Kerry Properties Limited — Proxy Solicitation & Information Statement 2011

Jan 20, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Kerry Properties Limited, you should at once hand this circular and the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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website: www.kerryprops.com (Stock Code: 00683)

CONNECTED TRANSACTIONS RELATING TO THE DISPOSAL OF INTERESTS IN THE HANGZHOU COMPANY AND THE ENTERING INTO OF JOINT VENTURE AGREEMENT RELATING TO THE HANGZHOU COMPANY AND NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

==> picture [89 x 38] intentionally omitted <==

First Shanghai Capital Limited

A letter from the Board is set out on pages 5 to 12 of this circular. A letter from the Independent Board Committee is set out on pages 13 and 14 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 22 of this circular.

A resolution will be proposed at the Special General Meeting of Kerry Properties Limited to be held at Atrium Room, Level 39, Island Shangri-La Hotel, Pacific Place, Supreme Court Road, Central, Hong Kong on Wednesday, 16 February 2011 at 2:30 p.m. to approve the matters referred to in this circular.

The notice convening the Special General Meeting is set out on pages 33 and 34 of this circular. A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to Tricor Abacus Limited, the Company’s branch share registrar and transfer office in Hong Kong, of 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Special General Meeting.

• for identification purpose only

21 January 2011

CONTENTS

Page

Definitions................................................................................................................	Definitions................................................................................................................	1
Letter from the Board
1.	Introduction ...............................................................................................	5
2.	Details of the Hangzhou SPA.....................................................................	6
3.	Details of the Hangzhou JV Agreement .....................................................	8
4.	Details of the Hangzhou Company.............................................................	8
5.	Financial effects of the Transactions ..........................................................	9
6.	Reasons for the Transactions......................................................................	9
7.	Information about the Company, SA and KHL...........................................	10
8.	Implications under the Listing Rules..........................................................	10
9.	Recommendations ......................................................................................	10
10.	General......................................................................................................	11
Letter from the Independent Board Committee ....................................................		13
Letter from the Independent Financial Adviser ....................................................		15
**Appendix **	I – Valuation Report on the Site...............................................	23
**Appendix **	II – General information ...........................................................	28
**Notice of **	Special General Meeting .........................................................................	33

– i –

DEFINITIONS

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

• “Agreements”

the Hangzhou JV Agreement and the Hangzhou SPA;

• “Associated Corporation”

has the meaning ascribed to it in Part XV of the SFO;

• “Board”

• the board of Directors;

• “Company”

Kerry Properties Limited, an exempted company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange;

• “Completion” completion of the Hangzhou SPA;

• “connected person”

has the meaning ascribed to it in the Listing Rules;

• “controlling shareholder” has the meaning ascribed to it in the Listing Rules;

• “Directors”

• the directors of the Company for the time being;

• “Excluded Businesses”

• the businesses of the Directors which, as at the Latest Practicable Date, competed or were likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses in which (a) the Group was interested and (b) the Directors’ only interests were as directors appointed to represent the interests of the Group;

• “Group”

the Company and its subsidiaries;

• “Hangzhou Company”

嘉里置業 (杭州)有限公司 Kerry Real Estate (Hangzhou) Co. Ltd.*, a company incorporated under the laws of the PRC;

• “Hangzhou JV Agreement”

the shareholders agreement to be entered into relating to the Hangzhou Company, the form of which is attached to the Hangzhou SPA;

• “Hangzhou SPA”

the sale and purchase agreement dated 31 December 2010 entered into between KPCL and SACL pursuant to which KPCL shall dispose of 25% of the equity interests in the Hangzhou Company to SACL;

• for identification purpose only

– 1 –

DEFINITIONS

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong;

• “Hong Kong”

• Hong Kong Special Administrative Region of the PRC;

• “Independent Board Committee” the independent committee of the Board consisting of all the independent non-executive Directors;

• “Independent Financial Adviser”

• First Shanghai Capital Limited, a licensed corporation under the SFO to carry out Type 6 (advising on corporate finance) regulated activity, and appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions;

• “Independent Shareholders” Shareholders who are not required to abstain from voting at the Special General Meeting to consider and, if thought fit, approve the Transactions;

• “Independent Valuation”

• the valuation of the Site as at 15 December 2010 as valued by the Independent Valuer;

• “Independent Valuer”

• DTZ Debenham Tie Leung Limited, an independent property valuer appointed by the Company to provide a valuation on the Site;

• “KHL”

Kerry Holdings Limited, a company incorporated in Hong Kong with limited liability and the controlling shareholder of both the Company and SA;

• “KPCL”

Kerry Properties (China) Limited, a company incorporated in Hong Kong with limited liability and wholly-owned by the Company;

• “KPL Undertaking”

the undertaking made on 18 July 1996 between the Company and Kerry Group Limited (on behalf of the Kuok Group) which was set out in the Company’s prospectus dated 23 July 1996 pursuant to which the Company undertakes that, for so long as the Company remains a member of the Kuok Group, it would offer to SA the opportunity to acquire at arm’s length price all or part of any hotel or serviced apartment projects in Hong Kong or the PRC that may be undertaken by the Group and are to be managed by SLIM;

– 2 –

DEFINITIONS

“Kuok Group”

• companies owned or controlled by Mr. Kuok Hock Nien and/or interests associated with him;

• “Latest Practicable Date” 18 January 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular;

• “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange;

• “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 to the Listing Rules;

• “Parties” collectively, KPCL and SACL and the expression “Party” shall mean any one of them;

• “percentage ratios” has the meaning ascribed to it in Chapter 14 of the Listing Rules;

• “PRC” The People’s Republic of China;

• “Resolution” the resolution to approve the Transactions by the Independent Shareholders at the Special General Meeting;

• “RMB” Renminbi, the lawful currency of the PRC;

• “SA” Shangri-La Asia Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are primarily listed on the Main Board of the Stock Exchange with secondary listing on SGX;

“SACL”

• Shangri-La China Limited, a company incorporated in Hong Kong with limited liability and wholly-owned by SA;

• “SA Group” SA and its subsidiaries;

• “SFO”

• Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

• “SGX” Singapore Exchange Securities Trading Limited;

• “Shareholders” holders of the Shares;

– 3 –

DEFINITIONS

• “Shares” ordinary shares of HK$1.00 each in the capital of the Company;

• “Site” the site held by the Hangzhou Company which is situated at Xiacheng District, Hangzhou, Zhejiang Province, the PRC, further details are provided in Appendix I of this circular;

• “SLIM” various subsidiaries of SA including Shangri-La International Hotel Management Limited;

• “Special General Meeting” the special general meeting of the Company to be held at Atrium Room, Level 39, Island Shangri-La Hotel, Pacific Place, Supreme Court Road, Central, Hong Kong on Wednesday, 16 February 2011 at 2:30 p.m. at which the Resolution will be proposed, the notice of which is set out on pages 33 and 34 of this circular;

• “Stock Exchange” The Stock Exchange of Hong Kong Limited; “subsidiary” has the meaning ascribed to it in section 2(4) of the Companies Ordinance of Hong Kong (Chapter 32 of the Laws of Hong Kong);

• “Transactions” the entering into of Hangzhou SPA and the Hangzhou JV Agreement by the Parties and the transactions contemplated thereunder;

• “US$” United States dollars, the lawful currency of the United States; and

• “%” per cent.

