MAJOR AND CONNECTED TRANSACTION: LEASE AGREEMENT

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SUNCITY GROUP HOLDINGS LIMITED

太陽城集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1383)

MAJOR AND CONNECTED TRANSACTION:

LEASE AGREEMENT

As disclosed in "Share Subscription by the Purchaser - Conditions Subsequent - (6)" in the 1029 Announcement, the signing of the Lease Agreement, being part of the Main Hotel Casino Agreement, is a Condition Subsequent to the Shares Subscription Agreement. As disclosed in "Project Site Payment - Conditions Precedent" in the 1125 Announcement, the signing of the Lease Agreement is a condition precedent to the Project Site Payment. The Lease Agreement has been entered into with the date, parties and principal terms and conditions of which set out in this announcement.

The Lease Agreement is subject to announcement and Shareholders' approval requirements under Chapter 14. The Lease Agreement is subject to reporting and announcement requirements but is exempt from the circular, independent financial adviser and independent Shareholders' approval under Chapter 14A pursuant to Rule 14A.101.

Application will be made by the Company to the Stock Exchange for a waiver to dispatch the circular of the Company on, among others, the Lease Agreement, within 15 business days as that required under Rule 14.41(a) to on or before 27 March 2020. If the waiver is granted, the Lease Agreement will be approved by way of written approval of the Controlling Shareholder. Otherwise, the Lease Agreement will have to be approved by way of Shareholders' approval at a general meeting of the Company.

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Reference is made to the 1st Announcement. Unless otherwise defined in this announcement, capitalised terms used in this announcement have the same meaning as defined in the 1st Announcement.

THE LEASE AGREEMENT

As disclosed in "Share Subscription by the Purchaser - Conditions Subsequent - (6)" in the 1029 Announcement, the signing of the Lease Agreement, being part of the Main Hotel Casino Agreement, is a Condition Subsequent to the Shares Subscription Agreement. As disclosed in "Project Site Payment - Conditions Precedent" in the 1125 Announcement, the signing of the Lease Agreement is a condition precedent to the Project Site Payment.

The Board is pleased to announced that the Lease Agreement has been entered into with the date, parties and principal terms and conditions of which set out below:

Date of the Lease	:	21 February 2020.
Agreement
Lessor	:	Travellers and Westside.
		Each of Travellers and Westside is an associate of
		Megaworld and a connected person of the Company at the
		subsidiary level as described in "Information of the Lessor
		" below in this announcement.
Lessee	:	SunTrust, a 51% owned subsidiary of the Company.
Premises	:	The Project Site on which the Main Hotel Casino will be
		built and operated.
Lease term and renewal	:	Commencing from the date on which the handover of the
		Project Site is delivered to SunTrust until 19 August 2039,
		which shall automatically be renewed, subject to applicable
		laws, for another twenty-five (25) years unless otherwise
		agreed upon by the Lessor and the Lessee, on the same
		terms and conditions of the Lease Agreement (or such
		other terms and conditions as the Lessor and the Lessee
		may agree in writing).

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Annual Rental	:	US$10,600,000, exclusive of the applicable value added
		tax, commencing from the latter of the first day of
		commencement of operation of the casino establishment of
		the Main Hotel Casino and the fulfilment of the Conditions
		Precedent (save the Shareholders' approval to the Lease
		Agreement) (or such other date as may be mutually agreed
		upon by the Lessor and the Lessee) in two installments
		payable on a semi-annual basis (or every six (6) months
		basis).
		The Annual Rental was determined by reference to the
		assessment of an independent valuer on the indicative
		market value of the Project Site of US$340,000,000.
Interest penalty and	:	In the event that the Lessee fails to pay/remit to the Lessor
surcharge		the Annual Rental on the due date of its payment, the
		Lessee shall be liable to pay the Lessor an interest penalty
		equivalent to one percent (1%) per month plus surcharge
		equivalent to one percent (1%) per month of the unpaid
		amount from the due date for payment until full payment of
		the rentals in arrears and penalty charges/interest is made.
Sublease and Transfer of	:	The Lessee may assign or transfer its rights under the Lease
Rights		Agreement, and sub-lease all or any part of the Project
		Site or enter into any arrangement whereby the use or
		possession of any part of the Project Site is transferred to
		any person as may be required for the operation of the Main
		Hotel Casino, with prior written approval of the Lessor
		provided that such prior written approval of the Lessor
		shall not be required and a written notice to the Lessor shall
		be sufficient in respect of all or any of the foregoing to or
		with any person (or persons) who is the subsidiary (or are
		the subsidiaries) of the Lessee.

