F-4 1 h04401fv4.htm FORM F-4 fv4
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As filed with the Securities and Exchange Commission on August 13, 2010
Registration No. 333-      
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
MCE Finance Limited
(Exact Name of Registrant as Specified in Its Charter)
(FOR CO-REGISTRANTS, PLEASE SEE “TABLE OF CO-REGISTRANTS” ON THE FOLLOWING PAGE)
 
         
Cayman Islands
(State or Other Jurisdiction
of Incorporation or Organization)
  7011
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification No.)
 
 
 
 
Walker House
87 Mary Street
George Town
Grand Cayman KY1-9005
Cayman Islands
(345) 945 3727
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
 
 
 
CT Corporation System
111 Eight Avenue, 13th Floor
New York, NY 10011
(212) 894-8940
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
 
 
 
 
Copies to:
Thomas M. Britt III, Esq.
Debevoise & Plimpton LLP
13th Floor, Entertainment Building
30 Queen’s Road Central
Hong Kong SAR
China
(852) 2160-9800
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.
 
 
 
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
 
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
 
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o
 
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  o
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
                         
            Proposed Maximum
    Proposed Maximum
     
Title of Each Class of
    Amount to be
    Offering
    Aggregate Offering
    Amount of
Securities to be Registered     Registered     Price per Unit(1)     Price     Registration Fee
10.25% Senior Notes due 2018
    US$600,000,000     98.671%     US$600,000,000     US$42,780(2)
Guarantees of 10.25% Senior Notes due 2018(3)
    N/A(4)     (4)     (4)     (4)
                         
 
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
 
(2) The registration fee has been calculated under Rule 457(f)(2) of the Securities Act.
 
(3) The following co-registrants are each guarantors of the 10.25% Senior Notes due 2018 and will be guarantors of the Exchange Notes that are being registered under this registration statement: Melco Crown Entertainment Limited, MPEL International Limited, Melco Crown Gaming (Macau) Limited, MPEL Nominee One Limited, MPEL Investments Limited, Altira Hotel Limited, Altira Developments Limited, Melco Crown (COD) Hotels Limited, Melco Crown (COD) Developments Limited, Melco Crown (Cafe) Limited, Golden Future (Management Services) Limited, MPEL (Delaware) LLC, Melco Crown Hospitality and Services Limited, Melco Crown (COD) Retail Services Limited, Melco Crown (COD) Ventures Limited, COD Theatre Limited, Melco Crown COD (HR) Hotel Limited, Melco Crown COD (CT) Hotel Limited and Melco Crown COD (GH) Hotel Limited.
 
(4) Pursuant to Rule 457(n), no separate filing fee is required with respect to the guarantees.
 
The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 


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Table of Co-Registrants
 
             
    State or Other
       
    Jurisdiction of
       
Exact Name of Co-Registrant
  Incorporation or
  I.R.S. Employer
  Address and Telephone Number
as Specified in its Charter
 
Organization
 
Identification No.
 
of Principal Executive Offices
 
Melco Crown Entertainment Limited
  Cayman Islands   Not Applicable   36th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong
(852) 2598 3600
MPEL International Limited
  Cayman Islands   Not Applicable   Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands
(345) 945 3727
Melco Crown Gaming (Macau) Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Dr. Mário Soares, no. 25, Edificio Montepio, 1.o andar, comp. 13, Macau
(853) 2859 1592
MPEL Nominee One Limited
  Cayman Islands   Not Applicable   Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands
(345) 945 3727
MPEL Investments Limited
  Cayman Islands   Not Applicable   Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands
(345) 945 3727
Altira Hotel Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Altira Developments Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown (COD) Hotels Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown (COD) Developments Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown (Cafe) Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880


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    State or Other
       
    Jurisdiction of
       
Exact Name of Co-Registrant
  Incorporation or
  I.R.S. Employer
  Address and Telephone Number
as Specified in its Charter
 
Organization
 
Identification No.
 
of Principal Executive Offices
 
Golden Future (Management Services) Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
MPEL (Delaware) LLC
  Delaware   Not Applicable   32 West Loockerman Square, Suite 210, Dover,
Delaware 19904
(302) 674 8670
Melco Crown Hospitality and Services Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown (COD) Retail Services Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown (COD) Ventures Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
COD Theatre Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown COD (HR) Hotel Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown COD (CT) Hotel Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880
Melco Crown COD (GH) Hotel Limited
  Macau Special Administrative Region of the People’s Republic of China   Not Applicable   Avenida Xian Xing Hai, Edifico Zhu Kuan, 22o
andar, Macau
(853) 8868 8880


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The information in this prospectus is not complete and may be changed. We may not complete the exchange offer or issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED AUGUST 13, 2010
 
(MCE FINANCE LIMITED LOGO)
 
MCE Finance Limited
(incorporated in the Cayman Islands with limited liability)
Offer to exchange all of the Outstanding Unregistered
US$600,000,000 10.25% Senior Notes due 2018
(CUSIP Nos. 55277B AA3, G59301 AA2; ISIN US55277BAA35, USG59301AA28),
for
US$600,000,000 10.25% Senior Notes due 2018
that have been registered under the Securities Act of 1933
(CUSIP Nos.           ; ISIN          )
 
 
 
 
The Exchange Offer:
 
  •  MCE Finance Limited, or MCE Finance, will exchange all outstanding Initial Notes that are validly tendered and not validly withdrawn for an equal principal amount of Exchange Notes that are freely tradable.
 
  •  You may withdraw tenders of Initial Notes at any time prior to the expiration date of the exchange offer.
 
  •  The offer to exchange Initial Notes for Exchange Notes will be open until 5:00 p.m., New York City time, on          , 2010, unless extended.
 
  •  MCE Finance will not receive any proceeds from the issuance of Exchange Notes in the exchange offer.
 
The Exchange Notes:
 
  •  The terms of the Exchange Notes to be issued in the exchange offer are substantially identical to the terms of the Initial Notes, except that the Exchange Notes will be registered under the Securities Act and therefore will not be subject to restrictions on transfer and will not entitle their holders to registration rights. The Exchange Notes will also be fully and unconditionally guaranteed by the parent company of MCE Finance, Melco Crown Entertainment Limited (the “Parent”), and certain of the Parent’s subsidiaries, MPEL International Limited, Melco Crown Gaming (Macau) Limited, MPEL Nominee One Limited, MPEL Investments Limited, Altira Hotel Limited, Altira Developments Limited, Melco Crown (COD) Hotels Limited, Melco Crown (COD) Developments Limited, Melco Crown (Cafe) Limited, Golden Future (Management Services) Limited, MPEL (Delaware) LLC, Melco Crown Hospitality and Services Limited, Melco Crown (COD) Retail Services Limited, Melco Crown (COD) Ventures Limited, COD Theatre Limited, Melco Crown COD (HR) Hotel Limited, Melco Crown COD (CT) Hotel Limited and Melco Crown COD (GH) Hotel Limited (together with the Parent, the “Guarantors.”)
 
Resale of the Exchange Notes:
 
  •  There is currently no public market for the Exchange Notes. Application has been made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Exchange Notes on the Official List of the SGX-ST. Such approval will be granted when the Exchange Notes have been admitted to the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any statements made, reports contained or opinions expressed in this prospectus. Admission of the Exchange Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Exchange Notes, the Guarantees, MCE Finance, the Guarantors or their respective subsidiaries or associated companies, if any.
 
Each broker-dealer that receives Exchange Notes for its account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal accompanying this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for the Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. See “Plan of Distribution.”
 
 
 
 
See “Risk Factors” beginning on page 16 of this prospectus for a discussion of certain risks you should consider before participating in the exchange offer.
 
 
Neither the Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
The date of this prospectus is          , 2010.


 

 
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 EX-4.1
 EX-4.2
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 EX-4.4
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 EX-4.6
 EX-4.11
 EX-5.2
 EX-5.3
 Ex-12.1
 EX-23.4
 EX-25.1
 EX-99.1
 EX-99.2
 EX-99.3
 Ex-99.4
 Ex-99.5
 
 
 
 
You should rely only on the information incorporated by reference or provided in this prospectus or to which this prospectus refers you. We have not authorized anyone to provide you with any information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making the exchange offer in any jurisdiction where the exchange offer is not permitted. You should assume that the information in this prospectus or any prospectus supplement, as well as the information we have previously filed with the SEC or incorporated by reference in this prospectus, is accurate only as of the date of the documents containing the information.
 
In making an investment decision, you must rely on your own examination of us and the terms of the exchange offer, including the merits and risks involved. These securities have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any other United States regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of


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the exchange offer or the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense in the United States.
 
 
 
 
This prospectus incorporates by reference important business and financial information about us that is not included in or delivered with this prospectus. See “Where You Can Find Additional Information.” You may read and copy any reports or other information that we filed with the SEC. Such filings are available to you over the internet at the SEC’s website at http://www.sec.gov. The SEC’s website is included in this prospectus as an inactive textual reference only. You may also read and copy any document that we file with the SEC at its public reference room at 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of the exchange offer registration statement and other information that we file with the SEC at no cost by calling us or writing to us at the following address:
 
MCE Finance Limited
c/o Melco Crown Entertainment Limited
36th Floor, The Centrium
60 Wyndham Street
Central
Hong Kong
Attn: Company Secretary
(852) 2598 3600
 
In order to obtain timely delivery of such materials, you must request documents from us no later than five business days before you make your investment decision or at the latest by          , 2010.
 
 
 
 
NOTICE TO NEW HAMPSHIRE RESIDENTS
 
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.


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CONVENTIONS THAT APPLY TO THIS PROSPECTUS
 
In this prospectus, unless otherwise indicated,
 
  •  “we,” “us,” “our company,” “our” and the “Company” refer to the Parent and its predecessor entities and its consolidated subsidiaries, including, but not limited to, MCE Finance (except where the context otherwise requires);
 
  •  “Parent” refers to Melco Crown Entertainment Limited, a Cayman Islands exempted company with limited liability;
 
  •  “MCE Finance” refers to MCE Finance Limited, a Cayman Islands exempted company with limited liability, a wholly-owned subsidiary of the Parent and the issuer of the Initial Notes and the Exchange Notes described in this prospectus;
 
  •  “Guarantees” refers to the guarantees provided by the Parent, MPEL International and the Subsidiary Group Guarantors.
 
  •  “Guarantors” refers to the Parent, MPEL International and the Subsidiary Group Guarantors.
 
  •  “Subsidiary Group Guarantors” refers to Melco Crown Gaming (Macau) Limited, MPEL Nominee One Limited, MPEL Investments Limited, Altira Hotel Limited, Altira Developments Limited, Melco Crown (COD) Hotels Limited, Melco Crown (COD) Developments Limited, Melco Crown (Cafe) Limited, Golden Future (Management Services) Limited, MPEL (Delaware) LLC, Melco Crown Hospitality and Services Limited, Melco Crown (COD) Retail Services Limited, Melco Crown (COD) Ventures Limited, COD Theatre Limited, Melco Crown COD (HR) Hotel Limited, Melco Crown COD (CT) Hotel Limited and Melco Crown COD (GH) Hotel Limited.
 
  •  “Melco” refers to Melco International Development Limited, a Hong Kong listed company;
 
  •  “Melco Crown Gaming” refers to our wholly-owned subsidiary, Melco Crown Gaming (Macau) Limited, a Macau company;
 
  •  “MPEL International” refers to MPEL International Limited, a Cayman Islands company with limited liability, and a direct, wholly-owned subsidiary of MCE Finance;
 
  •  “Crown” refers to Crown Limited, an Australian listed corporation which completed its acquisition of the gaming businesses and investments of PBL, now known as Consolidated Media Holdings Limited, on December 12, 2007 and which is now our shareholder. As the context may require, “Crown” shall include its predecessor, PBL;
 
  •  “PBL” refers to Publishing and Broadcasting Limited, an Australian listed corporation which is now known as Consolidated Media Holdings Limited;
 
  •  “SPV” refers to Melco Crown SPV Limited, formerly Melco PBL SPV Limited, a Cayman Islands exempted company which is 50/50 owned by Melco Leisure and Entertainment Group Limited and Crown Asia Investments Pty. Ltd.;
 
  •  “Altira Developments Limited” refers to the Macau company through which we hold the land and buildings for Altira Macau;
 
  •  “Altira Hotel Limited” refers to the Macau company through which we currently operate the hotel and other non-gaming businesses at Altira Macau;
 
  •  “Melco Crown (COD) Developments Limited” refers to the Macau company through which we hold the land and buildings for City of Dreams;
 
  •  “Melco Crown (COD) Hotels Limited” refers to the Macau company through which we currently operate the hotels and other non-gaming businesses at City of Dreams;
 
  •  “SBGF Agreement” refers to the subconcession bank guarantee request letter, dated 1 September 2006, issued by Melco Crown Gaming and the bank guarantee number 269/2006, dated 6 September 2006,


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  extended by Banco Nacional Ultramarino, S.A. in favor of the government of the Macau SAR at the request of Melco Crown Gaming, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection thereunder;
 
  •  “our subconcession” refers to the Macau gaming subconcession held by Melco Crown Gaming;
 
  •  “China,” “mainland China” and “PRC” refer to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan;
 
  •  “Greater China” refers to mainland China, Hong Kong, Macau and Taiwan, collectively;
 
  •  “HK$” and “H.K. dollars” refer to the legal currency of Hong Kong;
 
  •  “Hong Kong” refers to the Hong Kong Special Administration Region of the People’s Republic of China;
 
  •  “Macau” and the “Macau SAR” refer to the Macau Special Administrative Region of the People’s Republic of China;
 
  •  “Patacas” and “MOP” refer to the legal currency of Macau;
 
  •  “Renminbi” and “RMB” refer to the legal currency of China;
 
  •  “US$” and “U.S. dollars” refer to the legal currency of the United States; and
 
  •  “U.S. GAAP” refers to the accounting principles generally accepted in the United States.
 
PRESENTATION OF FINANCIAL INFORMATION
 
Our financial statements were prepared in accordance with generally accepted accounting principles in the United States. Our reporting currency is U.S. dollars.
 
Certain numerical figures set out in this prospectus, including financial data presented in millions or thousands, have been subject to rounding adjustments and, as a result, the totals of the data in this prospectus may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are calculated using the numerical data in our consolidated financial statements or the tabular presentation of other data (subject to rounding) contained in this prospectus, as applicable, and not using the numerical data in the narrative description thereof.
 
This prospectus contains non GAAP financial measures and ratios that are not required by, or presented in accordance with, U.S. GAAP. We present non GAAP financial measures because we believe that they and similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance. We use non GAAP financial measures as measures of the operating performance of our properties and to compare the operating performance of our properties with those of our competitors. The non GAAP financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results reported under U.S. GAAP. Non GAAP financial measures and ratios are not measurements of our performance under U.S. GAAP and should not be considered as alternatives to operating income or net profit or any other performance measures derived in accordance with U.S. GAAP or any other generally accepted accounting principles.


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MARKET AND INDUSTRY INFORMATION
 
We obtained the market and industry information used in this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications, including The Macau Gaming Inspection and Coordination Bureau, or DICJ, Statistics and Census Service of the Macau SAR Government, or DSEC, and other publicly available sources. Industry and general publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. Although we have not independently verified the market data and related information contained in this prospectus, we believe such data and information is accurate as of the date of this prospectus or the respective earlier dates specified herein.


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ENFORCEMENT OF CIVIL LIABILITIES
 
MCE Finance is incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:
 
  •  political and economic stability;
 
  •  an effective judicial system;
 
  •  a favorable tax system;
 
  •  the absence of exchange control or currency restrictions; and
 
  •  the availability of professional and support services.
 
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:
 
  •  the Cayman Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to investors; and
 
  •  Cayman Islands companies do not have standing to sue before the federal courts of the United States.
 
The constituent documents of MCE Finance do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between MCE Finance, its officers, directors and shareholders, be arbitrated.
 
Substantially all of our current operations, including our administrative and corporate operations, are conducted in Macau and Hong Kong, and substantially all of our assets are located in Macau. A majority of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a holder of the Exchange Notes to effect service of process within the United States upon us or such persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
 
MCE Finance has appointed CT Corporation System as its agent to receive service of process with respect to any action brought against MCE Finance in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against MCE Finance in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.
 
Walkers, our counsel as to Cayman Islands law, and Manuela António Law Office, our counsel as to Macau law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and Macau, respectively, would:
 
  •  recognize or enforce judgments of United States courts obtained against us, MCE Finance or any of the Guarantors incorporated in the Cayman Islands or our or their directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or
 
  •  entertain original actions brought in each respective jurisdiction against us, MCE Finance or any of the Guarantors incorporated in the Cayman Islands or our or their directors or officers predicated upon the securities laws of the United States or any state in the United States.
 
Walkers has further advised us that a judgment obtained in a foreign court will be recognized and enforced in the courts of the Cayman Islands without any re-examination of the merits (a) at common law, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, where the judgment is (i) final and conclusive and in respect of which the foreign court had jurisdiction over the defendant according to Cayman Islands conflict of law rules, (ii) either for a liquidated sum not in respect of penalties or taxes or a fine or similar fiscal or revenue obligations or, in certain circumstances, for in personam non-money relief, and which was neither obtained in a manner, nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands and execution as if it were a judgment of the Grand Court of the Cayman Islands, or (b) by statute,


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by registration in the Grand Court of the Cayman Islands and execution as if it were a judgment of the Grand Court where the judgment is a judgment of a superior court of any state of the Commonwealth of Australia which is final and conclusive for a sum of money not in respect of taxes or other charges of a like nature or in respect of a fine, penalty or revenue obligation, has not been wholly satisfied and which could be enforced by execution in that jurisdiction and is not set aside on the grounds that the country of the original court had no jurisdiction or the judgment was obtained by fraud or the enforcement of the judgment would be contrary to the public policy of the Cayman Islands or on any other grounds.
 
Manuela António Law Office has advised further that a final and conclusive monetary judgment for a definite sum obtained in a federal or state court in the United States would be treated by the courts of Macau as a cause of action in itself so that no retrial of the issues would be necessary, provided that: (1) such court had jurisdiction in the matter and the defendant either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process; (2) due process was observed by such court, with equal treatment given to both parties to the action, and the defendant had the opportunity to submit a defense; (3) the judgment given by such court was not in respect of penalties, taxes, fines or similar fiscal or tax revenue obligations; (4) in obtaining judgment there was no fraud on the part of the person in whose favor judgment was given or on the part of the court; (5) recognition or enforcement of the judgment in Macau would not be contrary to public policy; (6) the proceedings pursuant to which judgment was obtained were not contrary to natural justice; and (7) any interest charged to the defendant does not exceed three times the official interest rate, which is currently 9.75% per annum, over the outstanding payment (whether of principal, interest fees or other amounts) due.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus, including the documents incorporated by reference herein, and any related prospectus supplement contains forward-looking statements that relate to future events, including our future operating results and conditions, our prospects and our future financial performance and condition, all of which are largely based on our current expectations and projections. All statements other than statements of historical fact in this prospectus, the documents incorporated by reference and any related prospectus supplement, are forward-looking statements. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. See “Risk Factors” for a discussion of some risk factors that may affect our business and results of operations. These risks are not exhaustive. Other sections of this prospectus may include additional factors that could adversely impact our business and financial performance. Moreover, because we operate in a heavily regulated and evolving industry, may become highly leveraged, and operate in Macau, a market that has recently experienced extremely rapid growth and intense competition, new risk factors may emerge from time to time. It is not possible for our management to predict all risk factors, nor can we assess the impact of these factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed or implied in any forward-looking statement.
 
In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. We have based the forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
 
  •  satisfaction of and compliance with conditions and covenants under the US$1.75 billion City of Dreams Project Facility, or City of Dreams Project Facility, to maintain the facility;
 
  •  our ability to raise additional financing;
 
  •  our future business development, results of operations and financial condition;
 
  •  growth of the gaming market and visitation in Macau;
 
  •  our anticipated growth strategies;
 
  •  the liberalization of travel restrictions on PRC citizens and convertibility of the Renminbi;
 
  •  the uncertainty of tourist behavior related to spending and vacationing at casino resorts in Macau;
 
  •  fluctuations in occupancy rates and average daily room rates in Macau;
 
  •  increased competition and other planned casino hotel and resort projects in Macau and elsewhere in Asia, including in Macau from Sociedade de Jogos de Macau, S.A, or SJM, Sands China, Wynn Resorts (Macau) S.A, or Wynn Macau, Galaxy Casino, S.A., or Galaxy, and MGM Grand Paradise;
 
  •  the formal grant of an occupancy permit for certain areas of City of Dreams that remain under construction or development;
 
  •  obtaining approval from the Macau government for an increase in the developable gross floor area of the City of Dreams site;
 
  •  the development of Macau Studio City;
 
  •  our entering into new development and construction and new ventures;
 
  •  construction cost estimates for our development projects, including projected variances from budgeted costs;
 
  •  government regulation of the casino industry, including gaming license approvals and the legalization of gaming in other jurisdictions;


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  •  the completion of infrastructure projects in Macau; and
 
  •  other factors described under “Risk Factors.”
 
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we referenced in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.


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GLOSSARY
 
     
Average Daily Rate or ADR
  calculated by dividing total room revenue (less service charges, if any) by total rooms occupied, i.e., average price of occupied rooms per day.
Drop
  the amount of cash and net markers issued that are deposited in a gaming table’s drop box to purchase gaming chips plus gaming chips purchased at the casino cage.
Expected hold percentage
  casino win based upon our mix of games as a percentage of drop assuming theoretical house advantage is achieved.
Gaming machine handle (volume)
  the total amount wagered in gaming machines in aggregate for the period cited.
Hold percentage
  the amount of win (calculated before discounts and commissions) as a percentage of drop.
Hotel occupancy rate
  the average percentage of available hotel rooms occupied during a period.
Non-rolling chip volume
  the amount of table games drop in the mass market segment, therefore tracking the initial purchase of chips.
Non-rolling chip hold percentage
  mass market table games win as a percentage of non-rolling chip volume.
Revenue per Available Room or REVPAR
  calculated by dividing total room revenue (less service charges, if any) by total rooms available, thereby representing a summary of hotel average daily room rates and occupancy.
Rolling chip hold percentage
  rolling chip table games win as a percentage of rolling chip volume.
Rolling chip volume
  the amount of non-negotiable gaming chips wagered and lost by the rolling chip market segment, therefore tracking the sum of all losing wagers.
Table games win
  the amount of wagers won net of wagers lost that is retained and recorded as casino revenue.
Win percentage-gaming machines
  actual win expressed as a percentage of gaming machine handle.


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SUMMARY
 
This summary highlights information appearing elsewhere in this prospectus. You should carefully read the entire prospectus, including the section entitled “Risk Factors” and the financial statements and related notes thereto, and other documents incorporated by reference in this prospectus before making an investment decision.
 
Overview
 
We are a developer, owner and, through our subsidiary Melco Crown Gaming, operator of casino gaming and entertainment resort facilities focused on the Macau market. Melco Crown Gaming is one of six companies licensed, through concessions or subconcessions, to operate casinos in Macau.
 
Through our operations, we cater to a broad spectrum of potential gaming patrons, including patrons who seek the excitement of high stake rolling chip gaming, as well as more casual gaming patrons seeking a broader entertainment experience. We seek to attract these patrons from throughout Asia and in particular from Greater China.
 
Our leadership and vision have been evidenced over the last couple of years through the early development of the Mocha brand, the evolution of the Altira Macau (formerly known as Crown Macau) property, the ability to diversify our portfolio of properties and supporting our staff through what we believe are market leading business models.
 
Our existing operations and our development projects consist of:
 
City of Dreams.  City of Dreams, an integrated urban entertainment resort development, has become a “must experience” destination in Macau since it opened in Cotai in June 2009. As the only major casino that opened in Macau in 2009, the resort brings together a collection of world-renowned brands such as Crown, Grand Hyatt, Hard Rock and Dragone to create an exceptional guest experience that appeals to a broad spectrum of visitors from around Asia and the world. The initial opening of City of Dreams featured a 420,000 sq. ft. casino with approximately 500 gaming tables and approximately 1,300 gaming machines; over 20 restaurants and bars; an array of some of the world’s most sought-after retail brands; and The Bubble, an iconic and spectacular audio visual multimedia experience. The Crown Towers and the Hard Rock Hotel offer approximately 300 guest rooms each. Grand Hyatt Macau offers approximately 800 guest rooms. A Dragone inspired theater production is scheduled to open in the purpose-built Theater of Dreams in the third quarter of 2010. A second planned phase of development at City of Dreams will feature an apartment hotel consisting of approximately 800 units, which will be financed separately from the rest of the City of Dreams. The development of the apartment hotel is subject to the availability of additional financing, the Macau government’s approval and the approval of our lenders under our existing and any future debt facilities. Our project costs, including the casinos, the Hard Rock Hotel, the Crown Towers hotel, the Grand Hyatt twin-tower hotel, the purpose built wet stage performance theater, all retail space together with food and beverage outlets, were US$2.4 billion, consisting primarily of construction and fit-out costs, design and consultation fees, and excluding the cost of land, capitalized interest and pre-opening expenses. Dragon’s Treasure, the iconic landmark showcased in the Bubble at City of Dreams was honored with the 2009 THEA Award for “Outstanding Achievement” from the Themed Entertainment Association (TEA). City of Dreams also won the “Best in Leisure Development in Asia Pacific” award in the International Property Awards 2010 which recognizes distinctive innovation and outstanding success in leisure development.
 
Altira Macau.  Altira Macau is designed to provide a luxurious casino and hotel experience, which is primarily tailored to meet the cultural preferences and expectations of Asian rolling chip customers, and the gaming promoters who collaborate with Altira Macau. Altira Macau currently features a casino area of approximately 183,000 sq. ft. with a total of approximately 210 gaming tables, 216 deluxe hotel rooms, including 24 suites and 8 high end villas, several fine dining and casual restaurants, recreation and leisure facilities, including a health club, pool and spa and lounges and meeting facilities. We believe that gaming venues traditionally available to high-end patrons in Macau have not offered the luxurious accommodation and facilities we offer at Altira Macau, and instead have focused primarily on intensive gaming during day trips and short visits to Macau. Altira Macau won the “Best Casino Interior Design Award” in the first International Gaming Awards in 2008 which recognizes outstanding design in the casino sector. Altira Macau has now been awarded the Forbes Five Star rating in both Lodging and Spa


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categories by the 2010 Forbes Travel Guide (formerly Mobil Travel Guide). Altira Macau also won the “Best Business Hotel in Macau” award in TTG China Travel Awards 2009 and the “Best Luxury Hotel in Macau” award in the TTG China Travel Awards 2010. Altira is a property brand that has been developed in-house by the Company to target the Asian rolling chip market. The brand supports our overarching business objective at the Altira Macau property of developing our position as the premier Asian rolling chip casino. The rebranding of Crown Macau as Altira Macau reinforces two key strategies for the property: first, to align the brand positioning of the property with its concentrated market focus on Asian rolling chip customers, which has prevailed since late 2007; and second, to focus the Crown property brand solely at the City of Dreams property targeting premium rolling chip customers sourced through the regional marketing networks operated by us. The Altira brand was launched in April 2009. In late 2009 Altira successfully transitioned from a gaming promoter aggregator model to one where we contract directly with all our gaming promoters.
 
Mocha Clubs.  Mocha Clubs first opened in September 2003 and has expanded operations to eight clubs with a total of approximately 1,500 gaming machines, each club with an average of approximately 187 gaming machines and gaming space ranging from approximately 5,000 sq. ft. to 15,000 sq. ft. The clubs comprise the largest non-casino-based operations of electronic gaming machines in Macau and are conveniently located in areas with strong pedestrian traffic, typically within three-star hotels. Each club site offers a relaxed ambiance and electronic tables without dealers or punters. Our Mocha Club gaming facilities include the latest technology for gaming machines and offer both single player machines with a variety of games, including progressive jackpots, and multi-player games where players on linked machines play against each other in electronic roulette, baccarat and sicbo, a traditional Chinese dice game. Mocha Clubs focus on mass market and casual gaming patrons, including local residents and day-trip customers, outside the conventional casino setting. The Mocha Club at Mocha Square, which was temporarily closed for renovations from the end of 2007, resumed operations on February 20, 2009. We re-decorated the ground and first floors of the Hotel Taipa Square Mocha Club to facilitate easier access by customers during January 2009. As of March 31, 2010, Mocha had 1,543 gaming machines in operation, representing 11% of total machine installation in the market.
 
Taipa Square Casino.  Taipa Square Casino held its grand opening on June 12, 2008. The casino has approximately 18,300 sq. ft. of gaming space and features approximately 31 gaming tables servicing mass market patrons. Taipa Square Casino operates within Hotel Taipa Square located on Taipa Island, opposite the Macau Jockey Club.
 
City of Dreams Phase II.  We are in the final stage of concluding a revision to our land lease agreement for City of Dreams, pursuant to which we will be able to increase the developed gross floor area by approximately 1.6 million square feet. It is our current plan to develop an apartment hotel tower at City of Dreams and we continue to assess market conditions and other operating factors to ascertain whether this plan represents the best use of the potential developable opportunity at City of Dreams.
 
Macau Studio City Project.  Melco Crown Gaming has entered into a services agreement with New Cotai Entertainment (Macau) Limited and New Cotai Entertainment, LLC, under which Melco Crown Gaming will operate the casino portions of the Macau Studio City project, a large scale integrated gaming, retail and entertainment resort development. The project is being developed by a joint venture between eSun Holdings Limited, CapitaLand Integrated Resorts Pte Ltd and New Cotai Holdings, LLC, which is primarily owned by investment funds and David Friedman, a former senior executive of Las Vegas Sands. Under the terms of the services agreement, Melco Crown Gaming will retain a percentage of the gross gaming revenues from the casino operations of Macau Studio City. We will not be responsible for any of the project’s capital development costs, and the operating expenses of the casino will be substantially borne by New Cotai Entertainment (Macau) Limited. The formal opening of Macau Studio City has not yet been announced. Factors influencing the opening of this project include consensus amongst the joint venturers regarding the development of this project and the timing for the completion of financing for this project.
 
Macau Peninsula Site.  In May 2006, we entered into a conditional agreement to acquire a third development site, which is located on the shoreline of Macau Peninsula near the current Macau Ferry Terminal, or Macau Peninsula site. The acquisition price for the site was HK$1.5 billion (US$192.8 million), of which we paid a deposit of HK$100 million (US$12.9 million). The targeted purchase completion date of July 27, 2009 for the acquisition of the peninsula site passed and the acquisition agreement was terminated by the relevant parties on December 17,


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2009. The deposit under the acquisition agreement has been refunded to us. Our decision to terminate the agreement to acquire the Macau Peninsula site was based on our view that Cotai has established itself as the primary location for future development projects.
 
Objective and Strategies
 
Our objective is to become a leading provider of gaming, leisure and entertainment services capitalizing on the expected future growth opportunities in Macau. To achieve our objective, we have developed the following core business strategies:
 
Maintain a Strong Balance Sheet and Conservative Capital Structure, De-Leverage and Remain Alert to Opportunistic Growth Opportunities
 
We believe that a strong balance sheet is a core foundation for our future growth strategy. We will continue to raise the development funds that we need when we are able to do so, not when we are required to do so, and we will in the first instance and as a priority apply surplus cash generated from our operations to de-leveraging. Where applicable, we will plan our developments to include marketable non-core assets that can be sold to aid the financing of our core assets. Our time horizon for the future growth and development of the business is long and we understand that our history of development remains short. We believe that patience is an important attribute in monitoring the development of the markets in which we operate, and in identifying and executing future development. We will endeavor to manage our business with this attitude and frame of mind.
 
Develop a Targeted Product Portfolio of Well-Recognized Branded Experiences
 
We believe that building strong, well-recognized branded experiences is critical to our success, especially in the brand-conscious Asian market. We intend to develop our brands by building and maintaining higher quality properties than those that are generally available in Macau currently and which rival other high-end resorts located throughout Asia, and by providing a distinctive and unique set of experiences tailored to meet the cultural preferences and expectations of Asian customers.
 
Although we strive to have all of our properties consistently adhere to the ideals above, we have incorporated design elements at our properties that cater to specific customer segments. By utilizing a more focused strategy, we believe we can better service specific segments of the Macau gaming market.
 
Utilize Melco Crown Gaming’s Subconcession to Maximize Our Business and Revenue Potential
 
We intend to utilize Melco Crown Gaming’s subconcession, which, like the other concessions and subconcessions, does not limit the number of casinos we can operate in Macau, to capitalize on the potential growth of the Macau gaming market provided by the greater independence, flexibility and economic benefits afforded by being a subconcessionaire. Possession of a subconcession gives us the ability to negotiate directly with the Macau government to develop and operate new projects without the need to partner with other concessionaires or subconcessionaires. Furthermore, concessionaires and subconcessionaires such as SJM and Galaxy have demonstrated that they can leverage their licensed status by entering into arrangements with developers and hotel operators that do not hold concessions or subconcessions to operate the gaming activities at their casinos under leasing or services arrangements and keep a percentage of the revenues. In 2008, the Macau government imposed a moratorium on new gaming services agreements. In the event such moratorium is lifted, we may consider entering into other, similar arrangements with other such developers and hotel operators, subject to obtaining the relevant approvals.
 
Develop Comprehensive Marketing Programs
 
We will continue to seek to attract customers to our properties by leveraging our brands and utilizing our own marketing resources and those of our founders. Altira Macau has combined its brand recognition with sophisticated customer management techniques and programs in order to build a significant database of repeat customers and loyalty club members. In addition, our international marketing network has established marketing offices in Beijing, Singapore, Taiwan and Malaysia and plans on establishing further marketing offices elsewhere in Asia. Through Mocha Clubs’ significant share of the Macau electronic gaming market, we have also developed a significant customer database and have developed a customer loyalty program, which we believe has successfully enhanced repeat play and further built the Mocha brand.


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We will seek to continue to grow and maintain our customer base through the following sales and marketing activities:
 
  •  create a cross-platform sales and marketing department to promote all of our brands to potential customers throughout Asia in accordance with applicable laws;
 
  •  utilize special product offers, special events, tournaments and promotions to build and maintain relationships with our guests, in order to increase repeat visits and help fill capacity during lower-demand periods;
 
  •  refine our own customer loyalty programs to further build a significant database of repeat customers, which we closely modeled on Crown’s successful “Crown Club” program; and
 
  •  implement complimentary incentive programs and commission based programs with selected promoters to attract high-end customers.
 
Focus on Operating First Class Facilities
 
We have assembled a dedicated management team with significant experience in operating large scale, high quality resort facilities.
 
Service quality and memorable experiences will continue to grow as a key differentiator among the operators in Macau. As the depth and quality of product offerings continue to develop and more memorable properties and experiences are created, tailored services will drive competitive advantage. As such, our focus on creating service experiences attuned to the tastes and expectations of an increasingly segmented, increasingly demanding and constantly evolving consumer is imperative.
 
The continued development of our staff and supporting resources are central to our success in this regard. We will invest in the long term development of our people through relevant training and experience sharing.
 