Amounts denominated in RMB and US$ in this circular have been converted into HK$ at the rates of RMB0.85 = HK$1 and HK$7.75 = US$1 for illustration purposes.

– 4 –

LETTER FROM THE BOARD

website: www.kerryprops.com (Stock Code: 00683)

Executive Directors:

Mr. KUOK Khoon Chen (Chairman) Mr. WONG Siu Kong (President & Chief Executive Officer) Mr. HO Shut Kan Mr. MA Wing Kai, William Mr. QIAN Shaohua Mr. CHAN Wai Ming, William

Independent Non-executive Directors:

Mr. KU Moon Lun Mr. LAU Ling Fai, Herald Ms. WONG Yu Pok, Marina, JP

Registered Office:

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Head Office and Principal Place

of Business in Hong Kong: 25/F, Kerry Centre 683 King’s Road Quarry Bay Hong Kong

Non-executive Director:

Mr. TSE Kai Chi

21 January 2011

To the Shareholders and for information only, the optionholders of Kerry Properties Limited

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE DISPOSAL OF INTERESTS IN THE HANGZHOU COMPANY AND THE ENTERING INTO OF JOINT VENTURE AGREEMENT RELATING TO THE HANGZHOU COMPANY AND NOTICE OF SPECIAL GENERAL MEETING

1. INTRODUCTION

Reference is made to the joint announcement dated 31 December 2010 made by the Company and SA in relation to, among other things, disposal of equity interests in the Hangzhou Company by KPCL to SACL.

* for identification purpose only

– 5 –

LETTER FROM THE BOARD

Pursuant to the Hangzhou SPA, KPCL agreed to sell to SACL 25% of the equity interests in the Hangzhou Company. The consideration payable by SACL for the acquisition is RMB968.62 million (approximately HK$1,139.55 million).

Pursuant to the terms of the Hangzhou SPA, the Parties will enter into the Hangzhou JV Agreement in respect of the Hangzhou Company.

The entering into of the Agreements constitutes connected transactions for the Company. As the applicable percentage ratios for the Company in respect of the maximum total investment amount of KPCL to the Hangzhou Company exceed 5%, the Transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The purpose of this circular is to provide you with, inter alia , further information in respect of the Transactions and other information prescribed by the Listing Rules. This circular also contains a valuation report, a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Transactions, a letter of advice containing the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Transactions and a notice of the Special General Meeting.

2. DETAILS OF THE HANGZHOU SPA

KPCL currently owns 100% of the equity interests in the Hangzhou Company. Pursuant to the Hangzhou SPA, KPCL agreed to dispose of 25% of the equity interests in the Hangzhou Company to SACL. The principal terms of the Hangzhou SPA are set out below:

Date: 31 December 2010 Parties: KPCL and SACL Consideration: The consideration

The consideration payable by SACL to KPCL is RMB968.62 million (approximately HK$1,139.55 million).

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LETTER FROM THE BOARD

• Payment: (a) Within five working days after the signing of the Hangzhou SPA, SACL shall pay RMB48.43 million (approximately HK$56.98 million).

• (b) Within five working days after completion of the change of all registrations as required by PRC laws in respect of the Hangzhou Company, SACL shall pay the balance of the consideration to KPCL.

• Conditions precedent: Completion is conditional upon: (a) the Company having complied with all its obligations to consummate the transactions contemplated by the Hangzhou SPA under the Listing Rules including the passing of the Resolution;

• (b) SA having complied with all its obligations to consummate the transactions contemplated by the Hangzhou SPA under the Listing Rules; and

• (c) all necessary approvals from the PRC authorities in relation to the transfer of equity interests in the Hangzhou Company having been obtained and all relevant change of registrations as required by PRC laws having been completed, and there is no material change to the terms and conditions of the Hangzhou SPA after such approvals.

Long stop date: The long stop date under the Hangzhou SPA is the first anniversary of the signing of the Hangzhou SPA or such later date as agreed by the Parties in writing.

If any conditions precedent to the Hangzhou SPA is not satisfied on or before the aforesaid long stop date, the Hangzhou SPA shall be terminated. Within five working days after the termination of the Hangzhou SPA, KPCL shall refund to SACL, with interest at a rate of 1.5% per annum, all the consideration already paid by SACL under the Hangzhou SPA.

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LETTER FROM THE BOARD

3. DETAILS OF THE HANGZHOU JV AGREEMENT

Pursuant to the Hangzhou SPA, the Parties will enter into the Hangzhou JV Agreement to govern their relationships relating to the Hangzhou Company, the principal terms of which are set out below:

Maximum total The maximum total investment amount (whether equity, investment amount: loan or otherwise) shall be as follows:

		_RMB _	million		_HK$ _	million
KPCL:			4,500.0			5,294.1
SACL:			1,500.0			1,764.7
Total:			6,000.0			7,058.8

US$365.75 million (approximately HK$2,834.56 million).

Registered capital: US$365.75 million (approximately HK$2,834.56 million). Business scope: Real estate development, operation, sale, leasing, property management and hotel development, operation and management.

Funding and provision of securities:

The sources and terms of future funding requirements of the Hangzhou Company shall be determined by the board of directors of the Hangzhou Company from time to time. All shareholders’ funding or financial assistance from the Parties shall be provided on a pro-rata and several basis in accordance with each Party’s equity interests in the Hangzhou Company.

4. DETAILS OF THE HANGZHOU COMPANY

The Hangzhou Company is a single purpose company formed for the sole purpose of developing and operating the Site held by it. Since its incorporation on 21 June 2005, the Hangzhou Company has not recorded any profit or loss and other than holding the Site and other assets and liabilities associated with the holding of the Site, it does not have any other assets or liabilities.

The Site held by the Hangzhou Company is situated at Xiacheng District, Hangzhou, Zhejiang Province, the PRC. It was purchased in 2005 and 2008. It is designated for the development of a mixed-use property comprising a hotel, offices, apartments and a large-scale commercial retail mall complex. Piling works are expected to commence by the first quarter of 2011, the development being targeted for completion in phases by 2014.

The unaudited net assets and total assets of the Hangzhou Company as per its unaudited management accounts as at 31 October 2010 are RMB2,732.99 million (approximately

– 8 –

LETTER FROM THE BOARD

HK$3,215.29 million) and RMB2,735.00 million (approximately HK$3,217.64 million) respectively. Based on the audited balance sheet of the Hangzhou Company as at 31 December 2009, its net asset value is RMB2,732.99 million (approximately HK$3,215.29 million).

