Review of Operation

Fellow Shareholders,
Dreamgate Corporation Bhd. ("DCB") continues to make progress and benefits from strategies implemented in previous years. We recorded another year of positive growth with revenue and net profit improving by 28% and 22% respectively. The Group remains committed to ensuring solid returns to shareholders by meeting its financial and corporate targets.

The growth has been made possible by:

• Provision of strong customer support through dedicated offices at key
• locations across the region
• Availability of good mixture of machines and games
• Aggressive expansion of concession programs

The SSM division enjoyed approximately 33% growth in the number of gaming machines sold while the TSM division became one of the major and most successful concession program operators with approximately 6,000 units of machines deployed across Asia as at 31 December 2007.

Sales & Marketing ("SSM")

Continuous growth in the gaming industry regionally has increased demand and created opportunities for us to market products which have been generating good returns for the customers resulting in new and recurring orders. Our strategy of having dedicated offices in selected locations has enabled us to respond to customer demands in a timely manner thereby maximising financial returns for customers.

During the year, the Group continued to distribute products of various leading manufacturers including CRON Corporation (our associate company). Sales of RGBGames machines, however, were not encouraging due to late roll out of new games and concept to the market and robust competition.

In anticipation of the industry trend to utilize synthetic rather than wool for table layouts, SSM introduced a synthetic layout manufactured by Sibel Products Inc. of USA during the year. This has enabled the Group to retain its clients who have reduced their orders for wool layouts manufactured at our Prai, Penang factory.

SSM commenced marketing of products from our joint venture company, RGB Xtale Sdn. Bhd., towards the end of 2007 while products from the other joint venture company, RGB Abbiati Pte. Ltd., are expected to be marketed in 2008.

The Group was appointed distributor for USA based Wells Gardner Electronic Corp and its subsidiary, American Gaming & Electronics to market color video monitors and other related products in 2007.

The Group continues to create awareness for all its products through exhibition at two major regional expositions in Macau and the Philippines.

Research & Development ("R&D")

The Group continued to place emphasis on R&D to stay abreast in this highly competitive and technology driven industry for both slot machines and table games.

The Malaysian R&D Center at its new premises in Penang became fully operational during the year. The Center is equipped with new hardware and software and has increased manpower to cope with the many development projects on hand.

In 2007, the R&D team developed the 9 reels and 15 reels games concept, and the Hot Rock Link Progressive and continued to improve on the in-house SmartLink system, a solution to facilitate a more efficient gaming floor management. The development of a web-based support application for all RGBGames which will enable real time access by our customers as well as our personnel, is currently in progress.

Technical Support & Management ("TSM")

In 2007, TSM reported placement of an additional 2,200 units of machines throughout all locations of operations; an upsurge of 65% from 3,400 machines last year and participated in 21 new concession programs which opened for business during the year, bringing the total concession programs to 64. The Group has taken an equity interest in two new concessions, in Cambodia and commenced operations in Lao PDR with one new concession.

Technology - Manufacturing Activities

The Group has two factories with total area of about 14,000 sq. ft. in operation in 2007. An additional factory with an area of 20,000 sq. ft., which was acquired in 2006, was renovated during the year and shall commence operations in May 2008.

These manufacturing facilities cater to production of layouts, assembly of RGBGames machines and repairs and refurbishment of used machines.

Corporate Social Responsibility ("CSR")

The Board believes it should balance its pursuit of business objectives with strong support for the underprivileged communities in countries where we operate.

Details of the Group's CSR initiatives are shown under the heading of Corporate Social Responsibility 2007 in this Annual Report.

Human Capital Development

Human capital development remains a priority for the Group. In 2007, we have promoted a number of executives to senior management positions and directorship in subsidiary and associate companies. These executives will play a significant part in our growth and succession plans.

Due to our rapid growth in this industry, we have a headcount of 415 staff at the end of 2007 as against 210 in 2006. The demand for qualified personnel to fill positions were met by the recruitment of expatriates from various countries. It is expected that the trend of hiring expatriates will continue in the future.

Animation, Graphic And Signage

This division continues to meet its objectives of providing high quality and attractive signages for both casino operators and slot machine manufacturers.

Prospects

The Asian gaming and leisure industry continues to grow at a rapid pace with the expansion of opportunities in many countries. The success of gaming and leisure activities in Macau has encouraged the Philippines to accelerate its development of the Bagong Nayong Pilipino-Manila Bay Integrated City, where approval has been given for 4 integrated resorts and casinos, and Thailand and Indonesia to consider liberalization of such industry in their respective countries.

In order to capture a bigger slice of the market, the Group has initiated plans to manufacture and market its products under the RGBGames brand and through brands of joint venture partners.

In line with our expansion and to meet the demands of mega casino operators, the Group will set up a full integrated and logistics services center, initially, in Singapore.

The Group will continue to consider forming strategic alliances with manufacturers seeking to set up manufacturing facilities in the region. It will also participate in equity interest in companies which have concession programs with the Group's TSM division.

Subsequent to the year end, the Group increased its equity interest in Chateau de Bavet Club Co., Ltd. from 40% to 60%. The construction of the club and casino is in progress and it is expected to open by this year end. The Group is currently considering investment proposals for similar projects in various countries.

We are committed to improving our leading position in the industry and expect to deliver another set of positive results for the coming year.

Appreciation

My sincere appreciation to the team at DCB Group for their support, commitment and hard work in delivering the results for 2007.

I am confident that our Group's business plans will be achieved with the support from a dedicated team.

Datuk Chuah Kim Seah, JP
Group Managing Director
22 April 2008
Penang

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