Macau Legend Development Limited - Interim / Quarterly Report 2015

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Macau Legend Development Limited 澳門勵駿創建有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1680)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2015

RESULTS

The Board announces the unaudited consolidated interim results of the Group for the six months ended 30 June 2015 as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2015

Notes REVENUE 3 Costs of sales and services Other income, gains and losses Marketing and promotional expenses Operating, administrative and other expenses Finance costs 5 (LOSS) PROFIT BEFORE TAXATION 6 Taxation credit 7 (LOSS) PROFIT AND TOTAL COMPREHENSIVE (EXPENSE) INCOME FOR THE PERIOD, ATTRIBUTABLE TO OWNERS OF THE COMPANY (Loss) earnings per Share 9 Basic (HK cents) Diluted (HK cents)	Six months ended 30 June 2015 2014 HK$’000 HK$’000 (unaudited) (unaudited) 698,229 917,493 (497,406) (421,326) 200,823 496,167 65,754 (27,196) (64,832) (23,400) (229,881) (185,293) (42,795) (36,396) (70,931) 223,882 2,490 2,490 (68,441) 226,372 (1.1) 3.5 N/A 3.5

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2015

Notes NON-CURRENT ASSETS Investment properties 10 Property and equipment 10 Prepaid lease payments Goodwill Other intangible assets Deposits paid 11 CURRENT ASSETS Inventories Prepaid lease payments Trade and other receivables 12 Pledged bank deposits Bank balances and cash — Cash at banks and on hand — Short-term bank deposits with original maturity over three months CURRENT LIABILITIES Trade and other payables 13 Taxation Bank and other borrowings — due within one year 14 NET CURRENT ASSETS	At 30 June 2015 HK$’000 (unaudited) 377,258 3,833,379 1,767,812 681,986 284,513 716,514 7,661,462 40,939 53,346 416,829 20,581 4,412,292 — 4,943,987 685,890 825 554,417 1,241,132 3,702,855	At 31 December 2014 HK$’000 (audited) 248,906 3,653,802 1,770,626 681,986 302,211 705,317
		7,362,848
		54,423 52,648 499,822 20,581 4,047,398 500,200
		5,175,072
		665,326 1,650 448,601
		1,115,577
		4,059,495

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued) At 30 June 2015

Note TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank borrowings — due after one year 14 Deferred tax liability NET ASSETS CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company	At 30 June 2015 HK$’000 (unaudited) 11,364,317 3,785,186 181,521 3,966,707 7,397,610 644,926 6,752,684 7,397,610	At 31 December 2014 HK$’000 (audited) 11,422,343
		3,777,815 184,836
		3,962,651
		7,459,692
		644,926 6,814,766
		7,459,692

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION AND BASIS OF PREPARATION

The Company was incorporated in the Cayman Islands on 5 October 2006 as an exempted company with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and its Shares are listed on the Main Board of the Stock Exchange. The address of the registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and the principal place of business of the Company in Macau is 21/F, Macau Landmark Building, 555 Avenida da Amizade, Macau.

The Group is one of the leading owners of entertainment and casino gaming facilities in Macau. The Group currently has two major properties, The Landmark Macau and MFW. The Landmark Macau is an award-winning integrated hotel, casino and luxury shopping complex, featuring a five-star hotel and Macau’s first themed casino. MFW is a waterfront integrated gaming, hotel, convention and entertainment complex located on the outer harbour of the Macau Peninsula.

These condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 ‘‘Interim Financial Reporting’’ issued by the HKICPA as well as with the applicable disclosure requirements of Appendix 16 to the Listing Rules.

The condensed consolidated financial statements are presented in HK$, which is also the functional currency of the Group.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis.

The accounting policies and methods of computations used in the condensed consolidated financial statements for the six months ended 30 June 2015 are the same as those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2014.

In the current interim period, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA that are relevant for the preparation of the Group’s condensed consolidated financial statements:

Amendments to HKAS 19 Defined benefit plans: Employee contributions Amendments to HKFRSs Annual improvements to HKFRSs 2010–2012 cycle Amendments to HKFRSs Annual improvements to HKFRSs 2011–2013 cycle

The application of the above amendments to HKFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

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3. REVENUE

Revenue mainly represents the amounts received and receivable for goods sold and services rendered by the Group to outside customers, less discounts. An analysis of the Group’s revenue during the period is as follows:

Revenue from provision of gaming related facilities and gaming related general management services under the Service Agreement in respect of: — Mass market tables — Outsourced VIP rooms — Indirect participation in the gaming promotion business through New Legend under the VIE Structure — Slot machines Revenue from non-gaming operations: — Rental income from hotel rooms — Licensing income from investment properties — Income from building management services — Food and beverage — Sales of merchandise — Others	Six months 2015 HK$’000 (unaudited) 360,701 22,824 62,178 4,229 449,932 91,517 60,557 32,874 50,057 10,472 2,820 248,297 698,229	ended 30 June 2014 HK$’000 (unaudited) 572,225 77,745 — 4,966
		654,936
		93,982 48,526 38,187 59,372 19,417 3,073
		262,557
		917,493

4. SEGMENT INFORMATION

The executive Directors have been identified as the chief operating decision maker. The executive Directors review the Group’s internal reports in order to assess performance and allocate resources.

For provision of gaming related facilities and gaming related general management services and the indirect participation in the gaming promotion business, the executive Directors regularly analyse gaming related revenue in terms of service income from mass market tables, VIP rooms and slot machines. No operating result or discrete financial information is presented to the executive Directors in relation to the above analysis. The executive Directors review separately the entire revenues and operating results attributable to gaming related services and non-gaming operations. As such, the executive Directors have identified the operating and reportable segments under HKFRS 8 ‘‘Operating segments’’ as gaming and non-gaming operations.

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The segment information is consistent with the internal information that is regularly reviewed by the executive Directors for the purposes of resource allocation and assessment of performance. This is also the basis of organisation in the Group, whereby the management has chosen to organise the Group around differences in products and services. The principal activities of the operating and reportable segments are as follows:

Gaming — gaming related services for mass market tables, VIP rooms and slot machines under the Service Agreement, whereby the revenue is derived based on net gaming wins. Revenue from the indirect participation in the gaming promotion business represents the sharing of gross gaming revenue generated by gaming tables in VIP rooms operated by New Legend, whose financial results are consolidated into the Group upon implementation of the VIE Structure during the year ended 31 December 2014.

Non-gaming — operations at The Landmark Macau and MFW including hotel and other operations such as licensing income from the shops, provision of building management services, food and beverage and others.

Segment revenue and results:

The following is an analysis of the Group’s revenue and results by operating and reportable segments:

For the six months ended 30 June 2015 (unaudited):

External revenue Inter-segment revenue Segment revenue Segment profit (loss) Unallocated depreciation, release of prepaid lease payments and amortisation Unallocated corporate expenses Unallocated unrealised exchange loss, net Finance costs Loss before taxation	Gaming HK$’000 449,932 — 449,932 122,712	Non-gaming HK$’000 248,297 32,058 280,355 (45,493)	Segment total HK$’000 698,229 32,058 730,287 77,219	Elimination HK$’000 — (32,058) (32,058) —	Consolidated HK$’000 698,229 — 698,229 77,219 (51,414) (48,338) (5,603) (42,795) (70,931)

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For the six months ended 30 June 2014 (unaudited):

External revenue Inter-segment revenue Segment revenue Segment profit Unallocated depreciation and release of prepaid lease payments Unallocated corporate expenses Unallocated unrealised exchange loss, net Finance costs Profit before taxation	Gaming HK$’000 654,936 — 654,936 421,327	Non-gaming HK$’000 262,557 29,349 291,906 18,714	Segment total HK$’000 917,493 29,349 946,842 440,041	Elimination HK$’000 — (29,349) (29,349) —	Consolidated HK$’000 917,493 — 917,493 440,041 (33,717) (72,153) (73,893) (36,396) 223,882

Inter-segment revenue is charged at amounts agreed by both parties.

