09:44 CENTURY LEGEND<00079> - Announcement & Resumption (2) BACKGROUND TO AND REASONS FOR THE FORMATION OF THE JOINT VENTURES On 1 December 2003 and 29 February 2004, HKMJI had respectively acquired an aggregate of 15% interest in each of the DH Syndicate and DEH Syndicate at cash consideration of US$1.5 million (approximately HK$11.7 million) and HK$23.4 million for an entitlement to share 15% of the profit or loss generated from the Gaming Intermediary Operation at the Diamond Hall and the Diamond Entertainment Hall. The remaining 85% interest in each of the DH Syndicate and DEH Syndicate was then held by independent third parties. In early December 2004, China Sky acquired the remaining 85% interest in each of the DH Syndicate and DEH Syndicate. Pursuant to the Regulation which came into force in 2004, a gaming intermediary operation is required to be carried out through a company incorporated in Macau or an individual and that incorporated body or individual is required to obtain a Gaming Intermediaries Licence for the purpose of carrying out the gaming intermediary operation. For the purpose of limiting their liabilities that may arise from the Gaming Intermediary Operation and complying with the Regulation, HKMJI and China Sky have agreed to form the two Joint Ventures which are incorporated bodies with limited liabilities. The two Joint Ventures have applied for the Gaming Intermediaries Licences for the purpose of carrying on the Gaming Intermediary Operation at the Diamond Hall and the Diamond Entertainment Hall under the regime of the Regulation. PROPOSED STRUCTURE OF THE JOINT VENTURES [CHART] THE JV AGREEMENT DATED 11 JANUARY 2005 Parties Hong Kong Macau Junket Investments Limited, an indirect wholly-owned subsidiary of the Company. China Sky Investments Limited, the beneficial owner of Barsmark, who holds approximately 52.2% interest in the Company. Scope of business The Joint Ventures have applied for and will obtain the Gaming Intermediaries Licences under the Regulation for the purpose of carrying on the Gaming Intermediary Operation and other lawful gaming-related activities at the Diamond Hall and the Diamond Entertainment Hall. Registered capital of the Joint Ventures The initial registered capital of each of the Joint Ventures is MOP100,000 (approximately HK$96,200) and the same has been paid up. HKMJI and China Sky have respectively contributed MOP30,000 (approximately HK$28,860) and MOP170,000 (approximately HK$163,540) towards the registered capital of the Joint Ventures. Shareholders' Loans After the two Joint Ventures obtaining the Gaming Intermediaries Licences and the fulfillment of the conditions precedent to the JV Agreement (as summarised under the below section headed "Conditions precedent"), whichever is later, HKMJI and China Sky shall simultaneously make loan or loans in the sum or in the aggregate sum of not exceeding HK$99,900,000 to each of the Joint Ventures ("the Shareholders' Loans") in proportion to their shareholdings in the Joint Ventures. On this basis, HKMJI shall make loan or loans in the sum or in the aggregate sum of not exceeding HK$14,985,000 to each of the Joint Ventures; and China Sky shall make loan or loans in the sum or in the aggregate sum of not exceeding HK$84,915,000 to each of the Joint Ventures. The Shareholders' Loans shall be unsecured, interest-free and rank pari passu with all other unsecured obligations of the Joint Ventures. The Shareholders' Loans shall only be repaid simultaneously and shall not be repaid until after obtaining the mutual consent from both joint venture partners. Board of directors The board of directors of each of the Joint Ventures will have not more than 6 directors. HKMJI is entitled to nominate and appoint 2 directors and China Sky is entitled to nominate and appoint up to 4 directors to the board of directors of each of the Joint Ventures.