Kerry Properties Limited — M&A Activity 2001

Jul 16, 2001

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

CONNECTED TRANSACTION

DISPOSAL OF INTERESTS IN COMPANIES RELATING TO ENERGY PLAZA

The Directors of the Company announce that on 12 July 2001, the Sea Lord Vendors, the Coastline Vendors and the Energy Management Vendors entered into an Agreement with Elite, the Vendors' Guarantors and the Purchaser's Guarantor pursuant to which each of the Share Vendors agreed to sell their respective portions of the Sale Shares, being the entire issued share capital of Sea Lord, Coastline and Energy Management, and each of the Debt Vendors agreed to sell their respective portions of the Debts, to Elite for an aggregate consideration of HK$388,716,000 (subject to adjustment) subject to the terms and conditions as set out in the Agreement.

The Company holds an indirect equity interest of 55.5% each in Sea Lord through KPHKL and Burgo, in Coastline through KPHKL and in Energy Management through KEML. Both KPHKL and Burgo are indirect wholly-owned subsidiaries of the Company. KEML is a direct wholly-owned subsidiary of the Company. Sino Land holds a direct and an indirect (through its wholly-owned subsidiary, CCCL) aggregate equity interest of 44.5% each in Sea Lord, Coastline and Energy Management. Sino Land is therefore a substantial shareholder and also a controlling shareholder of each of Sea Lord, Coastline and Energy Management. Accordingly, Sino Land is a connected person of the Company as defined under the Listing Rules.

The entering into by, inter alia, KPHKL, Burgo and KEML of the Agreement constitutes a connected transaction of the Company under Rule 14.23(1)(b) of the Listing Rules. As the aggregate consideration payable under the Agreement represents less than 3% of the book value of the net tangible assets of the Company as disclosed in the latest published audited consolidated accounts of the Company, the Transaction falls under Rule 14.25(1) of the Listing Rules. Details of the Agreement will be included in the next published annual report and accounts of the Company in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules.

AGREEMENT

A. Date

12 July 2001

B. Parties

(1) Vendors: the Sea Lord Vendors, the Coastline Vendors and the Energy Management Vendors

(2) Purchaser: Elite

(3) the Vendors' Guarantors

(4) the Purchaser's Guarantor

C. Assets sold

(1) the Sale Shares, being the entire issued share capital of each of Sea Lord, Coastline and Energy Management

(2) the Debts

D. Consideration

A total of HK$388,716,000, which is determined with reference to an agreed value of the Sea Lord Properties at HK$387,280,500 and the Coastline Properties at HK$1,435,500 after arm's length negotiations between the parties to the Agreement, subject to adjustment and on the basis that apart from the Sea Lord Properties and the Coastline Properties, and save as disclosed pursuant to the Agreement, the Subject Companies do not have other material assets or liabilities.

A cash deposit of HK$38,871,600 has been paid by Elite to the solicitors acting for the vendors upon the signing of the Agreement and the balance of the consideration will be paid by Elite to the vendors or their solicitors in cash on the Completion Date, subject to adjustment.

E. Completion

The completion of the Agreement shall be subject to and conditional upon the fulfillment of the conditions precedent as stated in the Agreement and shall take place on the Completion Date.

The completion of the Agreement shall take place simultaneously with the completion of the YFH Sale.

REASONS FOR THE TRANSACTION

The disposal of the Sale Shares and the Debts is in the ordinary course of business of the Group.

CONNECTION BETWEEN THE PARTIES TO THE AGREEMENT

The Company holds an indirect equity interest of 55.5% each in Sea Lord through KPHKL and Burgo, in Coastline through KPHKL and in Energy Management through KEML. Both KPHKL and Burgo are indirect wholly-owned subsidiaries of the Company. KEML is a direct wholly-owned subsidiary of the Company. Sino Land holds a direct and an indirect (through its wholly-owned subsidiary, CCCL) aggregate equity interest of 44.5% each in Sea Lord, Coastline and Energy Management. Sino Land is therefore a substantial shareholder and also a controlling shareholder of each of Sea Lord, Coastline and Energy Management. Accordingly, Sino Land is a connected person of the Company as defined under the Listing Rules.

The Vendors' Guarantors are the respective wholly-owned subsidiaries of the Company and Sino Land. Elite and the Purchaser's Guarantor are independent third parties of and not connected with the Company, its directors, chief executives, substantial shareholders or their respective associates.