The accounting policies of the operating segments are the same as the Group’s accounting policies. Segment profit (loss) represents the results of each segment without allocation of depreciation of investment properties and property and equipment, release of prepaid lease payments arising from the fair value adjustments on acquisition of MFW Group, amortisation of other intangible assets, expenses relating to unallocated common area in MFW, corporate expenses, net exchange difference and finance costs. Corporate expenses include directors’ remuneration paid or payable by the Company and certain administrative expenses for corporate use. This is the measure reported to the executive Directors for the purposes of resource allocation and performance assessment.

No analysis of the Group’s assets and liabilities by operating and reportable segments is disclosed as it is not regularly provided to the executive Directors for review.

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5. FINANCE COSTS

Interest on bank borrowings which is wholly repayable within five years Amortisation of finance costs on bank borrowings Other finance costs Total borrowing costs Less: Capitalised borrowing costs in construction in progress (included in property and equipment)	Six months 2015 HK$’000 (unaudited) 58,997 11,186 545 70,728 (27,933) 42,795	ended 30 June 2014 HK$’000 (unaudited) 30,421 13,071 2,316 45,808 (9,412) 36,396

Borrowing costs capitalised during the period arose from the general borrowing pool and are calculated by applying a capitalisation rate of approximately 3.5% (six months ended 30 June 2014: 4.3%) per annum to expenditure on qualifying assets.

6. (LOSS) PROFIT BEFORE TAXATION

(Loss) profit before taxation has been arrived at after charging (crediting): Depreciation of investment properties Depreciation of property and equipment Amortisation of other intangible assets Release of prepaid lease payments Operating lease rentals in respect of leasehold land and buildings Reversal of allowance for inventories Cost of inventories recognised as an expense (included in cost of sales and services) Unrealised exchange loss, net Loss on disposal of property and equipment Pre-opening expenses Interest income Gross licensing income from investment properties Less: Direct operating expenses that generate licensing income Net licensing income	Six months 2015 HK$’000 (unaudited) 5,633 112,499 17,698 26,557 6,369 (204) 26,784 5,603 16 37,051 (54,869) (60,557) 5,633 (54,924)	ended 30 June 2014 HK$’000 (unaudited) 4,039 84,198 — 25,871 5,823 (184) 30,879 73,893 20,785 — (52,307)
		(48,526) 4,039
		(44,487)

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7. TAXATION CREDIT

Current tax charge Deferred taxation credit Income tax credit	Six months 2015 HK$’000 (unaudited) (825) 3,315 2,490	ended 30 June 2014 HK$’000 (unaudited) (825) 3,315 2,490

Macau Complementary Tax is calculated at the maximum progressive rate of 12% on the estimated assessable profit for the period. No provision for Macau Complementary Tax and Hong Kong Profits Tax has been made in the condensed consolidated financial statements as either the relevant group entities incurred tax losses or the estimated assessable profits were fully absorbed by tax losses brought forward from prior years.

Pursuant to the Dispatch of the Macau Financial Services Bureau dated 17 November 2006 and a confirmation letter issued by the Macau Financial Services Bureau dated 14 January 2013, gaming related revenue generated from the Service Agreement is not subject to Macau Complementary Tax since it is derived from SJM gaming revenue, which gaming revenue is exempted pursuant to the terms of no. 2 of article 28 of the Law 16/2001 and the exemption granted by Dispatch no. 30/2004 of 23 February 2004 and further by Dispatch no. 378/2011 of 23 November 2011.

Pursuant to the Dispatch of the Macau Financial Services Bureau dated 28 June 2013, Hong Hock is allowed to pay an annual lump sum dividend withholding tax of MOP1,700,000 (equivalent to approximately HK$1,650,000) for each of the years ended 31 December 2012 through to 2016 as payment in lieu of Macau Complementary Tax otherwise due by the shareholders of Hong Hock on dividend distributions from gaming profits generated in relation to the operation of the casinos at The Landmark Macau and MFW. Such annual lump sum tax payments are required regardless of whether dividends were actually distributed or whether Hong Hock has distributable profits in the relevant years. During the six months ended 30 June 2015, provision for taxation of HK$825,000 (six months ended 30 June 2014: HK$825,000) has been made.

8. DIVIDEND

No dividend was paid, declared or proposed in respect of both interim periods.

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9. (LOSS) EARNINGS PER SHARE

The calculation of the basic and diluted (loss) earnings per Share attributable to owners of the Company is based on the following data:

(Loss) earnings

(Loss) profit for the period for the purposes of basic and diluted (loss) earnings per Share Number of Shares Weighted average number of ordinary shares for the purpose of basic (loss) earnings per Share Effect of diluted potential ordinary shares (remark) — Share options — Directors’ reward shares Weighted average number of ordinary shares for the purpose of diluted (loss) earnings per Share	Six months 2015 HK$’000 (unaudited) (68,441) Six months 2015 ’000 6,449,261 N/A N/A N/A	ended 30 June 2014 HK$’000 (unaudited) 226,372
		ended 30 June 2014 ’000 6,410,830 16,944 29,083
		6,456,857

Remark: The computation of diluted loss per Share for the six months ended 30 June 2015 does not assume the conversion of the Company’s outstanding share options and Directors’ reward shares since their exercise would result in a decrease in loss per Share.

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10. INVESTMENT PROPERTIES AND PROPERTY AND EQUIPMENT

The addition of investment properties during the period includes amount of HK$133,985,000 (six months ended 30 June 2014: nil) for MFW Redevelopment.

The addition of property and equipment during the period includes amounts of HK$15,233,000 (six months ended 30 June 2014: HK$112,185,000) and HK$251,901,000 (six months ended 30 June 2014: HK$476,493,000) for renovation of The Landmark Macau and MFW Redevelopment, respectively.

11. DEPOSITS PAID

Deposits paid for acquisition of property and equipment Other deposit (remark)	At 30 June 2015 HK$’000 (unaudited) 18,690 697,824 716,514	At 31 December 2014 HK$’000 (audited) 7,493 697,824
		705,317

Remark: The other deposit represents a refundable deposit paid in respect of a potential long-term investment project.

12. TRADE AND OTHER RECEIVABLES

Trade receivables (remark) Less: Allowance for doubtful debts Other receivables and deposits Prepayments Receivables from gaming operator received on behalf of gaming promoters Total trade and other receivables	At 30 June 2015 HK$’000 (unaudited) 296,770 (14) 296,756 25,159 35,361 59,553 416,829	At 31 December 2014 HK$’000 (audited) 309,836 (14) 309,822 35,915 19,855 134,230 499,822

Remark: Included in trade receivables as at 30 June 2015 are amounts due from related companies of HK$1,730,000 (31 December 2014: HK$2,337,000). The amounts are unsecured, non-interest bearing and aged within an average credit period of three months. The Group did not hold any collateral over the balance.

The receivables from gaming operator are non-trading in nature, unsecured, non-interest bearing and repayable on demand.

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Before accepting any new customers, the Group assesses the potential customer’s credit quality by evaluating their historical credit records and defines credit limits by customers. Recoverability and credit limit of the existing customers are reviewed by the Group regularly. At the end of the reporting period, included in the Group’s trade receivable balances are receivables with aggregate carrying amount of HK$104,476,000 (31 December 2014: HK$89,830,000), which are neither past due nor impaired. The Directors considered that trade receivables which are neither past due nor impaired are of good credit quality given the continuous subsequent settlements from gaming operator and other customers.

The Group allows a credit period with an average of 30 days to the gaming operator relating to provision of gaming related services, an average of 30 days to certain hotel guests and an average of 15 days to its tenants. The following is an aged analysis of trade receivables net of allowance for bad and doubtful debts presented based on the invoice date at the end of the reporting period:

Within 3 months Over 3 months but within 6 months Over 6 months but within 1 year Over 1 year	At 30 June 2015 HK$’000 (unaudited) 129,602 27,563 63,497 76,094 296,756	At 31 December 2014 HK$’000 (audited) 194,646 6,496 49,429 59,251
		309,822

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13. TRADE AND OTHER PAYABLES

Trade and other payables principally comprise amounts outstanding for ongoing costs and construction work. The average credit period granted by the Group’s creditors is one month to three months.

