Macau Legend Development : Renewal of Existing Continuing Connected Transactions

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS

The Board announces that the terms of the (i) the Existing Amigo Travel Service Agreement; and (ii) the Existing Laundry Service Agreement will expire on 31 December 2019. On 10 December 2019 (after trading hours), the Company renewed the Agreements, each for a term of three years from 1 January 2020 to 31 December 2022, and set the Annual Caps for the continuing connected transactions contemplated under the Agreements for the three years ending 31 December 2022.

LISTING RULES IMPLICATIONS

As the highest percentage ratios of the respective Annual Caps under the New Amigo Travel Service Agreement and the New Laundry Service Agreement are more than 0.1% but less than 5%, but the highest of the Annual Caps in relation to the Travel Services under the New Amigo Travel Service Agreement, as well as the New Laundry Service Agreement, are over HK$3,000,000, such Annual Caps are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirement pursuant to Chapter 14A of the Listing Rules.

Reference is made to the announcements of the Company dated 7 November 2016, and the circular of the Company dated 2 December 2016 in relation to the Existing Amigo Travel Service Agreement. Reference is also made to the announcement of the Company dated 26 April 2018 in relation to, among other things, the Existing Laundry Service Agreement.

The Board announces that the terms of the (i) the Existing Amigo Travel Service Agreement; and (ii) the Existing Laundry Service Agreement will expire on 31 December 2019. On 10 December 2019 (after trading hours), the Company renewed the Agreements, each for a term of three years from 1 January 2020 to 31 December 2022, and set the Annual Caps for the continuing connected transactions contemplated under the Agreements for the three years ending 31 December 2022.

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RENEWAL OF EXISTING CONTINUING CONNECTED TRANSACTIONS WHICH ARE EXEMPT FROM THE INDEPENDENT SHAREHOLDERS' APPROVAL REQUIREMENT

1. The New Amigo Travel Service Agreement

Date: 10 December 2019

Parties

1. The Company
2. Amigo Travel

As Amigo Travel is owned as to 100% by the parents-in-law of Mr. David Chow's daughter, Amigo Travel is deemed as a connected person of the Company under the Listing Rules.

Term

The term of the New Amigo Travel Service Agreement will be commencing from 1 January 2020 and ending on 31 December 2022.

Principal terms

Pursuant to the New Amigo Travel Service Agreement, the principal terms are set out below:

1. the Company agrees to procure or to cause its subsidiaries to procure general travel agency services including but not limited to travelling, ticketing and transportation services (the "Travel Services") from Amigo Travel, and Amigo Travel agrees to provide travelling, ticketing and transportation services from time to time upon the terms and conditions contained in the New Amigo Travel Service Agreement;
2. the Company shall also procure Macau Fisherman's Wharf International Investment Limited, its wholly- owned subsidiary, to provide a designated premises of 63.28 square meters (equivalent to 677 square feet) situated in Harbourview Hotel, Macau, for the exclusive use by Amigo Travel during the term to provide its general travel agency services to customers with priority given to the guests and customers of the Group, and the Company will, on top of the fees payable for the Travel Services under each purchase order to be agreed in accordance with the pricing policy, pay a monthly fee of HK$4,300.00 to Amigo Travel for its provision of services to Harbourview Hotel's guests and customers as mentioned above, while Amigo Travel shall pay the Group HK$6.50 per square feet of the premises per month (totalling HK$4,400.50) representing the management fee for such premises including monthly electricity fee, water and air-conditioning fee;
3. Amigo Travel agrees to lease hotel rooms and procure ancillary food and beverage services (the "Room Leasing Services") from the Group and the Company agrees to lease or procure the leasing of hotel rooms and provide ancillary food and beverage services by the Company to Amigo Travel from time to time upon the terms and conditions contained in the New Amigo Travel Service Agreement;

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1. the Travel Services shall be provided by Amigo Travel pursuant to the purchase orders placed by the Group from time to time and agreed between the Parties setting out, among other things, the nature of the products, specifications, quantity, price, payment terms and delivery time (where applicable);
2. the Room Leasing Services shall be provided by the Group to Amigo Travel pursuant to the service requests placed by Amigo Travel from time to time and agreed between the Parties setting out, among other things, the number of rooms required, the rate, the dates and the payment terms; and
3. the prices of the Travel Services or Room Leasing Services shall be determined on an arm's length basis and with reference to the prevailing market prices based on the research on the market comparable conducted by the Parties from time to time.

