Kerry Properties Limited — M&A Activity 2004

Sep 27, 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.

==> picture [178 x 94] intentionally omitted <==

website: www.kerryprops.com

(Stock Code: 00683)

MAJOR TRANSACTION AND POSSIBLE CONNECTED TRANSACTIONS

On 20 September 2004, Kerry Logistics and Huatong entered into the Sale and Purchase Agreement pursuant to which Kerry Logistics shall purchase or procure the purchase of and Huatong shall sell or procure the sale of Treasure Lake Shares and Eas PRC Shares (as the case may be) at an aggregate consideration of RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment.

Closing shall take place in two stages. The First Closing relates to the acquisition of Treasure Lake Shares which in effect enables the Company to hold 50% of the Eas PRC Group (before the Restructuring). The Second Closing relates to the acquisition of Eas PRC Shares and enables the Company to increase its holding in the Eas PRC Group (after the Restructuring) to 70%. If the Second Closing does not take place on account of the Second Closing Conditions not being fulfilled or waived or a material breach on the part of Huatong, the First Closing will be unwound and the Treasure Lake Shares, being the subject of the First Closing, shall be repurchased by Huatong for the same consideration.

The Target Group (of which the Eas PRC Group forms a part) is principally engaged in the business of supply chain management services in China including international and domestic freight forwarding, international and domestic express services, Pan-China warehousing and distribution, exhibition and bonded logistics centres. The Company considers that the acquisition of the Target Group pursuant to the Sale and Purchase Agreement as disclosed in this announcement constitutes a strategic step in the expansion and consolidation of the logistics businesses of the Group.

The Acquisition constitutes a major transaction for the Company. Upon the First Closing, connected and/or continuing connected transactions may also arise. The Company will identify all such connected and/or continuing connected transactions but it is not practicable at this stage to identify such transactions with any accuracy.

Full details of the Acquisition and the connected and/or continuing connected transactions will be disclosed to shareholders of the Company by way of announcement and/or circular in compliance with all applicable requirements in the Listing Rules, including any requirement to obtain shareholders’ approval.

1

==> picture [590 x 53] intentionally omitted <==

Since the Company currently anticipates that more time is required to prepare all necessary information to be included in the circular of the Company, including the financial information of the Target Group and details of any connected and/or continuing connected transactions, the Company will apply to the Stock Exchange for an extension of time to despatch the circular. Further announcements will be made by the Company in relation to the result of such time extension or any other developments as appropriate.

THE SALE AND PURCHASE AGREEMENT

Date:

20 September 2004

Parties:

• (1) 華通實業發展有限責任公司 (Huatong Industrial Development Co., Ltd.), a state-owned limited liability company established in the PRC, as vendor

• (2) Kerry Logistics Network Limited, a wholly-owned subsidiary of the Company, as purchaser

Assets to be purchased by Kerry Logistics:

Kerry Logistics shall purchase or procure the purchase of and Huatong shall sell or procure the sale of the following:

• (1) Treasure Lake Shares, representing 100% of the issued share capital of Treasure Lake at First Closing; and

• (2) Eas PRC Shares, representing 20% equity interest in Eas PRC at Second Closing.

Conditions:

• (1) First Closing

Completion of the sale and purchase of Treasure Lake Shares is conditional upon:

• (a) the passing of resolution(s) by the shareholders of the Company in general meeting or the giving of written approval by a shareholder or a closely allied group of shareholders of the Company together holding more than 50% in nominal value of the Shares of the Company giving the right to attend and vote at general meetings of the Company and acceptance by the Stock Exchange that no general meeting is required to be convened, to approve:

• (i) the Acquisition and any connected and/or continuing connected transactions that may arise in connection with the Acquisition; and

• (ii) disposal of Treasure Lake Shares to Huatong in accordance with the terms of the Sale and Purchase Agreement in the event that the Second Closing does not take place (details of which are described under the section headed “Repurchase Obligations” below);

in each case, in compliance with the Listing Rules;

2

• (b) due diligence on the legal and financial position and other affairs of Target Group having been completed to Kerry Logistics’ satisfaction;

• (c) formal approvals having been issued by relevant governmental approval authorities in the PRC on terms and conditions satisfactory to Kerry Logistics, for amendments to the articles of association and joint venture contract of Eas PRC (such amendment documents shall be in form and substance agreed between the parties), which amendments shall include the change to the composition of the board of directors of Eas PRC (i.e. change to 3 directors of Eas PRC to be nominated by Eas HK and 2 directors of Eas PRC to be nominated by Huatong), and Huatong having reported the proposed transfer of the Treasure Lake Shares under the Sale and Purchase Agreement to the relevant governmental approval authorities in the PRC;

• (d) the execution by Huatong and Eas PRC of the Restructuring Agreement;

• (e) Huatong successfully procuring such documents in form and substance as are satisfactory to Kerry Logistics to be executed in order to confirm beneficial ownership of companies or entities comprised in the Target Group in accordance with the terms of the Sale and Purchase Agreement, in the event that Kerry Logistics reasonably takes the view that there is insufficient evidence to confirm such ownership;

