HK$’000 397,600 375,000 397,600 — — — 1,320,525 1,191,654 1,183,827 — — — 1,718,125 1,566,654 1,581,427
				1,718,125	1,566,654	1,581,427

The fair value of the borrowings is calculated using cash flows discounted at prevailing borrowing rates. The carrying amounts of floating rate and other current borrowings approximate their fair value.

• (h) The carrying amounts of bank loans and other borrowings are denominated in the following currencies:

Hong Kong dollar US dollar Renminbi Macau Patacas	Group 2008 2007 HK$’000 HK$’000 679,701 539,800 5,994,979 5,886,142 32,792 71,497 4,389 8,379 6,711,861 6,505,818	Company 2008 2007 HK$’000 HK$’000 375,000 397,600 1,433,585 1,320,525 — — — — 1,808,585 1,718,125	Company 2008 2007 HK$’000 HK$’000 375,000 397,600 1,433,585 1,320,525 — — — — 1,808,585 1,718,125
			1,718,125

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. DEFERRED TAXATION LIABILITIES

At beginning of the year Effect of changes in tax rate (Released)/charged to profit and loss statement At end of the year	Group 2008 2007 HK$’000 HK$’000 1,781,500 1,778,588 (901) — (1,513,375) 2,912 267,224 1,781,500	Group 2008 2007 HK$’000 HK$’000 1,781,500 1,778,588 (901) — (1,513,375) 2,912 267,224 1,781,500
		1,781,500

Deferred taxation assets and liabilities are offset when there is a legal right to set off current taxation assets with current taxation liabilities and when the deferred taxation relates to the same authority. The above liabilities shown in the consolidated balance sheet are determined after appropriate offsetting of the relevant amounts.

Deferred taxation is calculated in full on temporary differences under the liability method using applicable tax rates prevailing in the countries in which the Group operates. Movements on the deferred taxation liabilities/(assets) are as follows:

At 31 December 2006 (Released)/charged to profit and loss statement At 31 December 2007 Effect of changes in tax rate (Released)/charged to profit and loss statement At 31 December 2008	Depreciation allowance HK$’000 39,125 (6,317) 32,808 (1,403) (4,956) 26,449	Tax losses HK$’000 (24,367) 12,611 (11,756) 502 2,973 (8,281)	Fair value adjustments HK$’000 1,763,830 (3,382) 1,760,448 — (1,511,392) 249,056	Total HK$’000 1,778,588 2,912
				1,781,500 (901 (1,513,375
				267,224

Deferred taxation assets of HK$49,710,000 (2007: HK$63,862,000) arising from unused tax losses and other temporary differences totalling of HK$713,141,000 (2007: HK$460,394,000) have not been recognised in the consolidated financial statements. Unused tax losses of HK$77,426,000 (2007: HK$138,352,000) have no expiry date and the remaining balance will expire at various dates up to and including 2014.

Pursuant to the Despatch No. 326/2008 issued by the Chief Executive of the Macau Government on 20 November 2008, the Company is exempt from Macau Complementary Tax on its gaming activities for five years effective from the 2009 year of assessment till year 2013.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. PROVISIONS

At 31 December 2006 Reversal of provision Charged to the profit and loss statement Applied during the year At 31 December 2007 Reversal of provision Charged to the profit and loss statement Applied during the year At 31 December 2008	Environment restoration HK$’000 119,870 (1,597) 1,438 (16,807) 102,904 (42) 1,236 (14,114) 89,984	Group Quarrying right HK$’000 67,200 — 17,740 (15,258) 69,682 — 17,738 (21,800) 65,620	Total HK$’000 187,070 (1,597 19,178 (32,065
			172,586 (42 18,974 (35,914
			155,604

The current portion of the provisions amounting to HK$40,051,000 (2007: HK$36,964,000) is included under other creditors.

35. CREDITORS AND ACCRUALS

Trade creditors (note a) Other creditors Chips issued Loans from minority interests (note b) Accrued operating expenses Deposits received	Group 2008 2007 HK$’000 HK$’000 961,502 1,038,002 605,457 678,030 1,299,099 1,322,394 91,177 89,672 1,013,697 765,649 8,844 7,883 3,979,776 3,901,630	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — 6,132 30,198 — — 6,132 30,198	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — 6,132 30,198 — — 6,132 30,198
			30,198

(a) The aging analysis of trade creditors of the Group based on the invoice dates is as follows:

Within one month Two to three months Four to six months Over six months	2008 HK$’000 559,557 104,163 40,989 256,793 961,502	2007 HK$’000 608,429 86,894 43,952 298,727
		1,038,002

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of trade creditors of the Group are denominated in the following currencies:

Macau Patacas Renminbi Hong Kong dollar Other	2008 HK$’000 197,215 214,276 545,196 4,815 961,502	2007 HK$’000 206,157 204,646 617,369 9,830
		1,038,002

(b) The loans payable of HK$32,844,000 (2007: 32,281,000) are unsecured, carrying interest at prevailing market rate and have no fixed terms of repayment. The remaining are unsecured, interest free and have no fixed terms of repayment.

36. NOTES TO CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of operating (loss)/profit to cash generated from operations

Operating (loss)/profit Depreciation Change in fair value of investment properties Loss on disposal of property, plant and equipment Loss on disposal of intangible assets Realised and unrealised loss/(gain) on listed and unlisted investments Excess of fair value over consideration upon step up acquisition in a subsidiary (Gain)/loss on disposal of a subsidiary Gain on partial disposal of jointly controlled entities Gain on deemed disposal of jointly controlled entities Gain on disposal of non-current investments Excess of consideration over fair value on acquisition of subsidiaries Impairment of intangible assets Impairment of non-current investments Impairment of property, plant and equipment Interest income Gross earnings on finance lease Dividend income from listed and unlisted investments Amortisation of deferred expenditure Amortisation of intangible assets Amortisation of leasehold land and land use rights Fair value of share options granted Operating profit before working capital changes (Increase)/decrease in inventories Increase in debtors and prepayments (Decrease)/increase in creditors and accruals Decrease in amount due to a jointly controlled entity Cash (use in)/generated from operations	2008 HK$’000 (13,189,499) 352,417 (2,000) 8,267 473 37,694 (22,000) (8,255) — (15,697) — 9,344 12,330,305 23,992 — (145,168) (12,054) (13,038) 36,573 714,481 40,480 31,635 177,950 (3,168) (583,397) (30,086) (1,382) (440,083)	2007 HK$’000 81,282 328,280 — 1,229 — (68,429 — 2,337 (28,863 — (1,736 — — 4,569 27,457 (225,409 (14,514 (13,196 38,771 1,004,088 41,484 —
		1,177,350 227 (329,928 423,411 (3,284
		1,267,776

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Analysis of net cash inflow in respect of disposal of a subsidiary

Consideration settled in cash Net cash inflow on disposal	2008 HK$’000 — —	2007 HK$’000 49,217
		49,217

37. BUSINESS COMBINATIONS

• (a) The Group held 88.11% equity interest of Galaxy Casino, S.A. (‘‘GCSA’’). The principal activities of GCSA and its subsidiaries are operation in casino games of chance or games of other forms and related activities, provision of hospitality, entertainment and related services. On 29 September 2008, the Group acquired 1.89% equity interest in GCSA.

Cash consideration Direct costs relating to the acquisition Cash outflow on acquisition Assignment of consideration from sales of non-current investments Total acquisition cost Interest previously held by minority interest Excess of fair value of net assets acquired over consideration	HK$’000 10,164 916
	11,080 110,000
	121,080 143,080
	(22,000)

• (b) The Group held 40% equity interest in Friendship Catering Management Co Ltd (‘‘Friendship’’), a company engaged in catering service at StarWorld Hotel. On 20 February 2008, the Group acquired the remaining 60% equity interest in Friendship. Upon completion of the transaction, Friendship became a wholly owned subsidiary of the Group.

