Kerry Properties Limited - Proxy Solicitation & Information Statement 2004

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 stockbroker 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 Properties Limited, you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular.

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

MAJOR TRANSACTION

A letter from the board of directors of Kerry Properties Limited is set out on pages 5 to 25 of this circular.

* For identification purpose only

29 December 2004

CONTENTS

			Page
Definitions . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
Appendix I	–	Accountants’ Report on Treasure Lake. . . . . . . . . . . . . . . .	26
Appendix II	–	Accountants’ Report on Eas HK . . . . . . . . . . . . . . . . . . . .	33
Appendix III	−	Accountants’ Report on the Eas PRC Group . . . . . . . . . . .	51
Appendix IV	–	Financial Information of the Group . . . . . . . . . . . . . . . . . .	93
Appendix V	–	Unaudited Pro Forma Financial Information
		of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	196
Appendix VI	–	Property Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . .	203
Appendix VII	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	287

−i −

DEFINITIONS

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

“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 unless otherwise stated adopted for use for convenience for the purpose of this circular

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||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“associates”|has|the|meaning|as|ascribed|to|it|under|the|Listing|Rules|
|“Beijing|Huatong”|(Beijing|Huatong|
|Chuangzhan Investment Consultancy Co., Ltd.), a wholly|
|foreign|owned|enterprise|established|in|the|PRC|on|12|
|November|2004|and|an|indirect|wholly-owned|subsidiary|
|of|Eas|PRC|
|“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|
|“DTII”|Da|Tong|International|Investments|Holdings|Ltd.|
|,|a|company|incorporated|in|
|Samoa|on|23 August|2004|and|an|indirect|wholly-owned|
|subsidiary|of|Eas|PRC|

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−1 −

DEFINITIONS

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|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|“Eas|HK”|Eas|Da|Tong|International|Aircargo|Company|Limited|
|(|),|a|company|incorporated|in|
|Hong|Kong|with|limited|liability|on|11|November|1993|
|and|wholly|owned|by|Treasure|Lake|
|“Eas|PRC”|(Eas|International|Transportation|
|Ltd.), a sino-foreign joint venture company established in|
|the|PRC|on|27|February|1985|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|
|“Enlarged|Group”|the|Company|and|its|subsidiaries|upon|completion|of|the|
|Acquisition|
|“First|Announcement”|the|Company’s|announcement|dated|24|September|2004|
|in|relation|to|the|Sale|and|Purchase|Agreement|and|the|
|Acquisition|
|“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|headed|“Conditions”|in|the|
|letter|from|the|Board|set|out|in|this|circular|
|“First|Closing|Longstop|Date”|31|December|2004|
|“Group”|the|Company|and|its|subsidiaries|
|“HK$”|and|“HK|cents”|Hong|Kong|dollars|and|cents|respectively,|the|lawful|
|currency|of|Hong|Kong|
|“HK|GAAP”|accounting|principles|generally|accepted|in|Hong|Kong|
|“Hong|Kong”|the|Hong|Kong|Special|Administrative|Region|of|the|
|PRC|
|“Huatong”|(Huatong|Industrial|
|Development|Co.,|Ltd.),|a|state-owned|limited|liability|
|company|established|in|the|PRC|

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−2 −

DEFINITIONS

“Kerry Holdings”	Kerry Holdings Limited, a company incorporated in
	Hong Kong with limited liability, which, as at the Latest
	Practicable Date, was interested in 750,842,646 Shares of
	the Company as disclosed in the register maintained by
	the Company under the SFO, representing approximately
	62.00% of the 1,211,116,330 issued Shares of the
	Company as at the Latest Practicable Date
“Kerry Logistics”	Kerry Logistics Network Limited, an exempted company
	incorporated in Bermuda with limited liability and a
	wholly-owned subsidiary of the Company
“Latest Practicable Date”	24 December 2004, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“MOU”	the legally binding memorandum of understanding dated
	24 December 2004 between Huatong and Kerry Logistics
“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
	GAAP 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 circular, Hong Kong, the Macao Special
	Administrative Region of the PRC and Taiwan
“PRC GAAP”	relevant accounting rules and regulations applicable in
	the PRC
“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”	the agreement dated 10 November 2004 between Huatong
	and Eas PRC in relation to the Restructuring

−3 −

DEFINITIONS

“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
“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 headed “Conditions” in the
	letter from the Board set out in this circular
“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
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Shareholder(s)”	holder(s) of the Shares of the Company
“Shares of the Company”	ordinary shares of HK$1.00 each in the share capital of
	the Company
“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)
“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 on 16 April 2004 and wholly owned by Huatong
“Treasure Lake”	Treasure Lake Limited, a company incorporated in the
	British Virgin Islands with limited liability on 6 May
	2004 and wholly owned by Top Business
“Treasure Lake Shares”	the entire issued share capital of Treasure Lake
“%”	per cent.

−4 −

LETTER FROM THE BOARD

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website: www.kerryprops.com

(Stock Code: 00683)

Executive Directors:

Mr. ANG Keng Lam (Chairman) Mr. WONG Siu Kong (Deputy Chairman and Managing Director)

Mr. HO Shut Kan

Registered Office:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Mr. MA Wing Kai, William

Head Office and Principal Place

Independent Non-executive Directors:

Mr. William Winship FLANZ Mr. LAU Ling Fai, Herald

Mr. Christopher Roger MOSS, O.B.E.

of Business in Hong Kong:

13-14/F., Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong

29 December 2004

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

Dear Sir or Madam,

MAJOR TRANSACTION

INTRODUCTION

On 24 September 2004, the Company announced that Kerry Logistics and Huatong entered into the Sale and Purchase Agreement on 20 September 2004 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.

For identification purpose only

−5 −

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date:

20 September 2004

Parties:

(1) (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.

According to Jianda Law Firm, one of the Company’s PRC legal advisers, based on current PRC laws and regulations, Kerry Logistics is not required to obtain any prior regulatory approval or comply with any specific restrictions in respect of any subsequent sale of the Treasure Lake Shares. However, as far as the Eas PRC Shares are concerned, any subsequent sale of such equity interest by Eas HK requires prior approval to be obtained from the relevant governmental approval authorities in the PRC and such equity interest may be transferred in accordance with the terms and conditions of the articles of association and joint venture contract of Eas PRC. Any transfer of the Eas PRC Shares is required to be registered with the relevant administration department of industry and commerce in the PRC. Jianda Law Firm has advised the Company that based on current PRC laws and regulations, no specific legal impediment on the obtaining of the relevant approval and the necessary registration in the PRC in respect of any subsequent sale of the Eas PRC Shares is expected because such sale will not affect Eas PRC’s status as a sino-foreign joint venture company in the PRC. In addition, pursuant to the MOU, Huatong shall have a pre-emption right if Kerry Logistics directly or indirectly transfers all or part of its direct or indirect equity interest in Eas PRC or the control thereof to any party not related to Kerry Logistics.

−6 −

LETTER FROM THE BOARD

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;

(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;

−7 −

LETTER FROM THE BOARD

(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;
(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 is responsible for procuring satisfaction of condition (a) above, which was satisfied as at the Latest Practicable Date and Huatong shall exercise best endeavours to procure satisfaction of all other First Closing Conditions.

−8 −

LETTER FROM THE BOARD

If any of the First Closing Conditions have not been fulfilled by Huatong 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 issuing a written 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.