The Company’s interest in the Hangzhou Company will be reduced from 100% to 75% following Completion, i.e. the Hangzhou Company will become a non wholly-owned subsidiary of the Company.

5. FINANCIAL EFFECTS OF THE TRANSACTIONS

The consideration for the transfer of equity interests in the Hangzhou Company was arrived at based on arm’s length negotiation between the Parties by reference to the net asset value of the Hangzhou Company and the market value of the Site under development.

The proportion of equity interests to be transferred by KPCL to SACL in respect of the Hangzhou Company was arrived at following arm’s length negotiations between the Parties. The maximum total investment amount of the Hangzhou Company was arrived at based on arm’s length negotiation between the Parties by reference to the land costs and the expected development costs of the Site held by the Hangzhou Company.

According to the current accounting standards adopted by the Group, an estimated gain of approximately HK$427 million (before expenses and taxes, but after the exchange gain on capital injected) arising from the disposal of equity interests in the Hangzhou Company, will be recorded directly in the equity of consolidated statement of financial position of the Group.

The proceeds derived from the disposal of equity interests in the Hangzhou Company will be used by the Company to expand its portfolio of PRC properties.

6. REASONS FOR THE TRANSACTIONS

The Directors believe that the Group needs to expand its land bank in strategic locations in the PRC, with a view to further strengthening its presence in this market of tremendous potential. In order to maximise the utilization of the Group’s financial resources, the Directors have always intended to co-develop its mixed-use property interests in the PRC with other affiliated companies. The intention is reflected in the various PRC development projects of the Group such as Jing An Kerry Centre, Shanghai Kerry Parkside and Tianjin Kerry Centre, in which SA is a joint venture partner.

By inviting SA to participate in the development of the mixed-use property project held by the Hangzhou Company, the Company is able to benefit greatly from SA’s experience, expertise and standing in the hotel industry. SA will bring better prospects, success and enhanced shareholders’ value for the project held by the Hangzhou Company.

The Board has considered the KPL Undertaking when considering the Hangzhou SPA.

– 9 –

LETTER FROM THE BOARD

7. INFORMATION ABOUT THE COMPANY, SA AND KHL

The Group is principally engaged in (i) property development, investment and management in Hong Kong, the PRC and the Asia Pacific region; (ii) logistics, freight and warehouse ownership and operations; (iii) infrastructure-related investment in Hong Kong and the PRC; and (iv) hotel ownership in Hong Kong, and hotel ownership and operations in the PRC.

The SA Group is principally engaged in the ownership and operation of hotels and associated properties and the provision of hotel management and related services. SA’s subsidiaries are also the registered proprietors of various trademarks and service marks in various countries, including the brand names “Shangri-La”, “Traders”, “Rasa”, “Summer Palace” and “Shang Palace” and other related devices and logos.

KHL is an investment holding company.

8. IMPLICATIONS UNDER THE LISTING RULES

KHL is the controlling shareholder of both the Company and SA. SA is an associate of KHL and therefore SA is a connected person of the Company.

As the applicable percentage ratios for the Company in respect of the maximum total investment amount of KPCL to the Hangzhou Company exceed 5%, the Transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee has been formed to advise the Independent Shareholders in relation to the Transactions. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Transactions.

9. RECOMMENDATIONS

Having taken into account the Company’s obligations under the KPL Undertaking, the recommendation and advice from the Independent Financial Adviser and other factors in relation to the Agreements and the Transactions (as contained in the letter from the Independent Financial Adviser set out on pages 15 to 22 of this circular), the Independent Board Committee is of the view that the terms of the Agreements are on normal commercial terms and are fair and reasonable, the Transactions is in the ordinary and usual course of business of the Company and the entering into of the Transactions is in the interests of the Company and its Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, the Directors (including the independent non-executive Directors) consider that the terms of the Agreements are on normal commercial terms and are fair and reasonable, the Transactions are in the interests of the Company and its Shareholders as a whole. None of the Directors has a material interest in the Transactions, therefore none of the Directors was required to abstain from voting on the Board resolutions approving the Transactions.

– 10 –

LETTER FROM THE BOARD

Your attention is drawn to the letter from the Independent Board Committee set out on pages 13 and 14 of this circular, which contains its recommendation to the Independent Shareholders, and the letter from the Independent Financial Adviser set out on pages 15 to 22 of this circular, which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Transactions.

Both the Independent Board Committee and the Independent Financial Adviser recommend the Independent Shareholders to vote in favour of the Resolution. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the Resolution.

10. GENERAL

The notice convening the Special General Meeting is set out on pages 33 and 34 of this circular. At the Special General Meeting, the Resolution will be proposed to confirm, ratify and approve the Transactions.

A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to Tricor Abacus Limited, the Company’s branch share registrar and transfer office in Hong Kong, of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Special General Meeting. Completion and return of the accompanying form of proxy will not prevent you from attending and voting at the Special General Meeting should you so wish.

Under the Listing Rules, any connected person of the Company with a material interest in the Transactions, and any other Shareholders and their respective associates with a material interest in the Transactions, shall abstain from voting on the Resolution.

The following persons (the “ Abstaining Shareholders ”) will abstain from voting on the Resolution to approve the Transactions at the Special General Meeting:

• (a) KHL, Shang Holdings Limited (an indirect wholly-owned subsidiary of SA which is not involved in the Transactions) and their respective associates, which were interested in 781,085,473 Shares (representing approximately 54.39% of all Shares in issue) as at the Latest Practicable Date;

• (b) Mr. Kuok Khoon Chen (a common director of the Company and KHL) and his associates, who were interested in 6,362,711 Shares (representing approximately 0.44% of all Shares in issue) as at the Latest Practicable Date; and

• (c) Mr. Wong Siu Kong (a common director of the Company and KHL) and his associates, who were interested in 150,000 Shares (representing approximately 0.01% of all Shares in issue) as at the Latest Practicable Date.

– 11 –

LETTER FROM THE BOARD

In compliance with the Listing Rules, the Resolution will be voted on by way of poll at the Special General Meeting. The Company will announce the results of the poll in the manner prescribed under Rule 13.39 (5) of the Listing Rules.

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of Kerry Properties Limited Kuok Khoon Chen Chairman

– 12 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

website: www.kerryprops.com (Stock Code: 00683)

Independent Board Committee:

Mr. KU Moon Lun (Chairman) Mr. LAU Ling Fai, Herald Ms. Wong Yu Pok, Marina, JP

Registered Office:

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

21 January 2011

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE DISPOSAL OF INTERESTS IN THE HANGZHOU COMPANY AND

THE ENTERING INTO OF JOINT VENTURE AGREEMENT RELATING TO THE HANGZHOU COMPANY

We refer to the circular of which this letter forms part. Terms defined in the circular shall have the same meanings when used herein unless the context otherwise requires.

The Independent Board Committee has been formed to advise the Independent Shareholders as to whether, in our opinion, the entering into of the Transactions, in accordance with the terms set out in the Agreements, is in the interests of the Company and its Shareholders as a whole and the terms of which are fair and reasonable so far as the Company and the Independent Shareholders are concerned. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Transactions.

