Kerry Logistics Network Limited

636 BMG524181036

Air Freight & Logistics

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Mar. 29	Kerry Logistics Network Appoints CEO	MT
Mar. 28	Kerry Logistics Network Limited Announces Re-Designation of CHEUNG Ping Chuen Vicky as Chief Executive Officer, Effective April 1, 2024	CI

Kerry Logistics Network : Circular

May 02, 2021 at 08:17 pm EDT

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 your licensed securities dealer or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Kerry Logistics Network 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.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

(Incorporated in the British Virgin Islands and continued into Bermuda

as an exempted company with limited liability)

Stock Code 636

MAJOR TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE WAREHOUSES SALE AGREEMENT
1. CONTINUING CONNECTED TRANSACTION AND

SPECIAL DEAL UNDER THE WAREHOUSES MANAGEMENT AGREEMENTS

1. DISCLOSEABLE TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE TAIWAN BUSINESS SALE AGREEMENT
2. 1. CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE BRAND LICENCE AGREEMENTS
1. SPECIAL DEAL UNDER THE SHAREHOLDERS' AGREEMENT AND PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS
DISCLOSEABLE TRANSACTION, CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE FRAMEWORK SERVICES AGREEMENT

AND

(7) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

SOMERLEY CAPITAL LIMITED

Independent Financial Adviser to

the Independent Board Committees and the Independent Shareholders

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed "Definitions" of this circular. A letter from the Board is set out on pages 14 to 57 of this circular. A letter from the LR Independent Board Committee is set out on pages 58 to 59 of this circular. A letter from the Code Independent Board Committee is set out on pages 60 to 61 of this circular. A letter from Somerley containing its opinion and advice to the Independent Board Committees and the Independent Shareholders is set out on pages 62 to 118 of this circular.

A notice convening the SGM of the Company to be held at Orchid Room, Lower Level II, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong at 3:15 p.m. on Wednesday, 26 May 2021 (or as soon thereafter as the annual general meeting of the Company to be held at the same place and on the same date at 2:30 p.m. shall have been concluded or adjourned) (or any adjournment thereof) to approve the matters referred to in this circular is set out on pages N-1 to N-4 of this circular. A form of proxy for use at the SGM is enclosed with this circular and such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.kln.com).

Whether or not you are able to attend the SGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company's Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong not less than 48 hours before the time appointed for holding the SGM, i.e. by no later than 3:15 p.m. on Monday, 24 May 2021. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting if you so wish and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

Approval by the Shareholders and the Independent Shareholders, as applicable, of the Warehouses Sale Agreement, the Warehouses Management Agreements, theTaiwan Business Sale Agreement, the Brand Licence Agreements and the Shareholders' Agreement at the SGM are pre-conditions to the making of the Partial Offer. As a result, the Partial Offer can only be made if these agreements are approved at the SGM and all other pre-conditions are satisfied or waived where applicable.

WARNING

Completion of the Partial Offer is subject to pre-conditions and conditions being satisfied (or waived) and therefore the Partial Offer may or may not become unconditional and may or may not be completed. The issuance of this circular and the entering into of the Special Deal Agreements does not in any way imply that the Partial Offer will become unconditional. Completion of the Special Deal Agreements is subject to the conditions under each of the Special Deal Agreements being fulfilled. Accordingly, the issue of this circular also does not in any way imply that the Special Deal Agreements will be completed and the transactions contemplated by the Special Deal Agreements may or may not proceed. Shareholders and prospective investors are advised to exercise caution when dealing in the Shares. Persons who are in doubt as to the action they should take should consult their professional advisers.

3 May 2021

		CONTENTS
Definitions . . .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from the LR Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Letter from the Code Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60
Letter from Somerley	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	62
Appendix I	-	Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	-	Property Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III	-	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV	-	Letter from Somerley on Profit Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V	-	Letter from PricewaterhouseCoopers on Profit Estimate . . . . . . . . . . . . . . . . .	V-1
Appendix VI	-	Particulars of the Proposed Amendments to the Bye-Laws . . . . . . . . . . . . . . . .	VI-1
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-1

PRECAUTIONARY MEASURES FOR THE SPECIAL GENERAL MEETING

Considering the COVID-19 pandemic, certain measures will be implemented at the SGM with a view to minimising the risk of infection to attendees, including, without limitation:

Compulsory body temperature screening/checks
Compulsory health declaration
Compulsory wearing of surgical face mask - no mask will be provided at the venue
No admission of attendees who are subject to quarantine prescribed by the Department of Health of Hong Kong
Designated seating arrangements to ensure social distancing
No provision of refreshments or drinks and no corporate gift will be distributed

The Company reminds attendees that they should carefully consider the risks of attending the SGM, taking into account their own personal circumstances. Furthermore, the Company would like to remind the Shareholders that physical attendance in person at the SGM is not necessary for the purpose of exercising their voting rights and strongly recommends that the Shareholders appoint the Chairman of the SGM as their proxy and submit their form of proxy as early as possible.

Subject to the development of the COVID-19 pandemic situation, the Company will continue to monitor the situation and may implement additional measures at short notice which will be announced closer to the date of the SGM.

- i -

DEFINITIONS

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

"acting in concert"	has the meaning given to it under the Takeovers Code
"ASEAN"	the Association of Southeast Asian Nations
"associate(s)"	has the meaning given to it under the Takeovers Code
"Board"	the board of Directors
"Brand Licence Agreements"	the Company Brand Licence Agreement and the KE Thailand Brand Licence
	Agreement
"Bye-laws"	the bye-laws of the Company adopted on 25 November 2013 with effect
	from 19 December 2013, as amended from time to time
"close associate(s)"	has the meaning given to it under the Listing Rules
"Closing Date"	the First Closing Date of the Partial Offer or any subsequent closing date of
	the Partial Offer as may be extended or revised in accordance with the
	Takeovers Code
"Code Independent Board	the independent committee of the Board (comprising Mr YEO Philip Liat
Committee"	Kok and Mr ZHANG Yi Kevin, being all the INEDs other than: (i) Ms KHOO
	Shulamite N K who is also an independent non-executive director of
	Shangri-La Asia Limited which is the parent company of Shang Holdings
	Limited (which is a Controlling Shareholders Close Associate), and (ii) Ms
	WONG Yu Pok Marina who is also an independent non-executive director of
	Kerry Properties), established for the purpose of advising the Independent
	Shareholders in respect of the Partial Offer, the Option Offer and the Special
	Deal Agreements pursuant to the requirements of the Takeovers Code
"Company"	Kerry Logistics Network Limited, a company incorporated in the British
	Virgin Islands and continued into Bermuda to become an exempted
	company with limited liability, the Shares of which are listed on the Main
	Board of the Stock Exchange (Stock Code: 636)
"Company Brand Licence	the brand licence agreement dated 25 March 2021 entered into between
Agreement"	the Company and the Licensor in relation to the proposed grant of a licence
	by the Licensor to the Company, and the right to sub-license to certain of its
	subsidiaries and certain existing pre-approved invested entities of the
	Company for the use of the Kerry Trademarks and the Kerry Names

- 1 -

	DEFINITIONS
"Composite Document"	the composite document to be jointly issued by the Offeror and the
	Company in connection with the Partial Offer and the Option Offer in
	compliance with the Takeovers Code
"Conditions"	the conditions of the Partial Offer and the Option Offer, as set out under the
	section headed "Conditions of the Partial Offer and the Option Offer" in the
	Joint Announcement
"Controlling Shareholders"	Kerry Holdings, Kerry Group Limited and their respective subsidiaries which
	hold Shares, being Kerry Properties, Alpha Model Limited, Bright Magic
	Investments Limited, Ace Time Holdings Limited, Macromind Investments
	Limited, Marsser Limited, Noblespirit Corporation, Summer Fort Limited,
	Caninco Investments Limited, Darmex Holdings Limited, Glory Voice
	International Limited, Moslane Limited, Paruni Limited, Ban Thong
	Company Limited, Desert Grove Limited, Kerry Asset Management Limited,
	Star Medal Limited and Total Way Investments Limited
"Controlling Shareholders Close	close associates of the Controlling Shareholders, which as at the Latest
Associates"	Practicable Date, comprise (i) Shang Holdings Limited, a company which is
	indirectly owned as to more than 30% by Kerry Holdings and; (ii) Pristine
	Holdings Limited and Rosy Frontier Limited, each of which is an investment
	company of a discretionary trust of which Kerry Group Limited and Mr Kuok
	Khoon Hua (an Executive Director) are discretionary beneficiaries
"Despatch Date"	the date of despatch of the Composite Document to the Shareholders as
	required by the Takeovers Code
"Director(s)"	director(s) of the Company for the time being
"Effective Time"	the Final Closing Date provided that the Partial Offer has become or been
	declared unconditional in all respects
"Executive"	the executive director of the Corporate Finance Division of the SFC or any
	delegates of the executive director
"Executive Directors"	the executive Directors, namely Mr KUOK Khoon Hua, Mr MA Wing Kai
	William, Mr CHEUNG Ping Chuen Vicky and Mr NG Kin Hang
"Final Closing Date"	the date which is the 14th day after (i) the date on which the Partial Offer is
	declared unconditional as to acceptances or (ii) the First Closing Date,
	whichever is the later, provided that the Partial Offer will be opened for
	acceptance for at least 21 days following the Despatch Date

- 2 -

	DEFINITIONS
"First Closing Date"	the date stated in the Composite Document as the first closing day of the
	Partial Offer, which shall be at least 21 days following the Despatch Date, or
	such later date as may be extended by the Offeror in accordance with the
	Takeovers Code
"FL"	Kerry Warehouse (Fanling 1) Limited, a direct wholly-owned subsidiary of
	Warehouse Co (FL) and the legal owner of the FL Target Warehouse
"FL Target Warehouse"	a warehouse situated at Fanling Sheung Shui Town Lot No. 45 and No. 46
	(No. 39 On Lok Mun Street, Fanling, New Territories, Hong Kong)
"FL Warehouses Management	the management agreements dated 25 March 2021 entered into between
Agreement"	FL and the Warehouses Manager for the Warehouses Management Services
	in relation to the FL Target Warehouse, as amended pursuant to an
	amendment agreement dated 30 April 2021
"Framework Services Agreement"	the framework services agreement dated 25 March 2021 entered into
	between the Company and Kerry Holdings as amended pursuant to an
	amendment agreement dated 30 April 2021
"Greater China"	for the purpose of this circular, Mainland China, Hong Kong, Macau and
	Taiwan
"Group"	the Company and its subsidiaries
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of PRC
"Independent Board Committees"	the Code Independent Board Committee and the LR Independent Board
	Committee
"Independent Shareholders"	the Shareholders other than any Shareholders who are involved in or
	interested in the Special Deal Agreements, and their respective associates
	(as defined in the Listing Rules) and any persons acting in concert with any
	of them
"INEDs"	the independent non-executive Directors

- 3 -

	DEFINITIONS
"J.P. Morgan"	J.P. Morgan Securities (Asia Pacific) Limited, the financial adviser to the
	Offeror. J.P. Morgan is a registered institution under the SFO, licensed to
	conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6
	(advising on corporate finance) and Type 7 (providing automated trading
	services) regulated activities under the SFO
"Joint Announcement"	the announcement jointly published by the Offeror, the Company and Kerry
	Properties on 10 February 2021
"KC"	Kerry Warehouse (Kwai Chung) Limited, a direct wholly-owned subsidiary of
	Warehouse Co (KC) and the legal owner of the KC Target Warehouse
"KC Target Warehouse"	a warehouse situated at Kwai Chung Town Lot No. 326 (Nos. 4-6 Kwai Tai
	Road, Kwai Chung, New Territories, Hong Kong)
"KC Warehouses Management	the management agreements dated 25 March 2021 entered into between
Agreement"	KC and the Warehouses Manager for the Warehouses Management Services
	in relation to the KC Target Warehouse, as amended pursuant to an
	amendment agreement dated 30 April 2021
"KCC"	Kerry Cargo Centre Limited, a direct wholly-owned subsidiary of Warehouse
	Co (KCC) and the legal owner of the KCC Target Warehouse
"KCC Target Warehouse"	a warehouse situated at Kwai Chung Town Lot No. 455 (No. 55 Wing Kei
	Road, Kwai Chung, New Territories, Hong Kong)
"KCC Warehouses Management	the management agreements dated 25 March 2021 entered into between
Agreement"	KCC and the Warehouses Manager for the Warehouses Management
	Services in relation to the KCC Target Warehouse, as amended pursuant to
	an amendment agreement dated 30 April 2021
"KE Thailand"	the Company's Thailand-listed subsidiary, Kerry Express (Thailand) Public
	Company Limited, the shares of which are listed on the Thailand Stock
	Exchange (Stock Code: KEX)
"KE Thailand Brand Licence	the brand licence agreement dated 25 March 2021 entered into between KE
Agreement"	Thailand and the Licensor in relation to the proposed grant of a licence by
	the Licensor to KE Thailand, and the right to sub-license to certain of its
	subsidiaries for the use of the Kerry Express Trademarks and the Kerry
	Express Names
"Kerry Express Names"	"KERRY EXPRESS" as part of company name, trade name, internet domain
	names and social media handles

- 4 -

	DEFINITIONS
"Kerry Express Trademarks"	certain existing Kerry Express licensed trademarks
"Kerry Holdings"	Kerry Holdings Limited, one of the Controlling Shareholders of the
	Company
"Kerry Holdings Group"	Kerry Holdings and its subsidiaries (but for the purposes of this circular,
	excluding the Group)
"Kerry Names"	"KERRY" as part of company name, trade name, internet domain names and
	social media handles
"Kerry Properties"	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 (Stock Code: 683) and one of the Controlling Shareholders
	of the Company
"Kerry Trademarks"	certain existing Kerry licensed trademarks
"KWHK" or "Warehouses Manager"	Kerry Warehouse (Hong Kong) Limited (a wholly-owned subsidiary of the
	Company), the building manager and leasing agent of the Target
	Warehouses under the Warehouses Management Agreements
"Latest Practicable Date"	30 April 2021, being the latest practicable date prior to the printing of this
	circular for the purpose of ascertaining certain information contained
	herein
"Leased Properties"	the premises of the Kerry Holdings Group in Hong Kong leased or to be
	leased to the Group from time to time, which may include but are not
	limited to, office premises, staff quarter and warehouses
"Licensor"	Kuok Registrations Limited, being a fellow subsidiary of Kerry Holdings
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange
"LR Independent Board Committee"	the independent committee of the Board (comprising Mr YEO Philip Liat
	Kok and Mr ZHANG Yi Kevin, being all the INEDs other than: (i) Ms KHOO
	Shulamite N K who is also an independent non-executive director of
	Shangri-La Asia Limited which is the parent company of Shang Holdings
	Limited (which is a Controlling Shareholders Close Associate), and (ii) Ms
	WONG Yu Pok Marina who is also an independent non-executive director of
	Kerry Properties) established for the purpose of advising the Independent
	Shareholders in respect of the Warehouses Sale Agreement, the Taiwan
	Business Sale Agreement and the Framework Services Agreement pursuant
	to the Listing Rules

- 5 -

	DEFINITIONS
"Macau"	the Macao Special Administrative Region of PRC
"Mainland China"	PRC, excluding, for the purpose of this circular, Hong Kong, Macau and
	Taiwan
"Model Code"	the Model Code for Securities Transactions by Directors of Listed Issuers as
	set out in Appendix 10 of the Listing Rules
"NTD"	New Taiwan Dollars, the lawful currency of Taiwan
"Offer Price"	HK$18.80 for each Offer Share payable by the Offeror to the Shareholders
	accepting the Partial Offer
"Offer Shares"	the Shares subject to the Partial Offer, being 931,209,117 Shares, and "Offer
	Share" shall be construed accordingly
"Offeror"	Flourish Harmony Holdings Company Limited, a company incorporated in
	the Cayman Islands, that is indirectly wholly-owned by the Offeror Parent
"Offeror Group"	the Offeror and its subsidiaries
"Offeror Parent"	S.F. Holding Co., Ltd., a joint stock company incorporated in the PRC with
	limited liability and the shares of the Offeror Parent are listed on the
	Shenzhen Stock Exchange (Stock Code: 002352.SZ)
"Offeror Parent Group"	the Offeror Parent and its subsidiaries
"Offeror Parent Holdco"	Shenzhen Mingde Holding Development Co., Ltd., a joint stock company
	incorporated in the PRC with limited liability
"Offeror Ultimate Controlling	Mr WANG Wei
Shareholder"
"Option Offer"	the appropriate partial offer to be made by the Offeror to the Optionholders
	to cancel such number of outstanding Share Options representing 51.8% of
	the outstanding Share Options as at the Final Closing Date pursuant to Rule
	13 of the Takeovers Code
"Optionholders"	the holder(s) of the Share Options

- 6 -

	DEFINITIONS
"Partial Offer"	the pre-conditional voluntary partial cash offer to be made by J.P. Morgan
	on behalf of the Offeror to the Shareholders to acquire 931,209,117 Shares
	on the terms and conditions set out in the Joint Announcement and to be set
	out in the Composite Document, and in compliance with the Takeovers
	Code
"PRC"	the People's Republic of China
"Pre-Conditions"	the pre-conditions to the making of the Partial Offer and the Option Offer,
	as set out under the section headed "Pre-Conditions to the Partial Offer and
	the Option Offer" of the Joint Announcement
"Prior Company Brand Licence	the brand licence agreement dated 19 November 2013 (as amended and
Agreement"	supplemented) entered into between the Company and the Licensor
"Prior KE Thailand Brand Licence	the brand licence agreement dated 27 February 2020 (as amended and
Agreement"	supplemented) entered into between KE Thailand and the Licensor
"Record Date"	means the date immediately prior to the Final Closing Date, being the
	record date for determining Shareholders' entitlement to the Special
	Dividend
"Relevant Controlling Shareholders"	all the Controlling Shareholders which directly hold Shares (being, all the
	Controlling Shareholders other than Kerry Holdings and Kerry Group
	Limited)
"Relevant Kerry Holdings Group"	Kerry Holdings and its subsidiaries, which for the purpose of the Framework
	Services Agreement, excludes Kerry Properties and its subsidiaries
"SFC"	the Securities and Futures Commission of Hong Kong
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the laws of Hong
	Kong)
"SGM"	the special general meeting of the Company to be held to consider and, if
	thought fit, approve the Special Deal Agreements
"Share"	an ordinary share of par value of HK$0.50 each in the share capital of the
	Company, and "Shares" shall be construed accordingly

- 7 -

	DEFINITIONS
"Share Options"	outstanding options over Shares granted pursuant to the pre-IPO share
	option scheme adopted by the Company on 25 November 2013, where one
	Share Option represents the right to subscribe for one Share with an
	exercise price of HK$10.20 for each Share
"Shareholder"	a holder of any Shares, and "Shareholders" shall be construed accordingly
"Shareholders' Agreement"	the shareholders' agreement entered into between the Offeror, the Offeror
	Parent, Kerry Holdings and Kerry Properties for the purpose of, among other
	things, setting out their mutual agreement regarding the corporate
	governance of the Company and their respective rights and obligations after
	completion of the Partial Offer
"Somerley"	Somerley Capital Limited, the independent financial adviser to the
	Independent Board Committees and the Independent Shareholders
	appointed in respect of the Partial Offer, the Option Offer and the Special
	Deal Agreements
"Special Deal Agreements"	the Warehouses Sale Agreement, the Warehouses Management
	Agreements, the Taiwan Business Sale Agreement, the Brand Licence
	Agreements, the Shareholders' Agreement and the Framework Services
	Agreement
"Special Deals Announcement"	the announcement published by the Company on 25 March 2021 in relation
	to, among other things, the Special Deal Agreements
"Special Dividend"	conditional upon completion of the Warehouses Sale Agreement (which is
	conditional upon, amongst other conditions, the Partial Offer becoming or
	being declared unconditional in all respects), the special dividend of
	HK$7.28 per Share to be declared by the Company to distribute
	substantially all of the proceeds from the Warehouses Sale to those
	Shareholders who are Shareholders of record as at the Record Date
"SS"	Kerry Warehouse (Sheung Shui) Limited, a direct wholly-owned subsidiary
	of Warehouse Co (SS) and the legal owner of the SS Target Warehouse
"SS Target Warehouse"	a warehouse situated at Fanling Sheung Shui Town Lot No. 109, New
	Territories, Hong Kong
"SS Warehouses Management	the management agreement dated 25 March 2021 entered into between SS
Agreement"	and the Warehouses Manager for the Warehouses Management Services in
	relation to the SS Target Warehouse, as amended pursuant to an
	amendment agreement dated 30 April 2021

- 8 -

	DEFINITIONS
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"subsidiaries"	has the meaning given to it under the Listing Rules
"Taiwan Business"	the Taiwan Target Companies, which hold equity interests of certain
	companies that carry on the Unlisted Taiwan Business, and indirectly holds
	approximately 49.7% shareholding interest in the Taiwan Listco
"Taiwan Business Sale"	the proposed sale of the Taiwan Business by the Company to the Taiwan
	Purchaser pursuant to the Taiwan Business Sale Agreement
"Taiwan Business Sale Agreement"	the sale agreement dated 25 March 2021 entered into between the
	Company and the Taiwan Purchaser for the Taiwan Business Sale
"Taiwan Business Sale Continuing	has the meaning given to it on page 36 of this circular
Conditions"
"Taiwan Business Sale	has the meaning given to it on page 36 of this circular
Pre-Conditional Conditions"
"Taiwan Companies"	Tong Li Investments Co., Ltd., Da Ji International Ltd., Taiwan Kerry
	Investment Company Limited, Kerry Freight International Company
	Limited, Kerry Coffee Company Limited, Taiwan Listco and Science Park
	Logistics Co., Ltd, each a direct or indirect subsidiary of the Taiwan Target
	Companies
"Taiwan Listco"	Kerry TJ Logistics Company Limited, a company listed on the Taiwan Stock
	Exchange (Stock Code: 2608.TW)
"Taiwan Purchaser"	Treasure Seeker Group Limited, an indirect wholly-owned subsidiary of
	Kerry Holdings
"Taiwan Pure Holding Companies"	theTaiwanTarget Companies, Kerry Logistics Holdings (Taiwan) Limited, Da
	Ji International Ltd., Tong Li Investments Co., Ltd., Taiwan Kerry Investment
	Company Limited and Fair Point Limited
"Taiwan Seller"	Kerry Logistics Services Limited, a wholly-owned subsidiary of the Company
"Taiwan Target Companies"	Kerry Logistics (Taiwan) Investments Limited and Pan Asia Airlines
	Investment Limited

- 9 -

	DEFINITIONS
"Taiwan Unlisted Business	Kerry Freight International Company Limited, Direct Logistics Co., Ltd.,
Companies"	Kerry Speedy Logistics (Hong Kong) Limited and Kerry Coffee Company
	Limited, which together carry on the Unlisted Taiwan Business
"Takeovers Code"	the Hong Kong Code on Takeovers and Mergers
"Target Warehouses"	all the landed properties owned by the Target Warehouses Companies,
	which comprise the FL Target Warehouse, the KC Target Warehouse, the
	KCC Target Warehouse, the SS Target Warehouse, the TC2 Target
	Warehouse, theTWTarget Warehouse, theTC1-ATarget Property, theTC1-B
	Target Property and TC1-7A2 Target Property
"Target Warehouses Companies"	Warehouse Co (FL), Warehouse Co (KC), Warehouse Co (KCC), Warehouse
	Co (TC1-A), Warehouse Co (TC1-B), Warehouse Co (TC1-7A2), Warehouse
	Co (SS), Warehouse Co (TC2) and Warehouse Co (TW)
"Target Warehouses Sale Shares"	the entire issued shares in the share capital of each of the Target
	Warehouses Companies
"TC1-7A2"	Wah Ming Properties Limited, a direct wholly-owned subsidiary of
	Warehouse Co (TC1-7A2) and the legal owner of the TC1-7A2 Target
	Property
"TC1-7A2 Target Property"	Unit A2, 7/F., Block A and car parking space No. V18 on 1/F. at Nan Fung
	Godown Centre, No. 3 Kin Chuen Street, Kwai Chung, NewTerritories, Hong
	Kong
"TC1-7A2 Warehouses Management	the management agreement dated 25 March 2021 entered into between
Agreement"	TC1-7A2 and the Warehouses Manager for the Warehouses Management
	Services in relation to the TC1-7A2 Target Property, as amended pursuant to
	an amendment agreement dated 30 April 2021
"TC1-A Target Property"	certain premises at Block A and car parking spaces at Nan Fung Godown
	Centre, No. 3 Kin Chuen Street, Kwai Chung, New Territories, Hong Kong
"TC1-A Warehouses Management	the management agreement dated 25 March 2021 entered into between
Agreement"	Warehouse Co (TC1-A) and the Warehouses Manager for the Warehouses
	Management Services in relation to the TC1-A Target Property, as amended
	pursuant to an amendment agreement dated 30 April 2021

- 10 -

DEFINITIONS

"TC1-B Target Property"

"TC1-B Warehouses Management Agreement"

"TC2"

"TC2 Target Warehouse"

"TC2 Warehouses Management Agreement"

"TW"

"TW Target Warehouse"

"TW Warehouses Management Agreement"

"United States"

"Unlisted Taiwan Business"

"USD" or "US$"

"Warehouse Co (FL)"

certain premises at Block B, car parking spaces and parking area/loading and unloading platform and certain other premises (if any) and rights (if subsisting) at Nan Fung Godown Centre, No. 3 Kin Chuen Street, Kwai Chung, New Territories, Hong Kong

the management agreement dated 25 March 2021 entered into between TC1-B and the Warehouses Manager for the Warehouses Management Services in relation to theTC1-BTarget Property, as amended pursuant to an amendment agreement dated 30 April 2021

Kerry TC Warehouse 2 Limited, a direct wholly-owned subsidiary of Warehouse Co (TC2) and the legal owner of the TC2 Target Warehouse

a warehouse situated at Kwai Chung Town Lot No. 437 (No. 35 Wing Kei Road, Kwai Chung, New Territories, Hong Kong)

the management agreement dated 25 March 2021 entered into between TC2 and the Warehouses Manager for the Warehouses Management Services in relation to the TC2 Target Warehouse, as amended pursuant to an amendment agreement dated 30 April 2021