As at the Latest Practicable Date, all First Closing Conditions (except (e), (f), (h) and (i)) had been satisfied and First Closing Condition (h) had been waived by the Company as the Ministry of Commerce of the PRC has approved the articles of association and joint venture contract of Eas PRC dated 8 November 2004 pursuant to which the right to appoint the legal representative of Eas PRC lies with Eas HK instead of Huatong. A further announcement will be made by the Company on the First Closing, and it will be stated in that announcement if any of the other First Closing Conditions have 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 in the PRC 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 Administration Commission and the Ministry of Commerce of the PRC) on terms and conditions satisfactory to Kerry Logistics, for:
(i) the sale and purchase of the Eas PRC Shares; and

−9 −

LETTER FROM THE BOARD

(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 Administration Commission and the Ministry of Commerce of the PRC) 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.

−10 −

LETTER FROM THE BOARD

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 by Huatong 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
(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.

With respect to Second Closing Condition (c) above, Huatong has provided the Company with a copy of the approval dated 6 December 2004 and issued by the Ministry of Commerce of the PRC with respect to (i) the transfer of the Eas PRC Shares from Huatong to Eas HK so that Eas PRC shall be owned as to 30% by Huatong and 70% by Eas HK and (ii) the approval of the articles of association and joint venture contract of Eas PRC dated 8 November 2004. As at the Latest Practicable Date, none of the other Second Closing Conditions had been satisfied. A 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 have 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 of the board of directors 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.

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.

−11 −

LETTER FROM THE BOARD

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. The results and net asset value of Treasure Lake and Eas HK were excluded by the Company when assessing the price earnings multiple and the acquisition premium of the Acquisition as both Treasure Lake and Eas HK has no operation except in relation to holding the shares in Eas HK and Eas PRC respectively.

Based on the financial information referred to above submitted by Huatong to Kerry Logistics for the purpose of the due diligence, after making the relevant adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards and the necessary adjustments to effect the Restructuring:

(a) 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; and

−12 −

LETTER FROM THE BOARD

(b) 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% of the unaudited 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.

With reference to the accountants’ report on the Eas PRC Group (before the Restructuring) as set out in Appendix III to this circular, the price earnings multiple becomes 8.9 which is based on 70% of the average audited profit after taxation and extraordinary items of the Eas PRC Group (before the Restructuring) prepared under HK GAAP for the years ended 31 December 2002 (RMB21,577,000 (equivalent to about HK$20,356,000 based on the Agreed Rate)) and 31 December 2003 (RMB52,063,000 (equivalent to about HK$49,116,000 based on the Agreed Rate)) and the period from 1 January 2004 up to 30 June 2004 (RMB27,229,000 (equivalent to about HK$25,688,000 based on the Agreed Rate)). The operating results corresponding to various companies, assets and liabilities within the Eas PRC Group in connection with the Restructuring do not materially affect the price earnings multiple.

With reference to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix V to this circular, the unaudited pro forma acquisition premium is about RMB129,684,000 (equivalent to about HK$122,343,000 based on the Agreed Rate), which is calculated based on the Consideration and the Group’s share of the book value of the assets and liabilities of the Eas PRC Group as at 30 June 2004 after adjusting for the Restructuring and the revaluation adjustment on the land and buildings of Eas PRC based on the independent professional valuation as at 30 June 2004 set out in Appendix VI to this circular as if the Acquisition had taken place on 30 June 2004. The final acquisition premium shall be determined based on the NAV of the Eas PRC Group as at First Closing.

As the future prospects of the Eas PRC Group lie in its ability to generate earnings, the Company considers that a 8.9 average price earnings multiple is a reasonable yardstick in valuing the Acquisition. In addition, the Company has taken into account that 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 consists of properties 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 or for evaluating the terms of 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 considers that such acquisition premium and price earnings multiple are fair and reasonable.

−13 −

LETTER FROM THE BOARD

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
(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.

It is currently expected that the part of the Consideration payable on First Closing will be funded by the internal cash reserves of the Group and the part of the Consideration payable on Second Closing will be funded by the internal cash reserves of the Group and/or existing bank facilities of the Group.

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.

The Company intends the First Closing to take place as soon as possible after the despatch of this circular and on or before the First Closing Longstop Date.

(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.

−14 −

LETTER FROM THE BOARD

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.

Bearing in mind that approval has already been given by the Ministry of Commerce of the PRC with respect to the transfer of the Eas PRC Shares from Huatong to Eas HK so that Eas PRC shall be owned as to 30% by Huatong and 70% by Eas HK and the approval of the articles of association and joint venture contract of Eas PRC dated 8 November 2004, the Company intends the Second Closing to take place as soon as possible after the First Closing, subject to satisfaction and/or waiver of all other relevant Second Closing Conditions.

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 have no business synergy with its existing 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 referred to in the Sale and Purchase Agreement or as may be otherwise agreed in writing by Kerry Logistics and Huatong so as to streamline its logistics businesses for acquisition by Kerry Logistics. An outline restructuring plan is set out in the Sale and Purchase Agreement. The Sale and Purchase Agreement provides that details of the Restructuring and its implementation will be set out in the Restructuring Agreement, the conclusion of which is a First Closing Condition.

The Restructuring Agreement was entered into by Huatong and Eas PRC on 10 November 2004. Pursuant to the Restructuring Agreement, various companies, assets and liabilities that are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics aims to acquire will be transferred out of the Eas PRC Group (before the Restructuring) in accordance with the terms of the Restructuring Agreement. Such assets and liabilities will be carved out from the Eas PRC Group at their book value as at 30 November 2004. These assets and liabilities will be transferred to Huatong, a Huatong nominee company or Beijing Huatong, a wholly-owned subsidiary of DTII, which in turn is held by a whollyowned subsidiary of Eas PRC (as the case may be). DTII will ultimately be transferred to Huatong at book value. Pursuant to the MOU, Huatong warrants and undertakes to Kerry Logistics that it shall procure the completion of the transfer of all the issued shares of DTII to Huatong within 3 months of completion of the transfer of the relevant assets to Beijing Huatong. The investment in DTII will be stated at cost in the Eas PRC Group’s accounts before completion of the said transfer as DTII was incorporated solely for the purpose of carrying out the Restructuring and is not held for long term investment purpose.

In addition, Huatong has agreed in the MOU that it shall procure a 30% equity interest in (Huahan (Tianjin) Container Co., Ltd.) (“Huahan Tianjin”), which is being equity accounted for in Eas PRC’s accounts, to be legally transferred to Eas PRC as soon as practicable. Huahan Tianjin is principally engaged in container business in Tianjin, the PRC, and international container business. Although the 30% equity interest in

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LETTER FROM THE BOARD

Huahan Tianjin is not registered in the name of Eas PRC, Eas PRC is represented on the board of Huahan Tianjin and has received dividends paid by Huahan Tianjin as if it were the registered holder of the 30% equity interest in Huahan Tianjin.

Further, a vehicle related to the logistics businesses that Kerry Logistics aims to acquire will be transferred from Huatong to the Eas PRC Group at net book value as at 30 November 2004 in the sum of approximately RMB119,000 (equivalent to approximately HK$112,264 based on the Agreed Rate).

Pursuant to the Restructuring Agreement, various transfer agreements have been executed to effect the Restructuring. The Restructuring Agreement contains provisions to the effect that where further steps are required to be taken in order to complete and perfect the relevant transfers under law, such steps shall be taken as quickly as possible and Huatong has further agreed to indemnify Eas PRC for any economic loss sustained by the Eas PRC Group on account of its holding any assets to be carved out from the Eas PRC Group until all such steps have been taken.