* for identification purpose only

– 13 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the Company’s obligations under the KPL Undertaking and the recommendation and advice of the Independent Financial Adviser, in our opinion, the terms of the Agreements are on normal commercial terms and are fair and reasonable, the Transactions are in the ordinary and usual course of business of the Company and the entering into of the Transactions is in the interests of the Company and its Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the Resolution to be proposed at the Special General Meeting to approve the Transactions.

Yours faithfully,

The Independent Board Committee of Kerry Properties Limited Mr. KU Moon Lun (Chairman) Mr. LAU Ling Fai, Herald Ms. WONG Yu Pok, Marina, JP

– 14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation into this circular.

==> picture [147 x 63] intentionally omitted <==

FIRST SHANGHAI CAPITAL LIMITED

19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

21 January 2011

• To the Independent Board Committee and the Independent Shareholders

Dear Sirs or Madams,

CONNECTED TRANSACTIONS RELATING TO THE DISPOSAL OF INTERESTS IN THE HANGZHOU COMPANY AND THE ENTERING INTO OF JOINT VENTURE AGREEMENT RELATING TO THE HANGZHOU COMPANY

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Transactions contemplated under the Agreements, details of which are set out in the circular of the Company dated 21 January 2011 (the “ Circular ”), of which this letter forms a part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular.

On 31 December 2010, KPCL, a wholly-owned subsidiary of the Company, entered into the Hangzhou SPA with SACL, a wholly-owned subsidiary of SA, pursuant to which KPCL agreed to sell 25% of the equity interests in the Hangzhou Company, a wholly-owned subsidiary of the Company, to SACL at a consideration of RMB968.62 million. Under the Hangzhou SPA, KPCL and SACL will also enter into the Hangzhou JV Agreement, pursuant to which the maximum total investment amount of KPCL and SACL to the Hangzhou Company will be RMB4,500 million and RMB1,500 million respectively.

– 15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

KHL is the controlling shareholder of both the Company and SA. Therefore, SA is an associate of KHL and hence a connected person of the Company. As such, the Transactions constitute connected transactions for the Company under the Listing Rules.

The Independent Board Committee, comprising all the independent non-executive Directors, namely, Mr. Ku Moon Lun, Mr. Lau Ling Fai, Herald and Ms. Wong Yu Pok, Marina, JP, has been established to advise the Independent Shareholders on the terms of the Transactions. We, First Shanghai Capital Limited, have been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in this regard.

In putting forth our opinion and recommendations, we have relied on the accuracy of the information and representations included in the Circular and provided to us by the management of the Group, and have assumed that all such information and representations made or referred to in the Circular and provided to us by the management of the Group were true at the time they were made and continued to be true up to the time of the holding of the Special General Meeting. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Group and have been advised that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the management of the Group nor have we conducted any form of investigation into the business, affairs or future prospects of the Group (including the Hangzhou Company).

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendations, we have taken into account the following principal factors and reasons:

1. Background to and reasons for the entering into of the Agreements

Information on the Group

The Group is principally engaged in (i) property development, investment and management in Hong Kong, the PRC and the Asia Pacific region; (ii) logistics, freight and warehouse ownership and operations; (iii) infrastructure-related investment in Hong Kong and the PRC; and (iv) hotel ownership in Hong Kong, and hotel ownership and operations in the PRC.

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the unaudited interim report of the Company for the six months ended 30 June 2010 (the “ 2010 Interim Report ”), the Group recorded turnover of approximately HK$11,698 million for the six months ended 30 June 2010, representing an increase of approximately 116.4% compared to the same period over the previous year, which was mainly driven by the increase in property sales in Hong Kong. For the six months ended 30 June 2010, approximately 53.0% and 39.5% of the total turnover of the Group were contributed by property sales and logistics operations, respectively. The Group achieved net profit attributable to Shareholders of approximately HK$2,653 million for the six months ended 30 June 2010, representing an increase of approximately 41.4% over the same period in the previous year mainly due to the increase in property sales. As at 30 June 2010, the Group had net assets attributable to Shareholders of approximately HK$53,271 million.

As at 30 June 2010, the Group held a completed investment property portfolio of residential, commercial and office properties in the PRC and Hong Kong with an aggregate gross floor area (“ GFA ”) of approximately 3.82 million square feet and 2.59 million square feet, respectively. As advised by the management of the Group, the attributable interest in properties under development of the Group in the PRC had a total GFA of approximately 35.0 million square feet as at 30 June 2010, which were located in various cities of the PRC, including Shanghai, Shenzhen, Tianjin, Hangzhou, Nanjing, Chengdu, Nanchang, Changsha, Shenyang, Yangzhou, Qinhuangdao, Manzhouli and Tangshan. As stated in the 2010 Interim Report, the Group will continue to develop and hold premium property projects and land reserves in Beijing, Shanghai, Shenzhen and other core provincial cities.

Information on the SA Group

The SA Group is principally engaged in the ownership and operation of hotels and associated properties and the provision of hotel management and related services. The subsidiaries of SA are also the registered proprietors of various trademarks and service marks in various countries, including the brand names “Shangri-La”, “Traders”, “Rasa”, “Summer Palace” and “Shang Palace” and other related devices and logos. According to the joint announcement published by the Company and SA dated 31 December 2010, several high-end mixed developments of SA Group in the PRC have experienced good occupancies and rental / room rates in recent years.

As disclosed in the unaudited interim report of SA for the six months ended 30 June 2010, the SA Group recorded sales of approximately US$723 million (approximately HK$5,603 million), of which approximately 94.7% was contributed by hotel operation where the PRC was its largest market. Net profit attributable to equity holders of SA amounted to approximately US$75 million (approximately HK$581 million) for the six months ended 30 June 2010, representing an increase of approximately 11.1% over the same period in the previous year. The SA Group also recorded net assets attributable to equity owners of SA of approximately US$4,270 million (approximately HK$33,093 million) as at 30 June 2010. As at 30 June 2010, the SA Group had equity interest in 50 operating hotels with 24,552 available guest rooms and the 200-room Shangri-La Hotel, Tokyo was operating under a medium term operating lease. In addition, as at 25 August 2010, the SA Group had 17 management agreements in respect of operating hotels owned by third parties and had management agreements on hand for development of 15 new hotels located in a variety of countries.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Information on the Hangzhou Company and the Site

As set out in the letter from the Board in the Circular, the Hangzhou Company was formed for the sole purpose of developing and operating the Site. The Site held by the Hangzhou Company was acquired in 2005 and 2008 and is situated at Xiacheng District, Hangzhou, Zhejiang Province, the PRC. The Site has a total area of approximately 70,917 square meters and is designated for the development of a mixed-use property comprising a hotel, offices, apartments and a large-scale commercial retail mall complex with a planned total plot ratio GFA of approximately 175,160 square meters. Piling works are expected to commence by the first quarter of 2011, and the entire development is targeted for completion in phases by 2014. The land use rights have been granted for a term of 40 years for commercial use and 50 years for composite use respectively.