Historical transaction amounts and the Annual Caps

Historical transaction amounts under the Existing Amigo Travel Service Agreements for the two years ended 31 December 2018 and for the nine months ended 30 September 2019 in relation to the Travel Services and Room Leasing Services are set out below:

	Year ended	Year ended	Nine months ended
	31 December 2017	31 December 2018	30 September 2019
	(HK$'000)	(HK$'000)	(HK$'000)
Historical transaction amounts of
Travel Services	2,646	1,980	2,557
Historical transaction amounts of
Room Leasing Services	8,856	2,083	315

Historical annual caps under the existing Amigo Travel Service Agreement for the three years ending 31 December

2019 in relation to the Travel Services and Room Leasing Services are set out below:

	Year ended	Year ended	Year ended
	31 December 2017	31 December 2018	31 December 2019
	(HK$'000)	(HK$'000)	(HK$'000)
Historical annual caps of
Travel Services	3,600	4,500	6,500
Historical annual caps of
Room Leasing Services	9,800	10,300	12,400

The Group has closely monitored the transaction amounts under the Existing Amigo Travel Service Agreement in relation to the Travel Services and Room Leasing Services, which have not exceeded the historical annual caps for each of the two years ended 31 December 2018. As at the date of this announcement and for the year ending 31 December 2019, the annual cap for the transactions contemplated under the Existing Amigo Travel Service Agreement in relation to the Travel Services and Room Leasing Services for the year ending 31 December 2019 has not been and is not expected to be exceeded.

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The Annual Caps under the New Amigo Travel Service Agreement for the three years ending 31 December 2022 are set out below:

		Year ended	Year ended	Year ended
		31 December 2020	31 December 2021	31 December 2022
		(HK$'000)	(HK$'000)	(HK$'000)
Annual Caps in relation to the
	Travel Services	3,430	4,120	4,380
Annual Caps in relation to the
	Room Leasing Services	1,220	1,360	1,490

Since the Travel Services are expenses in nature and the Room Leasing Services are income in nature on the part of the Company, it is considered that the respective Annual Caps for the Travel Services and Room Leasing Services shall not be aggregated.

Basis of determination for the Annual Caps in relation to the Travel Services

The Annual Caps under the New Amigo Travel Service Agreement in relation to the Travel Services are determined with reference to the above historical transaction amounts and after taking into account the following factors:

1. the historical transaction amounts for the Travel Services under the Existing Amigo Travel Service Agreement for the year ended 31 December 2018 and the nine months ended 30 September 2019, and adjusted by the projection of higher demand by the projects of the Group in Cambodia, Cape Verde, and Lao PDR and the expected increase in demand for the Travel Services;
2. the assumption that the demand for Travel Services will be on an increasing trend due to the need of travel of the staff for the administrative needs in managing the daily business in the Lao PDR, Macau and Beijing; and
3. the resulting increased business travelling needs for marketing purposes as the Company will continue to seek for opportunities of strategic overseas expansions.

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Basis of determination for the Annual Caps in relation to the Room Leasing Services

The Annual Caps in relation to the Room Leasing Services are determined after taking into account the following factors:

1. the expected increase of hotel rooms consumption of 12% annually;
2. the expected inflation of approximately 3% per year;
3. the expected growth of the tourism market in Macau and hence the expected increase in the number of tourists to Macau; and
4. The historical transaction amount for the Room Leasing Services for the nine months ended 30 September 2019 was below usual historical pattern. Since the demand for hotel room services from independent customers were high and limited rooms were left available for Amigo Travel, the historical transaction amount was lower than expected. Amigo Travel has determined their business needs in bulk purchase of the Room Leasing Services in future events for the coming years, the Annual Caps are set to cater for such possible ad hoc bulk purchases.