Cash consideration Assignment of loan from the other shareholder Total acquisition cost	HK$’000 10,000 (7,185)
	2,815

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The assets and liabilities as at the date of acquisition are as follows:

Property, plant and equipment Trade and other receivables Inventories Cash and bank balances Trade and other payables Net liabilities acquired Interest previously held by the Group as investment in a jointly controlled entity Excess of consideration over fair value of net assets acquired Total acquisition cost Cash consideration Cash and bank balances acquired Net cash outflow on acquisition	Carrying amounts HK$’000 5,189 3,099 135 815 (14,140) (4,902)	Fair values HK$’000 5,189 3,099 135 815 (14,140) (4,902) 1,961 5,756 2,815 10,000 (815) 9,185

The acquired business contributed revenue of HK$18,718,000 and net loss of HK$5,667,000 to the Group for the period since acquisition. If the acquisition had occurred on 1 January 2008, revenue and loss for the year of the Group would have been increased by HK$1,801,000 and HK$1,178,000 respectively.

• (c) The Group held 50% equity interest in Prosperity Catering Management Co Ltd (‘‘Prosperity’’), a company engaged in catering service at StarWorld Hotel. On 28 February 2008, the Group acquired the remaining 50% equity interest in Prosperity. Upon completion of the transaction, Prosperity became a wholly owned subsidiary of the Group.

Cash consideration Assignment of loan from the other shareholder Total acquisition cost	HK$’000 1,146 (1,069) 77

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The assets and liabilities as at the date of acquisition are as follows:

Property, plant and equipment Trade and other receivables Inventories Cash and bank balances Trade and other payables Net liabilities acquired Interest previously held by the Group as investment in a jointly controlled entity Excess of consideration over fair value of net assets acquired Total acquisition cost Cash consideration Cash and bank balances acquired Net cash outflow on acquisition	Carrying amounts HK$’000 12,137 1,184 270 718 (21,331) (7,022)	Fair values HK$’000 12,137 1,184 270 718 (21,331
		(7,022 3,511 3,588
		77
		1,146 (718
		428

The acquired business contributed revenue of HK$9,714,000 and net loss of HK$5,974,000 to the Group for the period since acquisition. If the acquisition had occurred on 1 January 2008, revenue and loss for the year of the Group would have been increased by HK$3,665,000 and HK$628,000 respectively.

38. CAPITAL COMMITMENTS

Contracted but not provided for Authorised but not contracted for	Group 2008 2007 HK$’000 HK$’000 1,867,222 2,519,750 5,842,168 3,866,781

39. OPERATING LEASE COMMITMENTS

The future aggregate minimum lease rental expense in respect of land and buildings and equipments under noncancellable operating leases is payable in the following periods:

First year Second to fifth years inclusive After the fifth year	Group 2008 2007 HK$’000 HK$’000 48,453 29,245 76,423 43,518 105,082 108,742 229,958 181,505	Group 2008 2007 HK$’000 HK$’000 48,453 29,245 76,423 43,518 105,082 108,742 229,958 181,505
		181,505

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. OPERATING LEASE RENTAL RECEIVABLE

The future aggregate minimum lease rental income in respect of land and buildings under non-cancellable operating leases is receivable in the following periods:

First year Second to fifth years inclusive After the fifth year	Group 2008 2007 HK$’000 HK$’000 15,530 15,752 52,796 54,670 15,400 35,098 83,726 105,520	Group 2008 2007 HK$’000 HK$’000 15,530 15,752 52,796 54,670 15,400 35,098 83,726 105,520
		105,520

41. RELATED PARTY TRANSACTIONS

Significant related party transactions carried out in the normal course of the Group’s business activities during the year are as follows:

• (a) Interest income from jointly controlled entities amounted to HK$11,776,000 (2007: HK$5,409,000) based on terms agreed among the parties and no interest income was received from a subsidiary of K. Wah International Holdings Limited (‘‘KWIH’’), a substantial shareholder of the Company (2007: nil).

• (b) Management fee received from jointly controlled entities amounted to HK$3,047,000 (2007: HK$3,286,000).

• (c) Rental expenses of HK$2,008,000 (2007: HK$2,015,000) were paid to a subsidiary of KWIH based on the terms of the rental agreement between the parties.

• (d) There is no sales of property, plant and equipment to an associated company (2007: HK$3,122,000).

• (e) The balances with jointly controlled entities and an associated company are disclosed in note 26 and 25(c).

• (f) Key management personnel comprise the Chairman, Deputy Chairman, Managing Director, Deputy Managing Director and other Executive Directors. The total remuneration of the key management is shown below:

Fees Salaries and other allowances Discretionary bonuses Retirement benefits Share options	2008 HK$’000 570 19,275 8,636 1,053 6,656 36,190	2007 HK$’000 547 20,364 6,782 1,078 —
		28,771

42. GUARANTEES

The Company has executed guarantees in favour of banks in respect of facilities granted to subsidiaries amounting to HK$638,800,000 (2007: HK$627,109,000), of which HK$479,425,000 (2007: HK$307,087,000) have been utilised.

The Group has executed guarantees in favour of a bank in respect of facilities granted to an associated company amounting to HK$9,125,000 (2007: HK$9,125,000). At 31 December 2008, facilities utilised amounted to HK$9,125,000 (2007: HK$9,125,000).

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

43. POST BALANCE SHEET EVENTS

• (a) On 31 December 2008, US$113,890,000 principal amount of the Floating Rate Notes and US$56,337,000 principal amount of the Fixed Rate Notes were purchased by the Group, through its subsidiary, Galaxy Entertainment Finance Company Limited, for cash at an aggregate amount of approximately US$86,350,000 (including accrued interest up to the settlement date of 2 January 2009). The purchases were completed with payment made on 2 January 2009 and the estimated gain of approximately HK$650 million will be recognised in the 2009 financial statements.

• (b) On 18 February 2009, the Group entered into a sale and purchase agreement with a third party (the ‘‘Buyer’’) for the sale of 50% of the issued share capital of Boom Victory Investments Limited (‘‘Boom Victory’’), a wholly owned indirect subsidiary of the Group, and a related shareholder’s loan to Pioneer for a total consideration of HK$47,084,895 (‘‘SPA’’). Boom Victory is the sole shareholder of K. Wah Materials and Development (Huidong) Company Limited, which in turn, is one of the two shareholders of 惠東嘉華材料 有限公司 (K. Wah Materials (Huidong) Limited), being a sino-foreign co-operative joint venture licensed to quarry mine and extract rock at a quarry located in Huidong, Guangdong Province, mainland China. On the same date, the Group and the Buyer entered into a shareholders’ agreement to govern the terms of the joint venture in Boom Victory, under which, among other things, the Buyer is required to pay to the Group a total sum of HK$110,000,000 in seven annual instalments. The SPA was completed and the total consideration of HK$47,084,895 was received on 18 February 2009.

• (c) On 13 March 2009, the Company purchased US$50 million principal amount of its Convertible Notes. The aggregate amount to be paid by the Company will be approximately US$22.5 million, and the estimated gain is approximately HK$125 million. Payment was made on 1 April 2009.

44. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on 24 April 2009.