• (f) the issuance of a legal opinion addressed to Huatong and copied to Kerry Logistics by Huatong’s PRC legal adviser in form and substance satisfactory to Kerry Logistics, confirming, among other matters, that:

• (i) on completion of the Restructuring pursuant to the Restructuring Agreement, the licences, approvals and authorizations obtained by Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices in the PRC as may be required for carrying on their businesses in the PRC as stated in their business licences will not be invalidated, revoked, cancelled or terminated prior to their expiry as a result of the Restructuring;

• (ii) the Restructuring is legally valid and will not violate any laws and regulations of the PRC;

• (iii)the sale and purchase of Treasure Lake Shares as stipulated under the terms and conditions of the Sale and Purchase Agreement does not require any approvals of any relevant governmental approval authorities in the PRC and does not violate any PRC laws or regulations, and Huatong has reported to the relevant governmental approval authorities in the PRC; and

• (iv) upon Second Closing, save as otherwise provided, Eas HK and Huatong will respectively beneficially hold 70% and 30% equity interests in Eas PRC, such holding is legally permissible and will not violate any laws and regulations of the PRC;

• (g) there not having been any material breach of the warranties by Huatong under the Sale and Purchase Agreement from the date of the Sale and Purchase Agreement to the date on which the First Closing takes place. In this connection, in relation to any breach of warranty that gives rise to losses that can reasonably be quantified at the time of such breach, material breach means any breach or breaches that involve actual, contingent or potential compensation or damages that are not less than RMB17,000,000 (equivalent to about HK$16,037,736 based on the Agreed Rate) in aggregate;

3

• (h) Huatong having issued an appointment letter to a director of Eas PRC nominated by Eas HK appointing such director as the legal representative of Eas PRC and the board of Eas PRC having passed a board resolution to approve such appointment; and

• (i) (if necessary) Eas PRC and/or other members of the Eas PRC Group having given such prior notices or obtained such prior approvals as are required under any loan agreements to which Eas PRC and/or any other members of the Eas PRC Group is a party in relation to any change of control or transfer of any obligation under such loan agreements.

Kerry Logistics shall exercise best endeavours to procure satisfaction of the First Closing Condition referred to in paragraph (a) above, and Huatong shall exercise best endeavours to procure satisfaction of all other First Closing Conditions.

If any of the First Closing Conditions have not been fulfilled or waived by Kerry Logistics in writing on or before the First Closing Longstop Date, Kerry Logistics may at its option (but without prejudice to any right or remedy it may have) by notice to Huatong:

• (i) waive any of such conditions; and/or

• (ii) extend the First Closing Longstop Date to such other date as Kerry Logistics may determine; and/ or

(iii)terminate the Sale and Purchase Agreement without prejudice to any accrued rights.

Further announcement will be made by the Company on the First Closing, and it will be stated in that announcement if any of the First Closing Conditions has been waived.

• (2) Second Closing

Completion of the sale and purchase of Eas PRC Shares is conditional upon:

• (a) any First Closing Condition waived by Kerry Logistics (if such condition is conditionally waived, any relevant conditions attaching to such waiver) being fulfilled;

• (b) the Restructuring having been duly completed in accordance with the terms of the Restructuring Agreement and the accounts of Eas PRC having been adjusted, including but not limited to Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices at the time of completion of the Restructuring having on completion of the Restructuring obtained all necessary licences, approvals and authorizations required for their businesses carried on at the date of the Sale and Purchase Agreement, and all transfer agreements or other documents implementing the Restructuring Agreement having been executed in such form and substance satisfactory to Kerry Logistics;

• (c) formal approvals having been issued by relevant governmental approval authorities in the PRC (including the State-Owned Assets Supervision and Administration Commission of the State Council and the Ministry of Commerce) on terms and conditions satisfactory to Kerry Logistics, for:

• (i) the sale and purchase of the Eas PRC Shares; and

4

• (ii) amendments to the articles of association and joint venture contract of Eas PRC in relation to the Second Closing, including the change to the composition of the board of directors of Eas PRC (i.e. change to 6 directors of Eas PRC to be nominated by Eas HK and 3 directors of Eas PRC to be nominated by Huatong) and (if not already approved) the appointment of the legal representative of Eas PRC by Eas HK (such amendment documents shall be in form and substance agreed between the parties);

• (d) the issuance of a legal opinion addressed to Huatong and copied to Kerry Logistics by Huatong’s PRC legal adviser in form and substance satisfactory to Kerry Logistics, confirming, among other matters, that:

• (i) the Restructuring has been legally and validly completed in accordance with all relevant PRC laws and regulations;