Kerry Warehouse (Tsuen Wan) Limited, a direct wholly-owned subsidiary of Warehouse Co (TW) and the legal owner of the TW Target Warehouse

a warehouse situated at Kwai Chung Town Lot No. 452 (No. 3 Shing Yiu Street, Kwai Chung, New Territories, Hong Kong)

the management agreement dated 25 March 2021 entered into between TW and the Warehouses Manager for the Warehouses Management Services in relation to theTWTarget Warehouse, as amended pursuant to an amendment agreement dated 30 April 2021

the United States of America, its territories and possessions, any State of the United States and the District of Columbia

the international freight forwarding and coffee trading business in Taiwan

United States dollars, the lawful currency of the United States

Beaverton Limited, an indirect wholly-owned subsidiary of the Company as at the date of this circular and the direct holding company of FL

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	DEFINITIONS
"Warehouse Co (KC)"	Pola Company Limited, an indirect wholly-owned subsidiary of the
	Company as at the date of this circular and the direct holding company of KC
"Warehouse Co (KCC)"	Shabu Inc., an indirect wholly-owned subsidiary of the Company as at the
	date of this circular and the direct holding company of KCC
"Warehouse Co (SS)"	Kimberley Inc., an indirect wholly-owned subsidiary of the Company as at
	the date of this circular and the direct holding company of SS
"Warehouse Co (TC1-A)"	Kerry TC Warehouse 1 (Block A) Limited, an indirect wholly-owned
	subsidiary of the Company as at the date of this circular and the legal owner
	of the TC1-A Target Property
"Warehouse Co (TC1-B)"	Kerry TC Warehouse 1 (Block B) Limited, an indirect wholly-owned
	subsidiary of the Company as at the date of this circular and the legal owner
	of the TC1-B Target Property
"Warehouse Co (TC1-7A2)"	New Assets Management Limited, an indirect wholly-owned subsidiary of
	the Company as at the date of this circular and the direct holding company
	of TC1-7A2
"Warehouse Co (TC2)"	Denleigh Limited, an indirect wholly-owned subsidiary of the Company as
	at the date of this circular and the direct holding company of TC2
"Warehouse Co (TW)"	Twindale Limited, an indirect wholly-owned subsidiary of the Company as
	at the date of this circular and the direct holding company of TW
"Warehouses Management"	the proposed provision of Warehouses Management Services
"Warehouses Management	the FL Warehouses Management Agreement, the KC Warehouses
Agreements"	Management Agreement, the KCC Warehouses Management Agreement,
	the SS Warehouses Management Agreement, the TC2 Warehouses
	Management Agreement, the TW Warehouses Management Agreement,
	the TC1-A Warehouses Management Agreement, the TC1-B Warehouses
	Management Agreement and the TC1-7A2 Warehouses Management
	Agreement
"Warehouses Management Services"	includes building management services, leasing management services,
	operation of warehouse facilities and other related services including
	accounting, IT support, human resources and administration
"Warehouses Owners"	FL, KC, KCC, SS, Warehouse Co (TC1-A), Warehouse Co (TC1-B),TC1-7A, TC2
	and TW

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	DEFINITIONS
"Warehouses Purchaser"	Urban Treasure Holdings Limited, an indirect wholly-owned subsidiary of
	Kerry Holdings
"Warehouses Sale"	the proposed sale of the Target Warehouses Sale Shares by the Warehouses
	Vendor to the Warehouses Purchaser
"Warehouses Sale Agreement"	the sale agreement dated 25 March 2021 entered into among the Company,
	the Warehouses Vendor and the Warehouses Purchaser for the Warehouses
	Sale
"Warehouses Sale	has the meaning given to it on page 17 of this circular
Pre-Conditional Conditions"
"Warehouses Vendor"	Kerry Warehouse (HK) Holdings Limited, a wholly-owned subsidiary of the
	Company
"%"	per cent

For the purpose of this circular, the conversion into Hong Kong dollars (HK$) has been made at the rate of HK$0.27 to NTD1. The conversion should not be construed as a representation that Hong Kong dollar amounts actually represented have been, or could be, converted into this currency at this or any other rate.

References to time and date in this circular are to Hong Kong time and date (unless otherwise stated).

Certain amounts and percentage figures in this circular have been subject to rounding adjustments.

In the event of any inconsistency, the English version of this circular shall prevail over the Chinese version.

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LETTER FROM THE BOARD

(Incorporated in the British Virgin Islands and continued into Bermuda

as an exempted company with limited liability)

Stock Code 636

Executive Directors:	Registered Office:
Mr KUOK Khoon Hua (Chairman)	Victoria Place, 5th Floor
Mr MA Wing Kai William (Group Managing Director)	31 Victoria Street
Mr CHEUNG Ping Chuen Vicky	Hamilton HM 10
Mr NG Kin Hang	Bermuda
Non-executive Director:	Corporate Headquarters and
Ms TONG Shao Ming	Principal Place of Business in Hong Kong:
	16/F, Kerry Cargo Centre
Independent Non-executive Directors:	55 Wing Kei Road
Ms KHOO Shulamite N K	Kwai Chung
Ms WONG Yu Pok Marina	New Territories
Mr YEO Philip Liat Kok	Hong Kong
Mr ZHANG Yi Kevin
	3 May 2021
To the Shareholders
Dear Sirs or Madams,

MAJOR TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE WAREHOUSES SALE AGREEMENT

(2) CONTINUING CONNECTED TRANSACTION AND

SPECIAL DEAL UNDER THE WAREHOUSES MANAGEMENT AGREEMENTS

1. DISCLOSEABLE TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE TAIWAN BUSINESS SALE AGREEMENT
2. 1. CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE BRAND LICENCE AGREEMENTS
1. SPECIAL DEAL UNDER THE SHAREHOLDERS' AGREEMENT AND PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS
DISCLOSEABLE TRANSACTION, CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE FRAMEWORK SERVICES AGREEMENT

AND

(7) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Special Deals Announcement in relation to the Special Deal Agreements.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things: (i) further information on the Special Deal Agreements; (ii) a letter of advice from the LR Independent Board Committee to the Independent Shareholders in relation to the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement; (iii) a letter of advice from the Code Independent Board Committee to the Independent Shareholders in relation to the Special Deal Agreements; (iv) a letter of advice from Somerley to the Independent Board Committees and the Independent Shareholders in relation to the Special Deal Agreements; (v) the independent valuation report on the Target Warehouses; and (vi) a notice convening the SGM.

THE SPECIAL DEAL AGREEMENTS

Warehouses Sale Agreement

On 25 March 2021 (after trading hours), in connection with the Partial Offer and the Option Offer, Kerry Warehouse (HK) Holdings Limited (as vendor), the Company (as vendor guarantor), UrbanTreasure Holdings Limited (as purchaser) and Kerry Holdings (as purchaser guarantor) entered into the Warehouses Sale Agreement. The principal terms of the Warehouses Sale Agreement are set out below:

Date

25 March 2021

Parties

The Company (as the vendor guarantor);
Kerry Warehouse (HK) Holdings Limited, a wholly-owned subsidiary of the Company (as the vendor);
Kerry Holdings (as the purchaser guarantor); and
Urban Treasure Holdings Limited, a wholly-owned subsidiary of Kerry Holdings (as the purchaser).

Subject Matter

Pursuant to the Warehouses Sale Agreement, the Warehouses Vendor agreed to sell and the Warehouses Purchaser agreed to purchase, all issued shares in the capital of the Target Warehouses Companies together with all rights and benefits attaching to the Target Warehouses Sale Shares (including without limitation the right to all dividends and distributions) on or after the completion date.

Neither the Warehouses Vendor nor the Warehouses Purchaser shall be obliged to complete the sale and purchase of any Target Warehouses Sale Shares unless the sale and purchase of all of the Target Warehouses Sale Shares are completed simultaneously.

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LETTER FROM THE BOARD

Consideration

The total consideration for the sale and purchase of theTarget Warehouses Sale Shares is HK$13,500,000,000, which shall be payable by the Warehouses Purchaser to the Warehouses Vendor by way of cashier order or solicitors' cheque at completion of the Warehouses Sale. The consideration was determined after arm's length negotiations between the parties, taking into account (i) the historical financial performance of the Target Warehouses Companies, (ii) the preliminary indication of value of the Target Warehouses conducted by a professional valuer which is independent from the Company and its connected persons and (iii) the outlook for Hong Kong and demand for logistics services.

Consideration adjustments

Immediately prior to completion of the Warehouses Sale, if it is projected that the sum of the net asset value, or the consolidated net asset value, of the Target Warehouses Companies (with the book costs of the Target Warehouses and the carrying value of the other fixed assets of the Target Warehouses Companies replaced by the total consideration of HK$13,500,000,000):

will be greater than the amount of the total consideration, the Warehouses Vendor shall procure that each of the Target Warehouses Companies and the other Warehouses Owners shall declare interim dividends out of retained profits to their respective shareholder(s); or
will be less than the amount of the total consideration, the Warehouses Vendor shall inject such additional capital into the relevant Target Warehouses Company, thereby increasing the share capital of the relevant Target Warehouses Company or the Warehouses Owner but without issuing any new share,

in either case, such that as at completion, the consolidated net asset value of theTarget Warehouses Companies shall be equal to the amount of the total consideration, and the relevant distribution or the relevant injection (as the case may be) shall have been fully reflected in the pro forma completion accounts.

Guarantee

In consideration of the Company and the Warehouses Vendor agreeing to enter into the Warehouses Sale Agreement, Kerry Holdings agrees to unconditionally and irrevocably guarantee to the Warehouses Vendor and the Company the due and punctual performance and discharge by Warehouses Purchaser of all its obligations and liabilities under any transaction documents contemplated under the Warehouses Sale Agreement or arising out of or in connection with any transaction document contemplated under the Warehouses Sale Agreement.

In consideration of Kerry Holdings and the Warehouses Purchaser agreeing to enter into the Warehouses Sale Agreement, the Company agrees to unconditionally and irrevocably guarantee to the Warehouses Purchaser and Kerry Holdings the due and punctual performance and discharge by the Warehouses Vendor of all of its obligation and liabilities under any transaction document contemplated under the Warehouses Sale Agreement or arising out of or in connection with any transaction document contemplated under the Warehouses Sale Agreement.

Conditions

Completion under the Warehouses Sale Agreement is conditional upon:

consent having been obtained from the Executive to the transactions contemplated in the Warehouses Sale Agreement and the Warehouses Management Agreements, where applicable;
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LETTER FROM THE BOARD

the passing of the resolution to approve the Warehouses Sale Agreement and the Warehouses Management Agreements and the transactions contemplated under the Warehouses Sale Agreement and the Warehouses Management Agreements by the Independent Shareholders of the Company at the SGM;
no Target Warehouse having been destroyed, substantially damaged or rendered inaccessible by natural disaster, fire, explosion or other calamity or having been, for any reason, condemned, closed or declared dangerous by relevant government authorities or subject to demolition order(s) or closure order(s), and the reinstatement costs therefor exceeds HK$5,000,000,000; and
the Partial Offer becoming or being declared unconditional in all respects,

(the conditions set out in paragraphs (i) to (iii) above being the "Warehouses Sale Pre-ConditionalConditions").

For the avoidance of doubt, completion under the Warehouses Sale Agreement is not conditional upon the other Special Deal Agreements becoming unconditional. Rather, completion under the Warehouses Sale Agreement is conditional upon, amongst other conditions set out above, the Partial Offer becoming or being declared unconditional in all respects. In turn, it is a pre-condition to the Partial Offer that, amongst other terms, (i) theTaiwan Business Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived) and there being no event or circumstances which would render any of the Taiwan Business Sale Continuing Conditions incapable of satisfaction; (ii) the Brand Licence Agreements having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects; and (iii) the Shareholders' Agreement having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects.

The condition under the Warehouses Sale Agreement set out in paragraph (iii) above may be waived by the Warehouses Purchaser in its absolute discretion at any time on or before the date on which the Pre-Conditions (other than Pre-Condition (viii) to the extent that it relates to the condition set out in paragraph (iii) above) have been satisfied or (where applicable) waived. If the condition set out in paragraph (iii) above remains satisfied (or has been waived by the Warehouses Purchaser) at the time the Pre-Conditions (other than Pre-Condition (viii) to the extent it relates to the condition set out in paragraph (iii) above) has been satisfied or (where applicable) waived, it shall be deemed fully and irrevocably satisfied or waived (as applicable) as at and from such time, and the Warehouses Sale Agreement and completion thereunder shall no longer be conditional upon such condition. None of the other conditions set out above is waivable.

Following satisfaction or (in respect of condition set out in paragraph (iii) above) waiver by the Warehouses Purchaser of the conditions above, the Warehouses Sale Agreement shall become unconditional and, subject to the parties thereto complying with their respective closing obligations, will not be capable of termination. If the above conditions have not been satisfied or waived by the Warehouses Purchaser on or before the long stop date of the Warehouses Sale Agreement (being 31 December 2021 (or such other date as may be agreed by the Warehouses Vendor and the Warehouses Purchaser)), the Warehouses Sale Agreement shall be terminated. As at the Latest Practicable Date, none of the conditions to completion under the Warehouses Sale Agreement had been fulfilled.

Completion

If the Warehouses Sale Agreement becomes unconditional, completion thereunder shall take place on the third business day after the date on which the cheques for the Offer Price have been despatched to Shareholders under the Partial Offer.

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LETTER FROM THE BOARD

Pursuant to the Takeovers Code, if the Partial Offer becomes or is declared unconditional in all respects, such cheques shall be despatched as soon as possible, but in any event within seven business days following the close of the Partial Offer. Given completion of the Warehouses Sale Agreement shall take place on the third business day after the date on which the cheques for the Offer Price have been despatched to Shareholders under the Partial Offer, if the Warehouses Sale Agreement becomes unconditional, completion thereunder must take place by no later than the tenth business day following the close of the Partial Offer. As a result, Shareholders will receive the Special Dividend from the Company separately and after receiving the consideration of the Partial Offer from the Offeror.

Financial information of the Target Warehouses Companies

The audited net asset value of the Target Warehouses Companies as at 31 December 2020, and the audited profit and loss of the Target Warehouses Companies for the two years ended 31 December 2019 and 31 December 2020, respectively are set out in the following table:

				TargetWarehouses Companies
	Warehouse	Warehouse	Warehouse	Warehouse	Warehouse	Warehouse	Warehouse	Warehouse	Warehouse
	Co (FL)	Co (KC)	Co (KCC)	Co (SS)	Co (TC2)	Co (TW)	Co (TC1-A)	Co (TC1-B)	Co (TC1-7A2)
	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)	(HK$'000)
Net asset value as at
31 December 2020	551,031	626,504	4,567,600	836,928	1,363,134	1,478,057	376,978	208,545	29,147
Net profit before taxation for year ended 2019	35,113	44,019	474,641	79,353	114,849	179,114	28,978	39,565	2,401
Net profit after taxation for year ended 2019	32,475	41,066	444,410	73,680	106,314	165,967	26,299	32,636	2,178
Net profit before taxation for year ended 2020	45,650	127,173	637,861	152,014	154,335	260,105	65,841	42,950	4,953
Net profit after taxation for year ended 2020	42,369	124,057	613,391	147,201	144,565	247,078	62,965	35,686	4,723

Financial effects of the Warehouses Sale on the Group

The consideration of the Warehouses Sale is HK$3.46 billion in excess of the net book value of the Target Warehouses Companies in the audited accounts of the Company as at 31 December 2020. Taking into consideration the net proceeds from the Warehouses Sale (after deducting the estimated expenses relating to the Warehouses Sale) of approximately HK$13.4 billion and applying against the audited accounts of the Company as at 31 December 2020 for illustrative purposes, the Group expects to realise a gain upon completion of the Warehouses Sale or approximately HK$3.3 billion, the earnings of the Group to be increased by HK$3.3 billion from the gains arising from the Warehouses Sale, the Group's total assets to be increased by approximately HK$3.3 billion (without taking into account the Special Dividend which is proposed to be paid upon completion of the Warehouses Sale), and the Group's total liabilities to be decreased by HK$44.7 million. The actual amount of the gains to be realised by the Group is subject to audit and will depend on the carrying costs and reclassification adjustments amounts and the transaction costs, and therefore may vary from the amounts mentioned above. The aforesaid estimation is for illustrative purposes only and does not purport to represent how the financial position of the Group will be after the completion of the Warehouses Sale.

The Target Warehouses Companies will no longer be subsidiaries of the Company and Kerry Warehouse (HK) Holdings Limited following the completion of Warehouses Sale.

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LETTER FROM THE BOARD

Proceeds and proposed Special Dividend

Conditional upon completion of the Warehouses Sale (which is in turn conditional upon, amongst other conditions, the Partial Offer becoming or being declared unconditional in all respects), the Company will distribute substantially all of the proceeds from the Warehouses Sale and declare the Special Dividend of HK$7.28 per Share to all those Shareholders who are Shareholders of record on the Record Date (i.e. the date immediately prior to the Final Closing Date, which is after the Partial Offer becoming or being declared unconditional in all respects).

As at the Latest Practicable Date, the Company's total number of issued Shares was 1,798,978,042, meaning the aggregate amount of the Special Dividend was HK$13,096,560,145.76, representing substantially all of the HK$13,500,000,000 consideration (subject to adjustments) receivable by the Company pursuant to the Warehouses Sale.

As the Special Dividend is conditional upon completion of the Warehouses Sale, the receipt of the consideration for theTarget Warehouses Sale Shares will take place before the payment date of the Special Dividend. The payment date of the Special Dividend will be disclosed in the Composite Document with respect to the Partial Offer, to be despatched by the Offeror in due course. Shareholders will receive the Special Dividend from the Company separately and after receiving the consideration of the Partial Offer from the Offeror.

If the Partial Offer lapses, or if, after the Partial Offer becomes or is declared unconditional in all respects, the Warehouses Sale Agreement does not complete because the Company, the Controlling Shareholders or their respective subsidiaries breach their respective closing obligations in the Warehouses Sale Agreement, the Special Dividend will not be paid. The Company, the Controlling Shareholders and their respective subsidiaries have no intention of breaching their respective closing obligations in the Warehouses Sale Agreement.

Reasons for and benefits of entering into the Warehouses Sale Agreement

In connection with the Partial Offer, the Warehouses Sale Agreement would allow the Company to reposition itself as an asset-lighter business. This will boost Shareholder returns through the crystallisation of the value of the relevant warehouses and the subsequent distribution of the sale proceeds via the Special Dividend.

The Directors (including the members of the LR Independent Board Committee and the Code Independent Board Committee whose views have been set out in this circular together with the advice of Somerley) believe that the Warehouses Sale and the distribution of the Special Dividend are fair and reasonable so far as the Independent Shareholders are concerned, and (although not entered into in the ordinary and usual course of business of the Group) are in the interests of the Company and its Shareholders as a whole given the public markets have not previously ascribed meaningful value to the underlying real estate assets held by the Group.

Listing Rules implications

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Warehouses Sale Agreement is 25% or more but all are less than 75%, the Warehouses Sale Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement, and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

As Kerry Holdings is a controlling Shareholder and a connected person of the Company, the Warehouses Sale Agreement also constitutes a connected transaction of the Company under the Listing Rules and would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Takeovers Code implications

The Warehouses Sale Agreement constitutes a special deal in relation to the Partial Offer under Note 4 to Rule 25 of the Takeovers Code and requires the consent of the Executive. An application has been made by the Company to the Executive for its consent to proceed with the Warehouses Sale Agreement under Rule 25 of the Takeovers Code. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the terms of the Warehouses Sale Agreement are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the approval of the Warehouses Sale Agreement by the Independent Shareholders by way of poll at the SGM.

Warehouses Management Agreements

On 25 March 2021 (after trading hours), in connection with the Warehouses Sale, Kerry Warehouse (Hong Kong) Limited, a wholly-owned subsidiary of the Company, entered into nine Warehouses Management Agreements with, respectively, the legal owners of the Target Warehouses to provide Warehouses Management Services for the Target Warehouses. The principal terms of the Warehouses Management Agreements are set out below:

Date

25 March 2021 (as amended on 30 April 2021)

Subject Matter

In connection with the Warehouses Management Agreements, the respective legal owners of the Target Warehouses agreed to appoint and KWHK agreed to accept the appointment as the building manager and leasing agent of the respective Target Warehouses for the provision of Warehouses Management Services during the term of the respective Warehouses Management Agreements. In consideration for such Warehouses Management Services, the relevant legal owners shall pay certain management fees to the Warehouses Manager. In addition, under certain Warehouses Management Agreements, the Warehouses Manager has agreed to guarantee the relevant legal owners of certain Target Warehouses a minimum level of gross revenue during the term of the Warehouses Management Agreements. If the Warehouses Manager is unable to secure tenants for certain Target Warehouses in such Warehouses Management Agreements, the Warehouses Manager shall, as principal, satisfy such minimum guaranteed gross revenue.

The term of each Warehouses Management Agreement is an initial term of three (3) years commencing on the date of completion of the Warehouses Sale in respect of the corresponding Target Warehouses and, subject to the Warehouses Manager having duly performed and observed all terms and conditions of the Warehouses Management Agreements in all material respects, the term is renewable at the option of the Warehouses Manager for a further term of three (3) years. The Warehouses Management Agreements between the relevant parties and the obligations of the relevant parties thereunder would commence on the date of completion of the Warehouses Sale.

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LETTER FROM THE BOARD

For the avoidance of doubt, the Warehouses Management Agreements will only become effective upon completion of the Warehouses Sale. Commencement of each of the Warehouses Management Agreements is not otherwise subject to other conditionality, including by reference to the Partial Offer or the other Special Deal Agreements.

As at the Latest Practicable Date, the condition to the Warehouses Management Agreements becoming effective had not been fulfilled.

Principal terms of each Warehouses Management Agreement

1. KCC Warehouses Management Agreement - 60% guaranteed occupancy

Parties
Kerry Cargo Centre Limited (as the legal owner of the KCC Target Warehouse) ("KCC"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).
Management Fee

In consideration for the services provided by KWHK under the KCC Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to an aggregate of (i) 2% of one-twelfth of the guaranteed gross revenue; and (ii) 15% of the warrant income (being any actual income generated from warrant business operated in the KCC Target Warehouse and received by KCC) in the preceding month in the event that the occupancy of the KCC Target Warehouse of the preceding month exceeds or is equal to 60% (the guaranteed occupancy);
a monthly building manager fee at the rate of 10% of the actual management expenses of the preceding month; and
monthly reimbursement of the estate agent commissions incurred by KWHK for the relevant preceding month and approved by KCC in advance on an "at-cost basis" to the extent that occupancy of the KCC Target Warehouse exceeds or is equal to 60%.

KCC shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the KCC Target Warehouse, property insurance, and subject to KWHK's responsibility set out in the next sentence, all of the government rent and rates for vacant spaces, management fees for vacant spaces and fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the vacant space). KWHK shall be responsible for government rent and rates in respect of 60% (of/based on total gross floor area) of the KCCTarget Warehouse (inclusive of such amounts paid by the lessees, tenants and licensees in respect of the occupied premises), management fees in respect of 60% (of/based on total gross floor area) of the KCC Target Warehouse (inclusive of such amounts payable by the lessees, tenants and licensees in respect of the occupied premises) and fitting out costs and utility expenses and expenses for upkeep of the non-structural parts in respect of 60% (of/based on total gross floor area) of

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LETTER FROM THE BOARD

the KCC Target Warehouse (inclusive of such amounts paid by the lessees, tenants and licensees in respect of the occupied premises). The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to KCC the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee and KCC's share of estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then KCC shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by KCC Target Warehouse and received by KCC in a financial year (excluding warrant income) is less than the guaranteed gross revenue (being HK$151,000,000), KWHK shall pay to KCC an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then KCC shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined after arm's length negotiations between the parties with reference to the estimated rate of occupancy and/or usage of the KCCTarget Warehouse in the three years after the commencement of the KCC Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the KCC Target Warehouse.

2. TW Warehouses Management Agreement - 100% guaranteed occupancy

Parties

Kerry Warehouse (Tsuen Wan) Limited (as the legal owner of the TW Target Warehouse) ("TW"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

Management Fee

In consideration for the services provided by KWHK under the TW Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue;
a monthly building manager fee at the rate of 10% of the actual management expenses of the preceding month; and
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LETTER FROM THE BOARD

reimbursement of TW's share of the estate agent commissions incurred by KWHK and only in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with TW's prior approval, the term of which expire after the expiry of the management term and approved by TW in advance on an "at-cost basis".

TW shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the TW Target Warehouse and property insurance). KWHK shall be responsible for government rent and rates in respect of TW Target Warehouse and management fees in respect of the TW Target Warehouse to be determined on a monthly basis (currently at the rate of HK$1.30 per square foot per month), fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the TW Target Warehouse and all other estate agent commissions except TW's share as described in paragraph (iii) above. The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to TW the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee, TW's share of estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then TW shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by TW Target Warehouse and received by TW in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$105,000,000), KWHK shall pay to TW an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, thenTW shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined after arm's length negotiations by the parties with reference to the estimated rate of occupancy and/or usage of the TW Target Warehouse in the three years after the commencement of the TW Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the TW Target Warehouse.

3. TC1-7A2 Warehouses Management Agreement - 100% guaranteed occupancy

Parties

Wah Ming Properties Limited (as the legal owner of the TC1-7A2 Target Property) ("TC1-7A2"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

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LETTER FROM THE BOARD

Management Fee

In consideration for the services provided by KWHK under the TC1-7A2 Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue; and
reimbursement ofTC1-7A2's share of the estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with TC1-7A2's prior approval, the term of which expire after the expiry of the management term and approved by TC1-7A2 in advance on an "at-cost basis".