Pursuant to the Sale and Purchase Agreement, Huatong is entitled to the distributable profits of the Eas PRC Group (less any tax payable in connection with the distribution thereof) before the First Closing, subject to deducting therefrom any amounts payable by Huatong on account of any assets transferred to Huatong or its nominee under the Restructuring or any other deductions agreed to by Huatong.

According to the Restructuring Agreement, Eas PRC has to declare distribution of profits in the total sum of RMB193,607,033.16 (equivalent to approximately HK$182,648,144 based on the Agreed Rate), of which RMB158,498,835.16 (equivalent to approximately HK$149,527,203 based on the Agreed Rate) has been declared on 29 September 2004. All such distribution of profits will be paid to Huatong only and the distribution of profits will be set off against the net amount payable by Huatong or its nominee to the Eas PRC Group in respect of the assets and liabilities transferred pursuant to the Restructuring. It is expected that after such set-off, there will be a net balance payable to Huatong and such balance will be payable in cash. Based on the information as shown in the unaudited pro forma financial information of the Enlarged Group set out in Appendix V to this circular, the net amount payable, after set-off, would be HK$46,274,000 as at 30 June 2004.

The actual amount payable to Huatong will be determined by a completion audit to be conducted as soon as possible following the First Closing. Pursuant to the MOU, Huatong and Eas PRC have agreed that RMB5,000,000 shall be distributed in each of the financial years ending 31 December 2005 and 2006, and it is expected that such distribution of profits will be funded from the internal cash reserves of Eas PRC. The time of payment of the further distribution of profits has not been determined and neither the Restructuring Agreement nor the MOU prescribes a deadline for payment. A valid resolution of the board of Eas PRC will be required to determine the time and terms of payment thereof taking into account the cash reserves and other working capital requirements of Eas PRC at the time.

Pursuant to the Sale and Purchase Agreement, Huatong has agreed to indemnify Kerry Logistics and each member of the Target Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities, arising from any legal liabilities due to the Restructuring.

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LETTER FROM THE BOARD

Unless waived by Kerry Logistics, it is a Second Closing Condition that the Restructuring must have been completed in accordance with the terms of the Restructuring Agreement.

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.

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 pre-conditions (including legal, accounting and other professional fees).

Kerry Logistics intends to exercise its right to unwind the First Closing if the Second Closing does not take place.

A further announcement will be made by the Company in the event that the Second Closing does not take place and the First Closing has to be unwound.

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LETTER FROM THE BOARD

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 [205 x 267] 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 -----

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LETTER FROM THE BOARD

Structure of the Target Group immediately after First Closing

==> picture [282 x 267] intentionally omitted <==

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

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

Note: The Company has been advised by Jianda Law Firm, one of its PRC legal advisers, that the transfer of the Eas PRC Shares has already been approved by the Ministry of Commerce of the PRC and the title of the Eas PRC Shares will only be transferred to Eas HK upon the issue of the amended business licence of Eas PRC. This will only be carried out subject to and conditional upon the Second Closing taking place.

Structure of the Target Group immediately after Second Closing

==> picture [282 x 267] 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 -----

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LETTER FROM THE BOARD

INFORMATION ABOUT THE BUSINESS OF THE TARGET GROUP

The Target Group (whether before or after the Restructuring) is principally engaged in the business of supply chain management services in China including international and domestic freight forwarding, marine transportation, 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 an indirect wholly-owned subsidiary of Huatong) and holds the entire issued share capital of Eas HK, which in turn holds a 50% equity interest in Eas PRC. The other 50% equity interest in Eas PRC is directly held by Huatong.

Treasure Lake was incorporated in the British Virgin Islands on 6 May 2004 for the purpose of holding the shares in Eas HK. Eas HK was incorporated in Hong Kong on 11 November 1993 and it was engaged in freight forwarding business up to 25 March 2002 when such business was transferred to one of Eas PRC’s indirect subsidiaries. Eas HK has been engaged in investment holding for each of the two years ended 25 December 2001 and 2002, the period from 26 December 2002 to 31 December 2003 and the six months ended 30 June 2004 and it holds a 50% interest in Eas PRC, which was established in the PRC on 27 February 1985. The Eas PRC Group (after the Restructuring) represents the principal assets and liabilities and the operations and business of the Target Group.

Based on information provided to the Company by Huatong for the due diligence, Eas HK and Huatong became investors of Eas PRC in 1996 and 1997 respectively. Eas PRC was formerly owned as to 25% and 75% by Eas HK and Huatong respectively and pursuant to the articles of association and joint venture contract of Eas PRC both dated 11 December 2002, each of Eas HK and Huatong has been holding 50% of Eas PRC. As disclosed in the accountants’ report on the Eas PRC Group set out in Appendix III to this circular, the directors of Eas PRC regard Huatong as the ultimate holding company of Eas PRC as at the date of the accountants’ report.

As disclosed in the accountants’ report on Eas HK set out in Appendix II to this circular, the directors of Eas HK regard Huatong as the ultimate holding company of Eas HK as at 25 December 2001 and Shanghai Industrial Investment (Holdings) Company Limited as the ultimate holding company of Eas HK as at 25 December 2002, 31 December 2003 and 30 June 2004. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, Shanghai Industrial Investment (Holdings) Company Limited and the ultimate beneficial owner of Shanghai Industrial Investment (Holdings) Company Limited were, as at the date of the Sale and Purchase Agreement and up to the Latest Practicable Date, third parties independent of the Company. On 2 July 2004, the directors of Eas HK resolved that within three business days after receipt of the distribution of profits for the 2002 and 2003 financial years from Eas PRC of not less than HK$25,936,702.22, to distribute an interim dividend of not less than HK$25,936,702 payable in cash to the shareholders of Eas HK as of 1 June 2004.

The accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group (before the Restructuring) are set out in Appendix I, Appendix II and Appendix III to this circular respectively.

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LETTER FROM THE BOARD

Pursuant to the Restructuring Agreement, the unaudited net book value of the transferred assets and liabilities under the Restructuring as at 30 June 2004 amounted to RMB99,116,000. The unaudited turnover, profit before tax and profit after tax corresponding to the investments carved out from the Eas PRC Group in connection with the Restructuring were Nil, Nil and Nil respectively for the year ended 31 December 2001; RMB37,590,000, RMB509,000 and RMB509,000 respectively for the year ended 31 December 2002; RMB141,354,000, RMB1,441,000 and RMB1,224,000 respectively for the year ended 31 December 2003; and RMB62,960,000, RMB256,000 and RMB211,000 respectively for the six months ended 30 June 2004.

The unaudited depreciation and amortisation expenses corresponding to the assets carved out from the Eas PRC Group in connection with the Restructuring for the year ended 31 December 2001, 31 December 2002, 31 December 2003 and the six months ended 30 June 2004 were RMB2,043,000, RMB2,298,000, RMB2,298,000 and RMB1,160,000 respectively.

INFORMATION ABOUT HUATONG

Huatong is a state-owned limited liability company established 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 were, as at the date of the Sale and Purchase Agreement and up to and including the Latest Practicable Date, 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 forwarding, warehouse ownership and operations; (c) infrastructure related 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 consists of properties 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 interests of the Company and its shareholders as a whole. The Directors therefore recommend the Shareholders to vote for the resolution approving the Acquisition.

−21 −

LETTER FROM THE BOARD

As discussed in the section headed “Major Transaction” below, the consolidated turnover of the Eas PRC Group (before the Restructuring) represented approximately 53.63% of the consolidated turnover of the Group for the year ended 31 December 2003. Although the consolidated turnover of the Target Group should be reduced as a result of the Restructuring, the reduction is not significant and will not have a material effect on this ratio.

