WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION OF DOCUMENTS BY REFERENCE
Available Information
We are subject to
the periodic reporting and other informational requirements of the Securities Exchange Act of 1934. Under the Exchange Act, we file annual reports and other information with the SEC. As a foreign private issuer, we are exempt from, among other
things, the rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section
16 of the Exchange Act.
The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information
statements, and other information about issuers, such as us, who file electronically with the SEC. The address of that site is
www.sec.gov
.
Our website address is
www.melco-crown.com
. The information on or accessible through our website, however, is not, and should not be
deemed to be, a part of this prospectus supplement or the accompanying prospectus.
S-ii
This prospectus supplement and the accompanying prospectus are part of a registration statement
that we filed with the SEC and do not contain all of the information in the registration statement. The full registration statement may be obtained from the SEC, as provided above.
Incorporation by Reference
The
SECs rules allow us to incorporate by reference information into this prospectus supplement and the accompanying prospectus, which means that we can disclose important information to you by referring you to another document
separately filed with or furnished to the SEC. The information incorporated by reference is deemed to be part of this prospectus supplement and the accompanying prospectus, and subsequent information that we file with or, to the extent
expressly incorporated by reference into this prospectus supplement or the accompanying prospectus, furnish, to the SEC, will automatically update and supersede that information. Any statement contained in a previously filed or furnished document
incorporated by reference will be deemed to be modified or superseded for purposes of this prospectus supplement or the accompanying prospectus to the extent that a statement contained in this prospectus supplement or the accompanying prospectus
modifies or replaces that statement.
This prospectus supplement and the accompanying prospectus incorporate by reference the documents
set forth below that have previously been filed with or furnished to the SEC:
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the description of our ordinary shares contained in amendment no.1 to our registration statement on Form 8-A (File No. 001-33178) filed with the SEC on December 5, 2011 and any amendment or report filed with the SEC for
the purpose of updating the description;
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our annual report on Form 20-F for the year ended December 31, 2015 filed with the SEC on April 12, 2016, with the exception of our consolidated financial statements as of December 31, 2014 and 2015 and for the years
ended December 31, 2013, 2014 and 2015, and selected consolidated balance sheets data as of December 31, 2011 to 2015;
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our report on Form 6-K and the exhibits thereto furnished to the SEC on December 14, 2016, which contain our audited consolidated financial statements as of December 31, 2014 and 2015 and for the years ended December
31, 2013, 2014 and 2015, updated to reflect our retrospective adoption in 2016 of the new guidance on simplifying the presentation of debt issuance costs issued by the Financial Accounting Standards Board;
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our report on Form 6-K and the exhibits thereto furnished to the SEC on December 14, 2016, which contain (1) our unaudited condensed consolidated financial statements for the nine months ended September 30, 2015 and
2016 required under Item 8.A of Form 20-F, and (2) management discussion and analysis for the nine months ended September 30, 2015 and 2016, as well as updated financial data for prior periods to reflect our retrospective adoption in 2016 of the new
guidance referred to above; and
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our reports on Form 6-K and the exhibits thereto furnished to the SEC on May 4, 2016 (Accession No. 0001193125-16-576166), August 3, 2016, and November 8, 2016, respectively, which contain information on changes in our
shareholders and management.
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We are also incorporating by reference all subsequent annual reports on Form 20-F that we file
with the SEC and certain reports on Form 6-K that we furnish to the SEC after the date of this prospectus supplement (to the extent that any reports on Form 6-K state that they are incorporated by reference into this prospectus supplement or the
accompanying prospectus) prior to the termination of this offering. In all cases, you should rely on the later information over different information included in this prospectus supplement or the accompanying prospectus.
S-iii
Unless expressly incorporated by reference, nothing in this prospectus supplement or the
accompanying prospectus will be deemed to incorporate by reference information furnished to, but not filed with, the SEC. Copies of all documents incorporated by reference in this prospectus supplement or the accompanying prospectus, other than
exhibits to those documents unless such exhibits are specifically incorporated by reference in this prospectus supplement or the accompanying prospectus, will be provided at no cost to each person, including any beneficial owner, who receives a copy
of this prospectus supplement on the written or oral request of that person made to:
Melco Crown Entertainment Limited
36
th
Floor, The Centrium
60 Wyndham Street
Central, Hong
Kong
Phone: +852-2598-3600
S-iv
PROSPECTUS SUPPLEMENT SUMMARY
This prospectus supplement summary highlights certain information appearing elsewhere in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein and therein. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. This prospectus supplement summary is qualified in
its entirety by the more detailed information contained elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein. Before investing in the ADSs, you should read the entire
prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein carefully, including the information under Risk Factors and our consolidated financial statements and the related notes
thereto incorporated by reference herein.
Our Business
We are a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia. We currently have three major
casino-based operations in Macau, namely, City of Dreams, Altira Macau and Studio City, and non-casino-based slot machine operations in Macau at our Mocha Clubs. We also have a casino-based operation in the Philippines, City of Dreams Manila.
We are developing Morpheus, the fifth hotel tower at City of Dreams in Cotai, Macau, and are currently reviewing the development plan and
schedule for the remaining undeveloped land at Studio City. We plan to develop Morpheus into an iconic landmark and target its opening in 2018. With 1.0 million square feet of hotel space and 0.5 million square feet of podium space, Morpheus is
expected to house approximately 780 rooms, suites and villas.
Our current and future operations are designed to cater to a broad spectrum
of gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience. We currently own and operate two Forbes 5-Star hotels in Macau: Altira Macau and Crown Towers. We seek to attract patrons
throughout Asia and, in particular, from Greater China.
In the Philippines, MCE Leisure (Philippines) Corporation, a subsidiary of Melco
Crown (Philippines) Resorts Corporation, currently operates and manages City of Dreams Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila.
Our Principal Market
We generated a
major portion of the total revenues for the year ended December 31, 2015 and the nine months ended September 30, 2016 from our operations in Macau, the principal market in which we compete.
Macau continues to present a challenging operating environment due to a combination of the slowdown of economic growth in China and government
policies that may adversely affect the gaming market. For example, the Chinese government has taken measures to deter marketing of gaming activities to mainland Chinese residents by foreign casino and to reduce capital outflow. Such measures include
reducing the amount that China-issued ATM cardholders can withdraw in each withdrawal. The recent detention of employees of Crown Resorts in China in relation to gaming-related activities in China has created further regulatory uncertainty.
However, there are early signs of stabilization in Macau, particularly in the mass market segments, where we believe we remain the industrys innovative leader.
We believe that the world-class and unique lodging, entertainment, retail and gaming proposition delivered at our large-scale resorts in
Cotai, position us to benefit from Macaus evolution into a mass-focused, multi-day stay destination.
Our Objective and Strategies
Our objective is to capitalize on our position as one of the leading gaming, leisure and entertainment providers in Asia by serving the rapidly
developing and increasingly consumer-focused Asian middle class
S-1
through a world-class portfolio of assets across the region, with the ultimate goal of delivering long term value to our stakeholders. To enable us to reach our objectives, we have developed the
following core business strategies:
Develop a balanced product portfolio and well-recognized branded experiences tailored for a broad spectrum of
customer segments
We offer a balanced gaming and non-gaming product portfolio primarily targeting mass-market players, with an
emphasis on the mid-to-premium end of the market. Our gaming product portfolio also includes a highly competitive rolling chip offering. We have created a service culture and luxurious customer experience that appeal to an increasingly sophisticated
and discerning customer base. We believe our ability to cater to different market segments will enhance our ability to adapt to the fast-growing and changing gaming markets in Macau and the Philippines, and to achieve balanced and sustainable
long-term growth in the future.
We believe that building a strong, well-recognized brand is critical to our success, especially in the
brand-conscious Asia market. Morpheus, the fifth hotel tower at City of Dreams in Cotai, is the first hotel to obtain the newly launched Morpheus luxury brand, and is expected to strengthen the City of Dreams position as the
leading premium-focused integrated resort in Macau. We intend to develop and further strengthen our brands by maintaining high-quality offerings at our properties that differentiate us from our competitors throughout Asia and by providing customer
experiences tailored to address the cultural preferences and expectations of Asian customers.
We have incorporated design elements at our
properties that cater to specific customer segments. We believe that our focused customer segmentation strategy enables us to better service specific segments of the Macau and the Philippine gaming markets.
Deliver innovative and differentiated products and offerings, including world-class entertainment attractions, to target a broad spectrum of customers
and enhance customer acquisition and repeat patronage
We differentiate ourselves in the Macau gaming market through our emphasis
on entertainment and interactive attractions. The House of Dancing Water show at City of Dreams has attracted over 4 million spectators since commencing operation in September 2010, and was recognized as the Most Valuable
Brand by the 2015 Business Awards of Macau. We believe that the success of The House of Dancing Water, as well as the Club Cubic nightclub at City of Dreams, illustrates a strong demand for quality entertainment offerings in Macau,
which we believe is currently underserved.
Focusing on this strategy, Studio City offers a wide range of interactive entertainment
attractions, large number of themed restaurants, and architecturally unique façade. The delivery of these innovative products and offerings further differentiates us from Macaus existing integrated resorts, enhancing customer
acquisition, extending the length of patrons visits and driving repeat patronage. Studio Citys cinematically-themed, unique and innovative interactive attractions include: the worlds first figure-8 and Asias highest Ferris
wheel; a Warner Brothers-themed family entertainment center; a Batman film franchise digital ride; a 5,000 seat multi-purpose live performance arena; a live magic venue that showcases world-class magicians; and Pacha Macau, Macaus first
Ibiza-style nightclub.
We offer a diverse group of international restaurants, cafes and relaxed bars and lounges located throughout our
properties. In addition, we will continue to enhance and optimize our mix of retail offerings in line with the preferences of our target customers. We believe our continued emphasis on non-gaming attractions will enable us to drive visitation and
revenue growth.
Focus on higher-margin mass-market customer segments to maintain a stable revenue stream, drive profitability and cater to the fast
growing Asian middle-to-upper class
We focus on the mass market segment in Macau given the expected growth rates and historically
strong operating margins. We believe this focus will enable us to achieve stable growth of our diversified revenue streams. We also believe the growth of the Asian economies, including China, with their populations of over
S-2
3 billion people within a five-hour flight radius of Macau, will continue to drive mass market growth. We cater to mass-market customers by leveraging diversified entertainment attractions,
strategic marketing and promotional campaigns that offer a unique and tiered customer loyalty program catering to a wide range of customers.
We are committed to maintaining stable and diversified sources of revenues from both gaming and nongaming activities, and positioning
ourselves to serve the mass-market patrons who participate in both types of activities. We expect to maintain more predictable and recurring sources of gaming revenues by continuing our focus on the mass market gaming segment, which has proven more
resilient to market fluctuations. In addition, we expect to continue enhancing our non-gaming offerings, including entertainment attractions, food and beverages, and luxury accommodations, which will enable us to further generate non-gaming
revenues. We believe our commitment to maintaining stable revenue streams will provide us with the financial flexibility to pursue our business strategies and increase shareholder value.
Develop comprehensive marketing and customer loyalty programs
We will continue to seek to attract customers to our properties by leveraging our brands and utilizing our own marketing resources. By
combining our brand recognition with our strengths in customer management techniques and programs, we focus on building a platform of repeat customers and loyalty club members. In addition, we plan to expand our international marketing network,
which has marketing offices in various locations across Asia, by establishing additional marketing offices throughout Asia.
We will seek
to continue to grow and maintain our customer base through the following sales and marketing activities:
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create a cross-platform sales and marketing department to promote all of our brands to potential customers throughout Asia in accordance with applicable laws;
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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; and
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implement complimentary incentive programs and commission-based programs with selected promoters to attract high-end customers.
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Utilize our subconcession in Macau, and our gaming license in the Philippines, to maximize our business and revenue potential in the markets in which we
operate
In Macau, we intend to leverage the economic benefits and opportunities we enjoy as a subconcessionaire in Macau and a
gaming license holder in the Philippines to capitalize on the potential growth of these two major gaming markets in Asia. Subject to government and other regulatory approvals, we will continually evaluate opportunities within these two markets for
maximizing the economic and strategic benefits of our subconcession in Macau and gaming license in the Philippines.
Maintain a strong balance sheet
and conservative capital structure to invest in growth opportunities and return capital to shareholders
We believe that a strong
balance sheet and a conservative capital structure are key tenets of our fundamental operating philosophy as a company. This approach helps us to maintain financial stability. It also forms the core foundation for our future growth strategy and
strengthens our ability to return capital to shareholders subject to the discretion of our board of directors and our financial and operating results. We believe that a proactive management of our balance sheet and an efficient capital
structure will enhance our ability and flexibility to pursue opportunistic growth in the future. Additionally, 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 in existing, as well as new, markets.
S-3
We utilize a range of mechanisms to return surplus capital to shareholders, including share
repurchase programs and special dividends which, together with our ordinary dividend policy, provides us with an efficient platform to return surplus capital.
We believe this capital distribution platform enables us to return surplus capital efficiently while retaining sufficient flexibility to
invest in growth opportunities, which we believe will drive long term shareholder value.
Recent Developments
In May 2016, we repurchased 155 million ordinary shares from our substantial shareholder Crown Asia Investments Pty Ltd, a wholly owned
subsidiary of Crown Resorts Limited (Crown). Following completion of the repurchase, Melco International Development Limited (Melco), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited, became
our single largest shareholder. Mr. James Packer resigned from his position as Co-Chairman and became the Deputy Chairman of our board of directors, and Mr. Todd Nisbet resigned as a director. Our articles of association were amended to provide for
a board of nine directors, which comprised three nominees of Melco, two nominees of Crown and four independent directors. Mr. Lawrence Ho became the sole Chairman of our board of directors.
The terms of the land concession contract for Studio City require us to fully develop the land on which the property is located by July 24,
2018. In October 2016, we filed an application with the Macau government requesting an extension of the development period for the additional development on the land on which Studio City is located, which is expected to include a hotel and
related amenities. The application is currently under review by the Macau government. There can be no assurances that we will be granted the necessary extension or that the Macau government will not exercise its right to terminate the land grant,
either partially with respect to the undeveloped part of the site or in its entirety, and we could lose all or substantially all of our investment in Studio City and may not be able to operate Studio City, which would materially adversely affect our
business, results of operations and financial condition.
While Studio City continues to focus on the mass market segment for gaming, VIP
rolling chip operations, including both junket and premium direct VIP offerings, were introduced at Studio City in early November 2016. A VIP rolling chip area has been built at Studio City within which we operate up to 33 VIP tables allocated
to Melco Crown (Macau) Limited, our subsidiary and the holder of our gaming subconcession, by the Macau government.
On November 30, 2016,
our indirect 60% subsidiary Studio City Company Limited issued US$350 million aggregate principal amount of 5.875% senior secured notes due 2019 and US$850 million aggregate principal amount of 7.25% senior secured notes due 2021, the net proceeds
of which, together with cash on hand, were used to repay in full Studio Citys then-existing HK$10,855,880,000 senior secured credit facilities (except for the HK$1 million equivalent rolled over into the term loan facility referred to below).
The notes are guaranteed by Studio City Investments Limited, the direct parent of Studio City Company Limited, and all of the subsidiaries of Studio City Investments Limited (other than Studio City Company Limited, the issuer of the notes), and
secured by substantially all of the material assets of Studio City Investments Limited and its subsidiaries. Studio City Company Limited also entered into an amendment and restatement agreement on November 23, 2016 with, among others, Bank of China
Limited, Macau Branch, which, upon satisfaction of certain conditions precedent, amended, restated and extended the then existing senior secured credit facilities (the balance of which was repaid as described above) to provide for a new HK$233
million revolving credit facility and a HK$1 million term loan facility. The amended, restated and extended senior secured credit facilities are guaranteed by the same entities that guarantee the notes and secured by substantially the same
collateral as those securing the notes with priority over the notes with respect to any proceeds received upon any enforcement action against the common collateral.
S-4
Our Studio City operations sit within a separate, ring-fenced credit group, and the debt
obligations related to Studio City are not guaranteed by its shareholders. As such, we are not contractually required to provide any additional financial support to Studio City with respect to its debt obligations.
Private Transfer
On December 14, 2016,
the selling shareholder agreed to sell, subject to Macau regulatory approval, 198,000,000 ordinary shares to Melco Leisure and Entertainment Group Limited, a wholly owned subsidiary of Melco, in a privately negotiated sale outside the United States
in reliance on Regulation S. The aggregate purchase price is approximately US$1.2 billion, subject to upward adjustments for interest thereon if closing occurs after March 1, 2017. Melco Leisure and Entertainment Group Limited paid a deposit of
US$100 million that is refundable only if the sale and purchase agreement is terminated prior to closing due to the sellers default. The closing of the sale is subject to the receipt of Macau regulatory approval, the buyers financing
arrangements and other customary closing conditions. Melco has secured a banks written commitment to provide the necessary financing, subject to definitive agreement. Any such financing may require a pledge of our ordinary shares or ADSs held
by Melco Leisure and Entertainment Group Limited as collateral.
Shareholders Deed
In conjunction with this sale, Melco and Crown amended, with effect from the payment of the deposit, their shareholders deed relating to
our company to provide for an increase in the nominees of Melco on our board of directors from three to four, a decrease in the nominees of Crown from two to one, and the number of independent directors remaining at four. The amended
shareholders deed also provides that our right to use Crown in our corporate name will terminate six months after the closing of the private sale.