TC1-7A2 shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the TC1-7A2 Target Property and property insurance). KWHK shall be responsible for government rent and rates in respect of theTC1-7A2Target Property, management fees in respect of the TC1-7A2 Target Property (currently at the rate of HK$1.40 to HK$1.50 per month for each management share allocated to the TC1-7A2 Target Property), fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the TC1-7A2 Target Property and all other estate agent commissions except TC1-7A2's share as described in paragraph (ii) above. The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to TC1-7A2 the gross revenue of the relevant preceding month after deducting the lease management fee, TC1-7A2's share of the estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then TC1-7A2 shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by TC1-7A2 Target Property and received by TC1-7A2 in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$1,400,000), KWHK shall pay to TC1-7A2 an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then TC1-7A2 shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined after arm's length negotiations between the parties with reference to the estimated rate of occupancy and/or usage of the TC1-7A2 Target Property in the three years after the commencement of theTC1-7A2 Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the TC1-7A2 Target Property.

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4. TC1-A Warehouses Management Agreement - 100% guaranteed occupancy

Parties

Kerry TC Warehouse 1 (Block A) Limited (as the legal owner of the TC1-A Target Property) ("Warehouse Co (TC1-A)"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

Management Fee

In consideration for the services provided by KWHK under the TC1-A Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue; and
reimbursement of Warehouse Co (TC1-A)'s share of the estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with the Warehouse Co (TC1-A)'s prior approval, the term of which expire after the expiry of the management term and approved by Warehouse Co (TC1-A) in advance on an "at-cost basis".

Warehouse Co (TC1-A) shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the TC1-A Target Property and property insurance). KWHK shall be responsible for government rent and rates in respect of TC1-A Target Property, management fees in respect of the TC1-A Target Property (currently at the rate of HK$1.40 to HK$1.50 per month for each management share allocated to TC1-A Target Property), fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the TC1-A Target Property and all other estate agent commissions except Warehouse Co (TC1-A)'s share as described in paragraph (ii) above. The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to Warehouse Co (TC1-A) the gross revenue of the relevant preceding month after deducting the lease management fee, Warehouse Co (TC1-A)'s share of the estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then Warehouse Co (TC1-A) shall make up the shortfall within 14 days of demand by KWHK.

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If the actual gross revenue generated by TC1-A Target Property and received by Warehouse Co (TC1-A) in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$19,600,000), KWHK shall pay to Warehouse Co (TC1-A) an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then Warehouse Co (TC1-A) shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined after arm's length negotiations between the parties with reference to the estimated rate of occupancy and/or usage of the TC1-A Target Property in the three years after the commencement of the TC1-A Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the TC1-A Target Property.

5. TC1-B Warehouses Management Agreement - 100% guaranteed occupancy

Parties

Kerry TC Warehouse 1 (Block B) Limited (as the legal owner of the TC1-B Target Property) ("Warehouse Co (TC1-B)"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

Management Fee

In consideration for the services provided by KWHK under the TC1-B Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue; and
reimbursement of Warehouse Co (TC1-B)'s share of estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with the Warehouse Co (TC1-B)'s prior approval, the term of which expire after the expiry of the management term and approved by Warehouse Co (TC1-B) in advance on an "at-cost basis".

Warehouse Co (TC1-B) shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the TC1-B Target Property and property insurance). KWHK shall be responsible for government rent and rates in respect of the TC1-B Target Property, management fees in respect of the TC1-B Target Property (currently at the rate of HK$1.40 to HK$1.50 per month for each management share allocated to TC1-B Target Property), fitting out costs, utility expenses and expenses for upkeep of the TC1-B Target Property and all other estate agent commissions except Warehouse Co (TC1-B)'s share as described in paragraph (ii) above.The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

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Guaranteed gross revenue

KWHK shall pay to Warehouse Co (TC1-B) the gross revenue of the relevant preceding month after deducting the lease management fee, Warehouse Co (TC1-B)'s share of the estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then Warehouse Co (TC1-B) shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by TC1-B Target Property and received by Warehouse Co (TC1-B) in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$56,000,000), KWHK shall pay to Warehouse Co (TC1-B) an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then Warehouse Co (TC1-B) shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined after arm's length negotiations with reference to the estimated rate of occupancy and/or usage of the TC1-B Target Property in the three years after the commencement of the TC1-B Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the TC1-B Target Property.

6. TC2 Warehouses Management Agreement - 100% guaranteed occupancy

Parties
Kerry TC Warehouse 2 Limited (as the legal owner of the TC2 Target Warehouse) ("TC2"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).
Management Fee

In consideration for the services provided by KWHK under theTC2 Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue;
a monthly building manager fee at the rate of 10% of the actual management expenses of the preceding month; and
reimbursement ofTC2's share of the estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with the TC2's prior approval, the term of which expire after the expiry of the management term and approved by TC2 in advance on an "at-cost basis".

TC2 shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the TC2 Target Warehouse and property insurance). KWHK shall be responsible for government rent and rates in respect of TC2 Target Warehouse and management fees in

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respect of the TC2 Target Warehouse to be determined on a monthly basis (currently at the rate of HK$1.25 per square foot per month), fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the TC2 Target Warehouse and all other estate agent commissions except TC2's share as described in paragraph (iii) above. The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to TC2 the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee, TC2's share of estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then TC2 shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by TC2 Target Warehouse and received by TC2 in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$62,000,000), KWHK shall pay to TC2 an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then TC2 shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined by arm's length negotiations with reference to the estimated rate of occupancy and/or usage of the TC2 Target Warehouse in the three years after the commencement of the TC2 Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the TC2 Target Warehouse.

7. KC Warehouses Management Agreement - 100% guaranteed occupancy

Parties

Kerry Warehouse (Kwai Chung) Limited (as the legal owner of the KCTarget Warehouse) ("KC"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

Management Fee

In consideration for the services provided by KWHK under the KC Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to 2% of one-twelfth of the guaranteed gross revenue;
a monthly building manager fee at the rate of 10% of the actual management expenses of the preceding month; and
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reimbursement of KC's share of the estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to renew) entered into during the management term with KC's prior approval, the term of which expire after the expiry of the management term and approved by KC in advance on an "at-cost basis".

KC shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of structural parts of the KC Target Warehouse and property insurance). KWHK shall be responsible for government rent and rates in respect of KC Target Warehouse and management fees in respect of the KC Target Warehouse to be determined on a monthly basis (currently at the rate of HK$1.25 per square foot per month), fitting out costs, utility expenses and expenses for upkeep of the non-structural parts of the KC Target Warehouse and all other estate agent commissions except KC's share as described in (iii) above. The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Guaranteed gross revenue

KWHK shall pay to KC the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee and KC's share of estate agent commissions and other outgoings and expenses (if any). If gross revenue is not sufficient to cover the relevant fees, then KC shall make up the shortfall within 14 days of demand by KWHK.

If the actual gross revenue generated by KC Target Warehouse and received by KC in a financial year (including warrant income) is less than the guaranteed gross revenue (being HK$32,000,000), KWHK shall pay to KC an amount equivalent to guaranteed gross revenue minus actual gross revenue annually. If actual revenue exceeds guaranteed revenue, then KC shall pay to KWHK a bonus equivalent to 5.5% of the difference. The guaranteed gross revenue was determined by arm's length negotiations with reference to the estimated rate of occupancy and/or usage of the KC Target Warehouse in the three years after the commencement of the KC Warehouses Management Agreement, and the estimated market rental and other revenue to be generated from such occupancy and/or usage of the KC Target Warehouse.

8. FL Warehouses Management Agreement - Nil guaranteed occupancy

Parties

Kerry Warehouse (Fanling 1) Limited (as the legal owner of the FL Target Warehouse) ("FL"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

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Management Fee

In consideration for the services provided by KWHK under the FL Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to an aggregate of (a) 5.5% of gross revenue received by FL in the relevant preceding month, excluding warrant income (being actual income generated from warrant business operated in the FL Target Warehouse and received by FL) in the relevant preceding month; and (b) 15% of the warrant income of the relevant preceding month;
a monthly building manager fee at the rate of 10% of the actual management expenses of the relevant preceding month; and
monthly reimbursement of the estate agent commissions incurred by KWHK for the relevant preceding month and approved by FL in advance on an "at-cost basis".

KWHK shall pay to FL the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee and estate agent commissions (if any). If gross revenue is not sufficient to cover the relevant fees, then FL shall make up the shortfall within 14 days of demand by KWHK.

FL shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of the structural parts of the FL Target Warehouse, property insurance, government rent and rates in respect of the vacant space and management fees in respect of the vacant space to be determined on a monthly basis (currently at the rate of HK$1.25 per square foot of gross floor area per month), fitting out costs and expenses for the upkeep of the non-structural parts of the vacant space).The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

9. SS Warehouses Management Agreement - Nil guaranteed occupancy

Parties

Kerry Warehouse (Sheung Shui) Limited (as the legal owner of the SSTarget Warehouse) ("SS"); and
KWHK, a wholly-owned subsidiary of the Company (as the Warehouses Manager).

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Management Fee

In consideration for the services provided by KWHK under the SS Warehouses Management Agreement, KWHK shall be entitled to:

a monthly lease management fee equivalent to an aggregate of (a) 5.5% of gross revenue received by SS in the relevant preceding month, excluding warrant income (being actual income generated from warrant business operated in the SS Target Warehouse and received by SS) in the relevant preceding month; and (b) 15% of the warrant income of the relevant preceding month;
a monthly building manager fee at the rate of 10% of the actual management expenses of the relevant preceding month; and
monthly reimbursement of the estate agent commissions incurred by KWHK for the relevant preceding month and approved by SS in advance on an "at-cost basis".

KWHK shall pay to SS the gross revenue of the relevant preceding month after deducting the lease management fee, building manager fee and estate agent commissions (if any). If gross revenue is not sufficient to cover the relevant fees, then SS shall make up the shortfall within 14 days of demand by KWHK.

shall also be responsible for certain outgoings and expenses (e.g. costs and expenses in relation to maintenance and repairs of the structural parts of the SS Target Warehouse, property insurance, government rent and rates in respect of the vacant space and management fees in respect of the vacant space to be determined on a monthly basis (currently at the rate of HK$1.35 per square foot of gross floor area per month), fitting out costs and expenses for the upkeep of the non-structural parts of the vacant space).The management fee was determined after arm's length negotiations between the parties and is on normal commercial terms, taking into account various factors, including the service fees charged by independent third party warehouse services providers for standard building management services, and adjusted according to the type, size and location of the premises, and the relevant party's or customers' specific Warehouses Management Services required.

Other principal terms of the Warehouses Management Agreements

Adjustment of guaranteed gross revenue

Other than for the FL Warehouses Management Agreement and the SS Warehouses Management Agreement which have no guaranteed gross revenue arrangements, if KWHK exercises its right to renew under the relevant Warehouses Management Agreements, the guaranteed gross revenue of the Warehouses Management Agreements will be adjusted for the renewed management term, provided that the guaranteed gross revenue for the renewed management term shall not be adjusted downward by over 15% or upward by over 15% of the guaranteed gross revenue of the initial three-year management term. If the relevant parties fail to agree on the guaranteed gross revenue for the renewed management term, the parties shall each appoint one independent property valuer to assess the prevailing market rent of the relevant Target Warehouses and the guaranteed gross revenue for the renewed management term shall be adjusted to the average of the two property valuers' assessment.

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Capital Expenditure

The legal owners of the respective Target Warehouses shall bear all expenditure of a capital nature or of a kind not expected to be incurred annually. If any capital expenditure to be incurred is within the relevant amount contemplated under an approved budget submitted by KWHK, KWHK shall have authority to incur such capital expenditure without having to seek further approval from the relevant legal owner. If any single item of capital expenditure exceeds HK$500,000, KWHK shall seek the relevant legal owner's approval before incurring the capital expenditure.

Termination

The legal owners of the respective Target Warehouses may terminate the respective Warehouses Management Agreement or the part of the respective Warehouses Management Agreement relating to the provision of building management services at any time from the commencement date of the respective Warehouses Management Agreement by giving not less than 12 months' prior notice in writing to KWHK. Either party may terminate the respective Warehouses Management Agreement if the other party is, inter alia, in material breach of terms of the respective Warehouses Management Agreement, or if the other party becomes or is declared insolvent.

Indemnity

The legal owners of the respective Target Warehouses shall fully indemnify KWHK and its employees from and against all actions, proceedings, claims and demands relating to the Warehouses Management Agreements arising directly or indirectly out of or in connection with any act not involving criminal liability, dishonesty or negligence on the part of KWHK or its employees.

KWHK shall fully indemnify the legal owners of the respective Target Warehouses from and against all actions, proceedings, claims and demands in connection with any breach of the Warehouses Management Agreements and/or any act involving criminal liability, dishonesty or negligence on the part of KWHK or persons employed by KWHK.

Annual cap and basis for determining annual cap

There was no historical transaction between the Group and Kerry Holdings Group in relation to the provision of Warehouses Management Services.

On 30 April 2021, each of the Warehouses Owners entered into an amendment agreement amending the respective Warehouses Management Agreement with the Warehouses Manager to update the annual caps to those set out below. The Company proposes to set the aggregate annual caps for the amounts payable by the Group as principal (and not as agent) to Kerry Holdings Group under the Warehouses Management Agreements (being the guaranteed gross revenue and related charges) for the following periods: (i) the period from the commencement date until 31 December 2021, each of the financial years ending 31 December 2022 and 2023, the period from 1 January 2024 to the third anniversary of the commencement date, to be no more than HK$160.0 million, HK$480.0 million, HK$485.0 million and HK$550.0 million, respectively; and (ii) if the Warehouses Management Agreements are renewed at the option of the Warehouses Manager, the period from the third anniversary of the commencement

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date to 31 December 2024, each of the financial years ending 31 December 2025 and 2026, and the period from 1 January 2027 to the sixth anniversary of the commencement date, to be no more than HK$183.3 million, HK$551.0 million, HK$554.0 million and HK$554.0 million, respectively. The Company will consider the applicable percentage ratios in the size tests and comply with the relevant Listing Rules at the time of renewal if the Warehouses Management Agreements are renewed at the option of the Warehouses Manager.

The Company proposes to set the aggregate annual caps for the amounts receivable by the Group from Kerry Holdings Group for the following periods: (i) the period from the commencement date until 31 December 2021, each of the financial years ending 31 December 2022 and 2023, the period from 1 January 2024 to the third anniversary of the commencement date, to be no more than HK$11.3 million, HK$37.4 million, HK$41.6 million and HK$47.8 million respectively; and (ii) if the Warehouses Management Agreements are renewed at the option of the Warehouses Manager, the period from the third anniversary of the commencement date to 31 December 2024, each of the financial years ending 31 December 2025 and 2026, and the period from 1 January 2027 to the sixth anniversary of the commencement date, to be no more than HK$15.9 million, HK$53.4 million, HK$59.7 million and HK$59.7 million, respectively. The Company will consider the applicable percentage ratios in the size tests and comply with the relevant Listing Rules at the time of renewal if the Warehouses Management Agreements are renewed at the option of the Warehouses Manager.

The annual caps were determined on an aggregate basis and there is no ceiling on the amount receivable or payable by the Group each year in relation to each of the Warehouses Management Agreements.

The annual caps were determined with reference to the management fees charged by the Group when providing warehouse management services to independent third parties, as well as factors including (i) prevailing and projected market rates for building management fees and fees for operation of the warehouse facilities; and (ii) inflation and expected expansion and development of the Group's and Kerry Holdings' businesses.

Reasons for and benefits of entering into the Warehouses Management Agreements

The Group operates as a leading logistics service provider in Asia principally engaged in the integrated logistics and international freight forwarding businesses. Given its experience in operating warehouses, the Group can leverage on its existing set-up and resources to generate revenue by providing Warehouses Management Services.

The Board considers that due to the long-term relationship between the Group and Kerry Holdings Group, it is beneficial to the Company to enter into the Warehouses Management Agreements as these transactions will facilitate the operation and growth of the Company's business.

The Board (including the members of the Code Independent Board Committee whose views have been set out in this circular together with the advice of Somerley) also considers that the Warehouses Management Agreements and transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are on normal commercial terms, or on terms no less favourable than those available to the Group from independent third parties, which are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

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Listing Rules implications

Each of the Target Warehouses Companies will be an indirect wholly-owned subsidiary of Kerry Holdings following completion of the Warehouses Sale. As Kerry Holdings is a Controlling Shareholder and a connected person of the Company, the Warehouses Management Agreements also constitute continuing connected transactions of the Company under the Listing Rules and would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the annual caps of the transactions under the Warehouses Management Agreements will be more than 0.1% but all of them are less than 5%, the Warehouses Management Agreements are subject to reporting, announcement and annual review requirements but exempted from Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

The term of each Warehouses Management Agreement is an initial term of three (3) years commencing on the date of completion of the Warehouses Sale, and subject to the Warehouses Manager having duly performed and observed all terms and conditions of the Warehouses Management Agreements in all material respects, the term is renewable at the option of the Warehouses Manager for a further three (3) years.

Takeovers Code implications

The Warehouses Management Agreements constitute a special deal in relation to the Partial Offer under Note 4 to Rule 25 of the Takeovers Code and requires the consent of the Executive. An application has been made by the Company to the Executive for consent to proceed with the Warehouses Management Agreements. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the terms of the Warehouses Management Agreements are fair and reasonable; and (ii) the approval of the Warehouses Management Agreements by the Independent Shareholders by way of poll at the SGM. Somerley has stated in this circular its opinion on whether the terms of the Warehouses Management Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

Internal control procedures in relation to continuing connected transactions

The Company has established an internal control mechanism for monitoring and reporting continuing connected transactions to ensure compliance with Chapter 14A of the Listing Rules. The finance team of the Company will monitor the continuing connected transactions by communicating regularly with the regional heads of the finance teams of the Group in respect of the terms and pricing policies of the continuing connected transactions, and collecting monthly financial data together with underlying agreements for analysis and reporting. The finance team of the Company will prepare monthly summaries and work closely with the company secretary of the Company to monitor compliance with the annual caps of the continuing connected transactions. These monthly summaries will be made available to the INEDs and the Company's auditors for review periodically, and not less than at least once during each 6-month period. The internal audit team of the Company will carry out annual assessment of the effectiveness of the internal control system.

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TAIWAN BUSINESS SALE AGREEMENT

On 25 March 2021 (after trading hours), in connection with the Partial Offer and the Option Offer, the Company and Kerry Logistics Services Limited, a wholly-owned subsidiary of the Company, entered into the Taiwan Business Sale Agreement to sell the Company's interests in certain Taiwan businesses. The principal terms of the Taiwan Business Sale Agreement are set out below:

Date

25 March 2021

Parties

The Company (as the seller guarantor);
Kerry Logistics Services Limited, a wholly-owned subsidiary of the Company (as the seller);
Kerry Holdings (as the purchaser guarantor); and
Treasure Seeker Group Limited, a wholly-owned subsidiary of Kerry Holdings (as the purchaser).

Subject Matter

Pursuant to the Taiwan Business Sale Agreement, the Taiwan Seller agreed to sell and the Taiwan Purchaser agreed to purchase the entire issued share capital of Kerry Logistics (Taiwan) Investments Limited and Pan Asia Airlines Investment Limited, which are investment holding companies directly or indirectly holding equity interests of certain companies that carry on the Unlisted Taiwan Business (being, the Taiwan Unlisted Business Companies) and approximately 49.7% shareholding interest in the Taiwan Listco.

Conditions and closing

Closing of the Taiwan Business Sale is conditional upon satisfaction or waiver of the following conditions precedent:

the Partial Offer becoming or being declared unconditional in all respects;
all approvals and consents from Shareholders which are required in connection with the transactions contemplated under the Taiwan Business Sale Agreement pursuant to Chapters 14 and 14A of the Listing Rules and the Takeovers Code having been obtained;
all regulatory approvals which are required for closing of the Taiwan Business Sale having been obtained without condition or with conditions which will not materially adversely affect the Taiwan Purchaser, Kerry Holdings, Kerry Holdings' controlling shareholder and their respective subsidiaries and associates, or the Taiwan Target Companies and their respective subsidiaries (including the Taiwan Listco), and no
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requirement or restriction or criminal liability having been imposed or dictated on any member of the Kerry Holdings Group or the Taiwan Target Companies or their subsidiaries or their respective officers or employees by relevant regulators and governmental authorities in Taiwan;

no new laws or amendment to any existing laws are being promulgated or issued in Taiwan and no draft new law or draft amendment to any existing laws have been submitted for legislation which would render transactions contemplated under theTaiwan Business Sale Agreement not permissible or illegal or which would require Kerry Holdings to make a tender offer for shares in the Taiwan Listco and Kerry Holdings not being required by the regulators in Taiwan to make a tender offer for shares in the Taiwan Listco;
no new laws or amendment to any existing laws which would render the sale of the Taiwan Target Companies not permissible or illegal and no restraining governmental order or permanent injunction or other governmental order preventing any member of the Taiwan Target Companies (including the Taiwan Listco) from carrying out their businesses in Taiwan in the ordinary course; and
no material breach of any of the Taiwan Seller's and the Company's warranties and undertakings,

(the conditions set out in paragraphs (ii), (iii), (iv) and (vi) above being the "Taiwan Business Sale Pre-ConditionalConditions" and paragraph (v) being the "Taiwan Business Sale Continuing Conditions").

The Taiwan Purchaser has the right to waive any of the conditions set out in (iv) and (vi) above at any time on or before the date on which all the Pre-Conditions are declared satisfied. No other conditions are waivable. If the conditions precedent set out in (ii), (iii), (iv) and (vi) above are satisfied or waived at the time the Pre-Conditions (other than Pre-Condition (viii) to the Partial Offer to the extent it relates to the condition precedent set out in (ii) above) have been satisfied or waived, they shall be deemed fully and irrevocably satisfied or waived as at and from such time, and the Taiwan Business Sale Agreement and closing of the Taiwan Business Sale shall no longer be conditional upon such conditions precedent. The Taiwan Business Sale Agreement shall terminate if any of these conditions precedent are not satisfied at such time (unless waived).

The Taiwan Business Sale Agreement shall automatically terminate if the conditions set out above are not satisfied (or, where applicable, waived) on or before 31 December 2021.

For the avoidance of doubt, completion under the Taiwan Business Sale Agreement is not conditional upon the other Special Deal Agreements becoming unconditional. Rather, completion under the Taiwan Business Sale Agreement is conditional upon, amongst other conditions set out above, the Partial Offer becoming or being declared unconditional in all respects. In turn, it is a pre-condition to the Partial Offer that, amongst other terms,

the Warehouses Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived); (ii) the Brand Licence Agreements having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects; and (iii) the Shareholders' Agreement having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects.

As at the Latest Practicable Date, none of the conditions to completion under the Taiwan Business Sale Agreement had been fulfilled.

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Closing

Closing of theTaiwan Business Sale will take place on the earlier of (i) the seventh business day after the last day on which Shareholders may tender acceptances into the Partial Offer; (ii) the business day immediately before the day on which the Offeror Parent or its wholly-owned subsidiaries become a member on the register of members of the Company upon acquiring the title to the Shares under the Partial Offer, and (iii) such date as Kerry Holdings, the Company and the Offeror Parent may agree which is not to be earlier than immediately prior to the Partial Offer becoming unconditional in all respects.

Consideration

The initial consideration under the Taiwan Business Sale Agreement shall be the USD equivalent of NTD4,537,018,403 (equivalent to approximately HK$1.2 billion) (subject to audited completion accounts adjustments and post-closing adjustments set out below) in cash which shall be payable at closing.

The initial consideration has been determined by arm's length negotiations between the parties taking into account, inter alia, (i) the profit generated by the Taiwan Business, (ii) the historical price and liquidity of the shares of the Taiwan Listco, and (iii) the net debt position of the Taiwan Pure Holding Companies.

Audited completion accounts adjustments

The Company shall prepare consolidated completion accounts (as defined in the Taiwan Business Sale Agreement) in respect of the Taiwan Target Companies and their subsidiaries for the period from 1 January 2021 to the month-end immediately preceding the date of closing (being, the completion accounts reference date) to be audited at the Taiwan Purchaser's costs by the Company's auditors, and delivered to the Taiwan Purchaser within 120 days after closing.

Upon delivery of the audited completion accounts and subject to the net adjustment amount in this paragraph exceeding a de minimis amount of NTD1,000,000 (equivalent to approximately HK$270,000) (in which case the net adjustment shall be in respect of the full amount and not the excess only), the initial consideration shall be adjusted by reference to the audited completion accounts as follows:

to the extent the aggregate consolidated net asset values (which takes into account the residual deferred consideration and withholding tax provision on retained profits of Da Ji International Ltd., Tong Li Investments Co., Ltd. and where applicable any Taiwan Companies which have adequate retained profits and surplus cash to distribute dividend at the completion accounts reference date to any offshore shareholders, as applicable) of each of the Taiwan Target Companies as set out in the audited completion accounts are less than or exceed the initial consideration of NTD4,537,018,403 (equivalent to approximately HK$1.2 billion), any shortfall shall be deducted from the initial consideration and any excess shall be added to the initial consideration (as the case may be); and

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deducted on a dollar-for-dollar basis in the event that any contingent liabilities (including, without limitation, unpaid tax liabilities) exist for the Taiwan Pure Holding Companies at the time of the completion accounts reference date which under the Hong Kong Generally Accepted Accounting Principles should be deducted from the net asset values of the relevant companies as of the completion accounts reference date but have not been reflected in the completion accounts. For the avoidance of doubt, if relevant audit adjustment(s) have already been made to the net asset values in the audited completion accounts, no further deductions should be made to the initial consideration.

If the initial consideration is increased pursuant to the adjustments, then the Taiwan Purchaser shall pay the Taiwan Seller; and if the initial consideration is reduced pursuant to the adjustments, the Taiwan Seller shall pay the Taiwan Purchaser, the net adjustment amount within 10 business days after the delivery of the audited completion accounts to the Taiwan Purchaser.

Post-closing adjustments

Following closing of the Taiwan Business Sale, to the extent that any residual deferred consideration (being the portion of consideration which is payable by Taiwan Kerry Investment Company Limited, a member of the Target Group, or its subsidiaries in respect of acquiring 51% of the issued share capital of Direct Logistics Co., Ltd. which falls due after 31 December 2021) does not become payable (whether because the relevant financial thresholds are not met at the relevant times for them to be met, or otherwise), the Taiwan Purchaser shall pay to the Taiwan Seller an amount equal to the amount of the residual deferred consideration that does not become payable. Such payment shall be made by telegraphic transfer within 10 business days after such date on which the amount of residual deferred consideration (the portion of the deferred consideration in the amount of NTD65,634,010 (equivalent to approximately HK$17.7 million) which falls due after 31 December 2021) is finally determined in accordance with the terms of the deferred consideration.