• (ii) as stipulated in (c) above, all relevant PRC governmental approval authorities have, in accordance with terms and conditions satisfactory to Kerry Logistics, issued approvals or authorizations to approve the sale and purchase of the Eas PRC Shares and amendments to the articles of association and joint venture contract of Eas PRC, including the change to the composition of the board of directors of Eas PRC (i.e. change to 6 directors of Eas PRC to be nominated by Eas HK and 3 directors of Eas PRC to be nominated by Huatong) and (if not already approved) the appointment of the legal representative of Eas PRC by Eas HK; and

• (iii)when the approvals or authorizations have been issued by all relevant governmental approval authorities in the PRC (including the State-Owned Assets Supervision and Administration Commission of the State Council and the Ministry of Commerce) as described in (c) above, all registrations as required for the transfer of Eas PRC Shares by Huatong to Eas HK can be validly completed (including but not limited to the issuance of a new business licence to Eas PRC by the State Administration of Industry and Commerce), and there is no legal obstacle to the due completion of the relevant registration;

• (e) the auditors of Kerry Logistics having issued to Kerry Logistics and Huatong a statement relating to, inter alia, the NAV; and

• (f) there has not been any material breach by Huatong from the date of the Sale and Purchase Agreement to the date on which the Second Closing takes place, of those warranties under the Sale and Purchase Agreement which are expressly stated to relate to the period up to and including the Second Closing. In this connection, in relation to any breach of warranty that gives rise to losses that can reasonably be quantified at the time of such breach, material breach means any breach or breaches that involve actual, contingent or potential compensation or damages that are not less than RMB17,000,000 (equivalent to about HK$16,037,736 based on the Agreed Rate) in aggregate.

Huatong shall exercise best endeavours to procure satisfaction of all the Second Closing Conditions.

If any of the Second Closing Conditions have not been fulfilled or waived by Kerry Logistics in writing on or before the Second Closing Longstop Date, Kerry Logistics may at its option (but without prejudice to any right or remedy it may have) by notice to Huatong:

• (i) waive any of such conditions; and/or

5

• (ii) extend the Second Closing Longstop Date to such other date as Kerry Logistics may determine; and/or

• (iii)terminate the Sale and Purchase Agreement without prejudice to any accrued rights.

Further announcement will be made by the Company on the Second Closing, and it will be stated in that announcement if any of the Second Closing Conditions has been waived.

If any Second Closing Conditions are not satisfied or fulfilled and the Sale and Purchase Agreement is terminated by Kerry Logistics, Huatong is obliged to repurchase the Treasure Lake Shares sold to Kerry Logistics at the First Closing as disclosed in the section headed “Repurchase Obligations” below. The Company will comply with all relevant Listing Rules requirements in relation thereto.

The legal representative (who is also the chairman under PRC law) of Eas PRC does not have a casting vote. Pursuant to the Sale and Purchase Agreement: (a) at or before the First Closing, the number of directors of Eas PRC to be nominated by Eas HK will be changed from 1 to 3, and the number of directors of Eas PRC to be nominated by Huatong will be changed from 4 to 2; and (b) at or before the Second Closing, the number of directors of Eas PRC to be nominated by Eas HK will be changed from 3 (as changed at First Closing) to 6, and the number of directors of Eas PRC to be nominated by Huatong will be changed from 2 (as changed at First Closing) to 3. The Company is not aware of any restrictions on the change in the indirect ownership of the equity interest in Eas PRC from Huatong to Kerry Logistics as contemplated under the Sale and Purchase Agreement under any applicable PRC law other than as already disclosed in this announcement.

Consideration:

The aggregate consideration of the Acquisition is RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment.

If the NAV of the Eas PRC Group as at First Closing is less than RMB357,594,000 (equivalent to about HK$337,352,830 based on the Agreed Rate), the Consideration shall be adjusted by the Shortfall Amount. If the Shortfall Amount is less than RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate), Kerry Logistics shall, upon Second Closing, pay the balance of the Consideration after deducting the Shortfall Amount to Huatong. If the Shortfall Amount exceeds RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate), Kerry Logistics shall not be required to pay the balance of the Consideration, and Huatong shall pay to Kerry Logistics the amount of the Shortfall Amount exceeding the balance of the Consideration in cash at Second Closing. The adjustment to the Consideration referred to above will only be made at the Second Closing but if the Second Closing does not take place in the circumstances mentioned in the section headed “Repurchase Obligations” below, the First Closing has to be unwound and such adjustment will no longer be relevant.

Basis of Consideration:

The total consideration for the Acquisition has been determined after arm’s length negotiations between Kerry Logistics and Huatong with reference to the financial information including the audited financial statements prepared in accordance with PRC accounting policies and standards of the Eas PRC Group (before the Restructuring) for the years ended 31 December 2002 and 31 December 2003 and the unaudited financial statements prepared in accordance with PRC accounting policies and standards of the Eas PRC Group (before the Restructuring) for the period from 1 January 2004 up to 30 June 2004, submitted by Huatong to Kerry Logistics for the purpose of the due diligence, after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards, and the necessary adjustments to reflect the effect of the Restructuring.