Mr. James Packer, a Crown nominee director and our Deputy Chairman, resigned from our company with effect from December 15, 2016 after the
payment of the deposit. We expect that a director nominated by Melco to fill the board vacancy will be appointed in due course in accordance with our corporate governance policies.
Principal Shareholders
Following the
completion of the underwritten offering, Crowns shareholding in our company will be reduced from 27.4% to 24.6%. If the sale of ordinary shares to Melco Leisure and Entertainment Group Limited is completed, Crowns shareholding in our
company will be further reduced to 11.2% and Melcos shareholding will increase to 51.3% from the current 37.9%.
Corporate Information
Our principal executive offices are located at 36
th
Floor, The Centrium, 60 Wyndham
Street, Central, Hong Kong, and our telephone number is +852-2598-3600. Our website is
www.melco-crown.com
. The information on our website is not incorporated by reference into this prospectus supplement, and you should not consider
information contained on our website to be a part of this prospectus supplement. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., 400 Madison Avenue,
4
th
Floor, New York, New York 10017.
Risks Related to Our Business
Our ability to achieve our goals and execute our strategies is subject to risks and uncertainties. We believe the following are the major risks
and uncertainties that may materially affect us:
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geographic concentration and construction hazards, cost increases or delays in the development of our projects and intense competition;
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failure to develop the remaining land at Studio City under the terms of the land concessions, which could result in forfeiture of all or part of our related investment;
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regional political and economic risks, including changes in government regulations;
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S-5
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risks related to certain policies and campaigns implemented by the Chinese government;
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development of Manila and the Philippines as a tourist and gaming destination;
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disruptions or downturns in the gaming market; and
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cheating and counterfeiting.
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See Risk Factors and Special Note Regarding
Forward-Looking Statements in this prospectus supplement and the accompanying prospectus for detailed discussions of other risks and uncertainties associated with our business and investing in our ADSs or ordinary shares.
Conventions Used in this Prospectus Supplement
Unless otherwise indicated or the context otherwise requires and for the purposes of this prospectus supplement:
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we, us, our, our company and Melco Crown Entertainment refer to Melco Crown Entertainment Limited and, as the context requires, its consolidated subsidiaries;
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ADSs refers to our American depositary shares, each of which represents three ordinary shares;
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China refers to the Peoples Republic of China and, solely for the purposes of this prospectus supplement, excludes Taiwan, Hong Kong and Macau, and Greater China refers to the Peoples
Republic of China, Hong Kong and Macau; and
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shares and ordinary shares refer to our ordinary shares, par value US$0.01 per share.
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S-6
The Offering
Ordinary shares offered by the selling shareholder
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40,925,499 ordinary shares.
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Total ADSs offered
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40,973,766 ADSs (including 27,331,933 borrowed ADSs).
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The ADSs
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Each ADS represents three ordinary shares.
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The depositary will hold the ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time.
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If we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares, after deducting its fees and expenses in accordance with the
terms set forth in the deposit agreement.
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You may turn in your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any exchange.
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We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as
amended.
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To better understand the terms of the ADSs, you should carefully read the Description of American Depositary Shares section of the accompanying prospectus. You should also read the deposit agreement, which
is incorporated by reference as an exhibit to the registration statement that includes this prospectus supplement and the accompanying prospectus.
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Depositary
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Deutsche Bank Trust Company Americas.
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Use of Proceeds
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We will not receive any proceeds from the sale of ordinary shares by the selling shareholder or from the sale of the borrowed ADSs by the dealers.
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NASDAQ Global Select Market symbol
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MPEL.
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Risk Factors
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See Risk Factors in this prospectus supplement and the accompanying prospectus for a discussion of the risks you should consider before deciding to invest in our ADSs.
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S-7
Summary Consolidated Financial and Operating Data
The following summary consolidated statement of operations data for the years ended December 31, 2013, 2014 and 2015 and consolidated balance
sheet data as of December 31, 2014 and 2015 have been derived from our audited consolidated financial statements incorporated by reference in this prospectus supplement and the accompanying prospectus. The summary consolidated statement of
operations data for the nine months ended September 30, 2015 and 2016 and consolidated balance sheet data as of September 30, 2016 have been derived from our unaudited condensed consolidated financial statements incorporated by reference in this
prospectus supplement and the accompanying prospectus. The consolidated balance sheet data as of December 31, 2014 and 2015 reflect our retrospective adoption in 2016 of the new guidance on simplifying the presentation of debt issuance costs issued
by the Financial Accounting Standards Board. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The historical financial and operating results
presented below are not necessarily indicative of our results for any future fiscal period.
Consolidated Statement of Operations Data:
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Year ended
December 31,
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Nine months ended
September 30,
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2013
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2014
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2015
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2015
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2016
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(unaudited)
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(in thousands of U.S. dollars, except share, per share and per ADS data)
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Net revenues
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5,087,178
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4,802,309
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3,974,800
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2,916,770
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3,326,518
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Total operating costs and expenses
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(4,247,354
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)
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(4,116,949
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(3,876,385
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(2,800,522
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(3,079,370
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Operating income
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839,824
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685,360
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98,415
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116,248
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247,148
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Net income (loss)
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578,013
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527,386
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(60,808
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17,173
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50,407
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Net loss attributable to noncontrolling interests
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59,450
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80,894
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166,555
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100,913
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82,223
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Net income attributable to Melco Crown Entertainment
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637,463
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608,280
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105,747
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118,086
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132,630
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Net income attributable to Melco Crown Entertainment per share
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Basic
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0.386
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0.369
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0.065
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0.073
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0.086
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Diluted
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0.383
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0.366
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0.065
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0.073
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0.086
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Net income attributable to Melco Crown Entertainment per ADS
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|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1.159
|
|
|
|
1.108
|
|
|
|
0.196
|
|
|
|
0.219
|
|
|
|
0.259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
1.149
|
|
|
|
1.099
|
|
|
|
0.195
|
|
|
|
0.218
|
|
|
|
0.258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in net income attributable to Melco Crown Entertainment per share
calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,649,678,643
|
|
|
|
1,647,571,547
|
|
|
|
1,617,263,041
|
|
|
|
1,617,033,893
|
|
|
|
1,534,527,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
1,664,198,091
|
|
|
|
1,660,503,130
|
|
|
|
1,627,108,770
|
|
|
|
1,627,249,911
|
|
|
|
1,542,641,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share
|
|
|
|
|
|
|
0.2076
|
|
|
|
0.0389
|
|
|
|
0.0328
|
|
|
|
0.2282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-8
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of
September 30, 2016
|
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands of U.S. dollars)
|
|
Cash and cash equivalents
|
|
|
1,597,655
|
|
|
|
1,611,026
|
|
|
|
1,631,447
|
|
Bank deposits with original maturity over three months
|
|
|
110,616
|
|
|
|
724,736
|
|
|
|
92,819
|
|
Restricted cash
|
|
|
1,816,583
|
|
|
|
317,118
|
|
|
|
202,600
|
|
Total assets
(2)
|
|
|
10,260,780
|
|
|
|
10,262,309
|
|
|
|
9,334,858
|
|
Total current liabilities
(2)
|
|
|
1,315,004
|
|
|
|
1,211,017
|
|
|
|
1,474,157
|
|
Total debts
(1)(2)
|
|
|
3,730,998
|
|
|
|
3,815,232
|
|
|
|
3,785,171
|
|
Total liabilities
(2)
|
|
|
5,219,110
|
|
|
|
5,330,450
|
|
|
|
5,512,849
|
|
Noncontrolling interests
|
|
|
755,529
|
|
|
|
592,226
|
|
|
|
507,933
|
|
Total equity
|
|
|
5,041,670
|
|
|
|
4,931,859
|
|
|
|
3,822,009
|
|
Ordinary shares
|
|
|
16,337
|
|
|
|
16,309
|
|
|
|
14,759
|
|
(1)
|
Consists of current and non-current portion of long-term debt, net of debt issuance costs.
|
(2)
|
The amounts have been adjusted for the retrospective application of the authoritative guidance on the presentation of debt issuance costs, which we adopted on January 1, 2016.
|
Other Financial and Operational Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
Nine months ended
September 30,
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands of U.S. dollars)
|
|
Adjusted property EBITDA
(1)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mocha Clubs
|
|
|
40,222
|
|
|
|
36,337
|
|
|
|
30,259
|
|
|
|
23,850
|
|
|
|
18,354
|
|
Altira Macau
|
|
|
147,340
|
|
|
|
84,795
|
|
|
|
36,261
|
|
|
|
26,592
|
|
|
|
1,829
|
|
City of Dreams
|
|
|
1,193,211
|
|
|
|
1,165,632
|
|
|
|
798,504
|
|
|
|
606,272
|
|
|
|
553,614
|
|
Studio City
|
|
|
(1,059
|
)
|
|
|
(1,296
|
)
|
|
|
11,594
|
|
|
|
(1,042
|
)
|
|
|
99,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
1,379,714
|
|
|
|
1,285,468
|
|
|
|
876,618
|
|
|
|
655,672
|
|
|
|
673,128
|
|
The Philippines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Dreams Manila
|
|
|
(603
|
)
|
|
|
6
|
|
|
|
55,366
|
|
|
|
39,886
|
|
|
|
110,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjusted property EBITDA
|
|
|
1,379,111
|
|
|
|
1,285,474
|
|
|
|
931,984
|
|
|
|
695,558
|
|
|
|
783,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(2)(3)
|
|
|
1,287,812
|
|
|
|
1,166,503
|
|
|
|
816,249
|
|
|
|
608,248
|
|
|
|
700,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted property EBITDA is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and others, share-based compensation, payments to the
Philippine parties under the cooperative arrangement (the Philippine Parties), land rent to Belle Corporation, net gain on disposal of property and equipment to Belle Corporation, gain on disposal of assets held for sale, Corporate and
Others expenses and other non-operating income and expenses.
|
(2)
|
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and others, share-based compensation, payments to the Philippine
Parties, land rent to Belle Corporation, net gain on disposal of property and equipment to Belle Corporation, gain on disposal of assets held for sale and other non-operating income and expenses.
|
(3)
|
Our management uses Adjusted property EBITDA and Adjusted EBITDA to measure the operating performance of our
businesses, and to compare the operating performance of our properties with those of
|
S-9
|
our competitors. Adjusted property EBITDA and Adjusted 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. Our management also uses Adjusted property EBITDA and Adjusted EBITDA because they are used by some investors as a way to measure a companys ability to incur and service debt, make capital expenditures and
meet working capital requirements. Gaming companies have historically reported similar measures as a supplement to financial measures in accordance with generally accepted accounting principles, in particular, U.S. GAAP or International Financial
Reporting Standards. However, Adjusted property EBITDA or Adjusted EBITDA should not be considered in isolation, construed as an alternative to profit or operating profit, treated as an indicator of our U.S. GAAP operating performance, other
operating operations or cash flow data, or interpreted as an alternative to cash flow as a measure of liquidity. Adjusted property EBITDA and Adjusted EBITDA presented in this prospectus supplement may not be comparable to other similarly titled
measures of other companies operating in the gaming or other business sectors. While our management believes these figures may provide useful additional information to investors when considered in conjunction with our U.S. GAAP financial
statements and other information in this prospectus supplement, less reliance should be placed on Adjusted property EBITDA or Adjusted EBITDA as a measure in assessing our overall financial performance.
|
Reconciliation of Adjusted EBITDA and Adjusted Property EBITDA to Net Income Attributable to Melco Crown Entertainment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
Nine months ended
September 30,
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands of U.S. dollars)
|
|
Adjusted property EBITDA
|
|
|
1,379,111
|
|
|
|
1,285,474
|
|
|
|
931,984
|
|
|
|
695,558
|
|
|
|
783,264
|
|
Corporate and Others expenses
|
|
|
(91,299
|
)
|
|
|
(118,971
|
)
|
|
|
(115,735
|
)
|
|
|
(87,310
|
)
|
|
|
(82,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
1,287,812
|
|
|
|
1,166,503
|
|
|
|
816,249
|
|
|
|
608,248
|
|
|
|
700,533
|
|
Payments to the Philippine Parties
|
|
|
|
|
|
|
(870
|
)
|
|
|
(16,547
|
)
|
|
|
(11,994
|
)
|
|
|
(24,475
|
)
|
Land rent to Belle Corporation
|
|
|
(3,045
|
)
|
|
|
(3,562
|
)
|
|
|
(3,476
|
)
|
|
|
(2,634
|
)
|
|
|
(2,524
|
)
|
Net gain on disposal of property and equipment to Belle Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,134
|
|
Pre-opening costs
|
|
|
(13,969
|
)
|
|
|
(90,556
|
)
|
|
|
(168,172
|
)
|
|
|
(115,671
|
)
|
|
|
(2,212
|
)
|
Development costs
|
|
|
(26,297
|
)
|
|
|
(10,734
|
)
|
|
|
(110
|
)
|
|
|
(57
|
)
|
|
|
(7
|
)
|
Depreciation and amortization
|
|
|
(382,806
|
)
|
|
|
(368,394
|
)
|
|
|
(470,634
|
)
|
|
|
(340,681
|
)
|
|
|
(414,744
|
)
|
Share-based compensation
|
|
|
(14,987
|
)
|
|
|
(20,401
|
)
|
|
|
(20,827
|
)
|
|
|
(15,624
|
)
|
|
|
(14,748
|
)
|
Property charges and others
|
|
|
(6,884
|
)
|
|
|
(8,698
|
)
|
|
|
(38,068
|
)
|
|
|
(5,339
|
)
|
|
|
(2,809
|
)
|
Gain on disposal of assets held for sale
|
|
|
|
|
|
|
22,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other non-operating expenses, net
|
|
|
(259,370
|
)
|
|
|
(154,938
|
)
|
|
|
(158,192
|
)
|
|
|
(98,310
|
)
|
|
|
(192,725
|
)
|
Income tax expense
|
|
|
(2,441
|
)
|
|
|
(3,036
|
)
|
|
|
(1,031
|
)
|
|
|
(765
|
)
|
|
|
(4,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
578,013
|
|
|
|
527,386
|
|
|
|
(60,808
|
)
|
|
|
17,173
|
|
|
|
50,407
|
|
Net loss attributable to noncontrolling interests
|
|
|
59,450
|
|
|
|
80,894
|
|
|
|
166,555
|
|
|
|
100,913
|
|
|
|
82,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Melco Crown Entertainment
|
|
|
637,463
|
|
|
|
608,280
|
|
|
|
105,747
|
|
|
|
118,086
|
|
|
|
132,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-10
RISK FACTORS
An investment in our ADSs involves significant risks. You should carefully consider the risks described below and in our annual report on
Form 20-F for the year ended December 31, 2015, as well as the other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus before you decide to buy the ADSs. If any of the following risks
materializes, our business, prospects, financial condition and results of operations could be materially harmed, the trading price of our ADSs could decline and you could lose all or part of your investment.
Risks Related to This Offering
The
effect of the borrowing of our ADSs from Melco Leisure and Entertainment Group Limited and the subsequent sale of such borrowed ADSs by the dealers or their respective affiliates to establish or modify the dealers respective hedge positions in
respect of the cash settled swap transactions may have a negative effect on the market price of our ADSs.
In connection with hedging
their exposure under the cash-settled swap transactions and the related share pledge agreements (the swap transactions), the dealers or one of their respective affiliates will agree to borrow from Melco Leisure and Entertainment Group
Limited an aggregate amount of 27,331,933 ADSs (the borrowed ADSs). We have been advised by the dealers that they or their respective affiliates intend to establish the dealers initial hedge positions in respect of the swap
transactions by establishing short positions in the borrowed ADSs through the underwritten offering covered by this prospectus supplement. The establishment of such initial hedge positions could have the effect of decreasing, or limiting an increase
in, the market price of our ADSs. In addition, the purchases of our ADSs by the dealers or their respective affiliates in connection with the termination of all or any portion of the securities loan agreements with Melco Leisure and Entertainment
Group Limited and/or the swap transactions may have the effect of increasing, or limiting a decrease in, the market price of our ADSs during the relevant unwind period.
The securities loan agreements and the swap transactions are set to terminate in six months, but the swap transactions may be terminated early
by the selling shareholder and each of the securities loan agreements may be terminated early at the option of the dealer or its affiliate that is a party thereto and each of the swap transactions may be terminated early under certain conditions.
See Underwriting.
The trading price of our ADSs has been volatile since our ADSs began trading on Nasdaq, and may be
subject to fluctuations in the future.