The Hangzhou Company has not carried on any business save for the property development in the Site and has not recorded any profit or loss since its incorporation in the PRC on 21 June 2005. Other than holding the Site and other assets and liabilities associated with the holding of the Site since its incorporation, the Hangzhou Company has no other assets or liabilities. The following table summarizes the unaudited balance sheet of the Hangzhou Company as at 31 October 2010:

	As at
	31 October 2010
	RMB’000
Non-current assets	2,655,203
Current assets	79,793
Total assets	2,734,996
Total liabilities	2,003
Net assets	2,732,993

As at 31 October 2010, non-current assets primarily comprised properties under development of approximately RMB2,636 million and deferred assets (being expenditures related to project development) of approximately RMB19 million, which represented in aggregate approximately 97.1% of total assets. On the other hand, current assets primarily included cash and bank balances of approximately RMB77 million, representing approximately 96.5% of current assets.

Reasons for the entering into of the Agreements

As set out in the letter from the Board in the Circular, in order to maximize the utilization of the financial resources of the Group, the Directors have always intended to co-develop its mixed-use property interests in the PRC with other affiliated companies. By inviting SA to participate in the development of the mixed-use property project held by the Hangzhou Company, the Company will be able to benefit greatly from the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

experience, expertise and standing of SA in the hotel industry. As advised by the management of the Group, the Group and the SA Group have jointly invested in nine projects in PRC since 1996. Three of the nine projects have completed and have been in operation since 1998, they are Beijing Kerry Centre and Shangri-La’s Kerry Centre Hotel in Beijing, and the Shanghai Kerry Centre in Shanghai. The other six projects under development are mixed-use development projects located in Jingan and Pudong District of Shanghai, Hedong District of Tianjin, Nanchang of Jiangxi Province, Tangshan of Hebei Province and Nanjing of Jiangsu Province.

Having considered in particular (i) the principal businesses of the Group and the SA Group; (ii) the strategic intention of the Group to co-develop its existing projects in the PRC in order to maximize the utilization of the financial resources of the Group; (iii) the Site is designated for the development of a mixed-use property which will include a hotel, where potential synergies will be generated from the experience, expertise and standing of SA in the hotel industry; and (iv) the established relationship between the Group and the SA Group to jointly develop property projects, we are of the view that the Transactions are in the ordinary and usual course of business of the Company and the entering into of the Transactions is in the interests of the Company and the Shareholders as a whole and so far as the Independent Shareholders are concerned.

2. Principal terms of the Agreements

(i) Principal terms of the Hangzhou SPA

Pursuant to the Hangzhou SPA, KPCL agreed to dispose of 25% of the equity interest in the Hangzhou Company to SACL at a consideration of RMB968.62 million (the “ Consideration ”), where SACL shall pay RMB48.43 million (the “ Initial Deposit ”) to KPCL within five working days after the signing of the Hangzhou SPA and shall pay the balance to KPCL within five working days after completion of the change of all registrations as required by PRC laws in respect of the Hangzhou Company. We have been advised that SACL has already paid the Initial Deposit to KPCL as at the Latest Practicable Date. In addition, if the Hangzhou SPA were terminated, KPCL should refund to SACL the consideration already paid by SACL within five working days at an interest rate of 1.5% per annum, which is lower than the funding cost of the Group.

We understand that the Consideration was arrived at based on arm’s length negotiation between the parties by reference to the market value of the Site under development and the net asset value of the Hangzhou Company. We have been advised by the management of the Group that the Consideration was determined after taking into account (i) the value of the Site of approximately RMB3,796 million which is with reference to the independent valuation of the Site as at 15 December 2010 performed by the Independent Valuer, where the text of the valuation report and certificate is set out in Appendix I to the Circular; (ii) the book value of other net assets of the Hangzhou Company as at 31 October 2010 of approximately RMB78 million, being net assets of approximately RMB2,733 million less properties under development of approximately

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RMB2,636 million and deferred assets (being expenditures related to project development) of approximately RMB19 million; and (iii) the percentage of equity interest to be acquired by SACL. In assessing the Consideration, we have reviewed and discussed with the Independent Valuer the methodology of and basis and assumptions adopted for the valuation of the Site as contained in the valuation report. The Independent Valuer has adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market to value the Site, which in our opinion, is a normal approach in establishing the market value of the Site. During the course of our discussion with the Independent Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal basis and assumptions adopted for the valuation. As the Consideration was determined primarily with reference to the independent valuation which represents the prevailing market valuation of the Site and has taken into account the other net assets of the Hangzhou Company, we are of the opinion that the basis of determining the Consideration is fair and reasonable.

Taking into account of the above, we are of the view that the terms contemplated under the Hangzhou SPA are on commercial terms negotiated between the Group and the SA Group and are fair and reasonable so far as the Independent Shareholders are concerned.

(ii) Principal terms of the Hangzhou JV Agreement

Under the Hangzhou SPA, KPCL and SACL will enter into the Hangzhou JV Agreement to govern their relationship relating to the Hangzhou Company. The Hangzhou Company has a registered capital of US$365.75 million (approximately HK$2,834.56 million), with a business scope of participating in real estate development, operation, sale, leasing, property management and hotel development, operation and management. Pursuant to the terms of the Hangzhou JV Agreement, the maximum total investment amount (whether equity, loan or otherwise) of each of KPCL and SACL will be RMB4,500 million and RMB1,500 million respectively. As disclosed in the letter from the Board in the Circular, the total maximum investment amount of RMB6,000 million was arrived at based on arm’s length negotiation between KPCL and SACL by reference to the land costs and the expected development costs of the Site held by the Hangzhou Company. The sources and terms of future funding requirements of the Hangzhou Company shall be determined by the board of directors of the Hangzhou Company from time to time. All shareholders’ funding or financial assistance from KPCL and SACL shall be provided on a pro-rata and several basis in accordance with the equity interests of each party in the Hangzhou Company.

In view of the terms of the Hangzhou JV Agreement, we have reviewed the breakdown of the maximum total investment amount and we understand that the amount is primarily composed of land cost, construction cost and financial cost in relation to the Site. In addition, we understand that the contribution of investment amount and future funding, profit sharing and board composition of the Hangzhou Company will be on a pro-rata basis in accordance with the proportion of equity interests held by KPCL and SACL.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above, in particular, the contribution of investment amount and future funding, profit sharing and board composition of the Hangzhou Company will be based on the respective shareholding of KPCL and SACL, we are of the view that the apportionment and basis of determination of the maximum total investment amount are on normal commercial terms and the terms of the Hangzhou JV Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

3. Financial effect of the Transactions

(i) Earnings

Upon Completion, the Hangzhou Company will transform from a wholly-owned subsidiary to a non wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the accounts of the Group after Completion. As disclosed in the letter from the Board in the Circular, an estimated gain of approximately HK$427 million (before expenses and taxes, but after the exchange gain on capital injected) (the “ Disposal Gain ”) arising from the disposal of the equity interest in the Hangzhou Company will be recorded directly in the equity of consolidated statement of financial position of the Group. As the development of the Site is still in early stage, it is not expected that significant contribution will be recorded from the Hangzhou Company in near future. On the other hand, the future investment amount in the Hangzhou Company is not expected to have an impact on the consolidated income statement of the Group. Hence, the Transactions will not have any material impact to the earnings of the Group immediately upon Completion.