INFORMATION ON THE SUBJECT COMPANIES

Sea Lord is a company incorporated in Hong Kong on 8 August 1979. The Company has an indirect equity interest of 55.5% and Sino Land has a direct and an indirect equity interest of 44.5% in Sea Lord. The authorized share capital of Sea Lord is HK$2,000,000 divided into 2,000,000 shares of par value HK$1 each with 2,000,000 shares issued. Sea Lord is the registered and beneficial owner of the Sea Lord Properties but is only the registered owner of the YFH Properties (subject to a sale and purchase agreement dated 21 September 1983 for the sale of the YFH Properties by Sea Lord to an independent third party). Its audited profit before and after taxation for the year ended 31 December 2000 were HK$12,851,541 and HK$11,946,493, respectively (1999: HK$19,500,904 and HK$17,834,224, respectively). The audited net asset value of Sea Lord as at 31 December 2000 was HK$409,155,551 and does not include the value of the YFH Properties.

Coastline is a company incorporated in Hong Kong on 6 November 1987. The Company has an indirect equity interest of 55.5% and Sino Land has a direct and an indirect equity interest of 44.5% in Coastline. The authorized share capital of Coastline is HK$10,000 divided into 10,000 shares of par value HK$1 each with 10,000 shares issued. Coastline currently holds the Coastline Properties. Its audited profit before and after taxation for the year ended 31 December 2000 were HK$209,355 and HK$184,094, respectively (1999: HK$202,941 and HK$177,139, respectively). The audited net asset value of Coastline as at 31 December 2000 was HK$1,816,059.

Energy Management is a company incorporated in Hong Kong on 20 September 1983. The Company has an indirect equity interest of 55.5% and Sino Land has a direct and an indirect equity interest of 44.5% in Energy Management. The authorized share capital of Energy Management is HK$10,000 divided into 10,000 shares of par value HK$1 each with 1,000 shares issued. Energy Management is mainly engaged in the provision of management services for Energy Plaza. Its audited profit before and after taxation for the year ended 31 December 2000 were HK$46,375 and HK$43,922, respectively (1999: HK$37,244 and HK$32,302, respectively). The audited net asset value of Energy Management as at 31 December 2000 was HK$524,368.

BASIS OF THE CONSIDERATION

The total considerations for the Sale Shares and the Debts are determined after arm's length negotiations between the parties to the Agreement by reference to various factors, including but not limited to the net asset value of the Subject Companies, subject to adjustment on the completion of the Agreement.

GENERAL INFORMATION

The Agreement was entered into in the ordinary and usual course of business of each of Sea Lord and Coastline on normal commercial terms. The Directors, including two out of three of the independent non-executive directors who were contactable in Hong Kong on 12 July 2001, are of the opinion that the entering into of the Agreement by, inter alia, KPHKL, Burgo and KEML is fair and reasonable and in the best interests of the Group so far as the shareholders of the Company are concerned. The Company's 55.5% share of the proceeds of the disposal of the Sale Shares and the Debts will be used to finance the general working capital of the Group.

The entering into by, inter alia, KPHKL, Burgo and KEML of the Agreement constitutes a connected transaction of the Company under Rule 14.23(1)(b) of the Listing Rules. As the aggregate consideration payable under the Agreement represents less than 3% of the book value of the net tangible assets of the Company as disclosed in the latest published audited consolidated accounts of the Company, the Transaction falls under Rule 14.25(1) of the Listing Rules. Details of the Agreement will be included in the next published annual report and accounts of the Company in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules.

DEFINITIONS

"Agreement" the agreement for the sale and purchase relating to the Transaction

"Burgo" Burgo Inc, an International Business Company incorporated in the British Virgin Islands

"CCCL" Campbell Construction Company Limited, a company incorporated in Hong Kong with limited liability

"Coastline" Coastline Company Limited, a company incorporated in Hong Kong with limited liability

"Coastline Debt Vendors" KPHKL, Sino Land and CCCL

"Coastline Debts" all loans outstanding and owing as at the Completion Date by Coastline to the Coastline Debt Vendors

"Coastline Properties" UNIT 2B on the EIGHTH FLOOR of Energy Plaza

"Coastline Sale Shares" the 10,000 issued shares of HK$1 each in the capital of Coastline which are beneficially owned by the Coastline Share Vendors