Trade payables Deposits received from tenants Accrued staff costs Other accruals Other payables Amounts due to gaming promoters Total trade and other payables	At 30 June 2015 HK$’000 (unaudited) 37,470 52,080 106,120 30,591 424,354 35,275 685,890	At 31 December 2014 HK$’000 (audited) 59,554 56,641 117,568 39,184 280,818 111,561
		665,326

The amounts due to gaming promoters are non-trading in nature, unsecured, non-interest bearing and repayable on demand.

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

Within 3 months Over 3 months but within 6 months Over 6 months but within 1 year Over 1 year	At 30 June 2015 HK$’000 (unaudited) 35,524 274 1,375 297 37,470	At 31 December 2014 HK$’000 (audited) 57,686 1,570 264 34
		59,554

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14. BANK AND OTHER BORROWINGS

Bank borrowings, secured (remark i) Other borrowings (remark ii) Analysed for reporting purposes as: Current liabilities Non-current liabilities Remarks: (i) Bank borrowings, secured Secured bank borrowings due — within one year — more than one year, but not exceeding two years — more than two years, but not more than five years Less: Amount due within one year shown under current liabilities Amount due after one year The bank borrowings are denominated in HK$.	At 30 June 2015 HK$’000 (unaudited) 4,163,603 176,000 4,339,603 554,417 3,785,186 4,339,603 At 30 June 2015 HK$’000 (unaudited) 378,417 781,734 3,003,452 4,163,603 (378,417) 3,785,186	At 31 December 2014 HK$’000 (audited) 3,955,416 271,000 4,226,416 448,601 3,777,815 4,226,416 At 31 December 2014 HK$’000 (audited) 177,601 579,846 3,197,969 3,955,416 (177,601) 3,777,815

During the year ended 31 December 2014, the Group entered into a facility agreement with banks relating to a new five-year syndicated bank term loan facility in the amount of HK$4,221.0 million, of which HK$1,324.0 million was used to repay the then outstanding bank borrowings and the remaining HK$2,897.0 million was to partially finance the redevelopment project costs of MFW. As at 30 June 2015, the Group has fully drawn down the whole amount (31 December 2014: HK$4,024.0 million) under the facility.

As at 30 June 2015, the bank borrowings bear interests at Hong Kong Interbank Offered Rate (‘‘HIBOR’’) plus 2.5% per annum (31 December 2014: HIBOR plus 2.5% per annum) and the weighted average effective interest rate was 2.88% (31 December 2014: 2.95%) per annum.

(ii) Other borrowings represent the amount due to a gaming operator which is denominated in HK$ and is noninterest bearing, unsecured and repayable within one year.

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15. OPERATING LEASE COMMITMENTS

The Group as lessee

At the end of the reporting period, the Group had commitments for future minimum lease payments in respect of leasehold land, office properties, warehouse and staff quarters rented under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	At 30 June 2015 HK$’000 (unaudited) 36,955 14,022 50,977	At 31 December 2014 HK$’000 (audited) 62,420 15,542
		77,962

Operating lease payments represent rentals payable by the Group for certain of its leasehold land, office properties, warehouse and staff quarters. Lease term of leasehold land in Macau is negotiated for a term of 25 years at a fixed rental and is subject for renewal in accordance with applicable laws and regulations. Leases for office properties, warehouse and staff quarters are negotiated for an average term of two years and rentals are fixed for an average term of two years.

The Group as lessor

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth year inclusive Over five years	At 30 June 2015 HK$’000 (unaudited) 126,079 294,708 174,938 595,725	At 31 December 2014 HK$’000 (audited) 133,081 308,492 200,772
		642,345

Operating lease income represents licensing income receivable by the Group from its own premises and certain of its rented premises. Licensing arrangements are negotiated for an average term of five years and licensing fees are fixed for an average term of two years. In addition to the fixed licensing income which is disclosed above, pursuant to the terms of certain licensing arrangements, the Group has licensing income based on certain percentage of gross sales of relevant shop. The contingent licensing income contributed an insignificant amount of licensing income earned by the Group during both reporting periods.

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16. CAPITAL COMMITMENTS

At the end of the reporting period, the Group had capital commitments in respect of the acquisition of property and equipment and construction in progress which are contracted but not provided for in the amount of approximately HK$752,553,000 (31 December 2014: approximately HK$773,871,000).

At the end of the reporting period, the Group had capital commitments which are authorised but not contracted for in respect of (i) renovation work of The Landmark Macau of approximately HK$27,269,000 (31 December 2014: approximately HK$36,621,000); and (ii) the MFW Redevelopment of approximately HK$6,377,160,000 (31 December 2014: approximately HK$6,877,337,000).

17. CONTINGENT LIABILITIES

The Group had the following contingent liabilities at the end of the reporting period:

(i) Pursuant to the amendment in the Service Agreement on 16 December 2011, in the event of any non-payment by the gaming promoters or any failure to fulfill their obligations related to gaming promotion agreements as entered with SJM and gaming promoters, the Group undertakes to reimburse SJM for any loss caused by such misconduct of the gaming promoters as well as any possible legal costs associated with litigation. There are no such claims from SJM during the six months ended 30 June 2015 and the year ended 31 December 2014.
(ii) Prior to the acquisition by the Group, MFW Investment initiated repossession proceedings against a former tenant at MFW with rental arrears in dispute of approximately MOP89,008,000 (equivalent to approximately HK$86,416,000) in 2009. The former tenant initiated a counterclaim from MFW Investment an amount of approximately MOP90,728,000 (equivalent to approximately HK$88,085,000) in 2009 for alleging breach of undertakings pursuant to a memorandum of understanding on 19 October 2006 and an escrow undertaking letter on 5 September 2008, as well as seeking compensation for amounts spent on improvements to the premises. The Macau Court of First Instance dismissed the counterclaim from the former tenant on 29 April 2013 and the former tenant was condemned to pay MFW Investment the amount of approximately MOP67,151,000 (equivalent to approximately HK$65,195,000) as principal and the respective interests to be computed. This legal proceeding is pending before the Macau Court of Second Instance. The Directors believe the aforementioned case would not result in any material adverse effect on the financial position of the Group as at 30 June 2015. Accordingly, no further provision has been made in the condensed consolidated financial statements.
(iii) Prior to the acquisition by the Group, MFW Investment received a claim for outstanding payments on construction work at MFW from a contractor in 2008. The contractor claimed from MFW Investment an amount of approximately MOP23,709,000 (equivalent to approximately HK$23,018,000) and MFW Investment counterclaimed an amount of approximately MOP14,451,000 (equivalent to approximately HK$14,030,000) for defective construction work carried out by the contractor. In April 2010, the Macau Court of First Instance dismissed all claims from the contractor and awarded approximately MOP462,000 (equivalent to approximately HK$449,000) to MFW Investment. The contractor did not agree the court’s judgement and appealed to the Macau Court of Second Instance. The Macau Court of Second Instance dismissed the appeal from the contractor and agreed to award MFW Investment the amount of damages. The contractor lodged an appeal to the Macau Last Instance Court but it did not submit the legal arguments. The court final bill was received on 16 February 2015 and fully paid by MFW Investment. The Directors believe the aforementioned case would not result in any material adverse effect on the financial position of the Group as at 30 June 2015. Accordingly, no further provision has been made in the condensed consolidated financial statements.

