Kerry Properties Limited — Capital/Financing Update 2004

Oct 6, 2004

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

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

DISCLOSEABLE TRANSACTION

Kerry Electricity Jiangxi, a wholly-owned subsidiary of the Company, entered into the JV Agreement on 16 September 2004 with Changyuan, Guodian and Yugan City to form the JV Company. The scope of the business of the JV Company is to construct and operate a coal-generated electricity power plant in the Yugan County, Jiangxi Province in the PRC with an installed capacity of 2 x 600 MW.

The total investment of the JV Company is RMB5,000,000,000 (equivalent to approximately HK$4,716,981,132). The registered capital of the JV Company is RMB1,250,000,000 (equivalent to approximately HK$1,179,245,283). Kerry Electricity Jiangxi holds 33 per cent. of the registered capital in the JV Company and is obliged to contribute RMB412,500,000 (equivalent to approximately HK$389,150,943) in cash to the registered capital of the JV Company.

The establishment of the JV Company constitutes a discloseable transaction for the Company under the Listing Rules. A circular containing details of the JV Company will be dispatched to the Shareholders as soon as practicable.

THE JV AGREEMENT

Date of the JV Agreement

16 September 2004

Scope of the business of the JV Company

The scope of the business of the JV Company is to construct and operate a coal-generated electricity power plant in the Yugan County, Jiangxi Province in the PRC with an installed capacity of 2 x 600 MW. The electricity generated is expected to be transmitted by one or more of the relevant power grid companies in the PRC for the benefit of end users. Subject to the approval by the relevant PRC regulatory authorities of the JV Agreement and the articles of association of the JV Company, the term of the JV Company shall be 35 years from the date of issue of its business licence.

Information on the JV Parties

Kerry Electricity Jiangxi is an investment holding company incorporated on 17 December 2002 under the laws of Samoa, and a wholly-owned subsidiary of the Company.

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According to Changyuan’s Interim Report, Changyuan is a company incorporated in the PRC, the shares of which are listed on the Shenzhen Stock Exchange and is principally engaged in the generation and supply of electricity, heat and hot water and the manufacturing of related equipments.

According to the public information of Guodian, Guodian is a PRC state-owned enterprise and is principally engaged in the generation and supply of electricity.

According to information provided by Yugan City, Yugan City is a PRC state-owned enterprise and is principally engaged in infrastructure development and related investments in the Yugan County, Jiangxi Province in the PRC.

Total investment and registered capital of the JV Company

The total investment of the JV Company is RMB5,000,000,000 (equivalent to approximately HK$4,716,981,132). The registered capital of the JV Company is RMB1,250,000,000 (equivalent to approximately HK$1,179,245,283).

Kerry Electricity Jiangxi, Changyuan, Guodian and Yugan City are obliged to contribute RMB412,500,000, RMB625,000,000, RMB187,500,000 and RMB25,000,000 respectively (equivalent to approximately HK$389,150,943, HK$589,622,642, HK$176,886,792 and HK$23,584,906 respectively) to the registered capital of the JV Company and hold 33 per cent., 50 per cent., 15 per cent. and 2 per cent. respectively of the registered capital of the JV Company. The registered capital of the JV Company is to be paid by each of the JV Parties in cash. Profits derived from the JV Company are to be shared in proportion to the JV Parties’ contributions to the registered capital of the JV Company.

The remaining RMB3,750,000,000 (equivalent to approximately HK$3,537,735,849) of the total investment of the JV Company is to be funded by financing from financial institutions or the JV Parties as approved by the JV Board from time to time. The JV Parties are obliged to provide guarantees or other security, as and when required by any financial institution, in respect of the provision of any financing, in proportion to their contribution to the registered capital of the JV Company. The substantial terms of any guarantees or the nature and terms of any security to be provided have not been agreed between the JV Parties, and are to be approved by more than two thirds of the members present at a JV Board meeting. Any further contribution by Kerry Electricity Jiangxi to the total investment in excess of the registered capital of the JV Company will be funded as determined by the directors of Kerry Electricity Jiangxi from time to time.

The Company shall, as and when required to make further contributions to or provide any guarantees or other security for the benefit of the JV Company, comply with the provisions of the Listing Rules.

The JV Company will be accounted for as an associated company in the consolidated accounts of the Company.

Representation of the JV Board

The JV Board comprises nine directors. Guodian is entitled to appoint two directors, each of Kerry Electricity Jiangxi and Changyuan is entitled to appoint three directors and Yugan City is entitled to appoint one director.

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Timing of capital contribution

The JV Parties are obliged, within 30 days of the issue of JV Company’s business licence in the PRC, to make an initial contribution of RMB187,500,000 (equivalent to approximately HK$176,886,792) to the registered capital of the JV Company, being 15 per cent. of the registered capital of the JV Company, in proportion to their contribution to the registered capital of the JV Company. The issue of the business licence is subject to the approval by the relevant PRC regulatory authority, and the Company anticipates that the JV Company will obtain its business licence within 12 months from the date of the JV Agreement. The JV Board has power to determine the timing and amount of the subsequent contributions to the remaining registered capital of the JV Company, provided that the last contribution must be made before the second 600 MW power generator begins its operation, which is currently anticipated to begin in December 2007.

Condition

Pursuant to the JV Agreement, the establishment of the JV Company is conditional upon the obtaining of all necessary approvals from the relevant PRC regulatory authorities. If the relevant PRC regulatory authorities do not approve the JV Agreement and the articles of association of the JV Company within 12 months (or such longer period as the JV Parties may agree) of the date of the JV Agreement, the JV Agreement will become unenforceable automatically.