The trading price of our ADSs has been and may continue to be subject to wide fluctuations. Our
ADSs were first quoted on the Nasdaq Global Market beginning on December 19, 2006, and the Nasdaq Global Select Market since January 2, 2009. During the period from December 19, 2006 to December 14, 2016, the trading prices of our ADSs ranged from
US$2.27 to US$45.70 per ADS and the closing sale price on December 14, 2016 was US$17.31 per ADS. The market price for our shares and ADSs may continue to be volatile and subject to wide fluctuations in response to factors including the following:
|
|
|
uncertainties or delays relating to the financing, completion and successful operation of our projects;
|
|
|
|
developments in the Macau market, the Philippine market or other Asian gaming markets, including the announcement or completion of major new projects by our competitors;
|
|
|
|
general economic, political or other factors that affect the region where our properties are located;
|
|
|
|
regulatory developments affecting us or our competitors;
|
|
|
|
actual or anticipated fluctuations in our quarterly operating results;
|
|
|
|
changes in financial estimates by securities research analysts;
|
S-11
|
|
|
changes in the economic performance or market valuations of other gaming and leisure industry companies;
|
|
|
|
changes in our market share of the Macau gaming market and/or the Philippine gaming market;
|
|
|
|
addition or departure of our executive officers and key personnel;
|
|
|
|
fluctuations in the exchange rates between the U.S. dollar, Hong Kong dollar, Pataca, Renminbi and Philippine peso;
|
|
|
|
release or expiration of lock-up or other transfer restrictions on our outstanding shares;
|
|
|
|
sales or perceived sales of additional shares or ADSs or securities convertible or exchangeable or exercisable for shares or ADSs; and
|
|
|
|
rumors related to any of the above.
|
In addition, the securities market has from time to time
experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of our ADSs.
We cannot assure you that we will make dividend payments in the future.
On February 25, 2014, we adopted a dividend policy to distribute quarterly dividends of approximately 30% of consolidated net income
attributable to Melco Crown Entertainment for the relevant quarter, subject to our ability to pay dividends from our accumulated and future earnings and our cash balance and future commitments at the time of declaration of any dividend. We cannot
assure you that we will make any dividend payments on our shares in the future. Dividend payments will depend upon a number of factors, including our results of operations, earnings, capital requirements and surplus, general financial conditions,
contractual restrictions and other factors considered relevant by our board.
Except as permitted under the Companies Law, as amended, of
the Cayman Islands (the Cayman Companies Law) and the common law of the Cayman Islands, we are not permitted to distribute dividends unless we have a profit, realized or unrealized, or a reserve set aside from profits which our directors
determine is no longer needed. Our ability, or the ability of our subsidiaries, to pay dividends is further subject to restrictive covenants contained in our facility agreements governing indebtedness we and our subsidiaries may incur.
Substantial sales of our shares or ADSs in the public market could cause the price of our ADSs and shares to decline.
Sales of our ADSs or shares in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to
decline. The ADSs representing the ordinary shares offered in the underwritten offering will be freely tradable without restriction under the Securities Act. We and the selling shareholder have agreed, subject to specified exceptions, with the
underwriters not to directly or indirectly sell our shares for a period of 45 days, with respect to us, and 90 days, with respect to the selling shareholder, after the date of this prospectus supplement without the prior written consent of the
underwriters. See Underwriting. Following the 45-day, with respect to us, and 90-day, with respect to the selling shareholder, lock-up period, all of our ordinary shares may be sold in the public market by our existing shareholders,
subject to applicable Rule 144 of the Securities Act volume limitations and other limitations imposed under federal securities laws.
In
addition, our major shareholders, Melco International Development Limited and Crown Resorts Limited, have the right to cause us to register the sale of their shares under the Securities Act, subject to the terms of their shareholders deed.
Registration of these shares under the Securities Act would result in these shares becoming eligible for deposit in exchange for freely tradable ADSs without restriction under the Securities Act immediately upon the effectiveness of the registration
statement. Sales of these registered shares in the public market could cause the price of our ADSs to decline. Any decision by us to raise further equity in the markets in the U.S., which would result in dilution to existing shareholders, could
cause the price of our ADSs to decline.
S-12
Holders of ADSs have fewer rights than shareholders and must act through the depositary to
exercise those rights.
Holders of ADSs do not have the same rights of our shareholders and may only exercise the voting rights with
respect to the underlying ordinary shares of the depositary and in accordance with the provisions of the deposit agreement. Advance notice of at least seven days is required for the convening of our annual general meeting and other shareholders
meetings. When a general meeting is convened, you may not receive sufficient notice of a shareholders meeting to permit you to withdraw ordinary shares represented by your ADSs to allow you to cast your vote with respect to any specific
matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to
you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. The depositary and its agents will not be responsible for any failure to carry out
any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you requested. In
addition, in your capacity as an ADS holder, you will not be able to convene a shareholder meeting.
You may be subject to limitations
on transfers of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer
books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the
depositary are closed, or at any time if we deem or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings, and you may not
receive cash dividends if it is unlawful or impractical to make them available to you.
We may from time to time distribute rights to
our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption
from the registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered
under the Securities Act, or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be
declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.
In addition, the depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our
ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that
it is unlawful, inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain
distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property and you will not receive such distribution.
We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman
Islands law than that under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
Our
corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Companies Law and the common law of the Cayman Islands. The rights of shareholders to take
S-13
action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under the Cayman Companies Law are to a large extent governed by the
common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority
on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United
States. In particular, the Cayman Islands has a different body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman
Islands. Furthermore, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States.
As a result of all of the above, you may have more difficulty in protecting your interests in the face of actions taken by management, members
of our board or controlling shareholders than you would as shareholders of a U.S. public company.
You may have difficulty enforcing
judgments obtained against us.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the
United States. All of our current operations, and administrative and corporate functions are conducted in Macau, Hong Kong and the Philippines. 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, Hong Kong and Philippine 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, Hong Kong or the
Philippines 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, Hong Kong or the Philippine courts would be competent to hear original actions brought in the Cayman Islands, Macau, Hong Kong or the Philippines against us or such persons predicated upon the securities laws of the United States or
any state.
We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in
adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.
Based on the market price of our ADSs and
ordinary shares, and the composition of our income and assets, we do not believe we were a passive foreign investment company (PFIC), for our taxable year ended December 31, 2015. In addition, we do not expect to be a PFIC for US federal
income tax purposes for our current taxable year ending on December 31, 2016. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you we will not be a PFIC for any taxable year. A non-U.S.
corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such
year is attributable to assets that produce passive income or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of
our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, fluctuations in the market price of the ADSs and ordinary shares may cause us to become a PFIC. In addition,
changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in the Taxation section in the accompanying prospectus) holds an ADS or
ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. For example, such U.S. Holder may incur a significantly increased U.S. federal income tax liability on the receipt of certain distributions on our
ADSs or ordinary shares or on any gain recognized from a sale or other disposition of our ADSs or ordinary shares.
S-14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain or incorporate by reference forward-looking statements that relate to our
current expectations and views about future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those referenced under Risk Factors, which may cause our actual
results, performance or achievements to be materially different from our future results, performance or achievements expressed or implied by the forward-looking statements. Moreover, because we operate in a heavily regulated and evolving industry,
may become highly leveraged, and operate in Macau, a high-growth market with intense competition and the Philippines, a market that is expected to experience growth over the next several years, we may become subject to new risks from time to time.
In some cases, these 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 these 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:
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our ability to raise additional financing;
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our future business development, results of operations and financial condition;
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growth of the gaming market in and visitation to Macau and the Philippines;
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our anticipated growth strategies;
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the liberalization of travel restrictions on citizens of the Peoples Republic of China and convertibility of the Renminbi;
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the availability of credit for gaming patrons;
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the uncertainty of tourist behavior related to spending and vacationing at casino resorts in Macau and the Philippines;
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fluctuations in occupancy rates and average daily room rates in Macau and the Philippines;
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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., Venetian Macau, S.A., Wynn Resorts (Macau) S.A., Galaxy
Casino, S.A. and MGM Grand Paradise, S.A.;
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the formal grant of an occupancy permit for certain areas of City of Dreams that remain under construction or development;
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the development of Morpheus and retail precinct at City of Dreams;
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our entering into new development and construction projects and new ventures in or outside of Macau or the Philippines;
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construction cost estimates for our development projects, including projected variances from budgeted costs;
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government regulation of the casino industry, including gaming table allocation, gaming license approvals and the legalization of gaming in other jurisdictions;
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the completion of infrastructure projects in Macau and the Philippines; and
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the outcome of any current and future litigation.
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The forward-looking statements made or
incorporated by reference in this prospectus supplement and the accompanying prospectus relate only to events or information as of the date on which the statements are made.
S-15
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, or to
reflect the occurrence of unanticipated events. You should read this prospectus supplement, the accompanying prospectus, the documents that we incorporate by reference and the registration statement of which this prospectus supplement and
accompanying prospectus are part, completely and with the understanding that our actual future results may be materially different from what we expect.
S-16
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of ordinary shares by the selling shareholder or from the sale of the borrowed ADSs by
the dealers.
S-17
MARKET PRICE INFORMATION
The following table provides the high and low trading prices for our ADSs on the NASDAQ Global Select Market for the periods indicated.
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Sales Price
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High
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Low
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(U.S. dollars)
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Monthly High and Low
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December 2016 (through December 14)
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19.75
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16.26
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November 2016
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20.00
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16.61
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October 2016
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17.58
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14.99
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September 2016
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16.45
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13.65
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August 2016
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15.59
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12.86
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July 2016
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14.25
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11.91
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June 2016
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14.47
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11.99
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Quarterly High and Low
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Third Quarter 2016
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16.45
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11.91
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Second Quarter 2016
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17.12
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11.99
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First Quarter 2016
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18.00
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12.05
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Fourth Quarter 2015
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20.23
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13.37
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Third Quarter 2015
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24.00
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12.80
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Second Quarter 2015
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25.12
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17.82
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First Quarter 2015
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28.17
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20.40
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Fourth Quarter 2014
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27.19
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21.04
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Third Quarter 2014
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37.00
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24.77
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Second Quarter 2014
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41.90
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29.76
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First Quarter 2014
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45.70
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35.06
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Yearly High and Low
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2015
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28.17
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12.80
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2014
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45.70
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21.04
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2013
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39.42
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17.32
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2012
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16.98
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9.13
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2011
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16.15
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6.46
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S-18
DIVIDEND POLICY
Our board retains complete discretion on whether to pay dividends. Even if our board decides to pay dividends, the form, frequency and amount
will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board may deem relevant. Dividends will be declared and paid in Hong Kong dollar
for holders of ordinary shares and U.S. dollar for holders of ADSs.
On February 25, 2014, our board adopted a new dividend policy under
which, subject to our capacity to pay from accumulated and future earnings and the cash balance and future commitments at the time of declaration of dividend, we intend to provide our shareholders with quarterly dividends of approximately 30% of
consolidated net income attributable to our company for the relevant quarter. Our board reviews from time to time our dividend payout ratio, as part of our commitment to maximizing shareholder value, taking into consideration our financial
performance and market conditions.
On February 18, 2016, our board declared a special dividend of US$0.2146 per ordinary share which was
paid to our shareholders on March 16, 2016. On May 31, 2016, August 31, 2016 and November 30, 2016 we paid a quarterly dividend of US$0.0073 per ordinary share, US$0.0063 per ordinary share and US$0.0126 per ordinary share, respectively, to our
shareholders.
All subsidiaries incorporated in Macau are required to set aside a minimum of 10% to 25% of the entitys profit after
taxation to the legal reserve until the balance of the legal reserve reaches a level equivalent to 25% to 50% of the entitys share capital in accordance with the provisions of the Macau Commercial Code. The legal reserve sets aside an amount
from the subsidiaries statements of operations and is not available for distribution to the shareholders of the subsidiaries. The appropriation of legal reserve is recorded in the subsidiaries financial statements in the year in which it
is approved by the boards of directors of the relevant subsidiaries.
Our indebtedness contains, or may be expected to contain,
restrictions on payment of dividends to us, which is expected to affect our ability to pay dividends in the foreseeable future.
Under the
Cayman Companies Law, subject to the provisions of our articles of association, our share premium account may be applied to pay distributions or dividends to shareholders, provided that immediately following the date the distribution or dividend is
proposed to be paid, we are able to pay our debts as they fall due in the ordinary course of business.
S-19
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2016. The historical data in the table is derived from, should be
read in conjunction with and is qualified by reference to the consolidated financial statements and notes thereto and other financial information incorporated by reference in this prospectus supplement.
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As of September 30, 2016
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(unaudited)
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(in thousands of U.S. dollars)
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Long-term indebtedness:
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Long-term debt, net
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3,667,778
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Total long-term indebtedness
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3,667,778
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Shareholders equity
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Ordinary shares
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14,759
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Treasury shares
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(124
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)
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Additional paid-in capital
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2,776,599
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Accumulated other comprehensive losses
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(23,248
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)
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Retained earnings
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546,090
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Total Melco Crown Entertainment shareholders equity
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3,314,076
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Noncontrolling interests
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507,933
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Total equity
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3,822,009
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Total capitalization
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7,489,787
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On November 30, 2016, our indirect 60% subsidiary Studio City Company Limited issued US$350 million aggregate
principal amount of 5.875% senior secured notes due 2019 and US$850 million aggregate principal amount of 7.250% senior secured notes due 2021, the net proceeds of which, together with cash on hand, were used to repay in full Studio Citys
then-existing HK$10,855,880,000 senior secured credit facilities (except for the HK$1 million equivalent rolled over into the term loan facility referred to below). The notes are guaranteed by Studio City Investments Limited, the direct parent of
Studio City Company Limited, and all of the subsidiaries of Studio City Investments Limited (other than Studio City Company Limited, the issuer of the notes), and secured by substantially all of the material assets of Studio City Investments Limited
and its subsidiaries. Studio City Company Limited also entered into an amendment and restatement agreement on November 23, 2016 with, among others, Bank of China Limited, Macau Branch, which, upon satisfaction of certain conditions precedent,
amended, restated and extended the then existing senior secured credit facilities (the balance of which was fully repaid as described above) to provide for a new HK$233 million revolving credit facility and a HK$1 million term loan facility. The
amended, restated and extended senior secured credit facilities are guaranteed by the same entities that guarantee the notes and secured by substantially the same collateral as those securing the notes with priority over the notes with respect to
any proceeds received upon any enforcement action of the common collateral.
Except as disclosed above, there has been no material change
in our long-term indebtedness and shareholders equity since September 30, 2016.
S-20
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of December 15, 2016, by:
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each of our directors and executive officers;
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each person known to us to own beneficially more than 5.0% of our ordinary shares; and
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the selling shareholder.
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The calculations in the table below are based on 1,475,924,523
ordinary shares issued and outstanding as of December 15, 2016. The table below also presents information to give effect to the completion of the underwritten offering, but not Melco Leisure and Entertainment Group Limiteds loan of ADSs
to the dealers, or its purchase of 198,000,000 ordinary shares from the selling shareholder described in Prospectus Supplement Summary Private Transfer, the purchase and sale obligations and the closing of which is subject to the
receipt of Macau regulatory approval, the buyers financing arrangements and other customary closing conditions.
Beneficial
ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right
to acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security.
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Ordinary shares
beneficially owned prior to
the underwritten offering
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Ordinary shares being sold
in the underwritten offering
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Ordinary shares
beneficially owned after
the underwritten offering
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Number
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%
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Number
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%
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Number
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%
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Directors and Executive Officers
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|
Lawrence Yau Lung Ho
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559,229,043
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(1)
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37.9
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|
559,229,043
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(1)
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|
37.9
|
|
|
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|
13,820,617
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(2)
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|
0.9
|
|
|
|
|
|
|
|
|
|
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13,820,617
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(2)
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|
0.9
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|
Robert John Rankin
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|
Clarence Yuk Man Chung
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*
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*
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|
|
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*
|
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*
|
Evan Andrew Winkler
|
|
|
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|
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|
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|
|
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|
James Andrew Charles MacKenzie
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|
*
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*
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|
|
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|
*
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|
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*
|
Robert Wason Mactier
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*
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|
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*
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|
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|
*
|
|
|
|
*
|
Alec Yiu Wa Tsui
|
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*
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*
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*
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*
|
Thomas Jefferson Wu
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|
*
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|
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*
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|
|
|
|
*
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|
*
|
Geoffrey Stuart Davis
|
|
|
|
*
|
|
|
|
*
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|
|
|
|
|
|
|
|
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|
|
*
|
|
|
|
*
|
Stephanie Cheung
|
|
|
|
*
|
|
|
|
*
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|
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|
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|
|
|
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|
*
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|
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*
|
Akiko Takahashi
|
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|
*
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|
|
|
*
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|
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*
|
|
|
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*
|
Jaya Jesudason
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*
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*
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|
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|
|
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*
|
|
|
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*
|
Directors and executive officers as a group
|
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577,275,023
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38.7
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|
577,275,023
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|
|
|
38.7
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|
Major Shareholders
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|
Melco Leisure and Entertainment Group
Limited
(3)
|
|
|
559,229,043
|
|
|
|
37.9
|
|
|
|
|
|
|
|
|
|
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|
559,229,043
|
|
|
|
37.9
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|
Crown Asia Investments Pty Ltd
(4)
|
|
|
404,229,043
|
|
|
|
27.4
|
|
|
|
40,925,499
|
|
|
|
2.8
|
|
|
|
363,303,544
|
|
|
|
24.6
|
|
(1)
|
Represents 559,229,043 ordinary shares beneficially owned by Mr. Lawrence Ho through Melco Leisure and Entertainment Group Limited.
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(2)
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Represents 13,820,617 ordinary shares in which Mr. Lawrence Ho had a direct interest as of December 15, 2016, of which 9,697,673 ordinary shares are in the form of share options exercisable within 60 days and restricted
shares granted under our 2006 and 2011 Share Incentive Plans.