The consolidated net profit before tax (excluding revaluation deficits and provisions amounting to approximately HK$471 million) and the consolidated net profit after tax and minority interests (excluding revaluation deficits, provisions and deferred tax credits amounting to approximately HK$429 million) of the Group for the year ended 31 December 2003 amounted to approximately HK$1,043 million and HK$824 million respectively. According to the accountants’ report on the Eas PRC Group set out in Appendix III to this circular, the consolidated net profit before tax and the consolidated net profit after tax of the Eas PRC Group for the year ended 31 December 2003 amounted to approximately RMB102 million and RMB74 million respectively (equivalent to about HK$96 million and HK$70 million respectively based on the Agreed Rate), representing approximately 9.2% and 8.5% respectively of the consolidated net profit before tax (excluding revaluation deficits and provisions) and the consolidated net profit after tax and minority interests (excluding revaluation deficits, provisions and deferred tax credits) of the Group for the year ended 31 December 2003. As the operating results corresponding to various companies, assets and liabilities within the Eas PRC Group in connection with the Restructuring are not material to the results of the Eas PRC Group for the year ended 31 December 2003, the Restructuring will not have a material effect on the above ratios.

Nevertheless, the Acquisition is not expected to have material impact on the profits and turnover of the Group for the year ending 31 December 2004.

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.

COMPLIANCE WITH THE LISTING RULES

Upon the First Closing, the Company will hold, through Eas HK, 50% of Eas PRC. Upon the Second Closing, the Company will hold, through Eas HK, 70% of Eas PRC.

Major Transaction:

The consolidated turnover of the Group for the year ended 31 December 2003 was HK$4,204,466,000. Based on the accountants’ report on the Eas PRC Group (before the Restructuring) as set out in Appendix III to this circular, the consolidated turnover of the Eas PRC Group (before the Restructuring), which approximates the consolidated turnover of the Target Group (before the Restructuring), for the year ended 31 December 2003 was about

−22 −

LETTER FROM THE BOARD

RMB2,390,356,000 (equivalent to about HK$2,255,053,000 based on the Agreed Rate), which represented approximately 53.63% of the consolidated turnover of the Group for the year ended 31 December 2003. Although the consolidated turnover of the Target Group (before the Restructuring) should be reduced as a result of the Restructuring, the difference does not materially affect the revenue ratio and the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

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 between the First Closing and the Second Closing will be made in consultation with the Company’s auditors after the First Closing. A further announcement will be made by the Company after such a decision has been made.

After the First Closing and the Second Closing, Huatong will be a controlling shareholder (within the meaning of the Listing Rules) of Eas PRC and it will become a connected person of the Company only by virtue of it becoming a substantial shareholder (within the meaning of the Listing Rules) of Eas PRC. Eas PRC will become a non wholly-owned subsidiary of the Company after the First Closing and the Second Closing. However, since (a) there are no connected persons of the Company (other than at the level of its subsidiaries) as defined under Rules 14A.11(1) to (4) of the Listing Rules who are individually or together entitled to exercise, or control the exercise of, 10% or more of the voting power at any general meeting of Eas PRC and (b) Huatong is not an associate of any of the directors of Eas PRC nominated by Huatong, Eas PRC will not be regarded as a connected person of the Company as a result of the First Closing or the Second Closing.

However, transactions between (a) Huatong and other substantial shareholders of the non wholly-owned subsidiaries of Eas PRC on the one hand and (b) members of the Enlarged Group on the other hand after the First Closing and the Second Closing may constitute connected and/or continuing connected transactions under Chapter 14A of the Listing Rules. Based on the Company’s due enquiries and investigations, there will not be any such connected transactions and all the relevant continuing connected transactions are exempt from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules as they fall within the de minimis exemptions under Rules 14A.33(3) and 14A.34 of the Listing Rules respectively and only some of such continuing connected transactions may be subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules as each of the percentage ratios (other than the profits ratio) in respect of each of such transactions is on an annual basis less than 2.5%. The Company will make appropriate announcement in connection with such continuing connected transactions in compliance with the Listing Rules after the First Closing.

−23 −

LETTER FROM THE BOARD

APPROVAL FROM MAJOR SHAREHOLDER

Pursuant to the Listing Rules, shareholders’ approval is required for the Acquisition (including the 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). To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, none of the Shareholders or their respective associates (other than through the Company and Kerry Logistics) have any material interest in the Acquisition. As no Shareholder is required to abstain from voting if the Company were to convene a general meeting for approving the Acquisition and the accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group are not subject to any qualified opinion, pursuant to Rule 14.44 of the Listing Rules, in lieu of holding a general meeting, shareholders’ written approval has been obtained on 23 December 2004 from a closely allied group of Shareholders whose names appear on the registers of members of the Company and who, as at the Latest Practicable Date, held approximately 52.85% in nominal value of the Shares of the Company then in issue giving the right to attend and vote at that general meeting of the Company (if the Company were to convene one), approving the Acquisition (including the 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).

The respective names and shareholdings in the Company as at the Latest Practicable Date of the abovesaid Shareholders are as follows:

Name of Shareholder Caninco Investments Limited Darmex Holdings Limited Moslane Limited Total:	Number of the Company’s ordinary shares 303,891,879 250,024,187 86,150,350 640,066,416	Percentage of aggregate interests to total number of the Company’s ordinary shares in issue (%) 25.09 20.65 7.11
		52.85

Caninco Investments Limited, Darmex Holdings Limited and Moslane Limited are wholly-owned subsidiaries of Kerry Holdings and would together be regarded as “acting in concert” for the purposes of the Hong Kong Code on Takeovers and Mergers. Each of these Shareholders has been a Shareholder for not less than two years and they have voted in the same direction in the past on shareholders’ resolutions other than routine resolutions at an annual general meeting of the Company.

−24 −

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Shareholders should note that there are certain material differences in respect of the financial information about Eas HK and the Eas PRC Group between this circular and the First Announcement. Further disclosure of such differences by way of a further announcement and inclusion of such information in a supplemental circular to Shareholders will be appropriately made.

Where there are differences between the financial information set out in this circular as against the First Announcement, Shareholders should refer to the financial information set out in this circular instead. Shareholders should also note that none of such differences affects the classification of the transaction contemplated under the Sale and Purchase Agreement for the purpose of the Listing Rules.

The Company will provide to Shareholders such additional information as may be required under Rule 4.29 of the Listing Rules in respect of the pro forma financial information as disclosed in the First Announcement as soon as practicable.

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

Yours faithfully, For and on behalf of Kerry Properties Limited Ang Keng Lam Chairman

−25 −

ACCOUNTANTS’ REPORT ON TREASURE LAKE

APPENDIX I

The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.

29 December 2004

The Directors Kerry Properties Limited

Dear Sirs,

We set out below our report on the financial information relating to Treasure Lake Limited (“Treasure Lake”) for the period from 6 May 2004 (date of incorporation) to 30 June 2004 (the “Relevant Period”) for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake, which holds 50% equity interest of Eas International Transportation Ltd. (“Eas PRC”), and a 20% equity interest in Eas PRC from Huatong Industrial Development Co., Ltd. (“Huatong”).

Treasure Lake was incorporated in the British Virgin Islands on 6 May 2004 with limited liability under the Companies Law of the British Virgin Islands. Treasure Lake has been inactive since its incorporation.