"Coastline Share Vendors" KPHKL, Sino Land and CCCL

"Coastline Vendors" the Coastline Share Vendors and the Coastline Debt Vendors

"Company" Kerry Properties Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on The Stock Exchange of Hong Kong Limited

"Completion Date" 28 September 2001 or such other date as the vendors and Elite may agree

"Debt Vendors" the Sea Lord Debt Vendors, the Coastline Debt Vendors and the Energy Management Debt Vendors

"Debts" the Sea Lord Debts, the Coastline Debts and the Energy Management Debts

"Directors" the directors of the Company

"Elite" Elite Chance Limited, a company incorporated in Hong Kong with limited liability

"Energy Management" Energy Plaza Management Company Limited, a company incorporated in Hong Kong with limited liability

"Energy Management Debt KPHKL, Sino Land and CCCL

Vendors"

"Energy Management Debts" all loans outstanding and owing as at the Completion Date by Energy Management to the Energy Management Debt Vendors

"Energy Management Sale the 1,000 issued shares of HK$1 each in the capital of Energy

Shares" Management which are beneficially owned by the Energy Management Share Vendors

"Energy Management Share KEML, Sino Land and CCCL

Vendors"

"Energy Management the Energy Management Share Vendors and the Energy

Vendors" Management Debt Vendors

"Energy Plaza" the building known as "Energy Plaza", No. 92 Granville Road, Tsimshatsui, Kowloon, Hong Kong and is situated at Kowloon Inland Lot No. 10604

"Group" the Company and its subsidiaries

"KEML" Kerry Estate Management Limited, an International Business Company incorporated in the British Virgin Islands

"King Chance" King Chance Development Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Sino Land

"KPHKL" Kerry Properties (H.K.) Limited, a company incorporated in Hong Kong with limited liability

"Listing Rules" the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

"Purchaser's Guarantor" E. Lite (Choi's) Holdings Limited, a company incorporated in Hong Kong with limited liability

"Sale Shares" the Sea Lord Sale Shares, the Coastline Sale Shares and the Energy Management Sale Shares

"Sea Lord" Sea Lord Trading Company Limited, a company incorporated in Hong Kong with limited liability

"Sea Lord Debt Vendors" KPHKL and Sing-Ho

"Sea Lord Debts" all loans outstanding and owing as at the Completion Date by Sea Lord to the Sea Lord Debt Vendors

"Sea Lord Properties" all the units in Energy Plaza, including the RESERVED AREA (comprising of PODIUM AND LOWER COMMON AREAS AND FACILITIES, MECHANICAL ROOMS, ROOF and FLAT ROOF on the FOURTH FLOOR) of Energy Plaza, but excluding the Coastline Properties and the YFH Properties

"Sea Lord Sale Shares" the 2,000,000 issued shares of HK$1 each in the capital of Sea Lord which are beneficially owned by the Sea Lord Share Vendors

"Sea Lord Share Vendors" KPHKL, Burgo, Sino Land and CCCL

"Sea Lord Vendors" the Sea Lord Share Vendors and the Sea Lord Debt Vendors

"Share Vendors" the Sea Lord Share Vendors, the Coastline Share Vendors and the Energy Management Share Vendors

"Sing-Ho" Sing-Ho Finance Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Sino Land

"Sino Land" Sino Land Company Limited, a company incorporated in Hong Kong with limited liability

"Subject Companies" Sea Lord, Coastline and Energy Management

"Transaction" the sale and purchase of the Sale Shares and the Debts

"Vendors' Guarantors" KPHKL and King Chance

"YFH Properties" UNITS 1, 2, 3, 8, 9 and 10 on the FIRST BASEMENT, UNITS 6B, 10 and 11 on the LOWER GROUND FLOOR and the TWELFTH FLOOR (comprising of UNITS 1, 2, 3, 4, 5 and 6 and FLAT ROOF on the TWELFTH FLOOR) of Energy Plaza

"YFH Sale" the sub sale and purchase of the YFH Properties by an independent third party as vendor and Elite as purchaser

By Order of the Board

Chow Yin Ping, Anita

Company Secretary

Hong Kong, 13 July 2001

"Please also refer to the published version of this announcement in the South China Morning Post"