Leverage the Experiences and Resources of Our Founders
 
We believe one of our great strengths is the combined resources of our majority shareholders, Melco and Crown. We intend to leverage their experiences and resources in the gaming industry in Asia and particularly with Chinese and other Asian patrons.
 
General Information
 
On December 18, 2006, we completed our initial public offering of ADSs. Our ADSs are listed for quotation on the Nasdaq Global Select Market under the symbol “MPEL.” On November 6, 2007, May 1, 2009 and August 18, 2009, we completed follow-on offerings of ADSs.
 
The Parent was incorporated in the Cayman Islands on December 17, 2004 as an exempted company with limited liability, with registered number 143119. MCE Finance was incorporated in the Cayman Islands on June 7, 2006 as an exempted company with limited liability, with registered number 168872. Our principal executive offices are located at Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands. Our telephone number at this address is (345) 945 3727 and our fax number is (345) 945 4757.
 
Each Guarantor that is an indirect subsidiary of the Parent, will, along with the Parent, jointly and severally guarantee the Exchange Notes, on an unconditional, full and irrevocable basis, subject to certain limitations described in “Description of Exchange Notes.”
 
You should direct all inquiries to us at the address and telephone number of our Parent’s principal executive offices as set out in the Table of Co-Registrants above. Our website is www.melco-crown.com. The information contained on our website does not form part of this prospectus.


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Corporate Structure and Certain Financing Arrangements
 
The following chart shows our simplified corporate and financing structure as of March 31, 2010.
 
(FLOW CHART)
 
 
(1)  On May 17, 2010, MCE Finance on-lent to MPEL Investments under an intercompany note (the “Intercompany Note”) an aggregate amount necessary to reduce our indebtedness under the City of Dreams Project Facility. The Initial Notes and Guarantees were and the Exchange Notes and Guarantees will be secured by a first priority pledge of the Intercompany Note.
 
(2)  MPEL Nominee Three Limited and MPEL Nominee Two Limited are guarantors under the City of Dreams Project Facility, but as of the date of the indenture, are not guarantors of the Initial Notes or the Exchange Notes.
 
(3)  The shares are owned 96% by Melco Crown Gaming (Macau) Limited and 4% by MPEL Nominee Two Limited. Melco Crown (Cafe) Limited operates our non-gaming Mocha Club business.
 
(4)  Melco Crown (COD) Hotel Limited and Melco Crown (COD) Developments Limited operate our non-gaming City of Dreams business.
 
(5)  The shares of this company are owned 96% by Melco Crown Gaming (Macau) Limited and 4% by MPEL Nominee Two Limited.
 
(6)  The shares of this company are owned as to 99.98% by Melco Crown Gaming (Macau) Limited, 0.01% by MPEL Nominee Three Limited and 0.01% by MPEL Nominee Two Limited.


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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
 
In this prospectus, we refer to (1) the initial 10.25% Senior Notes due 2018 as the “Initial Notes,” (2) the new Senior Notes offered in exchange for the Initial Notes as the “Exchange Notes,” and (2) the Initial Notes and the Exchange Notes together as the “Notes.” The offering of Initial Notes was made only to qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S, and accordingly was exempt from registration under the Securities Act. Set forth below is a summary description of the terms of the exchange offer. We refer you to “The Exchange Offer” for a more complete description of the terms of the exchange offer.
 
Background On May 17, 2010, MCE Finance completed a private placement of the Initial Notes. In connection with that private placement, MCE Finance and the Guarantors entered into a registration rights agreement with Deutsche Bank Securities Inc., Merrill Lynch International, The Royal Bank of Scotland plc, ANZ Securities, Inc., Citigroup Global Markets Inc., Commerz Markets LLC, Credit Agricole Corporate and Investment Bank, nabSecurities, LLC and UBS AG (collectively, the “initial purchasers”), in which MCE Finance and the Guarantors agreed, among other things, to conduct this exchange offer.
 
The Exchange Offer MCE Finance is offering to exchange up to US$600,000,000 aggregate principal amount of Initial Notes for up to US$600,000,000 aggregate principal amount of Exchange Notes which have been registered under the Securities Act. Initial Notes may be tendered only in minimum denominations of US$2,000 of principal amount and integral multiples of US$1,000 in excess thereof.
 
Resale of the Exchange Notes MCE Finance and the Guarantors have undertaken the exchange offer pursuant to the terms of the registration rights agreement entered into with the initial purchasers of the Initial Notes. See “The Exchange Offer” for further information regarding the exchange offer and resale of the Exchange Notes.
 
Consequences of Failure to Exchange the Initial Notes
You will continue to hold Initial Notes that remain subject to their existing transfer restrictions if:
 
• you do not tender your Initial Notes; or
 
• you tender your Initial Notes and they are not accepted for exchange.
 
With some limited exceptions, we will have no obligation to register the Initial Notes after we consummate the exchange offer. See “The Exchange Offer — Terms of the Exchange Offer” and “The Exchange Offer — Consequence of Failure to Exchange.”
 
Expiration Date The exchange offer will expire at 5:00 p.m., New York City time, on          , 2010 (the “expiration date”), unless we extend it, in which case expiration date will mean the latest date and time on which the exchange offer is extended.
 
Interest on the Exchange Notes The Exchange Notes will accrue interest from the most recent date to which interest has been paid or provided for on the Initial Notes or, if no interest has been paid on the Initial Notes, from the date of original issue of the Initial Notes.
 
Conditions to the Exchange Offer The exchange offer is subject to several customary conditions, some of which we may waive. See “The Exchange Offer — Conditions.”


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Procedures for Tendering Initial Notes If you wish to accept the exchange offer, you must submit required documentation and effect a tender of Initial Notes pursuant to the procedures for book-entry transfer (or other applicable procedures), all in accordance with the instructions described in this prospectus and in the relevant letter of transmittal. See “The Exchange Offer — Procedures for Tendering,” “The Exchange Offer — Book-Entry Transfer” and “The Exchange Offer — Guaranteed Delivery Procedures.”
 
Guaranteed Delivery Procedures If you wish to tender your Initial Notes, but cannot properly do so prior to the applicable expiration date, you may tender your Initial Notes according to the guaranteed delivery procedures set forth in “The Exchange Offer — Guaranteed Delivery Procedures.”
 
Withdrawal Rights Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m. New York City time on the expiration date. To withdraw a tender of Initial Notes, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth in “The Exchange Offer — Exchange Agent” prior to 5:00 p.m. on the expiration date.
 
Acceptance of Initial Notes and Delivery of Exchange Notes
Except in some circumstances, any and all Initial Notes that are validly tendered in an exchange offer prior to 5:00 p.m., New York City time, on the expiration date will be accepted for exchange. The Exchange Notes issued pursuant to the exchange offer will be delivered promptly following the expiration date. We may reject any and all Initial Notes that we determine have not been properly tendered or any Initial Notes the acceptance of which would, in the opinion of our counsel, be unlawful. With some limited exceptions, we will have no obligation to register the Initial Notes after we consummate the applicable exchange offer. See “The Exchange Offer — Terms of the Exchange Offer.”
 
Certain U.S. Federal Income Tax Consequences
The exchange of an Initial Note for an Exchange Note pursuant to the exchange offer will not result in a taxable exchange to a beneficial owner of such Initial Note for U.S. federal income tax purposes. See “Taxation — Certain U.S. Federal Income Tax Consequences.”
 
Exchange Agent The Bank of New York Mellon in Hong Kong is serving as the exchange agent in connection with the exchange offer.
 
Information Agent and Solicitation Agent
BNY Mellon Shareowner Services is serving as the information agent and the solicitation agent in connection with the exchange offer.


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SUMMARY OF THE TERMS OF THE NOTES
 
The terms of the Exchange Notes offered in the exchange offer are identical in all material respects to the terms of the Initial Notes, except that the Exchange Notes:
 
  •  will be registered under the Securities Act and therefore will not be subject to restrictions on transfer;
 
  •  will not entitle their holders to registration rights;
 
  •  will bear a different CUSIP or ISIN number; and
 
  •  will be subject to terms relating to book-entry procedures and administrative terms relating to transfers that differ from those of the Initial Notes.
 
Issuer MCE Finance Limited, currently a wholly-owned subsidiary of Melco Crown Entertainment Limited.
 
Notes Offered US$600,000,000 aggregate principal amount of 10.25% Senior Notes due 2018.
 
Maturity May 15, 2018.
 
Interest 10.25% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, with the first payment on November 15, 2010.
 
Ranking of Notes The Initial Notes are and the Exchange Notes will be (1) general obligations of MCE Finance, (2) pari passu in right of payment to all existing and future senior indebtedness of MCE Finance, (3) senior in right of payment to any existing and future subordinated Indebtedness of MCE Finance, (4) effectively subordinated to all of MCE Finance’s existing and future secured indebtedness to the extent of the value of the assets securing such debt, and (5) unconditionally guaranteed by the Guarantors.
 
Guarantees The Initial Notes are and the Exchange Notes will be guaranteed, jointly and severally, on a senior basis by the Parent and MPEL International with respect to the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under the Notes and the indenture.
 
The Initial Notes are and the Exchange Notes will be guaranteed on a senior subordinated basis by the Subsidiary Group Guarantors.
 
The Initial Notes are and the Exchange Notes will be guaranteed, jointly and severally, on a senior subordinated basis by each of the Subsidiary Group Guarantors with respect to the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under the Notes. A guarantee by a Subsidiary Group Guarantor may be released or replaced in certain circumstances. See “Risk Factors — Risks Relating to Our Indebtedness, the Notes and the Guarantees” and “Description of Exchange Notes — Note Guarantees.” We refer to the guarantees provided by the Parent, MPEL International and the Subsidiary Group Guarantors as the “Guarantees.”
 
Ranking of Guarantees The guarantees provided by the Parent and MPEL International are and will be (1) general obligations of the Parent and MPEL International, (2) pari passu in right of payment with all existing and future senior indebtedness of the Parent and MPEL International, and


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(3) senior in right of payment to any existing and future subordinated indebtedness of the Parent and MPEL International.
 
The guarantees provided by the Subsidiary Group Guarantors are and will be (1) a general obligation of each such Subsidiary Group Guarantor, (2) subordinated in right of payment to indebtedness of such Subsidiary Group Guarantors under the City of Dreams Project Facility and under the SBGF Agreement, and (3) senior in right of payment to any existing and future subordinated indebtedness of such Subsidiary Group Guarantors.
 
Security The Initial Notes and the related Guarantees are and the Exchange Notes and the related Guarantees will be secured by a first priority pledge of the Intercompany Note.
 
Optional Redemption Prior to May 15, 2014, MCE Finance at its option may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes plus the applicable “make-whole” premium described in this prospectus plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the redemption date. See “Description of Exchange Notes — Optional Redemption.”
 
At any time after May 15, 2014, MCE Finance at its option may redeem the Notes, in whole or in part, at the redemption prices set forth in “Description of Exchange Notes — Optional Redemption” plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the redemption date.
 
At any time prior to May 15, 2013, MCE Finance may redeem up to 35% of the principal amount of the Notes, with the net cash proceeds of one or more Equity Offerings at a redemption price of 110.25% of the principal amount of the Notes, plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the redemption date. See “Description of Exchange Notes — Optional Redemption.”
 
Repurchase of Notes upon a Change of Control
Upon the occurrence of a Change in Control, MCE Finance will make an offer to repurchase all outstanding Notes at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the repurchase date. See “Description of Exchange Notes — Repurchase at the Option of Holders — Change of Control.”
 
Redemption for Taxation Reasons Subject to certain exceptions and as more fully described herein, MCE Finance may redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the date fixed by MCE Finance for redemption, if MCE Finance or a Guarantor would become obliged to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Description of Exchange Notes — Redemption for Taxation Reasons.”
 
Gaming Redemption The indenture grants MCE Finance the power to redeem the Notes if the gaming authority of any jurisdiction in which the Parent, MCE


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Finance or any of their respective subsidiaries conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable gaming laws and such holder or beneficial owner, as the case may be, fails to apply or become licensed or qualified within the required time period or is found unsuitable. See “Description of Exchange Notes — Gaming Redemption.”
 
Certain Covenants The Notes, the indenture governing the Notes, and the Guarantees include certain limitations on MCE Finance and its restricted subsidiaries’ ability to, among other things:
 
• incur or guarantee additional indebtedness;
 
• make specified restricted payments;
 
• issue or sell capital stock;
 
• sell assets;
 
• create liens;
 
• enter into agreements that restrict the restricted subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;
 
• enter into transactions with shareholders or affiliates; and
 
• effect a consolidation or merger.
 
These covenants are subject to a number of important qualifications and exceptions described in “Descriptions of Notes — Certain Covenants.”
 
Exchange Offer; Registration Rights Under a registration rights agreement executed as part of the offering of the Initial Notes, MCE Finance and the Parent have agreed to:
 
• file this registration statement with the SEC within 90 days after the issue date of the Initial Notes;
 
• use commercially reasonable efforts to cause the registration statement relating to the Notes to be declared effective no later than 180 days after the registration statement is filed; and
 
• consummate the offer to exchange the Initial Notes within 30 business days after the effective date of the registration statement.
 
Under certain circumstances, MCE Finance and the Guarantors will use all commercially reasonable efforts to file and to cause the SEC to declare effective a shelf registration statement with respect to the resale of the Initial Notes and MCE Finance and the Guarantors will use all commercially reasonable efforts to keep the shelf registration statement effective for up to one year after the date of the original issue of the Initial Notes. See “Description of Exchange Notes — Registration Rights; Liquidated Damages.”
 
Listing and Trading The Initial Notes are listed and quoted on the SGX-ST. Application has been made to the SGX-ST for the listing and quotation of the Exchange Notes on the Official List of the SGX-ST. Subject to the approval of the SGX-ST, the Exchange Notes will be traded on the SGX-ST in a minimum board lot size of S$200,000 (or its equivalent


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in foreign currencies) for so long as the Exchange Notes are listed on the SGX-ST and the rules of the SGX-ST so require.
 
Risk Factors Investing in the Exchange Notes involves substantial risks. Please see the “Risk Factors” section for a description of certain of the risks you should carefully consider before investing in the Exchange Notes.
 
Paying Agent For so long as the Exchange Notes are listed on the SGX-ST and the rules of the SGX-ST so require, we will appoint and maintain a paying agent in Singapore, where the Exchange Notes may be presented or surrendered for payment or redemption, in the event that the Global Notes are exchanged for definitive Exchange Notes. In addition, in the event that the Global Notes are exchanged for definitive Exchange Notes, an announcement of such exchange shall be made by or on behalf of us through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Exchange Notes, including details of the paying agent in Singapore, as long as the Exchange Notes are listed on the SGX-ST and the rules of the SGX-ST so require.


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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
 
The following summary historical consolidated statements of operations data for the years ended December 31, 2009, 2008 and 2007, and the summary historical consolidated balance sheets data as of December 31, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary historical balance sheet data as of December 31, 2007 has been derived from our audited consolidated financial statements not included in this prospectus. The following summary consolidated statements of operations data for the three months ended March 31, 2010 and 2009 and the summary consolidated balance sheet data as of March 31, 2010 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited information on the same basis as the audited consolidated financial statements, and have included, in our opinion, all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those financial statements and the notes to those statements included elsewhere in this prospectus. The historical results are not necessarily indicative of the results of operations to be expected in the future.
 
                                         
    Year Ended December 31,     Three Months Ended March 31,  
    2009     2008     2007     2010     2009  
    (In thousands of US$, except share and per share data and operating data)  
 
Consolidated Statements of Operations Data:
                                       
Net revenues
  $ 1,332,873     $ 1,416,134     $ 358,496     $ 567,605     $ 216,491  
Total operating costs and expenses
  $ (1,604,920 )   $ (1,414,960 )   $ (554,313 )   $ (561,436 )   $ (250,064 )
Operating (loss) income
  $ (272,047 )   $ 1,174     $ (195,817 )   $ 6,169     $ (33,573 )
Net loss
  $ (308,461 )   $ (2,463 )   $ (178,151 )   $ (12,474 )   $ (35,323 )
Loss per share
                                       
— Basic and diluted
  $ (0.210 )   $ (0.002 )   $ (0.145 )   $ (0.008 )   $ (0.027 )
— ADS(1)
  $ (0.631 )   $ (0.006 )   $ (0.436 )   $ (0.023 )   $ (0.080 )
Shares used in calculating loss per share
                                       
— Basic and diluted
    1,465,974,019       1,320,946,942       1,224,880,031       1,595,175,859       1,322,512,422  
 
                                 
    As of December 31,     As of March 31,  
    2009     2008     2007     2010  
    (In thousands of US$)  
 
Consolidated Balance Sheet Data:
                               
Cash and cash equivalents
  $ 212,598     $ 815,144     $ 835,419     $ 252,858  
Restricted cash
  $ 236,119     $ 67,977     $ 298,983     $ 127,148  
Total assets
  $ 4,900,369     $ 4,498,289     $ 3,620,268     $ 4,808,696  
Total current liabilities
  $ 559,167     $ 450,136     $ 483,685     $ 527,361  
Total debts (include other long-term liabilities)(2)
  $ 1,819,473     $ 1,566,467     $ 625,899     $ 1,819,828  
Total liabilities
  $ 2,391,325     $ 2,089,685     $ 1,191,727     $ 2,307,820  
Total equity
  $ 2,509,044     $ 2,408,604     $ 2,428,541     $ 2,500,876  
 
 
(1) Each ADS represents three ordinary shares.
 
(2) Total debts include loans from shareholders, long-term debt and other long-term liabilities.
 
The following events/transactions affect the year-to-year comparability of the selected financial data presented above:
 
  •  On May 12, 2007, Altira Macau opened and became fully operational on July 14, 2007.
 
  •  On June 1, 2009, City of Dreams opened featuring a 420,000 sq. ft. casino with approximately 500 gaming tables and 1,300 gaming machines, as well as approximately 600 hotel rooms and 20 food and beverage outlets.


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  •  In the last quarter of 2009, a further 800 rooms were progressively added to City of Dreams following the grand opening and operations of Grand Hyatt Macau at City of Dreams.
 
Other Financial and Operational Data
 
                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2010   2009
 
Adjusted property EBITDA(1)(3) (in thousands of US$)
  $ 95,784     $ 188,269     $ (702 )   $ 99,197     $ 26,980  
Adjusted EBITDA(2)(3) (in thousands of US$)
  $ 55,756     $ 157,025     $ (24,251 )   $ 86,937     $ 21,290  
 
The following table sets forth the Adjusted property EBITDA for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2010   2009
    (In thousands of US$)
 
Adjusted property EBITDA(1)(3)
                                       
Mocha Clubs
  $ 25,416     $ 25,805     $ 22,056     $ 6,473     $ 6,774  
Altira Macau
    13,702       162,487       (22,444 )     21,826       20,206  
City of Dreams
    56,666       (23 )     (314 )     70,898        
                                         
Total Adjusted property EBITDA
  $ 95,784     $ 188,269     $ (702 )   $ 99,197     $ 26,980  
                                         
 
 
(1) “Adjusted property EBITDA” is earnings before interest, taxes, depreciation, amortization, other expenses (including pre-opening costs, share-based compensation, marketing expense relating to Altira Macau opening in May 2007, property charges and others, corporate and other expenses and non-operating income (expenses)).
 
(2) “Adjusted EBITDA” is earnings before interest, taxes, depreciation, amortization, other expenses (including pre-opening costs, share-based compensation, marketing expense relating to Altira Macau opening in May 2007, property charges and others, and non-operating income (expenses)).
 
(3) The Company changed the name of its segment operating measure from Adjusted EBITDA to Adjusted property EBITDA effective for annual and interim periods commencing January 1, 2010. Additionally, the Company introduced a new performance measure, Adjusted EBITDA, which represents the Company’s total Adjusted property EBITDA less corporate and other expenses. Disclosures for previous periods are also presented on this basis for comparative purposes. Management uses Adjusted property EBITDA as its measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors. Adjusted EBITDA and Adjusted property EBITDA are also presented as supplemental disclosures because management believes they are widely used to measure performance and as a basis for valuation, of gaming companies. The Company also presents Adjusted property EBITDA and Adjusted EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures, and meet working capital requirements. Gaming companies have historically reported Adjusted property EBITDA and Adjusted EBITDA as a supplement to financial measures in accordance with U.S. GAAP.
 
The following reconciles Adjusted property EBITDA and Adjusted EBITDA to net loss for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2010   2009
    (In thousands of US$)
 
Adjusted property EBITDA
  $ 95,784     $ 188,269     $ (702 )   $ 99,197     $ 26,980  
Corporate and other expenses
    (40,028 )     (31,244 )     (23,549 )     (12,260 )     (5,690 )
                                         
Adjusted EBITDA
    55,756       157,025       (24,251 )     86,937       21,290  
Pre-opening costs
    (91,882 )     (21,821 )     (40,032 )     (4,072 )     (18,286 )
Depreciation and amortization
    (217,496 )     (126,885 )     (113,932 )     (76,098 )     (33,561 )
Share-based compensation
    (11,385 )     (6,855 )     (5,256 )     (1,106 )     (3,016 )
Marketing expense relating to Altira Macau opening
                (11,959 )            
Property charges and others
    (7,040 )     (290 )     (387 )     508        
Interest and other non-operating expenses, net
    (36,546 )     (5,107 )     16,212       (18,804 )     (1,528 )
Income tax credit (expense)
    132       1,470       1,454       161       (222 )
                                         
Net loss
  $ (308,461 )   $ (2,463 )   $ (178,151 )   $ (12,474 )   $ (35,323 )
                                         


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The following table sets forth our consolidated statements of cash flows for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
          Three Months Ended
 
    Year Ended December 31,     March 31,  
    2009     2008     2007     2010     2009  
    (In thousands of US$)  
 
Net cash (used in) provided by operating activities
  $ (112,257 )   $ (11,158 )   $ 147,372     $ 47,201     $ (23,479 )
Net cash used in investing activities
  $ (1,143,639 )   $ (913,602 )   $ (972,620 )   $ (6,490 )   $ (263,120 )
Net cash provided by (used in) financing activities
  $ 653,350     $ 904,485     $ 1,076,671     $ (451 )   $ 269,963  
 
The following table sets forth rolling chip volume for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
          Three Months Ended
 
    Year Ended December 31,     March 31,  
    2009     2008     2007     2010     2009  
    (In billions of US$)  
 
Altira Macau
  $ 37.5     $ 62.3     $ 14.4     $ 9.9     $ 9.1  
City of Dreams
    20.3                   9.8        
                                         
Total rolling chip volume
  $ 57.8     $ 62.3     $ 14.4     $ 19.7     $ 9.1  
                                         
 
The following table sets forth non-rolling chip volume for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
          Three Months Ended
 
    Year Ended December 31,     March 31,  
    2009     2008     2007     2010     2009  
    (In millions of US$)  
 
Altira Macau
  $ 273.0     $ 353.2     $ 240.6     $ 71.1     $ 76.0  
City of Dreams
    912.6                   479.4        
                                         
Total non-rolling chip volume
  $ 1,185.6     $ 353.2     $ 240.6     $ 550.5     $ 76.0  
                                         
 
The following table sets forth hold percentage for the three months ended March 31, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007:
 
                                         
          Three Months Ended
 
    Year Ended December 31,     March 31,  
    2009     2008     2007     2010     2009  
    (%)  
 
Altira Macau
                                       
Rolling chip table games
    2.55       2.85       2.37       2.80       2.79  
Non-rolling chip table games
    16.0       14.6       16.5       14.9       13.7  
City of Dreams
                                       
Rolling chip table games
    2.65                   3.04        
Non-rolling chip table games
    16.3                   20.4        


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Ratio Of Earnings To Fixed Charges
 
The following table sets forth our ratio of earnings to fixed charges on a historical basis for the periods indicated. The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income before income tax, before adjustment for noncontrolling interests, plus fixed charges and amortization of capitalized interest, less capitalized interest. Fixed charges consist of interest expensed and capitalized related to indebtedness, amortization of deferred financing costs, and the estimated portion of operating lease rental expense deemed to be representative of the interest factor. For the three months ended March 31, 2010 and the years ended December 31, 2009, 2008, 2007, 2006 and 2005, our earnings were insufficient to cover fixed charges.
 
                                                 
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2006   2005   2010
 
Ratio of earnings to fixed charges
          0.07                         0.21  
Deficiency (In thousands of US$)
    357,162       53,417       193,232       82,665       4,499       15,356  


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RISK FACTORS
 
You should carefully consider the risks described below and other information contained in this prospectus before making an investment decision. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations. If any of the possible events described below occur, our business, financial condition or results of operations could be materially and adversely affected. In such case, we may not be able to satisfy our obligations under the Notes, and you could lose all or part of your investment.
 
Risks Relating to Our Early Stage of Operations
 
We are in an early stage of operations of our business and properties, and so we are subject to significant risks and uncertainties. Our limited operating history may not serve as an adequate basis to judge our future operating results and prospects.
 
In significant respects we remain in an early phase of our business operations and there is limited historical information available about our company upon which you can base your evaluation of our business and prospects. In particular, we opened Altira Macau less than three years ago and commenced operations at City of Dreams in June 2009. The Mocha Club business, which we acquired in 2005, commenced operations in 2003. Melco Crown Gaming acquired its subconcession in September 2006 and previously did not have any direct experience operating casinos in Macau. As a result, you should consider our business and prospects in light of the risks, expenses and challenges that we will face as an early-stage company with limited experience operating gaming businesses in an intensely competitive market. Among other things, we have continuing obligations to satisfy and comply with conditions and covenants under the US$1.75 billion City of Dreams Project Facility so as to be able to continue to roll over existing revolving loans drawn down under the facility and to maintain the facility.
 
We have encountered and will continue to encounter risks and difficulties frequently experienced by early-stage companies, and those risks and difficulties may be heightened in a rapidly developing market such as the gaming market in Macau. Some of the risks relate to our ability to:
 
  •  fulfill conditions precedent to draw down or roll over funds from current and future credit facilities;
 
  •  raise additional capital, as required;
 
  •  respond to changing financing requirements;
 
  •  operate, support, expand and develop our operations and our facilities;
 
  •  attract and retain customers and qualified employees;
 
  •  maintain effective control of our operating costs and expenses;
 
  •  develop and maintain internal personnel, systems, controls and procedures to assure compliance with the extensive regulatory requirements applicable to the gaming business as well as regulatory compliance as a public company;
 
  •  respond to competitive market conditions;
 
  •  respond to changes in our regulatory environment;
 
  •  identify suitable locations and enter into new leases or right to use agreements (which are similar to license agreements) for new Mocha Clubs; and
 
  •  renew or extend lease agreements for existing Mocha Clubs.
 
If we are unable to complete any of these tasks, we may be unable to operate our businesses in the manner we contemplate and generate revenues from such projects in the amounts and by the times we anticipate. We may also be unable to meet the conditions to draw on our existing or future financing facilities in order to fund various activities or may suffer a default under our existing or future financing facilities. If any of these events were to occur,


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it would cause a material adverse effect on our business and prospects, financial condition, results of operation and cash flows.
 
Risks Relating to the Operation of Our Properties
 
Because we are and will be dependent upon a limited number of properties for a substantial portion of our cash flow, we are and will be subject to greater risks than a gaming company with more operating properties.
 
We are primarily dependent upon City of Dreams, Altira Macau and Mocha Clubs for our cash flow. Given that our operations are and will be conducted based on a small number of principal properties, we are and will be subject to greater risks than a gaming company with more operating properties due to the limited diversification of our businesses and sources of revenue.
 
Servicing the debt of our subsidiaries requires a significant amount of cash, and our subsidiaries may not generate a sufficient level of cash flow from their businesses to make scheduled payments on their debt.
 
Our subsidiaries’ ability to make scheduled payments of the principal of, to pay interest on or to refinance their indebtedness depends on our subsidiaries’ future performance, which is subject to certain economic, financial, competitive and other factors beyond our control. Our subsidiaries may not generate cash flow from operations in the future sufficient to service their debt or make necessary capital repayments. If they are unable to generate such cash flow, our subsidiaries may be required to adopt one or more alternatives, such as selling assets, restructuring debt, incurring additional indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our subsidiaries’ ability to refinance their indebtedness will depend on the financial markets and their financial condition at such time. Our subsidiaries may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our subsidiaries’ debt obligations and a material adverse effect on our financial condition and results of operations.
 
Our business depends substantially on the continuing efforts of our senior management, and our business may be severely disrupted if we lose their services or their other responsibilities cause them to be unable to devote sufficient time and attention to our company.
 
We place substantial reliance on the gaming, project development and hospitality industry experience and knowledge of the Macau market possessed by members of our senior management team, including our co-chairman and chief executive officer, Mr. Lawrence Ho. The loss of the services of one or more members of our senior management team could hinder our ability to effectively manage our business and implement our growth and development strategies. Finding suitable replacements for Mr. Ho or other members of our senior management could be difficult, and competition for personnel of similar experience could be intense in Macau. We do not currently carry key person insurance on any members of our senior management team.
 
We have recruited a substantial number of new employees for each of our properties, and competition may limit our ability to attract or retain suitably qualified management and personnel.
 
We require extensive operational management and staff to operate both Altira Macau and City of Dreams. Accordingly, we undertook a major recruiting program before both openings. The pool of experienced gaming and other skilled and unskilled personnel in Macau is limited. Many of our new personnel occupy sensitive positions requiring qualifications sufficient to meet gaming regulatory and other requirements or are required to possess other skills for which substantial training and experience are needed. Moreover, competition to recruit and retain qualified gaming and other personnel is expected to continue. In addition, we are not currently allowed under Macau government policy to hire non-Macau resident dealers, croupiers and supervisors. We cannot assure you that we will be able to attract and retain a sufficient number of qualified individuals to operate our properties or that costs to recruit and retain such personnel will not increase significantly. The inability to attract and retain qualified employees and operational management personnel could have a material adverse effect on our business.


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If we are unable to obtain approval for an increase in the developable gross floor area of the City of Dreams site and the consequent amendments to the terms of our land concession, we could forfeit all or a substantial part of our investment in the site and we would not be able to complete and fully operate the facility as planned.
 
On August 13, 2008, the Macau government granted a land concession to Melco Crown (COD) Developments Limited for land consisting of approximately 113,325 square meters (1.2 million sq. ft.) that comprises the City of Dreams site in Cotai for a period of 25 years, renewable for further consecutive periods of up to ten years each. The land concession enables Melco Crown (COD) Developments Limited to develop five star hotels, four star hotels, apartment hotels and a parking area with the total gross floor area of 515,156 square meters (approximately 5,545,093 sq. ft.). We have applied for an amendment to the land concession to enable the increase of the total developable gross floor area to 668,574 square meters (approximately 7,196,470 sq. ft.) for which we must pay an additional premium. In March 2010, our subsidiaries Melco Crown (COD) Developments Limited and Melco Crown Gaming accepted the final terms for the revision of the land lease agreement and paid the additional premium. Following the publication in the Macau official gazette of such revision the land grant amendment process will be complete. We are unable to project with any certainty the exact timing of the publication of the revised land grant. Until the occurrence of such publication, the land grant amendment process is not complete and our ability to fully operate City of Dreams as planned remains at risk and we could potentially lose all or a substantial part of our investment in City of Dreams should the publication fail to occur.
 
Our insurance coverage may not be adequate to cover all losses that we may suffer from our operations. In addition, our insurance costs may increase and we may not be able to obtain the same insurance coverage in the future.
 
We currently have various insurance policies providing certain coverage typically required by gaming and hospitality operations in Macau. Such coverage includes property damage, business interruption and general liability. These insurance policies provide coverage that is subject to policy terms, conditions and limits. There is no assurance that we will be able to renew such insurance coverage on equivalent premium cost, terms, conditions and limits upon policy renewals. The cost of coverage may in the future become so high that we may be unable to obtain the insurance policies we deem necessary for the operation of our projects on commercially practicable terms, or at all, or we may need to reduce our policy limits or agree to certain exclusions from our coverage. We cannot assure you that any such insurance policies we may obtain will be adequate to protect us from material losses. If we incur loss, damage or liability for amounts exceeding the limits of our current or future insurance coverage, or for claims outside the scope of our current or future insurance coverage, our financial conditions and business operations could be materially and adversely affected. For example, certain casualty events, such as labor strikes, nuclear events, acts of war, loss of income due to cancellation of conventions or room reservations arising from fear of terrorism, contagious or infectious disease, deterioration or corrosion, insect or animal damage and pollution may not be covered under our policies. As a result, certain acts and events could expose us to significant uninsured losses. In addition to the damages caused directly by a casualty loss such as fire or natural disasters, we may suffer a disruption of our business as a result of these events or be subject to claims by third parties who may be injured or harmed. While we intend to carry business interruption insurance and general liability insurance, such insurance may not be available on commercially reasonable terms, or at all, and, in any event, may not be adequate to cover all losses that may result from such events.
 
Risks Relating to Our Business and Operations in Macau
 
Conducting business in Macau has certain political and economic risks that may lead to significant volatility and have a material adverse effect on our results of operations.
 
All of our operations are in Macau. Accordingly, our business development plans, results of operations and financial condition may be materially adversely affected by significant political, social and economic developments in Macau and China and by changes in government policies or changes in laws and regulations or the interpretations of these laws and regulations. In particular, our operating results may be adversely affected by:
 
  •  changes in Macau’s and China’s political, economic and social conditions;
 
  •  tightening of travel restrictions to Macau which may be imposed by China;


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  •  changes in policies of the government or changes in laws and regulations, or in the interpretation or enforcement of these laws and regulations;
 
  •  changes in foreign exchange regulations;
 
  •  measures that may be introduced to control inflation, such as interest rate increases or bank account withdrawal controls; and
 
  •  changes in the rate or method of taxation.
 
Our operations in Macau are also exposed to the risk of changes in laws and policies that govern operations of Macau-based companies. Tax laws and regulations may also be subject to amendment or different interpretation and implementation, thereby adversely affecting our profitability after tax. Further, certain terms of our gaming subconcession may be subject to renegotiations with the Macau government in the future, including amounts we will be obligated to pay the Macau government in order to continue operations. Melco Crown Gaming’s obligations to make certain payments to the Macau government under the terms of its subconcession include a fixed annual premium per year and a variable premium depending on the number and type of gaming tables and gaming machines that we operate. The results of any renegotiations could have a material adverse effect on our results of operations and financial condition.
 
The Macau government granted us land leases for lands for Altira Macau and for City of Dreams. We have applied for approval from the Macau government to increase the developable gross floor area of City of Dreams. The opening and operation of the areas of City of Dreams for which construction is not yet completed will be subject to our obtaining an occupancy permit for such areas.
 
In January 2008, Former Secretary for Public Works and Transport of Macau, Mr. Ao Man Long, was convicted and sentenced to a prison term of 28.5 years on charges involving corruption, bribery, irregular financial activities and money laundering. Those being tried and convicted in cases connected with the conviction of Mr. Ao in 2008 are related to local companies to whom several major public works and services contracts were awarded and for whom certain licensing procedures were allegedly expedited. Mr. Lao Sio-Io was appointed the new Secretary for Transport and Public Works in March 2007. We cannot predict whether any ongoing or further prosecutions and investigations will adversely affect the functioning of the Macau Land, Public Works and Transports Bureau, any approvals that are pending before it, or for which applications may be made in the future (including with respect to our possible future projects), or will give rise to additional scrutiny or review of any approvals, including those for Altira Macau and City of Dreams, that were previously approved or granted through this Bureau and the Secretary for Transport and Public Works of Macau.
 