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Right of first refusal	:	If at any time during the term of the Lease Agreement, the
		Lessor acquired the Project Site or any portion thereof in its
		name or in the name of its affiliate and decided to sell the
		same (or receive a bona fide offer to purchase the same),
		the Lessee (or the nominee of the lessee which is qualified
		under the laws of Philippines to acquire) shall, subject to
		the relevant laws at that time and within twenty one (21)
		days of being notified in writing by the Lessor of such
		intended sale (or bona fide offer to purchase), have the right
		of first refusal on such sale on such terms and conditions
		as may be agreed upon with the Lessor (or in respect of a
		bona fide offer to purchase, to match that offer) .
Extension	:	The Lessor and the Lessee shall negotiate in good faith
		for the renewal or extension of the Lease Agreement prior
		to the expiry of the renewed term of 25 years for a further
		term of not less than twenty five (25) years (or for a shorter
		term to be agreed upon by the Lessor and the Lessee) at
		an annual rent to be adjusted based on the average of the
		year-on-year inflation rate in Philippines as released or
		published by the Philippine Statistics Authority (or other
		competent authority replacing it) for the term of the Lease
		Agreement and otherwise on the terms and conditions as
		may be agreed upon by the Lessor and the Lessee.
Conditions Precedent	:	The obligation of the Lessee to effect payment of the
		Annual Rental is conditional on the following:
		(1) the obtaining by the Lessor of the requisite
		irrevocable and unconditional (or if conditional, only
		of such conditions as are reasonable to the Lessee)
		approval, consent, license, permit, authorisation or
		consent of the relevant government authorities in the
		Philippines and such other relevant third parties, if
		any, permitting, allowing and authorising the Lessor
		with the full and absolute right, power, capacity and
		authority to lease the Project Site and enter into the
		Lease Agreement and, as part of its submission to the
		government authorities, to allow the Lessee to have
		the absolute right to conceptualise, design, develop,
		construct, maintain, operate, invest in and/or finance
		the Main Hotel Casino in accordance with the project
		implementation plan and/or other applicable project
		plans (and any amendments thereof as the Lessee
		may require) as approved by the relevant government
		authorities in the Philippines from time to time and
		otherwise on terms of the Lease Agreement and the
		O&M Agreement within one year from the date of
		the Lease Agreement;

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(2) (if required) the due signing of the necessary deeds, agreements and other documents, if any, to vest Westside and where necessary, Travellers, with such full and absolute right, power, capacity and authority

		to lease and to enter into the Lease Agreement;
		(3) the due signing of the O&M Agreement;
		(4) the obtaining by the Company of the necessary
		Shareholders' approval to the Lease Agreement
		and the transactions contemplated thereunder in
		accordance with the Listing Rules; and
		(5) the Lessor shall, within one year from the date of the
		Lease Agreement, obtain, and deliver to the Lessee,
		the written approval of the government authority in
		the Philippines the revised project implementation
		plan and other project plans as are necessary for
		the development and construction of the Main
		Hotel Casino, provided that the application for the
		government authority in the Philippines shall mention
		and specify, among others, the Lessee's participation
		in the financing of the Main Hotel Casino and its role
		as a developer, exclusive operator and investor in
		line with the Lessor's investment commitment under
		the Gaming License and the Lot Nos.4 and 6 Joint
		Venture Agreement (as supplemented by the Deed of
		Accession).
Termination	:	The Lessee shall be entitled to terminate the Lease
		Agreement by giving notice of such termination to the
		Lessor under certain circumstances as set out in the Lease
		Agreement, the major ones are:
		(1) failure on the part of the Lessor to comply with any
		of the material provisions of the Lease Agreement;
		(2) if the Lessee is prevented from the continuous
		peaceful use of the Project Site or any part thereof or
		deprived of the right to exclusively possess, develop,
		use, enjoy and control the Project Site during the term
		of the Lease Agreement through any act attributable
		to the Lessor;