Indemnity

Pursuant to the Taiwan Business Sale Agreement, the Company and Taiwan Seller will jointly and severally indemnify the Taiwan Purchaser for all losses and damages suffered (whether directly or indirectly) as a result of or arising in connection with (i) any breach by the Company or the Taiwan Seller of the representations and warranties under the Taiwan Business Sale Agreement, (ii) any contingent or undisclosed liabilities of any member of the Taiwan Target Companies and their subsidiaries arising from the conduct of their business prior to the closing of the Taiwan Business Sale Agreement (whether material or not, subject to and excluding matters disclosed or has otherwise been disclosed to the Taiwan Purchaser in writing), and (iii) any breach by the Taiwan Seller or the Company of their obligations under the Taiwan Business Sale Agreement.

The Company and the Taiwan Seller will jointly and severally indemnify and at all times keep indemnified (on a full indemnity basis) at the option of the Taiwan Purchaser, each member of the Taiwan Target Companies and their subsidiaries from and against all taxation falling on each member of the Taiwan Target Companies and their subsidiaries (insofar as the Taiwan Listco and/or its subsidiaries is/are concerned, the indemnification amount shall be pro-rated by reference to theTaiwan Purchaser's percentage economic interest in the relevant company) resulting from or by reference to gains or income earned on or before closing, and any and all taxation resulting from the receipt by such member of the Taiwan Target Companies and their subsidiaries of any amounts paid by the Taiwan Seller or its subsidiaries under the Taiwan Business Sale Agreement, and any and all costs reasonably incurred in connection with settlement of claim, legal proceedings or the enforcement of such settlement or judgement.

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The maximum aggregate liability of the Company and Taiwan Seller (together and not severally) in respect of all indemnification (other than the tax indemnity) shall not exceed the aggregate consideration payable by the Taiwan Purchaser to the Taiwan Seller under the Taiwan Business Sale Agreement; and the maximum aggregate liability of the Company and the Taiwan Seller under the Taiwan Business Sale Agreement shall not exceed the aggregate consideration payable by the Taiwan Purchaser to the Taiwan Seller under the Taiwan Business Sale Agreement plus the outstanding amount of bank loans (as defined in the Taiwan Business Sale Agreement) less the aggregate amount of unencumbered cash sitting on the accounts of each member of the Taiwan Pure Holding Companies, in each case as at closing.

Neither the Taiwan Seller nor the Company shall be liable in respect of any claim for breach of the terms of the Taiwan Business Sale Agreement and/or indemnity claim unless aggregate amount of claims at any time made by the Taiwan Purchaser and/or Kerry Holdings shall exceed NTD5,000,000 (equivalent to approximately HK$1,350,000), in which case the Company and the Taiwan Seller shall be liable for the whole amount.

Guarantee

In consideration of the Taiwan Seller and the Company (and each of them) agreeing to enter into the Taiwan Business Sale Agreement, Kerry Holdings agrees to unconditionally and irrevocably guarantee to the Taiwan Seller and the Company (and each of them) due and punctual performance and discharge by the Taiwan Purchaser of all its obligations and liabilities under the Taiwan Business Sale Agreement or arising out of or in connection with the Taiwan Business Sale Agreement.

In consideration of Kerry Holdings and the Taiwan Purchaser (and each of them) agreeing to enter into the Taiwan Business Sale Agreement, the Company agrees to unconditionally and irrevocably guarantee to the Taiwan Purchaser and Kerry Holdings (and each of them) the due and punctual performance and discharge by the Taiwan Seller of all of its obligation and liabilities under theTaiwan Business Sale Agreement or arising out of or in connection the Taiwan Business Sale Agreement.

Financial information of the Taiwan Target Companies

The unaudited combined net asset value of the Taiwan Target Companies as at 31 December 2020, and the unaudited combined profit and loss of the Taiwan Target Companies for the two years ended 31 December 2019 and

31 December 2020, respectively are set out in the following table:

	(HK$)
Combined net asset value as at 31 December 2020(1)	1,206,627,000
Combined net profit before taxation for year ended 31 December 2019	430,601,000
Combined net profit after taxation for year ended 31 December 2019 attributable to the
Taiwan Seller	147,981,000
Combined net profit before taxation for year ended 31 December 2020	560,237,000
Combined net profit after taxation for year ended 31 December 2020 attributable to the
Taiwan Seller	223,286,000

Note:

Pursuant to the Taiwan Business Sale Agreement, net asset value is defined as total assets including, without limitation, any goodwill debited to reserves (acquisition reserves) less total liabilities and non-controlling interests.

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The unaudited combined net profit before taxation and net profit after taxation attributable to the Taiwan Seller for the two years ended 31 December 2019 and 31 December 2020 have been prepared by combining the unaudited historical financial information of the Taiwan Target Companies on the basis that the Taiwan Target Companies are controlled by the Group, which is consistent in all material respects with the accounting policies adopted by the Directors and used in the preparation of the consolidated financial statements of the Group for the year ended 31 December 2019 and 2020, respectively.

The disclosure of unaudited net profits of the Taiwan Target Companies for the two financial years immediately preceding the transaction (the "RequiredTaiwan Financial Information") constitutes a profit forecast under Rule 10 of the Takeovers Code and is required to be reported on by both the Company's financial adviser and auditors in accordance with Rule 10.4 of the Takeovers Code. Please refer to Appendix IV and Appendix V for the respective letters issued by Somerley and the reporting accountants of the Company on the reporting on of the RequiredTaiwan Financial Information.

Financial effects of the Taiwan Business Sale on the Group

Taking into consideration the net proceeds from the Taiwan Business Sale of approximately NTD4.5 billion (equivalent to approximately HK$1.2 billion) and combined net asset value(1) of the Taiwan Business as at 31 December 2020, it is expected that the Taiwan Business Sale will not result in any changes to the retained earnings of the Group given the gain on disposal of the Taiwan Business to be recognised in the profit or loss will be set off by the transfer of acquisition reserves (which is the goodwill arose when the Company increased its equity interests in the Taiwan Listco and the Taiwan Unlisted Business Companies) to the retained earnings upon the completion of the Taiwan Business Sale. The aforesaid estimation is for illustrative purposes only and does not purport to represent how the financial position of the Group will be after the closing of the Taiwan Business Sale.

The Taiwan Target Companies will no longer be subsidiaries of the Company and Kerry Logistics Services Limited following the Taiwan Business Sale.

Proceeds

The proceeds from the Taiwan Business Sale, being the USD equivalent of NTD4.5 billion (equivalent to approximately HK$1.2 billion) (subject to audited completion accounts adjustments and post-closing adjustments) are expected to be retained by the Company to support the ongoing growth and development of the Group.

Reasons for and benefits of entering into the Taiwan Business Sale Agreement

Due to foreign investment restrictions, the Offeror is restricted from indirectly acquiring interests in Taiwan businesses. The Taiwan Business Sale Agreement is therefore essential to facilitate the Partial Offer and acquisition of interests in the Company by the Offeror. Given the reasons for and benefits of the Partial Offer, the Board (including the members of the LR Independent Board Committee and the Code Independent Board Committee whose views have been set out in the circular after considering the advice of Somerley) considers that the Taiwan Business Sale is in the interests of the Company and its Shareholders as a whole.

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Further, theTaiwan Business Sale presents itself as a good opportunity for the Company to refocus its resources on developing key markets and capture business growth which may arise in the longer run. Accordingly, the Directors (including the members of the LR Independent Board Committee and the Code Independent Board Committee whose views have been set out in this circular after considering the advice of Somerley) consider that the Taiwan Business Sale Agreement is on normal commercial terms, which are fair and reasonable so far as the Independent Shareholders are concerned, and (although not entered into in the ordinary and usual course of business of the Group) are in the interests of the Company and its Shareholders as a whole.

Listing Rules implications

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of theTaiwan Business Sale Agreement is 5% or more but less than 25%, the Taiwan Business Sale Agreement constitutes a discloseable transaction of the Company under the Listing Rules and would therefore be subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

As Kerry Holdings is a controlling Shareholder and a connected person of the Company, the Taiwan Business Sale Agreement also constitutes a connected transaction of the Company under the Listing Rules and would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Takeovers Code implications

The Taiwan Business Sale Agreement constitutes a special deal in relation to the Partial Offer under Note 4 to Rule 25 of the Takeovers Code. An application has been made by the Company to the Executive for consent to proceed with the Taiwan Business Sale Agreement. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the Taiwan Business Sale Agreement are fair and reasonable; and (ii) the approval of the Taiwan Business Sale Agreement by the Independent Shareholders by way of poll at the SGM. Somerley has stated in this circular its opinion on whether the terms of the Taiwan Business Sale Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

BRAND LICENCE AGREEMENTS

On 25 March 2021 (after trading hours), in connection with the Partial Offer and the Option Offer, each of the Company and KE Thailand entered into the respective Brand Licence Agreements. The principal terms of the Brand Licence Agreements are set out below:

Date

25 March 2021

Principal terms of each Brand Licence Agreement

1. Company Brand Licence Agreement

Parties

The Company (as a licensee); and

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Kuok Registrations Limited, a fellow subsidiary of Kerry Holdings (as the Licensor).

Subject Matter

By the Prior Company Brand Licence Agreement, the Company has been granted the right to use and to sub-license to its subsidiaries the right to use the Kerry Names and KerryTrademarks. Pursuant to the Company Brand Licence Agreement, the parties agreed that the Prior Company Brand Licence Agreement shall be terminated as of the Effective Time and that all sub-licences granted shall be deemed terminated automatically and simultaneously.

In order to ensure there will be continuity in the right to use and to sub-licence the right to use the Kerry Names and Kerry Trademarks, the Licensor agreed to grant to the Company (i) a limited, non-exclusive,non-assignable and revocable licence for the relevant Kerry Trademarks, and a limited, non-exclusive,non-assignable and revocable right to use the Kerry Names, in both cases in relation to certain permitted purposes and territories as set out in the Company Brand Licence Agreement; and (ii) a right to grant sub-licences to certain existing sub-licensees and, subject to the Licensor's prior written consent (such consent not to be unreasonably withheld or delayed), a right to sub-license additional sub-licences to its subsidiaries.

2. KEThailand Brand Licence Agreements

Parties

KE Thailand, the Company's Thailand-listed subsidiary (as a licensee); and
Kuok Registrations Limited, a fellow subsidiary of Kerry Holdings (as the Licensor).

Subject Matter

By the Prior KE Thailand Brand Licence Agreement, KE Thailand has been granted the right to use and to sub-license to its subsidiaries the right to use the Kerry Express Names and Kerry Express Trademarks.

As the Licensor is entitled to terminate the Prior KE Thailand Brand Licence Agreement in the event Kerry Group Limited and its subsidiaries (as defined in the Prior KEThailand Brand Licence Agreement) ceases to hold, control and own 30% or more of the voting rights in KEThailand, which will be triggered as a result of the Partial Offer, the parties entered into the KE Thailand Brand Licence Agreement in order to enable KE Thailand to continue to use the Kerry Express Names and Kerry Express Trademarks on the terms and conditions as set out in the KE Thailand Brand Licence Agreement.

Pursuant to the KE Thailand Brand Licence Agreement, the Licensor and KE Thailand agreed to terminate the Prior KE Thailand Brand Licence Agreement as of the Effective Time and that all sub-licences granted shall be deemed terminated automatically and simultaneously. In order to ensure there will be continuity in the right to use and to sub-licence the right to use the Kerry Express Names and Kerry Express Trademarks, the Licensor agreed to grant to KE Thailand (i) a limited, exclusive, non-assignable and revocable licence for the relevant Kerry Express Trademarks, and a limited, non-exclusive,non-assignable and revocable right to use the

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LETTER FROM THE BOARD

Kerry Express Names, in both cases in relation to certain permitted purposes in Thailand as set out in the KE Thailand Brand Licence Agreement; and (ii) a right to grant sub-licences to such existing sub-licensees and, subject to the Licensor's prior written consent (such consent not to be unreasonably withheld or delayed), a right to sub-license additional sub-licences to its subsidiaries.

Other general principal terms of each Brand Licence Agreement

Term

Subject to fulfilment of the conditions (details of which are set out below), the Company Brand Licence Agreement shall take effect at the Effective Time and shall unless terminated earlier, remain valid and continue to be in effect until the third anniversary of the Effective Time. The Company and the Licensor may have the option to renew the Company Brand Licence Agreement for such period and on such terms as the parties may agree.

Subject to fulfilment of the conditions (details of which are set out below), the KE Thailand Brand Licence Agreement shall take effect at the Effective Time and shall unless terminated earlier, remain valid and continue to be in effect until the third anniversary of the Effective Time and, shall be automatically extended for every three-year period unless KE Thailand elects not to extend prior to the expiry of the term, and provided that neither KE Thailand nor any of its sub-licensees is in breach of any of their representations, warranties, undertaking and obligations under the KE Thailand Brand Licence Agreement or the relevant sub-licence agreement, as the case may be.

Licence Fee

The licence fee for each of the Brand Licence Agreements is a nominal one-off amount of HK$100. The licence fee was determined by arm's length negotiations between the parties with reference to historical licence fees and use of the licence.

Conditions

Each of the Brand Licence Agreements shall be conditional upon satisfaction of the following conditions:

consent having been obtained from the Executive to the transactions contemplated in the Brand Licence Agreements;
the approval of the Brand Licence Agreements and the transactions contemplated under the Brand Licence Agreements by the Independent Shareholders by poll at the SGM; and
the Partial Offer becoming or being declared unconditional in all respects;

in each case on or before 31 December 2021, or such later date as agreed by the parties thereto. If the conditions are not satisfied by such date, the Brand Licence Agreements shall automatically terminate.

For the avoidance of doubt, the Brand Licence Agreements are not conditional upon the other Special Deal Agreements becoming unconditional. Rather, the Brand Licence Agreements are conditional upon, amongst other conditions set out above, the Partial Offer becoming or being declared unconditional in all respects. In turn, it is a

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pre-condition to the Partial Offer that, amongst other terms, (i) the Warehouses Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived); (ii) the Taiwan Business Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived) and there being no event or circumstances which would render any of the Taiwan Business Sale Continuing Conditions incapable of satisfaction; and (iii) the Shareholders' Agreement having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects.

As at the Latest Practicable Date, none of the conditions to the Brand Licence Agreements becoming effective had been fulfilled.

Termination

The Licensor shall have the right to terminate a Brand Licence Agreement with immediate effect after giving 30 days written notice if in the sole opinion of the Licensor, inter alia, the relevant licensee fails to pay any material amount due under the Brand Licence Agreement, is in breach of the respective Brand Licence Agreement or the relevant sub-licence and the breach is not capable of cure or is irremediable. The Licensor shall have the right to terminate a Brand Licence Agreement with immediate effect by giving 21 days written notice to the licensee if in the sole opinion of the Licensor, the relevant licensee is in breach of any term of the Brand Licence Agreement which is capable of remedy but fails to rectify within 14 days of receiving request from the Licensor.

The Licensor shall also be entitled to terminate a Brand Licence Agreement by giving not less than nine months' notice in writing if, inter alia, (i) Kerry Group Limited and its subsidiaries (as defined in the Brand Licence Agreements) cease to hold, directly or indirectly, 30% or more of the voting rights in the Company; (ii) the Offeror Parent Group ceases to control in any way, or hold, directly or indirectly, 50% or more of the voting rights in the Company; (iii) the Offeror Ultimate Controlling Shareholder ceases to have control or ownership over the Offeror Parent; (iv) Kerry Group Limited and its subsidiaries or the Offeror Parent Group or the Offeror Ultimate Controlling Shareholder enter into an agreement with a third party to sell or dispose of Shares upon completion of which (i), or (ii) or (iii) would occur.

With respect to KE Thailand Brand Licence Agreement, the Licensor may also terminate the licence agreement if (a) the Group ceases to control in any way, or to hold, directly or indirectly, 50% or more of the voting rights in KE Thailand; or (b) the Group enters into an agreement with a third party upon completion of which (a) would occur.

All sub-licences shall be automatically terminated upon termination of the relevant Brand Licence Agreement.

Guarantee and Indemnity

In consideration of the entering into of the Brand Licence Agreements, the Company and KE Thailand (as the case may be) shall guarantee the performance by the sub-licensees of all their obligations and liabilities under the respective Brand Licence Agreements. The Company and KE Thailand (as the case may be) under the Brand Licence Agreements also agree to indemnify the Licensor, Kerry Group Limited and its respective subsidiaries (as defined in the Brand Licence Agreements) against any loss or liabilities arising from a breach of the respective Brand Licence Agreements by the licensee or any of the sub-licensees and/or anyone associated or affiliated with them in relation to the use of the Kerry Trademarks, the Kerry Names, the Kerry Express Trademarks and the Kerry Express Names (as the case may be) or otherwise arising out of or in relation to the respective Brand Licence Agreements.

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Historical transaction amounts

No amount was payable by the Group for the use of the KerryTrademarks and Kerry Names for the years ended 31 December 2018, 2019 and 2020.

No amount was payable by the Group for the use of the Kerry Express Trademarks and Kerry Express Names for the years ended 31 December 2018 and 2019 and HK$100 was paid by KE Thailand for the use of Kerry Express Trademarks and Kerry Express Names for the year ended 2020.

Reasons of and benefits for entering into the Brand Licence Agreements

The Group have adopted the Kerry Trademarks and the Kerry Names across all the international markets in which the Company operates. As the Controlling Shareholders are expected to continue to be involved in the Company as significant Shareholders (i.e., in excess of 30%) after the completion of the Partial Offer and in order for the Company to continue to retain a clear brand identity and culture, the Company has requested the ongoing use of the Kerry Trademarks and the Kerry Names. KE Thailand and its subsidiary have adopted the Kerry Express Trademarks and Kerry Express Names in Thailand and in connection with the Partial Offer, KE Thailand has requested the ongoing use of the Kerry Express Trademarks and Kerry Express Names. The Directors (including the members of the Code Independent Board Committee whose views have been set out in this circular after considering the advice of Somerley) believe that the Brand Licence Agreements are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and its Shareholders as a whole.

Listing Rules implications

As the Licensor is a fellow subsidiary of Kerry Holdings (which in turn is the Controlling Shareholder) and a connected person of the Company, the Brand Licence Agreements constitute continuing connected transactions of the Company under the Listing Rules. As the licence fee is nominal, the aggregate amounts to be paid by the Company and KE Thailand (as the case may be) to the Licensor under the Brand Licence Agreements will not be, on an annual basis, more than the de minimis threshold of 0.1% during the term of the Brand Licence Agreements. The Brand Licence Agreements would therefore be fully exempt from the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Takeovers Code implications

The Brand Licence Agreements constitute a special deal in relation to the Partial Offer under Rule 25 of the Takeovers Code and requires the consent of the Executive. An application has been made by the Company to the Executive for its consent to proceed with the Brand Licence Agreements. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the terms of the Brand Licence Agreements are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the approval of the Brand Licence Agreements by the Independent Shareholders by way of poll at the SGM.

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SHAREHOLDERS' AGREEMENT AND THE PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS

As disclosed in the Joint Announcement, the Offeror and the Offeror Parent have entered into the Shareholders' Agreement with Kerry Holdings and Kerry Properties regarding certain corporate governance matters in relation to the Company. The principal terms of the Shareholders' Agreement, including the Board composition, reserved matters, business arrangements and public float, have been disclosed in the Joint Announcement and are set out below:

Board composition

For so long as Kerry Holdings and its associated companies in aggregate legally and beneficially hold 10% or more of the total issued share capital of the Company, the Offeror Parent shall procure that the Offeror shall, and each of the Offeror, Kerry Holdings and Kerry Properties (acting severally) shall, and shall procure that any of its associated companies which holds Shares will, exercise their respective voting power in the Company to procure that the Board shall comprise eleven Directors, including (i) seven Directors (excluding INEDs), of whom four shall be nominated by the Offeror, two shall be nominated by Kerry Holdings and one shall be nominated by Kerry Properties, and (ii) four INEDs, of whom three shall be nominated by the Offeror and one shall be nominated by Kerry Holdings, provided that if either Kerry Holdings or Kerry Properties does not exercise its right to nominate one or more Directors, the other shall be entitled to nominate the relevant number of Directors in its place so long as it or its associated company is still a Shareholder.

For so long as Kerry Holdings and its associated companies in aggregate legally and beneficially hold 5% or more but less than 10% of the total issued share capital of the Company, the Offeror Parent shall procure that the Offeror shall, and each of the Offeror, Kerry Holdings and Kerry Properties (acting severally) shall, and shall procure that any of its associated companies which holds Shares will, exercise its voting power in the Company to procure that one Director shall be nominated by Kerry Holdings, provided that if Kerry Holdings does not exercise its right to nominate such Director, Kerry Properties shall be entitled to nominate such Director so long as it is still a Shareholder.

In the event that Kerry Properties ceases to be an associated company of Kerry Holdings, it shall cease to be entitled to nominate any Directors and any such nomination rights shall be exercisable by Kerry Holdings in its place.

The parties to the Shareholders' Agreement shall determine in good faith an appropriate composition of any committee of the Board in a manner consistent with the principles outlined above.

Reserved matters

The Offeror Parent shall procure that the Offeror shall, and each of the Offeror, Kerry Holdings and Kerry Properties (acting severally) shall, and shall procure that any of its associated companies which holds Shares will, vote its Shares and (so far as practicable, and so far as it lawfully can) take all reasonable actions necessary (including to procure amendments of the Bye-laws) to ensure that none of the reserved matters are undertaken by the Company or, where applicable, any member of the Group without the prior approval of Directors representing two-thirds or more in number of the Directors in attendance and entitled to vote at the relevant Board meeting. These reserved matters comprise any change to the issued share capital or the creation or issue of any Shares or any

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other security convertible into Shares or the grant of any option or rights to subscribe for or to convert any instrument into such Shares, and any acquisition (or a series of related acquisitions) by the Company or any member of the Group with a value of HK$3 billion or more.The restriction on the Company undertaking such reserved matters without the approvals described above shall terminate immediately if and from the time that Kerry Holdings, Kerry Properties and their respective associated companies in aggregate cease to legally and beneficially hold 10% or more of the total issued share capital in the Company.

Business arrangements

Subject to the Offeror Parent obtaining requisite corporate approvals (or shareholders' approvals and/or regulatory approvals, if applicable) and (1) the Offeror Parent Group and (2) Kerry Holdings and Kerry Properties (and their respective associated companies) legally and beneficially hold not less than 50% and 30%, respectively, of the Shares, the Offeror and the Offeror Parent agree to procure that the Offeror Parent Group carries out its logistics businesses outside Greater China through the Group, subject to the followings: (i) any international freighter operations are excluded; (ii) consent from relevant partners of certain joint venture businesses; and (iii) no existing contracts (as at the date of the Shareholders' Agreement) of the Offeror Parent Group would be breached as a result. The Offeror Parent Group will be free to pursue any new business opportunities which the Group elects not to pursue.

The parties also agree that arrangements will be made between the Offeror Parent and the Group in relation to their businesses in Mainland China in order to better align their respective business and to optimally realise synergies.

The Shareholders' Agreement is conditional upon the Independent Shareholders' approval for the purposes of the Takeovers Code and the Partial Offer becoming or being declared unconditional in all respects. If the Shareholders' Agreement becomes unconditional, it will become effective at the Effective Time.

For the avoidance of doubt, the Shareholders' Agreement is not conditional upon the other Special Deal Agreements becoming unconditional. Rather, the Shareholders' Agreement is conditional upon, amongst other conditions set out above, the Partial Offer becoming or being declared unconditional in all respects. In turn, it is a pre-condition to the Partial Offer that, amongst other terms, (i) the Warehouses Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived); (ii) the Taiwan Business Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived) and there being no event or circumstances which would render any of the Taiwan Business Sale Continuing Conditions incapable of satisfaction; and (iii) the Brand Licence Agreements having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects.

As at the Latest Practicable Date, none of the conditions to the Shareholders' Agreement becoming effective had been fulfilled.

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In view of the Shareholders' Agreement, the Board proposes to make certain corresponding amendments to the Bye-laws. The Board proposes to seek the approval of the Shareholders at the SGM with respect to such amendments to the Bye-laws, which shall take effect from the Effective time, in order to align and facilitate the arrangements regarding Board composition and reserved matters under the Shareholders' Agreement. Please refer to Appendix VI for the particulars of the proposed amendments to the Bye-laws (marked to show changes to the existing Bye-laws).

The legal advisers to the Company as to Hong Kong laws and Bermuda laws have confirmed that the proposed amendments comply with the requirements of the Listing Rules and the applicable laws of Bermuda, respectively. The Company confirms that there is nothing unusual about the proposed amendments for a company listed on the Stock Exchange.

Takeovers Code implications

The Shareholders' Agreement constitutes a special deal in relation to the Partial Offer under Rule 25 of the Takeovers Code and requires the consent of the Executive. An application has been made by the Offeror to the Executive for its consent to proceed with the Shareholders' Agreement. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the terms of the Shareholders' Agreement are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the approval of the Shareholders' Agreement by the Independent Shareholders by way of poll at the SGM.

FRAMEWORK SERVICES AGREEMENT

On 25 March 2021 (after trading hours), the Company and Kerry Holdings entered into Framework Services Agreement. On 30 April 2021, the Company and Kerry Holdings further entered into an amendment agreement to update the annual caps to those set out below. The principal terms of the Framework Services Agreement are set out below:

Date

25 March 2021 (as amended on 30 April 2021)

Parties

the Company; and
Kerry Holdings.

Subject Matter

Pursuant to the Framework Services Agreement:

the Group agreed to provide in places outside Taiwan services including delivery and transportation services, local courier services, freight services, freight agency services, insurance brokerage and related services, catering services and services relating to management and operation of warehouse facilities
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LETTER FROM THE BOARD

(including building management, leasing and licensing management, warrant operations, IT support, human resources, administration and related services, and excluding the Warehouses Management Services to be provided pursuant to the Warehouses Management Agreements) to the Relevant Kerry Holdings Group on normal commercial terms and on an arm's length basis, or on terms no less favourable than those available to each of the Relevant Kerry Holdings Group and the Group from independent third parties;

the Relevant Kerry Holdings Group agreed to lease the Leased Properties to the Group on normal commercial terms and on an arm's length basis, or on terms no less favourable than those available to each of the Relevant Kerry Holdings Group and the Group from independent third parties; and
the Relevant Kerry Holdings Group agreed to provide services in and/or from Taiwan including land transportation, other logistics services; freight services, freight agency services and other logistics services; and warehousing services to the Group on normal commercial terms and on an arm's length basis, or on terms no less favourable than those available to each of the Relevant Kerry Holdings Group and the Group from independent third parties.