Treasure Lake has adopted 31 December as its financial year end date. No audited statutory accounts of Treasure Lake have been prepared since its date of incorporation. The management accounts of Treasure Lake for the Relevant Period has been prepared in accordance with accounting principles generally accepted in Hong Kong. The directors of Treasure Lake are responsible for preparing the accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.

The financial information as set out on pages 28 to 32 (the “Financial Information”) has been prepared by the directors of Treasure Lake based on the management accounts. We have performed independent audit procedures on the Financial Information, which was made available to us by KPL, in accordance with Statements of Auditing Standards issued by the HKICPA and have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA.

−26 −

ACCOUNTANTS’ REPORT ON TREASURE LAKE

APPENDIX I

The directors of Treasure Lake are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Treasure Lake as at 30 June 2004 and of the results and cash flows of Treasure Lake for the Relevant Period.

−27 −

APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE

I. FINANCIAL INFORMATION

Profit and Loss Account

Period from 6 May 2004 (date of incorporation) to 30 June 2004 HK$

Results for the period

–

−28 −

ACCOUNTANTS’ REPORT ON TREASURE LAKE

APPENDIX I

Balance Sheet

		30 June 2004
	Note	HK$
ASSET
Current asset
Cash		8
CAPITAL AND RESERVES
Share capital	3	8
Shareholder’s fund		8

−29 −

APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE

Statement of Changes in Equity

		Period
		from 6 May 2004
		(date of incorporation)
		to 30 June 2004
	Note	HK$
Issuance of ordinary share	3	8
Results for the period		–
Total equity at the end of the period		8

−30 −

ACCOUNTANTS’ REPORT ON TREASURE LAKE

APPENDIX I

Cash Flow Statement

	Period
	from 6 May 2004
	(date of incorporation)
	to 30 June 2004
	HK$
Financing activities
Issuance of ordinary share	8
Net cash inflow from financing activities	8
	- - - - - - - - - - - -
Increase in cash	8
Cash at the beginning of the period	–
Cash at the end of the period	8

−31 −

ACCOUNTANTS’ REPORT ON TREASURE LAKE

APPENDIX I

II. NOTES TO FINANCIAL INFORMATION

1. Basis of preparation

The Financial Information has been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the HKICPA. It has been prepared under the historical cost convention.

2. Principal accounting policy

The principal accounting policy adopted in the preparation of the Financial Information is set out below:

Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. All exchange differences arising are dealt with in the profit and loss account.

3. Share capital

	As at
	6 May 2004
	(date of incorporation)
	and 30 June 2004
	HK$
Authorised:
50,000 ordinary shares of US$1 each	390,000

Issued and fully paid:
1 ordinary share at US$1 each	8

1 ordinary share of US$1 (equivalent to HK$8) was issued at par for cash on 6 May 2004, date of incorporation.

4. Subsequent events

On 28 June 2004, a sale and purchase agreement was entered into between Treasure Lake and S.I. Logistics Group Limited (“SI Logistics”) for the acquisition by Treasure Lake of the entire issued share capital of Eas Da Tong International Aircargo Company Limited (“Eas HK”) and its underlying loan due to SI Logistics.

The consideration comprises share capital consideration and loan consideration, amounting to HK$51,659,062 and HK$141,737,164 respectively, and is required to be fully paid in cash on the date of completion. The acquisition was completed on 2 July 2004.

According to the relevant sale and purchase agreement, upon completion of the acquisition, Treasure Lake is obliged to procure Eas PRC, the 50% associate held by Eas HK, to distribute to SI Logistics its share of profit of Eas PRC prior to the acquisition of not less than RMB27,492,904.

III. SUBSEQUENT ACCOUNTS

No audited accounts of Treasure Lake have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.

Yours faithfully, PricewaterhouseCoopers

Certified Public Accountants Hong Kong

−32 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.

29 December 2004

The Directors Kerry Properties Limited

Dear Sirs,

We set out below our report on the financial information relating to Eas Da Tong International Aircargo Company Limited (“Eas HK”) for each of the two years ended 25 December 2001 and 2002, the period from 26 December 2002 to 31 December 2003 and the six months ended 30 June 2003 and 2004 (the “Relevant Periods”), for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake Limited, which holds 50% equity interest of Eas International Transportation Ltd. (“Eas PRC”) and a 20% equity interest in Eas PRC from Huatong Industrial Development Co., Ltd. (“Huatong”).

Eas HK was incorporated in Hong Kong on 11 November 1993 with limited liability. As at the date of this report, Eas HK is a wholly-owned subsidiary of Treasure Lake Limited and has a direct 50% interest in Eas PRC, an associate, details of which are set out in Note 11 of Section II. The financial year end of Eas HK and its associate is 31 December.

The accounts of Eas HK for the Relevant Periods were prepared in accordance with accounting principles generally accepted in Hong Kong. The accounts for the 2 years ended 25 December 2001 and 2002 were audited by Victor Ling, Tang & Partners and the accounts for the period from 26 December 2002 to 31 December 2003 were audited by Deloitte Touche Tohmatsu.

The financial information as set out on pages 35 to 50 (“Financial Information”) has been prepared based on the audited accounts or, where appropriate, unaudited management accounts of Eas HK. For the purpose of this report, we have examined the audited accounts or, where appropriate, the management accounts of Eas HK for the Relevant Periods, which were made available to us by the directors of KPL, and we have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The directors of Eas HK, at the Relevant Periods, are responsible for preparing these accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.

−33 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

The directors of Eas HK are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Eas HK as at 25 December 2001 and 2002, 31 December 2003 and 30 June 2004 and of the results and cash flows of Eas HK for the Relevant Periods.

−34 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

I. FINANCIAL INFORMATION

Profit and Loss Accounts

For the year ended 25 December 2001 2002 HK$’000 HK$’000 56,314 14,436 (48,197) (12,167)	For the year ended 25 December 2001 2002 HK$’000 HK$’000 56,314 14,436 (48,197) (12,167)	26.12.2002 to 31.12.2003 HK$’000 – –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – – –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – – –
8,117 1,460 (10,554) (10,593) (11,570) (21) (11,591) –	2,269 32,945 – (1,536) 33,678 (1,601) 32,077 (150)	– 1,003 – (742) 261 (1,003) (742) 150	– 1,003 – (164) 839 (1,003) (164) –	– – – –
				– –
				– –
(11,591) (116)	31,927 319	(592) (6)	(164) (2)	–

				–

−35 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

Balance Sheets

25.12.2001 HK$’000 197 19,500 10,155 19,078 1,433 – 2,016	25.12.2002 HK$’000 – 121,101 – – – – 2	31.12.2003 HK$’000 – 160,845 – – – 44 1	30.6.2004 HK$’000 – 160,843 – – – 44 1
32,682 - - - - - - - - - - 4,473 – 7,320 311 7	2 - - - - - - - - - - 645 150 – – –	45 - - - - - - - - - - 1,041 – – – –	45 - - - - - - - - - - 44 – – – –
12,111 - - - - - - - - - - 20,571 - - - - - - - - - - 40,268	795 - - - - - - - - - (793) - - - - - - - - - 120,308	1,041 - - - - - - - - - (996) - - - - - - - - - 159,849	44 - - - - - - - - -
			1 - - - - - - - - -
			160,844

100 (13,323) (13,223) - - - - - - - - - - 24 – 53,467	100 18,604 18,704 - - - - - - - - - – 101,601 3	100 18,012 18,112 - - - - - - - - - – – 141,737	100 18,012
			18,112 - - - - - - - - -
			– – 142,732
40,268	120,308	159,849	160,844