6

The Consideration represents about 9.8 times of 70% of the average unaudited profit after taxation and extraordinary items of the Eas PRC Group for the years ended 31 December 2002 (RMB19,927,000 (equivalent to about HK$18,799,000 based on the Agreed Rate)) and 31 December 2003 (RMB42,386,000 (equivalent to about HK$39,987,000 based on the Agreed Rate)) and for the period from 1 January 2004 up to 30 June 2004 (RMB26,898,000 (equivalent to about HK$25,375,000 based on the Agreed Rate)) assuming completion of the Restructuring and after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards. The average figure is calculated by adding the two full year figures and two times the six-month figure, and dividing the aggregate by three.

The Consideration also represents an acquisition premium of about RMB100,964,000 (equivalent to about HK$95,249,000 based on the Agreed Rate) over RMB279,036,000 (equivalent to about HK$263,242,000 based on the Agreed Rate), being 70% share of the net asset value of the Eas PRC Group as at 30 June 2004 assuming completion of the Restructuring and after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards.

It should be noted that the financial information referred to in this announcement has been prepared based on information made available to Kerry Logistics by Huatong and such information, as well as any adjustments required, are hence subject to verification and/or audit. An accountants’ report on the Target Group will be incorporated into the Company’s circular regarding the Acquisition. In the event that significant differences (if any) arise as a result of such verification and/or audit and such differences are material in the context of the Acquisition (including how the Acquisition may be classified under Chapter 14 of the Listing Rules), further disclosure of such information by way of announcement and inclusion of such information in the circular to shareholders of the Company will be appropriately made.

As the future prospects of the Eas PRC Group lie in its ability to generate earnings, the Company considers that a 9.8 average price earnings multiple is a reasonable yardstick in valuing the Acquisition. In addition, as the Eas PRC Group is a long-established and leading international freight forwarding and logistics services provider in the PRC with a well-developed Pan-China operation network and a portfolio of properties which is of high quality with potential of further appreciation. Further, the Company considers that there is no relevant market price or transaction that may be used for comparison with the Acquisition. In view of the above and also the potential synergy of the Eas PRC Group (after the Restructuring) with the existing logistics businesses of the Group, the Company also considers that such acquisition premium and price earnings multiple are fair and reasonable.

Payment terms:

The Consideration shall be paid by Kerry Logistics in the following manner:

• (1) upon the signing of the Sale and Purchase Agreement, a deposit in the sum of HK$179,450,000 (equivalent to about RMB190,217,000 based on the Agreed Rate) has been paid to Huatong. The deposit shall be refunded in full to Kerry Logistics without interest (but without prejudice to any accrued rights of Kerry Logistics) if the First Closing does not take place as a result of any of the First Closing Conditions not being fulfilled or waived, or as a result of a termination of the Sale and Purchase Agreement by Kerry Logistics on account of any breach of obligations on the part of Huatong in accordance with the terms of the Sale and Purchase Agreement;

• (2) at First Closing, Kerry Logistics shall pay HK$94,134,906 (equivalent to about RMB99,783,000 based on the Agreed Rate) to Huatong; and

7

• (3) at Second Closing, Kerry Logistics shall pay RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate) to Huatong, subject to deduction of the Shortfall Amount, if any.

The obligations of Huatong to refund the deposit aforementioned to Kerry Logistics in the circumstances mentioned in paragraph (1) above is secured, inter alia, upon a pledge of the Treasure Lake Shares by Top Business in favour of a wholly-owned subsidiary of Kerry Logistics. Subject to First Closing taking place, the pledge will be discharged as a result of First Closing.

The Consideration will be funded by the internal cash reserves of the Group and/or bank borrowings. No decision has yet been made in respect of the split.

Completion:

• (1) First Closing will take place on the third Business Day or such later date as Kerry Logistics may determine after the date on which all the First Closing Conditions have been fulfilled or waived.

The First Closing Longstop Date is 31 December 2004.

• (2) Second Closing will take place on the third Business Day or such later date as Kerry Logistics may determine after the date on which all the Second Closing Conditions have been fulfilled or waived.

The Second Closing Longstop Date is the date which is 270 days after the date on which all the First Closing Conditions have been fulfilled or waived.

Restructuring:

The Eas PRC Group comprises the operating entities within the Target Group. The Eas PRC Group (before the Restructuring) currently undertakes certain activities which are not directly connected or related to its logistics businesses. As a result, Huatong has undertaken to procure a Restructuring of the Eas PRC Group (before the Restructuring) in accordance with the restructuring plan set out in the Sale and Purchase Agreement so as to streamline its logistics businesses for acquisition by Kerry Logistics. The Restructuring will involve transferring various companies, assets and liabilities that are not directly connected or related to the logistics businesses that Kerry Logistics aims to acquire out of the Eas PRC Group (before the Restructuring) to Huatong, and transferring from Huatong certain assets relating to the logistics businesses that Kerry Logistics aims to acquire to the Eas PRC Group. An outline restructuring plan is set out in the Sale and Purchase Agreement. Details of the Restructuring and its implementation are subject to further negotiation and finalisation and will be set out in a Restructuring Agreement to be concluded as a pre-condition to the First Closing. It is currently expected that details of the Restructuring will be finalised before the despatch of the Company’s circular. Unless waived by Kerry Logistics, it is a Second Closing Condition that the Restructuring pursuant to the Restructuring Agreement must have been completed. It is anticipated that relevant PRC governmental approvals, as well as third party consents, will be required for the purpose of the Restructuring.