As we expect a significant number of patrons to come to our properties from China, general economic conditions and policies in China could have a significant impact on our financial prospects. A slowdown in economic growth and tightening of restrictions on travel imposed by China could adversely impact the number of visitors from China to our properties in Macau as well as the amounts they are willing to spend in our casinos, which could have a material adverse effect on the results of our operations and financial condition.
 
The winnings of our patrons could exceed our casino winnings.
 
Our revenues are mainly derived from the difference between our casino winnings and the winnings of our casino patrons. Since there is an inherent element of chance in the gaming industry, we do not have full control over our winnings or the winnings of our casino patrons. If the winnings of our patrons exceed our casino winnings, we may record a loss from our gaming operations, and our business, financial condition and results of operations could be materially and adversely affected.
 
Theoretical win rates for our casino operations depend on a variety of factors, some beyond our control.
 
In addition to the element of chance, theoretical win rates are also affected by other factors, including players’ skill and experience, the mix of games played, the financial resources of players, the spread of table limits, the volume of bets placed by our players and the amount of time players spend on gambling — thus our actual win rates may differ greatly over short time periods, such as from quarter to quarter, and could cause our quarterly results to be


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volatile. Each of these factors, alone or in combination, have the potential to negatively impact our win rates, and our business, financial condition and results of operations could be materially and adversely affected.
 
Our gaming business is subject to cheating and counterfeiting.
 
All gaming activities at our table games are conducted exclusively with gaming chips which, like real currency, are subject to the risk of alteration and counterfeiting. We incorporate a variety of security and anti-counterfeit features to detect altered or counterfeit gaming chips. Despite such security features, unauthorized parties may try to copy our gaming chips and introduce, use and cash in altered or counterfeit gaming chips in our gaming areas. Any negative publicity arising from such incidents could also tarnish our reputation and may result in a decline in our business, financial condition and results of operation.
 
Our existing surveillance and security systems, designed to detect cheating at our casino operations, may not be able to detect all such cheating in time or at all, particularly if patrons collude with our employees. In addition, our gaming promoters or other persons could, without our knowledge, enter into betting arrangements directly with our casino patrons on the outcomes of our games of chance, thus depriving us of revenues.
 
Because we depend upon our properties in one market for all of our cash flow, we will be subject to greater risks than a gaming company that operates in more markets.
 
We are and will be primarily dependent upon City of Dreams, Altira Macau and Mocha Clubs for our cash flow. Given that our current operations are and will be conducted only at properties in Macau, we will be subject to greater risks than a gaming company with operating properties in several markets. These risks include:
 
  •  dependence on the gaming and leisure market in Macau and limited diversification of our businesses and sources of revenue;
 
  •  a decline in economic, competitive and political conditions in Macau or generally in Asia;
 
  •  inaccessibility to Macau due to inclement weather, road construction or closure of primary access routes;
 
  •  a decline in air or ferry passenger traffic to Macau due to higher ticket costs, fears concerning travel or otherwise;
 
  •  travel restrictions to Macau imposed now or in the future by China;
 
  •  changes in Macau governmental laws and regulations, or interpretations thereof, including gaming laws and regulations;
 
  •  natural and other disasters, including typhoons, outbreaks of infectious diseases or terrorism, affecting Macau;
 
  •  that the number of visitors to Macau does not increase at the rate that we have expected; and
 
  •  a decrease in gaming activities at our properties.
 
Any of these conditions or events could have a material adverse effect on our business, cash flows, financial condition, results of operations and prospects.
 
Our gaming operations could be adversely affected by restrictions on the export of the Renminbi and limitations of the Pataca exchange markets.
 
Gaming operators in Macau are currently prohibited from accepting wagers in Renminbi, the currency of China. There are currently restrictions on the export of the Renminbi outside of mainland China, including to Macau. For example, Chinese traveling abroad are only allowed to take a total of RMB20,000 plus the equivalent of up to US$5,000 out of China. Restrictions on the export of the Renminbi may impede the flow of gaming customers from China to Macau, inhibit the growth of gaming in Macau and negatively impact our operations.
 
Our revenues in Macau are denominated in H.K. dollars and Patacas, the legal currency of Macau. Although currently permitted, we cannot assure you that H.K. dollars and Patacas will continue to be freely exchangeable into


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U.S. dollars. Although the exchange rate between the H.K. dollar and the U.S. dollar has been pegged since 1983 and the Pataca is pegged to the H.K. dollar, we cannot assure you that the H.K. dollar will remain pegged to the U.S. dollar and that the Pataca will remain pegged to the H.K. dollar. Also, because the currency market for Patacas is relatively small and undeveloped, our ability to convert large amounts of Patacas into U.S. dollars over a relatively short period of time may be limited. As a result, we may experience difficulty in converting Patacas into U.S. dollars.
 
Terrorism and the uncertainty of war, economic downturns and other factors affecting discretionary consumer spending and leisure travel may reduce visitation to Macau and harm our operating results.
 
The strength and profitability of our business depends on consumer demand for casino resorts and leisure travel in general. Changes in Asian consumer preferences or discretionary consumer spending could harm our business. Terrorist acts could have a negative impact on international travel and leisure expenditures, including lodging, gaming and tourism. We cannot predict the extent to which future terrorist acts may affect us, directly or indirectly. In addition to fears of war and future acts of terrorism, other factors affecting discretionary consumer spending, including general economic conditions, amounts of disposable consumer income, fears of recession and lack of consumer confidence in the economy, may negatively impact our business. Consumer demand for hotel, casino resorts and the type of luxury amenities we currently offer and plan to offer in the future are highly sensitive to downturns in the economy. An extended period of reduced discretionary spending and/or disruptions or declines in airline travel could significantly harm our operations.
 
An outbreak of the highly pathogenic avian influenza caused by the H5N1 virus (avian flu or bird flu), Severe Acute Respiratory Syndrome, or SARS, or H1N1 virus (swine flu) or other contagious disease may have an adverse effect on the economies of certain Asian countries and may adversely affect our results of operations.
 
During 2004, large parts of Asia experienced unprecedented outbreaks of avian flu which, according to a report of the World Health Organization, or WHO, in 2004, placed the world at risk of an influenza pandemic with high mortality and social and economic disruption. As of April 9, 2010, the WHO has confirmed a total of 292 fatalities in a total number of 493 cases reported to the WHO, which only reports laboratory confirmed cases of avian flu since 2003. In particular, Guangdong Province, PRC, which is located across the Zhuhai Border from Macau, has confirmed several cases of avian flu. Currently, fully effective avian flu vaccines have not yet been developed and there is evidence that the H5N1 virus are evolving so there can be no assurance that an effective vaccine can be discovered in time to protect against the potential avian flu pandemic. In the first half of 2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypical pneumonia, which seriously interrupted economic activities and caused the demand for goods and services to plummet in the affected regions. More recently, in April 2009, there has been an outbreak of the Influenza A (H1N1) virus which originated in Mexico but has since spread globally including confirmed reports in Indonesia, Hong Kong, Japan, Malaysia, Singapore, and elsewhere in Asia. Indonesia also recently confirmed its first Influenza A (H1N1) linked death. The Influenza A (H1N1) virus is believed to be highly contagious and may not be easily contained. There can be no assurance that an outbreak of avian flu, SARS, H1N1 (swine flu) or other contagious disease or the measures taken by the governments of affected countries against such potential outbreaks, will not seriously interrupt our gaming operations or visitation to Macau, which may have a material adverse effect on our results of operations. The perception that an outbreak of avian flu, SARS or other contagious disease may occur again may also have an adverse effect on the economic conditions of countries in Asia.
 
Macau is susceptible to severe typhoons that may disrupt our operations.
 
Macau is susceptible to severe typhoons. Macau consists of a peninsula and two islands off the coast of mainland China. In the event of a major typhoon or other natural disaster in Macau, our properties and business may be severely disrupted and our results of operations could be adversely affected. Although we or our operating subsidiaries do carry insurance coverage with respect to these events, our coverage may not be sufficient to fully indemnify us against all direct and indirect costs, including loss of business, that could result from substantial


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damage to, or partial or complete destruction of, our properties or other damages to the infrastructure or economy of Macau.
 
Any fluctuation in the value of the H.K. dollar, U.S. dollar or Pataca may adversely affect our indebtedness, expenses and profitability.
 
Although the majority of our revenues are denominated in H.K. dollars, our expenses will be denominated predominantly in Patacas. In addition, a significant portion of our indebtedness and certain expenses is denominated in U.S. dollars, and the costs associated with servicing and repaying such debt will be denominated in U.S. dollars. The value of the H.K. dollar and Patacas against the U.S. dollar may fluctuate and may be affected by, among other things, changes in political and economic conditions. Although the exchange rate between the H.K. dollar and the U.S. dollar has been pegged since 1983 and the Pataca is pegged to the H.K. dollar, we cannot assure you that the H.K. dollar will remain pegged to the U.S. dollar and that the Pataca will remain pegged to the H.K. dollar. We do not hedge our exposure to foreign currencies. Instead we maintain a certain amount of our operating funds in the same currencies in which we have obligations, thereby reducing our exposure to currency fluctuations. Any significant fluctuations in the exchange rates between H.K. dollars or Patacas to U.S. dollars may have a material adverse effect on our revenues and financial condition. For example, to the extent that we are required to convert U.S. dollar financings into H.K. dollars or Patacas for our operations, fluctuations in the exchange rates between H.K. dollars or Patacas against the U.S. dollar could have an adverse effect on the amounts we receive from the conversion.
 
Contract parties may not be able to secure adequate financing.
 
During the course of our business, we may enter into agreements with contract parties from which we may derive income in relation to the operation of gaming business. The inability of such contract parties to raise sufficient funds to develop and/or undertake the relevant project and gaming operations may affect our ability to derive such income as contracted for in the relevant agreements, and this may have an adverse impact on our business.
 
Our future construction projects will be subject to significant development and construction risks, which could have a material adverse impact on related project timetables, costs and our ability to complete the projects.
 
Our future construction projects will be subject to a number of risks, including:
 
  •  lack of sufficient or delays in availability of financing;
 
  •  changes to plans and specifications;
 
  •  engineering problems, including defective plans and specifications;
 
  •  shortages of, and price increases in, energy, materials and skilled and unskilled labor, and inflation in key supply markets;
 
  •  delays in obtaining or inability to obtain necessary permits, licenses and approvals;
 
  •  changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming, leisure, residential, real estate development or construction projects;
 
  •  labor disputes or work stoppages;
 
  •  disputes with and defaults by contractors and subcontractors;
 
  •  environmental, health and safety issues, including site accidents and the spread of viruses such as H1N1 or H5N1;
 
  •  weather interferences or delays;
 
  •  fires, typhoons and other natural disasters;


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  •  geological, construction, excavation, regulatory and equipment problems; and
 
  •  other unanticipated circumstances or cost increases.
 
The occurrence of any of these development and construction risks could increase the total costs, delay or prevent the construction or opening or otherwise affect the design and features of any future construction projects which we might undertake to complete. We cannot guarantee that our construction costs or total project costs for future projects will not increase beyond amounts initially budgeted.
 
Risks Relating to Our Operations in the Gaming Industry in Macau
 
Because our operations face intense competition in Macau and elsewhere in Asia, we may not be able to compete successfully and we may lose or be unable to gain market share.
 
The hotel, resort and casino businesses are highly competitive. Our competitors in Macau and elsewhere in Asia include many of the largest gaming, hospitality, leisure and resort companies in the world. Some of these current and future competitors are larger than we are and may have more diversified resources and greater access to capital to support their developments and operations in Macau and elsewhere.
 
We also compete to some extent with casinos located in other countries, such as Malaysia, North Korea, South Korea, the Philippines, Cambodia, Australia, New Zealand and elsewhere in the world, including Las Vegas and Atlantic City in the United States. In addition, certain countries, such as Singapore have legalized casino gaming and others may in the future legalize casino gaming, including Japan, Taiwan and Thailand. Singapore awarded a casino license to Las Vegas Sands and a second casino license to Genting International Bhd. in 2006. Genting International Bhd. opened its casino on February 14, 2010 and Las Vegas Sands opened its casino on April 27, 2010. We also compete with cruise ships operating out of Hong Kong and other areas of Asia that offer gaming. The proliferation of gaming venues in Southeast Asia could also significantly and adversely affect our financial condition, results of operations or cash flows.
 
Our regional competitors also include Crown’s Crown Casino Melbourne and Burswood Casino in Australia and other casino resorts that Melco and Crown may develop elsewhere in Asia outside Macau. Melco and Crown may develop different interests and strategies for projects in Asia under their joint venture which conflict with the interests of our business in Macau or otherwise compete with us for Asian gaming and leisure customers.
 
The Macau government could grant additional rights to conduct gaming in the future, which could significantly increase competition in Macau and cause us to lose or be unable to gain market share.
 
Melco Crown Gaming is one of six companies authorized by the Macau government to operate gaming activities in Macau. The Macau Government has announced that until further assessment of the economic situation in Macau there will not be any increase in the number of concessions or subconcessions. However, the policies and laws of the Macau government could change and the Macau government could grant additional concessions or subconcessions, and we could face additional competition which could significantly increase the competition in Macau and cause us to lose or be unable to maintain or gain market share.
 
Gaming is a highly regulated industry in Macau and adverse changes or developments in gaming laws or regulations could be difficult to comply with or significantly increase our costs, which could cause our projects to be unsuccessful.
 
Gaming is a highly regulated industry in Macau. Current laws, such as licensing requirements, tax rates and other regulatory obligations, including those for anti-money laundering, could change or become more stringent resulting in additional regulations being imposed upon the gaming operations in the Altira Macau casino, the City of Dreams casino, the Mocha Clubs, and other future projects including Macau Studio City and any other locations we may operate from time to time. Any such adverse developments in the regulation of the gaming industry could be difficult to comply with and could significantly increase our costs, which could cause our projects to be unsuccessful.


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In September 2009, the Macau government set a cap on commission payments to gaming promoters of 1.25% of net rolling. This policy, which is being enforced as of December 2009, may limit our ability to develop successful relationships with gaming promoters and attract rolling chip patrons. Any failure to comply with these regulations may result in the imposition of liabilities, fines and other penalties and may materially and adversely affect our gaming subconcession. See “Regulation.”
 
Also the Macau government has announced its intention to raise the minimum age required for the entrance in casinos in Macau from 18 years of age to 21 years of age. As far as employment is concerned, it was further announced that this measure, when adopted, would allow casino employees to maintain their positions while in the process of reaching the minimum required age. If implemented, this could adversely affect our ability to engage sufficient staff for the operation of our projects.
 
The Macau government announced that the number of gaming tables operating in Macau should not exceed 5,500 by the end of 2012, which may adversely affect the future expansion of our business.
 
Also, the Macau government announced that it intends to restrict the ability of operators to open slot lounges, such as our Mocha Clubs, in residential areas. This policy may limit our ability to find new sites or maintain existing sites for the operation of our Mocha Clubs.
 
Current Macau laws and regulations concerning gaming and gaming concessions and matters such as prevention of money laundering are, for the most part, fairly recent and there is little precedent on the interpretation of these laws and regulations. We believe that our organizational structure and operations are currently in compliance in all material respects with all applicable laws and regulations of Macau. However, these laws and regulations are complex and a court or an administrative or regulatory body may in the future render an interpretation of these laws and regulations or issue new or modified regulations that differ from our interpretation, which could have a material adverse effect on our financial condition, results of operations or cash flows.
 
Our activities in Macau are subject to administrative review and approval by various agencies of the Macau government. For example, our activities are subject to the administrative review and approval by the DICJ, the Health Department, Labor Bureau, Public Works Bureau, Fire Department, Finance Department and Macau Government Tourism Office. We cannot assure you that we will be able to obtain all necessary approvals, which may materially affect our business and operations. Macau law permits redress to the courts with respect to administrative actions. However, such redress is largely untested in relation to gaming regulatory issues.
 
Under Melco Crown Gaming’s subconcession, the Macau government may terminate the subconcession under certain circumstances without compensation to Melco Crown Gaming, which would prevent it from operating casino gaming facilities in Macau and could result in defaults under our indebtedness and a partial or complete loss of our investments in our projects.
 
Under Melco Crown Gaming’s gaming subconcession, the Macau government has the right to unilaterally terminate our subconcession in the event of non-compliance by Melco Crown Gaming with its basic obligations under the subconcession and applicable Macau laws. If such a termination were to occur, Melco Crown Gaming would be unable to operate casino gaming in Macau. We would also be unable to recover the US$900 million consideration paid to Wynn Macau for the issue of the subconcession. For a list of termination events, please see the section headed “Regulation.” These events could lead to the termination of Melco Crown Gaming’s subconcession without compensation to Melco Crown Gaming. In many of these instances, the subconcession contract does not provide a specific cure period within which any such events may be cured and, instead, we would rely on consultations and negotiations with the Macau government to remedy any such violation. Melco Crown Gaming has entered into a service agreement with New Cotai Entertainment (Macau) Limited and New Cotai Entertainment, LLC pursuant to which Melco Crown Gaming will operate the casino premises in its hotel casino resorts. If New Cotai Entertainment (Macau) Limited or other parties with whom we may, in the future, enter into similar agreements were to be found unsuitable or were to undertake actions that are inconsistent with Melco Crown Gaming’s subconcession terms and requirements, we could suffer penalties, including the termination of the subconcession.


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Based on information from the Macau government, proposed amendments to the legislation with regard to reversion of casino premises are being considered. We expect that if such amendments take effect, on the expiry or any termination of Melco Crown Gaming’s subconcession, unless Melco Crown Gaming’s subconcession were extended, only that portion of casino premises within our developments as then designated with the approval of the Macau government, including all gaming equipment, would revert to the Macau government automatically without compensation to us. Until such amendments come into effect, all of our casino premises and gaming equipment would revert automatically without compensation to us.
 
The subconcession contract contains various general covenants, obligations and other provisions as to which the determination of compliance is subjective. For example, compliance with general and special duties of cooperation, special duties of information, and with obligations foreseen for the execution of our investment plan may be subjective. We cannot assure you that we will perform such covenants in a way that satisfies the requirements of the Macau government and, accordingly, we will be dependent on our continuing communications and good faith negotiations with the Macau government to ensure that we are performing our obligations under the subconcession in a manner that would avoid any violations.
 
Under Melco Crown Gaming’s subconcession, the Macau government is allowed to request various changes in the plans and specifications of our Macau properties and to make various other decisions and determinations that may be binding on us. For example, the Chief Executive of the Macau SAR has the right to require that we increase Melco Crown Gaming’s share capital or that we provide certain deposits or other guarantees of performance with respect to the obligations of our Macau subsidiaries in any amount determined by the Macau government to be necessary. Melco Crown Gaming is limited in its ability to raise additional capital by the need to first obtain the approval of the Macau gaming and governmental authorities before raising certain debt or equity. Melco Crown Gaming’s ability to incur debt or raise equity may also be restricted by our existing and any future loan facilities. As a result, we cannot assure you that we will be able to comply with these requirements or any other requirements of the Macau government or with the other requirements and obligations imposed by the subconcession.
 
Furthermore, pursuant to the subconcession contract, we are obligated to comply not only with the terms of that agreement, but also with laws, regulations, rulings and orders that the Macau government might promulgate in the future. We cannot assure you that we will be able to comply with any such laws, regulations, rulings or orders or that any such laws, regulations, rulings or orders would not adversely affect our ability to construct or operate our Macau properties. If any disagreement arises between us and the Macau government regarding the interpretation of, or our compliance with, a provision of the subconcession contract, we will be relying on the consultation and negotiation process with the applicable Macau governmental agency described above. During any such consultation, however, we will be obligated to comply with the terms of the subconcession contract as interpreted by the Macau government.
 
Melco Crown Gaming’s failure to comply with the terms of its subconcession in a manner satisfactory to the Macau government could result in the termination of its subconcession. We cannot assure you that Melco Crown Gaming would always be able to operate gaming activities in a manner satisfactory to the Macau government. The loss of its subconcession would prohibit Melco Crown Gaming from conducting gaming operations in Macau which would have a material adverse effect on our financial condition, results of operations and cash flows and could result in defaults under our indebtedness and a partial or complete loss of our investments in our projects.
 
Currently, there is no precedent on how the Macau government will treat the termination of a concession or subconcession upon the occurrence of any of the circumstances mentioned above. Some of the laws and regulations summarized above have not yet been applied by the Macau government. Therefore, the scope and enforcement of the provisions of Macau’s gaming regulatory system cannot be fully assessed at this time.
 
Melco Crown Gaming’s subconcession contract expires in 2022 and if we were unable to secure an extension of its subconcession in 2022 or if the Macau government were to exercise its redemption right in 2017, we would be unable to operate casino gaming in Macau.
 
Melco Crown Gaming’s subconcession contract expires in 2022. Under the subconcession contract, beginning in 2017, the Macau government has the right to redeem the subconcession contract by providing us with at least one year’s prior notice. In the event the Macau government exercises this redemption right, we would be entitled to fair


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compensation or indemnity. The standards for the calculation of the amount of such compensation or indemnity would be determined based on the gross revenue generated by City of Dreams during the tax year immediately prior to the redemption, multiplied by the remaining term of the subconcession. We would not receive any further compensation (including for consideration paid to Wynn Macau for the subconcession). We cannot assure you that Melco Crown Gaming would be able to renew or extend its subconcession contract on terms favorable to us, or at all. We also cannot assure you that if Melco Crown Gaming’s subconcession were redeemed, the compensation paid would be adequate to compensate us for the loss of future revenues.
 
While Melco Crown Gaming will not initially be required to pay corporate income taxes on income from gaming operations under the subconcession, this tax exemption will expire in 2011, and it may not be extended.
 
The Macau government has granted to Melco Crown Gaming the benefit of a corporate tax holiday on gaming income in Macau for five years from 2007 to 2011. When this tax exemption expires, we cannot assure you that it will be extended beyond the expiration date.
 
Furthermore, the Macau government has granted to our subsidiary Altira Hotel Limited a declaration of utility purposes benefit, pursuant to which, for a period of 12 years, it is entitled to a vehicle and property tax holiday on any vehicles and immovable property that it owns or has been granted. Additionally, under the tax holiday, this entity will also be allowed to double the maximum rates applicable regarding depreciation and reintegration for purposes of assessment of corporate income tax for the same period of time. We have applied for the same tax holidays for Melco Crown (COD) Hotels Limited in relation to the hotels at City of Dreams, but we cannot assure you that they will be granted by the Macau government on as favorable terms, or at all.
 
We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.
 
We conduct our table gaming activities at our casinos to a limited degree on a credit basis, and expect to continue this practice in the future. This credit is often unsecured, as is customary in our industry. High-end patrons typically are extended more credit than patrons who wager lower amounts.
 
We may not be able to collect all of our gaming receivables from our credit customers. We expect that we will be able to enforce our gaming receivables only in a limited number of jurisdictions, including Macau and under certain circumstances Hong Kong. As most of our gaming customers are visitors from other jurisdictions, we may not have access to a forum in which we will be able to collect all of our gaming receivables because, among other reasons, courts of many jurisdictions do not enforce gaming debts. We may encounter forums that will refuse to enforce such debts, or we may be unable to locate assets in other jurisdictions against which to seek recovery of gaming debts. The collectability of receivables from international customers could be negatively affected by future business or economic trends or by significant events in the countries in which these customers reside. We may also in given cases have to determine whether aggressive enforcement actions against a customer will unduly alienate the customer and cause the customer to cease playing at our casinos. If we accrue large receivables from the credit extended to our customers, we could suffer a material adverse impact on our operating results if those receivables are deemed uncollectible. In addition, in the event a patron has been extended credit and has lost back to us the amount borrowed and the receivable from that patron is deemed uncollectible, Macau gaming tax will still be payable on the resulting gaming revenue notwithstanding our uncollectible receivable.
 
The current credit environment may limit availability of credit to gaming patrons and may negatively impact our revenue.
 
We conduct our table gaming activities at our casinos to a limited degree on a credit basis and our gaming promoters also conduct their operations by extending credit to gaming patrons. The general economic downturn and turmoil in the financial markets have placed broad limitations on the availability of credit from credit sources as well as lengthening the recovery cycle of extended credit. Continued tightening of liquidity conditions in credit markets may constrain revenue generation and growth and could have a material adverse effect on our business, financial condition and results of operations.


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Our business may face a higher level of volatility due to our focus on the rolling chip segment of the gaming market.
 
A significant proportion of our revenues is generated from the rolling chip segment of the gaming market. The revenues generated from the rolling chip segment of the gaming market are acutely volatile primarily due to high bets, and the resulting high winnings and losses. As a result, our business and results of operations and cash flows from operations may be more volatile from quarter to quarter than that of our competitors and may require higher levels of cage cash in reserve to manage this volatility.
 
We depend upon gaming promoters for a portion of our gaming revenue and if we are unable to establish, maintain and increase the number of successful relationships with gaming promoters, our ability to attract rolling chip patrons may be adversely affected.
 
Gaming promoters, who organize tours for rolling chip patrons to casinos in Macau, are responsible for a portion of our gaming revenues in Macau. With the rise in casino operations in Macau, the competition for relationships with gaming promoters has increased. As of March 31, 2010, we had agreements in place with approximately 59 gaming promoters. If we are unable to utilize and develop relationships with gaming promoters, our ability to grow our gaming revenues will be hampered and we will have to seek alternative ways to develop and maintain relationships with rolling chip patrons, which may not be as profitable as relationships developed through gaming promoters.
 
We are impacted by the reputation and integrity of the parties with whom we engage in business activities and we cannot assure you that these parties will always maintain high standards or suitability throughout the term of our association with them. Failure to maintain such high standards or suitability may cause us and our shareholders to suffer harm to our and the shareholders’ reputation, as well as impaired relationships with, and possibly sanctions from, gaming regulators.
 
The reputation and integrity of the parties with whom we engage in business activities, in particular those who are engaged in gaming related activities, such as gaming promoters and developers and hotel operators that do not hold concessions or subconcessions and with which we have or may enter into services agreements, are important to our own reputation and to Melco Crown Gaming’s ability to continue to operate in compliance with its subconcession. For parties we deal with in gaming related activities, where relevant, the gaming regulators undertake their own probity checks and will reach their own suitability findings in respect of the activities and parties which we intend to associate with. In addition, we also conduct our internal due diligence and evaluation process prior to engaging such parties. Notwithstanding such regulatory probity checks and our own due diligence, we cannot assure you that the parties with whom we are associated will always maintain the high standards that gaming regulators and we require or that such parties will maintain their suitability throughout the term of our association with them. If we were to deal with any party whose probity was in doubt, this may reflect negatively on our own probity when assessed by the gaming regulators. Also, if a party associated with us falls below the gaming regulators’ suitability standards, we and our shareholders may suffer harm to our and the shareholders’ reputation, as well as impaired relationships with, and possibly sanctions from, gaming regulators with authority over our operations.
 
In particular, the reputations of the gaming promoters we deal with are important to our own reputation and Melco Crown Gaming’s ability to continue to operate in compliance with its subconcession. While we endeavor to ensure high standards of probity and integrity in the gaming promoters with whom we are associated, we cannot assure you that the gaming promoters with whom we are associated will always maintain such high standards. If we were to deal with a gaming promoter whose probity was in doubt or who failed to operate in compliance with Macau law consistently, this may be considered by regulators or investors to reflect negatively on our own probity and compliance records. If a gaming promoter falls below our standards of probity, integrity and legal compliance, we and our shareholders may suffer harm to our or their reputation, as well as worsened relationships with, and possibly sanctions from, gaming regulators with authority over our operations.


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Since May 2008, China has imposed government restrictions on Chinese citizens traveling from mainland China to Macau. If China or other countries impose further restrictions on travel to Macau, our business or results of operations could be adversely affected.
 
We have made significant investments to develop our casino gaming and entertainment resort facilities and intend to make significant additional investments to develop Phase II at City of Dreams, based, in part, on our expectation of future visitor arrivals in Macau, particularly from mainland China. In 2007, 2008 and 2009, tourists from mainland China accounted for approximately 55.1%, 50.6% and 50.5%, respectively, of all visitors to Macau. If visitor arrivals from China and elsewhere fail to increase as anticipated or decrease further, our existing business and business prospects could be adversely affected.
 
Visitor arrivals from China and elsewhere may be negatively affected by visa and other travel restrictions from various countries. The Chinese government controls the flow of visitors from mainland China into Macau, as Chinese citizens must obtain visas to visit Macau. Under China’s Individual Visit Scheme (“IVS”), Chinese citizens from 49 urban centers and economically developed regions in the PRC may be eligible to obtain visas to visit Macau individually and not as part of a tour. The number of permits granted under the IVS has been gradually increasing since the system was introduced in 2003.
 
Between May and September 2008, the Chinese government imposed tighter restrictions on travel to Macau and may impose further restrictions in the future. In May and July 2008, the Chinese government readjusted its visa policy toward Macau and limited the number of visits that some mainland Chinese citizens may make to Macau in a given time period. In September 2008, it was publicly announced that mainland Chinese citizens with only a Hong Kong visa and not a Macau visa could no longer enter Macau from Hong Kong. In addition, in May 2009, China also began to restrict the operation of “below-cost” tour groups involving low up-front payments and compulsory shopping. These restrictions had a material adverse effect on the number of visitors to Macau from mainland China.
 
Visitor arrivals in Macau decreased by 5.2% to 21.8 million in 2009, compared to 22.9 million in 2008. Further restrictions on travel from China or other countries to Macau or any increase in prices of tours to Macau, as a result of new regulations on travel agencies or otherwise, may reduce the number of visitors to Macau in general and to our properties in particular.
 
We cannot assure you that anti-money laundering policies that we have implemented, and compliance with applicable anti-money laundering laws, will be effective to prevent our casino operations from being exploited for money laundering purposes.
 
Macau’s free port, offshore financial services and free movements of capital create an environment whereby Macau’s casinos could be exploited for money laundering purposes. We have implemented anti-money laundering policies in compliance with all applicable anti-money laundering laws and regulations in Macau. However, we cannot assure you that any such policies will be effective in preventing our casino operations from being exploited for money laundering purposes, including from jurisdictions outside of Macau. In the normal course of business, we expect to be required by regulatory authorities from Macau and other jurisdictions to attend meetings and interviews from time to time to discuss our operations as they relate to anti-money laundering laws and regulations. Any incidents of money laundering, accusations of money laundering or regulatory investigations into possible money laundering activities involving us, our employees, our gaming promoters or our customers could have a material adverse impact on our reputation, business, cash flows, financial condition, prospects and results of operations.
 
If Macau’s transportation infrastructure does not adequately support the development of Macau’s gaming and leisure industry, visitation to Macau may not increase as currently expected, which may adversely affect our projects.
 
Macau consists of a peninsula and two islands and is connected to China by two border crossings. Macau has an international airport and connections to China and Hong Kong by road, ferry and helicopter. To support Macau’s planned future development as a gaming and leisure destination, the frequency of bus, plane and ferry services to Macau will need to increase. While various projects are under development to improve Macau’s internal and external transportation links, these projects may not be approved, financed or constructed in time to handle the


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projected increase in demand for transportation or at all, which could impede the expected increase in visitation to Macau and adversely affect our projects.
 
Risks Relating to Our Corporate Structure and Ownership
 
Our existing shareholders will have a substantial influence over us and their interests in our business may be different than yours.
 
Melco and Crown together own the substantial majority of our outstanding shares, with each beneficially holding approximately 33.4% of our outstanding ordinary shares (exclusive of any ordinary shares represented by ADSs held by the SPV as of March 31, 2010). Melco and Crown have entered into a shareholders deed regarding the voting of their shares of our company under which each will agree to, among other things, vote its shares in favor of three nominees to our board designated by the other.
 
As a result, Melco and Crown, if they act together, will have the power, among other things, to elect directors to our board, including six of ten directors who are designated nominees of Crown and Melco, appoint and change our management, affect our legal and capital structure and our day-to-day operations, approve material mergers, acquisitions, dispositions and other business combinations and approve any other material transactions and financings. These actions may be taken in many cases without the approval of independent directors or other shareholders and the interests of these shareholders may conflict with your interests as holders of the Notes. In addition, if Melco or Crown provides shareholder support to us in the form of shareholder loans or provides credit support by guaranteeing our obligations, they may become our creditors with different interests than shareholders with only equity interests in us or you as holders of the Notes.
 
Business conducted through joint ventures involves certain risks.
 
We were initially formed as a 50/50 joint venture between Melco and PBL as their exclusive vehicle to carry on casino, gaming machine and casino hotel operations in Macau. Subsequently, Crown acquired all the gaming businesses and investments of PBL, including PBL’s investment in our company. As a joint venture controlled by Melco and Crown, there are special risks associated with the possibility that Melco and Crown may: (1) have economic or business interests or goals that are inconsistent with ours or that are inconsistent with each other’s interests or goals, causing disagreement between them or between them and us which harms our business; (2) have operations and projects elsewhere in Asia that compete with our businesses in Macau and for available resources and management attention within the joint venture group; (3) take actions contrary to our policies or objectives; (4) be unable or unwilling to fulfill their obligations under the relevant joint venture or shareholders’ deed; or (5) have financial difficulties. In addition, there is no assurance that the laws and regulations relating to foreign investment in Melco’s or Crown’s governing jurisdictions will not be altered in such a manner as to result in a material adverse effect on our business and operating results.
 
Melco and Crown may pursue additional casino projects in Asia, which, along with their current operations, may compete with our projects in Macau which could have material adverse consequences to us and your interests.
 
Melco and Crown may take action to construct and operate new gaming projects located in other countries in the Asian region, which, along with their current operations, may compete with our projects in Macau and could have adverse consequences to us and your interests. We could face competition from these other gaming projects. We also face competition from regional competitors, which include Crown’s Crown Casino in Melbourne, Australia and Burswood Casino in Perth, Australia. We expect to continue to receive significant support from both Melco and Crown in terms of their local experience, operating skills, international experience and high standards. Specifically, we have support arrangements with Melco and Crown under which they provide us technical expertise in connection with the on-going development of City of Dreams and the operations of the Altira Macau, City of Dreams and the Mocha Clubs businesses. Should Melco or Crown decide to focus more attention on casino gaming projects located in other areas of Asia that may be expanding or commencing their gaming industries, or should economic conditions or other factors result in a significant decrease in gaming revenues and number of patrons in Macau, Melco or Crown may make strategic decisions to focus on their other projects rather than us, which could


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adversely affect our growth. We cannot guarantee you that Melco and Crown will make strategic and other decisions which do not adversely affect our business and the trading price of the Notes.
 
Changes in our share ownership, including a change of control or a change in the amounts or relative percentages of our shares owned by Melco and Crown, could result in our inability to draw loans or events of default under our indebtedness or could require MCE Finance to make an offer to repurchase the Notes.
 