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1. the Lessor shall be adjudged bankrupt, insolvent, or in a state of rehabilitation with finality by a court of competent jurisdiction;
2. material breach of representation or warranty made by the Lessor under the Lease Agreement;
3. the Gaming License is not extended or is pre- terminated for any reason;
4. the O&M Agreement is terminated due to the act, omission and/or default of all or any of the Lessor, or there shall be any material breach on the part of all or any of the Lessor of the terms and conditions of the Lease Agreement as to adversely affect the rights and interests of the Lessee under the O&M Agreement and/or the Lease Agreement;
5. the Gaming License is revoked or cancelled or suspended for a continuous period of three (3) months or more in any calendar year due to the act, omission and/or default of all or any of the Lessor, or all or any of the Lessor commits any material breach or any act or omission giving rise to a material breach of the terms and conditions of the Gaming License as to adversely affect the rights and interests of the Lessee under the O&M Agreement and/or the Lot Nos.4 and 6 Joint Venture Agreement and/or the Lease Agreement;
6. the head lease agreement under which Westside leased one of the parcels of land comprised in the Project Site is terminated due to the act, omission and/or default of all or any of the Lessor, or all or any of the Lessor commits any material breach or any act or omission giving rise to a material breach of the terms and conditions thereof as to adversely affect the rights and interests of the Lessee under such head lease agreement and/or the O&M Agreement and/or Lease Agreement;

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1. the Lot Nos. 4 and 6 Joint Venture Agreement (as supplemented by the Deed of Accession) is terminated due to the act, omission and/or default of all or any of the Lessor, or all or any of the Lessor commits any material breach or any act or omission giving rise to a material breach of the terms and conditions thereof as to adversely affect the rights and interests of the Lessee under the O&M Agreement and/or the Lease Agreement; or
2. the head lease agreement under which Westside leased one of the parcels of land comprised in the Project Site is not renewed upon expiry of its initial first term of 25 years.

INFORMATION OF THE LESSOR

Travellers (a Lessor) is a company incorporated in the Philippines principally engaged in the business of hotels, restaurants, leisure parks, entertainment centers and other related businesses including operating casinos and other gaming activities.

Westside (a Lessor) is a company incorporated in the Philippines principally engaged in the business of hotels and restaurants.

Travellers is a fellow subsidiary of Megaworld for being an indirect non-wholly owned subsidiary (of approximately 68%) of Alliance Global Group, Inc. (being the holding company of Megaworld). Westside is a 95% non-wholly owned subsidiary of Travellers. Megaworld is a connected person of the Company at the subsidiary level for being solely a substantial shareholder of the Company's 51% owned subsidiary, SunTrust, currently holding 34.00% interest in SunTrust. Each of Westside and Travellers (as Lessor) is a connected person of the Company at the subsidiary level for being an associate of Megaworld.

INFORMATION OF THE GROUP

The Group is principally engaged in (i) property development in Guangdong and Anhui Provinces in the People's Republic of China; (ii) property leasing in Shenzhen in the People's Republic of China; (iii) provision of hotel and integrated resort general consultancy service in Vietnam and Cambodia; and (iv) provision of travel related products and service. The Group has been expanding its tourism-related business in the South East Asia region.