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(3)
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After giving effect to the purchase of 198,000,000 ordinary shares by Melco Leisure and Entertainment Group Limited (Melco Leisure) from Crown Asia Investments Pty Ltd, and assuming no other changes
subsequent to the closing of the underwritten offering, Melco Leisure would beneficially own 757,229,043 ordinary shares, or 51.3% of our outstanding ordinary shares. As of December 15, 2016, Mr. Lawrence Yau Lung Ho, our chairman, chief executive
officer and executive director as well as the chairman, chief executive officer and executive director of Melco International Development Limited (Melco), personally holds 30,769,132 ordinary shares of Melco, representing approximately
1.99% of Melcos ordinary shares outstanding. In addition, 119,303,024 ordinary shares of Melco are held by Lasting Legend Ltd., 294,527,606 ordinary shares of Melco are held by Better Joy Overseas Ltd., 50,830,447 ordinary shares of Melco are
held by Mighty Dragon Developments Limited, 7,294,000 ordinary shares of Melco are held by The L3G Capital Trust and 1,566,000 ordinary shares of Melco are held by Maple Peak Investments Inc., representing approximately 7.71%, 19.04%, 3.29% , 0.47%
and 0.10% of Melcos shares, all of which companies are owned by persons and/or trusts affiliated with Mr. Ho. Mr. Ho also has interest in Great Respect Limited, a company controlled by a discretionary family trust, the beneficiaries of which
include Mr. Ho and his immediate family members and held 306,382,187 ordinary shares of Melco, representing 19.81% of Melcos shares. Therefore, we believe that Mr. Ho beneficially owns an aggregate of 810,672,396 ordinary shares of Melco,
representing approximately 52.41% of Melcos ordinary shares outstanding. Melco Leisure is a direct wholly-owned subsidiary of Melco. The address of Melco and Melco Leisure is c/o The Penthouse, 38th Floor, The Centrium, 60 Wyndham Street,
Central, Hong Kong. Melco is listed on the Main Board of the Hong Kong Stock Exchange.
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(4)
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Crown Asia Investments is a direct wholly-owned subsidiary of Crown Entertainment Group Holdings and Crown Entertainment Group Holdings is a wholly-owned subsidiary of Crown Resorts Limited. As of December 15, 2016,
Crown Resorts Limited was approximately 48.2% owned by Consolidated Press Holdings Pty Limited and its related corporations, which is a group related to Mr. James Packer. The address of Crown Resorts Limited, Crown Entertainment Group Holdings and
Crown Asia Investments is Level 3, Crown Towers, 8 Whiteman Street, Southbank, Victoria 3006, Australia. Crown Resorts Limited is listed on the Australian Stock Exchange.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting agreement dated December 15, 2016, the selling shareholder has
agreed to sell 40,925,499 ordinary shares of Melco Crown Entertainment Limited in the underwritten offering, to the underwriters, who are reselling 13,641,833 ADSs representing these shares. In addition, the selling shareholder will enter into
cash-settled swap transactions relating to a fixed number of our ordinary shares (subject to anti-dilution and similar adjustments) and related share pledge agreements over our ordinary shares (the swap transactions) with affiliates of
each of the underwriters (the dealers). In connection with hedging their exposure under the swap transactions, the dealers or one of their respective affiliates have agreed to borrow ADSs (the borrowed ADSs) from Melco
Leisure and Entertainment Group Limited, and the underwriters have agreed to purchase the respective numbers of ADSs set out in in the table below. See Swap Transactions for more information. The offering of borrowed ADSs is
conditioned upon the effectiveness of the swap transaction with the selling shareholder and the delivery of the borrowed ADSs pursuant to the securities loan agreement with Melco Leisure and Entertainment Group Limited.
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Name
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Number of
secondary
shares
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Number
of borrowed
ADSs
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Total ADSs
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Deutsche Bank Securities Inc.
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UBS Securities LLC
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Morgan Stanley & Co. LLC
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Total
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The underwriting agreement provides that the underwriters obligation to purchase ordinary shares from the
selling shareholder or the borrowed ADSs from the dealers is subject to the satisfaction of the conditions contained therein. The underwriters are committed to take and pay for all of the ordinary shares being offered by the selling shareholder and
all of the borrowed ADSs being offered by the dealers, if any are taken.
The underwriters may offer the ADSs from time to time for sale
in one or more transactions on NASDAQ, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. In connection
with the sale of the ADSs offered hereby, the underwriters may be deemed to have received compensation in the form of an underwriting discount. The underwriters may effect such transactions by selling ADSs to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from the underwriters or purchasers of shares for whom they may act as agents or to whom they may sell as principal.
Swap Transactions
The selling
shareholder will enter into the swap transactions relating to a fixed number of our ordinary shares (subject to anti-dilution and similar adjustments) with the dealers. In connection with the execution of the swap transactions, the dealers or their
respective affiliates will borrow from Melco Leisure and Entertainment Group Limited and sell in this offering an aggregate of 27,331,933 ADSs through the underwriters. The selling shareholder will not receive any proceeds for the sale of the
borrowed ADSs.
The swap transactions generally provide for cash payments (i) by the selling shareholder to each of the dealers if the
market price during the valuation dates specified therein is in excess of the reference price and (ii) by each of the dealers to the selling shareholder if the market price during those valuation dates is less than the reference price. The
reference price will be US$ per ADS. In addition, each of the dealers and the selling shareholder will pay specified fixed and floating amounts to each other, and the
selling shareholder will pay each of the dealers certain costs related to borrowing the ADSs. The selling shareholder will pledge a number of ordinary shares underlying the number of ADSs to which the swap transactions relate in order to secure
its obligations thereunder. If the dealers are unable to borrow ADSs, or if this offering does not close, then the swap transactions will not become effective.
S-23
In connection with the swap transactions with the selling shareholder, the dealers will sell
securities covered by this prospectus supplement, including in short sale transactions. The dealers will use the borrowed ADSs to settle sales covered by this prospectus supplement.
Lock-Up Agreements
The selling
shareholder has agreed that, subject to certain exceptions, without the prior written consent of Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co. LLC, it will not directly or indirectly, (i) sell, offer to sell,
contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with the SEC in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any ADSs or the underlying shares or any other securities of our company that
are substantially similar to ADSs or the underlying shares, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of ownership of ADSs or the underlying shares or any other securities of our company that are substantially similar to ADSs or the underlying shares, or any securities
convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of ADSs or the underlying shares or such other securities, in cash or
otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii), for a period of 90 days after the date of this prospectus supplement. One such exception relates to dispositions in the public markets or
otherwise that are effected during periods of time when the swaps are being unwound.
We have agreed that, subject to certain exceptions,
without the prior written consent of Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co. LLC, we will not directly or indirectly, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with the SEC in respect of, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any ADSs or the underlying shares or any other securities of our company that are substantially similar to ADSs or the underlying shares, or
any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of ADSs or the underlying shares or any other securities of our company that are substantially similar to ADSs or the underlying shares, or any securities convertible into or exchangeable or exercisable for, or any warrants
or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of ADSs or the underlying shares or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any transaction
specified in clause (i) or (ii), for a period of 45 days after the date of this prospectus supplement.
The underwriters may release the
ADSs, the ordinary shares and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release ADSs, ordinary shares and other securities from
lock-up agreements, the underwriters will consider, among other factors, the holders reasons for requesting the release, the number of ordinary shares and other securities for which the release is being requested and market conditions at the
time.
Indemnification
We and the
selling shareholder have agreed to indemnify the underwriters, the dealers and their controlling persons against certain liabilities, including liabilities under the Securities Act of 1933.
Stabilization, Short Positions and Passive Market Making
In connection with the offering, the underwriters may purchase and sell ADSs in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
S-24
sales. Short sales involve the sale by the underwriters of a greater number of ADSs than it is required to purchase in the offering. The underwriters must close out any short position by
purchasing ADSs in the open market. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors
who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of ADSs made by the underwriters in the open market prior to the completion of the offering.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may
have the effect of preventing or retarding a decline in the market price of our ADSs, and may stabilize, maintain or otherwise affect the market price of the ADSs. As a result, the price of the ADSs may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on NASDAQ, in the over-the-counter market or otherwise.
In connection with this offering, underwriters and selling group members may engage in passive market making transactions in the ADSs on the
NASDAQ Global Select Market in accordance with Rule 103 of Regulation M under the Exchange Act during a period before the commencement of offers or sales of ADSs and extending through the completion of distribution. A passive market maker
must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market makers bid that bid must then be lowered when specified purchase limits are
exceeded. Passive market making may cause the price of our ADSs to be higher than the price that otherwise would exist in the open market in the absence of those transactions. The underwriters and Dealers are not required to engage in passive market
making and may end passive market making activities at any time.
Neither we, the selling shareholder, the Dealers, nor any underwriter
makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ADSs. In addition, neither we, the selling shareholder, the Dealers, nor any underwriter makes
any representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic Distribution
A prospectus
supplement and the accompanying prospectus may be made available in electric format on the Internet sites or through other online services maintained by the underwriters, or by their respective affiliates. In those cases, prospective investors may
view offering terms online and prospective investors may be allowed to place orders online.
Other than the prospectus supplement and the
accompanying prospectus in electronic format, the information on the website and any information contained in any other website maintained by the underwriters is not part of the prospectus supplement, accompanying prospectus or the registration
statement of which this prospectus supplement and the accompanying prospectus form a part, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.
Discretionary Sales
The underwriters
have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of ADSs offered by them.
Listing
Our ADSs are listed on NASDAQ
under the symbol MPEL.
S-25
Relationships with Underwriters and Dealers
The underwriters, the dealers and their respective affiliates are full service financial institutions engaged in various activities, which may
include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters, the dealers and their
respective affiliates have, from time to time, performed, and may in the future perform investment banking and advisory services for us from time to time for which they received or may in the future receive customary fees and expenses. In the
ordinary course of their various business activities, the underwriters, the dealers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and
financial instruments (including bank loans) for their own account and for the accounts of their customers, and may at any time hold long and short positions in such securities and instruments, and such investment and securities activities may
involve securities and/or instruments of our company.
The underwriters, the dealers and their respective affiliates may also make
investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and
instruments.
Certain of the affiliates of Deutsche Bank Securities Inc., one of the underwriters in this offering, are agents or lenders
under a HK$3.90 billion (equivalent to approximately US$500 million) term loan facility and a HK$9.75 billion (equivalent to approximately US$1.25 billion) revolving credit facility with Melco Crown (Macau) Limited. In addition, an affiliate of
Deutsche Bank Securities Inc. acted as an initial purchaser in the offering in November 2016 by Studio City Company Limited of US$350 million aggregate principal amount of 5.875% senior secured notes due 2019 and US$850 million aggregate principal
amount of 7.250% senior secured notes due 2021. This offering partially refinanced a previous term loan facility of HK$10.08 billion (equivalent to approximately US$1.3 billion) and a revolving credit facility of HK$775.4 million (equivalent to
approximately US$100.0 million) with Studio City Company Limited and in respect of which certain affiliates of Deutsche Bank Securities Inc. were agents or lenders (this facility has been substantially paid down and now comprises a term loan
facility of HK$1 million and a revolving credit facility of HK$233 million, with another financial institution as agent and lender).
Selling
Restrictions
Notice to Prospective Investors in Australia
This document does not constitute a prospectus or other disclosure document under the Corporations Act 2001 (Cth) (Australian
Corporations Act) and does not purport to include the information required of a disclosure document under the Australian Corporations Act. This document has not been, and will not be, lodged with the Australian Securities and Investments
Commission (whether as a disclosure document under the Australian Corporations Act or otherwise). Any offer in Australia of any securities under this document or otherwise may only be made to a person who is a wholesale client (within
the meaning of section 761G of the Australian Corporations Act) and either a sophisticated investor (within the meaning of section 708(8) of the Australian Corporations Act), a professional investor (within the meaning of
section 708(11) of the Australian Corporations Act) or a person to whom another exemption under section 708 of the Australian Corporations Act applies so that it is lawful to offer such securities to them in Australia without disclosure under Part
6D.2 of the Australian Corporations Act.
Any offer for on-sale of any securities that is received in Australia within 12 months after
their sale under this document is likely to need a prospectus under Part 6D.2 of the Australian Corporations Act, unless such offer
S-26
for on-sale in Australia is conducted in reliance on an exemption under section 708 of the Australian Corporations Act. Any persons acquiring such securities should observe such Australian
on-sale restrictions.
Neither we nor the underwriters are licensed in Australia to provide financial product advice in relation to any
securities. Any advice contained in this document is general advice only. This document has been prepared without taking account of any investors objectives, financial situation or needs, and before making an investment decision on the basis
of this document, investors should consider the appropriateness of the information in this document, having regard to their own objectives, financial situation and needs. No cooling off period applies to an acquisition of such securities.
Notice to Prospective Investors in Canada
Securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in
National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any
resale of such securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this
document (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers
province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4)
of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in China
This document has not been and will not be circulated or distributed in the Peoples Republic of China, and securities may not be offered
or sold, and will not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the Peoples Republic of China except pursuant to applicable laws and regulations of the Peoples Republic of
China. For the purpose of this paragraph, Peoples Republic of China does not include Taiwan and the special administrative regions of Hong Kong and Macau.
Notice to Prospective Investors in European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each a Relevant Member
State), no securities have been offered or will be offered pursuant to the offer to the public in that Relevant Member State prior to the publication of a prospectus in relation to such securities which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State, all in accordance with the Prospectus Directive, except that offers of such securities may be made to the public in that Relevant Member State
at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State:
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to any legal entity which is a qualified investor as defined under the Prospectus Directive;
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to fewer than 100, or if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons in a Relevant Member State (other than qualified investors as
defined in the Prospectus Directive) subject to obtaining the prior consent of the Underwriters; or
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S-27
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in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3(2) of the Prospectus Directive,
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provided that no such offer of such securities shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus
Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the
expression an offer to the public in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any such securities to be offered
so as to enable an investor to decide to purchase any such securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression Prospectus
Directive means Directive 2003/71/EC (with amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in each relevant member state. The
expression 2010 PD Amending Directive means Directive 2010/73/EU.
Notice to Prospective Investors in Hong Kong
This document has not been approved by or registered with the Securities and Futures Commission of Hong Kong or the Registrar of Companies of
Hong Kong. No person may offer or sell in Hong Kong, by means of any document, any Shares other than (i) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that
Ordinance, or (ii) in other circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer
to the public within the meaning of that Ordinance. No person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to any securities which is directed
at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to such securities which are or are intended to be disposed of
only to persons outside Hong Kong or only to professional investors as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Japan
No securities have been and will be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the
FIEA) and each Underwriters has represented and agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan,
including any corporation or entity organized under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration
requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice
to Prospective Investors in Singapore
Each Underwriter has acknowledged that this document has not been and will not be registered
as a prospectus with the Monetary Authority of Singapore and the securities will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore (the SFA). Accordingly, this document and any other document or
material in connection with the offer or sale, or invitation for subscription or purchase, of any securities may not be circulated or distributed, nor may the such securities be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 27 4 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA); (2) to a relevant
person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of,
any other applicable provision of the SFA.
S-28
Where any securities are subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited
investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the
beneficiaries rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the securities under Section 275 of the SFA except:
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to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
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where no consideration is or will be given for the transfer;
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where the transfer is by operation of law;
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as specified in Section 276(7) of the SFA;
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or as specified in Regulation 32 of the Securities and Futures
(Offers and Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Notice to Prospective Investors in United Arab Emirates (excluding
the Dubai International Financial Centre)
No securities has been and will not be offered, sold or publicly promoted or advertised
by it in the United Arab Emirates other than in compliance with any laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.
Notice to Prospective Investors in Dubai International Financial Centre
No securities has been and will not be offered to any person in the Dubai International Financial Centre unless such offer is:
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an Exempt Offer for the purposes of the Markets Rules 2012 of the Dubai Financial Services Authority (the DFSA); and
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made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSA Conduct of Business.
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Notice to Prospective Investors in United Kingdom
Provisions under Notice to Prospective Investors in European Economic Area apply with the additional provisions set forth
below.
Each Underwriter has represented, warranted and agreed that:
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it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial
Services and Markets Act 2000, as amended (the FSMA)) received by it in connection with the issue or sale of any securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and
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it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to such securities in, from or otherwise involving the United Kingdom.
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S-29
EXPENSES
The following table sets forth the estimated costs and expenses, other than underwriting discounts and commissions, related to this offering
and the swap transactions, which will be borne by the selling shareholder. With the exception of the SEC registration fee, all amounts are estimates.
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SEC registration fee
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US$
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Printing expenses
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Legal fees and expenses
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Accounting fees and expenses
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Depositary fees
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Miscellaneous expenses
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Total
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US$
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LEGAL MATTERS
We are being represented by Latham & Watkins with respect to certain legal matters as to United States federal securities and New
York state law. The validity of the ordinary shares represented by the ADSs offered in this offering and certain other legal matters as to Cayman Islands law will be passed upon for us by Walkers.
Certain legal matters relating to the underwritten offering will be passed upon for the underwriters by White & Case LLP as to United
States federal securities and New York state law. Certain legal matters relating to the swap transactions will be passed upon for the dealers by Davis Polk & Wardwell LLP and for the selling shareholder by Cleary Gottlieb Steen & Hamilton
LLP.