The City of Dreams Project Facility includes provisions under which we may suffer an event of default or incur an obligation to prepay the facility in full upon the occurrence of a change of control with respect to Melco Crown Gaming, or a decline in the aggregate indirect holdings of Melco Crown Gaming shares by Melco and Crown, below certain thresholds. Under the terms of the Notes, a Change of Control in connection with a decrease of the Sponsors holdings must be accompanied by a ratings decline in order to trigger a Change of Control. Furthermore, under the terms of the Notes, MCE Finance must offer to repurchase the Notes upon the occurrence of a Change of Control at a price equal to 101% of their principal amount, plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the date of redemption. See “— Risks Relating to Our Indebtedness, the Notes and the Guarantees — MCE Finance may not be able to repurchase the Notes upon a Change of Control.” Any occurrence of these events could be outside our control and could result in defaults and cross-defaults which cause the termination and acceleration of up to all of our credit facilities (or the Notes) and potential enforcement of remedies by our lenders, which would have a material adverse effect on our financial condition and results of operations.
 
Crown’s investment in our company is subject to regulatory review in several jurisdictions and if regulators in those jurisdictions were to find that we, Crown or Melco failed to comply with certain regulatory requirements and standards, then Crown maybe required to withdraw from the joint venture.
 
Crown, through wholly owned subsidiaries, owns and operates the Crown Casino in Melbourne, Australia and the Burswood Casino in Perth, Australia. Crown’s wholly owned subsidiaries hold casino licenses issued by the States of Victoria and Western Australia in Australia.
 
Crown, through a 50% owned joint venture subsidiary, owns and operates three casinos in the United Kingdom. The joint venture owns a 50% interest in a fourth casino in the United Kingdom.
 
Crown, through a 50% owned joint venture subsidiary, operates under a management agreement with the relevant provincial government authority seven casinos in British Columbia and two casinos in Alberta in Canada.
 
Under a previously announced Preferred Purchase Agreement, Crown has been required to be approved by gaming regulators in the State of Nevada and is undergoing approval in the State of Pennsylvania in the United States in relation to an investment in Cannery Casino Resorts LLC which owns and operates casinos in those states.
 
In all jurisdictions in which Crown, or one of its wholly owned subsidiaries, holds a gaming license or Crown has a significant investment in a company which holds gaming licenses, gaming regulators are empowered to investigate associates, including business associates of Crown to determine whether the associate is of good repute and of sound financial resources. If, as a result of such investigation, the relevant gaming regulator determines that, by reason of its association, Crown has ceased to be suitable to hold a gaming license or to hold a substantial investment in the holder of a gaming license then the relevant gaming regulator may direct Crown to terminate its association or risk losing its gaming license or approval to invest in the holder of a gaming license in the relevant jurisdiction.
 
If actions by us or our subsidiaries or by Melco or Crown fail to comply with the regulatory requirements and standards of the jurisdictions in which Crown owns or operates casinos or in which companies in which Crown holds a substantial investment own or operate casinos or if there are changes in gaming laws and regulations or the interpretation or enforcement of such laws and regulations in such jurisdictions, then Crown may be required to withdraw from its joint venture with Melco or limit its involvement in one or more aspects of our gaming operations, which could have a material adverse effect on our business, financial condition and results of operations. Withdrawal by Crown from its joint venture with Melco could cause the failure of conditions to drawing loans


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under our credit facilities or the occurrence of events that default under our credit facilities or as contemplated by our founders under their joint venture agreement.
 
Risks Relating to Our Indebtedness, the Notes and the Guarantees
 
Our current, projected and potential future indebtedness could impair our financial condition, which could further exacerbate the risks associated with our significant leverage.
 
Exclusive of the Notes, we have incurred and expect to incur, based on current budgets and estimates, secured long-term indebtedness, including the following:
 
  •  approximately US$1.75 billion under the City of Dreams Project Facility primarily for the development and construction of City of Dreams, of which we have drawn down, as of the date of this prospectus, an amount equivalent to approximately US$1.68 billion, of which US$444.1 million has been repaid out of the net proceeds from the sale of the Initial Notes and US$1.24 billion remains outstanding; and
 
  •  financing for a significant portion of the costs of developing Phase II at the City of Dreams site, in an amount which is as yet undetermined.
 
Our significant secured indebtedness could have important consequences. For example, it could:
 
  •  make it difficult for us to satisfy our obligations with respect to the Notes;
 
  •  increase our vulnerability to general adverse economic and industry conditions;
 
  •  impair our ability to obtain additional financing in the future for working capital needs, capital expenditure, acquisitions or general corporate purposes;
 
  •  require us to dedicate a significant portion of our cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds available to us for our operations;
 
  •  limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
 
  •  place us at a competitive disadvantage as compared to our competitors, to the extent that they are not as leveraged;
 
  •  subject us to higher interest expense in the event of increases in interest rates to the extent a portion of our debt bears interest at variable rates;
 
  •  cause us to incur additional expenses by hedging interest rate exposures of our debt and exposure to hedging counterparties’ failure to pay under such hedging arrangements, which would reduce the funds available for us for our operations; and
 
  •  in the event we or one of our subsidiaries were to default, result in the loss of all or a substantial portion of our and our subsidiaries’ assets, over which our lenders have taken or will take security.
 
Any of these or other consequences or events could have a material adverse effect on our ability to satisfy our other debt obligations, including the Notes.
 
We may not be able to generate sufficient cash flow to meet our debt service obligations.
 
Our ability to make scheduled payments due on our existing and anticipated debt obligations, including the Notes, and to fund planned capital expenditure and development efforts will depend on our ability to generate cash. We will require generation of sufficient operating cash flow from our projects to service our current and future projected indebtedness. Our ability to obtain cash to service our existing and projected debt is subject to a range of economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. We may not be able to generate sufficient cash flow from operations to satisfy our existing and projected debt obligations, including the Notes, in which case, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments, or seek to raise additional capital. We cannot assure you that any refinancing or restructuring would be possible, that any assets


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could be sold, or, if sold, of the timing of the sales or the amount of proceeds that would be realized from those sales. In addition, the terms of the indenture and/or the terms of our other indebtedness may limit our ability to pursue any of these measures. We cannot assure you that additional financing could be obtained on acceptable terms, if at all, or would be permitted under the terms of our various debt instruments then in effect. Our failure to generate sufficient cash flow to satisfy our existing and projected debt obligations, including the Notes, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of operations.
 
The terms of the City of Dreams Project Facility may restrict our current and future operations and harm our ability to complete our projects and grow our business operations to compete successfully against our competitors.
 
The City of Dreams Project Facility and associated facility and security documents that Melco Crown Gaming has entered into also contain a number of restrictive covenants that impose significant operating and financial restrictions on Melco Crown Gaming and its subsidiaries, and therefore, effectively, on us. The covenants in the City of Dreams Project Facility restrict or limit, among other things, our and our subsidiaries’ ability to:
 
  •  incur additional debt, including guarantees;
 
  •  create security or liens;
 
  •  dispose of assets;
 
  •  make certain acquisitions and investments;
 
  •  make loans, payments on certain indebtedness, distributions and other restricted payments or apply revenues earned in one part of our operations to fund development costs or cover operating losses in another part of our operations;
 
  •  enter into sale and leaseback transactions;
 
  •  engage in new businesses;
 
  •  enter into or vary contracts;
 
  •  issue preferred shares; and
 
  •  enter into transactions with shareholders and affiliates.
 
In addition, the restrictions under the City of Dreams Project Facility contain financial covenants, including requirements that we satisfy certain tests or ratios for the twelve month period commencing January 1, 2010 and ending December 31, 2010, and thereafter for each successive twelve month period ending on the last day of each quarter of our financial year, such as:
 
  •  Consolidated Leverage Ratio, as defined in the City of Dreams Project Facility;
 
  •  Consolidated Interest Cover Ratio, as defined in the City of Dreams Project Facility; and
 
  •  Consolidated Cash Cover Ratio, as defined in the City of Dreams Project Facility.
 
They also provide that, should a Change of Control (as defined in the City of Dreams Project Facility Agreement) occur, the Facility will be cancelled and all amounts outstanding thereunder become immediately due and payable. We have made certain amendments to the City of Dreams Project Facility, which became effective on or about the date of the indenture. See “Description of Other Material Indebtedness — Additional Information.”
 
These covenants may restrict our ability to operate and restrict our ability to incur additional debt or other financing we may require, and impede our growth.


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Drawdown or rollover of advances under our debt facilities involve satisfaction of extensive conditions precedent and our failure to satisfy such conditions precedent will result in our inability to access or roll over loan advances under such facilities. We do not guarantee that we are able to satisfy all conditions precedent under our current or future debt facilities.
 
Our current and future debt facilities, including the City of Dreams Project Facility, require and will require satisfaction of extensive conditions precedent prior to the advance or rollover of loans under such facilities. The satisfaction of such conditions precedent may involve actions of third parties and matters outside of our control, such as government consents and approvals. If there is a breach of any terms or conditions of our debt facilities or other obligations and it is not cured or capable of being cured, such conditions precedent will not be satisfied. The inability to draw down or roll over loan advances in any debt facility may result in a funding shortfall in our operations and we may not be able to fulfill our obligations as planned; such events may result in an event of default under such debt facility and may also trigger cross default in our other obligations and debt facilities. We do not guarantee that all conditions precedent to draw down or roll over loan advances under our debt facilities will be satisfied in a timely manner or at all. If we are unable to draw down or roll over loan advances under any current or future facility, we may have to find a new group of lenders and negotiate new financing terms or consider other financing alternatives. If required, it is possible that new financing would not be available or would have to be procured on substantially less attractive terms, which could damage the economic viability of the relevant development project. The need to arrange such alternative financing would likely also delay the construction and/or operations of our future projects or existing properties, which would affect our cash flows, results of operations and financial condition.
 
Our failure to comply with the covenants contained in our or our subsidiaries’ indebtedness, including failure as a result of events beyond our control, could result in an event of default that could materially and adversely affect our cash flow, operating results and our financial condition.
 
If there were an event of default under one of our or our subsidiaries’ debt facilities, including under the indenture governing the Notes, the holders of the debt on which we defaulted could cause all amounts outstanding with respect to that debt to become due and payable immediately. In addition, any event of default or declaration of acceleration under one debt facility could result in an event of default under one or more of our other debt instruments, with the result that all of our debt would be in default and accelerated. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt facilities, including under the indenture governing the Notes, either upon maturity or if accelerated upon an event of default, or that we would be able to refinance or restructure the payments on those debt facilities. Further, if we are unable to repay, refinance or restructure our indebtedness at our subsidiaries that own or operate our properties, the lenders under those debt facilities could proceed against the collateral securing that indebtedness, which will constitute substantially all the assets and shares of our subsidiaries. In that event, any proceeds received upon a realization of the collateral would be applied first to amounts due under those debt instruments. The value of the collateral may not be sufficient to repay all of our indebtedness, including the Notes.
 
Recent turmoil in the credit markets taken together with the role of the credit agencies may affect our ability to maintain current financing or obtain future financing which could result in delays in our project development schedule and could impact our ability to generate revenue from operations at our present and future projects.
 
The recent turmoil in the credit markets may adversely affect our ability to maintain our current debt facility and to obtain additional or future financing for our operations and our current and future projects. If we are unable to maintain our current debt facility or obtain suitable financing for our operations and our current or future projects, this could adversely impact our existing operations, or cause delays in, or prevent completion of, the development of future projects. This may limit our ability to operate and expand our business and may adversely impact our ability to generate revenue. The costs incurred by any new financing may be greater than anticipated due to the recent turmoil in the credit markets.


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MCE Finance may not be able to repurchase the Notes upon a Change of Control.
 
MCE Finance must offer to purchase the Notes upon the occurrence of a Change of Control, at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any. See “Description of Exchange Notes — Repurchase at the Option of Holders — Change of Control.”
 
The source of funds for any such purchase would be our available cash or third-party financing. However, MCE Finance may not have enough available funds at the time of the occurrence of any Change of Control to make purchases of outstanding Notes. MCE Finance’s failure to make the offer to purchase or purchase the outstanding Notes would constitute an Event of Default under the Notes. The Event of Default may, in turn, constitute an event of default under other indebtedness, any of which could cause the related debt to be accelerated after any applicable notice or grace periods. If our other debt were to be accelerated, we may not have sufficient funds to purchase the Notes and repay the debt.
 
In addition, the definitions of Change of Control for purposes of the indenture governing the Notes do not necessarily afford protection for the holders of the Notes in the event of some highly leveraged transactions, including certain acquisitions, mergers, refinancings, restructurings or other recapitalizations, although these types of transactions could increase our indebtedness or otherwise affect our capital structure or credit ratings. The definitions of Change of Control for purposes of the indenture governing the Notes also include a phrase relating to the sale of “all or substantially all” of its assets. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition under applicable law. Accordingly, MCE Finance’s obligation to make an offer to purchase the Notes, and the ability of a holder of the Notes to require MCE Finance to purchase its Notes pursuant to the offer as a result of a highly-leveraged transaction or a sale of less than all of its assets may be uncertain.
 
MCE Finance may, in its discretion, require holders and beneficial owners of Notes to dispose of their Notes, or MCE Finance may redeem the Notes, due to regulatory considerations.
 
The indenture grants MCE Finance the power to redeem the Notes if the gaming authority of any jurisdiction in which the Parent, MCE Finance or any of their respective subsidiaries conducts or proposes to conduct gaming requires that a person who is a holder or the beneficial owner of Notes be licensed, qualified or found suitable under applicable gaming laws and such holder or beneficial owner, as the case may be, fails to apply or become licensed or qualified within the required time period or is found unsuitable.
 
Under the foregoing circumstances, pursuant to the indenture, if such person fails to apply or become licensed or qualified or is found unsuitable, MCE Finance has the right, at its option:
 
(1) to require such person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of MCE Finance’s election or such earlier date as may be requested or prescribed by such gaming authority; or
 
(2) to redeem such Notes, which redemption may be less than 30 days following the notice of redemption if so requested or prescribed by the applicable gaming authority, at a redemption price equal to:
 
(a) the lesser of:
 
(1) the person’s cost, plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; and
 
(2) 100% of the principal amount thereof, plus accrued and unpaid interest, Additional Amounts and Liquidated Damages, if any, to the earlier of the redemption date or the date of the finding of unsuitability or failure to comply; or
 
(b) such other amount as may be required by applicable law or order of the applicable gaming authority.


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MCE Finance is not responsible for any costs or expenses any holder of Notes may incur in connection with its application for a license, qualification or a finding of suitability. See “Description of Exchange Notes — Gaming Redemption.”
 
The insolvency laws of the Cayman Islands and other local insolvency laws may differ from U.S. bankruptcy law or those of another jurisdiction with which holders of the Notes are familiar.
 
Because MCE Finance is incorporated under the laws of the Cayman Islands, an insolvency proceeding relating to MCE Finance, even if brought in the United States, would likely involve Cayman Islands insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of United States federal bankruptcy law. In addition, a majority of the Subsidiary Group Guarantors are incorporated in Macau and the insolvency laws of Macau may also differ from the laws of the United States or other jurisdictions with which the holders of the Notes are familiar.
 
You may have difficulty enforcing judgments obtained against us.
 
The Parent, MCE Finance and several of the Guarantors are Cayman Islands exempted companies and substantially all of our assets are located outside of the United States. Other than MPEL (Delaware) LLC, a Delaware company, the remaining Guarantors are incorporated in Macau. All of our current operations and administrative and corporate functions are conducted in Macau and Hong Kong. In addition, substantially all of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in Cayman Islands, Macau and Hong Kong courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands, Macau or Hong Kong would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, it is uncertain whether such Cayman Islands, Macau or Hong Kong courts would be competent to hear original actions brought in the Cayman Islands, Macau or Hong Kong against us or such persons predicated upon the securities laws of the United States or any state.
 
If we are unable to comply with the restrictions and covenants in our debt agreements or the indenture governing the Notes, there could be a default under the terms of these agreements or the indenture governing the Notes, which could cause repayment of our debt to be accelerated.
 
If we are unable to comply with the restrictions and covenants in the indenture governing the Notes or our current or future debt obligations and other agreements, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to us, accelerate repayment of the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of our debt agreements, including the indenture governing the Notes, contain cross-acceleration or cross-default provisions. As a result, our default under one debt agreement may cause the acceleration of repayment of debt, including the Notes, or result in a default under our other debt agreements, including the indenture governing the Notes. If any of these events occur, we cannot assure you that our assets and cash flow would be sufficient to repay in full all of our indebtedness, or that we would be able to find alternative financing. Even if we could obtain alternative financing, we cannot assure you that it would be on terms that are favorable or acceptable to us.
 
Our operations are restricted by the terms of the Notes, which could limit our ability to plan for or to react to market conditions or meet our capital needs.
 
The indenture governing the Notes includes a number of significant restrictive covenants. These covenants restrict, among other things, the ability of MCE Finance and its subsidiaries to:
 
  •  incur or guarantee additional indebtedness;
 
  •  make specified restricted payments;


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  •  issue or sell capital stock of our restricted subsidiaries;
 
  •  sell assets;
 
  •  create liens;
 
  •  enter into agreements that restrict the ability of us and our restricted subsidiaries to pay dividends, transfer assets or make intercompany loans;
 
  •  enter into transactions with shareholders or affiliates; and
 
  •  effect a consolidation or merger.
 
These covenants could limit our ability to plan for or react to market conditions or to meet our capital needs. Our ability to comply with these covenants may be affected by events beyond our control, and we may have to curtail some of our operations and growth plans to maintain compliance.
 
There is no established trading market for the Exchange Notes and holders of Exchange Notes may not be able to sell the Exchange Notes at the price that holders paid or at all; the liquidity and market price of the Exchange Notes following this exchange offer may be volatile.
 
There is no established trading market for the Exchange Notes. Application has been made to the SGX-ST for the listing and quotation of the Exchange Notes on the Official List of the SGX-ST. Such approval will be granted when the Exchange Notes have been admitted to the Official List of the SGX-ST. However, we can make no assurances that MCE Finance will be able to obtain or maintain such listing or that, if listed, a trading market will develop. Lack of a liquid, active trading market for the Exchange Notes may adversely affect the price of the Exchange Notes or may otherwise impede a holder’s ability to dispose of the Exchange Notes. As a result, we can make no assurances as to the liquidity of any trading market for the Exchange Notes.
 
We also can make no assurances that holders of the Exchange Notes will be able to sell their Exchange Notes at a particular time or that the prices that such holders receive when they sell the Exchange Notes will be equal to or more than the prices they paid for the Exchange Notes. Future trading prices of the Exchange Notes will depend on many factors, including the following:
 
  •  prevailing interest rates and the markets for similar securities;
 
  •  our results of operations, financial condition, historical financial performance and future prospects;
 
  •  political and economic developments in and affecting Macau and other countries in which we conduct business now or in the future;
 
  •  general economic conditions locally, regionally and globally;
 
  •  changes in the credit ratings of the Notes or us; and
 
  •  the financial condition and stability of the Asian or global financial sector.
 
Since the second quarter of 2008, the international credit markets have experienced periods of significant illiquidity and the prices of securities traded in the international capital markets have experienced substantial volatility and declines. Furthermore, historically, the market for debt by Asian issuers has been subject to disruptions that have caused substantial volatility in the prices of such securities. The market for the Exchange Notes may be subject to similar volatility or disruptions, which may have an adverse effect on holders of the Exchange Notes.
 
The Notes will initially be held in book-entry form, and therefore you must rely on the procedures of relevant clearing systems to exercise any rights and remedies.
 
The Notes will initially only be issued in global certificated form and held through the Depositary Trust Company, or DTC, and its participants, including Euroclear Bank S.A./N.A. (“Euroclear”) and Clearstream Banking, société anonyme, Luxembourg (“Clearstream”). Interests in the Global Notes (as defined in “Description of Exchange Notes — Book-Entry, Delivery and Form”) representing the Notes will trade in book-entry form only, and Notes in definitive registered form, or definitive registered Notes, will be issued in exchange for book-entry


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interests only in very limited circumstances. Owners of book-entry interests will not be considered owners or holders of Notes. The custodian for DTC will be the sole registered holder of the Global Notes. Payments of principal, interest and other amounts owing on or in respect of the Global Notes will be made to the paying agent who will make payments to DTC. Thereafter, these payments will be credited to accounts of participants (including Euroclear and Clearstream) that hold book-entry interests in the Global Notes and credited by such participants to indirect participants. After payment to the custodian for DTC, MCE Finance will have no responsibility or liability for the payment of interest, principal or other amounts to the owners of book-entry interests. Accordingly, if you own a book-entry interest, you must rely on the procedures of DTC, Euroclear and Clearstream, and if you are not a participant in DTC, Euroclear and Clearstream on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of Notes under the indenture.
 
Upon the occurrence of an event of default under the indenture, unless and until definitive registered Notes are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through DTC, Euroclear and Clearstream. The procedures to be implemented through DTC, Euroclear and Clearstream may not be adequate to ensure the timely exercise of rights under the Notes. See “Description of Exchange Notes and Guarantees — Book-Entry, Delivery and Form.”
 
The Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Guarantees.
 
Although laws differ among jurisdictions, under bankruptcy laws, fraudulent transfer laws, insolvency or similar laws, a guarantee could be voided if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by, or when it gives, its guarantee:
 
  •  incurred the debt with the intent to hinder, delay or defraud creditors or was influenced by a desire to put the beneficiary of the guarantee in a position which, in the event of the guarantor’s insolvency, would be better than the position the beneficiary would have been in had the guarantee not been given;
 
  •  received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee;
 
  •  was insolvent or rendered insolvent by reason of such incurrence;
 
  •  was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or
 
  •  intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
 
The measure of insolvency for purposes of the foregoing will vary depending on the laws of the jurisdiction which are being applied. Generally, however, a guarantor would be considered insolvent at a particular time if it were unable to pay its debts as they fell due or if the sum of its debts was then greater than all of its property at a fair valuation or if the present fair saleable value of its assets was then less than the amount that would be required to pay its probable liabilities in respect of its existing debt as it became absolute and matured or abandonment of the head office of the guarantor or dissipation of assets, fraudulent incurrence of credits or any other abusive procedure that reveals the intention of the guarantor not to comply with its obligations.
 
In addition, a guarantee may be subject to review under applicable insolvency or fraudulent transfer laws in certain jurisdictions or subject to a lawsuit by or on behalf of creditors of the guarantors. In such case, the analysis set forth above would generally apply, except that the guarantee could also be subject to the claim that, since the guarantee was not incurred for the benefit of the guarantor, the obligations of the guarantor thereunder were incurred for less than reasonably equivalent value or fair consideration.
 
Furthermore, and specifically with regard to Macau law, in general a Guarantee may be challenged if:
 
  •  the Guarantor delivered its Guarantee at a time when it had debt outstanding or with the intent to defraud its future creditors;
 
  •  delivery of the Guarantee rendered it impossible for the Guarantor’s creditors to obtain full repayment (regardless of whether independent events had already made full repayment impossible); and


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  •  the grant of the Guarantee was a gratuitous act for which no consideration was received by the beneficiary or, if consideration was received, the beneficiary was aware that the grant of the Guarantee would result in the Guarantor defrauding existing or future creditors.
 
In addition, under Macau bankruptcy and insolvency laws, a Guarantee may be voided in whole or in part by a Macau court on the grounds that:
 
  •  the Guarantee was a gratuitous act for which no consideration was received by the beneficiary and was granted within two years of the date of the judgment of bankruptcy or insolvency;
 
  •  in the case of an intercompany Guarantee that was delivered within six months of the date of judgment of bankruptcy or insolvency; or
 
  •  in the case of a Guarantee delivered within specified time periods of the date of bankruptcy or insolvency, the beneficiary was aware that the grant of the Guarantee would result in the Guarantor defrauding existing or future creditors.
 
Further, under Macau law, a Guarantor would be considered bankrupt or insolvent if it were unable to pay its debts as they fall due, if the members of its corporate bodies evade without appointing suitable substitutes, it abandons its head office or if it dissipates its assets, incurs fraudulently in credits or in any other abusive procedure that reveals the intention of the Guarantor not to punctually comply with its obligations.
 
Under Macau law, if a court declares a Guarantor bankrupt or insolvent, all its obligations will become immediately due and payable and interest and other charges thereon will cease to accrue. Further, after the declaration of bankruptcy or insolvency, creditors shall not be entitled to exercise any right to set off against a Guarantor.
 
If a court voided a Guarantee, subordinated such Guarantee to other indebtedness of the Guarantor, or held the Guarantee unenforceable for any other reason, holders of the Notes would cease to have a claim against that Guarantor based upon such Guarantee and would solely be creditors of us and any Guarantor whose Guarantee was not voided or held unenforceable. We cannot assure you that, in such an event, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes.
 
The value of the collateral may not be sufficient to satisfy MCE Finance’s obligations under the Notes and the Guarantors’ obligations under the Guarantees.
 
The Notes and the Guarantees pursuant to the Initial Notes are and pursuant to the Exchange Notes will be secured by a first priority pledge of the Intercompany Note. The amount of proceeds that ultimately would be distributed in respect of the Notes upon any enforcement action or otherwise may not be sufficient to satisfy MCE Finance’s obligations under the Notes and the Guarantors’ obligations under the Guarantees. Moreover, there can be no assurance that any enforcement action would be successful.
 
MCE Finance is a holding company which will depend on payments under the Intercompany Note to provide it with funds to meet its obligation under the Notes.
 
MCE Finance is a holding company with no material business operations of its own or significant assets other than the Intercompany Note. The Initial Notes are and the Exchange Notes will be material liabilities of MCE Finance. As such, MCE Finance will be dependent upon payments from MPEL Investments under the Intercompany Note (and, in turn, MPEL Investments will be dependent upon payments from Melco Crown Gaming under one or more additional intercompany loans) to make any payments due on the Notes.


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Each of the Guarantees provided by the Subsidiary Group Guarantors pursuant to the Initial Notes are and pursuant to the Exchange Notes will be subordinated to our Designated Senior Indebtedness.
 
The Guarantees provided by the Subsidiary Group Guarantors pursuant to the Initial Notes are and pursuant to the Exchange Notes will be the senior subordinated obligations of each of the Subsidiary Group Guarantors and are and will:
 
  •  rank pari passu in right of payment with all existing and future senior subordinated indebtedness of such Subsidiary Group Guarantor;
 
  •  be subordinated in right of payment to each such Subsidiary Group Guarantor’s obligations under, or guarantee of obligations under, the City of Dreams Project Facility and the SBGF Agreement (“Designated Senior Indebtedness”);
 
  •  be senior in right of payment to all existing and future obligations of such Subsidiary Group Guarantors expressly subordinated to the relevant Guarantee; and
 
  •  be effectively subordinated to any secured indebtedness and other secured obligations of each such Subsidiary Group Guarantor to the extent of the value of the assets securing such indebtedness or other obligations (other than to the extent such assets also secure such Subsidiary Guarantees on an equal and ratable or priority basis).
 
Upon any distribution to the creditors of such Subsidiary Group Guarantor in a liquidation, administration, bankruptcy, moratorium of payments, dissolution or other winding-up of such Subsidiary Group Guarantor, the lenders of our Designated Senior Indebtedness will be entitled to be paid in full before any payment may be made with respect to the Guarantee provided by such Subsidiary Group Guarantor. As a result, holders of the Notes may receive less, ratably, than the lenders of our Designated Senior Indebtedness.
 
Claims of the secured creditors of each Guarantor will have priority with respect to their security over the claims of unsecured creditors, such as the holders of the Notes, to the extent of the value of the assets securing such indebtedness.
 
Claims of the secured creditors of the Guarantors will have priority with respect to the assets securing their indebtedness over the claims of holders of the Notes. As such, each Guarantee pursuant to the Initial Notes is and pursuant to the Exchange Notes will be effectively subordinated to any secured indebtedness and other secured obligations of the relevant Guarantor to the extent of the value of the assets securing such indebtedness or other obligations (other than to the extent such assets also secure the Notes and/or the relevant Guarantees on an equal and ratable basis or priority basis). In the event of any foreclosure, dissolution, winding up, liquidation, reorganization, administration or other bankruptcy or insolvency proceeding of any Guarantor that has secured obligations, holders of secured indebtedness will have prior claims to the assets of such Guarantor that constitute their collateral (other than to the extent such assets also secure the Notes and/or the relevant Guarantees on an equal and ratable basis or priority basis).
 
Subject to the limitations referred to under the caption “— The Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Guarantees,” the holders of the Notes will participate, ratably with all holders of the unsecured indebtedness of the Parent, MPEL International and any future restricted subsidiary that is not a Subsidiary Group Guarantor, and potentially with all of their other general creditors, based upon the respective amounts owed to each holder or creditor, in the remaining assets of the relevant Guarantor. The holders of the Notes will participate ratably with all holders of the unsecured and unsubordinated indebtedness of a Subsidiary Group Guarantor, and potentially with all of their other general creditors, based upon the respective amounts owed to each holder or creditor, in the remaining assets of the relevant Subsidiary Group Guarantor, following payment in full in cash of all obligations due under Designated Senior Indebtedness.
 
In the event that any of the secured indebtedness of the relevant Guarantor becomes due or the creditors thereunder proceed against the operating assets that secure such indebtedness, our assets remaining after repayment of that secured indebtedness may not be sufficient to repay all amounts owing in respect of the relevant Guarantee. As a result, holders of Notes may receive less, ratably, than holders of secured indebtedness of the relevant Guarantor.


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The rights of holders of Notes under the Subordination Agreement to subordinate certain intra-group indebtedness will become effective after repayment in full under the City of Dreams Project Facility and the SBGF Facility.
 
On the date of the indenture, the Parent, MCE Finance and MPEL International entered into a subordination agreement (the “Subordination Agreement”) with the Trustee providing for the contractual subordination in favor of the Trustee and the holders of the Notes of the Parent’s rights to receive payments with respect to all loans made prior to the issuance of the Notes by the Parent to MPEL International under any loan agreement between the Parent and MPEL International, as well as any loan that is made after the date of the indenture between the Parent, MCE Finance, MPEL International or any other subsidiary of the Parent that is not an obligor under the Senior Credit Agreement, the proceeds of which are on-lent by the borrower under such loan to a Subsidiary Group Guarantor by way of a Shareholders Subordinated Loan. In addition, upon the repayment or refinancing of the Senior Credit Agreement and the Subconcession Bank Guarantee Facility Agreement, and the release of the 2007 Subordination Deed, the intra-group loans and Sponsor Group Loans (as defined in the Senior Credit Agreement) that are subordinated in right of payment to the indebtedness under the Senior Credit Agreement shall also become contractually subordinated to the Notes. The rights of the lenders under such subordinated loans will be subordinated to the prior payment in full in cash to holders of the Notes of all Obligations due in respect of the Notes. The holders of the Notes will be entitled to receive payment in full in cash of all Obligations due in respect of the Notes before such lenders will be entitled to receive any payment or amounts due to them under and in respect of such subordinated loans, other than payments permitted under the indenture as provided in “Description of Exchange Notes — Certain Covenants — Restricted Payments.”
 
However, in connection with the City of Dreams Project Facility, the debtors and creditors in respect of certain intra-group loans (i) owed by an obligor under the City of Dreams Project Facility to us or any of our subsidiaries and (ii) designated as Sponsor Group Loans under the City of Dreams Project Facility have already entered into a subordination deed (the “2007 Subordination Deed”), pursuant to which each such creditor has agreed to assign by way of security their rights, title and interests in such intra-group loans, and each creditor and debtor of such intra-group loans has agreed to subordinate the right of payment of such intra-group loan to the Priority Indebtedness (as defined in the 2007 Subordination Deed). Priority Indebtedness includes the indebtedness under the City of Dreams Project Facility and the SBGF Agreement. The parties to the 2007 Subordination Deed include all of the Subsidiary Group Guarantors as well as the Parent and MPEL International.
 
In relation to the intra-group loans described above owed by a Subsidiary Group Guarantor to an obligor under the City of Dreams Project Facility, the holders of the Initial Notes are, and the holders of the Exchange Notes will be, only able to acquire subordination rights in relation to such intra-group loans once the Priority Indebtedness has been repaid in full or is being refinanced in full. See “Description of Exchange Notes — Subordination Agreement.”
 
If the validity or enforceability of the Subordination Agreement were successfully challenged for any reason, the Notes could be held to be effectively equal with or junior to certain earlier incurred obligations, including the intra-group loans and Sponsor Group Loans. Therefore, the priority status of the Notes with respect to our intra-group loans and Sponsor Group Loans depends on the validity and enforceability of the Subordination Agreement.
 
The financial statements contained in this prospectus are for the Parent and its consolidated subsidiaries, and no Guarantor has any obligation to provide its financial statements to holders of the Notes.
 
The financial statements contained in this prospectus are for the Parent and its consolidated subsidiaries and therefore a portion of results in the consolidated financial statements is not attributable to MCE Finance and its restricted subsidiaries. MCE Finance and its restricted subsidiaries accounted for over 95% of the consolidated total assets as of the three months ended March 31, 2010 and over 99% of the consolidated net revenues for the three months ended March 31, 2010. In addition, no Guarantor has any obligation in connection with the Notes to publish or make available its consolidated financial statements. The absence of financial statements for any Guarantor may make it difficult for holders of the Notes to assess the financial condition or results of the Guarantors or their compliance with the covenants in the indenture.


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THE EXCHANGE OFFER
 
The following contains a summary of the material provisions of the exchange offer being made pursuant to the registration rights agreement, dated as of May 17, 2010, between MCE Finance, the Guarantors and the initial purchasers of the Initial Notes. It does not contain all of the information that may be important to an investor in the Notes. Reference is made to the provisions of the registration rights agreement, which has been filed as an exhibit to the registration statement of which this prospectus forms a part. Copies of the registration rights agreement are available as set forth under the heading “Where You Can Find More Information.”
 
Terms of the Exchange Offer
 
In connection with the issuance of the Initial Notes, pursuant to a purchase agreement, dated as of May 12, 2010, between MCE Finance, the Guarantors and the initial purchasers of the Initial Notes, the holders of the Initial Notes from time to time became entitled to the benefits of the registration rights agreement.
 
Under the registration rights agreement, MCE Finance and the Guarantors agreed to file a registration statement, of which this prospectus forms a part, relating to an offer to exchange the Initial Notes for the Exchange Notes and to use all commercially reasonable efforts to cause the registration statement to become effective under the Securities Act no later than 180 days after the date of original issue of the Initial Notes. MCE Finance and the Guarantors agreed to use their commercially reasonable efforts to cause the exchange offer to be consummated on or prior to the 30th business day, or longer if required by the federal securities laws, after the registration statement has been declared effective. MCE Finance and the Guarantors have also agreed to use all commercially reasonable efforts to keep the exchange offer open for a period required by applicable federal and state securities laws to consummate the exchange offer, but in any event for at least 20 business days.
 