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(iv) Pursuant to a revolving credit facility agreement and a supplementary agreement dated 1 July 2013 and 22 October 2013, respectively, a gaming promoter, New Legend, which has been consolidated into the Group upon the approval from independent shareholders of the Company on 3 July 2014, has been offered for total facility amount of HK$320 million from SJM to purchase rolling chips to be used in the VIP room(s) at the Pharaoh’s Palace Casino as well as Babylon Casino, where applicable. The revolving credit facility agreement is valid for one year from 3 July 2013 and all borrowed amounts should be repaid by 2 July 2014. The Group has provided a guarantee to SJM under the revolving credit facility agreement. If New Legend defaults on any payments or breaches any of its obligations under the agreement, the Group is liable to SJM and SJM is entitled to withhold monthly service income or deduct outstanding amounts from the monthly service income payable to the Group under the Service Agreement. The revolving credit facility was renewed from 3 July 2014 to 2 July 2015. As at 30 June 2015, an amount of HK$176 million (31 December 2014: HK$271 million) under the facility was utilised by New Legend and remained outstanding. Such facility was further renewed on 23 July 2015 and is valid for one year till 2 July 2016.

Save and except for the matters specified above, the Group does not have any litigations or claims of material importance and, so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any companies of the Group.

18. EVENTS AFTER THE END OF THE REPORTING PERIOD

On 22 July 2015, the Group entered into several agreements with the Government of Cape Verde in respect of an investment project by the Group in Cape Verde. The investment amount is expected to be approximately €250 million (equivalent to approximately HK$2,150 million). Further details of the investment project in Cape Verde are set out in the Company’s announcement dated 22 July 2015.

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MANAGEMENT DISCUSSION AND ANALYSIS

Overview of Interim Results

For the six months ended 30 June 2015, the Group achieved total reported revenue of approximately HK$698.2 million, representing a decrease of approximately HK$219.3 million or approximately 23.9% over that of the last corresponding period of approximately HK$917.5 million. Breakdown of the Group’s reported revenue for the six months ended 30 June 2015 and 2014 is as follows:

Gaming services: — Pharaoh’s Palace Casino — Mass market tables — VIP tables — Self-run (New Legend) — Outsourced — Slot machines — Babylon Casino — Mass market tables — VIP tables — Self-run (New Legend) — Slot machines Sub-total for gaming services Non-gaming operations: — The Landmark Macau — Macau Fisherman’s Wharf Sub-total for non-gaming operations Total reported revenue	Six months ended 30 June 2015 2014 HK$’000 HK$’000 309,307 502,227 49,531 — 22,824 77,745 4,200 4,271 385,862 584,243 51,394 69,998 12,647 — 29 695 64,070 70,693 449,932 654,936 115,958 166,664 132,339 95,893 248,297 262,557 698,229 917,493	Six months ended 30 June 2015 2014 HK$’000 HK$’000 309,307 502,227 49,531 — 22,824 77,745 4,200 4,271 385,862 584,243 51,394 69,998 12,647 — 29 695 64,070 70,693 449,932 654,936 115,958 166,664 132,339 95,893 248,297 262,557 698,229 917,493
		584,243 69,998 — 695
		70,693
		654,936
		166,664 95,893
		262,557
		917,493

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For the six months ended 30 June 2015, gaming revenue and non-gaming revenue of the Group decreased by approximately 31.3% to approximately HK$449.9 million and by approximately 5.4% to approximately HK$248.3 million respectively when compared to the last corresponding period. The decrease in gaming revenue was primarily due to the decrease in reported revenue from mass market tables of approximately HK$211.5 million and outsourced VIP tables of approximately HK$54.9 million, which was offset by the reported revenue contributed by New Legend, a new self-run VIP operation of the Group, of approximately HK$62.2 million for the six months ended 30 June 2015. The decrease in non-gaming revenue was primarily due to the decrease in revenue generated at The Landmark Macau of approximately HK$50.7 million which in turn was mainly due to the decreases in income from hotel rooms and food and beverage businesses of the hotel. The decrease in non-gaming revenue of the Group was offset by revenue contributed by Harbourview Hotel at MFW, which commenced its operation since 2 February 2015.

Adjusted EBITDA for the six months ended 30 June 2015 was approximately HK$128.4 million, representing a decrease of approximately HK$305.1 million or approximately 70.4% over that of the last corresponding period of approximately HK$433.5 million. The following table reconciles the Adjusted EBITDA to the profit (loss) attributable to owners of the Company.

Profit (loss) attributable to owners of the Company Adjustments for: Finance costs Depreciation of investment properties Depreciation of property and equipment Release of prepaid lease payments Amortisation of other intangible assets Loss on disposal of property and equipment Share-based payments Unrealised exchange loss (gain) Pre-opening expenses (remark) Interest income Tax charge (credit) Adjusted EBITDA			Six months ended 30 June	Six months ended 30 June		Consolidated HK$’000 226,372 36,396 4,039 84,198 25,871 — 20,785 16,762 73,893 — (52,307) (2,490) 433,519
		2015	Consolidated HK$’000 (68,441) 42,795 5,633 112,499 26,557 17,698 16 6,359 5,603 37,051 (54,869) (2,490) 128,411		2014
	The Group excluding MFW Group HK$’000 81,068 — 1,920 50,913 5,867 17,698 7 6,359 1,143 30,627 (21,767) 825 174,660	MFW Group HK$’000 (149,509) 42,795 3,713 61,586 20,690 — 9 — 4,460 6,424 (33,102) (3,315) (46,249)		The Group excluding MFW Group HK$’000 306,418 16,653 1,921 48,803 5,867 — 1,184 16,762 78,886 — (37,995) 825 439,324	MFW Group HK$’000 (80,046) 19,743 2,118 35,395 20,004 — 19,601 — (4,993) — (14,312) (3,315) (5,805)

Remark: Pre-opening expenses represent mainly staff related costs, marketing and other administrative expenses incurred prior to the opening of new or expanded operations of the Group for the relevant periods.

– 19 –

An analysis of the Adjusted EBITDA by segments (after elimination of inter-segment results) is as follows:

Gaming services Non-gaming operations Sub-total Unallocated corporate expenses Adjusted EBITDA			Six months ended 30 June	Six months ended 30 June		Consolidated HK$’000 450,451 15,592 466,043 (32,524) 433,519
		2015	Consolidated HK$’000 182,550 (32,165) 150,385 (21,974) 128,411		2014
	The Group excluding MFW Group HK$’000 208,130 (11,496) 196,634 (21,974) 174,660	MFW Group HK$’000 (25,580) (20,669) (46,249) — (46,249)		The Group excluding MFW Group HK$’000 443,866 27,982 471,848 (32,524) 439,324	MFW Group HK$’000 6,585 (12,390) (5,805) — (5,805)

Adjusted EBITDA from the Group excluding the MFW Group and unallocated corporate expenses, mainly arising from the operations at The Landmark Macau, for the six months ended 30 June 2015 decreased by approximately 58.3% to approximately HK$196.6 million when compared to the last corresponding period. The decrease was mainly due to the decrease in Adjusted EBITDA of gaming services at Pharaoh’s Palace Casino by approximately HK$235.7 million or approximately 53.1% when compared to the last corresponding period and the loss of approximately HK$11.5 million of the hotel operations at The Landmark Macau for the six months ended 30 June 2015. For the six months ended 30 June 2015, MFW Group operated at a loss of approximately HK$46.3 million which was primarily due to the loss of approximately HK$25.6 million of gaming services at Babylon Casino and approximately HK$20.7 million of the non-gaming operations at MFW.

The Group’s loss for the six months ended 30 June 2015 was approximately HK$68.4 million while the Group recorded a profit of approximately HK$226.4 million for the six months ended 30 June 2014. The loss for the six months ended 30 June 2015 was mainly due to (i) a decrease in revenue from gaming services provided by the Group due to a decrease in overall gross gaming revenue generated from the gaming tables in the casinos within the Group’s properties; (ii) an increase in overall operating expenses of the Group, particularly staff costs; and (iii) an increase in overall depreciation and amortisation charges, particularly the depreciation of Harbourview Hotel, which commenced operations on 2 February 2015, and the amortisation of intangible assets arisen from the consolidation of the financial results of New Legend since 3 July 2014.

Interim Dividend

The Board has resolved not to pay an interim dividend for the six months ended 30 June 2015.