It is envisaged that from time to time and as required, individual agreements will be entered into between the Group and the Relevant Kerry Holdings Group with respect to specific services covered by the Framework Services Agreement. Each agreement will set out the specific services requested by the relevant party.These agreements shall only contain provisions which are in all material respects consistent with the guidelines and terms and conditions set out above.

Conditions

The Framework Services Agreement shall be conditional upon satisfaction of the following conditions:

consent having been obtained from the Executive to the transactions contemplated under the Framework Services Agreement;
passing by the Independent Shareholders of an ordinary resolution to approve the Framework Services Agreement and the transactions contemplated under the Framework Service Agreement at the SGM as may be required pursuant to Chapters 14 and 14A of the Listing Rules and the Takeovers Code; and
the Partial Offer becoming or being declared unconditional in all respects.

For the avoidance of doubt, the Framework Services Agreement is not conditional upon the other Special Deal Agreements becoming unconditional, nor is the Partial Offer conditional upon the Framework Services Agreement becoming effective.

As at the Latest Practicable Date, none of the conditions to the Framework Services Agreement becoming effective had been fulfilled.

Pricing policies

Pursuant to the Framework Services Agreement, the pricing of each of the transactions entered into under the Framework Services Agreement shall be determined by the parties at the time of entry into the relevant agreements

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LETTER FROM THE BOARD

for such transactions with reference to the applicable market practice and value, with reference to any relevant rules and regulations being effective at the time.

With respect to the services to be provided by the Group to Relevant Kerry Holdings Group:

in relation to logistics and freight services (that are, delivery, transportation, local courier, freight, freight agency and catering services), the service fee shall be determined by the Parties at the time of entry into the relevant subsequent agreement with reference to the weight and type of cargo, mode of shipment, freight rate of the carrier, type of storage space required and the prevailing market service fees charged by independent third party logistics and freight services providers at the relevant time for comparable services. In the course of providing such services, the Group does not treat the Relevant Kerry Holdings Group differently from other independent third party customers, and the Group would customarily compare the prevailing market services fees charged by two or three independent third party logistics and freight services providers at the relevant time before fixing the final fee with the customer (including the Relevant Kerry Holdings Group);
in relation to insurance brokerage and related services, the service fee shall be determined by the Parties at the time of entry into the relevant subsequent agreement with reference to the prevailing market insurance brokerage fees charged by independent third party insurance companies at the relevant time for comparable types of insurance. The Group would customarily compare the prevailing market services fee charged by two or three independent third party insurance brokerage services providers at the relevant time before fixing the final brokerage fee with the customer (including the Relevant Kerry Holdings Group); and
in relation to services relating to management and operation of warehouse facilities (that is, building management, leasing and licensing management, warrant operations, IT support, human resources, administration and related services), the service fee shall be determined by the Parties at the time of entry into the relevant subsequent agreement with reference to the type, size and location of the premises, the relevant party/customers' specific requirements and the prevailing market service fees charged by independent third party warehouse services providers at the relevant time for comparable services. The Group will compare the prevailing market service fees charged by two or three independent third party warehouse services providers at the relevant time before fixing the final service fee with the Relevant Kerry Holdings Group.

With respect to the Leased Properties to be leased by Kerry Holdings to the Group, the rental shall be determined by the parties at the time of entry into the relevant subsequent agreements with reference to the prevailing market rent offered by independent third parties at the relevant time for comparable properties in the nearby area. The Group will obtain quotes from independent third party property agents in respect of two or three comparable properties in the nearby area.

With respect to the services to be provided by Kerry Holdings to the Group:

in relation to transportation and freight services (that is, land transportation, freight and freight agency services, and other logistics services in and/or from Taiwan), the service fee shall be determined by the Parties at the time of entry into the relevant subsequent agreement with reference to the weight and
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LETTER FROM THE BOARD

type of cargo, mode of shipment, freight rate of the carrier, type of storage space required and the prevailing market service fees charged by independent third party logistics and freight services providers at the relevant time for comparable services. In the course of obtaining such services, the Group does not treat Kerry Holdings differently from other independent third party suppliers, and the Group would customarily obtain quotes from two or three third party logistics and freight services providers, in addition to the quote from Kerry Holdings, before determining which supplier to provide the relevant service; and

in relation to warehousing services, the service fee shall be determined by the Parties at the time of entry into the relevant subsequent agreement with reference to the type, size and location of the premises, the relevant party/customers' specific requirements and the prevailing market service fees charged by independent third party warehouse services providers at the relevant time for comparable services. The warehousing services are typically provided to the Group as part of Leased Properties to be leased by Kerry Holdings to the Group. As explained above, the Group will obtain quotes from independent third party property agents in respect of two or three comparable properties in the nearby area, and such quotes would include details of warehousing services, including any relevant service fees.

Term

The Framework Services Agreement will commence on the Final Closing Date of the Partial Offer, and will expire on the third anniversary of the Final Closing Date. The Framework Services Agreement can be extended for a further term of three years with the mutual written agreement of the Company and Kerry Holdings.

Annual cap and basis for determining annual cap

The historical transactions between the Group and the Relevant Kerry Holdings Group in relation to the provision of services constitute de minimis transactions which are exempted from the annual reporting, annual review, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules. No framework agreement has been entered into between the Company and Kerry Holdings prior to the date of the Framework Services Agreement. Upon completion of the Warehouses Sale Agreement and the Taiwan Business Sale Agreement, the provision of logistics related services and services relating to management and operation of warehouse facilities will be expanded to the Relevant Kerry Holdings Group following the Kerry Holdings Group's acquisition of the Target Warehouses Companies and the Taiwan Target Companies.

The Company proposes to set the aggregate annual caps for the amounts payable by the Group to the Relevant Kerry Holdings Group for the period from the Final Closing Date until 31 December 2021, each of the financial years ending 31 December 2022 and 2023, and the period from 1 January 2024 to the third anniversary of the Final Closing Date to be no more than HK$1,863.6 million, HK$2,162.5 million and HK$1,062.2 million and HK$1,149.7 million, respectively.

The Company proposes to set the aggregate annual caps for the amounts receivable by the Group from the Relevant Kerry Holdings Group for the period from the Final Closing Date until 31 December 2021, each of the financial years ending 31 December 2022 and 2023, and the period from 1 January 2024 to the third anniversary of the Final Closing Date, to be no more than HK$61.8 million, HK$183.2 million, HK$232.2 million and HK$295.9

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LETTER FROM THE BOARD

million, respectively. For the avoidance of doubt, the fees receivable by the Group for the provision of Warehouses Management Services and any amount payable under the Warehouses Management Agreements shall not be subject to the annual caps set out in the Framework Services Agreement.

The annual cap was determined with reference to the fees typically charged by independent third party providers for similar services, the total value of the right-of-use assets involved in the leasing of the Leased Properties from the Relevant Kerry Holdings Group to the Group, as well as factors including (i) historical, current and projected rental for the Leased Properties and such further premises (if any) that the Relevant Kerry Holdings Group will lease to the Group during the term of the Framework Services Agreement; (ii) the prevailing and projected market rates for rental and building management fees and fees for comparable properties in the nearby area; (iii) historical, current and projected management fees and fees for operation of warehouse facilities and warehousing services comparable to those to be provided; (iv) historical, current and projected market rates for insurance brokerages and related services for comparable insurance products comparable to those to be provided; (v) historical, current and projected rates on delivery, local courier and freight services comparable to those to be provided; and (vi) inflation and expected expansion and development of the Group's and Kerry Holdings' businesses.

The Directors (including the INEDs) considered that the annual cap and terms of the Framework Services Agreement are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

Reasons for and benefits of entering into the Framework Services Agreement

The Group operates as a leading logistics service provider in Asia principally engaged in the integrated logistics and international freight forwarding businesses. As a logistics service provider, the Group has been providing logistics related services including insurance brokerage and related services and by expanding its services to the Relevant Kerry Holdings Group, the Group is able to enhance the operational scale of the Group. In relation to the provision of services relating to management and operation of warehouse facilities, the Group can leverage on its existing set-up and resources to generate revenue.

In addition, while the Company intends to transform into an asset-light business by entering into the Warehouses Sale Agreement, the Group requires to lease additional premises for its business operations due to the continuing growth in the Group's operations in Hong Kong.

The Board considers that due to the long-term relationship between the Group and the Relevant Kerry Holdings Group, it is beneficial to the Company to enter into the Framework Services Agreement as the transactions pursuant to it will facilitate the operation and growth of the Company's business.

The Board (including the members of the LR Independent Board Committee and the Code Independent Board Committee whose views have been set out in this circular after considering the advice of Somerley) considers that the Framework Services Agreement, the annual caps and the transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group and are on normal commercial terms, or on terms no less favourable than those available to the Group from independent third parties, which are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole, and that the annual caps for the transactions under the Framework Services Agreement are fair and reasonable.

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LETTER FROM THE BOARD

Listing Rules implications

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the annual caps of the transactions under the Framework Services Agreement is 5% or more but less than 25%, the Framework Services Agreement constitutes a discloseable transaction of the Company under the Listing Rules and will therefore be subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

As Kerry Holdings is a Controlling Shareholder and a connected person of the Company, the Framework Services Agreement also constitutes a continuing connected transaction of the Company under the Listing Rules and would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Takeovers Code implications

The Framework Services Agreement constitutes a special deal in relation to the Partial Offer under Note 4 to Rule 25 of theTakeovers Code and requires the consent of the Executive. An application will be made by the Company to the Executive for its consent to proceed with the Framework Services Agreement. Such consent, if granted, is expected to be subject to (i) the opinion of Somerley that the terms of the Framework Services Agreement are fair and reasonable; and (ii) the approval of the Framework Services Agreement by the Independent Shareholders by way of poll at the SGM. Somerley has stated in this circular its opinion on whether the terms of the Framework Services Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

Internal control procedures in relation to continuing connected transactions

THE BOARD

Mr KUOK Khoon Hua, together with his associates, indirectly holds more than 5% of the shares in Kerry Holdings, thus having a material interest in the Special Deal Agreements. He has abstained from voting on the proposed resolutions at the Board meeting approving the Special Deal Agreements.

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LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEES

The LR Independent Board Committee was established to consider the terms of the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement and to advise the Independent Shareholders on whether the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement are in the interests of the Company and the Shareholders as a whole and whether the terms are fair and reasonable, on normal commercial terms, and in the interests of the Company and its Shareholders as a whole.

The LR Independent Board Committee comprises Mr YEO Philip Liat Kok and Mr ZHANG Yi Kevin, being all the INEDs other than: (i) Ms KHOO Shulamite N K who is also an independent non-executive director of Shangri-La Asia Limited which is the parent company of Shang Holdings Limited (which is a Controlling Shareholders Close Associate), and (ii) Ms WONG Yu Pok Marina who is also an independent non-executive director of Kerry Properties.

The Code Independent Board Committee was established for the purpose of making a recommendation to, among others, the Independent Shareholders as to whether the terms of the Special Deal Agreements are fair and reasonable and the voting action that should be taken.

The Code Independent Board Committee comprises Mr YEO Philip Liat Kok and Mr ZHANG Yi Kevin, being all the INEDs other than: (i) Ms KHOO Shulamite N K who is also an independent non-executive director of Shangri-La Asia Limited which is the parent company of Shang Holdings Limited (which is a Controlling Shareholders Close Associate), and (ii) Ms WONG Yu Pok Marina who is also an independent non-executive director of Kerry Properties. Ms TONG Shao Ming, being the non-executive Director, is also an investment director of Kerry Holdings and is therefore not on the Code Independent Board Committee given the conflicts of interest in respect of the Special Deal Agreements.

INDEPENDENT FINANCIAL ADVISER

Somerley Capital Limited has been appointed to advise the Independent Board Committees and the Independent Shareholders in relation to, among others, the Special Deal Agreements.

INFORMATION ABOUT THE GROUP AND THE COUNTERPARTIES TO THE SPECIAL DEAL AGREEMENTS

Information about the Group

Information about Kerry Holdings

Kerry Holdings is incorporated in Hong Kong and is a wholly owned subsidiary of Kerry Group Limited. Kerry Holdings is an investment holding company and is a substantial shareholder of Kerry Properties, Shangri-La Asia Limited and the Company (all of which are listed in Hong Kong).

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LETTER FROM THE BOARD

Each of the Warehouses Purchaser and the Taiwan Purchaser is an investment holding company incorporated in the British Virgin Islands, and is an indirect wholly-owned subsidiary of Kerry Holdings.

Each of KCC, TW, TC2, KC, FL and SS is an investment holding company incorporated in Hong Kong, and each of TC1-7A2, Warehouse Co (TC1-A) and Warehouse Co (TC1-B) is an investment holding company incorporated in the British Virgin Islands, and each of which will be an indirect wholly-owned subsidiary of Kerry Holdings following completion of the Warehouses Sale. They are the legal owners of the Target Warehouses.

Kuok Registrations Limited is a company incorporated in Samoa and is a fellow subsidiary of Kerry Holdings. It is the owner and holder of certain rights in respect of the Kerry Names, Kerry Trademarks, Kerry Express Names and Kerry Express Trademarks.

Information about Kerry Properties

Kerry Properties is incorporated under the laws of Bermuda as an exempted company with limited liability, the shares of which are listed on the Main Board of the Stock Exchange. The principal activity of Kerry Properties is investment holding and the principal activities of Kerry Properties' subsidiaries, associates and joint ventures comprise property development, investment and management in Hong Kong, Mainland China and the Asia Pacific region; hotel ownership in Hong Kong, and hotel ownership and operations in Mainland China; and integrated logistics and international freight forwarding.

Information about the Offeror

The Offeror is a company incorporated in the Cayman Islands and is wholly owned by the Offeror Parent. The Offeror Parent is a joint stock company incorporated in the PRC with limited liability and the shares of the Offeror Parent are listed on the Shenzhen Stock Exchange. The Offeror Parent is a leading integrated express logistic services provider in the PRC. As at the date of this circular, the Offeror Parent is owned as to 59.3% by the Offeror Parent Holdco which is in turn controlled by the Offeror Ultimate Controlling Shareholder as to 99.9%.

SGM AND VOTING

The SGM will be held for the purpose of considering and, if thought fit, approving the Special Deal Agreements and the proposed amendments to the Company's Bye-laws, in each case by way of poll. Any Shareholders who are involved in or interested in the Special Deal Agreements, and their respective associates (as defined in the Listing Rules) and any persons acting in concert with any Shareholders who are involved in or interested in the Special Deal Agreements are required to abstain from voting on the relevant resolutions in respect of the Special Deal Agreements at the SGM. Other than the Controlling Shareholders, the Directors (other than the INEDs) and their respective associates (as defined in the Listing Rules), none of the Shareholders is required to abstain from voting on the relevant resolutions in respect of the Special Deal Agreements at the SGM. For the avoidance of doubt, no Shareholder, including the Controlling Shareholders, the Directors and their respective associates, are required to abstain from voting on the relevant resolution in respect of amendments to the Company's Bye-laws. As at the Latest Practicable Date, the Controlling Shareholders, the Directors (other than the INEDs) and their respective associates were, in aggregate, deemed to be interested in approximately 66.53% of the total issued share capital of the Company.

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LETTER FROM THE BOARD

RECOMMENDATIONS

Your attention is also drawn to the letters from the Independent Board Committees set out on pages 58 to 61 of this circular, and the letter from Somerley to the Independent Board Committees and the Independent Shareholders set out on pages 62 to 118 of this circular in connection with the transactions contemplated under the Special Deal Agreements and the principal factors and reasons considered by Somerley in arriving at such advice.

The LR Independent Board Committee, having taken into account the advice of Somerley, considers that (although the Warehouses Sale Agreement and the Taiwan Business Sale Agreement are not entered into in the ordinary and usual course of business of the Group) the transactions contemplated under the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement are in the interests of the Company and the Shareholders as a whole. The LR Independent Board Committee is also of the view that the terms of the Warehouses Sale Agreement, theTaiwan Business Sale Agreement and the Framework Services Agreement are on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned.

The Code Independent Board Committee, having taken into account the advice of Somerley, considers that the transactions contemplated under the Special Deal Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

The Board (including the INEDs) is of the view that the Special Deal Agreements are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned, and (although the Warehouses Sale Agreement and the Taiwan Business Sale Agreement are not entered into in the ordinary and usual course of business of the Group) are in the interests of the Group and the Shareholders as a whole.

The Board (including the INEDs) recommends the Shareholders to vote in favour of the resolutions to be proposed at the SGM.

FURTHER INFORMATION

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

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LETTER FROM THE BOARD

WARNING

Completion of the Partial Offer is subject to pre-conditions and conditions being satisfied (or waived) and therefore the Partial Offer may or may not become unconditional and may or may not be completed. The issuance of this circular and the entering into of the Special Deal Agreements do not in any way imply that the Partial Offer will become unconditional. Completion of the Special Deal Agreements is subject to the conditions under each of the Special Deal Agreements being fulfilled. Accordingly, the issue of this circular also does not in any way imply that the Special Deal Agreements will be completed and the transactions contemplated by the Special Deal Agreements may or may not proceed. Shareholders and prospective investors are advised to exercise caution when dealing in the Shares. Persons who are in doubt as to the action they should take should consult their professional advisers.

Yours faithfully

By Order of the Board

Kerry Logistics Network Limited

KUOK Khoon Hua

Chairman

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LETTER FROM THE LR INDEPENDENT BOARD COMMITTEE

(Incorporated in the British Virgin Islands and continued into Bermuda

as an exempted company with limited liability)

Stock Code 636

To the Independent Shareholders

Dear Sirs or Madams,

MAJOR TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE WAREHOUSES SALE AGREEMENT

(2) CONTINUING CONNECTED TRANSACTION AND

SPECIAL DEAL UNDER THE WAREHOUSES MANAGEMENT AGREEMENTS

1. DISCLOSEABLE TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE TAIWAN BUSINESS SALE AGREEMENT
2. 1. CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE BRAND LICENCE AGREEMENTS
1. SPECIAL DEAL UNDER THE SHAREHOLDERS' AGREEMENT AND PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS
DISCLOSEABLE TRANSACTION, CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE FRAMEWORK SERVICES AGREEMENT

AND

(7) NOTICE OF SPECIAL GENERAL MEETING

3 May 2021

We refer to the circular of the Company dated 3 May 2021 (the "Circular") to the Shareholders, of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used herein.

We have been appointed by the Board to form the LR Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, the transactions contemplated under the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and whether they are in the interests of the Company and the Shareholders as a whole. The appointment of Somerley as the Independent Financial Adviser to advise you and us in this regard has been approved by us. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 62 to 118 of the Circular.

Your attention is also drawn to the "Letter from the Board" and "Letter from Somerley" as set out on pages 14 to 57 and pages 62 to 118 to the Circular respectively.

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LETTER FROM THE LR INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Having considered the terms and conditions of the transactions contemplated under the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement, and taking into account the independent advice from Somerley, and in particular, the principal factors and reasons considered and opinion and recommendation as set out in its letter, we are of the opinion that the terms of the transactions contemplated under the Warehouses Sale Agreement, theTaiwan Business Sale Agreement and the Framework Services Agreement (although the Warehouses Sale Agreement and the Taiwan Business Sale Agreement are not entered into in the ordinary and usual course of business of the Group) are in the interests of the Company and the Shareholders as a whole. The LR Independent Board Committee is also of the view that the terms of the transactions contemplated under the Warehouses Sale Agreement, theTaiwan Business Sale Agreement and the Framework Services Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

We recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM.

Yours faithfully

For and on behalf of the LR Independent Board Committee

YEO Philip Liat Kok

ZHANG Yi Kevin

Independent non-executive Directors

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LETTER FROM THE CODE INDEPENDENT BOARD COMMITTEE

(Incorporated in the British Virgin Islands and continued into Bermuda

as an exempted company with limited liability)

Stock Code 636

To the Independent Shareholders

Dear Sirs or Madams,

MAJOR TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE WAREHOUSES SALE AGREEMENT
1. CONTINUING CONNECTED TRANSACTION AND

SPECIAL DEAL UNDER THE WAREHOUSES MANAGEMENT AGREEMENTS

1. DISCLOSEABLE TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE TAIWAN BUSINESS SALE AGREEMENT
2. 1. CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE BRAND LICENCE AGREEMENTS
1. SPECIAL DEAL UNDER THE SHAREHOLDERS' AGREEMENT AND PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS
DISCLOSEABLE TRANSACTION, CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE FRAMEWORK SERVICES AGREEMENT

AND

(7) NOTICE OF SPECIAL GENERAL MEETING

3 May 2021

We have been appointed by the Board to form the Code Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, the transactions contemplated under each of the Special Deal Agreements are fair and reasonable so far as the Independent Shareholders are concerned. The appointment of Somerley as the Independent Financial Adviser to advise you and us in this regard has been approved by us. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 62 to 118 of the Circular.

Your attention is also drawn to the "Letter from the Board" and "Letter from Somerley" as set out on pages 14 to 57 and pages 62 to 118 to the Circular respectively.

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LETTER FROM THE CODE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Having considered the terms and conditions of the transactions contemplated under each of the Special Deal Agreements, and taking into account the independent advice from Somerley, and in particular, the principal factors and reasons considered and opinion and recommendation as set out in its letter, we are of the opinion that the terms of the transactions contemplated under each of the Special Deal Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

We recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM.

Yours faithfully

For and on behalf of the Code Independent Board Committee

YEO Philip Liat Kok

ZHANG Yi Kevin

Independent non-executive Directors

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LETTER FROM SOMERLEY

Set out below is the letter of advice from Somerley Capital Limited, the independent financial adviser to the Independent Board Committees and the Independent Shareholders in respect of the Special Deal Agreements, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED

20th Floor

China Building

29 Queen's Road Central

Hong Kong

3 May 2021

To : the Independent Board Committees and the Independent Shareholders of

Kerry Logistics Network Limited

Dear Sirs,

MAJOR TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE WAREHOUSES SALE AGREEMENT

(2) CONTINUING CONNECTED TRANSACTION AND

SPECIAL DEAL UNDER THE WAREHOUSES MANAGEMENT AGREEMENTS

DISCLOSEABLE TRANSACTION, CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE TAIWAN BUSINESS SALE AGREEMENT
1. CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE BRAND LICENCE AGREEMENTS

SPECIAL DEAL UNDER THE SHAREHOLDERS' AGREEMENT AND PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS

AND

DISCLOSEABLE TRANSACTION, CONTINUING CONNECTED TRANSACTION AND SPECIAL DEAL UNDER THE FRAMEWORK SERVICES AGREEMENT

INTRODUCTION

We refer to our appointment as independent financial adviser to advise the Independent Board Committees and the Independent Shareholders in relation to the Special Deal Agreements and the transactions contemplated thereunder. Details of each of the Special Deal Agreements are contained in the circular of the Company dated 3 May 2021 (the "Circular"), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

On 10 February 2021, the Offeror (an indirectly wholly-owned subsidiary of the Offeror Parent, namely S.F. Holding Co., Ltd.), the Company and Kerry Properties jointly announce that the financial adviser to the Offeror, on

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LETTER FROM SOMERLEY

behalf of the Offeror, subject to the satisfaction or waiver (where applicable) of the Pre-Conditions, will make a voluntary conditional partial cash offer to Shareholders to acquire 931,209,117 Offer Shares (representing approximately 51.8% of the Shares in issue as at the date of the Joint Announcement) at the Offer Price of HK$18.80 per Offer Share. The Offeror will extend an appropriate partial offer to the Optionholders to cancel such number of Share Options representing 51.8% of the outstanding Share Options as at the Final Closing Date pursuant to Rule 13 of the Takeovers Code. In addition to the Offer Price, conditional on completion of the Warehouses Sale (which is conditional upon, amongst other conditions, the Partial Offer becoming or being declared unconditional in all respects), the Company will declare the Special Dividend of HK$7.28 per Share. Details of the Partial Offer and the Option Offer (the "Offers") are set out in the Joint Announcement.

In connection with the Offers, the Offeror and the Offeror Parent have entered into the Shareholders' Agreement with Kerry Holdings and Kerry Properties regarding certain corporate governance matters. The Company has also proposed to make certain corresponding amendments to its Bye-laws. In addition, on 25 March 2021 (as amended pursuant to an amendment agreement dated 30 April 2021 for the Warehouses Management Agreements and the Framework Services Agreement), the Company and its wholly-owned subsidiaries entered into (i) the Warehouses Sale Agreement; (ii) the Warehouses Management Agreements; (iii) the Taiwan Business Sale Agreement; (iv) the Brand Licence Agreements; and (v) the Framework Services Agreement. The Special Deal Agreements are each conditional upon the Partial Offer becoming or being declared unconditional in all respects. In turn, it is a pre-condition to the Partial Offer that, amongst other terms, (i) the Warehouses Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived); (ii) the Taiwan Business Sale Pre-Conditional Conditions have been satisfied (or, where applicable, waived) and there being no event or circumstances which would render any of the Taiwan Business Sale Continuing Conditions incapable of satisfaction; (iii) the Brand Licence Agreements having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects; and (iv) the Shareholders' Agreement having become unconditional save for the condition relating to the Partial Offer becoming or being declared unconditional in all respects.

Each of the Special Deal Agreements constitutes a special deal in relation to the Partial Offer under Note 4 to Rule 25 of the Takeovers Code. Applications have been made by the Offeror and the Company to the Executive for consent to proceed with the Special Deal Agreements. Such consent, if granted, will be subject to (i) the opinion of the Independent Financial Adviser that the terms of each of the Special Deal Agreements are fair and reasonable; and (ii) the approval of each of the Special Deal Agreements by the Independent Shareholders by way of poll at the SGM.

