11:01 MELCO INT'L DEV<00200> - Announcement (8) POSSIBLE FUTURE CONNECTED TRANSACTIONS The Directors intend to reach an agreement with SJM whereby, upon completion of the proposed casino and subject to obtaining the necessary Macau regulatory approvals, SJM would take a lease of and operate the casino, while (subject as aforesaid) the electronic gaming machine lounge will be managed by Mocha Slot, a subsidiary of Melco Entertainment. SJM, which is a subsidiary of STDM, is one of the three concessionaries granted rights by the Macau Government to engage in casino gaming operations in Macau from 1st April 2002 to 31st March 2020. Although there is currently no agreement in place with SJM for the lease and operation of the proposed casino, this model has been employed in Melco's other principal investment, via Great Wonders, in Macau, the "Park Hyatt" luxury hotel project with a casino and electronic gaming machine lounge on a parcel of land with an area of approximately 5,230 sq. meters located at Biaxa da Taipa, Macau, details of which were included in the announcement and circular of Melco respectively dated 23rd November 2004 and 5th January 2005. Pursuant to the relevant arrangement, a lease will be granted to SJM for a period from the commencement of business of the hotel to the expiry of SJM's concession to operate casinos in Macau. In terms of rental under the lease, the Melco Group is entitled to receive 40% of the gross monthly revenue generated from the first 60 (out of an estimated total of 160) gaming tables and a percentage to be agreed between SJM and the Melco Group (but in any event not less than 30%) of the gross monthly revenue generated from the remaining gaming tables. The Directors intend to enter into arrangements on a similar basis with SJM in relation to the casino to be built as part of the integrated entertainment resort described in this announcement. Dr. Stanley Ho, who is the Chairman and an Executive Director of Melco, has an equity interest in SJM and is a director of STDM. SJM is, therefore, treated by Melco as a connected person under the Listing Rules. Accordingly, the terms of any agreement reached with SJM in relation to the lease and operation of the proposed casino would constitute a connected transaction of Melco under Chapter 14A of the Listing Rules and, in the absence of any applicable exceptions, would be subject to the approval of the Independent Shareholders. Melco will make further announcements in respect of any agreement reached with SJM in respect of the above matters at the appropriate time in accordance with the Listing Rules. The total estimated investment amount for development of the "Park Hyatt" luxury hotel is approximately HK$1,448 million and the land premium payable by Great Wonders in connection with the grant of the said land in Tapia, Macau by the Macau Government is currently estimated to be approximately HK$223 million. The offer by the Macau Government to grant a long term lease in respect of the Land in the name of Melco Hotels for the development of an integrated entertainment resort was secured through the efforts of Great Respect in the context of the Joint Venture. Melco Entertainment has agreed to acquire a 100% interest in the Joint Venture, as described below. The offer was made by the Macau Government to Melco Hotels in its capacity as the vehicle used by the Joint Venture to make the relevant application. ACQUISITION OF INTERESTS IN THE JOINT VENTURE - VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION FOR MELCO A group structure chart appears below. Melco Entertainment is a company incorporated in the Cayman Islands which is directly owned as to 80% by Melco PBL Holdings and as to the balance of 20% by Melco Leisure. Melco Leisure is a wholly owned subsidiary of Melco, while Melco PBL Holdings is a 50/50 joint venture between Melco and PBL. Accordingly, Melco has a 60% direct and indirect attributable interest in Melco Entertainment. On 11th May 2005, Melco Entertainment agreed to acquire the 49.2% interest of Great Respect in a Joint Venture established to apply to the Macau Government for the grant of one or more parcels of land in Cotai, Macau.