Under certain circumstances, MCE Finance and the Guarantors will use all commercially reasonable efforts to file and to cause the SEC to declare effective a shelf registration statement with respect to the resale of the Initial Notes and MCE Finance and the Guarantors will use all commercially reasonable efforts to keep the shelf registration statement effective for up to one year after the date of the original issue of the Initial Notes. The circumstances include if MCE Finance and the Guarantors are not:
 
  •  required to file the exchange offer registration statement; or
 
  •  permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy or action; or
 
any holder of the Initial Notes notifies MCE Finance and the Guarantors prior to the 20th business day following the consummation of the exchange offer that it:
 
  •  is prohibited by law or SEC policy or action from participating in the exchange offer;
 
  •  may not resell the Exchange Notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales by such holder; or
 
  •  is a broker-dealer and holds Initial Notes acquired directly from MCE Finance or any of its affiliates.
 
By tendering Initial Notes in exchange for relevant Exchange Notes, and executing the letter of transmittal for such Exchange Notes, you will represent to us that:
 
  •  you are not an “affiliate,” as defined in Rule 144 of the Securities Act, of MCE Finance or any of the Guarantors;
 
  •  you are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the exchange offer; and
 
  •  you are acquiring the Exchange Notes in the ordinary course of business.
 
Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, all Initial Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date will


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be accepted for exchange. MCE Finance will issue Exchange Notes in exchange for an equal principal amount of outstanding Initial Notes accepted in the exchange offer. Initial Notes may be tendered only in minimum denominations of US$2,000 of principal amount and integral multiples of US$1,000 in excess thereof. This prospectus, together with the letter of transmittal, is being sent to all registered holders as of          , 2010. The exchange offer is not conditional upon any minimum principal amount of Initial Notes being tendered for exchange. However, our obligation to accept Initial Notes for exchange pursuant to the exchange offer is subject to certain customary conditions as set forth below under “— Conditions.”
 
Initial Notes shall be deemed to have been accepted as validly tendered when, as and if we have given oral or written notice of such acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders of Initial Notes for the purposes of receiving the Exchange Notes and delivering the Exchange Notes to such holders.
 
Based on interpretations of the SEC staff set forth in no-action letters issued to unrelated third parties (including Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling dated July 2, 1993) we believe that the Exchange Notes issued pursuant to the exchange offer may be offered for resale, resold and otherwise transferred by any holder of such Exchange Notes, without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that:
 
  •  such holder is not an “affiliate,” as defined in Rule 144 of the Securities Act, of MCE Finance or any of the Guarantors;
 
  •  such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the exchange offer; and
 
  •  such Exchange Notes are acquired in the ordinary course of the holder’s business.
 
MCE Finance and the Guarantors have not sought, and do not intend to seek, a no-action letter from the SEC with respect to the effects of the exchange offer, and there can be no assurance that the SEC staff would make a similar determination with respect to the Exchange Notes as it has in previous no-action letters.
 
Any holder using the exchange offer to participate in a distribution of the Exchange Notes will acknowledge and agree that, if the resales are of Exchange Notes obtained by such holder in exchange for Initial Notes acquired directly from MCE Finance or any of its affiliates, it:
 
  •  cannot rely on the position of the SEC enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters; and
 
  •  must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.
 
Each broker-dealer that receives Exchange Notes pursuant to the exchange offer for its own account as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”
 
Upon consummation of the exchange offer, any Initial Notes not tendered will remain outstanding and continue to accrue interest at the rate of 10.25%, but, with limited exceptions, holders of Initial Notes who do not exchange their Initial Notes for Exchange Notes pursuant to the exchange offer will no longer be entitled to registration rights and will not be able to offer or sell their Initial Notes unless such Initial Notes are subsequently registered under the Securities Act, except pursuant to an exemption from or in a transaction not subject to the


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Securities Act and applicable state securities laws. With limited exceptions, we will have no obligation to effect a subsequent registration of the Initial Notes.
 
Liquidated Damages
 
If any of the following events occur (each such event a “Registration Default”), MCE Finance and the Guarantors will pay each holder of applicable Initial Notes liquidated damages:
 
  •  the exchange offer registration statement of which this prospectus forms a part is not filed with the SEC on or prior to 90 days after the closing date of the offering of Initial Notes;
 
  •  the exchange offer registration statement of which this prospectus forms a part is not declared effective by the SEC within 180 days after the closing date of the offering of Initial Notes;
 
  •  the exchange offer is not consummated on or prior to the 30th business day, or longer if required by federal securities laws, after such exchange offer registration statement has been declared effective;
 
  •  the shelf registration statement is not filed with the SEC on or prior to 30 days after such filing obligation arises;
 
  •  the shelf registration statement is not declared effective by the SEC on or prior to 90 days after such obligation arises; or
 
  •  the shelf registration statement or the exchange offer registration statement of which this prospectus forms a part is filed and declared effective but thereafter ceases to be effective or usable for its intended purpose without being succeeded within three days by a post-effective amendment to such shelf registration statement or exchange offer registration statement, as the case may be, that cures such failure and that is itself declared effective within five days of filing such post-effective amendment to such shelf registration statement or exchange offer registration statement, as the case may be.
 
With respect to the first 90-day period immediately following the occurrence of the first Registration Default, liquidated damages will be paid in an amount equal to US$.05 per week per US$1,000 principal amount of Initial Notes. The amount of the liquidated damages will increase by an additional US$.05 per week per US$1,000 principal amount of Initial Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages for all Registration Defaults of US$.50 per week per US$1,000 principal amount of Initial Notes.
 
All accrued liquidated damages will be paid by MCE Finance and the Guarantors on the next scheduled interest payment date to DTC or its nominee by wire transfer of immediately available funds and to holders of Certificated Notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified.
 
Following the cure of all Registration Defaults, the accrual of liquidated damages will cease.
 
Expiration Date; Extensions; Amendments
 
The expiration date for the exchange offer shall be 5:00 p.m., New York City time, on , 2010, unless we, in our sole discretion, extend the exchange offer, in which case the expiration date for the exchange offer shall be the latest date to which the exchange offer is extended.
 
To extend an expiration date, we will notify the exchange agent of any extension by oral or written notice and will notify the holders of the relevant Initial Notes by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date for the exchange offer. Such notice to noteholders will disclose the aggregate principal amount of the outstanding Notes that have been tendered as of the date of such notice and may state that we are extending the exchange offer for a specified time.


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In relation to the exchange offer, we reserve the right to:
 
  •  delay acceptance of any Initial Notes due to an extension of the exchange offer, to extend the exchange offer or to terminate the exchange offer and not permit acceptance of Initial Notes not previously accepted if any of the conditions set forth under “— Conditions” have not occurred and have not been waived by us prior to 5:00 p.m., New York City time, on the expiration date, by giving oral or written notice of such delay, extension or termination to the exchange agent; or
 
  •  amend the terms of the exchange offer in any manner deemed by us to be advantageous to the holders of the Initial Notes.
 
Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice of such delay, extension or termination or amendment to the exchange agent. If the terms of the exchange offer are amended in a manner determined by us to constitute a material change, including the waiver of a material condition, we will promptly disclose such amendment in a manner reasonably calculated to inform you of such amendment, and we will extend the exchange offer if necessary so that at least five business days remain in the offer following notice of the material change.
 
Without limiting the manner in which we may choose to make public an announcement of any delay, extension or termination of the exchange offer, we shall have no obligations to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency.
 
Interest on the New Notes
 
Interest on the Exchange Notes will accrue at the rate of 10.25% per annum, accruing from the date of original issuance of the Initial Notes or, if interest has already been paid, from the date it was most recently paid on the corresponding Old Note surrendered in exchange for such Exchange Note to the day before the consummation of the exchange offer and thereafter, at the rate of 10.25% per annum, provided, that if an Old Note is surrendered for exchange on or after a record date for the Notes for an interest payment date that will occur on or after the date of such exchange and as to which interest will be paid, interest on the Exchange Note received in exchange for such Old Note will accrue from the date of such interest payment date. Interest on the Exchange Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2010. No additional interest will be paid on the Initial Notes tendered and accepted for exchange except as provided in the registration rights agreement.
 
Procedures for Tendering
 
To tender in the exchange offer, you must complete, sign and date the letter of transmittal, or a facsimile of such letter of transmittal, have the signatures on such letter of transmittal guaranteed if required by such letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile, together with any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the expiration date.
 
In addition, the following procedures apply:
 
  •  certificates of Initial Notes must be received by the exchange agent along with the applicable letter of transmittal; or
 
  •  a timely confirmation of a book-entry transfer of Initial Notes, if such procedures are available, into the exchange agent’s account at the book-entry transfer facility, DTC, pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the expiration date with the letter of transmittal; or
 
  •  you must comply with the guaranteed delivery procedures described below.
 
We will only issue Exchange Notes in exchange for Initial Notes that are timely and properly tendered. The method of delivery of Initial Notes, letter of transmittal and all other required documents is at your election and risk. Rather than mail these items, we recommend that you use an overnight or hand delivery service. If such delivery is by mail, it is recommended that registered mail, properly insured, with return receipt requested, be used. In all cases,


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sufficient time should be allowed to assure timely delivery and you should carefully follow the instructions on how to tender the Initial Notes. No Initial Notes, letters of transmittal or other required documents should be sent to us. Delivery of all Initial Notes (if applicable), letters of transmittal and other documents should be made to the exchange agent at its address set forth below under “— Exchange Agent.” You may also request your respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender on your behalf. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your Initial Notes or the tenders thereof.
 
Your tender of Initial Notes will constitute an agreement between you and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. Any beneficial owner whose Initial Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf.
 
Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by any member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an “eligible guarantor” institution within the meaning of Rule 17Ad-15 under the Exchange Act (each an “Eligible Institution”) unless the Initial Notes tendered pursuant to such letter of transmittal or notice of withdrawal, as the case may be, are tendered:
 
  •  by a registered holder of Initial Notes who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal; or
 
  •  for the account of an Eligible Institution.
 
If a letter of transmittal is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers or corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by us, submit with such letter of transmittal evidence satisfactory to us of their authority to so act.
 
All questions as to the validity, form, eligibility, time of receipt and withdrawal of the tendered Initial Notes will be determined by us in our sole discretion, such determination being final and binding on all parties. We reserve the absolute right to reject any and all Initial Notes not properly tendered or any Initial Notes which, if accepted, would, in the opinion of counsel for us, be unlawful. We also reserve the absolute right to waive any irregularities or defects with respect to tender as to particular Initial Notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within such time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Initial Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Initial Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Initial Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the exchange agent, unless otherwise provided in the letter of transmittal, promptly following the expiration date.
 
For as long as the Notes are in global form and held in the name of Cede & Co., all tenders shall be submitted via ATOP (as hereinafter defined).
 
Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes
 
Upon satisfaction or waiver of all of the conditions to the exchange offer all Initial Notes properly tendered will be accepted promptly after the expiration date, and the Exchange Notes will be issued promptly after the expiration date. See “— Conditions.” For purposes of the exchange offer, Initial Notes shall be deemed to have been accepted as validly tendered for exchange when, as and if we have given oral or written notice thereof to the exchange agent. For each Old Note accepted for exchange, the holder of such Old Note will receive an Exchange Note having a principal amount equal to that of the surrendered Old Note.


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In all cases, issuance of Exchange Notes for Initial Notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of:
 
  •  certificates for such Initial Notes or a timely book-entry confirmation of such Initial Notes into the exchange agent’s account at the book-entry transfer facility;
 
  •  a properly completed and duly executed letter of transmittal; and
 
  •  all other required documents.
 
If any tendered Initial Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer, such unaccepted or such non-exchanged Initial Notes will be returned without expense to the tendering holder of such Initial Notes, if in certificated form, or credited to an account maintained with such book-entry transfer facility promptly after the expiration or termination of the exchange offer.
 
Book-Entry Transfer
 
The exchange agent will make a request to establish an account with respect to the Initial Notes at the book-entry transfer facility, DTC, for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution that is a participant in the book-entry transfer facility’s systems may make book-entry delivery of Initial Notes by causing the book-entry transfer facility to transfer such Initial Notes into the exchange agent’s account for the relevant Notes at the book-entry transfer facility in accordance with such book-entry transfer facility’s procedures for transfer. However, although delivery of Initial Notes may be effected through book-entry transfer at the book-entry transfer facility, the letter of transmittal or facsimile thereof with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at one of the addresses set forth below under “— Exchange Agent” on or prior to 5:00 p.m., New York City time, on the expiration date or the guaranteed delivery procedures described below must be complied with. Delivery of documents to the applicable book-entry transfer facility does not constitute delivery to the exchange agent.
 
Exchanging Book-Entry Notes
 
The exchange agent and the book-entry transfer facility, DTC, have confirmed that any financial institution that is a participant in the book-entry transfer facility may utilize the book-entry transfer facility’s Automated Tender Offer Program (“ATOP”) to tender Initial Notes.
 
Any participant in the book-entry transfer facility may make book-entry delivery of Initial Notes by causing the book-entry transfer facility to transfer such Initial Notes into the exchange agent’s account for the relevant Notes in accordance with the book-entry transfer facility’s ATOP procedures for transfer. However, the exchange for the Initial Notes so tendered will only be made after a book-entry confirmation of the book-entry transfer of such Initial Notes into the exchange agent’s account for the relevant Notes, and timely receipt by the exchange agent of an agent’s message and any other documents required by the letter of transmittal. The term “agent’s message” means a message, transmitted by the book-entry transfer facility and received by the exchange agent and forming part of a book-entry confirmation, which states that the book-entry transfer facility has received an express acknowledgement from a participant tendering Initial Notes that are the subject of such book-entry confirmation that such participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against such participant.
 
Guaranteed Delivery Procedures
 
If the procedures for book-entry transfer cannot be completed on a timely basis, a tender may be effected if:
 
  •  the tender is made through an Eligible Institution;
 
  •  prior to the expiration date, the exchange agent receives by facsimile transmission, mail or hand delivery from such Eligible Institution a properly completed and duly executed letter of transmittal and notice of guaranteed delivery, substantially in the form provided by us, which


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  •  sets forth the name and address of the holder of the Initial Notes and the principal amount of Initial Notes tendered;
 
  •  states the tender is being made thereby;
 
  •  guarantees that within three New York Stock Exchange (“NYSE”) trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered Initial Notes, in proper form for transfer, or book-entry confirmation, as the case may be, and any other documents required by the letter of transmittal will be deposited by the Eligible Institution with the exchange agent; and
 
  •  the certificates for all physically tendered Initial Notes, in proper form for transfer, or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within three NYSE trading days after the date of execution of the notice of guaranteed delivery.
 
Withdrawal of Tenders
 
Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.
 
For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent prior to 5:00 p.m., New York City time, on the expiration date at the address set forth below under “— Exchange Agent.” Any such notice of withdrawal must:
 
  •  specify the name of the person having tendered the Initial Notes to be withdrawn;
 
  •  identify the Initial Notes to be withdrawn, including the principal amount of such Initial Notes;
 
  •  in the case of Initial Notes tendered by book-entry transfer, specify the number of the account at the book-entry transfer facility from which the Initial Notes were tendered and specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Initial Notes and otherwise comply with the procedures of such facility;
 
  •  contain a statement that such holder is withdrawing its election to have such Initial Notes exchanged;
 
  •  be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Initial Notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer to have the trustee with respect to the Initial Notes register the transfer of such Initial Notes in the name of the person withdrawing the tender; and
 
  •  specify the name in which such Initial Notes are registered, if different from the person who tendered such Initial Notes.
 
All questions as to the validity, form, eligibility and time of receipt of such notice will be determined by us, in our sole discretion, such determination being final and binding on all parties. Any Initial Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any Initial Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the tendering holder of such Notes without cost to such holder, in the case of physically tendered Initial Notes, or credited to an account maintained with the book-entry transfer facility for the Initial Notes promptly after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Initial Notes may be retendered by following one of the procedures described under “— Procedures for Tendering” and “— Book-Entry Transfer” above at any time on or prior to 5:00 p.m., New York City time, on the expiration date.
 
Conditions
 
Notwithstanding any other provision in the exchange offer, we shall not be required to accept for exchange, or to issue Exchange Notes in exchange for, any Initial Notes and may terminate or amend the exchange offer if at any time prior to 5:00 p.m., New York City time, on the expiration date, we determine in our reasonable judgment that


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the exchange offer violates applicable law, any applicable interpretation of the staff of the SEC or any order of any governmental agency or court of competent jurisdiction.
 
The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition or may be waived by us in whole or in part at any time and from time to time, prior to the expiration date, in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights prior to 5:00 p.m., New York City time, on the expiration date shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time prior to 5:00 p.m., New York City time, on the expiration date.
 
In addition, we will not accept for exchange any Initial Notes tendered, and no Exchange Notes will be issued in exchange for any such Initial Notes, if at any such time any stop order shall be threatened or in effect with respect to the registration statement of which this prospectus forms a part or the qualification of the indenture governing the Notes under the Trust Indenture Act of 1939, as amended. Pursuant to the registration rights agreement, MCE Finance and the Guarantors are required to use all commercially reasonable efforts to keep the registration statement, of which this prospectus forms a part, and any shelf registration statement continuously effective, supplemented, amended and current.
 
Exchange Agent
 
The Bank of New York Mellon has been appointed as exchange agent for the exchange offer. Questions and requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent addressed as follows:
 
     
By Registered/Certified Mail:
The Bank of New York Mellon
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7 East
New York, N.Y. 10286
United States of America
  By Facsimile (for Eligible Institutions only):
(212)-298-1915
     
Regular Mail or Overnight Courier:

The Bank of New York Mellon
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7 East
New York, N.Y. 10286
United States of America
  For Information or Confirmation by Telephone:
(212)-815-5098
Attn: Mr. Randolph Holder
     
Hand Delivery:
The Bank of New York Mellon
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7 East
New York, N.Y. 10286
United States of America
   
 
Fees and Expenses
 
The expenses of soliciting tenders pursuant to the exchange offer will be borne by MCE Finance and the Guarantors. The principal solicitation for tenders pursuant to the exchange offer is being made by mail; however, additional solicitations may be made by telegraph, telephone, telecopy or in person by our officers and regular employees.
 
We will not make any payments to or extend any commissions or concessions to any broker or dealer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange


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agent for its reasonable out-of-pocket expenses in connection therewith. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of the prospectus and related documents to the beneficial owners of the Initial Notes and in handling or forwarding tenders for exchange.
 
The expenses of MCE Finance and the Guarantors in connection with the exchange offer include:
 
  •  fees and expenses of the trustee and exchange agent and their counsel;
 
  •  registration and filing fees and expenses;
 
  •  fees and expenses of compliance with federal and state securities laws;
 
  •  printing, messenger and delivery services and telephone expenses;
 
  •  fees and disbursements of counsel for MCE Finance and the Guarantors;
 
  •  application and filing fees in connection with listing and quotation of the Exchange Notes on the SGX-ST; and
 
  •  fees and disbursements of accountants of the Parent.
 
In connection with any shelf registration statement, MCE Finance and the Guarantors will reimburse the initial purchasers and the holders of Initial Notes for the reasonable fees and disbursements of not more than one counsel. Each holder will pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such holder’s Initial Notes pursuant to any shelf registration statement.
 
Certain U.S. Federal Income Tax Consequences
 
The exchange of an Initial Note for an Exchange Note pursuant to the exchange offer will not result in a taxable exchange to a beneficial owner of such Initial Note for U.S. federal income tax purposes. See “Taxation — Certain U.S. Federal Income Tax Consequences.”
 
Accounting Treatment
 
The Exchange Notes will be recorded as carrying the same value as the Initial Notes, which is face value adjusted for any unamortized premium or discount, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes as a result of the exchange offer. The cost related to the exchange is capitalized as deferred financing cost.
 
Consequences of Failure to Exchange
 
Holders of Initial Notes who do not exchange their Initial Notes for Exchange Notes pursuant to the exchange offer will continue to be subject to the restrictions on transfer of such Initial Notes as set forth in the legend on such Initial Notes as a consequence of the issuance of the Initial Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Initial Notes may only be offered or sold pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws or in a transaction not subject to the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the Initial Notes under the Securities Act. To the extent that Initial Notes are tendered and accepted pursuant to the exchange offer, there may be little or no trading market for untendered and tendered but unacceptable Initial Notes. The restrictions on transfer may make the Initial Notes less attractive to potential investors than the Exchange Notes.


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USE OF PROCEEDS
 
The exchange offer is intended to satisfy our obligations under the registration rights agreement entered into in connection with the private offering of the Initial Notes. We will not receive any cash proceeds from the issuance of the Exchange Notes under the exchange offer. In consideration for issuing the Exchange Notes as contemplated by this prospectus, we will receive the Initial Notes in the aggregate principal amount equal to the aggregate principal amount of the Exchange Notes. The Initial Notes surrendered in exchange for the Exchange Notes will be retired and canceled. Accordingly, the issuance of the Exchange Notes will not result in any increase in our indebtedness.
 
On May 26, 2010, we applied a portion of the net proceeds from the sale of the Initial Notes (approximately US$578.9 million after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by us) to reduce our indebtedness under our City of Dreams Project Facility by US$444.1 million. A portion of the net proceeds in the amount of US$133.0 million, which was initially held in a debt service accrual account related to the City of Dreams Project Facility, will be used to pay upcoming City of Dreams Project Facility amortization payments commencing December 2010.


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CAPITALIZATION
 
The following table sets forth, as of March 31, 2010:
 
  •  actual capitalization of our company, which comprises Parent and its subsidiaries, including MCE Finance and its restricted subsidiaries;
 
  •  as adjusted capitalization of our company to give effect to the issuance and sale of the Initial Notes; and
 
  •  application of the net proceeds from the sale of the Initial Notes in the manner described under “Use of Proceeds.”
 
Since this transaction is an exchange offer, no cash will be received or disbursed, and therefore the exchange offer does not affect our capitalization. You should read this table in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus.
 
                 
    As of March 31, 2010  
    Actual     As Adjusted  
    (In thousands of U.S. dollars, except for share data)  
 
Cash and cash equivalents(1)(2)
  $ 252,858     $ 255,654  
                 
Indebtedness:
               
City of Dreams Project Facility
  $ 1,683,207     $ 1,106,141 (3)
Other long-term liabilities
    20,974       20,974  
Loans from shareholders
    115,647       115,647  
10.25% Senior Notes due 2018
          592,026 (4)
                 
Total indebtedness
    1,819,828       1,834,788  
                 
Shareholders’ Equity:
               
Ordinary shares at US$0.01 par value per share
(2,500,000,000 shares authorized; 1,596,741,356 shares issued — actual and as adjusted)
  $ 15,967     $ 15,967  
Treasury shares, at US$0.01 par value per share
(1,403,313 shares — actual and as adjusted)
    (14 )     (14 )
Additional paid-in capital
    3,089,878       3,089,878  
Accumulated other comprehensive losses
    (25,840 )     (25,840 )
Accumulated losses
    (579,115 )     (578,104 )
                 
Total shareholders’ equity(1)
    2,500,876       2,501,887  
                 
Total capitalization
  $ 4,320,704     $ 4,336,675  
                 
 
 
(1) A part of each of these line items is attributable to the Parent and certain other subsidiaries of the Parent that are not subsidiaries of MCE Finance or are Unrestricted Subsidiaries. The Parent is a Guarantor but will not be subject to the covenants set forth in the indenture. Subsidiaries of the Parent who are not subsidiaries of MCE Finance will not be Guarantors and will not be subject to the covenants set forth in the indenture. See “Risk Factors — The financial statements contained in this prospectus are for the Parent and its consolidated subsidiaries, and no Guarantor has any obligation to provide its financial statements to holders of the Notes.”
 
(2) Excludes US$127.1 million of restricted cash held as required by the City of Dreams Project Facility.
 
(3) Reflects the repayment of US$444.1 million on the City of Dreams Project Facility, as well as the application of US$133.0 million that was recorded as restricted cash upon issuance of the Initial Notes which will be further used to pay upcoming City of Dreams Project Facility amortization payments commencing December 2010.
 
(4) Reflects gross amount received by MCE Finance after deducting the discount to face value. Deduction excludes commission and estimated offering expenses which were capitalized as deferred financing cost.


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EXCHANGE RATE INFORMATION
 
Exchange Rate Information
 
Although we have certain expenses and revenues denominated in Patacas, our revenues and expenses are denominated predominantly in H.K. dollars and in connection with a portion of our indebtedness and certain expenses, U.S. dollars. The conversion of H.K. dollars into U.S. dollars in this prospectus is based on the noon buying rate in The City of New York for cable transfers of H.K. dollars as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from H.K. dollars to U.S. dollars and from U.S. dollars to H.K. dollars in this prospectus were made at a rate of HK$7.78 to US$1.00. The noon buying rate in effect as of March 31, 2010 was HK$7.7647 to US$1.00. We make no representation that any Hong Kong dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or H.K. dollars, as the case may be, at any particular rate, the rates stated below, or at all. On August 6, 2010, the noon buying rate was HK$7.7629 to US$1.00.
 
The Hong Kong dollar is freely convertible into other currencies (including the U.S. dollar). Since October 7, 1983, the Hong Kong dollar has been officially linked to the U.S. dollar at the rate of HK$7.80 to US$1.00. The link is supported by an agreement between Hong Kong’s three bank note-issuing banks and the Hong Kong government pursuant to which bank notes issued by such banks are backed by certificates of indebtedness purchased by such banks from the Hong Kong Government Exchange Fund in U.S. dollars at the fixed exchange rate of HK$7.80 to US$1.00 and held as cover for the bank notes issued. When bank notes are withdrawn from circulation, the issuing bank surrenders certificates of indebtedness to the Hong Kong Government Exchange Fund and is paid the equivalent amount in U.S. dollars at the fixed rate of exchange. Hong Kong’s three bank note-issuing banks are The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank and Bank of China (Hong Kong) Limited.
 
In May 2005, the Hong Kong Monetary Authority broadened the link from the original rate of HK$7.80 per US$1.00 to a rate range of HK$7.75 to HK$7.85 per US$1.00. No assurance can be given that the Hong Kong government will maintain the link at HK$7.75 to HK$7.85 per US$1.00 or at all.
 
The following table sets forth the noon buying rate for U.S. dollars in The City of New York for cable transfers in H.K. dollars as certified for customs purposes by the Federal Reserve Bank of New York.
 
                                 
    Noon Buying Rate
Period   Period End   Average(1)   High   Low
    (Hong Kong dollar per US$1.00)
 
August 2010 (through August 6, 2010)
    7.7629       7.7629       7.7638       7.7605  
July 2010
    7.7672       7.7753       7.7962       7.7651  
June 2010
    7.7865       7.7880       7.8040       7.7690  
May 2010
    7.7850       7.7856       7.8030       7.7626  
April 2010
    7.7637       7.7627       7.7675       7.7565  
March 2010
    7.7647       7.7612       7.7648       7.7574  
February 2010
    7.7619       7.7670       7.7716       7.7619  
2009
    7.7536       7.7513       7.7618       7.7495  
2008
    7.7499       7.7814       7.8159       7.7497  
2007
    7.7984       7.8008       7.8289       7.7497  
2006
    7.7771       7.7685       7.7928       7.7506  
2005
    7.7533       7.7755       7.7999       7.7514  
 
 
(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.
 
The Pataca is pegged to the Hong Kong dollar at a rate of HK$1.00 = MOP 1.03. All translations from Patacas to U.S. dollars in this prospectus were made at the exchange rate of MOP 8.0134 = US$1.00. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Patacas.


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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 
The following selected historical consolidated statements of operations data for the years ended December 31, 2009, 2008 and 2007, and the selected historical consolidated balance sheets data as of December 31, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following selected consolidated statements of operations data for the years ended December 31, 2006 and 2005 and the selected historical balance sheets data as of December 31, 2007, 2006 and 2005 have been derived from our audited consolidated financial statements not included in this prospectus. The following selected consolidated statements of operations data for the three months ended March 31, 2010 and 2009 and the selected consolidated balance sheet data as of March 31, 2010 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited information on the same basis as the audited consolidated financial statements, and have included, in our opinion, all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those financial statements and the notes to those statements included elsewhere in this prospectus. The historical results are not necessarily indicative of the results of operations to be expected in the future.
 
                                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2006   2005   2010   2009
    (In thousands of US$, except share and per share data and operating data)
 
Consolidated Statements of Operations Data:
                                                       
Net revenues
  $ 1,332,873     $ 1,416,134     $ 358,496     $ 36,101     $ 17,328     $ 567,605     $ 216,491  
Total operating costs and expenses
  $ (1,604,920 )   $ (1,414,960 )   $ (554,313 )   $ (93,754 )   $ (21,050 )   $ (561,436 )   $ (250,064 )
Operating (loss) income
  $ (272,047 )   $ 1,174     $ (195,817 )   $ (57,653 )   $ (3,722 )   $ 6,169     $ (33,573 )
Net loss
  $ (308,461 )   $ (2,463 )   $ (178,151 )   $ (73,479 )   $ (3,259 )   $ (12,474 )   $ (35,323 )
Loss per share
                                                       
 — Basic and diluted
  $ (0.210 )   $ (0.002 )   $ (0.145 )   $ (0.116 )   $ (0.006 )   $ (0.008 )   $ (0.027 )
 — ADS(1)
  $ (0.631 )   $ (0.006 )   $ (0.436 )   $ (0.348 )   $ (0.019 )   $ (0.023 )   $ (0.080 )
Shares used in calculating loss per share
                                                       
 — Basic and diluted
    1,465,974,019       1,320,946,942       1,224,880,031       633,228,439       522,945,205       1,595,175,859       1,322,512,422  
 
                                                 
    As of December 31,   As of March 31,
    2009   2008   2007   2006   2005   2010
    (In thousands of US$)
 
Consolidated Balance Sheet Data:
                                               
Cash and cash equivalents
  $ 212,598     $ 815,144     $ 835,419     $ 583,996     $ 19,769     $ 252,858  
Restricted cash
  $ 236,119     $ 67,977     $ 298,983     $     $     $ 127,148  
Total assets
  $ 4,900,369     $ 4,498,289     $ 3,620,268     $ 2,279,920     $ 421,208     $ 4,808,696  
Total current liabilities
  $ 559,167     $ 450,136     $ 483,685     $ 207,613     $ 138,741     $ 527,361  
Total debts (include other long-term liabilities)(2)
  $ 1,819,473     $ 1,566,467     $ 625,899     $ 115,647     $     $ 1,819,828  
Total liabilities
  $ 2,391,325     $ 2,089,685     $ 1,191,727     $ 389,554     $ 163,024     $ 2,307,820  
Noncontrolling interests(3)
  $     $     $     $     $ 19,492     $  
Total equity
  $ 2,509,044     $ 2,408,604     $ 2,428,541     $ 1,890,366     $ 258,184     $ 2,500,876  
 
 
(1) Each ADS represents three ordinary shares.
 
(2) Total debts include loans from shareholders, long-term debt and other long-term liabilities.
 
(3) The noncontrolling interests represent the 20% interest in Mocha Slot Group Limited and its subsidiaries before the interest was purchased by us on May 9, 2006.


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The following events/transactions affect the year-to-year comparability of the selected financial data presented above:
 
  •  From January 1, 2005 to March 7, 2005, the financial statements reflect the consolidated financial statements of Mocha Slot Group Limited, or Mocha, Melco Crown (COD) Developments Limited and Altira Developments Limited because they were under common control for this period. The contributions by Melco of its 80% interest in Mocha, 70% interest in Altira Developments Limited and 50.8% interest in the City of Dreams project to MPEL (Greater China) Limited, formerly Melco PBL Entertainment (Greater China) Limited, a company previously 80% indirectly owned by us and 20% owned by Melco, and cash contributions by Crown of US$163 million, which were completed on March 8, 2005, were accounted for as the formation of a joint venture for which a carryover basis of accounting has been adopted.
 
  •  In September 2006, we acquired a Macau subconcession. Prior to this date we did not hold a concession or subconcession to operate gaming activities in Macau and we operated under a services agreement with SJM.
 
  •  In April 2006, we commenced construction of City of Dreams.
 
  •  On May 12, 2007, Altira Macau opened and became fully operational on July 14, 2007.
 
  •  On June 1, 2009, City of Dreams opened and currently features a 420,000 sq. ft. casino with approximately 400 gaming tables and 1,300 gaming machines, as well as approximately 1,400 hotel rooms (including 800 rooms progressively added to City of Dreams following the grand opening and operations of Grand Hyatt Macau at City of Dreams in the fourth quarter of 2009) and 20 food and beverage outlets.
 
  •  Following construction completion of Grand Hyatt Macau at City of Dreams in December 2009, a further 800 rooms were added.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
The following discussion should be read in connection with “Selected Consolidated Financial and Other Data” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “Forward-Looking Statements” regarding these statements.
 
Our audited historical consolidated financial statements have been prepared in accordance with U.S. GAAP.
 
Overview
 
We are a holding company that, through our subsidiaries, develops, owns and operates casino gaming and entertainment resort facilities focused exclusively on the Macau market. We currently own and operate City of Dreams, which opened on June 1, 2009, Altira Macau which opened on May 12, 2007 and Mocha Clubs, a non-casino based operation of electronic gaming machines, which has been in operation since September 2003. Our future operating results are subject to significant business, economic, regulatory and competitive uncertainties and risks, many of which are beyond our control. See “Risk Factors — Risks Relating to Our Early Stage of Operations.” For detailed information regarding our operations and development projects, see “Business.”
 
Operations
 
City of Dreams
 
City of Dreams opened on June 1, 2009 and currently features a casino area of approximately 420,000 sq. ft. with a total of approximately 400 gaming tables and approximately 1,300 gaming machines; 1,400 hotel rooms and suites; over 20 restaurants and bars; 31 retail outlets; an innovative audio visual multimedia experience; recreation and leisure facilities, including health and fitness clubs, three swimming pools, spa and salons and banquet and meeting facilities. We are currently in the process of completing new entertainment venues to deliver our full service offering at City of Dreams. Our plan to construct an apartment hotel at City of Dreams is currently under evaluation.
 
Altira Macau
 
Altira Macau currently features a casino area of approximately 183,000 sq. ft. with a total of approximately 210 gaming tables, 216 deluxe hotel rooms, including 24 suites and 8 high end villas, several fine dining and casual restaurants, recreation and leisure facilities, including a health club, pool and spa and lounges and meeting facilities.
 
Since our opening of Altira Macau, we have further enhanced the casino in response to market demand and transferred the management of gaming machines to Mocha Clubs in 2008.
 
Mocha Clubs
 
Melco Crown Gaming currently operates eight Mocha Clubs in Macau with a total of approximately 1,500 gaming machines in operation.
 
Taipa Square Casino
 
Taipa Square Casino opened on June 12, 2008 and has approximately 18,300 sq. ft. of gaming space and features approximately 31 gaming tables.
 
The Macau Studio City Project
 
Due to various developmental and financing issues related to Macau Studio City, a large scale integrated gaming, retail and entertainment resort development on Cotai, no estimated opening date can be projected at this point. Upon the completion of construction and occurrence of opening date for this project, we will be in a position to commence operating the casino portions of this project under a services agreement with New Cotai


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Entertainment (Macau) Limited. Other than entering into this services agreement, there have been no operating cashflows associated with this project.
 