Repurchase Obligations:

It is the intention of Kerry Logistics to acquire, through the First Closing and the Second Closing, an effective interest of 70% in Eas PRC, the remaining 30% of which will be held by Huatong.

8

On that basis, the Sale and Purchase Agreement provides that if after the First Closing, the Second Closing does not take place either on account of (a) any Second Closing Conditions not having been satisfied or fulfilled and Kerry Logistics terminates the Sale and Purchase Agreement or (b) Kerry Logistics terminates the Sale and Purchase Agreement pursuant to the terms thereof on account of a breach or default by Huatong, Huatong shall be obliged to purchase or procure Top Business to purchase from Kerry Logistics (or its wholly-owned subsidiary) the Treasure Lake Shares sold by Huatong pursuant to the First Closing.

Completion of the repurchase shall take place within 30 days or such later date as Kerry Logistics may determine, after termination of the Sale and Purchase Agreement by Kerry Logistics as mentioned above. The consideration for the repurchase payable to Kerry Logistics is HK$273,584,906 (equivalent to about RMB290,000,000 based on the Agreed Rate).

The Sale and Purchase Agreement also provides that in the event of such termination, Huatong shall indemnify Kerry Logistics for all costs and expenses incurred by Kerry Logistics in connection with the negotiation, preparation, signing or termination of the Sale and Purchase Agreement or the Acquisition (including all due diligence expenses) or costs and expenses incurred in respect of satisfying any preconditions (including legal, accounting and other professional fees).

COMPANY AND OWNERSHIP STRUCTURE

The following charts summarise the existing structure of the Target Group, and how that structure will change immediately following the First Closing and the Second Closing.

Existing structure of the Target Group

==> picture [164 x 239] intentionally omitted <==

----- Start of picture text -----

Huatong
100% (indirect)
Top Business
100%
Treasure Lake
50%
100%
Eas HK
50%
Eas PRC
----- End of picture text -----

9

Structure of the Target Group immediately after First Closing

==> picture [238 x 239] intentionally omitted <==

----- Start of picture text -----

The Company
100%
Kerry Logistics
100% (indirect)
Treasure Lake
100%
Huatong Eas HK
50% 50%
Eas PRC
----- End of picture text -----

Structure of the Target Group immediately after Second Closing

==> picture [238 x 239] intentionally omitted <==

----- Start of picture text -----

The Company
100%
Kerry Logistics
100% (indirect)
Treasure Lake
100%
Huatong Eas HK
30% 70%
Eas PRC
----- End of picture text -----

INFORMATION ABOUT THE BUSINESS OF THE TARGET GROUP

The Target Group is principally engaged in the business of supply chain management services in China including international and domestic freight forwarding, international and domestic express services, Pan-China warehousing and distribution, exhibition and bonded logistics centres.

Treasure Lake is wholly-owned by Top Business, which is a company wholly-owned by Huatong, and holds the entire issued share capital of Eas HK, which in turn holds 50% equity interest in Eas PRC. The other 50% equity interest in Eas PRC is directly held by Huatong.

10

Treasure Lake was incorporated in the British Virgin Islands on 6 May 2004 for the purpose of holding the shares in Eas HK. The business of Eas HK is to hold its 50% interest in Eas PRC. None of Treasure Lake or Eas HK have any substantial assets or liabilities and profit or loss, save in respect of transactions which are entirely within the Target Group. The audited profit before taxation and extraordinary items of Eas HK for the year ended 31 December 2002 was HK$1,012,000 and the audited loss before taxation and extraordinary items of Eas HK for the year ended 31 December 2003 was HK$741,000. The audited net asset value of Eas HK as at 31 December 2002 and 31 December 2003 were HK$138,488,000 and HK$178,029,000 respectively. No equivalent figures for the relevant periods are available in respect of Treasure Lake as it was only incorporated in 2004.

The Eas PRC Group (after the Restructuring) represents the principal assets and liabilities and the operations and business of the Target Group. Based on the audited financial statements of the Eas PRC Group (before the Restructuring) prepared in accordance with PRC accounting policies and standards, the consolidated net asset value of the Eas PRC Group (before the Restructuring) as at 31 December 2003 was RMB476,577,000 (equivalent to about HK$449,601,000 based on the Agreed Rate), the turnover for the two financial years ended 31 December 2002 and 31 December 2003 were RMB430,501,000 (equivalent to about HK$406,133,000 based on the Agreed Rate) and RMB489,758,000 (equivalent to about HK$462,036,000 based on the Agreed Rate) respectively, the profit before taxation and extraordinary items for the two financial years ended 31 December 2002 and 31 December 2003 were RMB25,563,000 (equivalent to about HK$24,116,000 based on the Agreed Rate) and RMB77,360,000 (equivalent to about HK$72,981,000 based on the Agreed Rate) respectively, and the profits after taxation and extraordinary items for the two financial years ended 31 December 2002 and 31 December 2003 were RMB20,013,000 (equivalent to about HK$18,880,000 based on the Agreed Rate) and RMB59,974,000 (equivalent to about HK$56,579,000 based on the Agreed Rate) respectively.