In respect of the Warehouses Sale Agreement, as one or more of the applicable percentage ratios under Rule

14.07 of the Listing Rules is 25% or more but less than 75%, the Warehouses Sale Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore be subject to the reporting, announcement, and shareholders' approval requirements under Chapter 14 of the Listing Rules.

In respect of the Taiwan Business Sale Agreement, as one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules is 5% or more but less than 25%, the Taiwan Business Sale Agreement constitutes a discloseable transaction of the Company under the Listing Rules and would therefore be subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

In respect of the Framework Services Agreement, as one or more of the applicable percentage ratios under Rule

14.07 of the Listing Rules in respect of the annual caps of the transactions under the Framework Services Agreement is 5% or more but less than 25%, the Framework Services Agreement constitutes a discloseable transaction of the Company under the Listing Rules and would therefore be subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

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LETTER FROM SOMERLEY

As Kerry Holdings is a Controlling Shareholder and a connected person of the Company, each of the Warehouses Sale Agreement and Taiwan Business Sale Agreement also constitutes a connected transaction of the Company and the Framework Services Agreement constitutes a continuing connected transaction of the Company under the Listing Rules and would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

In respect of the Warehouses Management Agreements, as Kerry Holdings is a Controlling Shareholder and a connected person of the Company, the Warehouses Management Agreements also constitute continuing connected transactions under the Listing Rules. As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the annual caps of the transactions under the Warehouses Management Agreements will be more than 0.1% but all of them are less than 5%, the Warehouses Management Agreements are subject to reporting, announcement and annual review requirements but exempt from independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

In respect of the Brand Licence Agreements, as the Licensor is a fellow subsidiary of Kerry Holdings (which in turn is the Controlling Shareholder) and a connected person of the Company, the Brand Licence Agreements constitute continuing connected transactions of the Company under the Listing Rules. As the licence fee is nominal, the aggregate amounts to be paid by the Company and KE Thailand (as the case may be) to the Licensor under the Brand Licence Agreements will not be, on an annual basis, more than the de minimis threshold of 0.1% during the term of the Brand Licence Agreements. The Brand Licence Agreements would therefore be fully exempt from the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Board currently consists of four executive Directors, one non-executive Director and four independent non-executive Directors. The LR Independent Board Committee was established to consider and advise the Independent Shareholders on the terms of the Warehouses Sale Agreement, the Taiwan Business Sale Agreement and the Framework Services Agreement. The LR Independent Board Committee comprises Mr YEO Philip Liat Kok and Mr ZHANG Yi Kevin, being all of the INEDs other than (i) Ms KHOO Shulamite N K who is also an independent non-executive director of Shangri-La Asia Limited which is the parent company of Shang Holdings Limited (which is a Controlling Shareholders Close Associate); and (ii) Ms WONG Yu Pok Marina who is also an independent non-executive director of Kerry Properties.

The Code Independent Board Committee has been established for the purpose of making a recommendation to, among other things, the Independent Shareholders as to (i) whether the terms of the Special Deal Agreements are fair and reasonable; and (ii) the voting action that should be taken. The Code Independent Board Committee comprises Mr YEO Philip Liat Kok and Mr ZHANG Yi Kevin, being all of the INEDs other than Ms KHOO Shulamite N K and Ms WONG Yu Pok Marina for the reasons set out above. Ms TONG Shao Ming, being the non-executive Director, is also an investment director of Kerry Holdings and is therefore not on the Code Independent Board Committee given the conflicts of interest in respect of the Special Deal Agreements.

- 64 -

LETTER FROM SOMERLEY

The Independent Board Committees have approved our appointment as the Independent Financial Adviser to advise them and the Independent Shareholders on the terms of the Special Deal Agreements.

During the past two years, we have acted as an independent financial adviser to the Company in relation to the disposal of 100% total issued share capital of two indirectly wholly-owned subsidiaries of the Company (as disclosed in the Company's circulars dated 6 May 2019). The past engagement was limited to providing independent advisory services to the Company pursuant to the Listing Rules, for which we received normal professional fee relevant to such type of engagement. Accordingly, we do not consider the past engagement would affect our independence to act as the independent financial adviser to the Company under the current engagement.

We are not associated with the Company, Kerry Properties, Kerry Holdings, the Offeror, the Offeror's controlling shareholder, parties to the Special Deal Agreements (together, the "Parties") or their respective core connected persons, close associates or associates (all as defined under the Listing Rules) or any party acting, or presumed to be acting, in concert with any of them and, accordingly, are considered eligible to give independent advice on the Special Deal Agreements. Apart from normal professional fees payable to us in connection with this and similar appointments, no arrangement exists whereby we will receive any fees or benefits from the Parties, their respective substantial core connected persons, close associates or associates (all as defined under the Listing Rules) or any party acting, or presumed to be acting, in concert with any of them.

In formulating our opinion, we have reviewed, among other things, (i) the Joint Announcement; (ii) the Special Deals Announcement; (iii) the Shareholders' Agreement; (iv) the Warehouses Sale Agreements; (v) the Warehouses Management Agreement; (vi) the Taiwan Business Sale Agreement; (vii) the Brand Licence Agreements; (viii) the Framework Services Agreement; (ix) the annual reports of the Company for the years ended 31 December 2020 (the "2020 Annual Report") and 31 December 2019 (the "2019 Annual Report") (together, the "Annual Reports"); (x) the valuation report in relation to the Target Warehouses (the "Valuation Report") issued by Cushman & Wakefield Limited (the "Valuer"), an independent property valuer appointed by the Company, as set out in appendix II to the Circular and the information as set out in the Circular. We have discussed the business and future prospects of the Group as they may be affected by the transactions contemplated under the Special Deal Agreements with the management of the Group (the "Management") and we have also discussed the valuation methodology and bases and assumptions used in the Valuation Report with the Valuer. We have also performed site visits to the Warehouses.

We have relied on the information and facts supplied, and the opinions expressed, by the Directors and the Management, and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material respects at the time they were made and up to the Latest Practicable Date. We have further assumed that all representations contained or referred to in the Circular are true, accurate and complete at the time they were made and at the Latest Practicable Date. Independent Shareholders will be informed as soon as practicable if we become aware of any material change to such information. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We consider that the information we have received is sufficient for us to reach our advice and recommendations as set out in this letter. We have no reason to believe that any material information has been omitted or withheld, or doubt the truth or accuracy of the information provided. We have, however, not conducted any independent investigation into the business and affairs of the Group or the Parties nor have we carried out any independent verification of the information supplied.

- 65 -

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have taken into account the principal factors and reasons set out below.

1. Information of the Group

Business activities of the Group

The Group's core business encompasses integrated logistics, international freight forwarding and supply chain solutions. With headquarters in Hong Kong, the Group has a far-reaching global network that stretches across six continents, and includes one of the largest distribution network and hub operations in Greater China and the ASEAN region. In particular, the Group provides (i) integrated logistics services, including storage and value-added services, trucking and distribution, returns management and various ancillary services, primarily in Asia; (ii) leasing of warehousing space in Hong Kong; and (iii) international freight forwarding services intra-Asia and between Asia and Europe to transport cargo using air freight, ocean freight and cross-border road freight forwarding services.

Financial performance of the Group

Set out below is a summary of the financial performance of the Group for the years ended 31 December 2020, 31 December 2019 and 31 December 2018 as extracted from the Annual Reports.

	Year ended 31 December
	2020		2019		2018
	HK$ (million)	HK$ (million)	HK$ (million)
Revenue	53,360.5		41,139.1		38,138.5
Direct operating expenses	(47,187.5)	(35,736.6)	(33,382.9)

Gross profit	6,173.0		5,402.5		4,755.6
Other income and net gains	257.5		199.8	176.5
Administrative expenses	(3,072.5)	(2,841.7)	(2,538.3)

Operating profit before gain on disposal of
warehouses and fair value change of investment
properties	3,358.0		2,760.6		2,393.8
Gain on disposal of warehouses	-	1,957.5		-
Change in fair value of investment properties	1,069.2		482.9		1,097.9

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LETTER FROM SOMERLEY

		Year ended 31 December
		2020		2019			2018
		HK$ (million)	HK$ (million)	HK$ (million)
Operating profit	4,427.2		5,201.0			3,491.7
Finance costs	(303.1 )	(358.1 )	(224.2)
Share of results of associates and joint ventures	118.2		85.5			110.7

Profit before taxation	4,242.3		4,928.4	3,378.2
Taxation	(772.7)	(589.0)	(506.6)

Profit for the year	3,469.6		4,339.4	2,871.6
Profit for the year attributable to:


the Shareholders	2,895.8		3,788.3			2,439.8
non-controlling interests	573.8		551.1			431.8

		3,469.6		4,339.4	2,871.6


Core net profit	1,828.4	1,374.1			1,326.3

The Group achieved a revenue of approximately HK$41,139.1 million for the year ended 31 December 2019, representing a growth of approximately 7.9% from that for 2018. Gross margin of the Group enhanced from approximately 12.5% for the year ended 31 December 2018 by approximately 0.6% to approximately 13.1% for 2019. While the profit attributable to the Shareholders increased by approximately 55.3% from prior year to approximately HK$3,788.3 million for the year ended 31 December 2019, the Group's core net profit, which represents the profit attributable to the Shareholders before the after-tax effect of change in fair value of investment properties, gain on disposal of warehouses, fair value change of financial instruments and impairment, only grew by approximately 3.6% to approximately HK$1,374.1 million for 2019. The increase in profit was primarily driven by (i) business growth for the integrated logistics ("IL") segment in all major operating regions including Mainland China, Hong Kong, Taiwan and Asia; and (ii) growth of the international freight forwarding ("IFF") segment, which was partly attributable to the trade war between Mainland China and the US and resulted in frontloading by the Group's customers to get goods from Mainland China to the US.

The Group achieved a revenue of approximately HK$53,360.5 million for the year ended 31 December 2020, representing a growth of approximately 29.7% from that for 2019. Gross margin of the Group narrowed from approximately 13.1% for the year ended 31 December 2019 by approximately 1.5% to approximately 11.6% for 2020. Profit attributable to the Shareholders decreased by approximately 23.6% from prior year to approximately HK$2,895.8 million for the year ended 31 December 2020. However, the Group's core net profit grew by approximately 33.1% to approximately HK$1,828.4 million for the year ended 31 December 2020 primarily due to the absence of one-off disposal gain of warehouses in 2019. The increase in core net profit was mainly driven by (i) normalised growth rate of approximately 8% for the IL segment, driven by the strong performance in Hong Kong and Taiwan; and (ii) 64% growth of the IFF segment, which was mainly driven by a high global demand for pandemic-related goods as well as production and exports from Mainland China. The US arm of the Group has recorded an increase in volume of 17%, strengthening its Trans-Pacific market position. It was the number one non-vessel operating common carrier ("NVOCC") from Thailand, Vietnam, Indonesia and Malaysia to the US, the number two NVOCC from Asia to the US for 2020.

- 67 -

LETTER FROM SOMERLEY

Financial position of the Group

Set out below is a summary of financial position of the Group as at 31 December 2020, 31 December 2019 and 31 December 2018 as extracted from the Annual Reports.

		As at 31 December
	2020	2019		2018
	HK$ (million)		HK$ (million)	HK$ (million)
Non-current assets
Intangible assets	4,771.9	4,764.9		4,250.9
Investment properties	11,503.2	10,308.1		11,039.0
Property, plant and equipment	11,693.2	11,343.5		10,347.0
Other non-current assets	7,200.3	5,789.0	2,511.8

	35,168.6	32,205.5		28,148.7
Current assets
Accounts receivable, prepayments and deposits	12,358.6	10,149.0	9,502.9
Cash and bank balances	8,470.8	5,825.2		4,305.9
Other current assets	902.0	1,024.3		1,075.1

	21,731.4	16,998.5		14,883.9
Current liabilities
Accounts payable, deposits received and
accrued charges	9,269.2	7,387.8	6,795.7
Short-term bank loans and current portion of
long-term bank loans	3,941.8	1,947.8	4,936.9
Other current liabilities	1,697.6	1,645.2		586.3

	14,908.6	10,980.8	12,318.9
Net current assets	6,822.8	6,017.7		2,565.0

Non-current liabilities
Long-term bank loans	5,069.4	6,173.8	4,569.6
Other non-current liabilities	4,442.1	4,974.9		2,476.6

	9,511.5	11,148.7		7,046.2
Equity
Equity and reserves attributable to
the Shareholders	27,482.9	23,013.3		20,043.2
Non-controlling interests	4,997.0	4,061.2		3,624.3

	32,479.9	27,074.5		23,667.5

- 68 -

LETTER FROM SOMERLEY

As at 31 December 2020, non-current assets of the Group amounted to approximately HK$35,168.6 million, up approximately 9.2% from that as at 31 December 2019, of which investment properties and property, plant and equipment (the "PP&E") accounted for approximately 32.7% and 33.2% respectively. Investment properties mainly comprise warehouses and logistics centres in Hong Kong, Mainland China and Vietnam leased out by the Group for rental income. PP&E mainly consist of warehouses, port facilities, logistics centres, container depot and container terminal in Hong Kong, Mainland China, Taiwan and Asia owned by the Group for its own operations. As at 31 December 2020, the Group managed a logistics facility portfolio of approximately 74 million square feet, of which approximately 40.5% were self-owned.

The Group expanded its operational size and recorded increasing revenue and profit in recent years. The Group's cash and bank balances increased by approximately 45.4% to approximately HK$8,470.8 million as at 31 December 2020 from that as at 31 December 2019.The Group's total bank loans also grew by approximately 11.0% amounting to approximately HK$9,011.2 million as at 31 December 2020 from that as at 31 December 2019. As a result, the Group's gearing ratio, being total bank loans and overdrafts divided by equity attributable to the Shareholders excluding put options written on non-controlling interests, had dropped slightly to approximately 33.6% as at 31 December 2020, which was approximately 1.0% lower than that as at 31 December 2019. In particular, approximately 43.7% of the bank loans in the amount of approximately HK$3,941.8 million were due within 12 months from 31 December 2020. The net current assets of the Group have continued to improve, which increased by approximately HK$805.1 million or 13.4% to HK$6,822.8 million as at 31 December 2020 from approximately HK$6,017.7 million as at 31 December 2019.

Equity attributable to Shareholders enhanced by approximately HK$4,469.6 million or 19.4% from approximately HK$23,013.3 million as at 31 December 2019 to approximately HK$27,482.9 million as at 31 December 2020. The improvement was mainly attributable to the net profit recorded during the year ended 31 December 2020.

2. The Warehouses Sale Agreement

Reasons for and benefits of entering into the Warehouses Sale Agreement

We have discussed with the Management and note that the Warehouses Sale will enable the Group to become asset-light, which is in line with the business model of the Group's international competitors. Moreover, it has been the Group's stated strategy to unleash the value of its portfolio. For instance, the Group disposed of two warehouses in Hong Kong in 2019 to a subsidiary of Kerry Properties. The Warehouses Sale will provide an opportunity to unlock the value of the Target Warehouses and a significant return, through the distribution of the Special Dividend of HK$7.28 per Share, to the Shareholders. While the Target Warehouses will be disposed of after completion of the Warehouses Sale, they will be leased back to the Group for the continuation of the Group's logistics operations through the arrangement pursuant the Framework Services Agreement. Having considered the business strategy of the Group and the proposed distribution of the Special Dividend as well as the lease back arrangement of the Target Warehouses, we are of the view that the Warehouses Sale is in line with the Group's stated strategy and will unlock the value of the Target Warehouses for a return to the Shareholders.

- 69 -

Information of theTarget Warehouses
The principal assets of the Target Warehouses Companies are the Target Warehouses, details of which are set out in the following table:

- 70 -

	The KCC Target	The TW Target	The TC1-7A2 Target	The TC1-A Target
	Warehouse	Warehouse	Property	Property
Address	55 Wing Kei Road,	3 Shing Yiu Street,	3 Kin Chuen Street, Kwai Chung, New Territories
	Kwai Chung,	Kwai Chung,
	New Territories	New Territories
Number of storey	16	19	Unit A2, 7th floor of Block A	Whole of lower ground,
				ground, 2nd to 4th and
				6th floors of Block A
Gross floor area	1,990,356	591,973	11,951	168,171
("GFA") (sq. ft.)
Parking spaces	The public car park on P1 to	1 container parking space,	2 container parking spaces, 11 lorry parking spaces and
	P4 accommodates	28 lorry parking spaces	10 van/car parking spaces
	70 container parking	and 27 van/car
	spaces, 380 lorry parking	parking spaces
	spaces and 160 van/car
	parking spaces. In addition,
	1 container parking space,
	104 lorry parking spaces
	and 62 van/car
	parking spaces
Land usage	Industrial	Industrial	Industrial (Note)
Valuation of the Target	5,368	1,718		522
Warehouses as at 31 March
2021 (the "Valuation Date")
(HK$ million)

The TC1-B Target	The TC2 Target	The KC Target	The FL Target	The SS Target
Property	Warehouse	Warehouse	Warehouse	Warehouse
3 Kin Chuen Street,	35 Wing Kei Road,	4-6 Kwai Tai Road,	39 On Lok Mun Street,	2 San Po Street,
Kwai Chung,	Kwai Chung,	Kwai Chung,	On Lok Tsuen,	Sheung Shui,
New Territories	New Territories	New Territories	Fanling,	New Territories
			New Territories
Whole of lower ground and	16	16	6	6
2nd to 16th floors of
Block B
479,661	662,432	286,628	283,580	356,253
3 container parking spaces,	1 container parking space,	28 lorry parking spaces and	2 container parking spaces,	1 container parking space,
13 lorry parking spaces and	23 lorry parking spaces	5 van/car parking spaces	14 lorry parking spaces and	18 lorry parking spaces and
18 van/car parking spaces	and 23 van/car		14 van/car parking spaces	18 van/car parking spaces
	parking spaces
	A public vehicle park
	accommodating
	25 container parking
	spaces, 140 lorry parking
	spaces and 50 van/car
	parking spaces
Industrial (Note)	Industrial	Industrial	Industrial	Industrial
1,432	1,636	730	720	1,002

SOMERLEY FROM LETTER

Note: We understand from the Valuer that the land usage has been revised to "Residential Group (E)" based on the latest town zoning plan.

- 71 -

Information on theTarget Warehouse Companies

Each of the Target Warehouses Companies is an indirect wholly-owned subsidiary of the Company. They are either the registered and beneficial owners of the Target Warehouses or the holding companies of the companies that directly hold and beneficially own the Target Warehouses. The Target Warehouses Companies and their subsidiaries are principally engaged in leasing of the Target Warehouses for rental income with KWHK, a wholly- owned subsidiary of the Company, acting as their leasing agent.

Set out below is the summary of audited consolidated (if applicable) financial results of the Target Warehouse Companies for the years ended 31 December 2020 and 2019:

				Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co
				(KCC)	(TW)	(TC1-7A2)	(TC1-A)	(TC1-B)	(TC2)	(KC)	(FL)	(SS)
				For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended
				31 December	31 December	31 December	31 December	31 December	31 December	31 December	31 December	31 December
	2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
				HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$
	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)
Revenue	272.5		293.5		121.1		116.5		1.6		1.5		19.8		18.9		56.4		53.8		62.9		60.0		39.3		36.5		37.1		32.6		51.9		54.0
Direct operating expenses		(57.9)	(60.3)	(8.3)	(13.0)	-	-	(2.1)	(2.4)	(13.3)	(14.1)	(3.4)	(6.1)	(10.7)	(11.2)	(6.8)	(7.6)	(8.4)	(9.6)
Gross profit		214.6		233.2		112.8		103.5		1.6		1.5		17.7		16.5		43.1		39.7		59.5		53.9		28.6		25.3		30.3		25.0		43.5		44.4
Administrative expenses	(61.9)	(48.9)	(31.5)	(21.3)	-	-	(0.1)	(0.1)	(0.1)	(0.1)	(0.1)	(0.1)	(9.4)	(6.7)	(9.7)	(6.5)	(11.3)	(8.0)
Increase in fair value of
investment property	485.2	291.3	178.8	100.6	3.4	0.9	48.3	12.6	-	-	95.0	63.0	108.0	25.4	25.0	19.0	118.0	40.0
Other income				-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	1.8		3.0
Finance costs				-	(1.0)	-	(3.7)	-	-	-	-	-	-	-	(1.9)	-	-	-	(2.4)	-	-

Profit before taxation	637.9		474.6		260.1		179.1		5.0		2.4		65.9		29.0		43.0		39.6		154.4		114.9		127.2		44.0		45.6		35.1		152.0		79.4
Taxation	(24.5)	(30.2)	(13.0)	(13.1)	(0.2)	(0.2)	(2.9)	(2.7)	(7.3)	(6.9)	(9.8)	(8.5)	(3.1)	(3.0)	(3.3)	(2.6)	(4.8)	(5.7)

Profit after taxation	613.4		444.4		247.1		166.0		4.8		2.2		63.0		26.3		35.7		32.7		144.6		106.4		124.1		41.0		42.3		32.5		147.2		73.7

Note: The above figures are subject to rounding adjustments.

SOMERLEY FROM LETTER

- 72 -

Revenue of the Target Warehouses Companies mainly consists of rental income and carpark income. The fluctuation of revenue of the Target Warehouses Companies were mainly due to the changes in occupancy rate and adjustment to certain lettable unit rates during the year. Direct operating expenses mainly comprise repair and maintenance expenses and staff costs and administrative expenses primarily consists of the headquarter expenses such as information technology and office support charged by the Company.The majority of theTarget Warehouses Companies recorded increase in fair value of its investment property (i.e. the Target Warehouses) during the financial years stated in the table above. Overall, the fluctuations in the profit after taxation for the year ended 31 December 2020 were mainly due to changes in the leasing condition of the Target Warehouses, after excluding the increase in fair value of the investment property.

Set out below is the summary of the audited consolidated (if applicable) financial position of the Target Warehouse Companies as at 31 December

2020 and 2019:

			Warehouse Co			Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co			Warehouse Co			Warehouse Co			Warehouse Co	Warehouse Co
			(KCC)			(TW)	(TC1-7A2)	(TC1-A)	(TC1-B)			(TC2)			(KC)			(FL)	(SS)
			As at			As at	As at	As at	As at			As at			As at			As at	As at
			31 December			31 December	31 December	31 December	31 December			31 December			31 December			31 December	31 December
	2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019	2020	2019	2020	2019		2020	2019
			HK$			HK$			HK$			HK$	HK$	HK$	HK$	HK$	HK$	HK$			HK$			HK$			HK$			HK$		HK$		HK$	HK$			HK$
	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)
Non-current assets
Investment properties	4,486.0	3,995.0	1,477.0	1,263.0		26.7		23.3		381.4		333.1		-	-	1,348.0		1,253.0	603.0	495.0	579.0	554.0		825.0	707.0
Property, plant and equipment	65.2		75.2		0.3		0.2		-	-	13.7		15.7		208.0		218.5	11.7	13.9	14.2	16.1	0.9	1.6		0.2	0.3
Loans to fellow subsidiaries			-			-			-			-	-	-	-	-	-	-			-			-			-			-		-		-	-	63.3

	4,551.2		4,070.2	1,477.3	1,263.2	26.7	23.3	395.1	348.8	208.0	218.5	1,359.7	1,266.9	617.2	511.1	579.9	555.6		825.2	770.6
Current assets
Amounts due from fellow
subsidiaries	949.0		852.3		283.9		269.0		1.5		1.4		75.9		62.8		56.5		44.3		398.2	350.8	32.9	16.8	102.3	86.2		65.2	45.5
Cash and bank balances	0.5		1.0				-			-	3.8		2.9	-	-	-	-	2.0		1.3	0.1			-	0.1			-	2.2	2.2
Other current assets		16.3			1.1			1.7			0.3		-		-		0.4		0.4		28.9		3.0			0.8			0.2		0.3	0.3	0.4		0.3		0.1		-
	965.8		854.4		285.6		269.3		5.3		4.3	76.3		63.2		85.4		47.3		401.0		352.3	33.3	17.1	102.8	86.5		67.5	47.7

SOMERLEY FROM LETTER

- 73 -

		Warehouse Co		Warehouse Co	Warehouse Co	Warehouse Co	Warehouse Co		Warehouse Co		Warehouse Co		Warehouse Co	Warehouse Co
		(KCC)		(TW)	(TC1-7A2)	(TC1-A)	(TC1-B)		(TC2)		(KC)		(FL)	(SS)
		As at		As at	As at	As at	As at		As at		As at		As at	As at
		31 December		31 December	31 December	31 December	31 December		31 December		31 December		31 December	31 December
	2020	2019	2020	2019		2020		2019		2020		2019		2020	2019		2020		2019	2020	2019	2020		2019		2020	2019
		HK$		HK$		HK$		HK$	HK$	HK$	HK$	HK$	HK$		HK$		HK$		HK$		HK$		HK$		HK$	HK$	HK$	HK$
	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)	(million)
Current liabilities
Deposits received and
accrued charges	18.6	21.2	7.9	11.8		-	-	0.2		0.1		0.5	0.5		0.5		0.5	0.5	0.6	1.3		1.3		6.7	7.9
Amount due to intermediate
holding companies	773.1	673.1	233.8	223.8	2.5		0.5		50.3		50.3		58.3	13.3		248.6	228.6	20.0		-	118.8		118.8	37.4	4.5
Amounts due to fellow
subsidiaries	1.8	1.8	0.5	0.5		-	-	36.4		36.4		-		-	100.0		100.0		-		-		-	-	-		-
Taxation payable		1.1		24.4		2.3		16.2		-		0.3		1.0		4.5		2.6		9.6			3.2	6.4	1.3	2.9	1.3	3.0		0.6	5.1

		794.6		720.5		244.5		252.3	2.5		0.8		87.9		91.3		61.4	23.4	352.3	335.5	21.8	3.5	121.4		123.1	44.7	17.5
Net current assets/(liabilities)	171.2	133.9	41.1	17.0		2.8		3.5		(11.6)	(28.1)	24.0	23.9	48.7	16.8	11.5	13.6	(18.6)	(36.6)	22.8	30.2
Non-current liability
Deferred taxation		154.8		149.9		40.3		39.2		0.4		0.4		6.5		6.7		23.5		24.5	45.2	45.1	2.2	2.3	10.3		10.4	11.1	11.1

Net assets		4,567.6		4,054.2		1,478.1		1,241.0	29.1	26.4	377.0		314.0		208.5	217.9	1,363.2	1,238.6	626.5	522.4	551.0		508.6		836.9	789.7

Note: The above figures are subject to rounding adjustments.