(ii) Net assets

The assets and liabilities of the Hangzhou Company will continue to be consolidated into the accounts of the Group subsequent to Completion. Upon Completion, the net assets of the Group is expected to increase approximately by the Disposal Gain less expenses and taxes and exchange gain on capital injected. On the other hand, as each of KPCL and SACL shall contribute the investment amount of the Hangzhou Company in proportion to their respective equity interest, the contribution by the Group in the Hangzhou Company is not expected to have any significant immediate effect on the net assets of the Group.

(iii) Working capital and gearing

As stated in the 2010 Interim Report, the gearing ratio for the Group was approximately 20.7% as at 30 June 2010, which was calculated based on net debt of approximately HK$11,011 million and shareholders’ equity of approximately HK$53,271 million. Cash and bank balances, current assets and current liabilities of the Group were approximately HK$8,883 million, HK$27,912 million and HK$13,597 million respectively as at 30 June 2010. In terms of the Group’s available financial resources as at 30 June 2010, the Group had total undrawn bank loan and overdraft facilities of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

approximately HK$10,506 million and capital commitments of approximately HK$4,866 million. Upon Completion, the gearing ratio of the Group will be slightly reduced as the net assets will increase while the net debt will be reduced by the net proceeds from the disposal of 25% equity interest in the Hangzhou Company.

The Group’s proportionate maximum total investment amount in the Hangzhou Company is approximately RMB4,500 million, of which approximately RMB2,050 million has already been contributed as at the Latest Practicable Date, and is currently expected to be financed by its internal cash resources and/or external bank borrowings. Taking into account the cash position, available bank facilities and capital commitments of the Group as at 30 June 2010, the Group’s share of the maximum total investment amount in the Hangzhou Company is not expected to have any material adverse effect on the working capital of the Group. However, the gearing ratio of the Group is expected to increase with the payment of the construction and development costs. Nonetheless, the increase in the gearing ratio of the Group is not expected to have a material adverse impact to the Group.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the terms of the Agreements are on normal commercial terms and are fair and reasonable. We also consider the Transactions are in the ordinary and usual course of business of the Company and the entering into of the Transactions is in the interests of the Company and the Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, and we also recommend the Independent Shareholders, to vote in favour of the Resolution to approve the Transactions to be proposed at the Special General Meeting.

Yours faithfully, For and on behalf of

First Shanghai Capital Limited

Helen Zee Fanny Lee Managing Director Deputy Managing Director

– 22 –

VALUATION REPORT ON THE SITE

APPENDIX I

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from DTZ Debenham Tie Leung Limited, an independent property valuer, in connection with its opinion of market value of the Property held in the PRC as at 15 December 2010.

==> picture [87 x 82] intentionally omitted <==

16th Floor Jardine House 1 Connaught Place Central Hong Kong

21 January 2011

The Directors

Kerry Properties Limited 25/F, Kerry Centre 683 King’s Road Quarry Bay Hong Kong

Dear Sirs,

Re: Lot (2005)56, to the west of Yan’an Road, to the north of Qingchun Road, to the east of Changshou Road under planning and to the south of Haier Lane, Xiacheng District, Hangzhou, Zhejiang Province, the PRC

Instructions, Purpose & Date of Valuation

In accordance with the instruction for us to carry out the valuation of the market value of property (the “Property”) held by Kerry Properties Limited (the “Company”) or its subsidiaries (together the “Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Property in existing state as at 15 December 2010 (the “date of valuation”).

Definition of Market Value

Our valuation of the Property represents its market value which in accordance with The HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

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VALUATION REPORT ON THE SITE

APPENDIX I

Valuation Basis and Assumption

Our valuation of the Property excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.

In the course of our valuation of the Property situated in the PRC, we have assumed that transferable land use rights in respect of the Property for its specific term at nominal annual land use fee have been granted and that any premium payable has already been fully paid. We have relied on the information and advice given by the Group and the PRC legal opinion of the legal adviser, Zhong Lun Law Firm, regarding the title to the Property and the interests in the Property. In valuing the Property, we have prepared our valuation on the basis that the owner has enforceable title to the Property and has free and uninterrupted rights to use, occupy or assign the Property for the whole of the unexpired terms as granted.

No allowance has been made in our valuations for any charges, pledges or amounts owing on the Property nor any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Property is free from encumbrances, restrictions and outgoings of any onerous nature which could affect its value.

We have valued the whole interest in the Property.

Method of Valuation

In valuing the Property, which is held for future development in the PRC, we have valued the Property by direct comparison approach by making reference to comparable sales evidence as available in the relevant market.

In valuing the Property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institutes of Surveyors.

Source of Information

We have relied to a very considerable extent on the information given by the Group and the opinion of the PRC legal adviser as to the PRC laws. We have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of property, particulars of occupancy, development scheme, construction cost, site and floor areas and all other relevant matters.

Dimension, measurements and areas included in this valuation report are based on the information provided to us and are therefore only approximation. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuation. We were also advised that no material facts have been omitted from the information supplied.

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VALUATION REPORT ON THE SITE

APPENDIX I

We would point out that the copies of documents provided to us are mainly compiled in Chinese characters and the transliteration into English represents our understanding of the contents. We would therefore advise the Company to make reference to the original Chinese edition of the documents and consult your legal adviser regarding the legality and interpretation of these documents.

Title Investigation

We have been provided by the Group with copies or extracts of documents. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

Site Inspection

We have inspected the exterior, and wherever possible, the interior of the Property. However, we have not carried out any soil investigations to determine the suitability of the soil conditions and the services etc. for any future development. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

We have not been able to carry out detailed on-site measurements to verify the site and floor areas of the Property and we have assumed that the areas shown on the copies of documents handed to us are correct.

Currency

Unless otherwise stated, all sums stated in this valuation certificate are in Renminbi (“RMB”), the official currency of the PRC.

We attach herewith a valuation certificate.

Yours faithfully, For and on behalf of

DTZ Debenham Tie Leung Limited

Philip CY Tsang

Registered Professional Surveyor (GP) Registered China Real Estate Appraiser

MSc, MRICS, MHKIS

Director

Notes: Mr. Philip CY Tsang is a Registered Professional Surveyor who has over 18 years’ experience in the valuation of properties in the PRC.

Contributing PRC valuers of Hangzhou and Shanghai DTZ Offices with professional qualifications include, but not limited to, China Real Estate Appraiser, China Land Valuer and MRICS.

