TNAG-1617-FCO40-2225-Executive-Council-of-Hong-Kong-memoranda-and-minutes-of-meet-1987 — Page 97

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(v) Operating costs for new developments have been

adjusted to include special "opening allowance"

for advertising expenses on World of the Sea

during its first year of operations and additional

employee costs for Craft Village."

The majority of these simulation models illustrate that, under different

operating conditions, and assuming an 8% return on the $200 million endowment fund, the Company would be able to support the proposed capital spending program and maintain a positive cash balance at the end of each fiscal year through 30 June 1991.

4.

However, if the same set of assumptions is employed and

attendance falls by 10%, a deficit cash balance will surface in the fiscal years ending 1989 and 1990. If attendance should fall by 15%, while other factors remain constant, the Company will likely experience cash flow problems. In both cases, the Company will not be able to sustain the capital spending plan and maintain positive cash balances. According to the consultant's report, these possibilities illustrate the need for the Company's management to exercise certain planning precautions throughout the 5-year operating and capital spending period, and they have recommended the following measures :

"(i)

Establish attendance, revenue and profitability minimum requirement check points which if penetrated will cause an immediate delay and revaluation of the capital spending plan.

(ii)

(iii)

Establish a five year advertising and sales promotion plan to parallel the capital spending plan to help ensure that maximum attendance and operating revenue benefit is obtained from each capital project as it is completed. Annually, this plan could be expanded to greater detail, and become the advertising budget.

Undertake an analysis of operations and establish plans to improve internal revenues and/or cost control measures. Items for consideration in such a study include :

/.....