−36 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

Statements of Changes in Equity

At 26 December 2000 Loss for the year At 25 December 2001 Profit for the year At 25 December 2002 Loss for the period At 31 December 2003 Loss for the period At 30 June 2004 At 1 January 2003 Loss for the period At 30 June 2003	Share capital (Accumulated losses)/ retained profits HK$’000 HK$’000 100 (1,732) – (11,591) 100 (13,323) – 31,927 100 18,604 – (592) 100 18,012 – – 100 18,012	Share capital (Accumulated losses)/ retained profits HK$’000 HK$’000 100 (1,732) – (11,591) 100 (13,323) – 31,927 100 18,604 – (592) 100 18,012 – – 100 18,012	Total HK$’000 (1,632) (11,591) (13,223) 31,927 18,704 (592) 18,112 – 18,112 18,704 (164) 18,540
	100 –	18,604 (164)	18,704 (164
	100	18,440

−37 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

Cash Flow Statements

For the year ended 25 December 2001 2002 HK$’000 HK$’000 (11,570) 33,678 164 37 47 – – (31,065) (47) (3) – (1,601)	For the year ended 25 December 2001 2002 HK$’000 HK$’000 (11,570) 33,678 164 37 47 – – (31,065) (47) (3) – (1,601)	26.12.2002 to 31.12.2003 HK$’000 261 – – – – (1,003)	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 839 – – – – – – – – – (1,003) – (164) – – – – – – – – – – – (10) (997) – – (174) (997) – – (174) (997) - - - - - - - - - - - - - - - -	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 839 – – – – – – – – – (1,003) – (164) – – – – – – – – – – – (10) (997) – – (174) (997) – – (174) (997) - - - - - - - - - - - - - - - -
(11,406) 1,314 (129) 1,982 1,054 (339) (1,050) (15,183) (23,757) –	1,046 (5,484) 1,433 (1,267) – (262) 3,954 1,702 1,122 –	(742) – – – – – 396 – (346) (44)	(164) – – – – – (10) – (174) –	– – – – – – (997 –
				(997 –
(23,757) - - - - - - - -	1,122 - - - - - - - -	(390) - - - - - - - -	(174) - - - - - - - -

−38 −

APPENDIX II

ACCOUNTANTS’ REPORT ON EAS HK

For the year ended 25 December 2001 2002 HK$’000 HK$’000 – (3,055) – – – (101,601) 47 3 – 1,601 – (7)	For the year ended 25 December 2001 2002 HK$’000 HK$’000 – (3,055) – – – (101,601) 47 3 – 1,601 – (7)	26.12.2002 to 31.12.2003 HK$’000 – (141,343) 101,599 – 1,003 –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – (141,343) – 101,599 2 – – 1,003 – – –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – (141,343) – 101,599 2 – – 1,003 – – –
47 - - - - - - - - – 22,966 (21) – (35) 22,910 - - - - - - - - (800) 2,816	(103,059) - - - - - - - - 101,601 (75) – (1,601) (2) 99,923 - - - - - - - - (2,014) 2,016	(38,741) - - - - - - - - (101,601) 141,734 – (1,003) – 39,130 - - - - - - - - (1) 2	(38,741) - - - - - - - - (101,601) 141,518 – (1,003) – 38,914 - - - - - - - - (1) 2	2 - - - - - - - - – 995 – – –
				995 - - - - - - - -
				– 1
2,016	2	1	1	1

−39 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

II. NOTES TO FINANCIAL INFORMATION

1. Principal activity and change of financial year end

The company is a private company incorporated in Hong Kong with limited liability. The company was engaged in freight forwarding business up to 25 March 2002 when the business was disposed of for nil consideration to a wholly-owned subsidiary of the associate, Eas PRC. The company is also engaged in investment holding throughout the Relevant Periods.

The company changed its financial year end date from 25 December to 31 December with effect from 26 December 2002.

2. Principal accounting policies

(a) Basis of preparation

The financial information set out in this report has been prepared under historical cost convention and in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants. The principal accounting policies adopted are set out below.

(b) Associate

An associate is a company, not being a subsidiary or a jointly controlled entity, in which an equity interest is held for the long-term and significant influence is exercised in its management.

The investment in associate is stated at cost less provision for impairment losses. The results of associate are accounted for on the basis of dividends received and receivable.

(c) Fixed assets

Fixed assets are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use.

Depreciation on fixed assets is calculated to write off their cost on a straight-line basis over their expected useful lives to the company. The principal annual rate used for this purpose is 20%.

The gain or loss on disposal of fixed assets is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognised in the profit and loss account.

Costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the company.

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account.

(d) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(e) Borrowing costs

All borrowing costs are charged to the profit and loss account in the year/period in which they are incurred.

−40 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

(f) Deferred taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

(g) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.

(ii) Profit sharing and bonus plans

The expected cost of profit sharing and bonus payments are recognised as a liability when the company has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(iii) Retirement benefit costs

The company’s contributions to the mandatory provident fund scheme and the defined contribution retirement scheme are expensed as incurred. Contributions to the defined contribution retirement scheme which is operated in Hong Kong are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of all these schemes are held separately and independently from those of the company.

(h) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.

(i) Translation of foreign currencies

(j) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, cash investments with a maturity of three months or less from the date of investment and bank overdrafts.

(k) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

−41 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the company.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(l) Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(m) Revenue and income recognition

(i) Revenue from provision of freight forwarding services is recognised when the services are rendered.
(ii) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
(iii) Dividend income is recognised when the right to receive payment is established.

3. Turnover

Turnover represents the net invoiced value of freight forwarding service income less discounts prior to 25 March 2002.

4. Other income

Bank interest income Interest income on amount due from associate (note 25) Gain on disposal of freight forwarding business (note 22) Others	For the year ended 25 December 2001 2002 HK$’000 HK$’000 47 3 – 1,601 – 31,065 1,413 276 1,460 32,945	26.12.2002 to 31.12.2003 HK$’000 – 1,003 – – 1,003	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – 1,003 – – – – – 1,003 –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – 1,003 – – – – – 1,003 –
				–

−42 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

5. Operating (loss)/profit before finance costs

Operating (loss)/profit before finance costs is arrived at after charging:

	For the year	For the year	26.12.2002	For the six months	For the six months
	ended 25 December		to	ended 30 June
	2001	2002	31.12.2003	2003	2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Auditors’ remuneration	25	17	–	–	–
Depreciation on assets
under finance lease	4	2	–	–	–
Depreciation on own assets	160	35	–	–	–
Staff costs
– salaries and allowances	1,428	344	–	–	–
– contributions to defined
contribution schemes	75	19	–	–	–
Loss on disposal of fixed assets	47	–	–	–	–
Management fee (note 25)	4,650	–	–	–	–
Operating lease
– land and building	1,287	344	–	–	–
Provision for doubtful debts	2,223	–	–	–	–

6. Finance costs

Interest on amount due to an intermediate holding company (note 25) Interest on finance leases	For the year ended 25 December 2001 2002 HK$’000 HK$’000 – 1,601 21 – 21 1,601	26.12.2002 to 31.12.2003 HK$’000 1,003 – 1,003	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 1,003 – – – 1,003 –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 1,003 – – – 1,003 –
				–

7. Emoluments for directors and highest paid individuals

(a) Directors’ emoluments

None of the directors received or will receive any fees or emoluments in respect of their services rendered to the company during the Relevant Periods. No directors waived any remuneration during the Relevant Periods.