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FINANCIAL EFFECTS OF THE LEASE AGREEMENT

Pursuant to HKFRS 16 Leases, the Company will initially recognise the Right-of Use Asset (Lease) at cost, comprising the initial amount of any lease liability plus any lease payments made on or before the lease commencement date, and any initial direct costs incurred. The lease liability will be initially recognised at the present value of the lease payments payable over the entire term of the Lease Agreement (including the term upon automatic renewal of the Lease Agreement), discounted using the incremental borrowing rate.

The value of the Right-of-Use Asset (Lease) and the lease liability under the Lease Agreement as may be recognised by the Company in its consolidated financial statements are US$184,506,000 and US$184,506,000, respectively. The values of the Right-of-Use Asset (Lease) and the lease liability are based on preliminary assessment and are subject to finalisation of discount rate to be used at the lease commencement date.

No revenue has been generated from the Project Site as at the date of this announcement. Accordingly, the Project Site does not have an identifiable net income stream attributable to the Right-of-Use Asset (Lease) for the two years ended 31 December 2019.

REASON FOR, AND BENEFITS OF, THE LEASE AGREEMENT

The reason for and benefits of the Acquisition, the Shares Subscription, the Megaworld Shares Subscription, the Aurora Shares Subscription and the CB Subscription are disclosed in the 1029 Announcement. The reason for and benefits of the Project Site Payment are disclosed in the 1125 Announcement.

The Main Hotel Casino of which SunTrust will be appointed as the sole and exclusive operator shall be located at and constructed and developed on the Project Site. By the Lease Agreement, SunTrust as lessee of the Project Site is given the right to use the Project Site for the Project.

The Directors consider that the Lease Agreement is on terms fair and reasonable and in the interests of the Company and the Shareholders as a whole.

No Director is interested in the Lease Agreement and none of the Directors was required to abstain from voting on the resolution of the Board approving the Lease Agreement.

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IMPLICATIONS OF THE LISTING RULES

Chapter 14

Pursuant to HKFRS 16 Leases, the Company will recognise the Right-of-UseAsset (Lease) in its consolidated financial statements as an asset. The Lease Agreement is regarded as an acquisition of assets under Rule 14.04(1)(a) for the purposes of Chapter 14.

The value of the Right-of-Use Asset (Lease) as may be recognised by the Company according to HKFRS 16 Leases has to be aggregated on the Aggregation Basis when determining its own classification under Chapter 14.

As one of the applicable percentage ratios in respect of the Right-of-Use Asset (Lease) on the Aggregation Basis exceeds 25% but is less than 100%, the Lease Agreement constitutes a major transaction for the Company under Chapter 14 and is subject to announcement and Shareholders' approval requirements under Chapter 14.

Chapter 14A

The Lease Agreement is regarded as an acquisition of assets under Rule 14A.24(a) for the purposes of Chapter 14A. Each of Westside and Travellers (as Lessor) is a connected person of the Company at the subsidiary level as described in "Information of the Lessor" in this announcement. The Lease Agreement constitutes a connected transaction for the Company under Chapter 14A.

The value of the Right-of-Use Asset (Lease) as may be recognised by the Company according to HKFRS 16 Leases has to be aggregated on the Aggregation Basis when determining the requirements of the Listing Rules as are applicable to it under Chapter 14A.

As one of the applicable percentage ratios in respect of the Right-of-Use Asset (Lease) on the Aggregation Basis exceeds 25% but is less than 100%, the Lease Agreement should be subject to the reporting, announcement, circular, independent financial adviser and independent Shareholders' approval requirements under Chapter 14A if not for Rule 14A.101 as disclosed below.

Exemption under Rule 14A.101

Under Rule 14A.101, the Lease Agreement is subject to reporting and announcement requirements but is exempt from the circular, independent financial adviser and independent Shareholders' approval under Chapter 14A as (a) the Board has approved the Lease Agreement; and (b) all the independent non-executive Directors have confirmed that the terms of the Lease Agreement are fair and reasonable, the Lease Agreement is on normal commercial terms and is in the interests of the Company and the Shareholders as a whole.

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Written approval by the Controlling Shareholder

The Lease Agreement will therefore be subject to Shareholders' approval under Chapter 14.