Pricing policy in relation to the Travel Services

The travelling, ticketing and transportation services under the New Amigo Travel Service Agreement will be conducted on normal commercial terms and the price for each transaction contemplated under the New Amigo Travel Service Agreement will be agreed on an arm's length basis and with reference to the prevailing market prices based on the research on the market comparable conducted by the parties from time to time. The Company has obtained and compared quotes for similar services from independent third parties in the market to determine if the price and terms offered by Amigo Travel are comparable to those offered by such third parties. The Company will also seek and compare quotes for similar services from at least two independent third parties on a half-yearly basis in the market in order to determine if the price and terms offered by Amigo Travel are comparable to those offered by such third parties, and assess and review the fairness and reasonableness of the quotes under the New Amigo Travel Service Agreement. If the Company obtains more reasonable price and terms for similar services from an independent third party, the Company will negotiate with Amigo Travel for comparable price and terms of the services, and has full discretion to decide whether to engage the services from Amigo Travel if comparable price and terms cannot be agreed.

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Pricing policy in relation to the Room Leasing Services

The leasing of hotel rooms under the New Amigo Travel Service Agreement will be conducted on normal commercial terms and the price for each transaction contemplated under the New Amigo Travel Service Agreement will be agreed on an arm's length basis and with reference to the prevailing market prices based on the research on the market comparable conducted by the parties from time to time. The Company has obtained and compared price and terms for similar types of hotel rooms of similar class of hotels which are independent third parties for different seasonality offered to other travel agencies in Macau to determine if the price and terms offered by the Company to Amigo Travel are comparable to those offered by such third parties. The Company will consider a special discount within 5% if a bulk quantity of hotel rooms is required, the rate which is the same as that may be offered by the Group to other travel agencies in Macau. The Company will also seek and compare price and terms for similar types of hotel rooms from at least two similar class of hotels which are independent third parties for different seasonality offered to other travel agencies in Macau on a half-yearly basis to determine if the price and terms offered by the Company to Amigo Travel are comparable to those offered by such third parties, and to assess and review the fairness and reasonableness of the price and terms of the leasing of hotel rooms. If the Company obtains more comparable price and terms for the leasing of hotel rooms to other travel agencies in Macau, the Company will negotiate with Amigo Travel for comparable price and terms for the leasing of hotel rooms, and has full discretion to decide whether to lease hotel rooms to Amigo Travel if comparable price and terms cannot be agreed.

Internal control measures

To ensure compliance with the requirements for the continuing connected transactions and that the transactions contemplated under the New Amigo Travel Service Agreement were conducted on a fair and reasonable basis at terms no less favourable than that conducted with independent third parties, the Company had adopted the following internal control measures:

1. regularly obtain quotations from independent third parties for comparable services as mentioned in "Pricing policy" above for comparison;
2. the management of the Company will regularly review the transactions conducted under the New Amigo Travel Service Agreement and countercheck if there is any irregularity in the transactions in light of the pricing and the terms of such transactions;
3. the senior management has established a control system to monitor the transaction amounts under the New Amigo Travel Service Agreement on a monthly basis to ensure that the transaction amounts have not exceeded and will not exceed the approved Annual Caps;
4. the independent non-executive Directors will be provided with the New Amigo Travel Service Agreement and quotations obtained, as well as the report prepared by the management on the transactions details, to conduct annual review of the transactions; and
5. the auditors of the Company will also conduct annual review of the transactions.

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Reasons and benefits

The Group is continually engaged in strategic overseas expansion such as the development projects in Cambodia, Cape Verde, the Lao PDR and Portugal which results in increase in business travelling needs for operating and marketing purposes.

The Directors (including the independent non-executive Directors) are of the view that the New Amigo Travel Service Agreement was entered into on normal commercial terms and in the ordinary and usual course of business of the Group, and the terms and conditions, and the Annual Caps under it are fair and reasonable, and are in the interests of the Company and its Shareholders as a whole.