(b) Senior management emoluments

The five highest paid individuals included no director during the Relevant Periods and their emoluments were as follows:

Salaries and allowances Contributions to defined contribution schemes	For the year ended 25 December 2001 2002 HK$’000 HK$’000 873 268 46 12 919 280	26.12.2002 to 31.12.2003 HK$’000 – – –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – – – – –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 – – – – – –
				–

The emoluments of the five highest paid individuals were all less than HK$1,000,000.

−43 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

During the Relevant Periods, no emoluments were paid by the company to any of the directors or the five highest paid individuals as an inducement to join or upon joining the company or as compensation for loss of office.

8. Taxation

For the year ended 25 December 2002, Hong Kong profits tax was provided at the rate of 16% on the estimated assessable profits for the year. No provision for Hong Kong profits tax was made for the remaining periods of the Relevant Periods as the company had no assessable profit for those periods. The tax credit for the period from 26 December 2002 to 31 December 2003 represented overprovision in prior years.

The taxation on the company’s profit/loss before taxation differs from the theoretical amount that would arise using the taxation rate of Hong Kong as follows:

(Loss)/profit before taxation Calculated at taxation rates of 17.5% for the six months ended 30 June 2004 and 2003 and the period from 26 December 2002 to 31 December 2003 and of 16% for the years ended 25 December 2002 and 2001 Income not subject to taxation Expenses not deductible for taxation purposes Tax losses not recognised Utilisation of previously unrecognised tax losses Overprovision in prior years Tax charges/(credit)	For the year ended 25 December 2001 2002 HK$’000 HK$’000 (11,591) 32,077	For the year ended 25 December 2001 2002 HK$’000 HK$’000 (11,591) 32,077	26.12.2002 to 31.12.2003 HK$’000 (742)	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 (164) –	For the six months ended 30 June 2003 2004 HK$’000 HK$’000 (164) –
	(1,855) (7) 2,044 – (182) –	5,132 (4,973) – – (9) –	(130) – – 130 – (150)	(29) – – 29 – –	– – – – – –
	–	150	(150)	–	–

Deferred income tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through future taxation profits is probable. The company had unrecognised tax losses (subject to approval by relevant authority) of approximately HK$741,000 at 30 June 2004 and 31 December 2003, nil at 25 December 2002 and HK$1,186,000 at 25 December 2001 to carry forward against future taxable income. These tax losses had no expiry date.

9. (Loss)/earnings per share

The calculation of the basic loss/earnings per share is based on the loss or profit for each of the Relevant Periods and the 100,000 ordinary shares in issue throughout the Relevant Periods.

No diluted loss/earnings per share for each of the Relevant Periods has been presented as there were no potential dilutive shares throughout the Relevant Periods.

−44 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

10. Fixed assets

Office equipment HK$’000 315 35 (114)	Office equipment HK$’000 315 35 (114)	Furniture & fixtures Leasehold improvement HK$’000 HK$’000 291 285 – – (215) (24)	Furniture & fixtures Leasehold improvement HK$’000 HK$’000 291 285 – – (215) (24)	Furniture & fixtures Leasehold improvement HK$’000 HK$’000 291 285 – – (215) (24)	Motor vehicles HK$’000 713 – –	Total HK$’000 1,604 35 (353) 1,286 7 (1,293) – - - - - - - - - 1,231 164 (306) 1,089 37 (1,126) – - - - - - - - - 197 – 30.6.2004 HK$’000 160,843 – 160,843
236 4 (240) – - - - - - - - - 295 6 (104) 197 3 (200)		76 3 (79) – - - - - - - - - 252 2 (187) 67 2 (69)		261 – (261) – - - - - - - - - 113 37 (15) 135 9 (144)	713 – (713) – - - - - - - - - 571 119 – 690 23 (713)	1,286 7 (1,293
						– - - - - - - - - 1,231 164 (306
						1,089 37 (1,126
- - - - -	– - - - - - - - - - 39 – 25.12.2001 HK$’000 19,500 – 19,500	- - - - - -	– – – - - - - - - - - - - - - - - - - - - 9 126 23 – – – 25.12.2002 31.12.2003 HK$’000 HK$’000 19,500 160,843 101,601 2 121,101 160,845

11. Associate

−45 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

Details of the associate are as follows:

	Country of	Percentage of
	incorporation	interest in
Name of associate	and operation	registered capital	Principal activity
EAS International	The People’s	50%	Provision of freight
Transportation Ltd.	Republic of		forwarding and logistics
	China		services

The percentage of interest in the registered capital of the associate attributable to the company increased from 25% to 50% in April 2003.

The amount due from associate was unsecured, interest-free and not repayable within one year from the balance sheet date except for an amount of HK$100,000,000 at 25 December 2002 which was interest-bearing at prevailing market rates.

Highlights of financial information of the associate are as follows:

	31.12.2001	31.12.2002	31.12.2003	30.6.2004
	RMB’000	RMB’000	RMB’000	RMB’000
Non-current assets	458,576	451,999	411,272	416,975
Current assets	689,307	782,304	1,027,488	920,270
Current liabilities	(924,574)	(931,209)	(750,122)	(608,521)
Non-current liabilities	(13,331)	(54,095)	(210,337)	(210,722)

			For the year		For the six months	For the six months
		ended 31 December			ended 30 June
		2001	2002	2003	2003	2004
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total	revenue	1,820,450	1,853,697	2,396,465	1,023,394	1,324,367
Profit	for the year/period	7,907	30,824	74,376	26,805	38,899

For details on contingent liabilities of the associate, please refer to note 21 to the financial information as set out on pages 87 to 88 in the accountants’ report on Eas PRC set out in Appendix III of this circular.

12. Trade receivables

Included in accounts receivable, prepayments and deposits are trade receivables. The ageing analysis of the trade receivables is as follows:

Below 30 days 30 to 90 days Over 90 days	25.12.2001 HK$’000 221 8,248 1,393 9,862	25.12.2002 HK$’000 – – – –	31.12.2003 HK$’000 – – – –	30.6.2004 HK$’000 – – –
				–

In general, credit terms of 30 to 90 days were given to customers.

13. Amounts due from fellow subsidiaries/related companies

The amounts due from fellow subsidiaries and related companies were unsecured, interest-free and had no fixed repayment terms.

−46 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

14. Trade payables

Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of the trade payables is as follows:

Below 30 days 30 to 90 days Over 90 days	25.12.2001 HK$’000 953 434 526 1,913	25.12.2002 HK$’000 – – – –	31.12.2003 HK$’000 – – – –	30.6.2004 HK$’000 – – –
				–

15. Amount due to associate

The amount due to associate was derived from normal business activities, unsecured, interest-free and had no fixed repayment terms.

16. Amounts due to related companies

The amounts due to related companies were unsecured, interest-free and had no fixed repayment terms.

17. Obligations under finance leases

At 25 December 2001, the company’s obligations under finance leases were repayable as follows:

Within one year In the second year In the third to fifth years Future finance charges Present value of lease obligations	HK$’000 9 9 23
	41 (10)
	31

The present value of lease obligations was as follows:

Within one year In the second year In the third to fifth years Amount included under current liabilities Non-current amount	HK$’000 7 7 17
	31 (7)
	24

−47 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

18. Share capital

	25.12.2001	25.12.2002	31.12.2003	30.6.2004
	HK$’000	HK$’000	HK$’000	HK$’000
Authorised, issued and fully paid:
100,000 ordinary shares of HK$1 each	100	100	100	100

19. Amount due to an intermediate holding company

The amount was unsecured, interest-bearing at prevailing market rates and not repayable within one year from the balance sheet date.

