11:02 MELCO INT'L DEV<00200> - Announcement (9) The Joint Venture is constituted by a legally binding Joint Venture MOA made between Melco Leisure and Great Respect on 28th October 2004. The transaction involved no financial commitment on the part of Melco or its subsidiaries and was, therefore, not required to be announced. The Joint Venture MOA contemplated that Great Respect would use its best efforts, through its business relationships and connections in Macau, to apply to the Macau Government for the grant of development rights in respect of one or more parcels of land in Cotai, Macau. Great Respect is a company controlled by a discretionary family trust of Dr. Stanley Ho. Dr. Ho has had strong links with Macau and its business community over several decades. Dr. Ho and Great Respect have been able to employ Dr. Ho's strong and enduring links with Macau and its business community for the benefit of Melco, to secure the opportunity for the Melco group to obtain a long term lease in respect of the Land, which is an opportunity which would not otherwise have been open to Melco. Under the Joint Venture MOA, for expedience Melco Leisure would make available one of its Macau subsidiaries (which was ultimately Melco Hotels) to the Joint Venture, as the Macanese vehicle to make the application to the Macau Government for the long term lease in respect of the Land. The Joint Venture MOA provides that, if the Macau Government were to agree to grant land in Cotai to the Joint Venture, or the vehicle provided by Melco Leisure to make the application, Melco Leisure would have an interest of 50.8% in the land so agreed to be granted and Great Respect would have an interest of 49.2% in the relevant land and that, upon a land application being approved, Melco Leisure and Great Respect would jointly develop the land on a 50.8% (Melco Leisure): 49.2% (Great Respect) basis. The Acquisition Agreements Melco Entertainment has entered into the following two agreements: 1. The First Agreement, dated 11th May 2005, with Great Respect and Melco, pursuant to which: (a) Melco Entertainment has agreed to purchase and take an assignment of the 49.2% interest in the Joint Venture held by Great Respect under the Joint Venture MOA, for a cash consideration of HK$1,175 million; and (b) Great Respect has undertaken to immediately subscribe the entire amount of the consideration to be received by it on completion of the First Agreement for Convertible Loan Notes to be issued by Melco. 2. The Second Agreement, dated 11th May 2005, with Melco Leisure and Melco, pursuant to which Melco Leisure will transfer its 50.8% interest in the Joint Venture and its interest in Melco Hotels to Melco Entertainment, in accordance with the requirements of the Shareholders Agreement and the Declaration Agreement and in consideration of the mutual benefits to be derived by, and reciprocal covenants of Melco and PBL under the Shareholders Agreement. The Convertible Loan Notes will be issued in the principal amount of HK$1,175 million, will not bear interest and will be convertible into Shares at an initial conversion price of HK$19.93 per Share, subject to customary adjustments. The conversion price has been calculated as the average closing price of the Share for the five (5) trading days up to and including the Last Trading Date. The Convertible Loan Notes are not transferable without the consent of Melco and are not permitted to be converted into Shares prior to the date of grant by the Macau Government to Melco Hotels of the long term lease in respect of the Land for the construction and development of an integrated entertainment resort. Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares falling to be issued on conversion of the Convertible Loan Notes. The exercise in full of the Convertible Loan Notes would result in the issue of an aggregate of a maximum of 58,956,347 new Shares, representing approximately 12.01% of the issued share capital of Melco on the date of this announcement and 10.72% of the enlarged issued share capital on that date assuming full conversion of the Convertible Loan Notes.