– 20 –

Financial and Operational Reviews

A. Gaming Services

The Group’s revenue from gaming services consisted of service income received from SJM for services and facilities provided relating to mass market tables, VIP rooms and slot machines.

As at 30 June 2015 and 2014, the Group had the following number of gaming tables and slot machines in its two casinos:

At 30 June 2015 Pharaoh’s Palace Casino Babylon Casino Total 60 31 91 47 12 59 107 43 150 35 185 142 29 171	At 30 June 2015 Pharaoh’s Palace Casino Babylon Casino Total 60 31 91 47 12 59 107 43 150 35 185 142 29 171	At 30 June 2014	At 30 June 2014	At 30 June 2014
Pharaoh’s Palace Casino 60 47 107 142	Babylon Casino 31 12 43 29	Pharaoh’s Palace Casino 56 75 131 197	Babylon Casino 19 — 19 120	Total 75 75
				150 —
				150 317

Included in the number as at 30 June 2015 was a total of 10 (30 June 2014: 4) gaming tables which were temporarily not in operation.
^ Being additional gaming tables granted by the DICJ to the Company on 28 October 2014 which have not yet been put into operation by the Group.

The slot machines at Babylon Casino as at 30 June 2014 were temporarily not in operation.

– 21 –

For the six months ended 30 June 2015, the Group recorded approximately HK$449.9 million revenue from gaming services, representing a decrease of approximately HK$205.0 million or approximately 31.3% over that of the last corresponding period of approximately HK$654.9 million. Breakdowns of the Group’s revenue from gaming services for the six months ended 30 June 2015 and 2014 are as follows:

Mass market tables: — Pharaoh’s Palace Casino — Babylon Casino Self-run VIP tables: — Pharaoh’s Palace Casino — Babylon Casino Outsourced VIP tables: — Pharaoh’s Palace Casino Slot machines: — Pharaoh’s Palace Casino — Babylon Casino Total revenue from gaming services	Six months ended 30 June 2015 2014 HK$’000 HK$’000 309,307 502,227 51,394 69,998 360,701 572,225 49,531 — 12,647 — 62,178 — 22,824 77,745 85,002 77,745 4,200 4,271 29 695 4,229 4,966 449,932 654,936	Six months ended 30 June 2015 2014 HK$’000 HK$’000 309,307 502,227 51,394 69,998 360,701 572,225 49,531 — 12,647 — 62,178 — 22,824 77,745 85,002 77,745 4,200 4,271 29 695 4,229 4,966 449,932 654,936
		572,225
		— —
		— 77,745
		77,745
		4,271 695
		4,966
		654,936

– 22 –

The following tables set out certain key operational data of mass market tables, VIP tables and slot machines for six months ended 30 June 2015 and 2014:

Mass Market Tables

Games drop Net win Hold rate Average number of tables Net win per table per day	Pharaoh’s Palace Casino Six months ended 30 June 2015 2014 Change HK’000 HK’000 % 2,382,057 2,869,720 (17.0) 562,376 913,138 (38.4) 23.61% 31.82% (8.21) 60 58 3.4 52 87 (40.2)	Babylon Casino Six months ended 30 June 2015 2014 Change HK’000 HK’000 % 709,722 681,167 4.2 93,443 127,270 (26.6) 13.17% 18.68% (5.51) 26 21 23.8 20 33 (39.4)

The Group’s revenue from mass market tables for the six months ended 30 June 2015 was approximately HK$360.7 million, representing a decrease of approximately HK$211.5 million or approximately 37.0% over that of the last corresponding period of approximately HK$572.2 million. Revenue from mass market tables at Pharaoh’s Palace Casino decreased by approximately 38.4% to approximately HK$309.3 million while revenue at Babylon Casino decreased by approximately 26.6% to approximately HK$51.4 million. For the six months ended 30 June 2015, net win per table per day of mass market tables at Pharaoh’s Palace Casino and Babylon Casino decreased by approximately 40.2% to approximately HK$52,000 and approximately 39.4% to approximately HK$20,000 over that of the last corresponding period of approximately HK$87,000 and HK$33,000, respectively.

VIP Tables

Games turnover Net win Win percentage Average number of tables Net win per table per day	Pharaoh’s Palace Casino Six months ended 30 June	Babylon Casino Six months ended 30 June

The Group’s revenue from VIP tables for the six months ended 30 June 2015 was approximately HK$85.0 million, representing an increase of approximately HK$7.3 million or approximately 9.3% over that of the last corresponding period of approximately HK$77.7 million. During the six months ended 30 June 2015, approximately HK$62.2 million contributed from New Legend through the VIE Structure. Revenue from outsourced VIP tables decreased by approximately HK$54.9 million or approximately 70.6%. For the six months ended 30 June 2015, net win per table per day of VIP tables at Pharaoh’s Palace Casino decreased by approximately 53.7% to

– 23 –

approximately HK$144,000 over that of the six months ended 30 June 2014 of approximately HK$311,000. Net win per table per day of VIP tables at Babylon Casino which commenced operation since November 2014 was approximately HK$14,000.

On 3 July 2014, the Group obtained the approval from independent shareholders of the Company at an extraordinary general meeting of the Company for the establishment of the VIE Structure. The VIE Structure allows the Group to indirectly participate in the gaming promotion business and have a greater control over the management and marketing of the VIP rooms operated by New Legend in the casinos located in its properties, as well as enhance its market footprint and receive a higher percentage of gross gaming revenue generated by the gaming tables in these VIP rooms. During the six months ended 30 June 2015, New Legend contributed approximately HK$62.2 million of gaming revenue through the VIE Structure. Upon implementation of the VIE Structure, financial results of New Legend have been consolidated into the consolidated financial statements of the Group. Further details of the VIE Structure are set out in the Company’s circular dated 9 June 2014.

Slot Machines

Slot handle Net win Hold rate Average number of slot machines Net win per slot machine per day	Pharaoh’s Palace Casino Six months ended 30 June 2015 2014 Change HK’000 HK’000 % 409,330 366,863 11.6 14,035 17,728 (20.8) 3.43% 4.83% (1.40) 149 201 (25.9) 0.5 0.5 —	Babylon Casino Six months ended 30 June 2015 2014 Change HK’000 HK’000 % 948 39,939 (97.6) 69 1,671 (95.9) 7.28% 4.18% 3.10 29 120 (75.8) 0.01 0.1 (90.0)

The Group’s revenue from slot machines for the six months ended 30 June 2015 decreased by approximately HK$0.7 million or approximately 14.8% to approximately HK$4.2 million over that of the last corresponding period of approximately HK$5.0 million.

Investment in Casino Management System

In July 2014, the Group entered into a purchase and licence agreement with Bally Technologies, Inc. (‘‘Bally Technologies’’, whose shares are listed on the New York Stock Exchange), a global leading supplier of innovative games, table game products, systems, mobile, and iGaming solutions for gaming industry, to provide the Group with the latest casino management system for improving player connectivity, patron loyalty and yield management. These tools will be important components of the Group’s strategy to expand its mass gaming business. The casino management system licensed by Bally Technologies is the technology solution of choice for most of the large

– 24 –

multi-casino operators in the Asia-Pacific Region. The first phase of the casino management system has been installed and put into operation in Babylon Casino since February 2015. Implementation will be in phases to correspond to the expected expansion of gaming capacities of the Group.

B. Non-gaming Operations

For the six months ended 30 June 2015, the Group recorded a total non-gaming revenue of approximately HK$248.3 million, representing a decrease of approximately HK$14.3 million or approximately 5.4% over that of the last corresponding period of approximately HK$262.6 million. Out of the total non-gaming revenue, revenue from The Landmark Macau accounted for approximately HK$116.0 million or approximately 46.7% of the total non-gaming revenue (six months ended 30 June 2014: approximately HK$166.7 million or approximately 63.5%); and MFW accounted for approximately HK$132.3 million or approximately 53.3% of the total non-gaming revenue (six months ended 30 June 2014: approximately HK$95.9 million or approximately 36.5%). The increase in the percentage of contribution to the Group’s revenue by MFW Group was mainly due to the revenue contributed by Harbourview Hotel at MFW, which commenced its operation since 2 February 2015.