Summary of Financial Results
 
The following summarizes the results of our operations:
 
                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2009   2008   2007   2010   2009
    (In thousands of US$)
 
Net revenues
  $ 1,332,873     $ 1,416,134     $ 358,496     $ 567,605     $ 216,491  
Total operating costs and expenses
  $ (1,604,920 )   $ (1,414,960 )   $ (554,313 )   $ (561,436 )   $ (250,064 )
Operating (loss) income
  $ (272,047 )   $ 1,174     $ (195,817 )   $ 6,169     $ (33,573 )
Net loss
  $ (308,461 )   $ (2,463 )   $ (178,151 )   $ (12,474 )   $ (35,323 )
 
Our results of operations for the years presented are not comparable for the following reasons:
 
  •  On May 12, 2007, Altira Macau opened and was fully operational by July 14, 2007.
 
  •  On June 1, 2009, City of Dreams opened featuring a 420,000 sq. ft. casino with approximately 500 gaming tables and 1,300 gaming machines, as well as approximately 600 hotel rooms and 20 food and beverage outlets.
 
  •  Following construction completion of Grand Hyatt Macau at City of Dreams in December 2009, a further 800 rooms were added.
 
Our historical financial results may not be characteristic of our potential future results as we continue to expand and refine our service offerings at our properties. In addition to our debt facility, we currently rely on operating cash flows from only three businesses, City of Dreams, Altira Macau and Mocha Clubs, all in Macau, which expose us to certain risks that competitors, whose operations are more diversified, may be better able to control.
 
Key Performance Indicators (KPIs)
 
In leading our company to the achievement of our objectives and strategies, we monitor our performance utilizing gaming resort industry key performance indicators. These indicators are included in our discussion below of the Company’s operational performance for the periods in which a Consolidated Statement of Operations is presented.
 
For casino revenue, KPIs are defined as follows:
 
  •  Table games win:  the amount of wagers won net of wagers lost that is retained and recorded as casino revenue.
 
  •  Drop:  the amount of cash and net markers issued that are deposited in a gaming table’s drop box to purchase gaming chips plus gaming chips purchased at the casino cage.
 
  •  Gaming machine handle (volume):  the total amount wagered in gaming machines in aggregate for the period cited.
 
  •  Win percentage-gaming machines:  actual win expressed as a percentage of gaming machine handle.
 
  •  Hold percentage:  the amount of win (calculated before discounts and commissions) as a percentage of drop.
 
  •  Expected hold percentage:  casino win based upon our mix of games as a percentage of drop assuming theoretical house advantage is achieved.
 
There are also additional specific indicators utilized to monitor table game performance in Macau, relating to the rolling chip and mass market segments. In our rolling chip segment, customers primarily purchase identifiable


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chips known as non-negotiable chips (“Rolling Chips”) from the casino cage and there is no deposit into a gaming table drop box from chips purchased from the cage. Non-negotiable chips can only be used to make wagers. Winning wagers are paid in cash chips.
 
Rolling chip market segment KPIs are known as rolling chip indicators and mass market segment KPIs are known as non-rolling chip indicators. These are defined as follows:
 
  •  Rolling chip volume:  the amount of non-negotiable gaming chips wagered and lost by the rolling chip market segment, therefore tracking the sum of all losing wagers.
 
  •  Rolling chip hold percentage:  rolling chip table games win as a percentage of rolling chip volume.
 
  •  Non-rolling chip volume:  the amount of table games drop in the mass market segment, therefore tracking the initial purchase of chips.
 
  •  Non-rolling chip hold percentage:  Mass market table games win as a percentage of non-rolling chip volume.
 
Rolling chip volume and non-rolling chip volume are not equivalent. Rolling chip volume is a measure of amounts wagered and lost. Non-rolling chip volume measures buy in. Therefore rolling chip volume will generally be substantially higher than non-rolling chip volume. As these volumes are the base used in the calculation of hold percentage with the same use of gaming win as the numerator, the hold percentage is smaller in the rolling chip market segment as opposed to the mass market segment.
 
Our combined expected rolling chip table games hold percentage (calculated before discounts and commissions) across City of Dreams and Altira Macau is in the range of 2.7% to 3.0%.
 
Our combined expected non-rolling chip table games hold percentage is in the range from 16% to 20%, which is based on the mix of table games at our casino properties as each table game has its own theoretical win percentage and our combined expected gaming machine hold percentage is in the range from 5% to 6%.
 
For Hotel Operations, KPIs are defined as follows:
 
  •  Average Daily Rate, or ADR:  calculated by dividing total room revenue (less service charges, if any) by total rooms occupied, i.e., average price of occupied rooms per day.
 
  •  Hotel occupancy rate:  the average percentage of available hotel rooms occupied during a period.
 
  •  Revenue per Available Room, or REVPAR:  calculated by dividing total room revenue (less service charges, if any) by total rooms available, thereby representing a summary of hotel average daily room rates and occupancy.
 
As not all available rooms are occupied, average daily room rates are normally higher than revenue per available room.
 
Factors Affecting Results of Operations
 
Our business is and will be influenced most significantly by the continued growth of the gaming market in Macau. Rapid growth in the Macau gaming market commenced with the decision to grant new gaming concessions by the Macau government in late 2001, and this growth has been facilitated by a number of drivers and initiatives which include, but are not limited to, the favorable population demographics and economic growth across each of our Asian tourism source markets; the substantial capital investment which has been made by the new concessionaires and subconcessionaires, including our Company, into the development of high profile, well-branded and diversified destination resort properties; and the future commitment by central and local governments to improve or develop new infrastructure connecting Macau with its wider geography.
 
We expect that the local government will continue its focus of promoting the future development of Macau as a popular international destination for gaming patrons, other customers of leisure and hospitality services and MICE (Meetings, Incentives, Conferences and Exhibitions) attendees, with the stated intention of increasing the potential


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universe of visitors to Macau, and to extend the average length of visitor stay which has been historically short. Our business performance will be impacted by changes in visitation patterns to Macau.
 
After nearly a decade of rapid casino and hotel resort supply expansion in Macau, the pace of expansion has slowed in the past two years following limitations on the amount of investment capital available for new developments since the onset of the global financial crisis. A more balanced pace of development in Macau, together with improved co-operation within the industry and between the industry and government, is expected to maintain a stable cost inflation environment in Macau. Casino resort operations, once built, generally operate with a fixed cost base and any increase in cost environment will exert an influence on the overall performance of our properties and those of our competitors.
 
One of the primary drivers of Macau’s growth in both gaming and non-casino revenues has been China’s rapid economic growth and the rapid expansion of a middle class exhibiting high savings rates, low personal debt and first generation opportunity to travel overseas and spend money on entertainment, including gaming and non-gaming offerings. Continued and stable progress in the economic expansion of the domestic economy in China, any future appreciation of the Renminbi and further development of policy measures designed to advance economic co-operation between the Pearl River Delta, Hong Kong and Macau, transforming the region into a globally competitive hub of economic activity, is expected to serve to underpin the future development of our business opportunities.
 
Regionally, new gaming jurisdictions such as Singapore have opened in Asia and this has added to the overall competitive landscape. While much smaller in scale to Macau, we compete to some extent with these new destinations.
 
Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 
Revenues
 
Consolidated net revenues were US$567.6 million for the three months ended March 31, 2010, an increase of US$351.1 million (or 162.2%) from US$216.5 million for the three months ended March 31, 2009. The increase in net revenues was driven by increase in rolling chip volume at Altira Macau and the opening of City of Dreams in June 2009, which contributed US$336.3 million in net revenues.
 
Consolidated net revenues for the three months ended March 31, 2010 comprised of US$549.3 million in casino revenues (96.8% of total net revenues) and US$18.3 million of net non-casino revenues (3.2% of total net revenues). Consolidated net revenues for the three months ended March 31, 2009 were comprised of US$213.0 million in casino revenues (98.4% of total net revenues) and US$3.5 million of net non-casino revenues (1.6% of total net revenues).
 
Casino.  Casino revenues for the three months ended March 31, 2010 of US$549.3 million represented a US$336.3 million (or 157.9%) increase from casino revenues of US$213.0 million for the three months ended March 31, 2009 due to increase in casino revenue at Altira Macau by US$10.5 million to US$192.7 million, primarily driven by an increase in rolling chip volume and revenue of US$323.1 million attributable to the opening of the City of Dreams in June 2009 with approximately 500 gaming tables and approximately 1,300 gaming machines.
 
Altira Macau’s rolling chip volume for the three months ended March 31, 2010 of US$9.9 billion represented an increase of US$0.8 billion from US$9.1 billion for the three months ended March 31, 2009. Rolling chip turnover for the three months ended March 31, 2010 returned to and exceeded pre-commission cap levels. Altira Macau’s hold percentage for rolling chip table games (calculated before discounts and commissions) was 2.80% for the three months ended March 31, 2010, within our expected range of 2.7% to 3.0%, which was a slight increase from 2.79% for the three months ended March 31, 2009. In the mass market table games segment, drop (non-rolling chip) was US$71.1 million for the three months ended March 31, 2010, which decreased by 6.4% from US$76.0 million for the three months ended March 31, 2009. The mass market hold percentage was 14.9% for the three months ended March 31, 2010, below our expected range of 16.0% to 20.0% but an increase from 13.7% for the three months ended March 31, 2009.


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City of Dreams’ rolling chip volume was US$9.8 billion and hold percentage for rolling chip table games (calculated before discounts and commissions) was 3.04% for the three months ended March 31, 2010, above the expected range of 2.7% to 3.0%. In the mass table games segment, drop (non-rolling chip) totaled US$479.4 million and the hold percentage was 20.4%, which was above the expected range of 16.0% to 20.0% for the three months ended March 31, 2010. Average net win per gaming machine per day was US$187.
 
Mocha Club’s average net win per gaming machine per day for the three months ended March 31, 2010 was US$187, a decrease of approximately US$24 over the three months ended March 31, 2009.
 
Rooms.  Room revenue of US$19.0 million for the three months ended March 31, 2010 represented a US$14.6 million (or 327.1%) increase from room revenue of US$4.5 million for the three months ended March 31, 2009 due to the opening at City of Dreams, with approximately 1,650 hotel rooms across both properties. Altira Macau’s ADR, occupancy and REVPAR were US$166, 92% and US$153, respectively, for the three months ended March 31, 2010. This compares with the ADR, occupancy and REVPAR of US$234, 89% and US$208, respectively for the three months ended March 31, 2009. City of Dreams’ ADR, occupancy and REVPAR were US$152, 75% and US$114, respectively.
 
Food, beverage and others.  Other non-casino revenues for the three months ended March 31, 2010 included food and beverage revenue of US$13.2 million, and entertainment, retail and other revenue of approximately US$5.4 million. Other non-casino revenue for the three months ended March 31, 2009 included food and beverage revenue of US$3.6 million, and entertainment, retail and other revenue of approximately US$2.3 million. The increase of US$12.7 million was primarily due to the opening of City of Dreams.
 
Operating costs and expenses
 
Total operating costs and expenses were US$561.4 million for the three months ended March 31, 2010, an increase of US$311.4 million (or 124.5%) from US$250.1 million for the three months ended March 31, 2009. The increase in operating costs was primarily related to commencement of operations at City of Dreams in June 2009 and an increase in operating costs at Altira Macau due to the associated increase in revenue as described above, and was partially offset by various cost containment efforts across City of Dreams, Altira Macau and Mocha Clubs.
 
Casino.  Casino expenses increased by US$246.4 million (or 139.6%) to US$422.9 million in 2010, from US$176.5 million in 2009, primarily due to an increase of US$235.0 million casino expenses attributable to the opening of City of Dreams, and increase in gaming tax of US$8.6 million at Altira Macau.
 
Rooms.  Room expenses, which represent the costs in operating the hotel facilities at Altira Macau and City of Dreams, increased by US$2.7 million (or 464.2%) to US$3.3 million in 2010 from US$0.6 million in 2009, primarily due to commencement of operations at City of Dreams in June 2009.
 
Food, beverage and others.  Food, beverage and other expenses increased by US$8.7 million (or 298.9%) to US$11.6 million in 2010 from US$2.9 million in 2009, primarily due to commencement of operations at City of Dreams, and decrease in complimentary sales and recording the related costs under casino expense at Altira Macau.
 
General and administrative.  General and administrative expenses increased by US$25.8 million (or 141.6%) to US$44.0 million in 2010 from US$18.2 million in 2009, primarily due to commencement of operations at City of Dreams in June 2009.
 
Pre-opening costs.  Pre-opening costs of US$4.1 million were incurred in the three months ended March 31, 2010 relating to the opening of City of Dreams. In the three months ended March 31, 2009 we incurred pre-opening costs associated with City of Dreams of US$18.3 million. Such costs relate primarily to personnel training, equipment, marketing, advertising and other administrative costs in connection with the opening of the property.
 
Amortization of gaming subconcession.  Amortization of gaming subconcession recorded on a straight-line basis remained stable at US$14.3 million for the three months ended March 31, 2010 and 2009.
 
Amortization of land use rights.  Amortization of land use rights expenses for the three months ended March 31, 2010 of US$4.9 million remained relatively consistent with the three months ended March 31, 2009 of US$4.5 million.


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Depreciation and amortization.  Depreciation and amortization expense increased by US$42.2 million (or 286.9%) to US$56.9 million in the three months ended March 31, 2010 from US$14.7 million in the three months ended March 31, 2009, primarily due to depreciation of assets of City of Dreams following its opening in June 2009.
 
Property charges and others.  Property charges and others generally includes costs related to the remodeling and rebranding of a property which might include the retirement, disposal or write-off of assets. Property charges and others for the three months ended March 31, 2010 primarily related to the over-provision of re-branding expenses for Altira Macau of US$0.5 million. There were no property charges and others for the three months ended March 31, 2009.
 
Non-operating (expenses) income
 
Non-operating (expenses) income consists of interest income and expenses, amortization of deferred financing costs, loan commitment fees, foreign exchange gain and loss as well as other non-operating income.
 
Interest income decreased by US$109,000 (or 90.1%) to US$12,000 in the three months ended March 31, 2010, mainly due to a decrease in average cash balances as a result of increased investment in completing the construction of City of Dreams.
 
Total interest expenses, which primarily included interest paid or payable on shareholders’ loans, the US$1.75 billion City of Dreams Project Facility, and interest rate swap agreements for the three months ended March 31, 2010 and 2009 totaled US$19.2 million and US$19.5 million respectively, of which US$3.7 million and US$19.5 million was capitalized. Interest expenses net of capitalized interest increased by US$15.6 million, primarily due to cessation of capitalizable interest following the opening of City of Dreams together with additional borrowings under the City of Dreams Project Facility.
 
Other finance costs included US$3.1 million of amortization of deferred financing costs net of capitalization and US$0.3 million of loan commitment fees related to the US$1.75 billion City of Dreams Project Facility. The increase from the three months ended March 31, 2009 was attributable to cessation of captializable amortization of deferred financing costs following the opening of City of Dreams.
 
Net foreign exchange losses for the three months ended March 31, 2010 were US$0.4 million, mainly resulting from foreign exchange transaction losses on New Taiwan dollars, H.K. dollars and Euro dollars, compared to US$0.5 million of net foreign exchange losses for the three months ended March 31, 2009. Other non-operating income for the three months ended March 31, 2010 was US$0.5 million.
 
Income tax credit
 
Our negative effective income tax rate was 1.27% for the three months ended March 31, 2010, as compared to our positive effective income tax rate of 0.63% for the three months ended March 31, 2009. The negative effective income tax rate and positive effective income tax rate for the three months ended March 31, 2010 and 2009 differed from the statutory Macau Complementary Tax rate of 12%, primarily due to the effect of change in valuation allowance on the net deferred tax assets for the three months ended March 31, 2010 and 2009, the impact of the effect of a tax holiday of US$3.0 million on the net income of Macau gaming operations during the three months ended March 31, 2010 due to our income tax exemption in Macau, which is set to expire in 2011, and the net loss of Macau gaming operations during the three months ended March 31, 2009. Our management does not anticipate recording an income tax benefit related to deferred tax assets generated by our Macau operations; however, to the extent that the financial results of our Macau operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance through earnings.
 
Net loss
 
As a result primarily of the foregoing, there was a net loss of US$12.5 million for the three months ended March 31, 2010, compared to a net loss of US$35.3 million for the three months ended March 31, 2009.


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Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 
Revenues
 
Consolidated net revenues in 2009 were US$1.33 billion, a decrease of US$83.3 million (or 5.9%) from US$1.42 billion for 2008. The decrease in net revenues was driven by a decline in global economic conditions combined with low rolling chip hold percentages at Altira Macau and City of Dreams and was partially offset by the opening of City of Dreams in June 2009, which contributed US$552.1 million in net revenues.
 
Consolidated net revenues in 2009 were comprised of US$1.30 billion in casino revenues (97.9% of total net revenues) and US$28.2 million of net non-casino revenues (2.1% of total net revenues). Consolidated net revenues in 2008 were comprised of US$1.41 billion in casino revenues (99.3% of total net revenues) and US$10.2 million of net non-casino revenues (0.7% of total net revenues).
 
Casino.  Casino revenues for the year ended December 31, 2009 of US$1.30 billion represented a US$101.3 million (or 7.2%) decrease from casino revenues of US$1.41 billion for the year ended December 31, 2008 due to decrease in casino revenue at Altira Macau by US$651.0 million to US$653.0 million, primarily driven by a decline in rolling chip volume combined with lower rolling chip hold percentage, partially offset by revenue of US$532.5 million attributable to the opening of City of Dreams in June 2009 with approximately 500 gaming tables and approximately 1,300 gaming machines.
 
Altira Macau’s rolling chip volume for 2009 of US$37.5 billion represented a decrease of US$24.8 billion from US$62.3 billion for 2008. Altira Macau’s hold percentage for rolling chip table games (calculated before discounts and commissions) was 2.55% for 2009, below our expected level of 2.85% and a decrease from 2.85% for 2008. In the mass market table games segment, drop (non-rolling chip) was US$273.0 million for 2009 which decreased by 22.7% from US$353.2 million for 2008. The mass market hold percentage was 16.0% for 2009, within our expected range of 16.0% to 20.0% and an increase from 14.6% for 2008.
 
City of Dreams’ rolling chip volume was US$20.3 billion and hold percentage for rolling chip table games (calculated before discounts and commissions) was 2.65% for 2009, below the expected level of 2.85%. In the mass table games segment, drop (non-rolling chip) totaled US$912.6 million and the hold percentage was 16.3%, which was in line with the expected range of 16.0% to 20.0% for the year ended December 31, 2009. Average net win per gaming machine per day was US$137.
 
Mocha Club’s average net win per gaming machine per day for 2009 was US$182, a decrease of approximately US$54 over 2008.
 
Rooms.  Room revenue of US$41.2 million for the year ended December 31, 2009 represented a US$24.1 million (or 141.2%) increase from room revenue of US$17.1 million for the year ended December 31, 2008 due to the opening at City of Dreams, with approximately 1,650 hotel rooms across both properties. Altira Macau’s ADR, occupancy and REVPAR were US$219, 92% and US$201, respectively, for the year ended December 31, 2009. This compares with the ADR, occupancy and REVPAR of US$236, 94% and US$222, respectively for 2008. City of Dreams’ ADR, occupancy and REVPAR were US$159, 84% and US$133, respectively.
 
Food, beverage and others.  Other non-casino revenues for the year ended December 31, 2009 included food and beverage revenue of US$28.2 million, and entertainment, retail and other revenue of approximately US$11.9 million. Other non-casino revenue for the year ended December 31, 2008 included food and beverage revenue of US$16.1 million, and entertainment, retail and other revenue of approximately US$5.4 million. The increase of US$18.6 million was primarily due to opening of City of Dreams and was offset by decrease in revenue at Altira Macau as a result of reduced visitation.
 
Operating costs and expenses
 
Total operating costs and expenses were US$1.60 billion for the year ended December 31, 2009, an increase of US$190.0 million (or 13.4%) from US$1.41 billion for the year ended December 31, 2008. The increase in operating costs of US$190.0 million was primarily related to commencement of operation at City of Dreams in June 2009 and was partially offset by a decrease in operating costs at Altira Macau due to cost-savings initiatives.


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Casino.  Casino expenses decreased by US$29.6 million (or 2.6%) to US$1.13 billion in 2009 from US$1.16 billion in 2008 primarily due to a decrease in the gaming tax of US$328.3 million and US$140.9 million in casino-related expenses associated with payroll-related expenses and our rolling chip program at Altira Macau. This decrease was offset by an increase of US$440.7 million in casino expenses attributable to the opening of City of Dreams.
 
Rooms.  Room expenses, which represent the costs in operating the hotel facilities at Altira Macau and City of Dreams, increased by 373.7% to US$6.4 million in 2009 from US$1.3 million in 2008, primarily due to commencement of operations at City of Dreams in June 2009.
 
Food, beverage and others.  Food, beverage and other expenses increased by US$6.9 million (or 49.1%) to US$20.9 million in 2009 from US$14.0 million in 2008, primarily due to commencement of operation at City of Dreams and offset by decrease in expenses at Altira Macau driven by the associated decrease in revenue as described above.
 
General and administrative.  General and administrative expenses increased by US$40.3 million (or 44.4%) to US$131.0 million in 2009 from US$90.7 million in 2008, primarily due to commencement of operations at City of Dreams in June 2009.
 
Pre-opening costs.  Pre-opening costs of US$91.9 million were incurred in 2009 relating to the opening of City of Dreams. In 2008 we incurred pre-opening costs associated with City of Dreams of US$21.8 million. Such costs relate primarily to personnel training, equipment, marketing, advertising and other administrative costs in connection with the opening of the property.
 
Amortization of gaming subconcession.  Amortization of gaming subconcession recorded on a straight-line basis remained stable at US$57.2 million in 2009 and 2008.
 
Amortization of land use rights.  Amortization of land use rights expenses for 2009 of US$18.4 million remained relatively consistent with 2008 of US$18.3 million.
 
Depreciation and amortization.  Depreciation and amortization expense increased by US$90.5 million (or 176.1%) to US$141.9 million in 2009 from US$51.4 million in 2008 primarily due to depreciation of assets of City of Dreams following its opening in June 2009.
 
Property charges and others.  Property charges and others generally includes costs related to the remodeling and rebranding of a property which might include the retirement, disposal or write-off of assets. Property charges and others for the year ended December 31, 2009 was US$7.0 million, which primarily included US$4.1 million related to the re-branding of Altira Macau and US$2.9 million related to asset write-offs as a result of our termination of the Macau Peninsula project. Property charges and others for the year ended December 31, 2008 was US$0.3 million related to a minor reconfiguration of the casino at Altira Macau.
 
Non-operating (expenses) income
 
Non-operating (expenses) income consists of interest income and expenses, amortization of deferred financing costs, loan commitment fees, foreign exchange gain and loss as well as other non-operating income.
 
Interest income decreased by US$7.7 million (or 93.9%) to US$0.5 million in 2009, mainly due to a decline in interest rates and a decrease in average cash balances as a result of increased investment in completing the construction of City of Dreams.
 
Total interest expenses, which primarily included interest paid or payable on shareholders’ loans, the US$1.75 billion City of Dreams Project Facility, and interest rate swap agreements for 2009 and 2008 totaled US$82.3 million and US$49.6 million respectively, of which US$50.5 million and US$49.6 million was capitalized. Interest expenses net of capitalized interest increased by US$31.8 million, primarily due to cessation of capitalizable interest following the opening of City of Dreams together with additional borrowings under the City of Dreams Project Facility.
 
Other finance costs included US$6.0 million of amortization of deferred financing costs net of capitalization and US$2.3 million of loan commitment fees related to the US$1.75 billion City of Dreams Project Facility. The


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decrease from 2008 was attributable to decreases in the undrawn commitments as a result of drawdowns on the City of Dreams Project Facility during the second half of 2008 and the first half of 2009.
 
Net foreign exchange gains for 2009 were US$491,000, mainly resulting from foreign exchange transaction gains on Australian dollars, compared to US$1.4 million of net foreign exchange gains for 2008. Other non-operating income increased to US$2.5 million in 2009 from US$972,000 in 2008.
 
Income tax credit
 
Our negative effective income tax rate was 0.04% for the year ended December 31, 2009, as compared to 37.4% for the year ended December 31, 2008. The negative effective income tax rate for the years ended December 31, 2009 and 2008 differed from the statutory Macau Complementary Tax rate of 12% primarily due to the effect of a change in valuation allowance on the net deferred tax assets in 2009 and 2008, the impact of the net loss of Macau gaming operations during the year ended December 31, 2009 and the effect of a tax holiday of US$8.9 million on the net income of Macau gaming operations during the year ended December 31, 2008 due to our income tax exemption in Macau, which is set to expire in 2011. Our management does not anticipate recording an income tax benefit related to deferred tax assets generated by our Macau operations; however, to the extent that the financial results of our Macau operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance through earnings.
 
Net loss
 
As a result primarily of the foregoing, there was a net loss of US$308.5 million for 2009, compared to a net loss of US$2.5 million in 2008.
 
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 
Revenues
 
Consolidated net revenues were US$1.42 billion for 2008, an increase of US$1.06 billion (or 295.0%) from US$358.5 million for 2007. The increase in net revenues was driven by improved operating performance and a full year of operations at Altira Macau, which opened on May 12, 2007 and was fully operational by July 14, 2007.
 
Consolidated net revenues in 2008 were comprised of US$1.41 billion in casino revenues (99.3% of total net revenues) and US$10.2 million of net non-casino revenues (0.7% of total net revenues). Consolidated net revenues in 2007 were comprised of US$348.7 million in casino revenues (97.3% of total net revenues) and US$9.8 million of net non-casino revenues (2.7% of total net revenues).
 
Casino.  Casino revenues for the year ended December 31, 2008 of US$1.41 billion represented a US$1.06 billion (or 303.2%) increase from casino revenues of US$348.7 million for the year ended December 31, 2007. Altira Macau’s rolling chip volume for 2008 of US$62.3 billion represented an increase of US$47.9 billion from US$14.4 billion for 2007. Altira Macau’s hold percentage for rolling chip table games (calculated before discounts and commissions) was 2.85% for 2008, in line with our expected level and an increase from 2.37% for 2007. In the mass table games segment, drop (non-rolling chip) totaled US$353.2 million for 2008, which increased by 46.8% from US$240.6 million for 2007. The mass market hold percentage was 14.6%, below the expected range of 16% to 18%, a decrease from 16.5% for 2007. Altira Macau’s gaming machine handle (volume) was US$166.9 million for 2008, an increase of US$24.8 million from US$142.1 million for 2007, and gaming machine revenue was increased by 36.7% to US$13.4 million for 2008. Mocha Club’s average net win per gaming machine per day for 2008 was US$236, an increase of approximately US$16 over 2007.
 
Rooms.  Room revenue of US$17.1 million for the year ended December 31, 2008 represented a US$11.4 million (or 201.3%) increase from room revenue of US$5.7 million for the year ended December 31, 2007, due to a full year of operations, at Altira Macau in 2008. Altira Macau’s ADR, occupancy and REVPAR were US$236, 94% and US$222, respectively, for the year ended December 31, 2008. This compares with the ADR, occupancy and REVPAR of US$266, 66% and US$174, respectively, for the year ended December 31, 2007.


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Food, beverage and others.  Other non-casino revenues for the year ended December 31, 2008 included food and beverage revenue of US$16.1 million, and entertainment, retail and other revenue of approximately US$5.4 million. Other non-casino revenue for the year ended December 31, 2007 included food and beverage revenue of US$11.1 million and entertainment, retail and other revenue of approximately US$2.0 million.
 
Operating costs and expenses
 
Total operating costs and expenses were US$1.41 billion for the year ended December 31, 2008, an increase of US$860.6 million (or 155.3%) from US$554.3 million for the year ended December 31, 2007. The increase in operating costs of US$860.6 million was primarily related to a full year of operations of Altira Macau with increases in expenses commensurate with the increase in revenues and offset by a decrease in pre-opening costs relating to Altira Macau as more fully described below.
 
Casino.  Casino expenses increased by US$856.0 million (or 281.7%) to US$1.16 billion in 2008 from US$303.9 million in 2007, primarily due to an increase in gaming tax of US$574.3 million and US$257.6 million in casino-related expenses associated with additional payroll-related expenses and our rolling chip program at Altira Macau.
 
Rooms.  Room expenses, which represent the costs in operating the hotel facility at Altira Macau, decreased by 39.6% to US$1.3 million in 2008 from US$2.2 million in 2007, primarily due to an increase in complementary sales and recording the related costs under casino expenses.
 
Food, beverage and others.  Food, beverage and other expenses increased by US$3.0 million (or 26.6%) to US$14.0 million in 2008 from US$11.0 million in 2007, primarily due to related increases in the revenue for these segments.
 
General and administrative.  General and administrative expenses increased by US$7.9 million (or 9.6%) to US$90.7 million in 2008 from US$82.8 million in 2007, primarily due to growth in our operations, which included US$1.6 million in additional share-based compensation expense.
 
Pre-opening costs.  Pre-opening costs of US$21.8 million were incurred in 2008 relating to the opening of City of Dreams. In 2007 we incurred pre-opening costs associated with both Altira Macau, which opened on May 12, 2007, and City of Dreams of US$37.0 million and US$3.0 million, respectively. Such costs related to personnel training costs, equipment and other administrative costs, in connection with the future opening of these properties.
 
Amortization of gaming subconcession.  Amortization of gaming subconcession recorded on a straight-line basis remained stable at US$57.2 million in 2008 and 2007.
 
Amortization of land use rights.  Amortization of land use rights expenses increased by US$1.0 million (or 5.7%) to US$18.3 million in 2008 from US$17.3 million in 2007, primarily due to a full year of amortization expense related to the revised land concession cost for City of Dreams by US$41.7 million in October 2007, which in turn increased the amount of monthly amortization.
 
Depreciation and amortization.  Depreciation and amortization expense increased by US$11.9 million (or 30.2%) to US$51.4 million in 2008 from US$39.5 million in 2007 primarily due to a full year of operation of Altira Macau.
 
Property charges and others.  Property charges and others generally includes costs related to the remodeling and rebranding of a property which might include the retirement, disposal or write-off of assets. Property charges and others for the year ended December 31, 2008 was US$0.3 million related to a minor reconfiguration of the casino at Altira Macau.
 
Non-operating (expenses) income
 
Non-operating (expenses) income consists of interest income and expenses, amortization of deferred financing costs, loan commitment fees, foreign exchange gain and loss as well as other non-operating income.


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Interest income decreased to US$8.2 million in 2008 from US$18.6 million in 2007, mainly due to a decline in interest rates and a decrease in average cash balances due to increased investment in City of Dreams.
 
Interest expenses, which included interest paid or payable on shareholders’ loans, the US$1.75 billion City of Dreams Project Facility, and interest rate swap agreements in 2008, totaled US$49.6 million and was fully capitalized. The increase from US$14.5 million in 2007 was primarily due to additional borrowings drawn under the City of Dreams Project Facility together with a full year of interest charges for the City of Dreams Project Facility incurred in 2008 as compared with only three months in 2007.
 
Other finance costs included US$0.8 million of amortization of deferred financing costs net of capitalization and US$15.0 million of loan commitment fees related to the US$1.75 billion City of Dreams Project Facility. The increase from 2007 was attributable to additional fees incurred on the undrawn commitment of this facility.
 
Net foreign exchange gains for 2008 were US$1.4 million, mainly resulting from foreign exchange transaction gains on H.K. dollars, compared to US$3.8 million of net foreign exchange gains for 2007. Other non-operating income increased to US$972,000 in 2008 from US$275,000 in 2007.
 
Income tax credit
 
Our negative effective tax rate was 37.4% for the year ended December 31, 2008, as compared to 0.8% for the year ended December 31, 2007. The negative effective income tax rate for the years ended December 31, 2008 and 2007 differed from statutory Macau Complementary Tax rate of 12% primarily due to the effect of change in valuation allowance on the net deferred tax assets in 2008 and 2007, the effect of a tax holiday of US$8.9 million on the net income of Macau gaming operations during the year ended December 31, 2008 and the impact of net loss of Macau gaming operations during the year ended December 31, 2007 due to our income tax exemption in Macau, which is set to expire in 2011. Management does not anticipate recording an income tax benefit related to deferred tax assets generated by our Macau operations; however, to the extent that the financial results of our Macau operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance through earnings.
 
Net loss
 
As a result primarily of the foregoing, there was a net loss of US$2.5 million for 2008, compared to a net loss of US$178.2 million in 2007.
 
Critical Accounting Policies and Estimates
 
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. Our consolidated financial statements were prepared in conformity with U.S. GAAP. Certain of our accounting policies require that management apply significant judgment in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management evaluates those estimates, including those relating to the estimated lives of depreciable assets, asset impairment, fair value of restricted shares and shares options granted, allowances for doubtful accounts, accruals for customer loyalty rewards, revenue recognition, income tax and fair value of derivative instruments and hedging activities. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from our estimates.
 
We believe that the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
 
Property and equipment and other long-lived assets
 
We depreciate property and equipment on a straight-line basis over their estimated useful lives commencing from the time they are placed in service. The estimated useful lives are based on the nature of the assets as well as current operating strategy and legal considerations such as contractual life. Future events, such as property


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expansions, property developments and refurbishments, new competition, or new regulations, could result in a change in the manner in which we use certain assets requiring a change in the estimated useful lives of such assets.
 
Our land use rights in Macau under the land concession contracts for Altira Macau and City of Dreams are being amortized over the estimated lease term of the land on a straight-line basis. The expiry dates of the leases of the land use rights of Altira Macau and City of Dreams are March 2031 and August 2033, respectively. The maximum useful life of assets at Altira Macau and City of Dreams is therefore deemed to be the remaining life of the land concession contract.
 
Costs of repairs and maintenance are charged to expense when incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operating income or loss.
 
We also evaluate the recoverability of our property and equipment and other long-lived assets with finite lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the carrying value of those assets to be held and used, is measured by first grouping our long-lived assets into asset groups and, secondly, estimating the undiscounted future cash flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. We define an asset group as the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and estimate the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the carrying value of the asset group exceeds the estimated undiscounted cash flows, we record an impairment loss to the extent the carrying value of the long-lived asset exceeds its fair value with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.
 
During the years ended December 31, 2009, 2008 and 2007, impairment losses amounting to US$282,000, US$17,000 and US$421,000, respectively, were recognized to write off gaming equipment due to the reconfiguration of the casino at Altira Macau to meet the evolving demands of gaming patrons and target specific segments. During the year ended December 31, 2009, an impairment loss amounting to US$2.9 million was recognized to write off the construction in progress carried out at the Macau Peninsula site following termination of the related acquisition agreement in December 2009. No impairment loss was recognized during the three months ended March 31, 2010 and 2009.
 