2. The New Laundry Service Agreement

Date: 10 December 2019

Parties:

1. Lai Ou
2. Legend King
3. The Company

Lai Ou is owned as to 10% by Mr David Chow and 90% by a company established in Macau which is, in turn, owned as to 90% by Mr David Chow and 10% by Ms Melinda Chan Mei Yi, the spouse of Mr David Chow. Lai Ou is regarded as an associate of Mr David Chow, is therefore considered as a connected person of the Company under the Listing Rules.

Term

The term of the New Laundry Service Agreement will be commencing from 1 January 2020 and ending on 31 December 2022.

Principal terms

Pursuant to the New Laundry Service Agreement, Lai Ou shall provide below services (the "Laundry Management Service"):

1. provision of the Exclusive Area for the Group's use;
2. provision of sufficient manpower at the Laundry Service Centre in the Exclusive Area to carry out the Laundry Management Service; and
3. the management, maintenance and security services for the Exclusive Area and the procurement or obtaining of relevant licences.

Pursuant to the New Laundry Service Agreement, the Company shall be responsible for the renovation and maintenance of the Exclusive Area and the maintenance of equipment used in the Laundry Service Centre.

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During the Term, the Company shall pay Lai Ou a fee for the actual laundry service volume procured by the Group on monthly basis. The fee consists of:

1. the service fee of HK$536,042 per month;
2. the actual labour costs incurred for the provision of the management service for the Laundry Service Centre; and
3. the other laundry related costs and expense reimbursement, if any, in respect of the Laundry Service Centre.

Lai Ou shall issue invoices for the management service provided by it to the Group pursuant to the New Laundry Service Agreement on monthly basis. The Company shall settle the relevant fee within 30 days after such invoices are received.

Moreover, a refundable management service surety of HK$1,072,084 was paid by the Legend King to Lai Ou upon the signing of the Existing Laundry Service Agreement. Under the New Laundry Service Agreement, it was agreed by Legend King that such surety will be kept by Lai Ou and will be refunded to the Group upon the termination of the New Laundry Service Agreement.

Historical transaction amounts and the Annual Caps

Historical transaction amounts under the Existing Laundry Service Agreement for the year ended 31 December

2018 and for the nine months ended 30 September 2019 are set out below:

	Year ended	Nine months ended
	31 December 2018	30 September 2019
	(HK$'000)	(HK$'000)
Historical transaction amounts	12,755	13,876

Historical annual caps under the Existing Laundry Service Agreement for the two years ending 31 December

2019 are set out below:

	Year ended	Year ended
	31 December 2018	31 December 2019
	(HK$'000)	(HK$'000)
Historical annual caps	14,000	20,000

The Group has closely monitored the transaction amounts under the Existing Laundry Service Agreement, which have not exceeded the historical annual caps for the year ended 31 December 2018. As at the date of this announcement and for the year ending 31 December 2019, the annual cap for the transactions contemplated under the Existing Laundry Service Agreement for the year ending 31 December 2019 has not been and is not expected to be exceeded.

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The Annual Caps under the New Laundry Service Agreement for the three years ending 31 December 2022 are set out below:

	Year ended	Year ended	Year ended
	31 December 2020	31 December 2021	31 December 2022
	(HK$'000)	(HK$'000)	(HK$'000)
Annual Caps	21,300	23,600	26,100

Basis of determination for the Annual Caps

The Annual Caps are determined based on the agreed service fee and management fee payable by the Group to Lai Ou under the New Laundry Service Agreement and the actual volume of laundry services procured by the Group. The service fee and management fee are determined with reference to the actual size of the Exclusive Area and the market rate payable for same size of area of similar property in the vicinity. The labour costs and the outgoings will be payable by the Group on disbursement basis depending on the actual volume of laundry services procured by the Group.