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VALUATION REPORT ON THE SITE

APPENDIX I

VALUATION CERTIFICATE

Property held for future development in the PRC

Description and tenure

Property

Lot (2005)56, to the west The Property comprises three of Yan’an Road, to the parcels of contiguous land with a north of Qingchun Road, total site area of approximately to the east of Changshou 67,374 sq m. Road under planning and to the south of Haier According to the information Lane, Xiacheng District, provided by the Company, the Hangzhou, Property is designated for the Zhejiang Province, development of a mixed-use the PRC property comprising a hotel, offices, apartments and a largescale commercial retail mall complex with a planned total plot ratio gross floor area of approximately 175,160 sq m.

Market Value in Particulars of existing state as at occupancy 15 December 2010 The Property is RMB3,796,000,000 currently a vacant site. (Valuation on assumption of Land Use Rights Certificate has been issued.)

Piling works are expected to commence by the first quarter of 2011, the development being targeted for completion in phases by 2014.

The land use rights of the Property have been granted for a term of 40 years for commercial use and 50 years for composite use from the actual date of handing over land.

Notes:

• (1) According to Land Use Rights Granting Contract No. (2005)111, Supplementary Agreements I and II dated 28 October 2005, 3 November 2005, 29 August 2008 respectively and the Land Development Compensation Agreement dated 28 October 2005, 4 November 2005 and 29 August 2008:

(i) Grantee : Kerry Real Estate (Hangzhou) Co. Ltd. (a wholly-owned subsidiary of the Company) 嘉里置業 (杭州)有限公司 (ii) Site area : 70,917 sq m (in which 67,374 sq m is granted land) (iii) Land use : Commercial and financial industry, office, public facilities and square (iv) Land premium and : RMB2,513,573,964 land development (for total granted site area of 67,374 sq m) compensation fee (According to the information provided by the Company, the total costs expended including deed tax is RMB2,588,981,183) (v) Total gross floor : Not exceeding 161,699 to 175,173 sq m area above ground

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VALUATION REPORT ON THE SITE

APPENDIX I

(vi) Building covenant : Please see the PRC legal opinion in Note 3 (vii) below, the construction works on the Land is required to commence within the first half year of 2011. (vii) Land use term : 40 years for commercial use 50 years for composite use

• (2) According to Business License No. 330100400000026, Kerry Real Estate (Hangzhou) Co. Ltd. 嘉里置業 (杭 州)有限公司 was established with a registered capital of US$365,750,000 for a valid period from 21 June 2005 to 20 June 2055 and the scope of business includes development, operation, sale and leasing of real estate, and property management; hotel development, operation and management.

• (3) According to the PRC legal opinion by Zhong Lun Law Firm:-

• (i) Kerry Real Estate (Hangzhou) Co. Ltd. 嘉里置業 (杭州)有限公司 has legally obtained valid business license and is legally established under the PRC law;

• (ii) Kerry Real Estate (Hangzhou) Co. Ltd. 嘉里置業 (杭州)有限公司 has fully settled all land premium and land compensation fee, the total land premium and land compensation fee is RMB2,513,573,964;

• (iii) The Land Use Right Granting Contract and its Supplementary Agreements I and II were executed in conformity with the PRC laws and have the full legal effect pursuant to the relevant PRC laws;

• (iv) The Property consists of three phases with a total granting area of 67,374 sq m;

• (v) The land use rights of the Property have been granted for commercial and financial industry, office use, public facility and square use;

• (vi) The land use rights of the Property have been granted for commercial purpose for 40 years and composite purpose for 50 years;

• (vii) According to the Minutes of Meeting issued by the Hangzhou People’s Municipal Government dated 21 December 2010, the construction works on the Land is required to commence within the first half year of 2011; and

• (viii) Kerry Real Estate (Hangzhou) Co. Ltd. 嘉里置業 (杭州)有限公司 has not yet obtained the Land Use Rights Certificate and can legitimately obtain the land use rights subject to obtaining the Construction Land Planning Permit of the Land in accordance with the local government regulatory requirement.

• (4) The status of the title and grant of major approvals and licence in accordance with the information provided by the Group and the opinion of the PRC legal adviser:

Land Use Rights Certificate No Land Use Rights Granting Contract Yes Land Use Rights Granting Contract Supplementary Agreement Yes Land Development Compensation Agreement Yes Business License Yes

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of each of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its Associated Corporations which were (a) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange were as follows:

(i) The Company

				Number of
				underlying
				ordinary
				shares held
Number of ordinary shares				under		Approximate
	Personal	Other		equity		% of
Directors	interests1	interests4		derivatives2	Total	shareholding6
KUOK Khoon Chen	251,004	6,111,707		250,000	6,612,711	0.46
WONG Siu Kong	100,000	50,000		4,650,000	4,800,000	0.33
HO Shut Kan	–	50,000		1,700,000	1,750,000	0.12
MA Wing Kai, William	1,020	50,000		1,380,000	1,431,020	0.10
QIAN Shaohua	100,000	50,000		1,050,000	1,200,000	0.08
CHAN Wai Ming, William	–	50,000		1,100,000	1,150,000	0.08

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GENERAL INFORMATION

APPENDIX II

(ii) Associated Corporations

						Number of
						underlying
		**Number **	**of ordinary **	shares		ordinary shares
						held under		Approximate
Associated		Personal	Corporate	Other		equity		% of
Corporations	Directors	interests1	interests3	interests4		derivatives5	Total	shareholding
Kerry Group	KUOK Khoon Chen	1,651,791	6,500,000	287,286,813		8,000,000	303,438,604	19.797
Limited	WONG Siu Kong	4,617,263	8,504,300	–		3,000,000	16,121,563	1.057
	HO Shut Kan	1,388,452	–	–		1,000,000	2,388,452	0.167
	MA Wing Kai, William	1,010,620	–	–		500,000	1,510,620	0.107
	QIAN Shaohua	500,000	500,000	–		1,000,000	2,000,000	0.137
	CHAN Wai Ming, William	100,000	–	–		300,000	400,000	0.037
	TSE Kai Chi	600,000	–	–		1,500,000	2,100,000	0.147
Kerry Siam	MA Wing Kai, William	1	–	–		–	1	0.00
Seaport
Limited
SCMP Group	KUOK Khoon Chen	8,000	–	20,000		–	28,000	0.008
Limited
Shang Properties,	HO Shut Kan	1,570	–	–		–	1,570	0.00
Inc.

Notes:

• (1) This represents interests held by the relevant Director as beneficial owner.

• (2) This represents interests in options held by the relevant Director as a beneficial owner to subscribe for the relevant underlying Shares in respect of the option shares granted by the Company.

• (3) This represents interests held by the relevant Director through his controlled corporation(s).

• (4) This represents interests held by the relevant Director through discretionary trust(s) of which the relevant Director is a contingent beneficiary.

• (5) This represents interests in options held by the relevant Director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the option shares granted by Kerry Group Limited.