EXPERTS
Our consolidated financial statements and the related financial statements schedule as of December 31, 2014 and 2015 and for the years ended
December 31, 2013, 2014 and 2015 incorporated in this prospectus supplement by reference to our report on Form 6-K furnished to the SEC on December 14, 2016 and the effectiveness of our internal control over financial reporting have been audited by
Deloitte Touche Tohmatsu, an independent registered public accounting firm, as stated in their reports which are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements and
financial statements schedule and includes an explanatory paragraph referring to the retrospective adoption of the authoritative guidance on the presentation of debt issuance costs which we adopted on January 1, 2016, and (2) express an unqualified
opinion on the effectiveness of internal control over financial reporting). Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm upon their authority as experts in
auditing and accounting.
The offices of Deloitte Touche Tohmatsu are located at 35th Floor, One Pacific Place, 88 Queensway, Hong
Kong.
S-31
PROSPECTUS
Melco Crown Entertainment Limited
(incorporated in the Cayman Islands with limited liability)
American
Depositary Shares
(each representing three Ordinary Shares)
and Ordinary Shares
This prospectus
relates to the proposed sale from time to time by us or any selling shareholder of ADSs or ordinary shares of Melco Crown Entertainment Limited. Each ADS represents three ordinary shares of Melco Crown Entertainment Limited. We will not receive any
proceeds from the sale of ADSs or ordinary shares by any selling shareholder.
This prospectus may not be used to consummate sales of
securities unless accompanied by a prospectus supplement that will describe the method and terms of the offering. We will provide the specific terms of any offering and the offered securities, as well as information about the selling shareholders,
if any, in one or more supplements to this prospectus. We or any selling shareholder may sell these securities directly, through agents designated from time to time or through underwriters or dealers. If any of our agents or any underwriters are
involved in the sale of securities, we will include the names of those agents or underwriters and any commissions or discounts they may receive in the applicable prospectus supplement. Any prospectus supplement may also add, update or change
information contained in this prospectus.
Our ADSs are listed on the Nasdaq Global Select Market under the symbol MPEL.
Investing in our ADSs or ordinary shares involves risks. See
Risk Factors
beginning on page 3 of
this prospectus and any similar section contained or incorporated by reference in the applicable prospectus supplement concerning factors you should consider before investing in our ADSs or ordinary shares.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this
prospectus is December 14, 2016
Table of Contents
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ABOUT THIS PROSPECTUS
This prospectus is part of an automatic shelf registration statement that we filed with the SEC using a shelf registration process
as a well-known seasoned issuer as defined in Rule 405 under the Securities Act. Under the automatic shelf registration process, we and the selling shareholders may, over time, sell the securities described in this prospectus or in any
applicable prospectus supplement in one or more offerings. This prospectus provides you with a general description of the securities we and the selling shareholders may offer. As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement or the exhibits to the registration statement. Each time we or the selling shareholders sell securities, we will provide a prospectus supplement that will contain specific information about the
terms of that offering and the selling shareholders. A prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional
information described under the next heading Where You Can Find More Information; Incorporation of Documents by Reference before considering an investment in the securities offered by that prospectus supplement.
Neither we nor the selling shareholders have authorized any other person to provide you with different or additional information other than
that contained in or incorporated by reference into this prospectus. Neither we nor the selling shareholders take any responsibility for, or make any assurance as to the reliability of, any other information that others may give you. Neither we nor
the selling shareholders are offering to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable prospectus supplement to this
prospectus is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial
condition, results of operations and prospects may have changed since those dates.
WHERE YOU CAN FIND MORE
INFORMATION; INCORPORATION
OF DOCUMENTS BY REFERENCE
Available Information
We are subject to
the periodic reporting and other informational requirements of the Securities Exchange Act of 1934. Under the Exchange Act, we file annual reports and other information with the SEC. As a foreign private issuer, we are exempt from, among other
things, the rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act.
The public may read and copy any materials we file with the SEC at the SECs Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information about issuers, such as us, who file electronically with the SEC.
The address of that site is
www.sec.gov
.
Our website address is
www.melco-crown.com
. The information on or accessible
through our website, however, is not, and should not be deemed to be, a part of this prospectus.
This prospectus and any prospectus
supplement are part of a registration statement that we filed with the SEC and do not contain all of the information in the registration statement. The full registration statement may be obtained from the SEC, as provided above.
Incorporation by Reference
The
SECs rules allow us to incorporate by reference information into this prospectus, which means that we can disclose important information to you by referring you to another document separately filed with or
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furnished to the SEC. The information incorporated by reference is deemed to be part of this prospectus, and subsequent information that we file with or, to the extent expressly incorporated by
reference into this prospectus, furnish, to the SEC, will automatically update and supersede that information. Any statement contained in a previously filed or furnished document incorporated by reference will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in this prospectus modifies or replaces that statement.
This
prospectus and any accompanying prospectus supplement incorporate by reference the documents set forth below that have previously been filed with or furnished to the SEC:
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the description of our ordinary shares contained in amendment no. 1 to our registration statement on Form
8-A
(File
No. 001-33178)
filed with the SEC on December 5, 2011 and any amendment or report filed with the SEC for the purpose of updating the description;
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our annual report on Form
20-F
for the year ended December 31, 2015 filed with the SEC on April 12, 2016, with the exception of our consolidated financial statements as
of December 31, 2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015, and selected consolidated balance sheet data as of December 31, 2011 to 2015;
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our report on Form
6-K
and the exhibits thereto furnished to the SEC on December 14, 2016, which contain our audited consolidated financial statements as of December 31, 2014
and 2015 and for the years ended December 31, 2013, 2014 and 2015, updated to reflect our retrospective adoption in 2016 of the new guidance on simplifying the presentation of debt issuance costs issued by the Financial Accounting Standards
Board;
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our report on Form
6-K
and the exhibits thereto furnished to the SEC on December 14, 2016, which contain (1) our unaudited condensed consolidated financial statements for the
nine months ended September 30, 2015 and 2016 required under Item 8.A of Form
20-F,
and (2) management discussion and analysis for the nine months ended September 30, 2015 and 2016, as well as
updated financial data for prior periods to reflect our retrospective adoption in 2016 of new guidance referred to above; and
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our reports on Form
6-K
and the exhibits thereto furnished to the SEC on May 4, 2016 (Accession
No. 0001193125-16-576166),
August 3, 2016, and November 8, 2016, respectively, which contain information on changes in our shareholders and management.
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We are also incorporating by reference all subsequent annual reports on Form
20-F
that we file with the SEC and certain reports on Form
6-K
that we furnish to the SEC after the date of this prospectus (to the extent that any reports on Form
6-K
state
that they are incorporated by reference into this prospectus) prior to the termination of the offering of securities under this prospectus. In all cases, you should rely on the later information over different information included in this prospectus
or any accompanying prospectus supplement.
Unless expressly incorporated by reference, nothing in this prospectus will be deemed to
incorporate by reference information furnished to, but not filed with, the SEC. Copies of all documents incorporated by reference in this prospectus, other than exhibits to those documents unless such exhibits are specifically incorporated by
reference in this prospectus, will be provided at no cost to each person, including any beneficial owner, to whom a copy of this prospectus is delivered on the written or oral request of that person made to:
Melco Crown Entertainment Limited
36
th
Floor, The Centrium
60 Wyndham Street
Central, Hong
Kong
Phone:
+852-2598-3600
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OUR COMPANY
Unless otherwise indicated or the context otherwise requires and for the purposes of this prospectus, we, us,
our and our company refer to Melco Crown Entertainment Limited and, as the context requires, its consolidated subsidiaries.
Overview
We are a developer, owner and
operator of casino gaming and entertainment casino resort facilities in Asia. We currently have three major casino-based operations in Macau, namely, City of Dreams, Altira Macau and Studio City, and
non-casino-based
slot machine operations in Macau at our Mocha Clubs. We also have a casino-based operation in the Philippines, City of Dreams Manila.
We are developing Morpheus, the fifth hotel tower at City of Dreams in Cotai, Macau, and are currently reviewing the development plan and
schedule for the remaining undeveloped land at Studio City. We plan to develop Morpheus into an iconic landmark and target its opening in 2018. With 1.0 million square feet of hotel space and 0.5 million square feet of podium space, Morpheus is
expected to house approximately 780 rooms, suites and villas.
Our current and future operations are designed to cater to a broad spectrum
of gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience. We currently own and operate two Forbes
5-Star
hotels in Macau: Altira Macau and
Crown Towers. We seek to attract patrons throughout Asia and, in particular, from Greater China.
In the Philippines, MCE Leisure
(Philippines) Corporation, a subsidiary of Melco Crown (Philippines) Resorts Corporation, currently operates and manages City of Dreams Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila.
We generated a major portion of the total revenues for the year ended December 31, 2015 and the nine months ended September 30, 2016
from our operations in Macau, the principal market in which we compete.
Recent Developments
In May 2016, we repurchased 155 million ordinary shares from our substantial shareholder Crown Asia Investments Pty Ltd, a wholly owned
subsidiary of Crown Resorts Limited (Crown). Following completion of the repurchase, Melco International Development Limited (Melco), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited, became our
single largest shareholder. Mr. James Packer resigned from his position as
Co-Chairman
and became the Deputy Chairman of our board of directors, and Mr. Todd Nisbet resigned as a director. Our
articles of association were amended to provide for a board of nine directors. Our board now comprises three nominees of Melco, two nominees of Crown and four independent directors. Mr. Lawrence Ho is the Chairman of our board of directors.
On December 14, 2016, Crown Asia Investments Pty Ltd agreed to sell, subject to Macau regulatory approval, 198,000,000 ordinary shares,
or 13.4% of our outstanding ordinary shares, to Melco Leisure and Entertainment Group Limited, a wholly owned subsidiary of Melco, in a privately negotiated sale outside the United States in reliance on Regulation S. The aggregate purchase price is
approximately US$1.2 billion, subject to upward adjustments for interest thereon if closing occurs after March 1, 2017. Melco Leisure and Entertainment Group Limited will pay a deposit of US$100 million that is refundable only if the sale and
purchase agreement is terminated prior to closing due to the sellers default. The closing of the sale is conditional upon the receipt of Macau regulatory approval and the availability of financing to the buyer. Any such financing may require a
pledge of our ordinary shares or ADSs held by Melco Leisure and Entertainment Group Limited as collateral.
In conjunction with this sale,
Melco and Crown amended, with effect from the payment of the deposit, their shareholders deed relating to our company to provide for an increase in the nominees of Melco on our board of directors from three to four, a decrease in the nominees
of Crown from two to one, and the number of independent directors remaining at four. The amended shareholders deed also provides that our right to use Crown in our corporate name will terminate six months after the closing of the
private sale.
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Mr. James Packer, a Crown nominee director and our Deputy Chairman, will resign from our company
with effect from December 15, 2016 after the payment of the deposit. We expect that a director nominated by Melco to fill the board vacancy will be appointed in due course in accordance with our corporate governance policies.
The terms of the land concession contract for Studio City require us to fully develop the land on which the property is located by
July 24, 2018. In October 2016, we filed an application with the Macau government requesting an extension of the development period for the additional development on the land on which Studio City is located, which is expected to include a hotel
and related amenities. The application is currently under review by the Macau government. There can be no assurances that we will be granted the necessary extension or that the Macau government will not exercise its right to terminate the land
grant, either partially with respect to the undeveloped part of the site or in its entirety, and we could lose all or substantially all of our investment in Studio City and may not be able to operate Studio City, which would materially adversely
affect our business, results of operations and financial condition.
While Studio City continues to focus on the mass market segment for
gaming, VIP rolling chip operations, including both junket and premium direct VIP offerings, were introduced at Studio City in early November 2016. A VIP rolling chip area has been built at Studio City within which we operate up to 33 VIP tables
allocated to Melco Crown (Macau) Limited, our subsidiary and the holder of our gaming subconcession, by the Macau government.
On
November 30, 2016, our indirect, 60% subsidiary Studio City Company Limited issued US$350 million aggregate principal amount of 5.875% senior secured notes due 2019 and US$850 million aggregate principal amount of 7.25% senior secured
notes due 2021, the net proceeds of which, together with cash on hand, were used to repay in full Studio Citys then-existing HK$10,855,880,000 senior secured credit facilities (except for the HK$1 million equivalent rolled over into the
term loan facility referred to below). The notes are guaranteed by Studio City Investments Limited, the direct parent of Studio City Company Limited, and all of the subsidiaries of Studio City Investments Limited (other than Studio City Company
Limited, the issuer of the notes), and secured by substantially all of the material assets of Studio City Investments Limited and its subsidiaries. Studio City Company Limited also entered into an amendment and restatement agreement on November 23,
2016 with, among others, Bank of China Limited, Macau Branch, which, upon the satisfaction of certain conditions precedent, amended, restated and extended the then-existing senior secured credit facilities (the balance of which was repaid as
described above) to provide for a new HK$233 million revolving credit facility and a HK$1 million term loan facility. The amended, restated and extended senior secured credit facilities are guaranteed by the same entities that guarantee
the notes and secured by substantially the same collateral as those securing the notes, with priority over the notes with respect to any proceeds received upon any enforcement action against the common collateral.
Our Studio City operations sit within a separate, ring-fenced credit group, and the debt obligations related to Studio City are not guaranteed
by its shareholders. As such, we are not contractually required to provide any additional financial support to Studio City with respect to its debt obligations.
Corporate Information
Our principal
executive offices are located at 36
th
Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong, and our telephone number is
+852-2598-3600.
Our
website is
www.melco-crown.com
. The information on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be a part of this prospectus. Our agent for service of
process in the United States is Law Debenture Corporate Services Inc., 400 Madison Avenue, 4
th
Floor, New York, New York 10017.
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RISK FACTORS
Investing in any securities offered pursuant to this prospectus and the applicable prospectus supplement involves significant risks. You
should carefully consider the risk factors set forth in our most recent Annual Report on
Form 20-F
incorporated by reference into this prospectus and in our updates, if any, to those risk factors in our
reports on Form
6-K,
and all other information contained or incorporated by reference into this prospectus and the risk factors and other information contained in the applicable prospectus supplement, before
deciding whether to invest in any such securities. Any of these risks could cause you to lose all or part of your investment in the offered securities. For more information, see Where You Can Find More Information; Incorporation of Documents
by Reference.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and accompanying prospectus supplements contain or incorporate by reference forward-looking statements that relate to our
current expectations and views about future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those referenced under Risk Factors, that may cause our actual
results, performance or achievements to be materially different from our future results, performance or achievements expressed or implied by the forward-looking statements. Moreover, because we operate in a heavily regulated and evolving industry,
may become highly leveraged, and operate in Macau, a high-growth market with intense competition and the Philippines, a market that is expected to experience growth over the next several years, we may become subject to new risks from time to time.
In some cases, these 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 these 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:
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our ability to raise additional financing;
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our future business development, results of operations and financial condition;
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growth of the gaming market in and visitation to Macau and the Philippines;
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our anticipated growth strategies;
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the liberalization of travel restrictions on citizens of the Peoples Republic of China and convertibility of the Renminbi;
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the availability of credit for gaming patrons;
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the uncertainty of tourist behavior related to spending and vacationing at casino resorts in Macau and the Philippines;
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fluctuations in occupancy rates and average daily room rates in Macau and the Philippines;
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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., Venetian Macau, S.A., Wynn Resorts (Macau) S.A., Galaxy
Casino, S.A. and MGM Grand Paradise, S.A.;
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the formal grant of an occupancy permit for certain areas of City of Dreams that remain under construction or development;
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the development of Morpheus and retail precinct at City of Dreams;
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our entering into new development and construction projects and new ventures in or outside of Macau or the Philippines;
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construction cost estimates for our development projects, including projected variances from budgeted costs;
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government regulation of the casino industry, including gaming table allocation, gaming license approvals and the legalization of gaming in other jurisdictions;
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the completion of infrastructure projects in Macau and the Philippines; and
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the outcome of any current and future litigation.
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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
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update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, or to reflect the occurrence of unanticipated events. You should read
this prospectus and the documents that we reference 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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USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities as set forth in the applicable prospectus supplement. We will not receive
any proceeds from any sale of securities by any selling shareholder.
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DESCRIPTION OF SHARE CAPITAL
We are a Cayman Islands exempted company with limited liability and our affairs are governed by our memorandum and articles of association, as
amended and restated from time to time, and the Companies Law (as amended) of the Cayman Islands (the Companies Law).
As of
the date of this prospectus, our authorized share capital consists of 7,300,000,000 ordinary shares, with a nominal or par value of US$0.01 each. As of the date of this prospectus, there are 1,475,924,523 ordinary shares issued and outstanding.
The following are summaries of material provisions of our memorandum and articles of association and the Companies Law insofar as they relate
to the material terms of our ordinary shares.
General
All of our outstanding ordinary shares are fully paid and
non-assessable.
Some of the ordinary shares
are issued in registered form only with no share certificates. Our shareholders who are
non-residents
of the Cayman Islands may freely hold and vote their ordinary shares.
Dividends
The holders of our ordinary
shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law and our articles of association.
Voting Rights
Each ordinary share is
entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by our chairman or one or more shareholders present
in person or by proxy entitled to vote and who together hold not less than 10 % of the paid up voting share capital of our company .