Goodwill and purchased intangible assets
 
We review the carrying value of goodwill and purchased intangible assets with indefinite useful lives, representing the trademarks of Mocha Clubs, for impairment at least on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To assess potential impairment of goodwill, we perform an assessment of the carrying value of our reporting units at least on an annual basis or when events and changes in circumstances occur that would more likely than not reduce the fair value of our reporting units below their carrying value. If the carrying value of a reporting unit exceeds its fair value, we would perform the second step in our assessment process and record an impairment loss to earnings to the extent the carrying amount of the reporting unit’s goodwill exceeds its implied fair value. We estimate the fair value of our reporting units through internal analysis and external valuations, which utilize income and market valuation approaches through the application of capitalized earnings, discounted cash flow and market comparable methods. These valuation techniques are based on a number of estimates and assumptions, including the projected future operating results of the reporting unit, appropriate discount rates, long-term growth rates and appropriate market comparables.
 
A detailed evaluation was performed as of December 31, 2009 and the computed fair value of our reporting unit was significantly in excess of the carrying amount. As a result of this evaluation, we determined that no impairment of goodwill existed as of December 31, 2009. There was no event or change in circumstances as of March 31, 2010 and we determined that no impairment of goodwill existed as of March 31, 2010.
 
Trademarks of Mocha Clubs are tested for impairment using the relief-from-royalty method and we determined that no impairment of trademarks existed as of December 31, 2009. Under this method, we estimate the fair


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value of the intangible assets through internal and external valuations, mainly based on the after-tax cash flow associated with the revenue related to the royalty. These valuation techniques are based on a number of estimates and assumptions, including the projected future revenues of the trademarks, appropriate royalty rates, appropriate discount rates, and long-term growth rates. There was no event or change in circumstances as of March 31, 2010 and we determined that no impairment of trademarks existed as of March 31, 2010.
 
Share-based compensation
 
We issued restricted shares and share options under our share incentive plan during the years ended December 31, 2009, 2008 and 2007. No restricted shares nor share options under our share incentive plan were issued during the three months ended March 31, 2010. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize the cost over the service period in accordance with applicable accounting standards. We use the Black-Scholes valuation model to value the equity instruments issued. The Black-Scholes valuation model requires the use of highly subjective assumptions of expected volatility of the underlying stock, risk-free interest rates and the expected term of options granted. Management determines these assumptions through internal analysis and external valuations utilizing current market rates, making industry comparisons and reviewing conditions relevant to our company.
 
The expected volatility and expected term assumptions can impact the fair value of restricted shares and share options. Because of our limited trading history as a public company, we estimate the expected volatility based on the historical volatility of a peer group of publicly traded companies, and estimate the expected term based upon the vesting term or the historical expected term of publicly traded companies. We believe that the valuation techniques and the approach utilized in developing our assumptions are reasonable in calculating the fair value of the restricted shares and share options we granted. For 2009 awards (excluding our stock option exchange program), a 10% change in the volatility assumption would have resulted in a US$223,000 change in fair value and a 10% change in the expected term assumption would have resulted in a US$90,000 change in fair value. These assumed changes in fair value would have been recognized over the vesting schedule of such awards. It should be noted that a change in expected term would cause other changes, since the risk-free rate and volatility assumptions are specific to the term; we did not attempt to adjust those assumptions in performing the sensitivity analysis above.
 
Revenue recognition
 
We recognize revenue at the time persuasive evidence of an arrangement exists, the service is provided or the retail goods are sold, prices are fixed or determinable and collection is reasonably assured.
 
Casino revenues are measured by the aggregate net difference between gaming wins and losses less accruals for the anticipated payouts of progressive slot jackpots, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers’ possession.
 
We follow the accounting standards on reporting revenue gross as a principal versus net as an agent, when accounting for the operations of the Taipa Square Casino and the Grand Hyatt Macau hotel. For the operations of Taipa Square Casino, given that we operate the casino under a right to use agreement with the owner of the casino premises and have full responsibility for the casino operations in accordance with our gaming subconcession, we are the principal and casino revenue is therefore recognized on a gross basis. For the operations of Grand Hyatt Macau hotel, we are the owner of the hotel property and Hyatt operates the hotel under a management agreement as hotel manager, providing management services to us, and we receive all rewards and take substantial risks associated with the hotel business. As such, we are the principal and the transactions of the hotel are therefore recognized on a gross basis.
 
Rooms, food and beverage, entertainment, retail and other revenues are recognized when services are provided. Advance deposits on rooms are recorded as customer deposits until services are provided to the customer. Minimum operating and right to use fee, adjusted for contractual base fee and operating fee escalations, are included in entertainment, retail and other revenues and are recognized on a straight-line basis over the terms of the related agreement.


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Revenues are recognized net of certain sales incentives which are required to be recorded as a reduction of revenue; consequently, our casino revenues are reduced by discounts, commissions and points earned in customer loyalty programs, such as the player’s club loyalty program.
 
The retail value of rooms, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in casino expenses.
 
Accounts Receivable and Credit Risk
 
Financial instruments that potentially subject our company to concentrations of credit risk consist principally of casino receivables. We issue credit in the form of markers to approved casino customers following investigations of creditworthiness. At March 31, 2010, December 31, 2009 and 2008, a substantial portion of our markers were due from customers residing in foreign countries. Accounts are written off when management deems it is probable the receivable is uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful debts is maintained to reduce our receivables to their carrying amounts, which approximate fair values. The allowance is estimated based on the specific review of customer accounts as well as management’s experience with collection trends in the casino industry and current economic and business conditions. In determining our allowance for estimated doubtful debts, we apply industry standard reserve percentages to aged account balances and we specifically analyze the collectability of each account with a balance over a specified dollar amount, based upon the age of the account balance, the customer’s financial condition, collection history and any other known information. The standard reserve percentages applied are based on our historical experience and take into consideration current industry and economic conditions. At March 31, 2010, a 100 basis-point change in the estimated allowance for doubtful debts as a percentage of casino receivables would change the provision for doubtful debts by approximately US$3.4 million.
 
Income Tax
 
Deferred income taxes are recognized for all significant temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As of March 31, 2010, December 31, 2009 and 2008, we recorded valuation allowances of US$29.7 million, US$33.1 million and US$16.1 million, respectively, as management does not believe that it is more likely than not that the deferred tax assets will be realized. Our assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, and the duration of statutory carryforward periods. To the extent that the financial results of our operations improve and it becomes more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.
 
Derivative Instruments and Hedging Activities
 
We seek to manage market risk, including interest rate risk associated with variable rate borrowings, through balancing fixed-rate and variable-rate borrowings with the use of derivative financial instruments. We account for derivative financial instruments in accordance with applicable accounting standards. All derivative instruments are recognized in the consolidated financial statements at fair value at the balance sheet date. Any changes in fair value are recorded in the consolidated statement of operations or in other comprehensive income (loss), depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction and the effectiveness of the hedge. The estimated fair values of our derivative instruments are based on a standard valuation model that projects future cash flows and discounts those future cash flows to a present value using market-based observable inputs such as interest rate yields.


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Liquidity and Capital Resources
 
The following table sets forth a summary of our cash flows for the periods indicated:
 
                                         
          Three Months Ended
 
    Year Ended December 31,     March 31,  
    2009     2008     2007     2010     2009  
    (In thousands of US$)  
 
Net cash (used in) provided by operating activities
  $ (112,257 )   $ (11,158 )   $ 147,372     $ 47,201     $ (23,479 )
Net cash used in investing activities
    (1,143,639 )     (913,602 )     (972,620 )     (6,490 )     (263,120 )
Net cash provided by (used in) financing activities
    653,350       904,485       1,076,671       (451 )     269,963  
                                         
Net (decrease) increase in cash and cash equivalents
    (602,546 )     (20,275 )     251,423       40,260       (16,636 )
Cash and cash equivalents at beginning of year/period
    815,144       835,419       583,996       212,598       815,144  
                                         
Cash and cash equivalents at end of year/period
  $ 212,598     $ 815,144     $ 835,419     $ 252,858     $ 798,508  
                                         
 
Operating activities
 
Net cash provided by operating activities was US$47.2 million for the three months ended March 31, 2010, compared to cash used in operating activities of US$23.5 million for the three months ended March 31, 2009. There was an increase in operating cash flow mainly attributable to the opening of City of Dreams in June 2009. Net cash used in operating activities was US$112.3 million in 2009, compared to US$11.2 million in 2008. There was a decrease in operating cash flow mainly attributable to a decline in gaming revenue as described in the foregoing section, increased working capital for City of Dreams and Altira Macau and increased pre-opening activities for City of Dreams. Net cash used in operating activities was US$11.2 million in 2008, compared to US$147.4 million net cash provided by operating activities in 2007. This was primarily attributable to the decrease of outstanding gaming chips and tokens, customer deposits, commission payables and other gaming related accruals resulting from a decline in gaming activity at the end of 2008 as compared to 2007.
 
Investing activities
 
Net cash used in investing activities was US$6.5 million for the three months ended March 31, 2010, compared to US$263.1 million for the three months ended March 31, 2009, primarily due to a reduction in construction and development activity relating to City of Dreams contributing to our total capital expenditures of US$82.7 million, offset by an increase in the payment of City of Dreams’ land use rights of US$22.5 million and the usage of restricted cash of US$109.0 million. Net cash used in investing activities was US$1.14 billion in 2009, compared to US$913.6 million in 2008, primarily due to a reduction in construction and development activity relating to City of Dreams contributing to our total capital expenditures for the year ended December 31, 2009 of US$937.1 million, offset by an increase in the payment of City of Dreams’ land use rights of US$30.6 million and an increase of US$168.1 million in the amount of restricted cash, due to a deposit of cash into bank accounts that are restricted in accordance with the City of Dreams Project Facility which will be immediately released upon the final completion of City of Dreams and until this time is available for use as required for the City of Dreams’ costs under the disbursement terms specified in the City of Dreams Project Facility.
 
Net cash used in investing activities was US$913.6 million in 2008, compared to US$972.6 million in 2007 primarily due to increased construction and development activity relating to City of Dreams, with capital expenditure for the year ended December 31, 2008 of US$1.05 billion and payment of the City of Dreams’ land use rights deposit of US$42.1 million. This increase was offset by a decrease of US$231.0 million in the amount of restricted cash due to the utilization of funds on additional loan drawdowns from the City of Dreams Project Facility in 2008. Drawdown proceeds from the facilities must be deposited into restricted accounts and pledged to the credit facility lenders.


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Financing activities
 
Proceeds from Our Financing.  Net cash used in financing activities amounted to US$0.5 million for the three months ended March 31, 2010, primarily due to payment of deferred financing costs. Net cash provided by financing activities amounted to US$270.0 million for the three months ended March 31, 2009 primarily related to drawdown proceeds of US$270.7 million from the City of Dreams Project Facility. Net cash provided by financing activities amounted to US$653.4 million for the year ended December 31, 2009, primarily due to drawdown proceeds of US$270.7 million from the City of Dreams Project Facility and proceeds from our follow-on public offerings in May 2009 and August 2009 totaling US$383.5 million after deducting the offering expenses. Net cash provided by financing activities amounted to US$904.5 million for the year ended December 31, 2008, primarily due to drawdown proceeds of US$912.3 million from the City of Dreams Project Facility.
 
Shareholder Loans and Contributions.  As of March 31, 2010, we had approximately US$115.7 million of outstanding shareholder loans from Melco and Crown, of which US$115.6 million was in the form of fixed term loans repayable in May 2011. The fixed term loan from Crown is at an interest rate of 3-months HIBOR per annum and the fixed term loan from Melco is at 3-months HIBOR per annum and at 3-months HIBOR plus 1.5% per annum only during the period from May 16, 2008 to May 15, 2009 with the remaining balance of US$7,000 repayable on demand and non-interest bearing.
 
No fees or proceeds are payable to Melco and Crown in return for their contributions to us or our subsidiaries and their future economic interest in us is solely based on their share ownership in forming our company.
 
City of Dreams Project Facility.  On September 5, 2007, Melco Crown Gaming and certain other subsidiaries specified as guarantors under the City of Dreams Project Facility, or the Borrowing Group, entered into the US$1.75 billion City of Dreams Project Facility to finance a portion of the total project costs of City of Dreams. On September 24, 2007, the first drawdown which comprised both H.K. dollars and U.S. dollars totaling the equivalent of US$500.2 million was made under the City of Dreams Project Facility. Subsequent drawdowns took place in 2008 and 2009, which comprised of both H.K. dollars and U.S. dollars totaling the equivalent of US$912.3 million and US$270.7 million, respectively, under the City of Dreams Project Facility. Financing costs of US$0.5 million, US$0.7 million, US$0.9 million, US$7.6 million and US$49.7 million in relation to the City of Dreams Project Facility were paid accordingly during the three months ended March 31, 2010 and 2009, and the years ended December 31, 2009, 2008 and 2007, respectively. Subject to satisfaction of the relevant conditions precedent, a further US$50.3 million remained available for future drawdowns as at March 31, 2010 and US$100.5 million as of the date of this prospectus.
 
See “Description of Other Material Indebtedness — City of Dreams Project Facility.”
 
We, when permitted, may obtain financing in the form of, among other things, equity or debt, including additional bank loans or high yield, mezzanine or other debt, or rely on our operating cash flow to fund the development of our projects.
 
Sources and Uses
 
We have been able to meet our working capital needs, and we believe that we will be able to meet our working capital needs in the foreseeable future, with our operating cash flow, existing cash balances, proceeds from our follow-on public offering and additional financings.
 
New business developments or other unforeseen events may occur, resulting in the need to raise additional funds. There can be no assurances regarding the business prospects with respect to any other opportunity. Any other development would require us to obtain additional financing.
 
Ratings
 
Melco Crown Gaming has a corporate rating of “BB-” by Standard & Poor’s and a rating of “Ba3” by Moody’s Investors Service. For future borrowings, any decrease in our corporate rating could result in an increase in borrowing costs.


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Research and Development, Patents and Licenses
 
We have entered into a license agreement with Crown Melbourne Limited and obtained an exclusive and non-transferable license to use the Crown trademark in Macau. Our hotel management agreements for the use of the Grand Hyatt and Hyatt Regency trademarks on a non-exclusive and non-transferable basis were terminated in August 2008 and replaced by a management agreement for the use of the Grand Hyatt trademarks to reflect the branding of the twin-tower hotels under the “Grand Hyatt” brand. In January 2007, we entered into a casino trademark license agreement and a hotel trademark license agreement (which was subsequently novated and amended by a Novation Agreement on August 20, 2008) with Hard Rock Holdings Limited, or Hard Rock, to use the Hard Rock brand in Macau at the City of Dreams. Pursuant to the agreements, we have the exclusive right to use the Hard Rock brand for the hotel and casino facility at City of Dreams for a term of ten years based on percentages of revenues generated at the property payable to Hard Rock. We also purchase gaming tables and gaming machines and enter into licensing agreements for the use of certain tradenames and, in the case of the gaming machines, the right to use software in connection therewith. These include a license to use a jackpot system for the gaming machines. In addition, we have registered the trademarks “Mocha Club” and “City of Dreams” in Macau. We have registered in Macau certain trademarks and are currently in the process of applying for the registration of certain other trademarks and service marks to be used in connection with the operations of our hotel casino projects in Macau.
 
Trend Information
 
Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
 
Off-Balance Sheet Arrangements
 
Except as disclosed in Note 11(d) to the unaudited condensed consolidated financial statements included elsewhere in this prospectus, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements.
 
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.


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Tabular Disclosure of Contractual Obligations
 
Our total long-term indebtedness and other known contractual obligations are summarized below as of December 31, 2009.
 
                                         
    Payments Due by Period  
    Less than
                More than
       
    1 Year     1-3 Years     3-5 Years     5 Years     Total  
    (In millions of US$)  
 
Contractual obligations
                                       
Long-term debt obligations:
                                       
Loans from shareholders(1)
  $     $ 115.6     $     $     $ 115.6  
Other long-term debt(2)
    44.5       793.1       845.6             1,683.2  
Operating lease obligations:
                                       
Leases for office space, VIP lounge, recruitment and training center, staff quarter and Mocha Clubs locations
    10.0       11.6       9.0       9.7       40.3  
Other contractual commitments:
                                       
Government land use fees payable for Altira Macau land(3)
    0.2       0.3       0.3       2.8       3.6  
Government land use fees payable for City of Dreams land(4)
    1.2       2.4       2.4       22.0       28.0  
Interest on land premium for City of Dreams land(4)
    1.1       2.8       0.2             4.1  
Construction, plant and equipment acquisition commitments(5)
    32.6                         32.6  
Buses and limousines services commitments
    2.6                         2.6  
Fixed premium on gaming subconcession
    3.7       7.5       7.5       28.0       46.7  
Trademark and memorabilia license fee commitments
    0.9       1.8       1.8       4.0       8.5  
Consultancy and other services commitments
    2.7       1.3       0.8             4.8  
                                         
Total contractual obligations
  $ 99.5     $ 936.4     $ 867.6     $ 66.5     $ 1,970.0  
                                         
 
 
(1) Excludes the working capital loans provided by Melco and Crown, which had an outstanding balance of US$25,000 as of December 31, 2009. As of December 31, 2009, the balance of the outstanding term loans from Melco and Crown, amounting to approximately US$115.6 million was repayable in May 2011. The term loan from Melco as of December 31, 2009 is bearing interest at 3-months HIBOR per annum and at three months HIBOR plus 1.5% per annum only during the period from May 16, 2008 to May 15, 2009. The term loan from Crown as of December 31, 2009 is bearing interest at 3-months HIBOR.
 
(2) Other long-term debt represents US$1.75 billion under the City of Dreams Project Facility. The City of Dreams Project Facility consists of a US$1.5 billion term loan facility and a US$250 million revolving credit facility. The term loan facility matures in September 2014 and is subject to quarterly amortization payments commencing in December 2010. The revolving credit facility matures in September 2012 or, if earlier, the date of repayment, prepayment or cancellation in full of the term loan facility and has no interim amortization payment.
 
(3) Annual government land use fees payable is approximately MOP 1.4 million (US$171,000) and is adjusted every five years as agreed between the Macau government and Altira Developments Limited in accordance with the applicable market rates from time to time.
 
(4) In April 2005, the Macau government offered to grant a medium-term lease of 25 years for City of Dreams to Melco Crown (COD) Developments Limited, and Melco Crown (COD) Developments Limited preliminarily accepted the offer on May 10, 2005. In February 2008, Melco Crown (COD) Developments Limited and Melco Crown Gaming accepted the final terms of the land lease agreement, which required us to pay a land premium of approximately MOP 842.1 million (US$105.1 million). We paid MOP 300.0 million (US$37.4 million) of the land premium upon our acceptance of the final terms on February 11, 2008. On August 13, 2008 the Macau government formally granted the land concession to Melco Crown (COD) Developments Limited of which approximately MOP 467.5 million (US$58.3 million) has been paid as of December 31, 2009 and the remaining amount of approximately MOP 374.6 million (US$46.8 million), accrued with 5% interest per annum, will be paid in six biannual installments. In November 2009, Melco Crown (COD) Developments Limited and Melco


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Crown Gaming accepted in principle the initial terms for the revision of the land lease agreement from the Macau government for the increased developable gross floor area for City of Dreams and recognized additional land premium of approximately MOP 257.4 million (US$32.1 million) payable to the Macau government. In March 2010, Melco Crown (COD) Developments Limited and Melco Crown Gaming accepted the final terms for the revision of the land lease agreement and fully paid the additional land premium to the Macau government. The total outstanding balances of the land use right have been included in accrued expenses and other current liabilities and land use right payable as of December 31, 2009. We have also provided a guarantee deposit of approximately MOP 3.4 million (US$424,000), upon signing of the government lease in February 2008. According to the terms of the revised offer from the Macau government, payment in the form of government land use fees in an aggregate amount of approximately MOP 9.5 million (US$1.2 million) per annum is payable to the Macau government and such amount may be adjusted every five years as agreed between the Macau government and Melco Crown (COD) Developments Limited in accordance with the market rates from time to time.
 
(5) The amount as of December 31, 2009 mainly represents construction contracts for the design and construction, plant and equipment acquisitions of City of Dreams of approximately US$31.4 million. The balance includes the remaining payment obligations for Altira Macau and Mocha Clubs.


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BUSINESS
 
Overview
 
We are a developer, owner and, through our subsidiary Melco Crown Gaming, operator of casino gaming and entertainment resort facilities focused on the Macau market. Melco Crown Gaming is one of six companies licensed, through concessions or subconcessions, to operate casinos in Macau.
 
We have chosen to focus on the Macau gaming market because we believe that Macau will continue to be one of the largest gaming destinations in the world. In 2009, 2008 and 2007, Macau generated approximately US$14.9 billion, US$13.6 billion and US$10.4 billion of gaming revenue, respectively, according to the DICJ, compared to the US$5.5 billion, US$6.0 billion and US$6.7 billion (excluding sports book and race book) of gaming revenue, respectively, generated on the Las Vegas Strip, according to the Nevada Gaming Control Board, and compared to the US$3.9 billion, US$4.5 billion and US$4.9 billion of gaming revenue (excluding sports book and race book), respectively, generated in Atlantic City, according to the New Jersey Casino Control Commission. Gaming revenue in Macau has increased at a five-year CAGR from 2004 to 2009 of 23.60% compared to five-year CAGRs of 0.86% and -3.89% for the Las Vegas Strip and Atlantic City, respectively (excluding sports book and race book). Macau benefits from its proximity to one of the world’s largest pools of existing and potential gaming patrons and is currently the only market in Greater China, and one of only several in Asia, to offer legalized casino gaming.
 
The Macau market is dominated by gaming table play heavily skewed to baccarat, which historically has accounted for more than 85% of all gaming revenues generated in Macau. There are two distinct forms or programs of baccarat which exist in Macau: rolling chip baccarat and non-rolling chip baccarat. A baccarat patron wagering under the rolling chip program will generally require credit in order to be able to buy-in to non-negotiable rolling chips and will earn a rebate derived from the volume of roll that the patron generates. The rebate has the effect of reducing the house advantage that exists to the favor of the casino on baccarat. Baccarat is also played in Macau on a non-rolling chip (or traditional cash chip) basis, which does not provide the patron with a rebate based on volume of play, and does not involve the provision of credit.
 
A substantial majority of the rolling chip baccarat segment revenue generated by the casino operators in Macau is derived from patrons who collaborate with gaming promoters, primarily in order to access the credit that is then available. A gaming promoter, also known as a junket representative, is a person who, for the purpose of promoting rolling chip gaming activity, arranges customer transportation and accommodation, and provides credit in their sole discretion, food and beverage services and entertainment in exchange for commissions or other compensation from a concessionaire or subconcessionaire. In 2009 the Macau government fixed the maximum commission that can be paid to junket operators.
 
Rolling chip program baccarat is referred to as the “rolling chip segment” in Macau and non-rolling chip baccarat, together with all other forms of gaming table and all gaming machines play, is collectively referred to as the “mass segment” in Macau.
 
Rolling chip volume and non-rolling chip volume are not equivalent. Rolling chip volume is a measure of amounts wagered and lost. Non-rolling chip volume measures buy-in. Therefore rolling chip volume will generally be substantially higher than non-rolling chip volume.
 
Macau enjoys a symbiotic relationship with the wider Asian region, and experiences a wide array of peaks and seasonal effects. The “Golden Week” and “Chinese New Year” holidays are the key periods where business and visitation fluctuate considerably.
 
Through our operations, we cater to a broad spectrum of potential gaming patrons, including patrons who seek the excitement of high stake rolling chip gaming, as well as more casual gaming patrons seeking a broader entertainment experience. We seek to attract these patrons from throughout Asia and in particular from Greater China.


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Our leadership and vision have been evidenced over the last couple of years through the early development of the Mocha brand, the evolution of the Altira Macau (formerly known as Crown Macau) property, the ability to diversify our portfolio of properties and supporting our staff through market leading business models.
 
Our Mocha Clubs and Altira Macau operations have successfully established a solid market share in their respective markets. The introduction of City of Dreams has rounded out these offerings and resulted in a well diversified gaming and entertainment mix within Macau.
 
Our aim to leverage the complimentary nature of and gain maximum benefit from each of our core assets which will, we believe, enhance our market leadership position and strengthen our competitive advantage.
 
Operations
 
City of Dreams
 
City of Dreams, an integrated urban entertainment resort development, has become a “must experience” destination in Macau since it opened in Cotai in June 2009. As the only major casino opening in Macau in 2009, the resort brings together a collection of world-renowned brands such as Crown, Grand Hyatt, Hard Rock and Dragone to create an exceptional guest experience that appeals to a broad spectrum of visitors from around Asia and the world. The initial opening of City of Dreams featured a 420,000 sq. ft. casino that currently has approximately 400 gaming tables and approximately 1,300 gaming machines; over 20 restaurants and bars; an array of some of the world’s most sought-after retail brands; and The Bubble, an iconic and spectacular audio visual multimedia experience. The Crown Towers and the Hard Rock Hotel offer approximately 300 guest rooms each. Grand Hyatt Macau offers approximately 800 guest rooms. A Dragone inspired theater production is scheduled to open in the purpose-built Theater of Dreams in the third quarter of 2010. A second planned phase of development at City of Dreams will feature an apartment hotel consisting of approximately 800 units, which will be financed separately from the rest of the City of Dreams. The development of the apartment hotel is subject to the availability of additional financing, the Macau government’s approval and the approval of our lenders under our existing and any future debt facilities. Our project costs, including the casinos, the Hard Rock Hotel, the Crown Towers hotel, the Grand Hyatt twin-tower hotel, the purpose built wet stage performance theater, all retail space together with food and beverage outlets, were US$2.4 billion, consisting primarily of construction and fit-out costs, design and consultation fees, and excluding the cost of land, capitalized interest and pre-opening expenses. Dragon’s Treasure, the iconic land mark showcased in the Bubble at City of Dreams was honored with the 2009 THEA Award for “Outstanding Achievement” from the Themed Entertainment Association (TEA). City of Dreams also won the “Best in Leisure Development in Asia Pacific” award in the International Property Awards 2010 which recognizes distinctive innovation and outstanding success in leisure development.
 
Altira Macau
 
Altira Macau is designed to provide a luxurious casino and hotel experience which is primarily tailored to meet the cultural preferences and expectations of Asian rolling chip customers and the gaming promoters who collaborate with Altira Macau. We believe that gaming venues traditionally available to high-end patrons in Macau have not offered the luxurious accommodation and facilities we offer at Altira Macau, and instead have focused primarily on intensive gaming during day trips and short visits to Macau. Altira Macau won the “Best Casino Interior Design Award” in the first International Gaming Awards in 2008, which recognizes outstanding design in the casino sector. Altira Macau has now been awarded the Forbes Five Star rating in both Lodging and Spa categories by the 2010 Forbes Travel Guide (formerly Mobil Travel Guide). Altira Macau also won the “Best Business Hotel in Macau” award in TTG China Travel Awards 2009 and the “Best Luxury Hotel in Macau” award in the TTG China Travel Awards 2010.
 
The casino at Altira Macau has approximately 183,000 sq. ft. of gaming space and features approximately 210 gaming tables. The multi-floor layout provides general gaming areas as well as limited access high-limit private gaming areas and private gaming rooms catering to high-end patrons. High-limit tables located in the limited access private gaming areas provide our high-end patrons with a premium gaming experience in an exclusive private environment. The table limits on our main casino floors accommodate a full range of casino patrons. Due to the


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flexibility of our multi-floor layout, we are able to reconfigure our casino to meet the evolving demands of our patrons and target specific segments we deem attractive on a periodic basis.
 
Altira Hotel, located within the 38-story Altira Macau, is recognized as one of the leading hotels in Macau. The top floor of the hotel serves as the hotel lobby and reception area, providing guests with sweeping views of the surrounding area. The hotel comprises approximately 216 deluxe rooms, including 24 suites and 8 high end villas, and features a luxurious interior design combining elegance and comfort with some of the latest in-room entertainment and communication facilities.
 
A number of restaurants and dining facilities are available at Altira Macau, including Tenmasa, a renowned Japanese restaurant in Tokyo, several Chinese and international restaurants, dining areas and restaurants focused around the gaming areas and a range of bars across multiple levels of the property. Altira Hotel also offers high-quality non-gaming entertainment venues, including a spa, gymnasium, outdoor garden podium and a sky terrace lounge.
 
The introduction of highly experienced local management in 2008 to the Altira Macau property has been successful. Our team has a deep understanding of its customers and will continue to hone the operational effectiveness of our property through the development of a tailored experience for its customers.
 
Altira is a property brand that has been developed in-house by the Company to target the Asian rolling chip market. The brand supports our overarching business objective at the Altira Macau property of developing our position as the premier Asian rolling chip casino. The rebranding of Crown Macau as Altira Macau reinforces two key strategies for the property: first, to align the brand positioning of the property with its concentrated market focus on Asian rolling chip customers, which has prevailed since late 2007; and second, to focus the Crown property brand solely at the City of Dreams property targeting premium rolling chip customers sourced through the regional marketing networks operated by us. The Altira brand was launched in April 2009. In late 2009 Altira successfully transitioned from a gaming promoter aggregator model to one where we contract directly with all our gaming promoters.
 
Mocha Clubs
 
Mocha Clubs first opened in September 2003 and has expanded operations to eight clubs with a total of approximately 1,500 gaming machines, each club with an average of approximately 187 gaming machines and gaming space ranging from approximately 5,000 sq. ft. to 15,000 sq. ft. The clubs comprise the largest non-casino-based operations of electronic gaming machines in Macau and are conveniently located in areas with strong pedestrian traffic, typically within three-star hotels. Each club site offers a relaxed ambiance and electronic tables without dealers or punters. Our Mocha Club gaming facilities include the latest technology for gaming machines and offer both single player machines with a variety of games, including progressive jackpots, and multi-player games where players on linked machines play against each other in electronic roulette, baccarat and sicbo, a traditional Chinese dice game.
 
Mocha Clubs focus on mass market and casual gaming patrons, including local residents and day-trip customers, outside the conventional casino setting. The Mocha Club at Mocha Square, which was temporarily closed for renovations from the end of 2007, resumed operations on February 20, 2009. We re-decorated the ground and first floors of the Hotel Taipa Square Mocha Club to facilitate easier access by customers during January 2009. As of March 31, 2010, Mocha had 1,543 gaming machines in operation, representing 11% of total machine installation in the market.
 
Taipa Square Casino
 
Taipa Square Casino held its grand opening on June 12, 2008. The casino has approximately 18,300 sq. ft. of gaming space and features approximately 31 gaming tables servicing mass market patrons. Taipa Square Casino operates within Hotel Taipa Square located on Taipa Island, opposite the Macau Jockey Club. Taipa Square Casino is designated as an Excluded Project under our City of Dreams Project Facility.


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Development Projects
 
General
 
In the ordinary course of our business, in response to market developments and customer preferences, we have made and continue to make certain enhancements and refinements to our properties. We have incurred and will continue to incur these capital expenditures at our properties.
 
Future Pipeline Projects
 
We continually seek out new opportunities for additional gaming or related businesses in Macau and will continue to target the development of a future project pipeline in Macau in order to maximize the business and revenue potential of Melco Crown Gaming’s investment in its subconcession. This remains a core strategy for us. We will also maintain our focus on three principles in defining and setting the pace, form and structure for any future pipeline development. The three principles we adhere to are: (i) securing financing for any project before commencing construction; (ii) ensuring that our existing portfolio of properties is enhanced by the new development through a developed understanding of how the market for our properties and services has continued to evolve and segment; and (iii) pacing new supply in accordance with the demands of the market.
 
City of Dreams Phase II
 
We are in the final stage of concluding a revision to our land lease agreement for City of Dreams, pursuant to which we will be able to increase the developed gross floor area by approximately 1.6 million square feet. It is our current plan to develop an apartment hotel tower at City of Dreams and we continue to assess market conditions and other operating factors to ascertain whether this plan represents the best use of the potential development opportunity at City of Dreams.
 
Macau Studio City Project
 
Melco Crown Gaming has entered into a services agreement with New Cotai Entertainment (Macau) Limited and New Cotai Entertainment, LLC, under which Melco Crown Gaming will operate the casino portions of the Macau Studio City project, a large scale integrated gaming, retail and entertainment resort development. The project is being developed by a joint venture between eSun Holdings Limited, CapitaLand Integrated Resorts Pte Ltd and New Cotai Holdings, LLC, which is primarily owned by investment funds and David Friedman, a former senior executive of Las Vegas Sands. Under the terms of the services agreement, Melco Crown Gaming will retain a percentage of the gross gaming revenues from the casino operations of Macau Studio City. We will not be responsible for any of the project’s capital development costs, and the operating expenses of the casino will be substantially borne by New Cotai Entertainment (Macau) Limited. The formal opening of Macau Studio City has not yet been announced. Factors influencing the opening of this project include consensus amongst the joint venturers regarding the development of this project and the timing for the completion of financing for this project. Macau Studio City Project is designated as an Excluded Project under our City of Dreams Project Facility.
 
Macau Peninsula Site
 
In May 2006, we entered into a conditional agreement to acquire a third development site, which is located on the shoreline of Macau Peninsula near the current Macau Ferry Terminal, or Macau Peninsula site. The acquisition price for the site was HK$1.5 billion (US$192.8 million), of which we paid a deposit of HK$100 million (US$12.9 million). The targeted purchase completion date of July 27, 2009 for the acquisition of the peninsula site passed and the acquisition agreement was terminated by the relevant parties on December 17, 2009. The deposit under the acquisition agreement has been refunded to us. Our decision to terminate the agreement to acquire the Macau Peninsula site was based on our view that Cotai has established itself as the primary location for future development projects.


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Our Objective and Strategies
 
Our objective is to become a leading provider of gaming, leisure and entertainment services capitalizing on the expected future growth opportunities in Macau. To achieve our objective, we have developed the following core business strategies:
 
Maintain a Strong Balance Sheet and Conservative Capital Structure, De-Leverage and Remain Alert to Opportunistic Growth Opportunities
 
We believe that a strong balance sheet is a core foundation for our future growth strategy. We will continue to raise the development funds that we need when we are able to do so, not when we are required to do so, and we will in the first instance and as priority apply surplus cash generated from our operations to de-leveraging. Where applicable, we will plan our developments to include marketable non-core assets that can be sold to aid the financing of our core assets. Our time horizon for the future growth and development of the business is long and we understand that our history of development remains short. We believe that patience is an important attribute in monitoring the development of the markets in which we operate, and in identifying and executing future development. We will endeavor to manage our business with this attitude and frame of mind.
 
Develop a Targeted Product Portfolio of Well-Recognized Branded Experiences
 
We believe that building strong, well-recognized branded experiences is critical to our success, especially in the brand-conscious Asian market. We intend to develop our brands by building and maintaining higher quality properties than those that are generally available in Macau currently and which rival other high-end resorts located throughout Asia, and by providing a distinctive and unique set of experiences tailored to meet the cultural preferences and expectations of Asian customers.
 
Although we strive to have all of our properties consistently adhere to the ideals above, we have incorporated design elements at our properties that cater to specific customer segments. By utilizing a more focused strategy, we believe we can better service specific segments of the Macau gaming market.
 