The following table provides details on the composition of the Group’s non-gaming revenue:

		Six months ended 30 June	Six months ended 30 June
	2015	Consolidated HK$’000 91,517 60,557 32,874 50,057 10,472 2,820 248,297		2014
The Group excluding MFW Group HK$’000 47,500 26,719 20,979 18,516 — 2,244 115,958	MFW Group HK$’000 44,017 33,838 11,895 31,541 10,472 576 132,339		The Group excluding MFW Group HK$’000 80,854 25,697 28,210 29,171 — 2,732 166,664	MFW Group HK$’000 13,128 22,829 9,977 30,201 19,417 341 95,893	Consolidated HK$’000 93,982 48,526 38,187 59,372 19,417 3,073
					262,557

The decrease in non-gaming revenue was primarily attributable to the decrease in the rental income from hotel rooms and food and beverage income at The Landmark Macau which was offset by the contribution from the newly opened Harbourview Hotel at MFW.

– 25 –

The decrease in non-gaming revenue was primarily due to the decrease in revenue generated at The Landmark Macau of approximately HK$50.7 million which in turn was mainly due to the decrease in income from hotel rooms by approximately HK$33.4 million or approximately 41.3% and food and beverage businesses of the hotel by approximately HK$10.7 million or approximately 36.5%. The decrease in non-gaming revenue of the Group was offset by revenue contributed by Harbourview Hotel at MFW, which commenced its operation since 2 February 2015. For the six months ended 30 June 2015, Harbourview Hotel contributed revenue of approximately HK$43.7 million to the Group.

The following table sets out certain key operational data on hotel operations of the Group for the six months ended 30 June 2015 and 2014:

	Six months ended	30 June
	2015	2014
The Landmark Macau
Occupancy rate (%)	64.5	91.3
ADR (HK$)	1,390.9	1,447.4
REVPAR (HK$)	897.1	1,321.9
Rocks Hotel
Occupancy rate (%)	78.0	84.2
ADR (HK$)	1,161.1	1,475.9
REVPAR (HK$)	905.6	1,243.1
Harbourview Hotel (opened on 2 February 2015)
Occupancy rate (%)	57.2	n/a
ADR (HK$)	975.4	n/a
REVPAR (HK$)	557.9	n/a

The Landmark Macau

The occupancy rate of The Landmark Macau for the six months ended 30 June 2015 was approximately 64.5%, an approximately 26.8% decrease over that of the last corresponding period of approximately 91.3%. For the six months ended 30 June 2015, ADR and REVPAR of The Landmark Macau decreased by approximately 3.9% and approximately 32.1% respectively when compared to those of the last corresponding period.

Macau Fisherman’s Wharf

For the six months ended 30 June 2015, MFW attracted a total of approximately 1,978,000 visitors, representing an increase of approximately 2.7% when compared to that of the last corresponding period of approximately 1,926,000 visitors.

– 26 –

Rocks Hotel

The occupancy rate of Rocks Hotel for the six months ended 30 June 2015 was approximately 78.0%, an approximately 6.2% decrease over that of the last corresponding period of approximately 84.2%. For the six months ended 30 June 2015, ADR and REVPAR of Rocks Hotel decreased by approximately 21.3% and approximately 27.1% respectively when compared to those of the last corresponding period.

Harbourview Hotel

Harbourview Hotel was opened on 2 February 2015. The occupancy rate of Habourview Hotel for the period from its opening to 30 June 2015 was approximately 57.2%. ADR and REVPAR of Harbourview Hotel were approximately HK$975.4 and approximately HK$557.9 respectively.

C. Corporate and Business Updates

(a) Upgrade of exterior lighting of The Landmark Macau

The Landmark Macau has commenced the upgrade of exterior lighting and promotional signage with lighting elements installation in the first half of 2015. It is expected the upgrade will be completed in the second half of 2015 which will enhance the revenue generating potential of the property and ensure consistent luxury experience for the guests.

(b) MFW Redevelopment

Opening of Harbourview Hotel

Harbourview Hotel, the first new hotel under the MFW Redevelopment, commenced soft opening on 2 February 2015 and had its grand opening on 11 February 2015. With design based on the 18th century Prague architectural style, Harbourview Hotel contributes an additional 389 rooms and 55 suites to the tourism market of Macau Peninsula. The hotel is connected via footbridges to the adjacent Babylon Casino.

– 27 –

Other redevelopment

In addition to the opening of Harbourview Hotel, the Group also made progress on other projects of the MFW Redevelopment. The table below provides further details on the status of the ongoing construction projects as part of the MFW Redevelopment:

			Target
Buildings/Facilities	Brief Description	Progress	Completion Date
Legend Palace Hotel	A five-star deluxe-themed hotel	Foundation work has been	2Q 2016
	in the style of Central/Northern	substantially completed. Licence
	Asian medieval architecture with	for construction of the
	229 opulent guests rooms	superstructure of hotel has been
	including suites	obtained in July 2015.
		Construction of hotel will be
		commenced in 3Q 2015
Legendale Hotel	A flagship five-star deluxe rating	Revised design concepts have	4Q 2017
	hotel modelled after the Neo-	been developed and are under
	Renaissance style of architecture	review for reduction of
	of mid-17th century Central	construction costs and
	European period with a planned	improvement on the planning
	500 guests rooms including	and operational efficiencies
	suites
		Application for increase of the
		height of the hotel has been
		submitted to Macau government
		for approval
General entertainment	The dinosaur journey is an	The facility is being designed to	2Q 2017
and cultural facility	entertainment experience	include fossil exhibits as well as
	bringing the world of dinosaurs	the addition of intellectual,
	to the visitors	entertaining and interactive
		elements to provide an exciting
		visitor experience. Detailed
		design is significantly developed
	A newly developed multi-	The design stage is significantly	2Q 2017
	propose entertainment and	developed
	performance theatre holding
	more than 1,000 seats
Yacht club and public	Further development of the	Phase 1 — completed in
pier for harbour	marina to increase the size of its	November 2014
cruises	mooring area and inclusion of a
	yacht club with immigration
	facilities
		Phase 2 — further pontoons and	3Q 2016
		wave attenuator wall in design
		stage

– 28 –

			Target
Buildings/Facilities	Brief Description	Progress	Completion Date
Canopied open-air	Development of fixed canopy	Design for the canopy on	3Q 2015
shopping, dining	structures on Main Boulevard	Jackson Square has been
and entertainment	and Jackson Square providing	completed and approval for
colonnade	all-weathered protection with	construction from Macau
	integrated lighting entertainment	government has been obtained.
	shows	Construction will be commenced
		in 3Q 2015
		For the canopy on Main	2Q 2016
		Boulevard, design has been
		completed and submitted to
		Macau government for approval.
		Currently awaiting construction
		licence
Redevelopment of	Refurbishment and addition of	Approval of Miami Building at	Phased
existing facilities	facilities to certain buildings	MFW as part of Babylon	completions
	including Babylon Casino and	Casino’s extension has been	4Q 2014 to
	Rocks Hotel, construction of	obtained from DICJ. Some slot	4Q 2015
	new parking facilities for shuttle	machines have been put into
	buses and coaches, addition of	operation in the building since
	fine dining and family style	2Q 2015
	restaurants and building of a
	canopy

For the six months ended 30 June 2015, all work within the MFW Redevelopment has progressed significantly. Following the Group’s efforts of close monitoring and supervision of the project, it is indicated the development of Harbourview Hotel would be completed with significant savings to the established budget forecasts.

Up to this period, many of the above projects have been progressing through the design and government approval submission stages. The ongoing design stages for Legend Palace Hotel, dinosaur journey, theatre and canopy on the Main Boulevard have significantly developed and construction works are continuing and/or will commence for these projects within 2015 according to forecast programs.