A quorum required for a meeting of shareholders consists of one or more shareholders who hold at least
one-third
of our ordinary shares at the meeting present in person or by proxy or, if a corporation or other
non-natural
person, by its duly authorized representative.
Shareholders meetings are held annually and may be convened by our board on its own initiative or upon a request to the directors by shareholders holding in aggregate at least ten percent of our ordinary shares. Advance notice of at least
seven days is required for the convening of our annual general meeting and other shareholders meetings.
An ordinary resolution to be
passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of not less than
two-thirds
of the votes cast attaching to the ordinary shares. A special resolution will be required for important matters such as changing our name or making changes to our memorandum and articles of association.
Transfer of Ordinary Shares
Subject
to the restrictions of our articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.
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Our board may, in its absolute discretion, decline to register any transfer of any ordinary share
which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any ordinary share unless:
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the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates, and such other evidence as our board may reasonably require to show the right of the transferor
to make the transfer;
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the instrument of transfer is in respect of only one class of ordinary shares;
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the instrument of transfer is properly stamped, if required; or
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in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four.
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If our directors refuse to register a transfer they must, within two months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register
closed at such times and for such periods as our board may from time to time determine, provided, however, that the registration of transfers may not be suspended nor the register closed for more than 30 days in any year.
Liquidation
On a return of capital on
winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis.
If our assets available for distribution are insufficient to repay all of the
paid-up
capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
Our board may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such
shareholders at least 14 clear days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.
Redemption of Ordinary Shares
Subject to
the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as the directors may determine.
Prohibitions on the Receipt of Dividends, the Exercise of Voting or Other Rights or the Receipt of Other Remuneration
Our memorandum and articles of association prohibit anyone who is an unsuitable person or an affiliate of an unsuitable person from:
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receiving dividends or interest with regard to our shares;
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exercising voting or other rights conferred by our shares; and
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receiving any remuneration in any form from us or an affiliated company for services rendered or otherwise.
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Such unsuitable person or its affiliate must sell all of the shares, or allow us to redeem or
repurchase the shares on such terms and manner as the directors may determine and agree with the shareholders, within such period of time as specified by a gaming authority.
These prohibitions commence on the date that a gaming authority serves notice of a determination of unsuitability or our board determines that
a person or its affiliate is unsuitable and continue until the securities are owned or controlled by persons found suitable by a gaming authority or our board, as applicable, to own them. An unsuitable person is any person who is
determined by a gaming authority to be unsuitable to own or control any of our shares or who causes us or any affiliated company to lose or to be threatened with the loss of any gaming license, or who, in the sole discretion of our board, is deemed
likely to jeopardize our or any of our affiliates application for, receipt of approval for right to the use of, or entitlement to, any gaming license.
The terms affiliated company, gaming authority and person have the meanings set forth in our articles of
association.
Redemption of Securities Owned or Controlled by an Unsuitable Person or an Affiliate
Our memorandum and articles of association provide that shares owned or controlled by an unsuitable person or an affiliate of an unsuitable
person are redeemable by us, out of funds legally available for that redemption, by appropriate action of our board to the extent required by the gaming authorities making the determination of unsuitability or to the extent deemed necessary or
advisable by our board having regard to relevant gaming laws. From and after the redemption date, the securities will not be considered outstanding and all rights of the unsuitable person or affiliate will cease, other than the right to receive the
redemption price and the right to receive any dividends declared prior to any receipt of any written notice from a gaming authority declaring the suitable person to be an unsuitable person but not yet paid. The redemption price will be the price, if
any, required to be paid by the gaming authority making the finding of unsuitability or, if the gaming authority does not require a price to be paid, the sum deemed to be the fair value of the securities by our board. The price for the shares will
not exceed the closing price per share of the shares on the principal national securities exchange on which the shares are then listed on the trading date on the day before the redemption notice is given. If the shares are not then listed, the
redemption price will not exceed the closing sales price of the shares as quoted on an automated quotation system, or if the closing price is not then reported, the mean between the bid and asked prices, as quoted by any other generally recognized
reporting system. Our right of redemption is not exclusive of any other rights that we may have or later acquire under any agreement, its bylaws or otherwise. The redemption price may be paid in cash, by promissory note, or both, as required by the
applicable gaming authority and, if not, as we elect.
Our memorandum and articles of association require any unsuitable person and any
affiliate of an unsuitable person to indemnify us and our affiliated companies for any and all losses, costs and expenses, including attorneys fees, incurred by us and our subsidiaries as a result of the unsuitable persons or affiliates
ownership or control of shares, the neglect, refusal or other failure to comply with the provisions of our memorandum and articles of association relating to unsuitable persons, or failure to promptly divest itself of any shares in us.
Variations of Rights of Shares
All or
any of the rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied or abrogated either with the unanimous written consent of the holders of the issued shares of that class or with the sanction of a
special resolution passed at a general meeting of the holders of the shares of that class.
Changes in Capital
We may from time to time by ordinary resolution:
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increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution may prescribe;
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consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
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convert all or any of our
paid-up
shares into stock and reconvert that stock into paid up shares of any denomination;
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sub-divide
our existing shares, or any of them, into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any,
unpaid on each reduced share will be the same as it was in case of the share from which the reduced share is derived; or
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cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.
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We may by special resolution reduce our share capital and any capital redemption reserve in any manner authorized by law.
Accounts and Audit
No shareholder
(other than a director) has any right to inspect any of our accounting record or book or document except as conferred by law or authorized by our board or our company by ordinary resolution of the shareholders.
Subject to compliance with all applicable laws, we may send to every person entitled to receive notices of our general meetings under the
provisions of the articles of association a summary financial statement derived from our annual accounts and our boards report.
Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the
provisions of the articles of association. The remuneration of the auditors shall be fixed by our board.
Our financial statements shall
be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the
shareholders in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this
fact and name such country or jurisdiction.
Exempted Company
We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies
and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the
same as for an ordinary company except for the exemptions and privileges listed below:
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annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the
Companies Law;
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an exempted companys register of members is not open to inspection;
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an exempted company does not have to hold an annual general meeting;
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an exempted company may issue bearer shares or shares with no par value;
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an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
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an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
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an exempted company may register as a limited duration company; and
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an exempted company may register as a segregated portfolio company.
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Differences in Corporate Law
The Companies Law is modeled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the
Companies Law differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to Delaware
corporations and their stockholders.
Mergers and Similar Arrangements
The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and
non-Cayman
Islands companies. For these purposes:
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a merger means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company; and
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a consolidation means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated
company.
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In order to effect a merger or consolidation, the directors of each constituent company must approve a written
plan of merger or consolidation, which must then be authorized by:
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a special resolution of the shareholders of each constituent company; and
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such other authorization, if any, as may be specified in such constituent companys articles of association.
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The plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the
consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent
company and that notification of the merger and consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, subject to
certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory
procedures.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that
the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as
the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands.
While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be
approved, the court can be expected to approve the arrangement if it determines that:
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the statutory provisions as to the required majority vote have been met;
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the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
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the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
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the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
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When a take-over offer is made and accepted by holders of not less than 90% of the shares within four months, the offeror may, within a
two-month
period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of
the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.
If the arrangement and
reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting stockholders of Delaware corporations, providing rights to receive payment
in cash for the judicially determined value of the shares.
Shareholder Suits
Derivative actions have been brought in the Cayman Islands courts. In most cases, the company will be the proper plaintiff in any claim based
on a breach of duty owed to it, and a claim against (for example) the companys officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive
authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
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a company is acting, or proposing to act, illegally or beyond the scope of its authority;
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the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or
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those who control the company are perpetrating a fraud on the minority.
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shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.
Directors Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its stockholders. This duty has
two components, the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must
inform himself of, and disclose to stockholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director must act in a manner he or she reasonably believes to be in the best
interests of the corporation. A director must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its stockholders take
precedence over any interest possessed by a director, officer or controlling stockholder and not shared by the stockholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the
honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a
director, the director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
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As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a
fiduciary with respect to the company, and therefore it is considered that he or she owes the following duties to the company: a duty to act bona fide in the best interests of the company, a duty not to make a profit out of his or her position
as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third party and a duty to
exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of
his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that the courts are moving towards an objective standard with regard to the required
skill and care.
Under our memorandum and articles of association, directors who are in any way, whether directly or indirectly,
interested in a contract or proposed contract with our company must declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote in respect of any contract or proposed contract
notwithstanding his interest.
Shareholder Action by Written Resolution
Under the Delaware General Corporation Law, a corporations certificate of incorporation may eliminate the right of stockholders to act by
written consent. Our memorandum and articles of association allow shareholders to act by written resolutions.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporations
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the
shareholder is entitled for a single director, which increases the shareholders voting power with respect to electing such director.
As permitted under Cayman Islands law, our memorandum and articles of association do not provide for cumulative voting.
Removal of Directors
Under the
Delaware General Corporation Law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Under our memorandum and articles of association, directors can be removed by special resolution of the shareholders.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the
corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an interested stockholder for three years
following the date on which such person becomes an interested stockholder. An interested stockholder generally is one which owns or owned 15% or more of the targets outstanding voting stock within the past three years. This has the effect of
limiting the ability of a potential acquirer to make a
two-tiered
bid for the target in which all stockholders would not be treated equally. The statute does not apply if, among other things, prior to the date
on which such stockholder becomes an interested stockholder, the board of directors approves either the business combination or the transaction that resulted in the
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person becoming an interested stockholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the targets
board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections
afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions entered into must be bona fide
in the best interests of the company, for a proper corporate purpose and not with the effect of perpetrating a fraud on the minority shareholders.
Dissolution and Winding Up
Under
the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by stockholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by
the board of directors may it be approved by a simple majority of the corporations outstanding shares. The Delaware General Corporation Law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting
requirement in connection with dissolutions initiated by the board of directors.
Under our memorandum and articles of association,
if our company is wound up, the liquidator of our company may distribute the assets with the sanction of an ordinary resolution of the shareholders and any other sanction required by law.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the
outstanding shares of such class, unless the certificate of incorporation provides otherwise.
Under Cayman Islands law and our memorandum
and articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the unanimous consent in writing of the holders of the issued shares of the relevant class or with the
sanction of a resolution passed at a separate meeting of the holders of the shares of such class by a majority of
two-thirds
of the votes cast at such a meeting.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporations governing documents may be amended with the approval of a majority of the
outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Our memorandum and articles of
association may be amended by a special resolution of shareholders.
Inspection of Books and Records
Under the Delaware General Corporation Law, any stockholder of a corporation may for any proper purpose inspect or make copies of the
corporations stock ledger, list of stockholders and other books and records.
Holders of our shares have no general right under
Cayman Islands law to inspect or obtain copies of our register of members or our corporate records. However, we intend to provide our shareholders with annual reports containing audited financial statements.
Anti-takeover Provisions in our Memorandum and Articles of Association
Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management
that shareholders may consider favorable, including a provision that
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authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without
any further vote or action by our shareholders.
Such shares could be issued quickly with terms calculated to delay or prevent a change in
control of our company or make removal of management more difficult. If our board of directors decides to issue these preference shares, the price of our ordinary shares may fall and the voting and other rights of the holders of our ordinary shares
may be materially adversely affected.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to
them under our memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Rights of
Non-resident
or Foreign Shareholders
There are no limitations imposed by our memorandum and articles of association on the rights of
non-resident
or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above
which shareholder ownership must be disclosed.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Receipts
Deutsche
Bank Trust Company Americas, as depositary, will issue the ADSs representing our ordinary shares. Each ADS will represent an ownership interest in three ordinary shares which we will deposit with the custodian under the deposit agreement among
ourselves, the depositary and yourself as an ADS holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which it has not distributed directly to you. Your ADSs will be evidenced
by what are known as American depositary receipts (ADRs) in the same way a share is evidenced by a share certificate.
The
following is a summary of the material provisions of the deposit agreement, as amended. For more complete information, you should read the entire deposit agreement, as amended, and the form of ADR. You can read a copy of the deposit agreement, as
amended, which is on file with the SEC under cover of a registration statement on Form
F-6
(File
No. 333-139159).
You may also obtain a copy of the deposit
agreement, as amended, at the SECs Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549, United States of America. You may obtain information on the operation of the Public Reference Room by calling the SEC at
+1-800-SEC-0330
or +1 (202) 551 8090. Copies of the deposit agreement and the form of ADR are also available for inspection at the
corporate trust office of Deutsche Bank Trust Company Americas, currently located at 60 Wall Street, New York, New York 10005, United States of America, and at the principal office of Deutsche Bank AG, Hong Kong Branch, as the custodian, currently
located at 57/F International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong S.A.R., Peoples Republic of China. Deutsche Bank Trust Company Americas principal executive office is located at 60 Wall Street, New York, New York
10005, United States of America. The depositary will keep books at its corporate trust office for the registration of ADRs and transfers of ADRs which, at all reasonable times, shall be open for inspection by ADS holders, provided that
inspection shall not be for the purpose of communicating with ADS holders in the interest of a business or object other than our business or a matter related to the deposit agreement or the ADSs.
Holding the ADSs
How will I hold my ADSs?
ADSs shall be held electronically in book-entry form through The Depository Trust Company (DTC) in your name or
indirectly through your broker or other financial institution. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADR holders described in this section. You should
consult with your broker or financial institution to find out what those procedures are. This description assumes that you hold your ADSs directly solely for the purposes of summarizing the deposit agreement.
We will not treat an ADR holder as one of our shareholders and you will not have shareholder rights. Cayman Islands law governs shareholder
rights. The depositary will be the holder of the shares underlying your ADSs. As a holder of ADRs, you will have ADR holder rights. The deposit agreement among us, the depositary and you, as an ADS holder and the beneficiary owners of ADSs sets out
ADR holder rights, representations and warranties as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADRs.
If you become a holder of ADSs, you will become a party to the deposit agreement and therefore will be bound by its terms and by the terms of
the ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations as a holder of ADSs and those of the depositary bank. As an ADS holder, you appoint the depositary bank to
act on your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New York law. However, our obligations to the holders of ordinary shares will continue to be governed by Cayman Islands law, which may be different from
the laws in the United States.
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Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited
securities, after deducting its fees, charges and expenses and any taxes withheld, duties or other governmental charges. You will receive these distributions in proportion to the number of shares your ADSs represent as of the record date (which will
be as close as practicable to the record date for our ordinary shares) set by the depositary with respect to the ADSs.
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Cash
. The depositary will convert any cash dividend or other cash distribution we pay on the shares or any proceeds from the sale of any shares, rights, securities or other entitlements into U.S. dollars, if it
can do so in its judgment on a practicable basis and can transfer the U.S. dollars to the United States. If that is not practicable or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to
distribute the foreign currency only to those ADR holders to whom it is practicable to do so. The depositary will hold the foreign currency it cannot convert for the account of the ADR holders who have not been paid. The depositary will not invest
the foreign currency and it will not be liable for any interest.
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Before making a distribution, the depositary will deduct
any withholding taxes or other governmental charges, together with fees and expenses of the Depositary. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate
during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.
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Shares
. The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution to the extent permissible by law. The depositary will only distribute whole ADSs. It
will try to sell shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new
shares.
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Elective
Distributions
in
Cash
or
Shares
. If we offer holders of our ordinary shares the option to receive dividends in either cash or ordinary shares, the depositary, after
consultation with us and having received timely notice of such elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to you as a holder of the ADSs. We must first instruct the
depositary to make such elective distribution available to you and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practical to make such elective distribution available to
you, or it could decide that it is only legal or reasonably practical to make such elective distribution available to some but not all holders of the ADSs. In such case, the depositary shall, on the basis of the same determination as is made in
respect of the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing ordinary shares in the same way as it does in a share distribution. The
depositary is not obligated to make available to you a method to receive the elective dividend in ordinary shares rather than in ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the same
terms and conditions as the holders of ordinary shares.
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Rights
to
Purchase
Additional
Shares
. If we offer holders of our securities
any rights to subscribe for additional ordinary shares or any other rights, the depositary, after consultation with us and having received timely notice of such distribution by us, has discretion to determine how these rights become available to you
as a holder of ADSs. We must first instruct the depositary to do so and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practical to make the rights available to you, or it
could decide that it is only legal or reasonably practical to make the rights available to some but not all holders of the ADSs. The depositary may decide to sell the rights and distribute the proceeds in the same way as it does with cash. If the
depositary decides that it is not legal or reasonably practical to make the rights available to you or to
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sell the rights, the rights that are not distributed or sold could lapse. In that case, you will receive no value for them. The depositary is not responsible for a failure in determining whether
or not it is legal or reasonably practical to distribute the rights. The depositary is liable for damages, however, if it acts with gross negligence or willful misconduct, in accordance with the provisions of the deposit agreement.
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If the depositary makes rights available to you, it will establish procedures to distribute such rights and enable you
to exercise the rights upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. The depositary shall not be obliged to make available to you a method to exercise such rights
to subscribe for ordinary shares (rather than ADSs).
U.S. securities laws or laws of the Cayman Islands may restrict the sale, deposit,
cancellation, and transfer of the ADSs issued after an exercise of rights. For example, you may not be able to trade the new ADSs freely in the United States. In this case, the depositary may issue the new ADSs under a separate restricted deposit
agreement which will contain the same provisions as the deposit agreement, except for changes needed to put the restrictions in place.