To the best of the knowledge of the Directors, no Shareholders, including the Controlling Shareholder, a controlling shareholder of the Company holding 4,991,643,335 Shares (representing 74.87% interest in the Company) which does not have a material interest in the Lease Agreement, are required to abstain from voting at a general meeting of the Company if one were to be convened and held to approve the Lease Agreement.

Application will be made by the Company to the Stock Exchange for a waiver to despatch the circular of the Company on, among others, the Lease Agreement, within 15 business days as that required under Rule 14.41(a) to on or before 27 March 2020 as time is required by the Company to gather and finalise the necessary financial information required to be included in the circular, including, without limitation, the pro forma statement of assets and liabilities of the Group combined with the Right-of-Use Asset (Lease), the statement of indebtedness and the working capital projection for the purpose of the statement on sufficiency of working capital. If the waiver is granted, the Lease Agreement will be approved by way of written approval of the Controlling Shareholder without convening a general meeting of the Company to approve it for the purpose of Shareholders' approval under Chapter 14. Otherwise, the Lease Agreement will have to be approved by way of Shareholders' approval at a general meeting of the Company.

DEFINITIONS

In this announcement, unless the context otherwise required, the following terms and expressions have the following meanings when used herein.

"1st Announcement"	collectively, the announcements of the Company (1)
	dated 29 October 2019 ("1029 Announcement") on the
	Acquisition, the Shares Subscription, the Megaworld Shares
	Subscription and the Aurora Shares Subscription; (2) dated 5
	November 2019 ("1105 Announcement") on the Megaworld
	Shares Subscription; (3) dated 25 November 2019 ("1125
	Announcement") on the Project Site Payment; and (4) dated
	20 January 2020 on the payment schedule of the Project Site
	Payment, respectively
"Aggregation"	the aggregation of the Right-of-Use Asset (Lease) with
	the Project Site Payment, the Acquisition and the Shares
	Subscription under Rules 14.22 and 14A.84 and "Aggregation
	Basis" has the corresponding meaning

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"Annual Rental"	the yearly rental payable by SunTrust as Lessee under the
	Lease Agreement as described in "The Lease Agreement -
	Annual Rental" in this announcement
"Conditions Precedent"	the conditions precedent as set out in "The Lease Agreement
	- Conditions Precedent" in this announcement
"Controlling Shareholder"	Fame Select Limited, a company incorporated in the British
	Virgin Islands and a controlling shareholder of the Company
"HKFRS"	The Hong Kong Financial Reporting Standards issued by the
	Hong Kong Institute of Certified Public Accountants
"Lease Agreement"	the lease agreement dated 21 February 2020 made between
	the Lessor and the Lessee for the leasing by the Lessor to
	the Lessee of the Project Site on and subject to the terms and
	conditions contained in it
"Lessor"	Westside and Traveller, the lessor to the Lease Agreement
"Lessee"	SunTrust, the lessee to the Lease Agreement
"Right-of-Use Asset (Lease)"	an asset representing the value of the Group's right (as
	lessee) to use the Project Site under the Lease Agreement in
	its consolidated financial statements pursuant to HKFRS 16
	Leases

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Notes:

1. All references to times and dates are references to Hong Kong time unless otherwise stated.
2. In this announcement, unless otherwise stated, all references to Rules and Chapters are references to Rules and Chapters of the Listing Rules.
3. When translated, each HK$ amount stated in this announcement was translated at the exchange rate of HK$1.0 to PHP6.6142 and US$1.0 to HK$7.8127.

By order of the Board

Suncity Group Holdings Limited

Chau Cheok Wa

Chairman

Hong Kong, 24 February 2020

As at the date of this announcement, the executive Directors are Mr. Chau Cheok Wa, Mr. Lo Kai Bong, Mr. Au Chung On John and Mr. Manuel Assis Da Silva; and the independent non-executive Directors are Mr. Tou Kin Chuen, Dr. Wu Kam Fun Roderick and Mr. Lo Wai Tung John.

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