(c) Cooperation with Dynam

The Company entered into a non-binding Memorandum of Understanding for Business Cooperation (the ‘‘MOU’’) with DYNAM JAPAN HOLDINGS Co., Ltd (‘‘Dynam’’), a company incorporated in Japan and whose shares are listed on the Main Board of the Stock Exchange (stock code: 6889), on 23 August 2013 in respect of opportunities for business cooperation between the two groups. The terms of the MOU have been extended and further extended with an expiry date of 23 February 2015. The Company and Dynam have not

– 29 –

concluded or entered into any definitive agreement before the expiry of the MOU, and the MOU expired on 23 February 2015. Further details of the expiry of the MOU are set out in the Company’s announcement dated 24 February 2015.

Outlook

During the period under review, visitors to Macau have decreased by approximately 3.5% to approximately 14.8 million when compared to that of the same period in 2014. The property market in the Mainland remained sluggish and there had been volatile corrections in the stock markets, and these, when combined with other negative factors impacted to the industry, have contributed to lower propensity of travel and spending level of visitors to Macau.

Recently we are gradually seeing certain shift towards more supportive policies such as the easing of transit visas limitations in July 2015 which should help boost visitations to Macau, and we are optimistic that this and other upcoming measures would favour the VIP and premium mass businesses in the upcoming seasonally stronger months.

The Group opened its first new hotel at MFW, Harbourview Hotel, in February 2015. The opening of Harbourview Hotel adds non-gaming elements to further enrich the existing leisure facilities at MFW. Planning and construction work for our second and third new hotels and other developments at MFW are moving ahead according to plan with the second new hotel, Legend Palace Hotel, scheduled for completion in mid-2016.

As revival of previously high growth momentum in the local market might be a slight distance, we are taking steps to seize opportunities to tap into areas which have the potential of expanding the footprint and dimension of the Group.

In July 2015, we entered into agreements with the Government of Cape Verde to develop a world-class integrated leisure, tourism and entertainment complex in Praia, the capital city of Cape Verde on Santiago Island, with an investment amount of approximately €250 million (equivalent to approximately HK$2,150 million) (the ‘‘Project’’). Cape Verde is an archipelago nation located in the North Atlantic to the west of Africa. This resort, when completed, will be at a hub of up to 5-hour flight time of some major cities in Europe, Africa and South America, all of which have seen significant investments from China in recent years and host to an untapped pool of Chinese expatriate executives and workers.

Land concession for the Project is 75 years. The Group has been granted a 25 years gaming concession on Santiago Island (of which the first 15 years is on an exclusive basis). In addition, the Group has been granted an exclusive nationwide operation of online gaming, physical and online sports betting for a period of 10 years from the commencement of operation of the online gaming business by the Group in Cape Verde.

– 30 –

We consider this investment in Cape Verde a great opportunity for us as a Macau enterprise to make use of the Sino-Portuguese platform to expand its business overseas. Also, the Project follows the China Government’s national policy ‘‘One belt, one road’’, a strategy to help position Macau as one of the important cities on the Maritime Silk Road, and has the potential to lead the small and medium enterprises of Macau to expand from Macau.

Remaining to be committed to the successful completion of the MFW Redevelopment, the Group also considers the investment in Cape Verde is the first step in reaching out to international markets for maximising value for its shareholders, partners and customers.

Liquidity and Capital Resources

The Group’s liquidity needs primarily comprise working capital, capital expenditure, and servicing borrowings of the Group. The Group has generally funded its operations and development projects from internal resources, debt and/or equity financing.

As at 30 June 2015, the consolidated net assets attributable to owners of the Company amounted to approximately HK$7,397.6 million, representing a decrease of approximately HK$62.1 million from approximately HK$7,459.7 million as at 31 December 2014. The decrease in consolidated net assets during the six months ended 30 June 2015 was mainly due to the Group’s loss for the period of approximately HK$68.4 million.

Bank balances and cash

As at 30 June 2015, bank balances and cash held by the Group amounted to approximately HK$4,432.9 million (including pledged bank deposits of approximately HK$20.6 million) of which approximately 69.3% was denominated in RMB and the remaining approximately 30.7% was denominated mainly in HK$ and MOP. Given MOP are pegged to HK$, the Group considers the exposure to exchange rate risk is nominal for its bank balances and cash denominated in MOP. The Group’s bank deposits denominated in RMB are subject to exchange rate risk as the exchange rate of RMB to HK$ may fluctuate significantly.

The Company completed a global offering with its Shares listed on the Stock Exchange with effect from 5 July 2013 on which the Company raised net proceeds of approximately HK$2.1 billion. In addition, the Company completed a top-up placement of 188,000,000 new Shares and raised net proceeds of approximately HK$1,350.8 million in January 2014. In order to enhance better yield from the portion of the proceeds raised from the Listing and the top-up placement which are not expected to be utilised in the near term, the Group has placed these funds at banks in Hong Kong and Macau as HK$ or RMB fixed deposits with maturities ranging from 1 to 3 months. As at 30 June 2015, a total of approximately HK$3,787.8 million had been placed as fixed deposits at banks in Macau, including approximately HK$3,051.7 million in RMB and approximately HK$736.1 million mainly in HK$, at an average annualised interest rate of approximately 2.6%.

– 31 –

Exchange rate of RMB against HK$ fluctuated during the six months ended 30 June 2015. For accounting purposes, the RMB fixed deposits were retranslated into HK$ at the exchange rate as at 30 June 2015 which resulted in an unrealised exchange loss of approximately HK$5.6 million being recognised in the Group’s interim results.

Borrowings

As at 30 June 2015, the Group had outstanding secured and unguaranteed bank borrowings of approximately HK$4,163.6 million and an unsecured, interest-free and unguaranteed other borrowings of approximately HK$176.0 million.

In respect of the bank borrowings of approximately HK$4,163.6 million, the maturity profile was spread over a period of less than 5 years with approximately HK$378.4 million repayable within one year, approximately HK$781.7 million repayable in the second year and approximately HK$3,003.5 million repayable in the third to fifth years. The other borrowings of approximately HK$176.0 million are repayable within one year.

The Group’s bank borrowings carried interest at prevailing market rates and on floating rate basis. In addition, the bank borrowings and the other borrowings as at 30 June 2015 were denominated in HK$ (the Group’s functional currency) and hence the Group does not expect any significant foreign currency exposure in respect of its bank borrowings and other borrowings as at 30 June 2015.

Use of Proceeds from the Global Offering

Trading of the Shares on the Stock Exchange commenced on 5 July 2013, and the Group raised net proceeds of approximately HK$2.1 billion from the global offering. The Group intends to apply such proceeds in a manner consistent with the intended use of proceeds as disclosed in the Supplemental Prospectus and the announcement made by the Company on 4 July 2013 (the ‘‘Announcement’’). Details of the intended use of proceeds are set out in the Supplemental Prospectus and the Announcement. Up to 30 June 2015, the Group had applied approximately HK$1,353.6 million, HK$199.7 million and HK$97.5 million of the net proceeds for the MFW Redevelopment, renovation of The Landmark Macau and settlement of an amount in respect of purchase of an aircraft, respectively, which are in compliance with the intended use of proceeds as set out in the Supplemental Prospectus and the Announcement.

Charge on the Group’s Assets

As at 30 June 2015, certain assets of the Group were pledged to secure credit facilities and use of electricity granted to the Group, including investment properties with a total carrying amount of approximately HK$377.3 million, buildings with a total carrying amount of approximately HK$2,339.0 million, prepaid lease payments with a total carrying amount of approximately HK$1,821.2 million, trade receivables of approximately HK$102.7 million and bank deposits of approximately HK$20.6 million.

– 32 –

Gearing

The Group’s gearing ratio (expressed as a percentage of total borrowings over total equity as at the end of the reporting period) was approximately 58.7% as at 30 June 2015 (31 December 2014: approximately 56.7%). The increase in gearing ratio of the Group for the six months ended 30 June 2015 was mainly due to the additional drawdown of bank loan by the Group during the period.