Based on financial and other information submitted by Huatong to Kerry Logistics for the purpose of the due diligence, on a basis assuming completion of the Restructuring and after making the necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards, the adjusted consolidated net asset value of the Eas PRC Group was RMB360,152,000 (equivalent to about HK$339,766,000 based on the Agreed Rate) as at 31 December 2003 and RMB398,623,000 (equivalent to about HK$376,059,000 based on the Agreed Rate) as at 30 June 2004, the adjusted turnover was RMB2,287,038,000 (equivalent to about HK$2,157,583,000 based on the Agreed Rate) for the year ended 31 December 2002, RMB2,909,121,000 (equivalent to about HK$2,744,454,000 based on the Agreed Rate) for the year ended 31 December 2003 and RMB1,530,302,000 (equivalent to about HK$1,443,681,000 based on the Agreed Rate) for the six months ended 30 June 2004, the adjusted profit before taxation and extraordinary items was RMB35,912,000 (equivalent to about HK$33,879,000 based on the Agreed Rate) for the year ended 31 December 2002, RMB82,232,000 (equivalent to about HK$77,577,000 based on the Agreed Rate) for the year ended 31 December 2003 and RMB42,928,000 (equivalent to about HK$40,498,000 based on the Agreed Rate) for the six months ended 30 June 2004, and the adjusted profit after taxation and extraordinary items was RMB28,467,000 (equivalent to about HK$26,856,000 based on the Agreed Rate) for the year ended 31 December 2002, RMB60,551,000 (equivalent to about HK$57,124,000 based on the Agreed Rate) for the year ended 31 December 2003 and RMB38,426,000 (equivalent to about HK$36,251,000 based on the Agreed Rate) for the six months ended 30 June 2004.

11

It should be noted that the financial information referred to in this announcement has been prepared based on information made available to Kerry Logistics by Huatong and such information, as well as any adjustments required, are hence subject to verification and/or audit. An accountants’ report on the Target Group will be incorporated into the Company’s circular regarding the Acquisition. In the event that significant differences (if any) arise as a result of such verification and/or audit and such differences are material in the context of the Acquisition (including how the Acquisition may be classified under Chapter 14 of the Listing Rules), further disclosure of such information by way of announcement and inclusion of such information in the circular to shareholders of the Company will be appropriately made.

Further financial information concerning the Eas PRC Group appears in the section headed “Listing Rules Implications” below.

INFORMATION ABOUT HUATONG

Huatong is a state-owned limited liability company incorporated in the PRC and its permitted business scope includes high technology development; sales of construction materials, equipment and metres, chemical engineering products, automobile accessories, daily necessities; research on, and manufacture and sales of, rubbers, plastics, leather goods and glass products; and provision of consultation services on cultivation technologies.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, Huatong and the ultimate beneficial owner of Huatong is, as at the date of the Sale and Purchase Agreement and the date of this announcement, third parties independent of the Company and connected persons of the Company.

INFORMATION ABOUT THE GROUP

The Group is principally engaged in (a) property development and investment in Hong Kong, the PRC and the Asia Pacific region; (b) logistics, freight, warehouse ownership and operations; (c) infrastructurerelated investment in Hong Kong and the PRC; and (d) hotel ownership in the PRC.

REASONS FOR AND BENEFITS OF THE ACQUISITION

One of the main businesses of the Group is logistics, freight forwarding, and warehouse ownership and operations. The Group, through its logistics network division, carries on logistics, distribution and freight forwarding business in the PRC. The Eas PRC Group is a long-established and leading international freight forwarding and logistics services provider in the PRC with a well-developed Pan-China operation network and a portfolio of properties which is of high quality with potential of further appreciation.

The Directors considers that the terms of the Acquisition are fair and reasonable and are in the interest of the Company and its shareholders as a whole.

The Acquisition is a strategic step in the expansion and consolidation of the logistics businesses of the Group. It will enable the Group to further expand its business in China and strengthen its Pan-China logistics network.