SOMERLEY FROM LETTER

LETTER FROM SOMERLEY

As at 31 December 2020, the consolidated (if applicable) net asset value (the "NAV") of each of the Target Warehouses Companies were as follow:

	HK$ (million)
Warehouse Co (KCC)	4,567.6
Warehouse Co (TW)	1,478.1
Warehouse Co (TC1-7A2)	29.1
Warehouse Co (TC1-A)	377.0
Warehouse Co (TC1-B)	208.5
Warehouse Co (TC2)	1,363.2
Warehouse Co (KC)	626.5
Warehouse Co (FL)	551.0
Warehouse Co (SS)	836.9

	10,037.9

As at 31 December 2020, the assets of the Target Warehouses Companies mainly comprised the Target Warehouses and amounts due from fellow subsidiaries. The amounts due from and due to fellow subsidiaries represent the net balance due from or due to KWHK, which acts as the leasing agent of the Target Warehouses and receives rental income and makes payments on behalf of the Target Warehouses. The amounts due to intermediate holding companies represent inter-company loans. Other liabilities of the Target Warehouses Companies chiefly consisted of deposits received and accrued charges, taxation payable and deferred taxation.

Principal terms of the Warehouses Sale Agreement

Set out below is the summary of the principal terms of the Warehouses Sale Agreement:

Date	25 March 2021
Parties	(i)	The Company (as the vendor guarantor);
	(ii)	Kerry Warehouse (HK) Holdings Limited, a wholly-owned subsidiary of the
		Company (as the vendor);
	(iii)	Kerry Holdings (as the purchaser guarantor); and
	(iv)	Urban Treasure Holdings Limited, a wholly-owned subsidiary of Kerry
		Holdings (as the purchaser).

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	LETTER FROM SOMERLEY
Subject matter	The Warehouses Vendor agreed to sell and the Warehouses Purchaser agreed to
	purchase, all issued shares in the capital of the Target Warehouses Companies
	together with all rights and benefits attaching to the Target Warehouses Sale
	Shares (including without limitation the right to all dividends and distributions)
	on or after the completion date.
	Neither the WarehousesVendor nor the Warehouses Purchaser shall be obliged to
	complete the sale and purchase of any Target Warehouses Sale Shares unless the
	sale and purchase of all of the Target Warehouses Sale Shares are completed
	simultaneously.
Consideration	The total consideration for the sale and purchase of the Target Warehouses Sale
	Shares is HK$13,500.0 million, which shall be payable by the Warehouses
	Purchaser to the Warehouses Vendor by way of cashier order or solicitors' cheque
	at completion of the Warehouses Sale.
	The consideration was determined after arm's length negotiations between the
	parties, taking into account (i) the historical financial performance of the Target
	Warehouse Companies; (ii) the preliminary indication of value of the Target
	Warehouses conducted by a professional valuer which is independent from the
	Company and its connected persons; and (iii) the outlook for Hong Kong and
	demand for logistics services.
Consideration	Immediately prior to completion of the Warehouses Sale, if it is projected that the
adjustments	sum of the net asset value, or the consolidated net asset value, of the Target
	Warehouses Companies (with the book costs of the Target Warehouses and the
	carrying value of the other fixed assets of the Target Warehouses Companies
	replaced by the total consideration of HK$13,500.0 million):
	(i) will be greater than the amount of the total consideration, the Warehouses
	Vendor shall procure that each of the Target Warehouses Companies and
	the other Warehouses Owners shall declare interim dividends out of
	retained profits to their respective shareholder(s); or
	(ii) will be less than the amount of the total consideration, the Warehouses
	Vendor shall inject such additional capital into the relevant Target
	Warehouses Company, thereby increasing the share capital of the relevant
	Target Warehouses Company or the Warehouses Owner but without issuing
	any new share,
	in either case, such that as at completion, the consolidated net asset value of the
	Target Warehouses Companies shall be equal to the amount of the total
	consideration.

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		LETTER FROM SOMERLEY
Conditions	Completion under the Warehouses Sale Agreement is conditional upon:
	(i)	consent having been obtained from the Executive to the transactions
		contemplated in the Warehouses Sale Agreement and the Warehouses
		Management Agreements, where applicable;
	(ii)	the passing of the resolution to approve the Warehouses Sale Agreement
		and the Warehouses Management Agreements and the transactions
		contemplated under the Warehouses Sale Agreement and the Warehouses
		Management Agreements by the Independent Shareholders of the
		Company at the SGM;
	(iii)	no Target Warehouse having been destroyed, substantially damaged or
		rendered inaccessible by natural disaster, fire, explosion or other calamity or
		having been, for any reason, condemned, closed or declared dangerous by
		relevant government authorities or subject to demolition order(s) or closure
		order(s), and the reinstatement costs therefor exceeds HK$5,000.0 million;
		and
	(iv)	the Partial Offer becoming or being declared unconditional in all respects.
	The condition set out in paragraph (iii) above may be waived by the Warehouses
	Purchaser and none of the other conditions set out above is waivable.
	If the above conditions have not been satisfied or waived by the Warehouses
	Purchaser on or before the long stop date of the Warehouses Sale Agreement
	(being 31 December 2021 (or such other date as may be agreed by the
	Warehouses Vendor and the Warehouses Purchaser)), the Warehouses Sale
	Agreement shall be terminated.
Completion	If the Warehouses Sale Agreement becomes unconditional, completion
	thereunder shall take place on the third business day after the date on which the
	cheques for the Offer Price have been despatched to Shareholders under the
	Partial Offer.

As at the Latest Practicable Date, none of the conditions to completion under the Warehouses Sale

Agreement have been fulfilled. Other major terms and conditions to the Warehouses Sale Agreement are set

out in the letter from the Board contained in the Circular.

The valuation of theTarget Warehouses
1. Information on the Valuer

The Target Warehouses were valued by the Valuer, an independent property valuer appointed by

the Company.The full text of the valuation report of theTarget Warehouses is set out in appendix II to the

Circular. The valuation of the Target Warehouses as at 31 March 2021 (the "Valuation") of the Target

Warehouses has been carried out in accordance with The HKIS Valuation Standards 2020 published by

The Hong Kong Institute of Surveyors and the requirements set out in Chapter 5 of the Listing Rules.

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LETTER FROM SOMERLEY

We have reviewed the Valuation Report and certain valuation workings of the Valuer and interviewed the relevant staff of the Valuer with particular attention to: (i) the Valuer's terms of engagement with the Company; (ii) the Valuer's qualification and experience in relation to the preparation of the Valuation; and (iii) the steps and due diligence measures taken by the Valuer in performing the Valuation.

In our review of the engagement letter between the Company and the Valuer, we are satisfied that the terms of engagement between the Company and the Valuer are appropriate to the opinion the Valuer is required to give. The Valuer has confirmed that it is independent from the parties to the Warehouses Sale Agreement and their respective core connected persons, close associates and associates. We further understand that the Valuer is certified with the relevant professional qualifications required to perform the Valuation and the person-in-charge of the Valuation has over 35 years of experience in conducting valuation of properties in Hong Kong. We note that the Valuer mainly carried out its due diligence through management interviews and conducted its own proprietary research and has relied on publicly available information obtained through its own research as well as the financial information provided by the Management.

Valuation methodology

In arriving at its opinion of value, the Valuer has valued the Target Warehouses by adopting the market approach by making reference to comparable sales evidence as available in the relevant market subject to suitable adjustments between the Target Warehouses and the comparable properties including but not limited to, location, time, size, age and maintenance standard, etc.. We have discussed with the Valuer about the rationale of adopting the abovementioned valuation methodology for valuing the Target Warehouses. According to the Valuer, the market approach is the most appropriate valuation method for assessing the market value of the Target Warehouses as there is transparent and readily available market price information for warehouse properties.

After considering the reasons for the Valuer's choice of adopting the valuation methodology for valuing the Warehouses and the current status of the Target Warehouses, we are of the opinion that the valuation methodology used is reasonable and acceptable in establishing the market values of the Target Warehouses as at 31 March 2021.

(iii) Valuation bases and assumptions

In arriving at its opinion of value of the Target Warehouses, the Valuer generally starts the process by collecting and analysing the recent transactions of the market comparables located in the vicinity of the Target Warehouses. In particular, the Valuer selected market comparable transactions that (i) were located in the same district; (ii) were conducted during the month of the Valuation Date, or if not available, as close as the Valuation Date starting from around the middle of 2020. The collected comparables were then adjusted to reflect the difference between the comparables and the Target Warehouses in terms of, among others, location, time, size, age and maintenance standard. We have reviewed and discussed about the Valuer's workings on the selection of the market comparables and the relevant adjustments made. We are of the view that the basis of selection of market comparables and the

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LETTER FROM SOMERLEY

adjustments, including various factors (i.e. date of transaction, location, time, size, age and maintenance standard) taken into account, made for reflecting the difference between the selected comparables and the Target Warehouses are reasonable and relevant for the purpose of establishing the market value of the Target Warehouses. The appraised value of the Target Warehouses was then derived from the estimated average unit price (after applying the direct comparison approach) and gross floor area of the Target Warehouses.

Taking into account the above, we consider that the bases and assumptions adopted by the Valuer for the valuation methodology discussed above are reasonable and in line with market practices.

Based on the Valuation Report, the market values of the Target Warehouses as at 31 March 2021 were HK$13,128 million. Accordingly, the total consideration for the Warehouses Sale of HK$13,500 million represents a premium of approximately 2.8% over the amount of the Valuation. For the avoidance of doubt, the Warehouses Sale will be conducted through the sale of the Target Warehouses Sale Shares by the Warehouses Vendor and, in any event, the sum of the consolidated (if applicable) NAV of the Target Warehouses Companies shall always be equal to the amount of the total consideration of HK$13,500 million by adjusting the consolidated (if applicable) NAV of the Target Warehouses Companies via declaration of interim dividends or injection of additional capital (as the case may be).

3. The Warehouses Management Agreements

Reasons for and benefits of entering into the Warehouses Management Agreements

The Group operates as a leading logistics service provider in Asia principally engaged in the integrated logistics and international freight forwarding businesses. The Group is currently the owner of the Target Warehouses and operates at and manages these properties. Given theTarget Warehouses will be disposed of to the Kerry Holdings Group after completion of the Warehouses Sale, it is considered reasonable for the Group to enter into the Warehouses Management Agreements and be retained as the Warehouses Manager owing to the Group's expertise and knowledge of logistics business operation and familiarity of the Target Warehouses. Furthermore, by leveraging on the Group's existing set-up and resources, the provision of the Warehouses Management Services will generate additional income for the Group.

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Principal terms of the Warehouses Management Agreements

On 25 March 2021, in connection with the Warehouses Sale, KWHK, a wholly-owned subsidiary of the Company, entered into nine Warehouses Management Agreements (as amended on 30 April 2021) with, respectively, the legal owners of the Target Warehouses to provide Warehouses Management Services for the Target Warehouses. The principal terms of the Warehouses Management Agreements are summarised below:

KCC Warehouses

TW Warehouses

TC1-7A2 Warehouses

TC1-A Warehouses

TC1-B Warehouses

TC2 Warehouses

KC Warehouses

FL Warehouses

SS Warehouses

Management Agreement

Parties

(i)

KCC (as the owner)

(i)

TW (as the owner)

(i)

TC1-7A2 (as the owner)

(i)

Warehouse Co (TC1-A)

(i)

Warehouse Co (TC1-B)

(i)

TC2 (as the owner)

(i)

KC (as the owner)

(i)

FL (as the owner)

(i)

SS (as the owner)

(ii)

KWHK (as the

(ii)

KWHK (as the

(ii)

KWHK (as the

(as the owner)

(ii)

KWHK (as the

(ii)

KWHK (as the

(ii)

KWHK (as the

(ii)

KWHK (as the

Warehouses Manager)

(ii)

KWHK (as the

(ii)

KWHK (as the

Warehouses Manager)

LETTER

Term

The term of each Warehouses Management Agreement is an initial term of three years commencing on the date of completion of the Warehouses Sale in respect of the corresponding Target Warehouses and, subject to the Warehouses Manager having duly performed and observed all

Guaranteed occupancy

60%

100%

Nil

terms and conditions of the Warehouses Management Agreements in all material respects, the term is renewable at the option of the Warehouses Manager for a further term of three years.

79-

FROM

Consideration of services to be provided:

Monthly lease management

(i)

2% of one-twelfth of

2% of one-twelfth of the guaranteed gross revenue

(i) 5.5% of gross revenue; and

SOMERLEY

fee (Note 1)

the guaranteed gross

(ii) 15% of the warrant income of the relevant preceding

revenue; and

month

(ii)

15% of the warrant

income in the

preceding month in the

event that the

occupancy of the KCC

Target Warehouse of

the preceding month

exceeds or is equal to

60%

Monthly building manager

10% of the actual management expenses of the preceding

Not applicable

10% of the actual management expenses of the preceding month

fee

month

Monthly reimbursement of

"At-cost basis" to the extent

Reimbursement of the relevant Warehouses Owners' share of the estate agent commissions incurred by KWHK in respect of long leases for a term beyond the expiry of the initial

Monthly reimbursement of the estate agent commissions

the estate agent

that occupancy of the KCC

management term of 3 years (if KWHK does not exercise its option to renew) or for a term beyond the expiry of the further management term of 3 years (if KWHK exercises its option to

incurred by KWHK for the relevant preceding month and

commission

Target Warehouse exceeds or

renew) entered into during the management term with the relevant Warehouses Owner's prior approval, the term of which expire after the expiry of the management term and approved by

approved by the relevant Warehouses Owners in advance on

is equal to 60%

the relevant Warehouses Owner in advance on an "at-cost basis".

an "at-cost basis".

- 80 -

	KCC Warehouses	TW Warehouses	TC1-7A2 Warehouses	TC1-A Warehouses	TC1-B Warehouses	TC2 Warehouses	KC Warehouses	FL Warehouses	SS Warehouses
	Management Agreement	Management Agreement	Management Agreement	Management Agreement	Management Agreement	Management Agreement	Management Agreement	Management Agreement	Management Agreement

Guaranteed gross revenue	HK$151,000,000	HK$105,000,000	HK$1,400,000	HK$19,600,000	HK$56,000,000	HK$62,000,000	HK$32,000,000	Not applicable

Bonus fee	If actual revenue exceeds guaranteed revenue, then the relevant Warehouses Owners shall pay to KWHK a bonus equivalent to 5.5% of the difference			Not applicable

Outgoings and expenses	The relevant Warehouses Owners shall be responsible for certain outgoings and expenses in relation to maintenance and repairs of structural parts of the relevant Target Warehouses and property insurance.
(Note 2)	KWHK shall be responsible for (i) government rent and rates; (ii) management fees; (iii) fitting out costs, utility expenses and expenses for up keep of the non-structural parts of the Relevant Target Warehouses; and (iv) all other estate agent commissions except for the relevant
	Warehouses Owners' share as described above.

Current property	HK$1.55 per sq.ft. per month	HK$1.30 per sq.ft. per month	HK$1.40 to HK$1.50 per	HK$1.40 to HK$1.50 per	HK$1.40 to HK$1.50 per	HK$1.25 per sq.ft. per month	HK$1.25 per sq.ft. per month	HK$1.25 per sq.ft. per month	HK$1.35 per sq.ft. per month
management fees			sq.ft. per month	sq.ft. per month	sq.ft. per month

Notes:

Warrant income refers to any actual income generated from warrant business operated in the respective Target Warehouses and received by the relevant Warehouses Owners.
KCC shall be responsible for the outgoings and expenses mentioned above as long as the occupancy of the KCC Target Warehouse is equal to or exceeds 60%. KWHK shall be responsible for up to 60% of (i) government rent and rates; (ii) management fees; (iii) fitting out costs and utility expenses and expenses for upkeep of the non-structural parts for vacant spaces; and (iv) all other estate agent commissions except for the relevant Warehouses Owners' share as described above, if the occupancy rate of KCC Target Warehouse falls below 60%.

SOMERLEY FROM LETTER

LETTER FROM SOMERLEY

For the avoidance of doubt, the Warehouses Management Agreements only become effective upon completion of the Warehouses Sale. Commencement under the Warehouses Management Agreements are not otherwise subject to other conditionality, including by reference to the Partial Offer or the other Special Deal Agreements.

As at the Latest Practicable Date, the condition to the Warehouses Management Agreements becoming effective had not been fulfilled.

Guaranteed occupancy and guaranteed gross revenue

Pursuant to the Warehouses Management Agreements, the Group has guaranteed certain amounts of rental income and 100% occupancy for the TW Target Warehouse, TC1-7A2 Target Property, the TC1-A Target Property, the TC1-B Target Property, the TC2 Target Warehouse, the KC Target Warehouse (together, the "Fully Guaranteed Target Warehouses") and 60% occupancy for the KCC Target Warehouse (the "Partially Guaranteed Target Warehouse"). In view of the above, we have obtained and reviewed a breakdown of the leasing profile of the aforesaid Target Warehouses (the "Leasing Profile") from the Management and we note the Company is occupying almost all floor spaces in the Fully Guaranteed Target Warehouses, except for the TW Target Warehouse where the Company only occupies approximately 30% of the floor space. That said, we note that the majority of the remaining approximately 70% of the floor space of the TW Target Warehouse has ongoing long-term lease contracts expiring in or beyond 2024. As regarding the Partially Guaranteed Target Warehouse, we note from the Leasing Profile that over 60% of floor space of the KCC Target Warehouse is currently occupied by the Group. Furthermore, we have reviewed lettable unit rates of not less than four comparable properties for each Target Warehouse and the selected comparables were either (i) units within the same Target Warehouse that are being leased to independent third parties to the Group; or (ii) nearby warehouses that are comparable in terms of size, property usage and building conditions. The comparables selected for comparison are exhaustive and representative and we note that the implied guaranteed rental rate is not higher than that of the comparable properties. Based on our discussion with the Management, since (i) the Group intends to continue occupying the aforesaid existing floor spaces in the relevant warehouses; (ii) the majority of the remaining floor spaces leased by third party tenants have long leases; and (iii) the implied guaranteed rental rate is not higher than that of comparable properties, it is considered reasonable to guarantee the occupancy and the gross revenue of the aforesaid warehouses under the Warehouses Management Agreements.

Monthly lease management fee and monthly building manager fee (together, the "Lease and Building Management Fees") and bonus fee

As shown in the table above, the Lease and Building Management Fees include (A) the monthly lease management fee comprises (a) 2% of one-twelfth of the guaranteed gross revenue for the Fully Guaranteed Target Warehouses; (b) 2% of one-twelfth of the guaranteed gross revenue and 15% of warrant income for the Partially Guaranteed Target Warehouse (together with the Fully Guaranteed Target Warehouses, the "Guaranteed Target Warehouses"); and (c) 5.5% of gross revenue and 15% of the warrant income for the FL Target Warehouse and the SS Target Warehouse; (B) a monthly building manager fee of 10% of the actual management expenses for the Target Warehouses other than the

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LETTER FROM SOMERLEY

TC1-7A2 Target Property, the TC1-A Target Property and the TC1-B Target Property; and (C) the bonus fee of 5.5% for the amount exceeding the guaranteed gross revenue for the Guaranteed Target Warehouses. In order to assess the fairness and reasonableness of the Lease and Building Management Fees, we have compared an implied Lease and Building Management Fees rate, which is determined based on actual rental revenue for the year ended 31 December 2020 and the corresponding Lease and Building Management Fees would have been generated as if the Warehouses Management Agreements have been effective, and against the property management fee of all real estate investment trusts ("REITs") listed on the Main Board of the Stock Exchange. We understand that it is common for REITs to appoint property management company to manage their portfolio properties and we consider the property management fee payable by the REITs is similar in nature to the Lease and Building Management Fees. We consider the list of selected REITs below exhaustive and representative since, save as disclosed below, other REITs did not disclose information about property management fee. Please refer to the table below for details of the comparison:

Name	Stock code	Property management fee
Yuexiu Real Estate Investment	405	Base fee of 2.0% on total
Trust		revenue
Sunlight Real Estate Investment	435	Base fee not exceeding 3.0%
Trust		per annum of the gross
		revenue
Fortune Real Estate Investment	778	Base fee of 3.0% per annum
Trust		of gross revenue for the
		provision of property
		management services and

lease management services

Bonus fee

Incentive management fee varied from 3.0% to 6.0% on gross operating profits

Not applicable

Prosperity Real Estate	808	Base fee of 3.0% per annum	Not applicable
Investment Trust		of gross revenue for the
		provision of property
		management services and
		lease management
		services
Implied Lease and Building		Approximately 4.1%	5.5% of the amount
Management Fees based on			exceeding the guaranteed
actual rental revenue for the			gross revenue
year ended 31 December
2020

Source: Latest annual reports of the REITs above.

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LETTER FROM SOMERLEY

According to the table above, property management fee rates of REITs listed on Main Board of the Stock Exchange ranged between 2.0% to 3.0% such that the implied Lease and Building Management Fees of approximately 4.1% is higher than the aforesaid range. In addition, since the Lease and Building Management Fees is more favourable than that of the comparables shown in the table above, it is in the Group's favour to have an additional bonus fee of 5.5% for the amount exceeding the guaranteed gross revenue as it provides an additional income for the Group. Furthermore, we have obtained from the Management a breakdown of the costs involved in operating KWHK for fulfilling its obligation as the property manager for the Target Warehouses and compared that against the implied Lease and Building Management Fees based on rental revenue for the year ended 31 December 2020 and we note that the profit margin is reasonable.

(iii) Monthly reimbursement of the estate agent commission

According to the Warehouses Management Agreements, the relevant Warehouses Owners shall reimburse the relevant share of the estate agent commissions incurred by KWHK on an "at-cost basis" and such arrangement is considered reasonable.

(iv) Outgoings and expenses

According to the Warehouses Management Agreements, the relevant Warehouses Owners shall be responsible for certain outgoings and expenses in relation to structural parts of the relevant Target Warehouses, and KWHK shall be responsible for expenses for up keep of the non-structural parts of the Relevant Target Warehouses, government rent and rates, management fees and estate agent commissions except for the relevant Warehouses Owners' share. We are of the view that this arrangement is reasonable and common in nature.

Current property management fees

As shown in the table above, property management fees ranged from HK$1.25 per sq.ft. per month to HK$1.55 per sq.ft per month. In view of this, we have obtained property management fees charged by the Group to independent third party tenants in the relevant Target Warehouses (as applicable) and nearby comparable warehouses and we note that the aforesaid property management fees chargeable under the Warehouses Management Agreements for the relevant Target Warehouses are comparable to that of independent third party tenants in the relevant Target Warehouses (as applicable) and nearby comparable warehouses.

In view of the analysis set out above, we consider the terms of the Warehouses Management Agreements fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM SOMERLEY

Pricing policies and internal control

Based on our discussions with the Management, the pricing of each of the transactions entered into under the Warehouses Management Agreement shall be determined by the parties at the time of entry into the relevant agreements for such transactions with reference to the applicable market practice and value, with reference to any relevant rules and regulations being effective at the time. Given that the pricing of each of the transactions entered into under the Warehouses Management Agreements will be determined with reference to the applicable market practice and the prevailing market rate charged by independent third party at the relevant time for comparable transactions, we are of the view that the pricing policies of the Warehouses Management Agreements are fair and reasonable.

Annual caps

Set out below are the aggregate annual caps for the transactions under the Warehouses Management Agreements for the years ending 31 December 2021, 2022, 2023 and 2024 (the "Warehouses Management

Annual Caps"):

	For the year ending 31 December
	2021	2022	2023	2024
	HK$	HK$	HK$	HK$
	(million)	(million)	(million)	(million)
	(Note 1)			(Note 2)
Amounts payable by the Group as
principal to Kerry Holdings Group	160.0	480.0	485.0	550.0
Amounts receivable by the Group from
Kerry Holdings Group	11.3	37.4	41.6	47.8

Notes:

The cap amounts for the year ending 31 December 2021 only cover the period from the Final Closing Date to 31 December 2021.
The cap amounts for the year ending 31 December 2024 only cover the period from 1 January 2024 to the third anniversary of the Final Closing Date.

As stated in the letter from the Board contained in this Circular, the Warehouses Management Annual Caps were determined with reference to the management fees charged by the Group when providing warehouse management services to independent third parties, as well as factors including (i) prevailing and projected market rates for building management fees and fees for operation of the warehouse facilities; and (ii) inflation and expected expansion and development of the Group's and Kerry Holdings' businesses.

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LETTER FROM SOMERLEY

In view of the above, we have obtained a breakdown from the Management regarding the components of the Warehouses Management Annual Caps as set out in the table below.

	For the year ending 31 December
	2021		2022			2023	2024
	HK$	HK$	HK$	HK$
	(million)	(million)	(million)	(million)
	(Note 1)							(Note 2)
Amounts payable by the Group as
principal to Kerry Holdings Group:
Guaranteed gross revenue	143.0	428.0	428.0		492.0
Property management fee	17.0		52.0	57.0		58.0

	160.0		480.0	485.0		550.0
Amounts receivable by the Group from
Kerry Holdings Group:
Lease management fee	2.9		8.5	8.5		9.8
Building manager fee	2.1		7.5	8.6		9.9
Bonus fee	4.9		17.0	19.6		22.5
Contingency	1.4		4.4	4.9		5.6

	11.3		37.4	41.6		47.8

Notes:

The cap amounts for the year ending 31 December 2021 only cover the period from the Final Closing Date to 31 December 2021.
The cap amounts for the year ending 31 December 2024 only cover the period from 1 January 2024 to the third anniversary of the Final Closing Date.

Amounts payable by the Group as principal to Kerry Holdings Group

For guaranteed gross revenue, it is determined based on the sum of all guaranteed rental income for the relevant Fully Guaranteed Target Warehouses and Partially Guaranteed Target Warehouses.