45. PRINCIPAL SUBSIDIARIES, JOINTLY CONTROLLED ENTITIES AND ASSOCIATED COMPANY

(a) Subsidiaries

Name of company Principal place of operation Incorporated in Hong Kong Barichon Limited Hong Kong Chelsfield Limited Hong Kong Construction Materials Limited Hong Kong Doran (Hong Kong) Limited Hong Kong Earnmark Limited Hong Kong Galaxy Entertainment Management Services Limited Hong Kong

Issued share capital Number of ordinary shares Number of non-voting deferred shares Par value per share Percentage of equity held by the Group Principal activities HK$ 3,000,000 — 1 99.93 Sale and distribution of concrete pipes 2,111,192 — 10 100 Investment holding 30,000 — 10 100 Sale of aggregates 1,000 — 10 100 Sale and distribution of concrete pipes 1 — 1 100 Investment holding 1 — 1 100 Provision of management services

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Name of company Principal place of operation K. Wah Asphalt Limited Hong Kong K. Wah Concrete Company Limited Hong Kong K. Wah Construction Materials (Hong Kong) Limited Hong Kong K. Wah Construction Products Limited Hong Kong K. Wah Materials Limited Hong Kong K. Wah Quarry Company Limited Hong Kong K. Wah Stones (Zhu Hai) Company Limited Zhuhai KWP Quarry Co. Limited Hong Kong Lightway Limited Hong Kong Master Target Limited Hong Kong Quanturn Limited Hong Kong Rainbow Country Limited Hong Kong Starflow Enterprises Limited Hong Kong

Issued share capital Number of ordinary shares Number of non-voting deferred shares Par value per share Percentage of equity held by the Group Principal activities HK$ 1,100,000 — 10 100 Manufacture, sale and distribution and laying of asphalt 2 1,000 100 100 Manufacture, sale and distribution of ready-mixed concrete 2 2 10 100 Provision of management services 2 1,000 100 100 Manufacture, sale and distribution of concrete products 28,080,002 — 1 100 Trading 200,002 100,000 100 100 Sale of aggregates 2 1,000 10 100 Quarrying 9,000,000 — 1 63.5 Quarrying 2 2 1 100 Property investment 2 — 1 100 Investment holding 2 — 1 100 Equipment leasing 2 — 1 100 Investment holding 1 — 1 100 Investment holding

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Percentage of equity Principal place Registered held by Name of company of operation capital the Group Principal activities

Incorporated in Mainland China

Wholly-owned foreign enterprise	Wholly-owned foreign enterprise
Doran Construction	Shenzhen	HK$10,000,000
Products (Shenzhen)
Co., Ltd.
K. Wah Consultancy	Guangzhou	HK$1,560,000
(Guangzhou) Co., Ltd.
K. Wah Consultancy	Shanghai	US$350,000
(Shanghai) Co., Ltd.
Shanghai Jia Shen	Shanghai	RMB20,000,000
Concrete Co., Ltd.
Shanghai K.Wah Qingsong	Shanghai	US$2,420,000
Concrete Co., Ltd.
深圳嘉華混凝土管樁	Shenzhen	US$2,100,000
有限公司
Cooperative joint venture
Beijing K.Wah GaoQiang	Beijing	US$2,450,000
Concrete Co., Ltd.
K. Wah Materials	Huidong	US$2,800,000
(Huidong) Ltd.
Nanjing K. Wah Concrete	Nanjing	US$1,330,000
Co., Ltd.
Shanghai Beicai Concrete	Shanghai	RMB31,500,000
Co., Ltd.
Shanghai Jiajian Concrete	Shanghai	RMB17,400,000
Co., Ltd.
Shanghai K. Wah Concrete	Shanghai	RMB10,000,000
Co., Ltd.
Equity joint venture
Shanghai Ganghui	Shanghai	US$4,000,000
Concrete Co., Ltd.

100 Manufacture, sale and distribution of concrete pipes

• 100 Provision of management services

• 100 Provision of management services

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Manufacture, sale and distribution of concrete piles

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Quarrying

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Manufacture, sale and distribution of ready-mixed concrete

• 100 Manufacture, sale and distribution of ready-mixed concrete and provision of quality assurance service

• 60 Manufacture, sale and distribution of ready-mixed concrete

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Principal	Number of		Percentage of
	place of	ordinary	Par value	equity held by
Name of company	operation	shares	per share	the Group	Principal activities
Incorporated in the British
Virgin Islands
Canton Treasure Group Ltd.	Macau	10	US$1	100*	Investment holding
Cheer Profit International Limited	Macau	10	US$1	100	Property investment
Eternal Profits International	Hong Kong	10	US$1	100	Property investment
Limited
Forcecharm Investments Limited	Hong Kong	10	US$1	80	Investment holding
Galaxy Entertainment Finance	Macau	10	US$1	90	Financing
Company Limited
K. Wah Construction Materials	Hong Kong	10	US$1	100*	Investment holding
Limited
High Regard Investments Limited	Hong Kong	20	US$1	100	Investment holding
Profit Access Investments Limited	Hong Kong	10	US$1	100	Investment holding
Prosperous Fields Limited	Hong Kong	10	US$1	100	Investment holding
Taksin Profits Limited	Hong Kong	17	US$1	100	Investment holding
Right Grand Investments Limited	Hong Kong	100	US$1	80	Investment holding
Incorporated in Macau
Galaxy Casino, S.A.	Macau	951,900	MOP1,000	Equity: 90	Casino games of
				Profit sharing: 100	chance

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Principal			Percentage of
	place of	Number	Registered	equity held by
Name of company	operation	of quota	share capital	the Group	Principal activities
Incorporated in Macau
StarWorld Hotel Company	Macau	2	MOP100,000	100	Property holding and
Limited					hospitality
Friendship Catering	Macau	2	MOP25,000	100	Catering
Management Company
Limited
Prosperity Catering	Macau	2	MOP25,000	100	Catering
Management Limited
K. Wah (Macao Commercial	Macau	1	MOP100,000	100	Trading
Offshore) Company Limited
Wise Concrete Limited	Macau	2	MOP25,000	75	Trading

• Wholly owned and directly held by the Company

(b) Jointly controlled entities

Principal Number of Percentage of place of ordinary Par value per equity held by Name of company operation shares share the Group Principal activities HK$ Incorporated in Hong Kong AHK Concrete Ltd. Hong Kong 1,000,000 1 50 Manufacture, sale and distribution of ready-mixed concrete

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

			Percentage
			of equity
	Principal place	Registered	held by the
Name of company	of operation	capital	Group	Principal activities
Incorporated in Mainland China
Anhui Masteel K. Wah New	Maanshan	US$4,290,000	30	Manufacture, sale and
Building Materials Co., Ltd.				distribution of slag
Baoshan Kungang & K. Wah	Baoshan	RMB253,000,000	25.6	Manufacture, sale and
Cement Construction Materials				distribution of cement
Co., Ltd.
Beijing Shougang K. Wah	Beijing	RMB50,000,000	40	Manufacture, sale and
Construction Materials Co., Ltd.				distribution of slag
Guangdong Shaogang Jia Yang	Shaoguan	US$6,000,000	35	Manufacture, sale and
New Materials Co., Ltd.				distribution of slag
Maanshan Masteel K. Wah	Maanshan	US$2,450,000	30	Manufacture, sale and
Concrete Co., Ltd.				distribution of ready-
				mixed concrete
Qinhuangdao Shouqin K. Wah	Qinhuangdao	RMB60,000,000	50	Manufacture, sale and
Construction Materials				distribution of slag
Company Limited
Qujing Kungang & K. Wah Cement	Qujing	RMB374,520,000	32	Manufacture, sale and
Construction Materials Co. Ltd.				distribution of cement
Shanghai Bao Jia Concrete Co.,	Shanghai	US$4,000,000	50	Manufacture, sale and
Ltd.				distribution of ready-
				mixed concrete
Shaoguan City New Shaogang Jia	Shaoguan	US$5,000,000	35	Manufacture, sale and
Yang New Materials Co., Ltd.				distribution of slag
Yunnan Kungang & K. Wah	Kunming	RMB660,000,000	25.6	Manufacture, sale and
Cement Construction Materials				distribution of cement
Co., Ltd.