Hedging, Acquisition and Disposals and Significant Investments

During the six months ended 30 June 2015, the Group did not (i) employ any financial instruments for hedging purposes; (ii) undertake any material acquisitions or disposals of assets, business or subsidiaries; or (iii) make any significant investments.

Contingent Liabilities

Details of contingent liabilities of the Group as at 30 June 2015 are set out in note 17 to the condensed consolidated financial statements of the Group for the six months ended 30 June 2015.

Capital Commitments

As at 30 June 2015, the Group had capital commitments which were authorised but not contracted for in respect of the renovation work of The Landmark Macau and the MFW Redevelopment of approximately HK$27.3 million (31 December 2014: approximately HK$36.6 million) and approximately HK$6,377.2 million (31 December 2014: approximately HK$6,877.3 million) respectively. In addition, as at 30 June 2015, the Group had capital commitments in respect of acquisition of property and equipment and construction in progress which are contracted but not provided for in the amount of approximately HK$752.6 million (31 December 2014: approximately HK$773.9 million).

Employees and Remuneration Policies

As at 30 June 2015, the Group had a total of approximately 3,400 employees, including approximately 1,370 gaming operation employees who were employed and paid by SJM but over whom the Group exercised oversight in accordance with the Service Agreement. The Group reimbursed SJM in full for the salaries and other benefits of these gaming operation employees.

The Group recognises the importance of maintaining a stable staff force for its continued success. Staff remuneration is determined by reference to personal qualifications, work performance, industry experience, responsibilities and relevant market trends. Discretionary bonuses are granted to employees based on merit and in accordance with industry practice. Other benefits including share options, reward shares, retirement benefits, subsidised medical care, pension funds and sponsorship for external education and training programmes are offered to eligible employees.

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PURCHASE, SALE OR REDEMPTION OF LISTED SHARES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of its listed Shares during the six months ended 30 June 2015.

CORPORATE GOVERNANCE

Compliance with the Corporate Governance Code

The Company believes that good corporate governance practices are very important for maintaining and promoting investor confidence and for the sustainable growth of the Group. The Board sets appropriate policies and implements corporate governance practices appropriate to the conduct and growth of the Group’s business. The Board is committed to strengthening the Group’s corporate governance practices and ensuring transparency and accountability of the Company’s operations. Throughout the six months ended 30 June 2015, the Company has complied with the CG Code except for code provision A.2.1.

Code provision A.2.1

Code provision A.2.1 of the CG Code stipulates that the roles of chairman and chief executive should be separate and should not be performed by the same individual. Currently, Mr David Chow and Mr Tong Ka Wing, Carl are co-chairmen of the Board and responsible for the management of the Board and ensuring that all major and appropriate issues are discussed by the Board in a timely and constructive manner. In addition, Mr David Chow is the chief executive officer of the Company, taking care of the day-to-day management of the Group’s business and implementing the Group’s policies, strategic plans and business goals formulated by the Board. Although Mr David Chow is both a cochairman and the chief executive officer of the Company, the powers and authorities of the cochairman have not been concentrated as the responsibilities have been shared between the co-chairmen. The Board believes that the balance of power and authority for the present arrangement will not be impaired and is adequately ensured by the current Board which comprises experienced and high calibre individuals with sufficient number of Directors being non-executive Directors.

REVIEW OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s unaudited condensed consolidated financial statements for the six months ended 30 June 2015 have been reviewed by the audit committee of the Company, which currently comprises three independent non-executive Directors, namely Mr Fong Chung, Mark, Mr Xie Min and Madam Tam Wai Chu, Maria, and the non-executive Director, Mr Tong Ka Wing, Carl, and by the Company’s independent auditor in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA.

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INVESTOR RELATIONS

Information regarding the Company is published on its website at ‘‘www.macaulegend.com’’. Interim and annual reports, circulars and notices of the Company are dispatched to shareholders of the Company at appropriate times. The website of the Company provides information such as e-mail address, correspondence address and telephone numbers for inquiries, and provides information on business activities of the Group.

DEFINITIONS

In this announcement, the following expressions have the following meanings unless the context otherwise requires:

‘‘Adjusted EBITDA’’

the Group’s earnings before interest income, finance costs, income taxes, depreciation, release of prepaid lease payments, amortisation, loss on disposal of property and equipment, unrealised exchange gain/ loss, share-based payments, pre-opening expenses and one-off costs incurred or associated with corporate exercises

‘‘ADR’’ average daily room rate ‘‘Board’’ the board of Directors ‘‘Cape Verde’’ the Republic of Cabo Verde ‘‘CG Code’’ the Corporate Governance Code contained in Appendix 14 to the Listing Rules ‘‘Company’’ Macau Legend Development Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange ‘‘DICJ’’ Direcção de Inspecção e Coordenação de Jogos, the Gaming Inspection and Coordination Bureau in Macau ‘‘Directors’’ the directors of the Company ‘‘Group’’ the Company and its subsidiaries ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘HKFRSs’’ Hong Kong Financial Reporting Standards ‘‘HKICPA’’ Hong Kong Institute of Certified Public Accountants ‘‘Hong Hock’’ Hong Hock Development Company Limited, a company incorporated in Macau and a subsidiary of the Company

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‘‘Listing’’	the listing of the Shares on the Main Board of the Stock Exchange with
	effect from 5 July 2013
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock Exchange
‘‘MFW’’	Macau Fisherman’s Wharf operated by MFW Investment
‘‘MFW Group’’	MFW Investment and its subsidiaries
‘‘MFW Investment’’	Macau Fisherman’s Wharf International Investment Limited, a company
	incorporated in Macau and a subsidiary of the Company
‘‘MFW Redevelopment’’	the redevelopment of MFW
‘‘MOP’’	Macau Pataca, the lawful currency of Macau
‘‘Mr David Chow’’	Mr Chow Kam Fai, David, a co-chairman, an executive Director and
	the chief executive officer of the Company and a controlling
	shareholder (as defined in the Listing Rules) of the Company
‘‘Mr Frederick Yip’’	Mr Yip Wing Fat, Frederick, the sole shareholder and sole director of
	New Legend and the executive vice president, head of casino
	operations of the Company
‘‘New Legend’’	New Legend VIP Club Limited, a company incorporated in Macau by
	Mr Frederick Yip, and consolidated as a subsidiary of the Company
	under the VIE Structure
‘‘REVPAR’’	revenue per available room
‘‘RMB’’	Renminbi, the lawful currency of the People’s Republic of China
‘‘Service Agreement’’	the service agreement dated 25 September 2006 and its related
	amendments entered into between Hong Hock and SJM, under which
	the Group provides gaming services to SJM in the Group’s two major
	casinos, namely Pharaoh’s Palace Casino in The Landmark Macau and
	Babylon Casino in MFW
‘‘Share(s)’’	ordinary share(s) of HK$0.1 each in the share capital of the Company
‘‘SJM’’	Sociedade de Jogos de Macau, S.A.
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Supplemental Prospectus’’	the supplemental prospectus of the Company dated 26 June 2013

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‘‘VIE Structure’’ the structure established through the entering into of the VIE agreements (that is, the exclusive management and consultancy services agreement, the exclusive undertaking to sell agreement, the transfer of profit and loan agreement, the share and equity pledge agreement and the power of attorney entered into among Hong Hock, New Legend and Mr Frederick Yip, where appropriate), which enables the Group to indirectly participate in the gaming promotion business operations in Macau through New Legend

‘‘€’’

Euro, the lawful currency of the European Union

‘‘%’’

per cent

By Order of the Board

Macau Legend Development Limited Chow Kam Fai, David Co-chairman, executive Director and chief executive officer

Hong Kong, 19 August 2015

As at the date of this announcement, the executive Directors are Chow Kam Fai, David, Lam Fong Ngo and Sheldon Trainor-DeGirolamo; the non-executive Director is Tong Ka Wing, Carl; and the independent non-executive Directors are Fong Chung, Mark, Xie Min and Tam Wai Chu, Maria.

for identification purposes only

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