10:49 MELCO INT'L DEV<00200> - Announcement & Resumption (11) REASONS AND BENEFITS FOR ENTERING INTO THE THIRD AGREEMENT AND THE GREAT WONDERS AGREEMENT Subject to the completions of the Third Agreement and the Great Wonders Agreement, the respective attributable interests in Great Wonders owned by Melco and PBL will be increased from 42% and 28% respectively to 60% and 40% respectively and STDM will cease to have any equity interest in Great Wonders. While the First Agreement was for the purpose of acquiring an initial 50% equity interests in Great Wonders by Melco, the Second Agreement was for the purpose of obtaining a controlling interests in Great Wonders by Melco through acquisition of an additional 20% equity interests therein. After formation of the JV Group, the Directors and the directors of Melco PBL Holdings consider there will be a commercial advantage for entering into the Third Agreement and the Great Wonders Agreement as the same will serve the purposes of rationalizing the shareholding structure of Great Wonders via a complete buyout of STDM's equity interests therein thereby enhancing its operational efficiency and strengthening the cooperation between Melco and PBL in pursuing the Hospitality Business, in particular, fulfilling the terms and spirit of the Subscription Agreement and the Shareholders Deed to have all gaming, entertainment and hospitality ventures and businesses in the Greater China region effectively owned as to 60% by Melco and 40% by PBL through the JV Group. As such, the entire equity interests in Great Wonders have been acquired by Melco or Melco Entertainment (as the case may be) by different trenches. In respect of the future prospects of the Hospitality Business and gaming business in Macau, the Directors hold an optimistic view based on the reasons and belief that: - due to the proximity of Macau to the PRC, Macau will be able to capture the economic benefit generated by the continuous economic growth and increase in per capita annual disposable income of urban households in the PRC as disclosed in the China Statistical Yearbook 2004, which in turn translates into a vast long-term opportunity for the gaming and hospitality businesses; - the relaxation of travel restrictions for individual travelers from the PRC since mid-2003 has proved to be a new driver for the PRC tourists. According to the Statistics and Census Service of the Macau Government, in the first nine months of 2004, the PRC visitors to Macau increased 83% on a year on year basis and accounted for 57% of total visitors, up from 45% in 2003; - also, because of the proximity of Macau to Hong Kong, the gaming and hospitality businesses in Macau are likely to benefit from the Disneyland to be opened in Hong Kong by the end of 2005, which is expected to attract many visitors from the PRC and the other parts of the world. The Directors consider that a complete buyout of STDM's interests in Great Wonders will enable the JV Group to consolidate the entire results, assets and liabilities of Great Wonders and hence, the Hospitality Business and based on the above belief in the potential business prospects in Macau, the Directors are of the view that a higher effective interest in Great Wonders obtained by the Melco pursuant to the Third Agreement and the Great Wonders Agreement will contribute to the improvement of return for the Shareholders. In addition, since the transactions under the Third Agreement and the Great Wonders Agreement are intended to be a back-to-back arrangement with substantial similar terms and given the fact that on the one hand, part of the consideration of HK$200 million payable by Melco to STDM under the Third Agreement will be satisfied by way of issue of the Consideration Shares and on the other hand, the entire consideration of HK$400 million receivable by Melco from Melco Entertainment under the Great Wonders Agreement will be satisfied by way of cash financed from the internal resources of the JV Group, the Directors consider that the overall effect of the two transactions will result in an increase in the cash resources available to Melco and is in the interest of Melco. It is currently intended by Melco that such additional cash resources will be applied as general working capital of the Group. Save for the above, the Directors consider that the two transactions shall have no material financial impact on the Group and there shall neither be any gain nor loss accrued to Melco as a result of these transactions.