(c) Associated Company

		Number of
	Principal	issued		Percentage of
	place of	ordinary	Par value per	equity held by
Name of company	operation	shares	share	the Group	Principal activities
			HK$
Incorporated in
Hong Kong
AHK Aggregates Limited	Hong Kong	2,000,000	1	36.5	Quarrying

– 76 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. WORKING CAPITAL STATEMENT

In the absence of unforeseen circumstances and taking into account the Land Grant and the financial resources available to the Group, including internally generated funds and the available banking facilities, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements for the next 12 months from the date of this circular.

2. INDEBTEDNESS STATEMENT

As at the close of business on 31 August 2009, being the latest practicable date for ascertaining certain information relating to this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$4,468,179,000, comprising bank loans of approximately HK$224,513,000 (in which secured bank loans are of approximately HK$21,700,000 and unsecured bank loans are of approximately HK$202,813,000, respectively), guaranteed notes of approximately HK$3,144,158,000, unsecured convertible notes of approximately HK$1,046,274,000, finance lease obligations of approximately HK$1,463,000 and unsecured loans from minority shareholders of subsidiaries of approximately HK$51,771,000. The aggregate amount repayable at 31 August 2009 is as follows:

Bank loans repayable Within one year Between one and two years Between two and five years Over five years Guaranteed notes repayable Between one and two years Between two and five years Convertible notes repayable Between two and five years Finance lease obligations payable Within one year Loans from minority shareholders of subsidiaries Repayable on demand Within one year	HK$’000 169,973 37,160 6,480 10,900
	224,513
	916,992 2,227,166
	3,144,158
	1,046,274 1,463 39,555 12,216
	51,771
	4,468,179

– 77 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Building with net book values of approximately HK$15,740,000, leasehold land with net book values of approximately HK$210,793,000 and bank deposits of approximately HK$53,545,000 have been pledged to secure the Group’s banking facilities.

The Group has executed guarantees in favour of banks in respect of facilities granted to an associated company amounting to HK$9,125,000. These facilities have been fully utilised as at 31 August 2009.

As at 31 August 2009, save as disclosed in this circular and apart from intra-group liabilities, the Group did not have any debt securities issued and outstanding, or authorised/ otherwise created but un-issued, any term loans (secured, unsecured, guaranteed or not), any other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments (whether secured/unsecured, guaranteed or not), any mortgages and charges, any contingent liabilities or guarantees.

Foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on 31 August 2009.

3. NO MATERIAL ADVERSE CHANGE

At the Latest Practicable Date, save for the Land Grant as disclosed in the Letter from the Board in this circular, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008 (being the date to which the latest published audited financial statements of the Group were made up).

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Throughout the six-month period ended 30 June 2009, the management team of the Company has been focused on continuing to deliver improving financial returns for Shareholders, through both growing business volumes in a profitable manner and also implementing a cost efficiency program.

For the six months ended 30 June 2009, the Group recorded revenue and net profit attributable to shareholders of HK$5,335 million and HK$1,059 million respectively, as compared to revenue of HK$5,405 million and a loss of HK$7,432 million for the corresponding period in 2008. The reporting of a profit is particularly significant as it confirms that the Company has achieved an important milestone in moving from a company that was building a major business to one that is now delivering substantial profits. The Group’s adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) was HK$507 million, compared to HK$265 million for the corresponding period in 2008. The earnings per Share for the six months ended 30 June 2009 was 26.9 HK cents, as compared to a loss per Share of 188.8 HK cents for the corresponding period in 2008.

– 78 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Here is a brief segmental analysis of the Group’s operating results for the six months ended 30 June 2009. The gaming and entertainment division contributed HK$451 million to the Group’s EBITDA (HK$224 million for the corresponding period in 2008). The flagship property, StarWorld Hotel & Casino continued to drive exceptionally strong EBITDA with four consecutive quarters of EBITDA growth. Following the restructure of management agreements in 2008 and adjusting the business model and scale of the operations, the performance of the City Clubs has been substantially improved. The construction materials division contributed HK$108 million to the Group’s EBITDA, which was a modest 1% decline when compared to the corresponding period in 2008. Corporate costs reduced the Group’s EBITDA by HK$52 million (HK$67 million for the corresponding period in 2008). The savings in corporate costs were a result of the implementation of an operational efficiency program.

The Group’s balance sheet is very liquid with cash on hand of HK$5.4 billion at 30 June 2009. During the six months ended 30 June 2009, the Group further strengthened its already strong balance sheet with a debt buyback program retiring a total of HK$1,941 million (US$250 million) of debts at an approximate 50% discount. The Group has generated interest savings of HK$429 million (US$55 million) over the life of the debts.

In 2009, we have seen evidence of a slowly recovering world economy and in particular an improving gaming and entertainment environment in Macau. Whilst it may be too early to state categorically that the recent challenging economic experience is over, the Group is cautiously optimistic on the outlook for Macau. Both the Central Government and the Macau Government are actively progressing with major infrastructure initiatives that will support the long term sustainable growth of the Macau economy. StarWorld is poised for further growth having successfully relaunched the mass gaming floor after completion of renovation and facilities upgrade, and with the addition of more VIP gaming tables. The construction of Cotai development project continues and is on schedule to have the external building works completed by the end of this year. The Group is well positioned for future growth and management will continue exercise tight cost control to ensure continuing profitability for the rest of 2009.

– 79 –

VALUATION REPORT

APPENDIX III

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from Vigers Appraisal and Consulting Limited, an independent professional valuer, in connection with the valuation of the property as at 31st August 2009 to be acquired by the Group.

Vigers Appraisal and Consulting Limited

International Property Consultants 10/F, The Grande Building 398 Kwun Tong Road, Kowloon, Hong Kong Tel: (852) 2810 1100 Fax: (852) 3101 9041 www.Vigers.com

==> picture [59 x 60] intentionally omitted <==

29th September 2009

The Board of Directors Galaxy Entertainment Group Limited Room 1606, 16th Floor Hutchison House 10 Harcourt Road Central Hong Kong

Dear Sirs,

RE: LOTS I, II, III AND IV SITUATED AT NASCENTE DA AVENIDA MARGINAL FLOR DE LOTUS E A SUL DA ESTRADA DA BAIA DE NOSSA SENHORA DA ESPERANCA, COTAI, MACAO SPECIAL ADMINISTRATIVE REGION

In accordance with your instruction for us to value the captioned property to be acquired by ‘‘New Galaxy Entertainment Company Limited’’ which is a subsidiary of ‘‘Galaxy Entertainment Group Limited’’ (referred to as ‘‘the Company’’) (hereinafter together referred to as ‘‘the Group’’), we confirm that we have inspected the property, made relevant enquiries and investigations as well as obtained such further information as we consider necessary for the purpose of providing our opinion of value of the property as at 31st August 2009 (the ‘‘Valuation Date’’).

BASIS OF VALUATION

Our valuation is our opinion of market value of the property which is defined as intended to mean ‘‘the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller on an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without ’’ ‘‘ compulsion . Our valuation has been prepared in accordance with The HKIS Valuation Standards on Properties (First Edition 2005)’’ published by The Hong Kong Institute of Surveyors, the relevant provisions in the Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Main Board).