• (6) The percentage has been compiled based on the total number of Shares in issue as at the Latest Practicable Date (i.e. 1,436,031,280 Shares).

• (7) The percentage has been compiled based on the total number of ordinary shares of Kerry Group Limited in issue as at the Latest Practicable Date (i.e. 1,533,649,913 ordinary shares).

• (8) The percentage has been compiled based on the total number of ordinary shares of SCMP Group Limited in issue as at the Latest Practicable Date (i.e. 1,560,945,596 ordinary shares).

All the interests disclosed in sections (i) and (ii) above represent long positions in the Shares or the shares of Associated Corporations.

– 29 –

GENERAL INFORMATION

APPENDIX II

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had any other interests or short positions in the shares, underlying shares or debentures of the Company or any of its Associated Corporations which were (a) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, (1) Mr. Kwok Khoon Chen, the Chairman of the Company, is a director of Kerry Group Limited, a company which is interested as to 53.95% of the entire issued share capital of the Company; and (2) Mr. Kuok Khoon Chen and Mr. Wong Siu Kong, President & Chief Executive Officer of the Company, are directors of KHL, a company which is interested as to 52.19% of the entire issued share capital of the Company (being interests fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO).

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or any proposed director of the Company is a director or employee of a company which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ INTEREST IN THE CONTRACT

• (a) As at the Latest Practicable Date, no Director was materially interested in any contract or arrangement subsisting which is significant in relation to the business of the Group taken as a whole.

• (b) Since 31 December 2009 (being the date to which the latest published audited financial statements of the Group were made up), none of the Directors has or has had any direct or indirect interest in any assets acquired or disposed of by or leased to or proposed to be acquired or disposed of by or leased to any member of the Group.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, a service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation, other than statutory compensation.

– 30 –

GENERAL INFORMATION

APPENDIX II

5. COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors were considered to have interests in the following Excluded Businesses:

• (a) Messrs. Kuok Khoon Chen and Wong Siu Kong were directors of subsidiaries of SA and Mr. Kuok had interests in shares of SA, the businesses of which consisted of hotel ownership and operation. The Directors believe that as the size of that part of these Excluded Businesses in Beijing, where the Group has hotel businesses, is not insignificant when compared with the hotel business of the Group in Beijing, it is likely that these Excluded Businesses may compete with the hotel business of the Group in Beijing; and

• (b) Messrs. Kuok Khoon Chen and Wong Siu Kong were directors of (but both of them did not have any interests in shares in) the China World Trade Center Co., Ltd. group of companies, the businesses of which consisted of property investment and development and hotel ownership and operation in PRC. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the property and hotel businesses of the Group in PRC, it is likely that these Excluded Businesses may compete with the property and hotel businesses of the Group in PRC.

The Excluded Businesses are operated and managed by companies (and in the case of SA and China World Trade Co., Ltd., by publicly listed companies) with independent management and administration. On this basis, the Directors believe that the Group is capable of carrying on its businesses independently of the Excluded Businesses and at arm’s length from the Excluded Businesses.

6. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this circular or have given opinion or advice which are contained in this circular:

Name	Qualification
First Shanghai Capital	a licensed corporation under the SFO to carry out Type 6
Limited	(advising on corporate finance) regulated activity
DTZ Debenham Tie	an independent property valuer
Leung Limited
Zhong Lun Law Firm	qualified PRC lawyers

Each of the above mentioned experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion prepared for the purpose of incorporation in this circular, and the references to its name and opinion in the form and context in which they respectively appear.

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GENERAL INFORMATION

APPENDIX II

Each of the above mentioned experts has confirmed that as at the Latest Practicable Date, it did not have any beneficial shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group nor did it have any direct or indirect interests in any assets which have since 31 December 2009 (being the date to which the latest published audited financial statements of the Group were made up) been acquired or disposed of by or leased to any members of the Group, or were proposed to be acquired or disposed of by or leased to any members of the Group.

7. NO MATERIAL ADVERSE CHANGE

Since 31 December 2009 (being the date to which the latest published audited financial statements of the Company have been made up), there has been no material adverse change in the financial or trading position of the Group.

8. MISCELLANEOUS

This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Agreements and the letter from the Independent Financial Adviser (the text of which is set out in the section of this circular headed “Letter from the Independent Financial Adviser”) are available for inspection during normal business hours at any weekday (public holidays excepted) at the office of the Company at 25/F, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong up to and including 16 February 2011.

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NOTICE OF SPECIAL GENERAL MEETING

website: www.kerryprops.com (Stock Code: 00683)

NOTICE IS HEREBY GIVEN that a special general meeting of Kerry Properties Limited (the “Company”) will be held at Atrium Room, Level 39, Island Shangri-La Hotel, Pacific Place, Supreme Court Road, Central, Hong Kong on Wednesday, 16 February 2011 at 2:30 p.m. for the following purpose:

To consider, and if thought fit, passing with or without modification the following resolution as an ORDINARY RESOLUTION :

“ THAT

• (1) the Agreements (copies of the Agreements have been produced to this meeting marked “A” and signed by the Chairman of the special general meeting for the purpose of identification) and the Transactions be and are hereby confirmed, ratified and approved; and

• (2) the board of directors of the Company be and is hereby authorised to take all such actions as it considers necessary or desirable to implement and give effect to the Agreements and the Transactions.

For the purposes of this resolution, the terms “Agreements” and “Transactions” shall have the same definition as defined in the circular to the shareholders of the Company dated 21 January 2011.”

By order of the Board Li Siu Ching, Liz Company Secretary

Hong Kong, 21 January 2011

* for identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

Head Office and Principal Place

of Business in Hong Kong:

25/F, Kerry Centre

683 King’s Road

Quarry Bay Hong Kong

Notes:

• (1) Every member entitled to attend and vote at the above meeting (or at any adjournment thereof) (the “SGM”) is entitled to appoint up to two individuals as his proxies. A proxy need not be a member of the Company. The number of proxies appointed by a clearing house (or its nominee) is not subject to the aforesaid limitation.

• (2) Where there are joint holders of any share, any one of such persons may vote at the SGM, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the SGM personally or by proxy, that one of the said persons so present whose name stands first on the registers of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

• (3) To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority must be deposited at the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for the holding the SGM. Completion and return of the form of proxy will not preclude a member from attending the SGM and voting in person if he so wishes.

• (4) The registers of members of the Company will be closed on Tuesday, 15 February 2011 and Wednesday, 16 February 2011, both days inclusive, during which period no transfer of shares will be effected. In order to be entitled to attend and vote at the SGM, all transfers accompanied by the relevant share certificates must be lodged for registration with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited, at the above address not later than 4:00 p.m. on Monday, 14 February 2011.

• (5) Shareholders are advised to read the circular to the shareholders of the Company dated 21 January 2011 which contains information concerning the resolution to be proposed in this notice.

• (6) The resolution to be proposed at the SGM shall be decided by way of a poll.

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