The Directors (including the independent non-executive Directors) believe that the management fee and Annual Caps for the New Laundry Service Agreement are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

Pricing policy

The fees payable by the Group under the New Laundry Service Agreement comprises a fixed service fee and management fee, which are determined after arm's length negotiation, while the labour costs and laundry related expenses are payable on a reimbursement basis. No additional fee will be charged to the Group during the course of the transactions apart from the fixed fees and the disbursement.

Internal control measures

To ensure compliance with the requirements for the continuing connected transactions and that the transactions contemplated under the New Laundry Service Agreement were conducted on a fair and reasonable basis at terms no less favourable than that conducted with independent third parties, the Company had adopted the following internal control measures:

1. the management of the Company will regularly review the transactions conducted under the New Laundry Service Agreement and countercheck the compliance of the terms thereof;
2. the senior management has established a control system to monitor the transaction amounts under the New Laundry Service Agreement on a monthly basis to ensure that the transaction amounts have not exceeded and will not exceed the approved Annual Caps;
3. the independent non-executive Directors will be provided with the New Laundry Service Agreement, as well as the report prepared by the management on the transactions details, to conduct annual review of the transactions; and
4. the auditors of the Company will also conduct annual review of the transactions.

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Reasons and benefits

The Group has been engaging laundry services since May 2018, such laundry services are mainly provided to the Group's hotels, restaurants and other entertainment and leisure facilities in Macau Fisherman's Wharf, but is also extended to other clients.

As the Group only stepped into the laundry business in May 2018, the procurement of Laundry Management Service from Lai Ou ensures the Group's smooth operation in the laundry business. Further, with Lai Ou providing the Laundry Management Service, the Group can focus on the development of and allocate better resources to its core operation, being the operation of gaming tables as well as hotels and other entertainment facilities in its properties. The Laundry Management Service ensure that the Group provides clean and quality services to its clients.

The Directors (including the independent non-executive Directors) consider that the entering into of the New Laundry Service Agreement is in the usual and ordinary course of business of the Group and the terms of the New Laundry Service Agreement were negotiated on an arm's length basis and on normal commercial terms between the Group and Lai Ou. The Directors (including the independent non-executive Directors) are of view that the terms and conditions of the New Laundry Service Agreement including the Annual Caps, are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

INFORMATION OF AMIGO TRAVEL

As Amigo Travel is owned as to 100% by the parents-in-law of Mr David Chow's daughter, Amigo Travel is deemed as a connected person of the Company under the Listing Rules. To the best knowledge of the Directors, Amigo Travel is principally engaged in providing travelling, ticketing and transportation services, and service of leasing hotel rooms.

INFORMATION OF LAI OU

Lai Ou, a company incorporated in Macau and is owned as to 10% by Mr David Chow and 90% by a company established in Macau which is, in turn, owned as to 90% by Mr David Chow and 10% by Ms Melinda Chan Mei Yi. Accordingly, Lai Ou is a connected person of the Company under the Listing Rules. To the best knowledge of the Directors, Lai Ou is principally engaged in property investment and management services.

INFORMATION OF THE GROUP

The Company is an investment holding company. The Group is one of the leading owners of entertainment and gaming facilities in Macau. It is principally engaged in (i) the provision of gaming services to Sociedade de Jogos de Macau, S.A. in Legend Palace Casino, Babylon Casino and Landmark Casino; (ii) the operation of casino inside Savan Legend Resorts Hotel and Entertainment Complex in the Lao PDR; and (iii) the operation of hotels, entertainment and leisure facilities within the Group's properties.

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LISTING RULES IMPLICATIONS

As the highest percentage ratios of the respective Annual Caps under the New Amigo Travel Service Agreement and the New Laundry Service Agreement are more than 0.1% but less than 5%, but the highest of the Annual Caps in relation to the Travel Services under the New Amigo Travel Service Agreement, as well as the New Laundry Service Agreement, are over HK$3,000,000, such Annual Caps are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirement pursuant to Chapter 14A of the Listing Rules.