REASONS FOR ESTABLISHING THE JV COMPANY

The demand for electricity in the Jiangxi Province in the PRC is high and is expected to steadily increase. The JV Company is to build the first coal-generated electricity power plant with an installed capacity of 2 x 600 MW in the Jiangxi Province. It is intended that the capacity of the power plant to be built by the JV Company will be higher than that of any of the other power plants in the Jiangxi Province. It is therefore expected that the costs of production of the power plant of the JV Company will be lower than those of the other power plants in the Jiangxi Province. The formation of the JV Company also enables the Company to benefit from the expertise of the other JV Parties and to participate in the development of the electricity industry in the PRC. The Company, through its participation in the JV Company, hopes to strengthen its portfolio of infrastructure-related investments and to build its experience and expertise in this sector.

The Directors believe that the terms of the JV Agreement entered into by Kerry Electricity Jiangxi are fair and reasonable and in the interests of the Shareholders as a whole.

FUNDING

The contribution to the registered capital of the JV Company by Kerry Electricity Jiangxi was agreed upon after arm’s length negotiations with the other JV Parties, and is to be funded from internal resources of the Company and/or bank borrowings. No decision has yet been made in respect of the split.

ARTICLES OF ASSOCIATION

The articles of association of the JV Company were entered into between the JV Parties on 16 September 2004 and contain substantially the same terms as the JV Agreement.

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INFORMATION ON THE COMPANY

The Company and its subsidiaries are principally engaged in (1) property development and investment in Hong Kong, the PRC and the Asia Pacific region; (2) logistics, freight, warehouse ownership and operations; (3) infrastructure-related investment in Hong Kong and the PRC and (4) hotel ownership in the PRC.

GENERAL

The establishment of the JV Company constitutes a discloseable transaction for the Company under the Listing Rules. A circular containing details of the JV Company will be dispatched to the Shareholders as soon as practicable.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, Changyuan, Guodian and Yugan City and their respective ultimate beneficial owners are independent third parties and are not connected with or related to the Company or its subsidiaries or their respective associates or connected persons of the Company.

As at the date of this announcement, the Directors are Messrs. Ang Keng Lam[+] , Wong Siu Kong[+] , Ho Shut Kan[+] , Ma Wing Kai, William[+] , William Winship Flanz[#] , Lau Ling Fai, Herald[#] and Christopher Roger Moss[#] , O.B.E.

DEFINITIONS

DEFINITIONS
“Changyuan”	國電長源電力股份有限公司(Guodian Changyuan Electric Power Co.,
	Ltd.), a company incorporated under the laws of the PRC, whose A
	shares are listed on the Shenzhen Stock Exchange, and according to
	Changyuan’s Interim Report, its largest shareholder, Guodian, acquired
	its 36.12 per cent. interest in Changyuan from湖北省電力公司(Hubei
	Province Electric Power Co. Ltd.), and as at the date of Changyuan’s
	Interim Report, the formalities in relation to the transfer of such interest
	to Guodian was in the process of being complied with;
“Changyuan’s Interim Report”	the interim report dated 14 August 2004 of Changyuan for the six months
	ended 30 June 2004;
“Company”	Kerry Properties Limited, an exempted company incorporated in Bermuda
	with limited liability, the shares of which are listed on the Main Board
	of The Stock Exchange of Hong Kong Limited;
“Directors”	the directors of the Company;
“Guodian”	中國國電集團公司(China Guodian Corporation), and according to
	the public information of Guodian, is a PRC state-owned enterprise;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“JV Agreement”	the agreement dated 16 September 2004 and made between the JV Parties
	relating to the establishment of the JV Company;

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“JV Board”	the board of directors of the JV Company;
“JV Company”	國電長源嘉里黃金埠發電有限公司(Guodian Changyuan Kerry
	Huangjinbu Electricity Company Ltd.) , a sino-foreign equity joint
	venture company to be incorporated under the laws of the PRC;
“JV Parties”	Guodian, Kerry Electricity Jiangxi, Changyuan and Yugan City;
“Kerry Electricity Jiangxi”	Kerry Electricity (Jiangxi) Ltd.嘉里電力（江西）有限公司, a company
	incorporated in Samoa with limited liability, which is a wholly-owned
	subsidiary of the Company;
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of
	Hong Kong Limited;
“MW”	megawatts or one million watts;
“PRC”	the People’s Republic of China, which for the purpose of this
	announcement excludes Hong Kong, the Macao Special Administrative
	Region of the PRC and Taiwan;
“RMB”	Renminbi, the lawful currency of the PRC;
“Shareholders”	the shareholders of the Company;
“subsidiary”	has the meaning ascribed to it in section 2(4) of the Companies Ordinance
	of Hong Kong (Chapter 32 of the Laws of Hong Kong); and
“Yugan City”	余干縣城市建設投資開發有限公司(Yugan City Development Co.
	Ltd.), and according to information provided by Yugan City, is a PRC
	state-owned enterprise.

By Order of the Board Kerry Properties Limited Chow Yin Ping, Anita Company Secretary

Hong Kong, 5 October 2004

In this announcement, certain amounts quoted in RMB have been translated into HK$ at the reference rate of HK$1.00 = RMB1.06 for information purpose only. Such translation should not be construed as a representation that the relevant amounts have been, could have been, or could be, converted at that or any other rate or at all.

* For identification purpose only

+ Executive director

# Independent non-executive director

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

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