Utilize Melco Crown Gaming’s Subconcession to Maximize Our Business and Revenue Potential
 
We intend to utilize Melco Crown Gaming’s subconcession, which, like the other concessions and subconcessions, does not limit the number of casinos we can operate in Macau, to capitalize on the potential growth of the Macau gaming market provided by the greater independence, flexibility and economic benefits afforded by being a subconcessionaire. Possession of a subconcession gives us the ability to negotiate directly with the Macau government to develop and operate new projects without the need to partner with other concessionaires or subconcessionaires. Furthermore, concessionaires and subconcessionaires such as SJM and Galaxy have demonstrated that they can leverage their licensed status by entering into arrangements with developers and hotel operators that do not hold concessions or subconcessions to operate the gaming activities at their casinos under leasing or services arrangements and keep a percentage of the revenues. In 2008, the Macau government imposed a moratorium on new gaming services agreements. In the event such moratorium is lifted, we may consider entering into other, similar arrangements with other such developers and hotel operators, subject to obtaining the relevant approvals.
 
Develop Comprehensive Marketing Programs
 
We will continue to seek to attract customers to our properties by leveraging our brands and utilizing our own marketing resources and those of our founders. Altira Macau has combined its brand recognition with sophisticated customer management techniques and programs in order to build a significant database of repeat customers and loyalty club members. In addition, our international marketing network has established marketing offices in Beijing, Singapore, Taiwan and Malaysia and plans on establishing further marketing offices elsewhere in Asia. Through Mocha Clubs’ significant share of the Macau electronic gaming market, we have also developed a significant customer database and have developed a customer loyalty program, which we believe has successfully enhanced repeat play and further built the Mocha brand.


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We will seek to continue to grow and maintain our customer base through the following sales and marketing activities:
 
  •  create a cross-platform sales and marketing department to promote all of our brands to potential customers throughout Asia in accordance with applicable laws;
 
  •  utilize special product offers, special events, tournaments and promotions to build and maintain relationships with our guests, in order to increase repeat visits and help fill capacity during lower-demand periods;
 
  •  refine our own customer loyalty programs to further build a significant database of repeat customers, which we closely modeled on Crown’s successful “Crown Club” program; and
 
  •  implement complimentary incentive programs and commission based programs with selected promoters to attract high-end customers.
 
Focus on Operating First Class Facilities
 
We have assembled a dedicated management team with significant experience in operating large scale, high quality resort facilities.
 
Service quality and memorable experiences will continue to grow as a key differentiator among the operators in Macau. As the depth and quality of product offerings continue to develop and more memorable properties and experiences are created, tailored services will drive competitive advantage. As such, our focus on creating service experiences attuned to the tastes and expectations of an increasingly segmented, increasingly demanding and constantly evolving consumer is imperative.
 
The continued development of our staff and supporting resources are central to our success in this regard. We will invest in the long term development of our people through relevant training and experience sharing.
 
Leverage the Experiences and Resources of Our Founders
 
We believe one of our great strengths is the combined resources of our majority shareholders, Melco and Crown. We intend to leverage their experiences and resources in the gaming industry in Asia and particularly with Chinese and other Asian patrons.
 
Our Properties
 
We operate our gaming business in accordance with the terms and conditions of our gaming subconcession. In addition, our operations and development projects are also subject to the terms and conditions of land concessions and lease agreements for leased premises.
 
City of Dreams
 
The City of Dreams site is located on two adjacent land parcels in Cotai, Macau with a combined area of 113,325 square meters (approximately 1.2 million sq. ft.). On August 13, 2008, the Macau government formally granted a land concession for the City of Dreams site to Melco Crown (COD) Developments Limited for a period of 25 years, renewable for further consecutive periods of up to ten years each. The premium is approximately MOP 842.1 million (equivalent to US$105.1 million), of which approximately MOP 467.5 million (equivalent to US$58.3 million) has been paid as of December 31, 2009 and the remaining premium of approximately MOP 374.6 million (equivalent to US$46.8 million), accrued with 5% interest, will be paid in six biannual installments. We have also provided a guarantee deposit of approximately MOP 3.4 million (US$424,000), subject to adjustments, in accordance with the relevant amount of government land use fees payable during the year. The land concession enables Melco Crown (COD) Developments Limited to develop five star hotels, four star hotels, apartment hotels and a parking area with a total gross floor area of 515,156 square meters (approximately 5,545,093 sq. ft.). We have applied for an amendment to the land concession to enable the increase of the total developable gross floor area and on October 16, 2009 we received from the Macau government the initial terms for the revision of the land lease agreement pursuant to which we would be able to increase the developable gross floor area to 668,574 square meters (approximately 7,196,470 sq. ft.). In March 2010, our subsidiaries Melco Crown (COD) Developments Limited


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and Melco Crown Gaming accepted the final terms for the revision of the land lease agreement and fully paid the additional premium in the amount of MOP 257.4 million (equivalent to US$32.1 million) to the Macau government. Following the gazetting of such revision, the land grant amendment process will be complete. Under the revised land concession, the developable gross floor area at the site will be 668,574 square meters (approximately 7,196,470 sq. ft.).
 
During the construction period, we paid the Macau government land use fees at an annual rate of MOP 30.0 (US$3.74) per square meter of land, or an aggregate annual amount of approximately MOP 3.4 million (US$424,000). According to the terms of the revised offer from the Macau government, the annual government land use fees payable are approximately MOP 9.5 million (US$1.2 million). The government land use fee amounts may be adjusted every five years.
 
The equipment utilized by City of Dreams in the casino and hotel is owned by us and held for use on the City of Dreams site and includes the main gaming equipment and software to support its table games and gaming machine operations, cage equipment, security and surveillance equipment, casino and hotel furniture, fittings, and equipment.
 
Our purpose built 2,000 seat Theater of Dreams will stage “The House of Dancing Water” show. The production incorporates costumes, sets and audio and visual special effects. The cast of 77 international performance artists and the team of 130 production and technical staff have been recruited from 18 countries around the world. The House of Dancing Water is set to become the live entertainment centerpiece of City of Dreams’ overall leisure and entertainment offering. The production will reinforce City of Dreams’ position as a highly innovative and diverse entertainment-focused destination and strengthen the diversity of Macau as a multi-day stay market and one of Asia’s premier leisure and entertainment destinations.
 
Altira Macau
 
The Altira Macau property and equipment is located on a plot of land of approximately 5,230 square meters (56,295 sq. ft.) under a 25-year land lease agreement with the Macau government which is renewable for successive periods of up to ten years until 2049, subject to obtaining approvals from the Macau government. The terms and conditions of the land lease agreement entered into in March 2006 by Altira Developments Limited, our wholly-owned subsidiary through which Altira Macau was developed, require a land premium payment of approximately MOP 149.7 million (US$18.7 million). The initial land premium payment of MOP 50.0 million (US$6.2 million) was paid on November 25, 2005 upon acceptance of the terms and conditions of the agreement and the balance was paid in four equal semi-annual installments bearing interest at 5% per annum. We paid the outstanding balance in July 2006. A guarantee deposit of approximately MOP 157,000 (US$20,000) was also paid upon signing of the lease and is subject to adjustments in accordance with the relevant amount of government land use fees payable during the year. We pay the Macau government land use fees of approximately MOP 1.4 million (US$171,000) per annum. The amounts may be adjusted every five years as agreed between the Macau government and us using applicable market rates in effect at the time of the adjustment.
 
The Macau government approved total gross floor area for development for the Altira Macau site of approximately 95,000 square meters (1,022,600 sq. ft.).
 
The equipment utilized by Altira Macau in the casino and hotel is owned by us and held for use on the Altira Macau site and includes the main gaming equipment and software to support its table games and gaming machine operations, cage equipment, security and surveillance equipment, casino and hotel furniture, fittings, and equipment.


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Mocha Clubs
 
Mocha Clubs operate at premises with a total floor area of approximately 63,010 sq. ft. at the following locations:
 
                 
            Gaming
Mocha Club
  Opening Date  
Location
  Area
            (In sq. ft.)
 
Mocha Altira
  December 2008   Level 1 of Altira Macau     4,200  
Mocha Square
  October 2007   1/F, 2/F and 3/F of Mocha Square     6,000  
Marina Plaza
  December 2006   1/F and 2/F of Marina Plaza     12,500  
Hotel Taipa
  January 2006   G/F of Hotel Taipa     6,100  
Sintra
  November 2005   G/F and 1/F of Hotel Sintra     5,110  
Taipa Square
  March 2005   G/F, 1/F and 2/F of Hotel Taipa Square     14,500  
Kingsway
  April 2004   G/F of Kingsway Commercial Centre     6,100  
Royal
  September 2003   Lobby and 1/F of Hotel Royal     8,500  
                 
Total
            63,010  
                 
 
For locations operating at leased or subleased premises, the lease and sublease terms are pursuant to lease agreements that expire at various dates through December 2021, which are renewable upon our giving notice prior to expiration and subject to incremental increases in monthly rentals, except for the Marina Plaza lease, which will expire in 2011.
 
In addition to leasehold improvements to Mocha Club premises, the onsite equipment utilized at the Mocha Clubs is owned and held for use to support the gaming machines operations.
 
Taipa Square Casino
 
Taipa Square Casino premises, including the fit-out and gaming related equipment, located on the ground floor and level one within Hotel Taipa Square and having a floor area of approximately 1,700 square meters (approximately 18,300 sq. ft.), is operated under a Right-to-Use Agreement signed on June 12, 2008 with the owner, Hotel Taipa Square (Macau) Company Limited. The agreement is for a term of one year from the date of execution and is automatically renewable subject to certain contractual provisions for successive periods of one year under the same terms and conditions until June 26, 2022.
 
Other Premises
 
Apart from the property sites for Altira Macau and City of Dreams, we maintain various offices and storage locations in Macau and Hong Kong. We lease all of our office and storage premises, except for five units located at Zhu Kuan Building whose property rights belong to us. The five units have a total area of approximately 839 square meters (approximately 9,029 sq. ft.) and we operate a Recruitment Center there. The five units were purchased by MPEL Properties Macau Limited, our indirect wholly owned subsidiary, for approximately HK$79.7 million (US$10.2 million) on August 15, 2008. The Zhu Kuan Building is erected on a plot of land under a land lease grant that expires on July 27, 2015. Such land lease grant is renewable for successive periods of up to ten years until 2049, subject to obtaining certain approvals from the Macau government.
 
Advertising and Marketing
 
We seek to attract customers to our properties and to grow our customer base over time by undertaking several types of advertising and marketing activities and plans. We utilize local and regional media to publicize our projects and operations. We have built a strong public relations and advertising team that cultivates media relationships, promotes our brands and directly liaises with customers within target Asian countries in order to explore media opportunities in various markets. Advertising uses a variety of media platforms that include digital, print, television, online, outdoor, on property (as permitted by Macau, PRC and other regional laws), collateral and direct mail pieces. We hold various promotions and special events, operate loyalty programs, and have developed a series of


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commission and other incentive-based programs for offer to both gaming promoters and individuals alike, in order to be competitive in the Macau gaming environment.
 
Competition
 
We believe that the gaming market in Macau is and will continue to be intensely competitive. Our competitors in Macau and elsewhere in Asia include all the current concession and subconcession holders and many of the largest gaming, hospitality, leisure and property development companies in the world. Some of these current and future competitors are larger than us and have significantly longer track records of operation of major hotel casino resort properties.
 
Gaming in Macau is administered through government-sanctioned concessions awarded to three different concessionaires — SJM, which is controlled by Dr. Stanley Ho, the father of Mr. Lawrence Ho, our co-chairman and chief executive officer, Wynn Macau, a subsidiary of Wynn Resorts Ltd., and Galaxy, a consortium of Hong Kong and Macau businessmen. SJM has granted a subconcession to MGM Grand Paradise, a joint venture formed by MGM-Mirage and Ms. Pansy Ho, Dr. Stanley Ho’s daughter and the sister of Mr. Lawrence Ho. Galaxy has granted a subconcession to The Venetian Macau, a subsidiary of US-based Las Vegas Sands Corporation, the developer of Sands Macao and the Venetian Macao. Melco Crown Gaming obtained its subconcession under the concession of Wynn Macau.
 
The existing concessions and subconcessions do not place any limit on the number of gaming facilities that may be operated. In addition to facing competition from existing operations of these concessionaires and subconcessionaires, we will face increased competition when any of them constructs new, or renovates pre-existing, casinos in Macau or enters into leasing, services or other arrangements with hotel owners, developers or other parties for the operation of casinos and gaming activities in new or renovated properties, as SJM and Galaxy have done. The Macau government has agreed under the existing concessions that it would not grant any additional gaming concessions until April 2009 and has publicly stated that each concessionaire will only be permitted to grant one subconcession. Moreover, the Macau government announced that until further assessment of the economic situation in Macau, there would be no increase in the number of concessions and subconcessions. The Macau government further announced that the number of gaming tables operating in Macau should not exceed 5,500 by the end of 2012. In accordance with the DICJ the number of gaming tables operating in Macau as of December 2009 was 4,770. The Macau government has reiterated further that it does not intend to authorize the operation of any new casino that was not previously authorized by the Government. However, the policies and laws of the Macau government could change and permit the Macau government to grant additional gaming concessions or subconcessions. Such change in policies may also result in a change of the number of gaming tables and casinos that the Government is prepared to authorize to operate.
 
SJM holds one of the three gaming concessions in Macau and currently operates multiple casinos throughout Macau. SJM has recently opened new facilities at Ponte 16 and Oceanus. Controlled by Dr. Stanley Ho, SJM has extensive experience in operating in the Macau market and long-established relationships in Macau.
 
Wynn Resorts (Macau), S.A. holds a gaming concession and opened the Wynn Macau in September 2006 on the Macau Peninsula. An extension to Wynn Macau called Encore opened on April 21, 2010.
 
Galaxy, the third concessionaire in Macau, currently operates multiple casinos in Macau. In October 2006, Galaxy opened the Galaxy StarWorld, a hotel and casino resort in Macau’s central business and tourism district. Galaxy has also announced plans to develop Galaxy Mega Resort in Cotai.
 
With a subconcession under Galaxy’s concession, The Venetian Macau Limited operates Sands Macao, together with the Venetian Macao and The Four Seasons Macau, which are both located in Cotai.
 
MGM Grand Paradise, a joint venture, has been granted a subconcession under SJM’s concession. In December 2007, MGM Grand Paradise opened the MGM Grand Macau, which is located next to Wynn Macau on the Macau Peninsula.
 
We may also face competition from casinos and gaming resorts located in other Asian destinations together with cruise ships. Genting Highlands is a popular international gaming resort in Malaysia, approximately a


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one-hour drive from Kuala Lumpur. South Korea has allowed gaming for some time but these offerings are available primarily to foreign visitors. There are also casinos in the Philippines, although they are relatively small compared to those in Macau. In addition, there are a number of casino complexes in Cambodia. We believe Australia currently offers the closest gaming facilities in Asia comparable to Macau casinos. The major gaming markets in Australia are located in Melbourne, Perth, Sydney and the Gold Coast.
 
Singapore has legalized casino gaming and awarded casino licenses to Las Vegas Sands Corporation and Genting International Bhd. in 2006. Genting opened its resort in Sentosa, Singapore in February 2010 and Las Vegas Sands opened its casino on April 27, 2010. In addition, several other Asian countries are considering or are in the process of legalizing gambling and establishing casino-based entertainment complexes.
 
Employees
 
We had 9,631, 4,803, and 4,928 employees as of December 31, 2009, 2008 and 2007, respectively. The following table sets forth the number of employees categorized by the areas of operations and as a percentage of our workforce as of December 31, 2009, 2008 and 2007.
 
                                                 
    December 31,
    2009   2008   2007
    Number of
  Percentage of
  Number of
  Percentage of
  Number of
  Percentage of
    Employees   Total   Employees   Total   Employees   Total
 
Mocha
    757       7.8 %     615       12.8 %     545       11.1 %
Altira Macau
    2,753       28.6       3,540       73.7       4,201       85.2  
City of Dreams
    5,718       59.4       317       6.6       83       1.7  
Corporate and centralized services
    403       4.2       331       6.9       99       2.0  
                                                 
Total
    9,631       100 %     4,803       100 %     4,928       100 %
                                                 
 
None of our employees are members of any labor union and we are not party to any collective bargaining or similar agreement with our employees. We believe that our relationship with our employees is good. We recruited a significant number of employees in 2009 to cater for the opening of City of Dreams in June 2009 for which we developed human resources outreach programs in Macau and hosted several recruitment events in cities throughout China. See “Risk Factors — Risks Relating to the Operation of Our Properties — We have recruited a substantial number of new employees for each of our properties and competition may limit our ability to attract or retain suitably qualified management and personnel.”
 
We have implemented a number of human resource initiatives over recent years for the benefit of our employees and their families. These initiatives include a unique in-house learning academy, an on-site high school diploma program, scholarship awards, corporate management trainee programs as well as fast track promotion training initiatives jointly coordinated with the School of Continuing Study of Macau University of Science & Technology and Macao Technology Committee.
 
Intellectual Property
 
We have registered the trademarks “Altira,” “Mocha Club” and “City of Dreams” in Macau. We have also registered in Macau certain other trademarks and service marks used in connection with the operations of our hotel casino projects in Macau. We have entered into a license agreement with Crown Melbourne Limited and obtained an exclusive and non-transferable license to use the Crown brand in Macau. Our hotel management agreements provide us the right to use the Grand Hyatt trademarks on a non-exclusive and non-transferable basis. Our trademark license agreements with Hard Rock Holdings Limited provide us the right to use the Hard Rock brand in Macau, which we use at City of Dreams. Pursuant to these agreements, we have the exclusive right to use the Hard Rock brand for a hotel and casino facility at City of Dreams for a term of ten years based on percentages of revenues generated at the property payable to Hard Rock Holdings Limited. We also purchase gaming tables and gaming machines and enter into licensing agreements for the use of certain trade names and, in the case of the gaming machines, the right to use software in connection therewith. These include a license to use a jackpot system for the


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gaming machines. Crown Melbourne Limited, the owner of a number of “Crown” trademarks in Macau licensed to us, has an ongoing legal proceeding regarding a number of “Crown” trademarks in Macau. For more information, see “— Legal and Administrative Proceedings” below.
 
Legal and Administrative Proceedings
 
We are currently a party to certain legal proceedings which relate to matters arising out of the ordinary course of our business. Our management does not believe that the outcome of such proceedings will have a material adverse effect on our company’s financial position or results of operations. Crown Melbourne Limited, a wholly-owned subsidiary of Crown and the owner of the “Crown” brand, registered a number of “Crown” based trademarks in Macau in 1996 and in 2005, sought to register other trademarks for the “Crown” brand. In August 2005, a company called Tin Fat Gestão e Investimentos Limitada, or Tin Fat, sought to have the registration of the registered marks removed on the basis of non-use and opposed the application for registration of the additional marks. These challenges mainly relate to the “accommodation” class of registration, not the gaming class. Tin Fat is the operator of a hotel adjacent to the Macau airport, which changed its name in 2004/2005 to Golden Crown China Hotel (Macau). Tin Fat has applied to register Golden Crown China Hotel (Macau) and the Chinese and Portuguese equivalents. Crown Melbourne Limited has successfully opposed these registrations and has defended a number of oppositions in the Macau Intellectual Property Department and the Court of First Instance in Macau. To date Tin Fat’s applications and oppositions have all been unsuccessful and they have lodged numerous appeals in these actions. In some of the key opposition matters (such as the CROWN trademark), Crown Melbourne Limited has succeeded in the final Court of Appeal in Macau (Tin Fat cannot appeal further).


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INDUSTRY
 
Macau Gaming Market Overview
 
Macau is the world’s largest and fastest growing gaming market measured by gross gaming revenues and the only location in China to offer legalized casino gaming. The Macau market generated US$14.9 billion in gross gaming revenues in 2009, more than double the US$5.6 billion generated by the Las Vegas Strip during the same period. From 2004 through the end of 2009, gross gaming revenues have experienced a CAGR of 23.4% (an increase of almost three times from US$5.2 billion in 2004), while visitation has grown at a CAGR of 5.5% (from 16.7 million visitors in 2004). In 2009, visitation to Macau totaled 21.8 million, largely from mainland China and Hong Kong. Although the global economic crisis caused a decline in visitation between 2007 and 2009, the Macau gaming market has rebounded significantly in the first quarter of 2010 with gaming revenues of US$5.1 billion, a growth rate of approximately 57% year-on-year compared to US$3.2 billion generated in the same period of 2009. Macau gaming revenues rose 42% year on year (1% month on month) to US$1.7 billion in March 2010.
 
The following table summarizes certain information about Macau and its gaming market.
 
                                                                 
                                5-Year
    2009   2008   2007   2006   2005   2004   2008-2009   CAGR
 
Macau
                                                               
Macau nominal GDP (US$bn)
    21.1       21.5       18.7       14.2       11.6       10.4       (1.9 )%     15.2 %
Gross gaming revenues (US$bn)
    14.9       13.6       10.4       7.1       5.7       5.2       9.6 %     23.4 %
Number of gaming tables(1)
    4,770       4,017       4,375       2,762       1,388       1,092       18.7 %     34.3 %
Total visitation (mm)(2)
    21.8       22.9       27.0       22.0       18.7       16.7       (5.2 )%     5.5 %
China IVS(mm)
    4.8       6.8       7.2       5.8       5.3       3.5       (29.4 )%     6.2 %
% of IVS to total visitation
    22.0 %     29.6 %     26.7 %     26.4 %     28.3 %     20.9 %                
 
 
Sources: DICJ, DSEC.
 
(1) Number of gaming tables as of year end.
 
(2) 2008 visitor numbers were revised by DSEC and show a significant drop compared to previous non-revised numbers due to methodological changes made. DSEC visitor numbers are based on counts of visitors taken at ports of entry to Macau. Expatriates working in Macau are processed together with tourists visiting Macau at these points of entry. DSEC had therefore previously included expatriates resident in Macau in its visitor numbers. From 2008 forward, DSEC has excluded these individuals from the visitor count. The number of visitors to Macau in 2008 based on DSEC’s previous methodology is 30,185,740, an increase of 11.8% from 27,003,370 in 2007.
 
Macau is a Special Administrative Region of the People’s Republic of China and is located on the Pearl River Delta on the southern coastline of China’s Guangdong Province (a wealthy, urban and populous province of China). It is an hour away from Hong Kong via high-speed ferry, a key transportation and visitor hub in the region and home to Asia’s third busiest airport after Tokyo and Beijing, and it also lies in close proximity to many key Asian countries with favorable population and economic characteristics. Macau draws visitors from approximately ninety-five million residents of Guangdong and from the combined two billion residents of China, Taiwan, Japan, Korea, Thailand, Malaysia, Singapore, Indonesia and the Philippines located within an approximate four-hour flight from Macau.
 
Visitors from China constitute a majority of arrivals into Macau, accounting for 50.5% of 2009 arrivals with Hong Kong accounting for a further 30.9%. Total visitors to Macau under China’s IVS expanded at a CAGR of 6.2% from 2004 to 2009. As mainland China continues to develop its economy, coupled with an increasingly affluent population, Macau is expected to benefit and maintain both its economic as well as gaming revenue growth rates.
 
China GDP and Demographics
 
One of the drivers of Macau’s growth in both gaming and non-casino revenues has been China’s rapid economic growth. According to EIU, China’s GDP has grown at a CAGR of 15.9% over the past five years, with nominal GDP growing from US$1,937 billion in 2004 to more than US$4,912 billion in 2009. The middle class in China continues to expand rapidly, with the number of households with an annual disposable income over US$15,000 reaching 25.5 million as of 2009. This growing middle class trend is complemented by high savings


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rates and low levels of personal debt. Savings in China are currently estimated to be 39% of disposable income, totaling US$1,075 billion in 2009, as compared to total consumer loans of US$811 billion. The high savings rate relative to personal debt is expected to increase spending on overseas travel and other entertainment, including gaming and non-gaming offerings. In November 2008, China announced a HK$4.5 trillion stimulus package, with investment in transportation links and infrastructure highlighted as one of the package’s primary goals. In January 2009, the National Development and Reform Commission (NDRC) introduced a 2008 – 2020 national development blueprint for the southern Pearl River Delta. These policy measures focus on strengthening business cooperation between the Pearl River Delta, Hong Kong and Macau and developing the region into a globally competitive hub of economic activity.
 
Development of the Market
 
In an attempt to improve the size, scope and quality of Macau’s casinos and consolidate its position as a gaming center in the region, the Macau government initiated a bidding process to grant three new gaming concessions in late 2001. In 2002, Wynn Macau was awarded the first gaming concession, followed by SJM and Galaxy. A subsequent process allowed each concessionaire to grant one subconcession. There are now six companies licensed to operate casinos in Macau. The increase in the number of full-service casino resorts has not only contributed to a three-fold increase in gross gaming revenues from 2004 through 2009, but has also transformed Macau’s gaming market into one that features a diverse range of non-gaming entertainment offerings. The market is increasingly evolving to appeal to new, premium-focused customers attracted by previously limited high-end retail, entertainment and leisure offerings, leading to additional revenue opportunities. The Macau market continues to evolve, and it is anticipated that developers of integrated resorts will be the prime beneficiaries and experience significant growth.
 
Historically, Macau has catered primarily to rolling chip baccarat patrons (representing in excess of two-thirds of total gaming revenues), who typically wager higher stakes. Gaming promoters have historically managed the majority of rolling chip customer relationships, although the new concessionaires and subconcessionaires have been increasingly successful in marketing directly to this segment. In this regard, concessionaires and subconcessionaires have benefited from changes in Macau law that permit casinos to lend directly to customers and junket operators and to enforce their debts. The entry of international gaming operators, coupled with favorable regional economic trends has led to strong growth in both the overall and rolling chip gaming markets.
 
Macau’s gross gaming revenues and rolling chip gross gaming revenues have increased rapidly between 2004 through 2009, growing at CAGRs of 23.4% and 21.8%, respectively. Beginning in late 2008, Macau began to experience the effects of the global economic slowdown and, in 2009, the outbreak of H1N1 influenza. However, based on available 2010 data, a significant continued rebound in Macau’s gross gaming revenues for 2010 is expected. Macau product offerings will also continue to develop through capital investments in new casino resorts and enhancements in infrastructure.


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The following graph shows Macau’s gross gaming revenues and rolling chip gross gaming revenues for the years 2004 through 2009 and the first quarter of 2010:
 
     
MACAU GAMING REVENUE
(US$BN)
  MACAU ROLLING CHIP GAMING REVENUE (US$BN)
     
(BAR CHART)   (BAR CHART)
 
 
Source: DICJ.
 
Note:  2010 full-year revenues are presented on an annualized basis, assuming quarterly revenues for full 2010 equal the actual quarterly revenues recorded from January 1, 2010 through March 31, 2010. The annualized 2010 revenues are not a projection of actual 2010 revenues, which could differ materially from the annualized figures.
 
With the Macau government’s support and the growing popularity of gaming, the number of casinos and hotels in Macau has shown a steady increase. Macau has six concessionaires or subconcessionaires currently authorized to own and operate casinos, some of which are international corporations; the casino operations in Macau are primarily centered on the Macau peninsula along the belt between the Macau-Hong Kong Ferry Terminal and the Macau-Taipa Bridge. There has also been significant recent development in Cotai, an area of reclaimed land directly connected to the Macau peninsula by three bridges.
 
Significant resorts operating on the Macau peninsula include the Hotel Lisboa and the Grand Lisboa, each owned by SJM, the Sands Macau, owned by Venetian Macau S.A., Galaxy’s Star World hotel casino and MGM Grand Paradise Limited’s MGM Grand Macau.
 
Significant resorts operating in Cotai include The Venetian, which opened in 2007, and the Four Seasons, which opened in 2008, both owned by Venetian Macau S.A. New casino openings and expansions in 2009 included the opening of the Company’s City of Dreams in June 2009 in Cotai and the opening of SJM’s L’Arc and Oceanus on the Macau peninsula in the second half of 2009. Venetian Macau S.A. has also commenced construction of Phases 5 and 6 of its Cotai development, which are expected to open in the third quarter of 2011 and include internationally recognized hotels and significant additional gaming space. Galaxy World is not expected to become operational until mid-2011. Completion of these projects would result in an increase in the number of gaming tables, slot machines and hotel rooms in the Macau market and will add meaningful critical mass to the group of developments, including the Company’s City of Dreams, located in Cotai.
 
Macau visitors currently spend only a fraction of what their U.S. counterparts spend on non-casino activities. MICE events held in various venues in Macau totaled 1,485 with an average duration of two days, attracting 660,881 participants and attendees, significantly lower than its Las Vegas counterparts which had 19,394 events and 4.5 million attendees. We believe there is significant long-term growth potential for Macau’s non-gaming segment given the continued development of world class facilities and its proximity to the growing MICE market in Greater China. We believe that as the non-gaming segment grows in Greater China, visitors to Macau will on average stay longer per visit and spend more on both gaming and non-gaming activities during their time in Macau.
 
Drivers of the Market
 
The growth of the Macau gaming market has been facilitated by a number of drivers and initiatives, including favorable population demographics and economic growth across each of the Asian source markets, commitment by central and local governments to infrastructure developments and improvements, and a diversified offering of gaming segments.


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Close proximity to two billion of the world’s population
 
Macau shares a border with China’s populous and wealthy Guangdong province and is approximately one hour from Hong Kong via high-speed ferry. Approximately two billion people live within an approximately four-hour flight from Macau. The relatively easy access from major population centers in Asia facilitates Macau’s development as a popular gaming destination in Asia. Demand for non-gaming offerings including retail, leisure and entertainment services is also supported by the double-digit annual growth rate of personal disposable income and the growth of the middle class in China.
 
The following graph shows population information for countries and regions within a four-hour flight of Macau:
 
(BAR CHART)
 
 
Source:  Population statistics as of 2009, per respective government data source; visitation figures as of 2009 from Macau government.
 
Visitation growth from China, Macau’s primary source of visitors, has been supported by the implementation of the IVS. Following its implementation in 2003, mainland Chinese citizens from select large urban centers and economically developed regions were able to obtain permits to travel to Macau on their own without belonging to a tour group. As at December 2009, the IVS has expanded to cover 49 cities and more than 290 million Chinese citizens, representing approximately 22% of the most affluent people in China in 2009. However, it is estimated that less than 2% of those eligible to visit Macau under IVS did so in 2009 (4.8 million IVS travelers).
 
In mid-2008, the Chinese government adjusted its IVS visa policy toward Macau and limited the number of visits that some mainland Chinese citizens may make to Macau in a given time period under the scheme. In addition, in May 2009, China placed certain restrictions on the operation of “below-cost” tour groups involving low up-front payments and compulsory shopping. In 2008 and 2009, the number of visitors to Macau across the gaming spectrum was also negatively impacted by conditions in the global economy and credit markets and the outbreak of H1N1 influenza.
 
We compete to some extent with casinos located in other countries, such as Malaysia, North Korea, South Korea, the Philippines, Cambodia, Australia, New Zealand and elsewhere in the world, including Las Vegas and Atlantic City in the United States. In addition, certain countries, such as Singapore have legalized casino gaming and others may in the future legalize casino gaming, including Japan, Taiwan and Thailand. Singapore awarded a casino license to Las Vegas Sands and a second casino license to Genting International Bhd. in 2006. Genting International Bhd. opened its casino on February 14, 2010 and Las Vegas Sands opened its casino on April 27, 2010. We also compete with cruise ships operating out of Hong Kong and other areas of Asia that offer gaming.


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Diversified offering of gaming segments with a focus on VIP customers
 
The Macau gaming market consists of three primary segments: the cash or mass market, the rolling chip or VIP market, and direct VIP rolling chip:
 
Mass Market.  The mass market segment consists of both table games and slot machines played on public mass gaming floors for cash stakes. The mass market segment is generally viewed as a higher-margin component of the overall gaming market versus the rolling chip segment due to the commission costs of operating the rolling chip operations. Mass market gaming revenues have grown significantly, according to the DICJ, from 2004 to 2009 at a CAGR of 24.7% and 59.0% for mass market tables and slot operations, respectively. Mass market table and slot operations accounted for approximately 25.0% and 4.8%, respectively, of total casino gaming revenue in Macau for the three months ended March 31, 2010.
 
Rolling Chip Market.  In accordance with general industry practice, gaming promoters typically commit to certain casino-specified minimum rolling chip purchases per VIP room per month. In return for their services, the gaming operator typically pays a commission to the gaming promoter based on either gaming win or the rolling chip volume generated, a significant proportion of which is paid onto the player in the form of a revenue rebate. The obligation to pay commissions to gaming promoters means that although this segment accounts for a large proportion of total gaming revenues, margins are lower than those of the mass market segment. Rolling chip players typically receive various forms of complimentary services, including transportation, accommodation and food and beverage services from the gaming promoters or casinos. These complimentary services also affect the margins associated with the rolling chip segment of the business.
 
Direct VIP.  Direct VIP rolling chip players are brought in through the direct marketing efforts of the gaming operators based on relationship or preference for a particular gaming operator or property. Although revenue rebates are paid to these customers, the commission uplift in rebate costs associated with rolling chip play generated by gaming promoters is not incurred. As such, direct VIP players have potentially higher margins compared to rolling chip market players. Direct VIP players typically receive various forms of complimentary services from gaming operators.
 
The following table shows annual Macau casino gaming revenue by segment from 2004 to 2009 and quarterly casino gaming revenue for the first quarters of 2009 and 2010.
 
                                                                         
                                                    5-Year
 
    2009     2008     2007     2006     2005     2004     2010 1Q     2009 1Q     CAGR  
    (US$ MM)  
 
Rolling chip table gross gaming revenues
    9,963       9,206       6,959       4,590       3,602       3,717       3,589       2,100       21.8 %
Mass market table gross gaming revenues
    4,121       3,662       2,953       2,220       1,988       1,367       1,278       956       24.7 %
Slot machine gross gaming revenues
    812       705       448       256       156       80       243       191       59.0 %
                                                                         
Total
    14,896       13,573       10,360       7,066       5,746       5,164       5,110       3,247       23.4 %
                                                                         
 
 
Source: DICJ.


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REGULATION
 
Gaming Regulations
 
The ownership and operation of casino gaming facilities in Macau are subject to the general laws (e.g., the Civil Code and the Commercial Code) and to specific gaming laws, in particular, Law No. 16/2001, and various regulations govern the different aspects of the gaming activity. Macau’s gaming operations are subject to the grant of a concession or subconcession by and regulatory control of the Macau government (“Dispatch” of the Chief Executive).
 
The laws, regulations and supervisory procedures of the Macau gaming authorities are based upon declarations of public policy that are concerned with, among other things:
 
  •  the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;
 
  •  the adequate operation and exploitation of games of fortune and chance;
 
  •  the fair and honest operation and exploitation of games of fortune and chance free of criminal influence;
 
  •  the protection of Macau’s interest in receiving the taxes resulting from the gaming operation; and
 
  •  the development of the tourism industry, social stability and economic development of Macau.
 
If we violate the Macau gaming laws, Melco Crown Gaming’s subconcession could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, we, and the persons involved, could be subject t