– 80 –

VALUATION REPORT

APPENDIX III

PROPERTY CATEGORISATION

The property being valued is to be acquired by the Group for future development in Macao Special Administrative Region (‘‘Macao’’). In the course of our valuation, we have valued the property by adopting direct comparison method of valuation on the assumption that the property can be sold with the benefit of vacant possession as raw land. Comparisons based on prices realized on actual sales of comparable properties have been made. Comparable properties with similar character, location and so on are analyzed and carefully weighed against all respective advantages and disadvantages of the property in order to arrive at a fair comparison of value.

TITLE INVESTIGATION

The property is located in Macao but the property is yet to be registered at ‘‘Conservatoria do Registo Predial’’ (‘‘Property Registration Bureau’’), and hence ‘‘Informacao Por Escrito do Registo Predial’’ (‘‘Property Registration Information’’) for the property is not yet available as at the Valuation Date. However, we have been provided with a copy of draft land lease of the property to be entered into between the Government of Macao and the Group. All documents disclosed in this report, if any, are for reference only and no responsibility is assumed for any legal matters concerning the legal title to the property set out in this report. In addition, we have not searched the original documents to ascertain ownership nor to verify any lease amendments which may not appear on the copies handed to us.

VALUATION ASSUMPTIONS

Our valuation has been made on the assumption that the property can be sold in the prevailing market as raw land without the effect of any deferred term contract, leaseback, joint venture, management agreement or any other similar arrangement which may serve to affect the value of the property. In addition, no account has been taken into of any option or right of preemption concerning or affecting the sale of the property.

In our valuation, we have assumed that the owner of the property has free and uninterrupted rights to use and assign the property during the whole of the term to be granted subject to the payment of usual Government Rent.

No soil investigation has been carried out to determine the suitability of the ground conditions or the services for any property development(s) to be erected on the property. Our valuation has been carried out on the assumption that these aspects are satisfactory. We have also assumed that all necessary consents, approvals and licences from relevant government authorities have been or will be granted without onerous conditions or delay.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, we have assumed that the property is free from any encumbrances, restrictions and outgoings of an onerous nature which may serve to affect the value thereof.

We have not carried out on-site measurement to verify the correctness of the site and floor areas in respect of the property in concern but we have assumed that the site and floor areas shown on the documents handed to us are correct.

– 81 –

VALUATION REPORT

APPENDIX III

Other special assumption(s) for the property has/have been stated in the footnote(s) of the valuation certificate, if any.

VALUATION CONSIDERATION

We have inspected the property. However, no structural survey nor test on any of the services has been made and we are therefore unable to report as to whether the property is free from rot, infestation or other structural or non-structural defect.

Having examined all relevant documents, we have relied to a considerable extent on the information given by the Group, particularly in respect of planning approvals or statutory notices, easements, tenure, site areas, floor areas, occupancy status and in the identification of the property.

Unless otherwise stated, all dimensions, measurements and areas included in the valuation certificate are based on the information contained in the documents provided by the Group and are therefore approximations. We have had no reason to doubt the truth and accuracy of the information made available to us and we have been advised by the Group that no material facts have been omitted from the information so given.

REMARKS

We declare hereby that we are independent to the Group and we are not interested directly or indirectly in any shares in any member of the Group. We do not have any right or option whether legally enforceable or not to subscribe for or to nominate persons to subscribe for any shares in any member of the Group.

Unless otherwise stated, all monetary amounts stated herein are in the currency of Macao Pacata (‘‘MOP’’), the lawful currency of Macao.

We enclose herewith our Valuation Certificate.

Yours faithfully, For and on behalf of

VIGERS APPRAISAL AND CONSULTING LIMITED

David W. I. Cheung MRICS MHKIS RPS(GP) CREA MCIArb Executive Director

Note: Mr. David W. I. Cheung is a Registered Professional Surveyor in General Practice Division with over 25 years’ valuation experience on properties in various regions including Hong Kong, Macao and the PRC, who has been vetted on the list of property valuers for undertaking valuations for incorporation or reference in listing particulars and circulars and valuations in connection with takeovers and mergers published by The Hong Kong Institute of Surveyors, and is suitably qualified for undertaking valuations relating to listing exercises.

– 82 –

VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Property to be Acquired by the Group for Future Development Purpose

Property

Lots I, II, III and IV situated at Nascente da Avenida Marginal Flor de Lotus e a Sul da Estrada da Baia de Nossa Senhora da Esperanca, Cotai, Macao

Description and Tenure

The property comprises four parcels of contiguous land in irregular shape having a total site area of approximately 440,248 square metres with breakdown tabulated as follows:

Lot Site Area

Particulars of Occupancy

The property was vacant.

Capital Value in Existing State as at 31st August 2009

MOP3,090,000,000

(Please also refer to Note 2. below for further details.)

Lot I 223,560 square metres Lot II 61,049 square metres Lot III 48,000 square metres Lot IV 107,639 square metres Total 440,248 square metres

The land-use of the property is comprehensive development with inclusion of casino, hotels, hotel-apartments as well as convention and exhibition centre having a total planned buildable gross floor area of approximately 1,703,714 square metres, and landscaping area of approximately 292,985 square metres.

The property is to be held under ‘‘Concessao Por Arrendamento’’ for a lease term of 25 years commencing on the date of Gazette regarding the approval of the aforesaid ‘‘Concessao Por Arrendamento’’ renewable continuously in accordance with the prevailing applicable laws in Macao with aggregate Government Rent of MOP13,207,440.00 per annum during the construction period and aggregate Government Rent of MOP27,317,130.00 per annum upon completion of construction works.

– 83 –

VALUATION REPORT

APPENDIX III

Notes:

1. Pursuant to the contract to be entered into between Macao Government, New Galaxy Entertainment Company Limited and Galaxy Casino, S.A., Macao Government intends to grant to New Galaxy Entertainment Company Limited a parcel of land situated at Nascente da Avenida Marginal Flor de Lotus e a Sul da Estrada da Baia de Nossa Senhora da Esperanca with total site area of approximately 440,248 square metres for a term of 25 years with salient terms and conditions extracted as follows:

Gross	Floor	Area	:	Lot I
				5-star Hotel	636,038 square metres
				4-star Hotel-apartment	38,260 square metres
				5-star Hotel Carpark	92,280 square metres
				4-star Hotel-apartment Carpark	8,996 square metres
				5-star Hotel Outdoor Area	166,381 square metres
				4-star Hotel-apartment Outdoor Area	1,937 square metres
				Lot II
				5-star Hotel	125,340 square metres
				4-star Hotel-apartment	65,460 square metres
				5-star Hotel Carpark	19,349 square metres
				4-star Hotel-apartment Carpark	9,728 square metres
				5-star Hotel Outdoor Area	22,450 square metres
				4-star Hotel-apartment Outdoor Area	18,096 square metres
				Lot III
				Casino	2,500 square metres
				5-star Hotel	95,400 square metres
				Convention and Exhibition Centre	53,000 square metres
				5-star Hotel Carpark	31,636 square metres
				5-star Hotel Outdoor Area	16,719 square metres
				Lot IV
				5-star Hotel	116,743 square metres
				4-star Hotel	206,357 square metres
				4-star Hotel-apartment	130,930 square metres
				5-star Hotel Carpark	17,102 square metres
				4-star Hotel Carpark	35,201 square metres
				4-star Hotel-apartment Carpark	19,394 square metres
				5-star Hotel Outdoor Area	21,991 square metres
				4-star Hotel Outdoor Area	27,869 square metres
				4-star Hotel-apartment Outdoor Area	17,542 square metres

Transfer of Casino : Upon completion of registration for multiple ownership, the casino to be constructed in Lot III of the property shall be transferred by New Galaxy Entertainment Company Limited to Galaxy Casino, S.A..

