(Incorporated in Hong Kong with limited liability) (Stock Code: 119) CONNECTED TRANSACTION FORMATION OF JOINT VENTURE

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. (Incorporated in Hong Kong with limited liability) (Stock Code: 119) CONNECTED TRANSACTION FORMATION OF JOINT VENTURE The Board announces that on 19 May 2016 (after trading hours), Poly Jinan, a whollyowned subsidiary of the Company, and Shandong Heshun entered into the JV Agreement, pursuant to which, the parties will jointly develop the Project through the Project Company. The Project Company is owned by Poly Jinan and Shandong Heshun as to 70% and 30%, respectively. The parties propose to inject a total of RMB160,000,000 to the Project Company in the combination of capital contribution and shareholders' loans before Such fundings will be provided by Poly Jinan and Shandong Heshun on a 70:30 basis. It is currently contemplated that the total fundings in the long run to be contributed to the Project Company by both parties will not exceed RMB500,000,000. LISTING RULES IMPLICATIONS As (i) the sole purpose of the Project Company is to develop the Project which is of a revenue nature in the ordinary and usual course of business of the Company; (ii) the transactions contemplated under the JV Agreement are on an arm s length basis and on normal commercial terms; and (iii) the Project Company may not, without the unanimous consent from the parties to the JV Agreement, change the nature and scope of its businesses or enter into any transactions which are not on an arm s length basis, the transactions contemplated under the JV Agreement do not constitute notifiable transactions of the Company under Chapter 14 of the Listing Rules as provided for in Rule 14.04(1)(f) of the Listing Rules. As at the date of this announcement, Shandong Heshun is a substantial shareholder of a number of the Company's subsidiaries and therefore a connected person of the Company at the subsidiary level. Accordingly, the transactions contemplated under the JV Agreement constitute a connected transaction of the Company. The Board (including the independent non-executive Directors) has approved the JV Agreement and the transactions contemplated under the JV Agreement and confirmed that the JV Agreement has been made on normal commercial terms and in the ordinary and usual course of business of the Group, and that its terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole. As such, the transactions contemplated under 1

2 the JV Agreement are exempted from the circular, independent financial advice and Shareholders approval requirements pursuant to Rule 14A.101 of the Listing Rules. The Board announces that on 19 May 2016 (after trading hours), Poly Jinan, a whollyowned subsidiary of the Company, and Shandong Heshun entered into the JV Agreement, pursuant to which, the parties will jointly develop the Project through the Project Company. THE JV AGREEMENT Date 19 May 2016 Parties (1) Poly Jinan, a wholly-owned subsidiary of the Company (2) Shandong Heshun Shandong Heshun is a company established in the PRC, whose principal business is property development in the PRC. It is a substantial shareholder of a number of the Company's subsidiaries and therefore a connected person of the Company at the subsidiary level. Property Development through the Project Company The JV Agreement was entered into between Poly Jinan and Shandong Heshun in order to facilitate the development of the Project on the Land through the Project Company. The Project Company is established in the PRC with a registered capital of RMB10,000,000, which is owned by Poly Jinan and Shandong Heshun as to 70% and 30%, respectively. Since its establishment, the Project Company has not carried on any substantial business activities. Principal Terms of the JV Agreement A summary of the major terms and conditions of the JV Agreement is set out below: Purpose : For Poly Jinan and Shandong Heshun to own and develop the Project on a 70:30 basis through the Project Company. The sole purpose and business of the Project Company is to develop the Project. Distribution : Distributions will be made to the parties proportionate to their respective shareholding percentages in the Project Company in compliance with applicable laws and the articles of association of the Project Company. Capital requirement : It is currently expected that the total funding required for 2

3 the development of the Project (including any costs for the primary development of the Land and the acquisition costs for the land use right of the Land) is RMB12,000,000,000, out of which the cost for the primary development of the Land will be RMB2,082,000,000. Shandong Heshun will be solely responsible for any primary development costs in excess of RMB2,082,000,000. The total funding required for the development of the Project was determined based on, among other things, the costs for the primary development of the Land, the acquisition costs for the land use right of the Land, the construction and development costs and the financing costs. The parties intend to increase the registered capital of the Project Company to RMB100,000,000, and the increment will be contributed by Poly Jinan and Shandong Heshun as to 70% and 30%, respectively. The Project Company will continue to be a subsidiary of the Company after such capital injection. Further, Poly Jinan and Shandong Heshun intend to extend a shareholder's loan to the Project Company in the amount of RMB49,000,000 and RMB21,000,000 respectively before It is currently contemplated that the total amount of funds to be provided to the Project Company from both parties (whether by way of capital contribution or shareholder's loans or both) will not exceed RMB500,000,000. The Group currently expects to fund the capital contribution and shareholder's loans to be made by Poly Jinan through the Group's internal resources. Any further funding required for the primary development of the Land, the acquisition costs of the land use right of the Land and development of the Project shall be raised by the Project Company through external financing. In the event that any security or guarantee is required for future external financing of the Project Company, Poly Jinan and Shandong Heshun will provide such security or guarantee according to their respective shareholding percentages in the Project Company. In the event that either party (the "Contributing Party") agrees to provide guarantee and/or security in respect of such financing which is more than its pro-rated portion, (i) the other party (the "Noncontributing Party") agrees to provide a counterguarantee to the Contributing Party by way of a share charge over the Non-contributing Party's interest in the Project Company for the Non-contributing Party's prorated portion of the obligations under such financing, and (ii) the Contributing Party will receive from the Non- 3