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Other
Distributions
. Subject to receipt of timely notice from us with the request to make any such distribution available to you, and provided the depositary has determined such distribution is lawful and
reasonably practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will distribute to you anything else we distribute on deposited securities by any means it deems practical in proportion to the number of
ADSs held by you, upon receipt of applicable fees and charges of, and expenses incurred by, the depositary and net of any taxes and other governmental charges withheld. If it cannot make the distribution in that way, or has not received a timely
request for distribution from us, the depositary has a choice. It may decide to sell by public or private sale, net of fees and charges of, and expenses incurred by, the depositary and any taxes and other governmental charges, what we distributed
and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to dispose of such property in any way it deems reasonably practicable for nominal or no consideration. However, the depositary is not required to distribute
any securities (other than ADSs) to you unless it receives satisfactory evidence from us that it is legal to make that distribution.
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The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders. We
have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADRs, shares, rights or anything else to ADR holders. This means that
you may not receive the distributions we make on our shares or any value for them if it is illegal, impractical or infeasible for us or the depositary to make them available to you.
Deposit and Withdrawal
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposits shares with the custodian. Shares deposited in the future with the
custodian must be accompanied by documents, including instruments showing that those shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made.
The custodian will hold all deposited shares, including those being deposited by or on behalf of our company in connection with this offering
to which this prospectus relates, for the account of the depositary. You thus have no direct ownership interest in the shares and only have the rights that are set out in the deposit agreement. The custodian also will hold any additional securities,
property and cash received on, or in substitution for, the deposited shares. The deposited shares and any such additional items are all referred to as deposited securities.
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Upon each deposit of shares, receipt of related delivery documentation and compliance with the
other provisions of the deposit agreement, including the payment of the fees and charges of, and expenses incurred by, the depositary and of any taxes or charges, such as stamp taxes or share transfer taxes or fees, the depositary will issue an ADR
or ADRs in the name of the person entitled thereto evidencing the number of ADSs to which that person is entitled.
How do ADS holders cancel an ADR
and obtain shares?
You may surrender your ADRs through instructions provided to your broker. Upon payment of the fees and charges
of, and expenses incurred by, the depositary and of any taxes or charges, such as stamp taxes or share transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADR to you or a person you
designate at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its principal New York office or any other location that it may designate as its transfer office, if feasible.
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time subject only to:
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temporary delays caused by closing our or the depositarys transfer books or the deposit of our ordinary shares in connection with voting at a shareholders meeting or the payment of dividends;
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the payment of fees, taxes and similar charges; or
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compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of the deposited securities.
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U.S. securities laws provide that this right of withdrawal may not be limited by any other provision of the deposit agreement.
Transfer
Are there any restrictions on the right
to transfer ADSs?
The deposit agreement contains restrictions on the depositing of shares into the ADR facility if they are
restricted securities. The deposit agreement also provides that to be transferred the ADRs will need to be properly endorsed but are otherwise transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of
the state of New York but that it may be necessary for signatures to be guaranteed and if any stamp duty or transfer tax is required on any instrument of transfer, or there are any applicable fees and charges of the depositary, these must be paid,
before the depositary will execute a new ADR or ADRs to or upon the order of the transferee. Transfers must also be in compliance with any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs and such reasonable
regulations as the depositary may establish consistent with the provisions of the deposit agreement and applicable law. Further, transfers of ADRs may be refused during any period when the transfer books of the depositary are closed or if any such
action is deemed necessary or advisable by the depositary or us from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange on which the ADRs or shares are listed, as provided in
the deposit agreement.
Redemption
Whenever we decide to redeem any of the shares on deposit with the custodian in accordance with our memorandum and articles of association, we
will notify the depositary as soon as practicable prior to the intended date of redemption which notice will set forth the particulars of the proposed redemption.
Upon receipt of (1) such notice and (2) satisfactory documentation given by us to the depositary, the depositary will mail to each
holder subject to the redemption a notice setting forth our intention to exercise our redemption rights as well as any other particulars set forth in our notice to the depositary.
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The depositary will instruct the custodian to present us the shares on deposit with the custodian
in respect of which redemption rights are being exercised against payment of the applicable redemption price as set forth in our memorandum and articles of association.
Upon receipt of confirmation from the custodian that the redemption has taken place and that funds representing the redemption price have been
received, the holders of ADSs representing the shares subject to redemption will be required to return their ADSs to the depositary and the depositary will convert, transfer, and distribute the proceeds (net of applicable (1) fees and charges
of, and the expenses incurred by, the depositary and (2) taxes), retire ADSs and cancel ADRs upon delivery of such ADSs.
The
redemption price per ADS will be the per share amount received by the depositary upon the redemption of the shares represented by ADSs (subject to the terms of the deposit agreement on conversion of foreign currency and the applicable fees and
charges of, and expenses incurred by, the depositary, and taxes) multiplied by the number of the shares represented by each ADS redeemed.
You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your ADSs. If less than all ADSs are being
redeemed, the ADSs to be redeemed will be selected by lot or on a pro rata basis, as the depositary bank may determine.
Transmission of Notices to
Shareholders
We will promptly transmit to the depositary those communications that we make generally available to our shareholders
together with annual and other reports prepared in accordance with applicable requirements of U.S. securities laws in English. If those communications were not originally in English, we will translate them. Upon our request, and at our expense,
subject to the distribution of any such communications being lawful and not in contravention of any regulatory restrictions or requirements if so distributed and made available to holders, the depositary will arrange for the timely mailing of copies
of such communications to all ADS holders and will make a copy of such communications available for inspection at the depositarys corporate trust office, the office of the custodian or any other designated transfer office of the depositary.
Voting Rights
How do you vote?
You may instruct the depositary to vote the shares underlying your ADSs. You could exercise your right to vote directly if you withdraw the
ordinary shares. However, you may not know about the meeting sufficiently in advance to withdraw the ordinary shares. The voting rights of holders of ordinary shares are described in Description of Share CapitalVoting Rights.
Upon receipt of timely notice from us, the depositary will notify you of the upcoming vote and arrange to deliver our voting materials to you.
The materials will describe the matters to be voted on and explain how you, if you hold the ADSs on a date specified by the depositary, may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs as you
direct. For your instructions to be valid, the depositary must receive them in writing on or before a date specified by the depositary. The depositary will try, as far as practical, subject to any applicable law and the provisions of our memorandum
and articles of association, to vote or to have its agents vote the ordinary shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct and will not vote any shares where no instructions
have been received. Furthermore, under the deposit agreement, if we do not timely procure the demand for a vote by poll with respect to any given resolution, and no other relevant party has made such a demand, the depositary shall refrain from
voting and any voting instructions received from any ADS holders shall lapse.
We cannot assure you that you will receive the voting
materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry
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out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and if your ordinary shares are not voted as you
requested, you may have no recourse.
Fees and Expenses
Persons depositing shares will be charged a fee for each issuance of ADSs, including issuances resulting from distributions of shares, share
dividends, share splits, bonus and rights distributions and other property, and for each surrender of ADSs in exchange for deposited securities. The fee in each case is up to $5.00 for each 100 ADSs, or any portion thereof, issued or
surrendered. The depositary will also charge a fee of up to $5.00 per 100 ADSs for distribution of cash proceeds pursuant to a cash distribution (so long as the charging of such fee is not prohibited by any exchange upon which the ADSs are listed),
sale of rights and other entitlements or otherwise. The depositary may also charge an annual fee of up to US$5.00 per 100 ADSs for the operation and maintenance costs in administering the facility. Notice will be given to you by the depositary
stating that the fees will be amended and will become effective 30 days after the date of the notice. You or persons depositing shares also may be charged the following expenses:
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taxes and other governmental charges incurred by the depositary or the custodian on any ADR or share underlying an ADR, including any applicable interest and penalties thereon, and any share transfer or other taxes and
other governmental charges;
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cable, telex and facsimile transmission and delivery charges;
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transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities including those of a central
depository for securities (where applicable);
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expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars;
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fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to the shares, deposited securities and ADSs; and
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any other fees, charges, costs or expenses that may be incurred by the depositary from time to time.
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We will pay all other charges and expenses of the depositary and any agent of the depositary, except the custodian, pursuant to agreements
from time to time between us and the depositary. We and the depositary may amend the fees described above from time to time.
Deutsche
Bank Trust Company Americas, as depositary, has agreed to pay certain amounts to us in consideration of its appointment as depositary. We may use these funds toward our expenses relating to the establishment and maintenance of the ADR program,
including investor relations expenses, or otherwise as we see fit. The depositary may pay us a fixed amount, it may pay us a portion of the fees collected by the depositary from holders of ADSs, and it may pay specific expenses incurred by us in
connection with the ADR program.
Neither the depositary nor we may be able to determine the aggregate amount to be paid to us because
(i) the number of ADSs that will be issued and outstanding, (ii) the level of service fees to be charged to holders of ADSs and (iii) our reimbursable expenses related to the program are not known at this time.
Depositary fees payable upon the issuance and cancellation of ADSs are generally paid to the depositary by the brokers receiving the newly
issued ADSs from the depositary and by the brokers delivering the ADSs to the depositary for cancellation. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary service fee are charged by
the depositary to the holders of record of ADSs as of the applicable ADS record date.
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In the case of cash distributions, service fees are generally deducted from the cash being
distributed. In the case of distributions other than cash (i.e., stock dividends, rights, etc.), the depositary charges the applicable ADS record date holder concurrent with the distribution. In the case of ADSs registered in the name of the
investor (whether certificated or in the direct registration system (DRS)), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary
generally collects the fees through the settlement systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their
clients ADSs in DTC accounts in turn charge their clients accounts the amount of the service fees paid to the depositary.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities underlying
your ADRs. The custodian may refuse to deposit shares and the depositary may refuse to issue ADSs, deliver ADRs, register the transfer,
split-up
or combination of ADRs, or allow you to withdraw the deposited
securities underlying your ADSs until such payment is made including any applicable interest and penalty thereon. We, the custodian or the depositary may withhold or deduct the amount of taxes owed from any distributions to you or may sell deposited
securities, by public or private sale, to pay any taxes and any applicable interest and penalties owed. You will remain liable if the proceeds of the sale are not enough to pay the taxes. If the depositary sells deposited securities, it will, if
appropriate, reduce the number of ADSs to reflect the sale and pay to you any proceeds, or send to you any property remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If we take actions that affect the deposited securities, including any change in par value,
split-up,
cancellation, consolidation or other reclassification of deposited securities to the extent permitted by any applicable law; any distribution on the shares that is not distributed to you; and any recapitalization, reorganization, merger,
consolidation, liquidation or sale of our assets affecting us or to which we are a party, then the cash, shares or other securities received by the depositary will become deposited securities and ADRs will, be subject to the deposit agreement and
any applicable law, evidence the right to receive such additional deposited securities, and the depositary may choose to:
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distribute additional ADRs;
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call for surrender of outstanding ADRs to be exchanged for new ADRs;
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distribute cash, securities or other property it has received in connection with such actions;
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sell any securities or property received at public or private sale on an averaged or other practicable basis without regard to any distinctions among holders and distribute the net proceeds as cash; or
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treat the cash, securities or other property it receives as part of the deposited securities, and each ADS will then represent a proportionate interest in that property.
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Amendment and Termination
How may the deposit
agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any
reason deemed necessary or desirable. You will be given at least 30 days notice of any amendment that imposes or increases any fees or charges, except for taxes, governmental charges, delivery expenses or expenses incurred in connection with
foreign exchange control regulations and other charges specifically payable by ADS holders under the deposit agreement, or which otherwise materially prejudices any substantial existing right of holders or beneficial owners of ADSs. If an ADS holder
continues to hold ADSs after being so notified of these changes, that ADS holder is deemed to agree to that amendment and be bound by the ADRs and the agreement as amended. An amendment can become effective before notice is given if necessary to
ensure compliance with a new law, rule or regulation.
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How may the deposit agreement be terminated?
At any time, we may instruct the depositary to terminate the deposit agreement, in which case the depositary will give notice to you at least
30 days prior to termination. The depositary may also terminate the agreement if it has told us that it would like to resign or we have removed the depositary and we have not appointed a new depositary bank 60 days; in such instances, the depositary
will give notice to you at least 30 days prior to termination. After termination, the depositarys only responsibility will be to deliver deposited securities to ADS holders who surrender their ADSs upon payment of any fees, charges, taxes or
other governmental charges, and to hold or sell distributions received on deposited securities. After the expiration of one year from the termination date, the depositary may sell the deposited securities which remain and hold the net proceeds of
such sales, uninvested and without liability for interest, for the pro rata benefit of ADS holders who have not yet surrendered their ADSs. After selling the deposited securities, the depositary has no obligations except to account for those net
proceeds and other cash. Upon termination of the deposit agreement, we will be discharged from all obligations except for our obligations to the depositary.
Limitations on Obligations and Liability
Limits on
our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADRs
The deposit agreement expressly
limits our and the depositarys obligations and liability.
We and the depositary, including its agents:
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are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct;
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are not liable if either of us is prevented or delayed in performing any obligation by law or circumstances beyond our control from performing our obligations under the deposit agreement, including, without limitation,
requirements of any present or future law, regulation, governmental or regulatory authority or stock exchange of any applicable jurisdiction, any present or future provision of our memorandum and articles of association, on account of possible civil
or criminal penalties or restraint, any provisions of or governing the deposited securities, any act of God, war or other circumstances beyond each of our control as set forth in the deposit agreement;
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are not liable if either of us exercises or fails to exercise the discretion permitted under the deposit agreement, the provisions of or governing the deposited securities or our memorandum and articles of association;
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disclaim any liability for any action/inaction on the advice or information of legal counsel, accountants, any person presenting shares for deposit, holders and beneficial owners (or authorized representatives) of ADRs,
or any person believed in good faith to be competent to give such advice or information;
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disclaim any liability for the inability of any holder to benefit from any distribution, offering, right or other benefit made available to holders of deposited securities but is not made available to holders of ADSs;
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have no obligation to become involved in a lawsuit or other proceeding related to any deposited securities or the ADSs or the deposit agreement on your behalf or on behalf of any other party;
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may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party; and
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disclaim any liability for any consequential or punitive damages for any breach of the terms of the deposit agreement.
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The depositary and any of its agents also disclaim any liability for any failure to carry out any instructions to vote, the manner in which
any vote is cast or the effect of any vote or failure to determine that any distribution or
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action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the
content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the
deposited securities or for any tax consequences that may result from ownership of ADSs, shares or deposited securities and for any indirect, special, punitive or consequential damage.
We have agreed to indemnify the depositary under certain circumstances. The depositary may own and deal in any class of our securities and in
ADSs.
Disclosure of Interests in ADSs
We may from time to time request you and other holders and beneficial owners of ADSs to provide information as to:
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the capacity in which you and other holders and beneficial owners own or owned ADSs;
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the identity of any other persons then or previously interested in those ADSs; and
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the nature of that interest.
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The depositary has agreed that it will use reasonable efforts to
comply with our written instructions requesting that it forward any such requests for information relating to your interests to you. By holding an ADS or an interest in an ADS, you will be agreeing to comply with these requests.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADR, make a distribution on an ADR, or permit withdrawal of shares or
other property, the depositary may require:
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payment of share transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities;
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production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance with any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to the withdrawal or delivery of deposited securities and such reasonable regulations as it may establish,
from time to time, consistent with the deposit agreement, including presentation of transfer documents.
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The depositary also
may suspend the issuance of ADSs, the deposit of shares, the registration, transfer,
split-up
or combination of ADRs or the withdrawal of deposited securities, unless the deposit agreement provides otherwise,
if the register for ADRs is closed or if we or the depositary decide any such action is necessary or advisable.
Deutsche Bank Trust
Company Americas will keep books for the registration and transfer of ADRs at its offices. You may reasonably inspect such books, except if you have a purpose other than our business or a matter related to the deposit agreement or the ADRs.
Pre-Release
of ADSs
Subject to the provisions of the deposit agreement, the depositary may issue ADSs before deposit of the underlying ordinary shares. This is
called a
pre-release
of the ADS. The depositary may also deliver ordinary shares upon cancellation of
pre-released
ADSs, even if the ADSs are cancelled before the
pre-release
transaction
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has been closed out. A
pre-release
is closed out as soon as the underlying ordinary shares are delivered to the depositary. The depositary may receive ADSs
instead of ordinary shares to close out a
pre-release.
The depositary may
pre-release
ADSs only under the following conditions:
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each
pre-release
transaction will be accompanied by or subject to a written agreement whereby the person to whom the
pre-release
is being
made must represent that it or its customer owns the ordinary shares to be deposited, assign all beneficial right, title and interest in such shares to the depositary for the benefit of the holders of ADSs, indicate the depositary as owner of such
shares in its records, not take any action with respect to such shares that is inconsistent with the transfer of beneficial ownership (including without the consent of the depositary, disposing of such shares other than in satisfaction of such
pre-release)
and unconditionally guarantee to deliver such shares or ADSs to the depositary or the custodian as the case may be;
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the
pre-release
must be fully collateralized with cash or other collateral that the depositary considers appropriate;
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the depositary must be able to close out the
pre-release
on not more than five business days notice; and
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each
pre-release
is subject to such further restrictions, requirements, indemnities and credit regulations as the depositary deems appropriate.