Building Covenant : 8 years from the date of Gazette regarding the approval of ‘‘Concessao Por Arrendamento’’ of the property

Land Premium : Lot I

MOP1,353,931,809.00 (of which MOP49,388,424.00 has been settled as of the Valuation Date, MOP650,000,000.00 is payable upon acceptance of the contract; and the residual MOP654,543,385.00 plus interests of 5% per annum is payable in eight half-year instalments with the first instalment due in six calendar months from the date of Gazette regarding the approval of ‘‘Concessao Por Arrendamento’’ of the property)

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VALUATION REPORT

APPENDIX III

Lot II

MOP421,489,698.00 (of which MOP13,486,822.00 has been settled as of the Valuation Date, MOP137,000,000.00 is payable upon acceptance of the contract; and the residual MOP271,002,876.00 plus interests of 5% per annum is payable in eight half-year instalments with the first instalment due in six calendar months from the date of Gazette regarding the approval of ‘‘Concessao Por Arrendamento’’ of the property)

Lot III

MOP211,187,315.00 (of which MOP10,604,063.00 has been settled as of the Valuation Date, MOP68,000,000.00 is payable upon acceptance of the contract; and the residual MOP132,583,252.00 plus interests of 5% per annum is payable in eight half-year instalments with the first instalment due in six calendar months from the date of Gazette regarding the approval of ‘‘Concessao Por Arrendamento’’ of the property)

Lot IV

MOP937,411,183.00 (of which MOP23,779,391.00 has been settled as of the Valuation Date, MOP306,000,000.00 is payable upon acceptance of the contract; and the residual MOP607,631,792.00 plus interests of 5% per annum is payable in eight half-year instalments with the first instalment due in six calendar months from the date of Gazette regarding the approval of ‘‘Concessao Por Arrendamento’’ of the property)

1. Our valuation is made on the basis that the property is remained as vacant raw land as at the Valuation Date, and we have not made any allowance for the land premium payable nor interest payment for stage payment of land premium as at the Valuation Date.

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GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular relating to the Group and confirm, having made all reasonable enquiries that to the best of their knowledge and belief there are no other facts the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

A. Directors’ Interests

As at the Latest Practicable Date, the interests and short positions of the Directors in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules and which were required to be entered into the register required to be kept under section 352 of the SFO were as follows:

(i) Shares (including underlying Shares)

Name Lui Che Woo Francis Lui Yiu Tung Joseph Chee Ying Keung Paddy Tang Lui Wai Yu James Ross Ancell William Yip Shue Lam Anthony Thomas Christopher Carter Martin Clarke Guido Paolo Gamucci Patrick Wong Lung Tak		Number of Sha	res (including underlying Shares)	res (including underlying Shares)	Percentage of Issued Share Capital Total 2,975,899,499 75.57 2,975,899,499 75.57 3,103,000 0.08 2,975,899,499 75.57 250,000 0.01 250,000 0.01 2,800,000 0.07 — — — — — —
	Personal Interests 24,087,632 21,498,896 3,103,000 12,939,722 250,000 250,000 2,800,000 — — —	Family Interests 2,181,518 — — — — — — — — —	Corporate Interests 395,362,426(1) 407,558,099(3) — — — — — — — —	Other Interests 2,554,267,923(2) 2,546,842,504(2) — 2,962,959,777(2) — — — — — —

Notes:

• (1) 80,387,837 Shares, 305,401 Shares, 106,716,107 Shares, 162,484,047 Shares, 13,308,179 Shares, 9,660,855 Shares and 22,500,000 Shares were respectively held by Best Chance Investments Ltd., Po Kay Securities & Shares Company Limited, Super Focus Company Limited, Sutimar Enterprises Limited, Premium Capital Profits Limited, Mark Liaison Limited and Favor Right Investments Limited, all controlled by Dr. Lui Che Woo.

• (2) A discretionary family trust established by Dr. Lui Che Woo as founder was interested in 1,313,887,206 Shares. Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung and Ms. Paddy Tang Lui Wai Yu, as either direct or indirect discretionary beneficiaries of the discretionary family trust, are deemed to have an interest in those Shares in which the trust has an interest.

Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung and Ms. Paddy Tang Lui Wai Yu are, among others, parties to certain arrangements to which Section 317 of the SFO applies and each of them is deemed, for the purpose of the disclosure requirements in Part XV of the SFO, to be interested

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GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

in any Shares held by the other parties to such arrangements for so long as such arrangements are in place. The deemed interests pursuant to these arrangements of Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung and Ms. Paddy Tang Lui Wai Yu were 1,240,380,717 Shares, 1,232,955,298 Shares and 1,649,072,571 Shares respectively.

• (3) 114,504,039 Shares were held by Recurrent Profits Limited which is controlled by Mr. Francis Lui Yiu Tung. Top Notch Opportunities Limited (‘‘Top Notch’’) was interested in 171,916,021 underlying Shares. Kentlake International Investments Limited (‘‘Kentlake’’) was interested in 60,000,000 Shares and 61,138,039 underlying Shares. Both Kentlake and Top Notch are controlled by Mr. Francis Lui Yiu Tung. The aforesaid underlying Shares had not been delivered to Top Notch and Kentlake and are still counted towards the public float.

(ii) Share Options

The particulars of the options held by each of the Directors as at the Latest Practicable Date were as follows:

		Number of
	Date of	Options	Exercise
Name	grant	held	price	Exercise period
			(HK$)
Lui Che Woo	30 Dec 1999	1,800,000	0.5216	30 Dec 2000 – 29 Dec 2009
	28 Feb 2003	2,000,000	0.5140	1 Mar 2004 – 28 Feb 2013
	21 Oct 2005	2,700,000	4.5900	22 Oct 2005 – 21 Oct 2011
	21 Oct 2005	590,000	4.5900	22 Oct 2006 – 21 Oct 2011
	17 Jan 2008	862,500	6.9720	17 Jan 2010 – 16 Jan 2014
	17 Jan 2008	862,500	6.9720	17 Jan 2011 – 16 Jan 2014
	17 Jan 2008	1,725,000	6.9720	17 Jan 2012 – 16 Jan 2014
	8 May 2009	1,150,000	2.1600	8 May 2010 – 7 May 2015
	8 May 2009	1,150,000	2.1600	8 May 2011 – 7 May 2015
	8 May 2009	1,150,000	2.1600	8 May 2012 – 7 May 2015
Francis Lui Yiu Tung	30 Dec 1999	1,600,000	0.5216	30 Dec 2000 – 29 Dec 2009
	28 Feb 2003	1,870,000	0.5140	1 Mar 2004 – 28 Feb 2013
	21 Oct 2005	6,000,000	4.5900	22 Oct 2005 – 21 Oct 2011
	21 Oct 2005	580,000	4.5900	22 Oct 2006 – 21 Oct 2011
	17 Jan 2008	1,250,000	6.9720	17 Jan 2010 – 16 Jan 2014
	17 Jan 2008	1,250,000	6.9720	17 Jan 2011 – 16 Jan 2014
	17 Jan 2008	2,500,000	6.9720	17 Jan 2012 – 16 Jan 2014
	8 May 2009	1,666,666	2.1600	8 May 2010 – 7 May 2015
	8 May 2009	1,666,666	2.1600	8 May 2011 – 7 May 2015
	8 May 2009	1,666,668	2.1600	8 May 2012 – 7 May 2015
Joseph Chee Ying
Keung	21 Oct 2005	270,000	4.5900	22 Oct 2006 – 21 Oct 2011
	18 Aug 2008	383,000	3.3200	18 Aug 2009 – 17 Aug 2014
Paddy Tang Lui Wai Yu	21 Oct 2005	3,000,000	4.5900	22 Oct 2005 – 21 Oct 2011
	21 Oct 2005	400,000	4.5900	22 Oct 2006 – 21 Oct 2011
	17 Jan 2008	500,000	6.9720	17 Jan 2010 – 16 Jan 2014
	17 Jan 2008	500,000	6.9720	17 Jan 2011 – 16 Jan 2014
	17 Jan 2008	1,000,000	6.9720	17 Jan 2012 – 16 Jan 2014
	8 May 2009	666,666	2.1600	8 May 2010 – 7 May 2015
	8 May 2009	666,666	2.1600	8 May 2011 – 7 May 2015
	8 May 2009	666,668	2.1600	8 May 2012 – 7 May 2015