Mr David Chow is interested in the Agreements, as such, Mr David Chow, Madam Lam Fong Ngo (the mother of and hence an associate of Mr David Chow), and Mr Chow Wan Hok, Donald (the son of and hence an associate of Mr David Chow), have abstained from voting on the resolutions of the Board approving the Agreements.

DEFINITIONS

In this announcement, the following expressions have the following meanings unless the context otherwise requires:

"Agreements"	the New Amigo Travel Service Agreement and the New Laundry Service
	Agreement
"Amigo Travel"	Amigo Travel (Macau) Limited, a company incorporated in Macau with
	limited liability and a connected person of the Company
"Annual Caps"	the respective annual caps in relation to the transaction amounts under the
	Agreements, for the three years ending 31 December 2022
"associate(s)"	has the same meaning ascribed to it under the Listing Rules
"Board"	the board of Directors
"Company"	Macau Legend Development Limited, a company incorporated in the
	Cayman Islands with limited liability, the shares of which are listed on
	the main board of the Stock Exchange (stock code: 1680)
"connected person(s)"	has the same meaning ascribed to it under the Listing Rules
"Director(s)"	the director(s) of the Company

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"Existing Amigo Travel Service	the framework agreement dated 7 November 2016 between the Company
Agreement"	and Amigo Travel for the procurement of travelling, ticketing and
	transportation services, and the leasing of hotel rooms
"Existing Laundry Service	the service agreement dated 26 April 2018 and entered into between
Agreement"	Legend King and Lai Ou in relation to the services at the Laundry Service
	Centre
"Exclusive Area"	an area of 50,570 square feet on level 3 of a six-storey building erected
	on Parcela "C2" at Zhuhai-Macau CrossBorder Industrial Zone - Macau
	Zone designated for the Group's exclusive use
"Group"	the Company and its subsidiaries
"Independent Shareholder(s)"	Shareholder(s) of the Company who are independent to the connected
	persons of the Company and their respective associates and are not
	interested in the transactions contemplated under the Agreements
"independent third party/parties"	a person or persons which is or are independent of, and not connected
	with, any Directors, chief executive or substantial shareholders of the
	Company or any of its subsidiaries or any of their respective associate(s)
"Lai Ou"	Lai Ou Industrial Limited (勵澳工業有限公司), a company incorporated
	in Macau with limited liability and a connected person of the Company
"Lao PDR"	Lao People's Democratic Republic
"Laundry Services Centre"	the laundry service centre set up in the Exclusive Area and exclusively
	used by the Group or its designated persons
"Legend King"	Legend King International Limited, a company incorporated in Macau
	with limited liability and an indirect wholly-owned subsidiary of the
	Company
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange
"Mr David Chow"	Mr Chow Kam Fai, David, a co-chairman, an executive Director, and the
	chief executive officer of the Company

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"New Amigo Travel Service	the framework agreement dated 10 December 2019 between the Company
Agreement"	and Amigo Travel for the procurement of travelling, ticketing and
	transportation services, and the leasing of hotel rooms
"New Laundry Service	the framework agreement dated 10 December 2019 between the Company,
Agreement"	Legend King and Lai Ou for the services at the Laundry Service Centre
"percentage ratio(s)"	has the same meaning ascribed to it under the Listing Rules
"Shareholder(s)"	shareholder(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"subsidiary" or "subsidiaries"	has the meaning ascribed to it under the Listing Rules

By order of the Board

Macau Legend Development Limited

Chow Kam Fai, David

Co-chairman, executive Director and

chief executive officer

Hong Kong, 10 December 2019

As at the date of this announcement, the executive directors of the Company are Chow Kam Fai, David, Lam Fong Ngo (Chow Kam Fai, David as her alternate), Sheldon Trainor-DeGirolamo and Chow Wan Hok, Donald; the non-executive directors of the Company are Tong Ka Wing, Carl and Ho Chiulin, Laurinda; and the independent non-executive directors of the Company are Fong Chung, Mark, Xie Min and Tam Wai Chu, Maria.

* for identification purposes only

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