12

LISTING RULES IMPLICATIONS

Major Transaction:

The consolidated turnover of the Group for the year ended 31 December 2003 was HK$4,204,466,000. Based on the audited financial statements of the Eas PRC Group (before the Restructuring) prepared in accordance with PRC accounting policies and standards, the consolidated turnover of the Eas PRC Group (before the Restructuring) for the year ended 31 December 2003 was RMB489,758,000 (equivalent to about HK$462,036,000 based on the Agreed Rate), which therefore represented 10.99% of the consolidated turnover of the Group for the year ended 31 December 2003. However, based on financial and other information submitted by Huatong to Kerry Logistics for the purpose of the due diligence, on a basis assuming completion of the Restructuring and after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards, the consolidated turnover of the Eas PRC Group for the year ended 31 December 2003 amounted to about RMB2,909,121,000 (equivalent to about HK$2,744,454,000 based on the Agreed Rate), which therefore represented 65.27% of the consolidated turnover of the Group for the year ended 31 December 2003. Accordingly, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

It should be noted that the financial information referred to in this announcement has been prepared based on information made available to Kerry Logistics by Huatong and such information, as well as any adjustments required, are hence subject to verification and/or audit. An accountants’ report on the Target Group will be incorporated into the Company’s circular regarding the Acquisition. In the event that significant differences (if any) arise as a result of such verification and/or audit and such differences are material in the context of the Acquisition (including how the Acquisition may be classified under Chapter 14 of the Listing Rules), further disclosure of such information by way of announcement and inclusion of such information in the circular to shareholders of the Company will be appropriately made.

Connected Transactions:

It is a First Closing Condition that a majority of the board of directors of Eas PRC will be appointed and be subject to removal by Eas HK which will become a wholly-owned subsidiary of the Company upon the First Closing. As a result, it is anticipated that upon First Closing, Eas PRC will be regarded as a subsidiary of the Company for the purpose of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong) and the Listing Rules, notwithstanding that the Company only holds, through Eas HK, 50% of Eas PRC. A decision on whether to consolidate the accounts of the Eas PRC Group to the Company’s accounts will be made in consultation with the Company’s auditors after the First Closing.

Huatong will continue as a controlling shareholder (within the meaning of the Listing Rules) of Eas PRC after the First Closing and the Second Closing and, for that reason, Eas PRC will be regarded as an associate of Huatong after the First Closing. Hence, transactions between Huatong and the Eas PRC Group on the one hand and the Company and its other subsidiaries on the other hand after the First Closing may constitute connected and/or continuing connected transactions under Chapter 14A of the Listing Rules.

It is a First Closing Condition that all connected and/or continuing connected transactions that may arise in connection with the Acquisition shall receive shareholders’ approval in compliance with the requirements of the Listing Rules.

13

As due diligence is still in progress with respect to the Target Group and the Eas PRC Group will also undergo a Restructuring, it is not possible at this stage to identify with any accuracy, the nature, extent and description of connected and/or continuing connected transactions which may arise after the First Closing.

The Company will identify all connected and/or continuing connected transactions before the First Closing and comply with all Listing Rules requirements, including the appointment of an independent financial adviser and the establishment of an independent board committee.

Shareholders’ Approval:

Pursuant to the Listing Rules, shareholders’ approval is required for a major transaction and certain connected and/or continuing connected transactions. As disclosed above, it is a First Closing Condition that necessary shareholders’ approval be obtained. This may take the form of convening a shareholders’ meeting or, subject to acceptance by the Stock Exchange that no general meeting is required to be convened to approve the Acquisition and any such connected and/or continuing connected transactions, the Company may consider seeking a written approval from Kerry Holdings Limited, the controlling shareholder of the Company, which held 751,042,097 Shares of the Company as disclosed in the register maintained by the Company under the Securities and Futures Ordinance, representing approximately 62.83% of the 1,195,341,262 issued Shares of the Company as at the date of this announcement. The Company will seek confirmation from Kerry Holdings Limited as to whether Kerry Holdings Limited and/or its associates have any interest in the relevant transactions as appropriate, and subject to that, an application may be made to the Stock Exchange for the acceptance of a written approval from Kerry Holdings Limited in lieu of a general meeting of the Company as appropriate.

CIRCULAR

A circular containing details of the Acquisition and any connected and/or continuing connected transactions will be despatched to shareholders of the Company as soon as practicable in compliance with the Listing Rules.

As mentioned above, the relevant accounts of the Eas PRC Group have to be adjusted on the assumption that the Restructuring has been completed, and the details of the Restructuring will need to be negotiated between the parties. The relevant accounts of the Eas PRC Group will also have to be adjusted to reflect the accounting policies of the Company and Hong Kong accounting standards. In consideration of the above and also taking into account the time it may take to identify details of the connected party transactions which may arise subject to and following the First Closing, the Company currently anticipates that more time is required to prepare all necessary information to be included in the circular of the Company and relevant application will be made to the Stock Exchange for an extension of time to despatch the circular. The extension is subject to the Stock Exchange’s approval and further announcements will be made by the Company in relation to the result of such time extension or any other developments as appropriate.

SUSPENSION AND RESUMPTION OF TRADING

Trading in the Shares of the Company has been suspended since 9:30 a.m. on 21 September 2004 pending the publication of this announcement as a result of the conclusion of the Sale and Purchase Agreement. An application has been made by the Company to the Stock Exchange for the resumption of trading of the Shares of the Company upon the commencement of trading from 9:30 a.m. on 27 September 2004.