– 87 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

		Number of
	Date of	Options	Exercise
Name	grant	held	price	Exercise period
			(HK$)
James Ross Ancell	21 Oct 2005	250,000	4.5900	22 Oct 2006 – 21 Oct 2011
William Yip Shue Lam	21 Oct 2005	250,000	4.5900	22 Oct 2006 – 21 Oct 2011
Anthony Thomas
Christopher Carter	21 Oct 2005	2,500,000	4.5900	22 Oct 2005 – 21Oct 2011
Martin Clarke	—	—	—	—
Guido Paolo Gamucci	—	—	—	—
Patrick Wong Lung Tak	—	—	—	—

The consideration paid by each of the grantees on each acceptance of the options was HK$1.00.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any interests and short positions in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules and which were required to be entered into the register required to be kept under section 352 of the SFO.

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GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

B. Substantial Shareholders’ Interests

As at the Latest Practicable Date, so far as is known to the Directors , the following persons (other than a Director or chief executive of the Company) had an interest or short position in the Shares and underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who are, directly or indirectly interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any member of the Group.

• (i) Interests in the Company

	Number of	Percentage of	Percentage of
	Shares	Issued Share
Name	(Long Position)		Capital
City Lion Profits Corp.	2,975,899,499(1)		75.57
ENB Topco 2 S.àr.l	2,975,899,499(1)(3)		75.57
Galaxy Entertainment Group Limited	2,975,899,499(1)		75.57
HSBC International Trustee Limited	1,313,887,206(2)		33.36
Mark Liaison Limited	2,975,899,499(1)		75.57
Permira Holdings Limited	2,975,899,499(1)(4)		75.57
Premium Capital Profits Limited	2,975,899,499(1)		75.57
Recurrent Profits Limited	2,975,899,499(1)		75.57
Super Focus Company Limited	2,975,899,499(1)		75.57

Notes:

• (1) City Lion Profits Corp., ENB Topco 2 S.àr.l, Galaxy Entertainment Group Limited, Mark Liaison Limited, Permira Holdings Limited, Premium Capital Profits Limited, Recurrent Profits Limited and Super Focus Company Limited are, among others, parties having interests in certain arrangements to which Section 317 of the SFO applies and each of them is deemed, for the purpose of the disclosure requirements in Part XV of the SFO, to be interested in any Shares held by the other parties to such arrangements for so long as such arrangements are in place. Their deemed interests pursuant to these arrangements were 1,662,012,293 Shares, 2,333,180,916 Shares, 2,975,899,499 Shares, 2,966,238,644 Shares, 2,177,515,499 Shares, 2,962,591,320 Shares, 2,861,395,460 Shares and 2,706,699,345 Shares respectively.

• (2) HSBC International Trustee Limited is the trustee of a discretionary family trust established by Dr. Lui Che Woo as founder, which was interested in 1,313,887,206 Shares.

• (3) ENB Topco 2 S.àr.l is deemed to have an interest in the Shares as a result of the direct holding of the Shares by ENB Lux 2 S.àr.l, its wholly-owned subsidiary.

• (4) Permira Holdings Limited is deemed to have an interest in the Shares in its capacity as the holding company of the general partner and manager of the funds which control the companies holding the Shares.

– 89 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

There was duplication of interests of:

• (i) 1,313,887,206 Shares between Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung, Ms. Paddy Tang Lui Wai Yu, City Lion Profits Corp. and HSBC International Trustee Limited;

• (ii) 9,660,855 Shares between Dr. Lui Che Woo and Mark Liaison Limited;

• (iii) 13,308,179 Shares between Dr. Lui Che Woo and Premium Capital Profits Limited;

• (iv) 269,200,154 Shares between Dr. Lui Che Woo and Super Focus Company Limited;

• (v) 114,504,039 Shares between Mr. Francis Lui Yiu Tung and Recurrent Profits Limited;

• (vi) 642,718,583 Shares between Permira Holdings Limited and ENB Topco 2 S.àr.l.; and

• (vii) apart from the above, duplication of interests also existed among Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung, Ms. Paddy Tang Lui Wai Yu, City Lion Profits Corp., ENB Topco 2 S.àr.l, Galaxy Entertainment Group Limited, Mark Liaison Limited, Permira Holdings Limited, Premium Capital Profits Limited, Recurrent Profits Limited and Super Focus Company Limited, which are parties having interests in certain arrangements to which Section 317 of the SFO applies. As a result, each of them is deemed, for the purpose of the disclosure requirements in Part XV of the SFO, to be interested in any Shares held by the other parties to such arrangements for so long as such arrangements are in place. Their interests were duplicated to the extent disclosed in the relevant notes above.

(ii) Interests in other members of the Group

	Name of direct or indirect owner	Effective
	of shares or equity interest	% of equity
Name of subsidiary	(as the case may be)	interest held
Archiever Capital Limited	Pedro Ho On Chun	10%
Brilliant Field	Pedro Ho On Chun	10%
Investments Limited
Charm Rich International	Pedro Ho On Chun	10%
Limited

– 90 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

	Name of direct or indirect owner	Effective
	of shares or equity interest	% of equity
Name of subsidiary	(as the case may be)	interest held
Clear Rise Enterprises	Pedro Ho On Chun	10%
Limited
E-cost Enterprises	Ke Guo Bin	22.22%
Limited
Fast Concrete Limited	Joint Link Development Limited	25%
Firmever Limited	Joint Link Development Limited	25%
Forcecharm (Hong Kong)	Sumitomo Osaka Cement Co., Ltd.	20%
Enterprises Limited
Forcecharm Investments	Sumitomo Osaka Cement Co., Ltd.	20%
Limited
Galaxy A Hotel Macau	Pedro Ho On Chun	10%
Limited
Galaxy B.T. Resort	Pedro Ho On Chun	10%
Limited
Galaxy B1 Hotel Limited	Pedro Ho On Chun	10%
Galaxy Casino, S.A.	Pedro Ho On Chun	10%
Galaxy Entertainment	Pedro Ho On Chun	10%
Finance Company
Limited
Galaxy Hotel	Pedro Ho On Chun	10%
Management Company
Limited
Galaxy Professional	Pedro Ho On Chun	10%
Services Limited
Galaxy Project	Pedro Ho On Chun	10%
Management Company
Limited

– 91 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

	Name of direct or indirect owner	Effective
	of shares or equity interest	% of equity
Name of subsidiary	(as the case may be)	interest held
Galaxy Tour & Travel	Pedro Ho On Chun	10%
Company Limited
Glory Rise Investments	Pedro Ho On Chun	10%
Limited
Green Palace	Pedro Ho On Chun	10%
Investments Limited
Guangzhou Jiafang	廣州宏圖實業公司(Guangzhou	20%
Concrete Co., Ltd.	Hongtu Enterprise Company)
	廣州市土地開發綜合服務公司	10%
	(Guangzhou Land Development
	Integrated Services Company)
	廣州市房地產實業總公司	10%
	(Guangzhou Real Estate
	Enterprise Company )
惠州大亞灣嘉華混凝土有	Dayabay Hong Kong Limited	20%
限公司(K. Wah
Concrete (Huizhou
Daya Bay) Limited)
K. Wah Concrete	Dayabay Hong Kong Limited	20%
Technology
Consultancy Limited
KWP Quarry Co. Limited	Pioneer Quarries (Hong Kong)	36.5%
	Limited
Majestic Orient Limited	Pedro Ho On Chun	10%
New Galaxy	Pedro Ho On Chun	10%
Entertainment
Company Limited
Ocean Right Investments	Pedro Ho On Chun	10%
Limited