For the property management fee, it is noted that this sub-category of the Warehouses Management Annual Caps was determined based on the applicable property management fee rate for the relevant Target Warehouses multiplies by the relevant gross floor area of the Target Warehouses plus a 5% increment per annum to reflect the possible adjustment to the property management fee due to, among others, inflation. Based on our review of the Leasing Profile, we understand that the applicable property management fee rates ranged between HK$1.25 per square feet and HK$1.55 per sq. ft. per month, which are in line with the management fee rate charged to tenants of the relevant Target Warehouses that are independent third parties to the Group.

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LETTER FROM SOMERLEY

Amounts receivable by the Group from Kerry Holdings Group

This sub-category of the Warehouses Management Annual Caps comprises lease management fee, building manager fee and bonus fee and they were determined based on the actual rental revenue for the year ended 31 December 2020 with an increment of 15% per annum and multiplies by the respective percentages of the Lease and Building Management Fees and bonus fee. The Company also included a contingency of approximately 13% for each item to cater for unexpected changes such as increase in rental rate.

Having considered the basis on which the Warehouses Management Annual Caps were determined as described above, we are of the view that the Warehouses Management Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned.

4. The Taiwan Business Sale Agreement

Reasons for and benefits of entering into theTaiwan Business Sale Agreement

As stated in the letter from the Board contained in this Circular, due to foreign investment restrictions, the Offeror is restricted from indirectly acquiring interests in Taiwan businesses. The Taiwan Business Sale Agreement is therefore essential to facilitate the Partial Offer and acquisition of interests in the Company by the Offeror. Further, the Taiwan Business Sale presents itself as a good opportunity for the Company to refocus its resources on developing key markets and capture business growth which may arise in the longer run.

As mentioned in the Joint Announcement, the Partial Offer will bring together the core competencies of the Offeror Parent Group and the Group across multiple verticals to create the leading Asia-based global logistics platform. Having considered the future prospects of the Group together with the Offeror Parent Group and the foreign investment restrictions of acquiring interests in Taiwan businesses, the entering into of the Taiwan Business Sale Agreement is considered acceptable.

Information on theTaiwanTarget Companies
1. Business and shareholding

The Taiwan Target Companies represent the entire issued share capital of Kerry Logistics (Taiwan) Investments Limited and Pan Asia Airlines Investment Limited, which hold, among others, approximately 49.7% equity interest in the Taiwan Listco and equity interests of certain companies that engage in the Unlisted Taiwan Business.

- 86 -

LETTER FROM SOMERLEY

The Taiwan Listco

The Taiwan Listco, namely Kerry TJ Logistics Company Limited which is a company listed on the Taiwan Stock Exchange, has two major businesses: (i) truck freight services; and (ii) logistics services. For truck freight services, the Taiwan Listco constructs freight transportation hub-and- spoke network with pickups at satellite stations to complete consignments and provide business- to-business and business-to-consumer services. The Taiwan Listco has established approximately 150 service locations, including transit centers, operations offices and goods collection stations. For logistics services, the Taiwan Listco provides integrated logistics services including supply chain logistics solutions, professional storage management such as devanning, warehousing, sorting, retrieving, disposal, and cold storage and temperature-controlled distribution.

The Unlisted Taiwan Business

The Unlisted Taiwan Business includes the international freight forwarding (the "IFF") and coffee trading business in Taiwan. The IFF business refers to import/export marine transport, import/export air freight, sea-air intermodal transport, and customs clearance services. The coffee trading business was started in 2020 and it serves as a distributor of coffee products in Taiwan and engages in retail and wholesale of coffee beans, ground coffee, accessory coffee products as well as coffee machines.

The Taiwan Pure Holding Companies

The Taiwan Pure Holding Companies consist of seven investment holding companies. Assets of the Taiwan Pure Holding Companies are mainly cash and bank balances, investment in subsidiaries and amount due from the Group. Liabilities of the Taiwan Pure Holding Companies are mainly bank loans, accounts payable and accrued charges.

- 87 -

LETTER FROM SOMERLEY

Shareholding structure

Set out below is the simplified shareholding structure of the Taiwan Target Companies and the Taiwan Companies as at the Latest Practicable Date.

												The Company

						100%						100%
				Kerry Logistics (Taiwan) Investments Limited					Pan Asia Airlines Investment Limited

Taiwan													100%
					66%	77%
Pure			Kerry Logistics Holdings (Taiwan) Limited					Tong Li Investments Co., Ltd.			Fair Point Limited
Holding
Companies							8.16%
			100%
	100%		Da Ji International Ltd.							0.19%

						5.99%

								39.25%
			Taiwan Kerry Investment Company Limited


				100%							Taiwan Listco
			Kerry Freight International Company Limited


IFF		100%

			Kerry Speedy Logistics (Hong Kong) Limited
							100%

			Kerry Coffee Company Limited

Financial results and financial position of the Taiwan Target Companies

Set out below is the summary of unaudited combined income statement of the Taiwan Target Companies for the years ended 31 December 2020 and 2019.

	For the year ended 31 December
	2020	2019
	HK$ (million)	HK$ (million)
Revenue	3,564.3	3,254.0
Profit before tax	560.2	430.6
Profit after tax	449.3	335.6
Profit after tax attributable to the Taiwan Sellers	223.3	148.0

- 88 -

LETTER FROM SOMERLEY

The Taiwan Target Companies' combined revenue was substantially contributed by the Taiwan Listco, which provided over 90% of the combined revenue for the years ended 31 December 2019 and 2020. The IFF business generated substantially the remaining combined revenue for the years ended 31 December 2019 and 2020. The revenue contribution from the coffee trading business was minimal. The Taiwan Target Companies' combined revenue amounted to approximately HK$3,564.3 million for the year ended 31 December 2020, representing a year-on-year increase of approximately 9.5%. The growth was mainly due to the increase in the Taiwan Listco's revenue. The profit after tax attributable to the Taiwan Seller amounted to approximately HK$223.3 million for the year ended 31 December 2020, representing a year-on-year increase of approximately 50.9%. Similarly, the growth was also mainly due to the increase in the net profit of the Taiwan Listco.

Set out below is the summary of unaudited combined statement of financial position of the Taiwan Target Companies as at 31 December 2020 and 2019.

	As at 31 December
	2020	2019
	HK$ (million)	HK$ (million)
Non-current assets	5,416.2	4,999.2
Current assets	1,584.4	1,579.5
Non-current liabilities	2,839.4	3,355.1
Current liabilities	2,156.5	1,521.9
Combined NAV (Note) attributable to the Taiwan Seller	1,206.6	973.7

Note: Pursuant to the Taiwan Business Sale Agreement, NAV is defined as total assets including, without limitation, any goodwill debited to reserves (acquisition reserves) less total liabilities and non-controlling interests.

As at 31 December 2020, the combined total assets of the Taiwan Target Companies were approximately HK$7,000.6 million. Fixed assets, amounted to approximately HK$4,382.0 million or approximately 62.6% of the total assets as at 31 December 2020, were mainly the fixed assets of the Taiwan Listco. The combined cash and bank balances were approximately HK$623.1 million, which were mainly held by the Taiwan Pure Holding Companies and the Taiwan Listco. The combined total liabilities of the Taiwan Target Companies as at 31 December 2020 were approximately HK$4,995.9 million, of which over 58.3% were bank loans. Lease liabilities and accounts payable accounted for approximately 19.1% and approximately 15.3% of the combined total liabilities of the Taiwan Target Companies as at 31 December 2020 respectively. The combined NAV of the Taiwan Target Companies attributable to the Taiwan Seller was approximately HK$1,206.6 million as at 31 December 2020, representing an increase of approximately 23.9% from that as at 31 December 2019.

As the significant majority, being over 90%, of the combined revenue of the Taiwan Target Companies is related to that of the Taiwan Listco, we therefore further review the financials of the Taiwan Listco below.

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LETTER FROM SOMERLEY

(iii) Financial results and financial position of the Taiwan Listco

Set out below is the summary of the audited consolidated income statement of the Taiwan Listco based on the International Financial Reporting Standards (the "IFRS") for the years ended 31 December 2020 and 2019.

	For the year ended 31 December
	2020		2019
	NTD (million)	NTD (million)
Revenue	12,344.2		11,855.7
Cost of sales	(9,674.8)	(9,461.0)

Gross profit	2,669.4		2,394.7
Operating expenses	(707.5)	(686.1)
Other income	126.3		78.8
Other (losses)/gains	(13.9)	43.4
Finance costs	(106.1)	(108.6)
Share of results of associates and joint ventures	(0.2)	2.6

Profit before tax	1,968.0		1,724.8
Income tax expense	(397.6)	(318.1)

Profit for the year	1,570.4		1,406.7
Profit attributable to the shareholders of the


Taiwan Listco	1,497.4		1,352.3


Earnings per share (NTD)	3.21		2.90

The Taiwan Listco's revenue has been substantially derived from truck freight services and logistics services. For the year ended 31 December 2020, the Taiwan Listco's revenue amounted to approximately NTD12,344.2 million (equivalent to approximately HK$3,332.9 million), representing a year-on-year increase of approximately 4.1%. The increase was mainly attributable to the growth of semi-conductors and electronics manufacturing, the increasing demand in pharmaceutical logistics as well as the rise in e-commerce business inTaiwan. Profit attributable to the shareholders of theTaiwan Listco amounted to approximately NTD1,497.4 million (equivalent to approximately HK$404.3 million), representing an increase of approximately 10.7% year-on-year, which was mainly due to increase in revenue as mentioned above.

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LETTER FROM SOMERLEY

Set out below is the summary of the audited consolidated balance sheet of the Taiwan Listco based on the IFRS as at 31 December 2020 and 2019.

	As at 31 December
	2020		2019
	NTD (million)	NTD (million)
ASSETS
Non-current assets
Property, plant and equipment	13,367.0		13,111.0
Right-of-use assets	3,563.9		3,364.4
Others	1,012.1		1,150.0

	17,943.0		17,625.4
Current assets
Cash and bank balances	1,507.9		1,344.3
Accounts receivable	1,570.1	1,543.5
Other receivables	130.9		498.7
Others	517.0		508.7

	3,725.9		3,895.2
Total assets	21,668.9		21,520.6
LIABILITIES

Non-current liabilities
Long-term bank loans	3,609.2		3,970.0
Lease liabilities	3,046.6		2,805.6
Others	962.0		1,019.7

	7,617.8		7,795.3
Current liabilities
Accounts payable	617.8		604.3
Other payables	1,438.9		1,496.1
Short-term bank loans	44.0		394.0
Lease liabilities	415.1		414.4
Others	712.6		802.0

	3,228.4		3,710.8
Total liabilities	10,846.2		11,506.1
EQUITY

Capital and reserves attributable to the
shareholders of the Taiwan Listco	10,268.3		9,483.7
Non-controlling interests	554.4		530.8

	10,822.7		10,014.5

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LETTER FROM SOMERLEY

As at 31 December 2020, total assets of the Taiwan Listco were approximately NTD21,668.9 million (equivalent to approximately HK$5,850.6 million), representing a slight increase of approximately 0.7% from that as at 31 December 2019. The Taiwan Listco had a significant portion, around 61.7% of its total assets as at 31 December 2020, represented property, plant and equipment, which primarily included land, buildings and logistics equipment. Right-of-use assets, which mainly related to leasehold land, land use rights and buildings, amounted to NTD3,563.9 million (equivalent to approximately HK$962.3 million), represented approximately 16.4% of Taiwan Listco's total assets as at 31 December 2020 and an increase of approximately 5.9% from that as at 31 December 2019.

The total liabilities of the Taiwan Listco were approximately NTD10,846.2 million (equivalent to approximately HK$2,928.5 million), representing a decrease of approximately 5.7% as compared to that as at 31 December 2019. The majority of the liabilities were bank loans and lease liabilities, which accounted for approximately 33.7% and 31.9% of the total liabilities as at 31 December 2020 respectively. The decrease in the total liabilities was mainly due to repayment of certain bank loans in 2020.

The NAV attributable to the shareholders of the Taiwan Listco was approximately NTD10,268.3 million (equivalent to approximately HK$2,772.4 million), representing an increase of approximately 8.3% from that as at 31 December 2019. The increase in the NAV was mainly attributable to the profit generated for the year ended 31 December 2020.

Principal terms of theTaiwan Business Sale Agreement

On 25 March 2021, in connection with the Partial Offer and the Option Offer, the Company and Kerry Logistics Services Limited, a wholly-owned subsidiary of the Company, entered into the Taiwan Business Sale Agreement to sell the Company's interests in certain Taiwan businesses. The principal terms of the Taiwan Business Sale Agreement are set out below:

Date	25 March 2021
Parties	(i)	The Company (as the seller guarantor);
	(ii)	Kerry Logistics Services Limited, a wholly-owned subsidiary of the Company
		(as the seller);
	(iii)	Kerry Holdings (as the purchaser guarantor); and
	(iv)	Treasure Seeker Group Limited, a wholly-owned subsidiary of Kerry
		Holdings (as the purchaser).
Subject matter	Pursuant to the Taiwan Business Sale Agreement, the Taiwan Seller agreed to sell
	and the Taiwan Purchaser agreed to purchase the entire issued share capital of

Kerry Logistics (Taiwan) Investments Limited and Pan Asia Airlines Investment Limited, which are investment holding companies directly or indirectly holding approximately 49.7% equity interest in the Taiwan Listco and equity interests of certain companies that carry on the Unlisted Taiwan Business (being Taiwan Unlisted Business Companies).

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	LETTER FROM SOMERLEY
Conditions and	Closing of the Taiwan Business Sale is conditional upon satisfaction or waiver of
closing	the following conditions precedent, among other things:
	(i) the Partial Offer becoming or being declared unconditional in all respects;
	and
	(ii) all approvals and consents from Shareholders which are required in
	connection with the transactions contemplated under the Taiwan Business
	Sale Agreement pursuant to Chapters 14 and 14A the Listing Rules and the
	Takeovers Code having been obtained.
	Neither condition precedent above is capable of waiver. Other conditions
	precedent to theTaiwan Business Sale Agreement are set out in the letter from the
	Board contained in the Circular.
	The Taiwan Business Sale Agreement shall automatically terminate if the
	conditions precedent are not satisfied (or, where applicable, waived) on or before
	31 December 2021.
Closing	Closing of the Taiwan Business Sale will take place on the earlier of (i) the seventh
	business day after the last day on which Shareholders may tender acceptances
	into the Partial Offer; (ii) the business day immediately before the day on which
	the Offeror Parent or its wholly-owned subsidiaries become a member on the
	register of members of the Company upon acquiring the title of the Shares under
	the Partial Offer; and (iii) such date as Kerry Holdings, the Company and the
	Offeror Parent may agree which is not to be earlier than immediately prior to the
	Partial Offer becoming unconditional in all respects.
Consideration	The initial consideration under the Taiwan Business Sale Agreement shall be the
	USD equivalent of NTD4,537,018,403 (equivalent to approximately HK$1,225.0
	million) (subject to adjustments set out below) in cash which shall be payable at
	closing. The initial consideration has been determined by arm's length
	negotiations between the parties taking into account, inter alia, (i) the profit
	generated by the Taiwan Business; (ii) the historical price and liquidity of the
	shares of the Taiwan Listco; and (iii) the net debt position of the Taiwan Pure
	Holding Companies.

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LETTER FROM SOMERLEY

As advised by the Management, the initial consideration comprises the followings:

approximately NTD10,939.7 million (equivalent to approximately HK$2,953.7 million), being the Carrying Book Value (as defined below) of the Taiwan Listco and the Taiwan Unlisted Business Companies as at 31 December 2020;
NTD342.9 million (equivalent to approximately HK$92.6 million), being the Taiwan Target Companies' proportionate interest in the aggregate unencumbered cash held by the Taiwan Pure Holding Companies;
less NTD6,680.0 million (equivalent to approximately HK$1,803.6 million), being the total bank loans owed by one of the wholly-owned subsidiaries within the Taiwan Target Companies as at 31 December 2020 (the "Bank Loans"); and
less NTD65.6 million (equivalent to approximately HK$17.7 million), representing the residual deferred consideration (being the portion of consideration which is payable by Taiwan Kerry Investment Company Limited, being one of the Taiwan Companies, or its subsidiaries in respect of acquiring 51% of the issued share capital of Direct Logistics Co., Ltd. which falls due after 31 December 2021).

The "Carrying Book Value" in relation to the Taiwan Listco and the Taiwan Unlisted Business Companies shall mean:

its or their respective net asset value (including intangible assets); plus
any goodwill credited to that company on the Company's audited consolidated accounts, including amounts credited and debited to reserves; less
any non-controlling interests.

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LETTER FROM SOMERLEY

Audited completion The Company shall prepare audited consolidated completion accounts (as

accounts defined in the Taiwan Business Sale Agreement) in respect of the Taiwan Target

adjustments Companies and their subsidiaries for the period from 1 January 2021 to the month-end immediately preceding the date of closing (being, the completion accounts reference date). The initial consideration shall be adjusted by reference to the audited completion accounts as follows:

to the extent the aggregate consolidated net asset values (which takes into account the residual deferred consideration and withholding tax provision on retained profits of Da Ji International Ltd., Tong Li Investments Co., Ltd. and where applicable any Taiwan Companies which have adequate retained profits and surplus cash to distribute dividend at the completion accounts reference date to any offshore shareholders, as applicable) of each of the Taiwan Target Companies as set out in the audited completion accounts are less than or exceed the initial consideration of NTD4,537,018,403 (equivalent to approximately HK$1,225.0 million), any shortfall shall be deducted from the initial consideration and any excess shall be added to the initial consideration (as the case may be); and
deducted on a dollar-for-dollar basis in the event that any contingent liabilities (including, without limitation, unpaid tax liabilities) exist for the Taiwan Pure Holding Companies at the time of the completion accounts reference date which under the Hong Kong Generally Accepted Accounting Principles should be deducted from the net asset values of the relevant companies as of the completion accounts reference date but have not been reflected in the completion accounts. For the avoidance of doubt, if relevant audit adjustment(s) have already been made to the net asset values in the audited completion accounts, no further deductions should be made to the initial consideration.

If the initial consideration is increased pursuant to the adjustments, then Taiwan Purchaser shall pay the Taiwan Seller; and if the initial consideration is reduced pursuant to the adjustments, theTaiwan Seller shall pay theTaiwan Purchaser, the net adjustment amount.

- 95 -

	LETTER FROM SOMERLEY
Post-closing	Following closing of the Taiwan Business Sale, to the extent that any residual
adjustments	deferred consideration (being the portion of consideration which is payable by
	Taiwan Kerry Investment Company Limited, being one of the Taiwan Companies,
	or its subsidiaries in respect of acquiring 51% of the issued share capital of Direct
	Logistics Co., Ltd. which falls due after 31 December 2021) does not become
	payable, the Taiwan Purchaser shall pay to the Taiwan Seller an amount equal to
	the amount of the residual deferred consideration that does not become payable.
	Other key terms of the Taiwan Business Sale Agreement, including indemnity and
	guarantee, are set out in the letter from the Board contained in the Circular.
Proceeds	The proceeds from the Taiwan Business Sale, being the USD equivalent of
	NTD4,537,018,403 (equivalent to approximately HK$1,225.0 million) (subject to
	audited completion accounts adjustments and post-closing adjustments) are
	expected to be retained by the Company to support the ongoing growth and
	development of the Group.

Evaluation of the consideration for theTaiwan Business Sale Agreement

As mentioned above in the sub-section "(c) Principal terms of the Taiwan Business Sale Agreement" above, the consideration for the Taiwan Business Sale Agreement consists of the followings:

	NTD (million)
The Carrying Book Value of:
the Taiwan Listco	10,092.3
Kerry Freight International Company Limited (including Direct Logistics Co., Ltd.)
and Kerry Speedy Logistics (Hong Kong) Limited (the "IFF Companies")	838.6
Kerry Coffee Company Limited ("Kerry Coffee")	8.8

	10,939.7
The Taiwan Target Companies' proportionate interest in the aggregate
unencumbered cash	342.9
Less: the Bank Loans	(6,680.0)
Less: residual deferred consideration	(65.6)

Total	4,537.0

- 96 -

LETTER FROM SOMERLEY

We have evaluated the various portions of the consideration for the Taiwan Business Sale Agreement below.

Comparison of the market prices of the shares of the Taiwan Listco

The Group's effective equity interest in the Taiwan Listco as at the Latest Practicable Date was approximately 49.67%, representing approximately 231,957,790 shares of the Taiwan Listco (the "Taiwan Listco Share(s)"). The implied consideration of each of the Taiwan Listco Shares of approximately NTD43.51 (the "Taiwan Listco Share Consideration"), being the consideration for the Taiwan Listco of NTD10,092.3 million divided by the aforesaid 231,957,790 of the Taiwan Listco Shares, represents:

		Premium/(Discount)
		of the Taiwan Listco
		Share Consideration
	Closing price or	over/(to) the closing
	average closing price	price or average
	of the Taiwan Listco	closing price of the
	Shares or the NAV	Taiwan Listco Shares
	per Taiwan Listco	or the NAV per
	Share	Taiwan Listco Share
Last trading day of the Shares before publication of the Joint
Announcement
(i.e. 4 February 2021)	NTD40.45	7.56%
10 trading days (Note 1)	NTD44.80	(2.88)%
30 trading days (Note 1)	NTD43.82	(0.71)%
180 trading days (Note 1)	NTD41.76	4.19%
The Latest Practicable Date	NTD45.00	(3.31)%
NAV per Taiwan Listco Share as at 31 December 2020 (Note 2)	NTD21.99	97.86%

Source: Bloomberg and the website of Market Observation Post System of Taiwan Stock Exchange

Notes:

Up to and including the Latest Practicable Date.
It is calculated based on the NAV attributable to the shareholders of the Taiwan Listco of approximately NTD10,268.3 million as at 31 December 2020 divided by 467,000,498 Taiwan Listco Shares in issue as at the Latest Practicable Date.

The Taiwan Listco Share Consideration of approximately NTD43.51 represents a premium of approximately 7.56% over the closing share price of theTaiwan Listco on the last trading day of the Shares before publication of the Joint Announcement. It also represents a premium of approximately 4.19% over the average closing share price of the Taiwan Listco for the 180-trading days (up to and including the Latest Practicable Date) and discounts of approximately 2.88% and 0.71% to the average closing share price of the Taiwan Listco for the 10- and 30-trading days (up to and including the Latest Practicable Date).The closing share price of theTaiwan Listco as at the Latest Practicable Date and the corresponding

- 97 -

LETTER FROM SOMERLEY

discount were NTD45.00 and approximately 3.31% respectively. Lastly, the Taiwan Listco Share Consideration represents a premium of approximately 97.86% over the NAV attributable to the shareholders per Taiwan Listco Share as at 31 December 2020.

Historical price performances of the Taiwan Listco Shares

Set out below are the price performances of the Taiwan Listco Shares since the beginning of 2020 to the Latest Practicable Date (the "Review Period").

	48.0
	46.0	Implied Taiwan Listco Share Consideration of approximately NTD43.51

(NTD)	44.0
42.0
price

Share	40.0																	(E)

38.0
Listco
36.0
Taiwan							(B)								(D)
											(C)

34.0
	32.0					(A)
	30.0
		2020			2020			2020			2020			2020		2020	2021	2021	The Latest
	2 Jan		Mar		May		Jul		Sep		Nov	2 Jan		Mar	Practicable
							Date
		2		2		2		2		2			2

As set out in the discussion below, the Taiwan Listco published a number of announcements during the Review Period, which we consider to be crucial in shaping the market price of the Taiwan Listco Shares.

Date	Details of the announcements

31 Mar 2020 Publication of annual results for the year ended 31 December 2019
15 May 2020 Publication of first quarterly results for the three months ended 31 March 2020
14 Aug 2020 Publication of interim results for the six months ended 30 June 2020
13 Nov 2020 Publication of third quarterly results for the nine months ended

30 September 2020

26 Mar 2021 Publication of annual results for the year ended 31 December 2020

Source: The website of Market Observation Post System of Taiwan Stock Exchange

- 98 -

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Chart Kerry Logistics Network Limited

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Company Profile

Kerry Logistics Network Limited is an investment holding company principally engaged in provision of logistics business services. Along with subsidiaries, the Company operates its business through three segments. The International Freight Forwarding segment is engaged in the provision of international freight forwarding (IFF) services, including intra-Asia and between Asia and Europe to transport cargo using air freight, ocean freight and cross-border road freight forwarding services. The Logistics Operations segment is engaged in the provision of logistics operations (IL) services, including storage and value-added services, trucking and distribution, returns management and various ancillary services, primarily in Asia. The Hong Kong Warehouse segment is engaged in the leasing of warehousing space in Hong Kong.

Sector

Air Freight & Logistics

Calendar

2024-08-28 - Q2 2024 Earnings Release (Projected)

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Income Statement Evolution

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Ratings for Kerry Logistics Network Limited

Trading Rating

Investor Rating

ESG Refinitiv

C+

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Analysts' Consensus

Sell

Buy

Mean consensus

BUY

Number of Analysts

Last Close Price

7.72 HKD

Average target price

11.33 HKD

Spread / Average Target

+46.80%

Consensus

EPS Revisions

Estimates Revisions

Quarterly revenue - Rate of surprise

Company calendar

Sector Integrated Logistics Operators

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KERRY LOGISTICS NETWORK LIMITED	-9.25%	1.78B
KUEHNE UND NAGEL INTERNATIONAL AG	-14.15%	32.6B
DSV A/S	-10.04%	31.89B
PANALPINA WELTTRANSPORT (HOLDING) AG	-1.52%	6.34B
HYUNDAI GLOVIS CO., LTD.	-10.76%	4.66B
NIPPON EXPRESS HOLDINGS INC.	-1.85%	4.53B
COMPAGNIE DU CAMBODGE	+8.46%	4.21B
COMPAÑÍA DE DISTRIBUCIÓN INTEGRAL LOGISTA HOLDINGS, S.A.	+1.96%	3.52B
JIAYOU INTERNATIONAL LOGISTICS CO.,LTD	+60.78%	2.45B
SEINO HOLDINGS CO., LTD.	-1.64%	2.31B

Integrated Logistics Operators

Kerry Logistics Network Limited

Equities

636

BMG524181036

Air Freight & Logistics

Kerry Logistics Network : Circular

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Sector Integrated Logistics Operators