4 contributing Party a guarantee fee. Board representation : Poly Jinan shall have the right to nominate and appoint such number of directors and supervisors of the Project Company as it thinks fit. It also has the right to appoint the chairman of the board of directors and the general manager of the Project Company. Shandong Heshun has the right to appoint one director, one supervisor and one finance staff of the Project Company. Management and operation : Poly Jinan will be responsible for the daily management and operation of the Project Company. Shandong Heshun will have the right to participate and supervise the major corporate actions concerning the Project Company. REASONS FOR AND BENEFITS OF ENTERING INTO THE JV AGREEMENT The Company is an investment holding company with its subsidiaries principally engaged in property development and investment in the PRC. The Directors (including the independent non-executive Directors) believe that the co-development of the Project pursuant to the JV Agreement will broaden the asset and earnings base of the Company and further strengthen the Company s property development business in the PRC. The Directors (including the independent non-executive Directors) are of the view that the terms of the JV Agreement and the transactions contemplated thereunder are based on normal commercial terms and in the ordinary and usual course of business of the Group, are fair and reasonable and in the interests of the Company and its Shareholders as a whole. As no Directors have any material interest in the transactions contemplated under the JV Agreement and accordingly, none of them have abstained from voting on the relevant board resolutions. LISTING RULES IMPLICATIONS As (i) the sole purpose of the Project Company is to develop the Project which is of a revenue nature in the ordinary and usual course of business of the Company; (ii) the transactions contemplated under the JV Agreement are on an arm s length basis and on normal commercial terms; and (iii) the Project Company may not, without the unanimous consent from the parties to the JV Agreement, change the nature and scope of its businesses or enter into any transactions which are not on an arm s length basis, the transactions contemplated under the JV Agreement do not constitute notifiable transactions of the Company under Chapter 14 of the Listing Rules as provided for under Rule 14.04(1)(f) of the Listing Rules. 4

5 As at the date of this announcement, Shandong Heshun is a substantial shareholder of a number of the Company's subsidiaries (namely, Jinan Poly Property Development Co. Ltd. ( 濟南保利房地產開發有限公司 ), Shandong Poly Jia Yuan Property Co. Ltd. ( 濟南保利嘉園置業有限公司 ), and Jinan Poly City Property Co. Ltd. ( 濟南保利城置業有限公司 ) and therefore a connected person of the Company at the subsidiary level. Accordingly, the transactions contemplated under the JV Agreement constitute a connected transaction of the Company. The Board (including the independent non-executive Directors) has approved the JV Agreement and the transactions contemplated under the JV Agreement and confirmed that the JV Agreement has been made on normal commercial terms and in the ordinary and usual course of business of the Group, and that its terms are fair and reasonable and in the interests of the Company and its Shareholders as a whole. As such, the transactions contemplated under the JV Agreement are exempted from the circular, independent financial advice and Shareholders approval requirements pursuant to Rule 14A.101 of the Listing Rules. DEFINITIONS Unless the context otherwise requires, the following expressions have the following meanings in this announcement: Board Company Directors Group Hong Kong the board of Directors Poly Property Group Co., Limited, a company incorporated in Hong Kong with limited liability, whose Shares are listed on the Main Board of the Stock Exchange the directors of the Company the Company and its subsidiaries the Hong Kong Special Administrative Region of the PRC JV Agreement the joint venture agreement dated 19 May 2016 entered into between Poly Jinan and Shandong Heshun in relation to the proposed development of the Project through the Project Company Land Listing Rules a piece of land (comprised of several plots adjacent to one another) located in Jinan City of the PRC with a total construction area of about 965,525 square metres the Rules Governing the Listing of Securities on the Stock Exchange 5

6 Poly Jinan Project Project Company PRC RMB Shandong Heshun Shareholders Shares Stock Exchange 濟南保利置業有限公司 (Jinan Poly Real Estate Co., Ltd.), a limited liability company established in the PRC and a wholly-owned subsidiary of the Company, whose principal business is property development in the PRC the "Wu Li Pai Fang" project to be developed on the Land, comprising mixed-use properties including residential and commercial properties 保利新城置業有限公司 (Poly Newtown Real Estate Co., Ltd.), a limited liability company established in the PRC and a subsidiary of the Company, which is owned by Poly Jinan and Shandong Heshun as to 70% and 30%, respectively the People's Republic of China, which for the purpose of this announcement excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan Renminbi, the lawful currency of the PRC 山東和順投資有限公司 (Shandong Heshun Investment Co., Ltd.), a company established in the PRC and a connected person of the Company at the subsidiary level holders of the Shares ordinary shares of the Company The Stock Exchange of Hong Kong Limited In this announcement, the terms connected person, subsidiary and substantial shareholder have the meanings given to such terms in the Listing Rules, unless the context otherwise requires. For reference purposes only, the Chinese names of the PRC entities have been translated into English in this announcement. In the event of any discrepancies between the Chinese names of these PRC entities and their respective English translations, the Chinese version shall prevail. Hong Kong, 19 May 2016 For and on behalf of the Board Poly Property Group Co., Limited XUE Ming Chairman As at the date of this announcement, the executive directors of the Company are Mr. Xue Ming, Mr. Han Qingtao, Mr. Wang Xu and Mr. Ye Li Wen, the non-executive director is Mr. Ip Chun Chung, Robert, and the independent non-executive directors are Mr. Choy Shu Kwan, Miss Leung Sau Fan, Sylvia and Mr. Wong Ka Lun. 6