– 92 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

	Name of direct or indirect owner	Effective
	of shares or equity interest	% of equity
Name of subsidiary	(as the case may be)	interest held
Oi Ling Ding (Zhuhai)	珠海市東區恒升建材有限公司	25%
Precast Concrete	(Zhuhai Eastern District
Products Limited	Hengsheng Construction
	Materials Company Limited)
Perfect Smart	Pedro Ho On Chun	10%
International Limited
遷安首嘉建材有限公司	首鋼總公司(Shougang	30%
(Qianan Shougang K.	Corporation)
Wah Construction	河北省首鋼遷安鋼鐵有限責任公司	15%
Materials Company	(Hebei Shougang Qian’An Iron &
Limited)	Steel Co., Ltd.)
Right Grand Investments	Sumitomo Osaka Cement Co., Ltd.	20%
Limited
Shanghai Ganghui	上海徐房建築實業公司(Shanghai	40%
Concrete Co., Ltd.	Xufang Construction Enterprise
	Company)
Shanghai Jiajian	上海市第一市政工程有限公司	39%
Concrete Co., Ltd.	(Shanghai Diyishizheng
	Construction Materials Company
	Limited)
Sky Majestic Enterprises	Pedro Ho On Chun	10%
Limited
StarWorld Hotel	Pedro Ho On Chun	10%
Company Limited
Success Management	Pedro Ho On Chun	10%
Services Company
Limited
Success Tower	Pedro Ho On Chun	10%
Properties Limited
Top Hit Technology	Hong Kong-Dal Limited	20%
Limited	Digital Ventures Limited	10%

– 93 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

	Name of direct or indirect owner	Effective
	of shares or equity interest	% of equity
Name of subsidiary	(as the case may be)	interest held
Top Line Road Safety	Hui Tak Chin	22%
Engineering Co.	Wan Wing Shun	10%
Limited
Wealth Ahead	Pedro Ho On Chun	10%
Investments Limited
Wise Concrete Limited	Joint Link Development Limited	25%
(incorporated in the
British Virgin Islands)
Wise Concrete Limited	Joint Link Development Limited	25%
(incorporated in
Macau)
Year Forward Limited	Pedro Ho On Chun	10%

Save as disclosed above, the Directors are not aware that there is any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any other member of the Group.

C. Competing Interests of Directors and Associates

As at the Latest Practicable Date, none of the Directors or their respective associates was interested in any business (other than as an independent non-executive director) which competes or is likely to compete, either directly or indirectly, with the business of the Group.

D. Directors’ Service Contracts

As at the Latest Practicable Date, none of the Directors has entered into any service contracts with any members of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

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GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

E. Litigation

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against any member of the Group.

F. Interests in Assets of the Group

As at the Latest Practicable Date, none of the Directors or Vigers Appraisal and Consulting Limited had any direct or indirect interests in any assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by or leased to, any member of the Group since 31 December 2008 (being the date to which the latest published audited consolidated financial statements of the Company were made up).

G. Interests in Contracts

As at the Latest Practicable Date, none of the Directors was materially interested in any contracts or arrangements entered into by any member of the Group and subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

H. Qualifications of Expert and Consent

• (i) The following are the qualifications of the expert which has given an opinion or advice contained in this circular.

Name Qualifications

Vigers Appraisal and Property valuer Consulting Limited (‘‘Vigers’’)

• (ii) Vigers has given and has not withdrawn its written consent to the issue of this circular with the inclusion of references to its name and its letter in the form and context in which it appears.

• (iii) As at the Latest Practicable Date, Vigers did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

– 95 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

I. Material Contracts

The following contracts have been entered into by the Group (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this circular and are or may be material:

• (1) a subscription agreement dated 8 October 2007 between the Company, ENB LUX 1 S.à.r.l, ENB LUX 2 S.à.r.l., and Permira IV L.P.1 for the subscription by ENB LUX 1 S.à.r.l and ENB LUX 2 S.à.r.l. of 323,384,000 new Shares in aggregate;

• (2) an investors’ rights agreement dated 8 October 2007 between the Company, ENB LUX 1 S.à.r.l, Permira IV L.P.1, City Lion Profits Corp., Super Focus Company Limited, Mark Liaison Limited, Premium Capital Profits Limited, Dr. Lui, Recurrent Profits Limited, Francis Lui Yiu Tung and Paddy Tang Lui Wai Yu concerning ENB LUX 1 S.à.r.l’s right to appoint directors to the Board, amongst other things;

• (3) a conversion and repayment agreement dated 8 October 2007 between the Company, City Lion Profits Corp. and Recurrent Profits Limited in relation to the conversion and repayment of certain variable rate unsecured loan notes issued by the Company;

• (4) a placing agreement dated 11 October 2007 between the Company and Merrill Lynch Fast East Limited relating to 150,000,000 Shares;

• (5) an agreement for sale and purchase of shares in Boom Victory Investments Limited dated 18 February 2009 between Spring High Limited, Pioneer Quarries (Hong Kong) Limited, K. Wah Construction Materials (Hong Kong) Limited and Alliance Construction Materials Limited, under which, inter alia, Spring High Limited has agreed to sell shares and a related shareholder’s loan to Pioneer Quarries (Hong Kong) Limited for a consideration of HK$47,084,895;

• (6) a shareholders’ agreement dated 18 February 2009 between Spring High Limited, Pioneer Quarries (Hong Kong) Limited, K. Wah Construction Materials (Hong Kong) Limited, Alliance Construction Materials Limited and Boom Victory Investments Limited setting out the terms of the joint venture in Boom Victory Investments Limited; and

• (7) the draft Concession Contract.

– 96 –

GENERAL INFORMATION ABOUT THE GROUP

APPENDIX IV

J. Documents Available for Inspection

Copies of the following documents are available for inspection at the office of Richards Butler in association with Reed Smith LLP at 20th Floor, Alexandra House, 16-20 Chater Road, Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 13 October 2009:

• (i) the memorandum and articles of association of the Company;

• (ii) the annual reports of the Company for the three financial years ended 31 December 2006, 31 December 2007 and 31 December 2008;

• (iii) the valuation report from Vigers Appraisal and Consulting Limited on the Property, the text of which is set out in Appendix III of this circular;

• (iv) the written consent referred to in the paragraph headed ‘‘Qualifications of Expert and Consent’’ in this appendix;

• (v) all material contracts referred to in the paragraph headed ‘‘Material Contracts’’ in this appendix; and

• (vi) the circular of the Company dated 10 March 2009 on connected transactions - Formation of a Strategic Joint Venture for Quarrying Business in Huidong, Mainland China.

K. General Information

• (i) The company secretary of the Company is Miss Kitty Chan Lai Kit, B.A., an associate member of the Institute of Chartered Secretaries and Administrators in the United Kingdom and The Hong Kong Institute of Chartered Secretaries.

• (ii) The share registrar of the Company is Computershare Hong Kong Investor Services Limited, Shop 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (iii) The English version of this circular shall prevail over the Chinese text.

– 97 –