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In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of
pre-release,
although the depositary may disregard the limit from time to time as it deems appropriate, including (i) due to a decrease in the aggregate number of ADSs outstanding that causes existing
pre-release
transactions to temporarily exceed the limit stated above or (ii) where otherwise required by market conditions.
The Depositary
Who is the depositary?
The depositary is Deutsche Bank Trust Company Americas. The depositary is a state-chartered New York banking corporation and a member of the
United States Federal Reserve System, subject to regulation and supervision principally by the United States Federal Reserve Board and the New York State Banking Department. The depositary was incorporated on March 5, 1903 in the State of New
York. The registered office of the depositary is located at 60 Wall Street, New York, NY 10005, United States of America and the registered number is BR1026. The principal executive office of the depositary is located at 60 Wall Street, New York NY
10005, United States of America. The depositary operates under the laws and jurisdiction of the State of New York.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System
(Profile), will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be
evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the depositary to register a
transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register such transfer.
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TAXATION
The following summary of the material Cayman Islands and U.S. federal income tax consequences of an investment in our ADSs or ordinary
shares is based upon laws and relevant interpretations thereof as of the date of this prospectus, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary
shares, such as the tax consequences under state, local and other tax laws not addressed herein.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no
taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after
execution brought within the jurisdiction of, the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable to any payments made by or to our company. There are no exchange control regulations or currency
restrictions in the Cayman Islands.
There is no income tax treaty currently in effect between the United States and the Cayman Islands.
United States Federal Income Taxation
The following discussion describes certain material U.S. federal income tax consequences to U.S. Holders (as defined below) under present law
of an investment in the ADSs or ordinary shares. This discussion applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets within the meaning of Section 1221 of the United States Internal Revenue Code of 1986, as
amended (generally, property held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as of the date of this annual report and U.S. Treasury regulations in effect
or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply
retroactively and could affect the tax consequences described below.
The following discussion neither deals with the tax consequences to
any particular investor nor describes all of the tax consequences applicable to persons in special tax situations such as:
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certain financial institutions;
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regulated investment companies;
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real estate investment trusts;
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traders that elect to mark to market;
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persons liable for alternative minimum tax;
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persons holding ADSs or ordinary shares as part of a straddle, hedging, conversion or integrated transaction;
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persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;
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persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or
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partnerships or pass-through entities, or persons holding ADSs or ordinary shares through such entities.
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INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS
WELL AS THE STATE, LOCAL,
NON-U.S.
AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.
The discussion below of the U.S. federal income tax consequences to U.S. Holders will apply to you if you are the beneficial owner
of ADSs or ordinary shares and you are, for U.S. federal income tax purposes,
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any State thereof or the District of
Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.
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If you are a partner in a partnership (or other entity
treated as a partnership for U.S. federal income tax purposes) that holds ADSs or ordinary shares, your tax treatment will generally depend on your status and the activities of the partnership. If you are a partner in such a partnership, you should
consult your tax advisor.
The discussion below assumes the representations contained in the deposit agreement are true and the
obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. If you own ADSs, you should be treated as the owner of the underlying ordinary shares represented by those ADSs for U.S. federal
income tax purposes.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS
and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example,
pre-releasing
ADSs to persons that do not
have the beneficial ownership of the securities underlying the ADSs). Accordingly, the availability of the reduced tax rate for any dividends received by certain
non-corporate
U.S. Holders, including
individuals U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as
beneficial owners of underlying ordinary shares.
Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares
Subject to the passive foreign investment company (PFIC) rules discussed below, the gross amount of any distributions we make to
you with respect to the ADSs or ordinary shares (including the amount of any taxes withheld therefrom) generally will be includible in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or on the date
of receipt by you, in the case of ordinary shares, but only to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will not be
eligible for the dividends received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined
under U.S. federal income tax principles), such excess amount will be treated first as a
tax-free
return of your tax basis in your
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ADSs or ordinary shares, and then, to the extent such excess amount exceeds your tax basis in your ADSs or ordinary shares, as capital gain. We currently do not, and we do not intend to,
calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that any distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a
non-taxable
return of capital or as capital gain under the rules described above.
With respect to
certain
non-corporate
U.S. Holders, including individual U.S. Holders, any dividends may be taxed at the lower capital gains rate applicable to qualified dividend income, provided (1) the ADSs
or ordinary shares, as applicable, are readily tradable on an established securities market in the United States, (2) we are neither a PFIC nor treated as such with respect to you (as discussed below) for the taxable year in which the dividend
was paid and the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ADSs will be considered for purposes of clause (1) above to be readily tradable on an established
securities market in the United States if they are listed on the Nasdaq, as are our ADSs. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends paid
with respect to our ADSs or ordinary shares.
Taxation of Disposition of ADSs or Ordinary Shares
Subject to the PFIC rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of ADSs
or ordinary shares equal to the difference between the amount realized for the ADSs or ordinary shares and your tax basis in the ADSs or ordinary shares. The gain or loss generally will be capital gain or loss. If you are a
non-corporate
U.S. Holder, including an individual U.S. Holder, that has held the ADSs or ordinary shares for more than one year, you may be eligible for reduced U.S. federal income tax rates. The deductibility of
capital losses is subject to limitations. Any gain or loss you recognize on a disposition of ADSs or ordinary shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. You should consult your tax
advisors regarding the proper treatment of gain or loss in your particular circumstances.
Passive Foreign Investment Company
Based on the market price of our ADSs and ordinary shares, and the composition of our income and assets, we do not believe we were a PFIC for
U.S. federal income tax purposes for our taxable year ended December 31, 2015. In addition, we do not expect to be a PFIC for US federal income tax purposes for our current taxable year ending on December 31, 2016. However, the application
of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you we will not be a PFIC for any taxable year. Furthermore, because PFIC status is a factual determination based on actual results for the entire taxable year,
our U.S. counsel expresses no opinion with respect to our PFIC status and expresses no opinion with respect to this paragraph. A
non-U.S.
corporation will be a PFIC for U.S. federal income tax purposes for any
taxable year if either:
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at least 75% of its gross income for such year is passive income; or
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at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive
income.
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For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate
share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
A separate
determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and
ordinary shares, our PFIC status will depend in large part on the market price of our ADSs, which may fluctuate significantly. In addition, changes in the composition of our income or assets may cause us to become a PFIC.
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If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, we generally
will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold ADSs or ordinary shares, unless we cease to be a PFIC and you make a deemed sale election with respect to the ADSs or ordinary
shares. If such election is made, you will be deemed to have sold ADSs or ordinary shares you hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be
subject to the consequences described in the following two paragraphs. After the deemed sale election, your ADSs or ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we
subsequently become a PFIC.
For each taxable year we are treated as a PFIC with respect to you, you will be subject to special tax rules
with respect to any excess distribution you receive and any gain you recognize from a sale or other disposition (including a pledge) of the ADSs or ordinary shares, unless you make a
mark-to-market
election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three
preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:
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the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or ordinary shares;
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the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and
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the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to
underpayments of tax will be imposed on the resulting tax attributable to each such year.
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The tax liability for amounts
allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale or other disposition of the ADSs or ordinary shares
cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets.
If we are a PFIC with respect to you for
any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned
by us in that proportion which the value of the ADSs or ordinary shares you own bears to the value of all of our ADSs or ordinary shares, as applicable, and you may be subject to the adverse tax consequences described in the preceding two paragraphs
with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
A U.S. Holder of marketable stock (as defined below) in a PFIC may make a
mark-to-market
election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make a
mark-to-market
election for the ADSs or ordinary shares, you will include in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or ordinary shares
as of the close of your taxable year over your adjusted basis in such ADSs or ordinary shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or ordinary shares over their fair market value as of the close
of the taxable year. However, deductions will be allowable only to the extent of any net
mark-to-market
gains on the ADSs or ordinary shares included in your income for
prior taxable years. Amounts included in your income under a
mark-to-market
election, as well as gain on the actual sale or other disposition of the ADSs or ordinary
shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any
mark-to-market
loss on the ADSs or ordinary shares,
as well as to any loss realized on the actual sale or other disposition of the ADSs or ordinary shares, to the extent the amount of such loss does not exceed the net
mark-to-market
gains previously included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss
amounts. If you make a
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mark-to-market
election, any distributions we make would generally be subject to the rules discussed above under
Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares, except the lower rate applicable to qualified dividend income would not apply.
The
mark-to-market
election is available only for
marketable stock, which generally is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our ADSs are listed on the Nasdaq, which is a qualified exchange or other
market for these purposes. Consequently, if the ADSs continue to be listed on Nasdaq and are regularly traded, and you are a holder of ADSs, we expect the
mark-to-market
election would be available to you if we were to become a PFIC. Because a
mark-to-market
election cannot be made for equity interests in any lower-tier PFICs that we
own, a U.S. Holder may continue to be subject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. You should consult your tax
advisors as to the availability and desirability of a
mark-to-market
election, as well as the impact of such election on interests in any lower-tier PFICs.
Alternatively, if a
non-U.S.
corporation is a PFIC, a holder of shares in that corporation may elect
out of the PFIC rules described above regarding excess distributions and recognized gains by making a qualified electing fund election to include in income its pro rata share of the corporations income on a current basis. However,
you may make a qualified electing fund election with respect to your ADSs or ordinary shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.
If a U.S. Holder owns ADSs or ordinary shares during a taxable year in which we are a PFIC, such holder generally will be required to file
Internal Revenue Service Form 8621 with the U.S. Holders tax return for such year. If we are or become a PFIC, you should consult your tax advisors regarding any reporting requirements that may apply to you.
You are strongly urged to consult your tax advisors regarding the application of the PFIC rules to your investment in ADSs or ordinary
shares.
Information Reporting and Backup Withholding
Any dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or other taxable disposition of ADSs or
ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number
and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form
W-9.
U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax
liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.
Additional Reporting Requirements
Certain U.S. Holders are required to report information relating to an interest in our ordinary shares, subject to certain exceptions
(including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions). You should consult your tax advisors regarding the effect, if any, of these rules on your ownership and disposition of ADSs or
ordinary shares.
30
THE DISCUSSION ABOVE IS A GENERAL DISCUSSION. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE
IMPORTANT TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE ADSs OR ORDINARY SHARES UNDER THE INVESTORS OWN CIRCUMSTANCES.
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PLAN OF DISTRIBUTION
We or the selling shareholders may sell the securities offered by this prospectus from time to time pursuant to underwritten public offerings,
negotiated transactions, block trades or a combination of these methods or through underwriters or dealers, through agents or directly to one or more purchasers. The securities may be distributed from time to time in one or more transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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Each time that we or any of the selling shareholders sell securities
covered by this prospectus, we or the applicable selling shareholders will provide a prospectus supplement or supplements that will describe the method of distribution and set forth the terms and conditions of the offering of such securities,
including the offering price of the securities and the proceeds to us or the selling shareholders, if applicable.
Offers to purchase the
securities being offered by this prospectus may be solicited directly. Agents may also be designated to solicit offers to purchase the securities from time to time. Any agent involved in the offer or sale of our securities will be identified in a
prospectus supplement.
If a dealer is utilized in the sale of the securities being offered by this prospectus, the securities will be
sold to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale.
If an underwriter is utilized in the sale of the securities being offered by this prospectus, an underwriting agreement will be executed with
the underwriter at the time of sale and the name of any underwriter will be provided in the prospectus supplement that the underwriter will use to make resales of the securities to the public. In connection with the sale of the securities, we, the
selling shareholders or the purchasers of securities for whom the underwriter may act as agent, may compensate the underwriter in the form of underwriting discounts or commissions. The underwriter may sell the securities to or through dealers, and
those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters or commissions from the purchasers for which they may act as agent. Unless otherwise indicated in a prospectus supplement, an agent
will be acting on a best efforts basis and a dealer will purchase securities as a principal, and may then resell the securities at varying prices to be determined by the dealer.
Any compensation paid to underwriters, dealers or agents in connection with the offering of the securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be described in the applicable prospectus supplement. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be
underwriters within the meaning of the Securities Act, and any discounts and commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions. The selling
shareholders may also be deemed underwriters within the meaning of the Securities Act. We or the selling shareholders may enter into agreements to indemnify underwriters, dealers and agents against civil liabilities, including
liabilities under the Securities Act, or to contribute to payments they may be required to make in respect thereof and to reimburse those persons for certain expenses.
To facilitate the offering of securities, certain persons participating in the offering may engage in transactions that stabilize, maintain or
otherwise affect the price of the securities. This may include over-allotments or short sales of the securities, which involve the sale by persons participating in the offering of more securities than were sold to them. In these circumstances, these
persons would cover such over-allotments or
32
short positions by making purchases in the open market or by exercising their over-allotment option, if any. In addition, these persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by imposing penalty bids, whereby selling concessions allowed to dealers participating in the offering may be reclaimed if securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might otherwise prevail in the open market. These transactions may be discontinued at any
time.
If indicated in the applicable prospectus supplement, underwriters or other persons acting as agents may be authorized to solicit
offers by institutions or other suitable purchasers to purchase the securities at the public offering price set forth in the prospectus supplement, pursuant to delayed delivery contracts providing for payment and delivery on the date or dates stated
in the prospectus supplement. These purchasers may include, among others, commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions. Delayed delivery contracts will be subject
to the condition that the purchase of the securities covered by the delayed delivery contracts will not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which the purchaser is subject. The underwriters
and agents will not have any responsibility with respect to the validity or performance of these contracts.
We or the selling
shareholders may engage in
at-the-market
offerings into an existing trading market in accordance with the provisions of the Securities Act. In addition, we or the
selling shareholders may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement so indicates, in
connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or the
selling shareholders or borrowed from us, the selling shareholders or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us or the selling shareholders in settlement of those
derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be named in the applicable prospectus supplement (or a post-effective
amendment to the registration statement of which this prospectus forms a part). In addition, we or the selling shareholders may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities
short using this prospectus and an applicable prospectus supplement. Such financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other
securities.
The specific terms of any
lock-up
provisions in respect of any given offering will be
described in the applicable prospectus supplement.
The underwriters, dealers and agents may engage in transactions with us, or perform
services for us, in the ordinary course of business for which they receive compensation.
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EXPENSES
The following table sets forth the estimated costs and expenses, other than underwriting discounts and commissions, in connection with the
offering of the securities.
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SEC registration fee
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(1)
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Printing expenses
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(2)
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Legal fees and expenses
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(2)
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Accounting fees and expenses
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(2)
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Depositary fees
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(2)
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Miscellaneous expenses
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(2)
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Total
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(2)
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(1)
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Rules 456(b) and 457(r) under the Securities Act permit the payment of the SEC registration fee at the time of any particular offering of securities under the registration statement of which this prospectus forms a
part, which fee is therefore not currently determinable.
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(2)
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These fees are calculated based on the number of issuances and accordingly cannot be estimated at this time.
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LEGAL MATTERS
The validity of the issuance of the ordinary shares, including ordinary shares represented by the ADSs, offered hereby will be passed upon for
us by Walkers, Cayman Islands counsel. Additional legal matters may be passed upon for us or any underwriters, dealers or agents by counsel that we will name in the applicable prospectus supplement.
EXPERTS
Our consolidated financial statements and the related financial statements schedule as of December 31, 2014 and 2015 and for the years
ended December 31, 2013, 2014 and 2015 incorporated in this prospectus by reference to our report on Form
6-K
furnished to the SEC on December 14, 2016 and the effectiveness of our internal control over
financial reporting have been audited by Deloitte Touche Tohmatsu, an independent registered public accounting firm, as stated in their reports which are incorporated herein by reference (which reports (1) express an unqualified opinion on the
consolidated financial statements and financial statements schedule and includes an explanatory paragraph referring to the retrospective adoption of the authoritative guidance on the presentation of debt issuance costs which we adopted on
January 1, 2016 and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting). Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in auditing and accounting.
The offices of Deloitte Touche Tohmatsu are located at
35th Floor, One Pacific Place, 88 Queensway, Hong Kong.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are 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 foreign exchange control or currency restrictions, and the availability of professional and support services.
However, certain disadvantages may accompany incorporation in the Cayman Islands. These disadvantages may include:
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the Cayman Islands has a different body of securities laws than the United States and may provide significantly less protection to investors; and
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Cayman Islands companies may not have standing to sue before the federal courts of the United States.
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Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the
United States, between us, our officers, directors and shareholders, be arbitrated.
A majority of our directors 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 shareholder to effect service of process within the
United States upon such persons, or to enforce against 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.
We have appointed Law Debenture Corporate Services Inc. as our agent to receive service of process with respect to
any action brought against us 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 us
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.
We have been advised by our Cayman Islands legal counsel, Walkers, that there is uncertainty as to whether the courts of the Cayman Islands
would (i) recognize or enforce against us or our directors or officers judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any state in the United
States; or (ii) entertain original actions brought in the Cayman Islands, to impose liabilities against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state
in the United States. This uncertainty relates to whether a judgment obtained from the United States courts under civil liabilities provisions of the securities laws will be determined by the courts and the Cayman Islands as penal or punitive in
nature. However, in the case of laws that are not penal in nature, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a
foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment
has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty,
inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman
Islands. Awards of punitive or multiple damages could be held to be contrary to public policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
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