14

DEFINITIONS

“Acquisition”	the proposed acquisition by Kerry Logistics from Huatong of (a)
	Treasure Lake Shares and (b) Eas PRC Shares in accordance with the
	terms and conditions of the Sale and Purchase Agreement
“Agreed Rate”	the exchange rate of HK$1.00 to RMB1.06, being the exchange rate
	agreed between Kerry Logistics and Huatong for the purpose of the
	Sale and Purchase Agreement, and adopted for use for convenience
	for the purpose of this announcement
“associates”	has the meaning as ascribed to it under the Listing Rules
“Board” or “Director(s)”	the director(s) of the Company
“Business Day”	a day on which banks are open for business in Hong Kong (excluding
	Saturday)
“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
“connected person”	has the meaning as ascribed to it under the Listing Rules
“Consideration”	the aggregate consideration of the Acquisition in the sum of
	RMB380,000,000 (equivalent to about HK$358,490,566 based on the
	Agreed Rate), subject to adjustment in accordance with the terms of
	the Sale and Purchase Agreement
“Eas HK”	Eas Da Tong International Aircargo Company Limited (達通國際空
	運有限公司), a company incorporated in Hong Kong with limited
	liability and wholly-owned by Treasure Lake
“Eas PRC”	大通國際運輸有限公司(Eas International Transportation Ltd.), a
	sino-foreign joint venture company established in the PRC and owned
	as to 50% by Eas HK and 50% by Huatong
“Eas PRC Group”	Eas PRC and its subsidiaries, associated companies and other
	investments, branch offices and representative offices as detailed in
	the Sale and Purchase Agreement
“Eas PRC Shares”	20% equity interest in Eas PRC
“First Closing”	completion of the sale and purchase of Treasure Lake Shares
“First Closing Conditions”	pre-conditions for First Closing as referred to in paragraph (1) of the
	section of this announcement headed “Conditions”
“First Closing Longstop Date”	31 December 2004

15

“Group”	the Company and its subsidiaries
“Huatong”	華通實業發展有限責任公司(Huatong Industrial Development Co.,
	Ltd.), a state-owned limited liability company established in the PRC
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Kerry Logistics”	Kerry Logistics Network Limited, an exempted company incorporated
	in Bermuda with limited liability and wholly-owned by the Company
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“NAV”	the consolidated net asset value of the Eas PRC Group as at the date
	of the First Closing, assuming completion of the Restructuring, as
	certified by a firm of accountants appointed by Kerry Logistics in
	accordance with PRC accounting standards and in accordance with
	the provisions of the Sale and Purchase Agreement
“PRC”	The People’s Republic of China, excluding, for the purpose of this
	announcement, Hong Kong, the Macao Special Administrative Region
	of the PRC and Taiwan
“Restructuring”	the restructuring of the Eas PRC Group (before the Restructuring) by
	transferring certain companies, assets and liabilities, into and out of
	the Eas PRC Group (before the Restructuring) in accordance with the
	terms and conditions of the Restructuring Agreement
“Restructuring Agreement”	an agreement to be entered into between Huatong and Eas PRC in
	relation to the Restructuring in form and content satisfactory to Kerry
	Logistics
“RMB”	Renminbi, the lawful currency of the PRC
“Sale and Purchase Agreement”	an agreement dated 20 September 2004 entered into between Huatong
	and Kerry Logistics in relation to the sale and purchase of Treasure
	Lake Shares and Eas PRC Shares
“Shares of the Company”	ordinary shares of HK$1.00 each in the share capital of the Company
“Second Closing”	completion of the sale and purchase of Eas PRC Shares
“Second Closing Conditions”	pre-conditions for Second Closing as referred to in paragraph (2) of
	the section of this announcement headed “Conditions”
“Second Closing Longstop Date”	the date which is 270 days after the date on which all the First
	Closing Conditions have been fulfilled or waived
“Shortfall Amount”	70% of the amount by which the NAV is less than RMB357,594,000
	(equivalent to about HK$337,352,830 based on the Agreed Rate)

16

“Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Group” Treasure Lake, Eas HK and the Eas PRC Group (after the Restructuring) “Top Business” Top Business Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability and wholly-owned by Huatong

“Treasure Lake” Treasure Lake Limited, a company incorporated in the British Virgin Islands with limited liability and wholly-owned by Top Business

“Treasure Lake Shares” the entire issued share capital of Treasure Lake

GENERAL

As at the date of this announcement, Messrs. Ang Keng Lam, Wong Siu Kong, Ho Shut Kan and Ma Wing Kai, William are executive Directors and Mr. Lau Ling Fai, Herald, Mrs. Lee Pui Ling, Angelina and Mr. Christopher Roger Moss, O.B.E. are independent non-executive Directors.

By Order of the Board Ang Keng Lam Chairman

Hong Kong, 24 September 2004

• For identification purpose only

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

17