20. Amount due to immediate holding company

The amount is unsecured, interest-free and not repayable within one year from the balance sheet date.

21. Ultimate holding company

The directors regard Huatong Industrial Development Co., Ltd., a company incorporated in The People’s Republic of China, as being the ultimate holding company at 25 December 2001 and Shanghai Industrial Investment (Holdings) Company Limited, a company incorporated in Hong Kong, as being the ultimate holding company at 25 December 2002, 31 December 2003 and 30 June 2004.

22. Disposal of freight forwarding business

On 25 March 2002, the company disposed of its freight forwarding business for nil consideration to a whollyowned subsidiary of the associate. Assets and liabilities of the freight forwarding business disposed of are as follows:

Fixed assets Cash Accounts receivable, prepayments and deposits Amounts due from fellow subsidiaries Obligations under finance leases Accounts payable, deposits received and accrued charges Amounts due to related companies Amount due to associate Amount due to immediate holding company Net liabilities disposed of Consideration received Gain on disposal of freight forwarding business Net cash outflow arising from disposal of freight forwarding business	HK$’000 167 3,055 15,639 20,345 (29 (7,782 (49 (9,022 (53,389
	(31,065 –
	31,065

	(3,055

−48 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

23. Operating lease commitments

At 25 December 2001, the company had future aggregate minimum lease payments under non-cancellable operating leases as follows:

Land and buildings – expiring within one year – expiring in the second to fifth years inclusive	HK$’000 199 116
	315

The company did not have any operating lease commitment at 25 December 2002 and thereafter.

24. Capital commitment

	25.12.2001	25.12.2002	31.12.2003	30.6.2004
	HK$’000	HK$’000	HK$’000	HK$’000
Amount authorised but not provided for
in respect of additional investment in
the associate	–	196,262	56,604	–

25. Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decision. Parties are also considered to be related if they are subject to common control or common significant influence.

In addition to the related party transactions disclosed elsewhere in the Financial Information, the company had the following related party transactions during the Relevant Periods:

	For the year	For the year	26.12.2002	For the six months	For the six months
	ended 25 December		to	ended 30 June
	2001	2002	31.12.2003	2003	2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Provision of freight forwarding
services
– to associate (note a)	13,840	3,604	–	–	–
– to fellow subsidiaries (note a)	1,690	547	–	–	–
Interest on amount due from
associate (note b)	–	1,601	1,003	1,003	–
Interest on amount due to
an intermediate holding
company (note b)	–	(1,601)	(1,003)	(1,003)	–
Management fee to immediate
holding company (note c)	(4,650)	–	–	–	–

Notes:

(a) The transactions were conducted on terms and prices agreed between both parties.

(b) The interest was charged at prevailing market rates.
(c) The management fee was paid to the immediate holding company for administrative and management services provided.

−49 −

ACCOUNTANTS’ REPORT ON EAS HK

APPENDIX II

26. Subsequent events

On 2 July 2004, the directors of the company resolved that, upon receipt of profit distribution from Eas PRC, the associate, of not less than HK$25,936,702, to distribute an interim dividend of not less than HK$25,936,702 payable to the shareholders of the company as of 1 June 2004. On 29 September 2004, Eas PRC declared a dividend of RMB49,320,543 payable to the company.

On 9 November 2004, the company entered into an equity transfer agreement for the acquisition of a further 20% equity interest in Eas PRC at a consideration of RMB90,000,000.

III. SUBSEQUENT ACCOUNTS

No audited accounts of Eas HK have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.

Yours faithfully PricewaterhouseCoopers Certified Public Accountants Hong Kong

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.

29 December 2004

The Directors Kerry Properties Limited

Dear Sirs,

We set out below our report on the consolidated financial information relating to Eas International Transportation Ltd. (“Eas PRC”) and its subsidiaries (hereinafter collectively referred to as “Eas PRC Group”) for each of the three years ended 31 December 2001, 2002 and 2003 and the six months ended 30 June 2003 and 2004 (the “Relevant Periods”), for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake Limited, which holds 50% equity interest in Eas PRC, and a 20% equity interest in Eas PRC, from Huatong Industrial Development Co., Ltd. (“Huatong”).

Eas PRC (formerly known as EAS Air Cargo (China) Company Limited) was established as a sino-foreign joint venture company in the People’s Republic of China (the “PRC”) on 27 February 1985. As at the date of this report, Eas PRC has direct or indirect interests in certain subsidiaries and associates. Details of the principal subsidiaries and associates are set out in Note 25 of Section II. The financial year end of companies comprising Eas PRC Group is 31 December, except as disclosed in Note 25 of Section II.

The statutory or management accounts of the companies comprising Eas PRC Group, that were incorporated outside Hong Kong, were prepared in accordance with the applicable accounting principles and relevant regulations in their places of incorporation for the Relevant Periods. For the purpose of this report, the directors of Eas PRC have prepared the consolidated accounts of Eas PRC Group for the Relevant Periods in accordance with accounting principles generally accepted in Hong Kong (the “HK GAAP accounts”). The directors of Eas PRC are responsible for preparing the HK GAAP accounts which give a true and fair view. In preparing the HK GAAP accounts, it is fundamental that appropriate accounting policies are selected and applied consistently. We have carried out an independent audit of the HK GAAP accounts in accordance with the Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

The financial information as set out on pages 53 to 92 (“Financial Information”) has been prepared based on the HK GAAP accounts. We have examined the Financial Information for the Relevant Periods which was made available to us by KPL and we have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA. The directors of Eas PRC are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Eas PRC Group as at 31 December 2001, 2002 and 2003 and 30 June 2004 and of the results and cash flows of Eas PRC Group for the Relevant Periods.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

I. FINANCIAL INFORMATION

Consolidated Profit and Loss Accounts

For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 1,812,832 1,846,888 2,390,356 7,618 6,809 6,109	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 1,812,832 1,846,888 2,390,356 7,618 6,809 6,109	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 1,812,832 1,846,888 2,390,356 7,618 6,809 6,109	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 1,022,415 1,339,874 979 2,493 1,023,394 1,342,367 (831,100) (1,130,870) (100,127) (107,556) (19,059) (17,720) (28,090) (28,637) 45,018 57,584 (11,007) (9,359) 34,011 48,225 2,104 2,336 36,115 50,561 (8,435) (11,243) 27,680 39,318 (875) (419) 26,805 38,899 N/A N/A	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 1,022,415 1,339,874 979 2,493 1,023,394 1,342,367 (831,100) (1,130,870) (100,127) (107,556) (19,059) (17,720) (28,090) (28,637) 45,018 57,584 (11,007) (9,359) 34,011 48,225 2,104 2,336 36,115 50,561 (8,435) (11,243) 27,680 39,318 (875) (419) 26,805 38,899 N/A N/A
1,820,450 (1,483,296) (183,531) (45,563) (67,363) 40,697 (31,374) 9,323 3,499 12,822 (3,926) 8,896 (989)	1,853,697 (1,477,208) (187,492) (44,257) (80,393) 64,347 (27,786) 36,561 2,965 39,526 (9,038) 30,488 336	2,396,465 (1,945,385) (221,792) (37,953) (73,763) 117,572 (19,775) 97,797 4,670 102,467 (26,052) 76,415 (2,039)	1,023,394 (831,100) (100,127) (19,059) (28,090) 45,018 (11,007) 34,011 2,104 36,115 (8,435) 27,680 (875)	1,342,367 (1,130,870 (107,556 (17,720 (28,637
				57,584 (9,359
				48,225 2,336
				50,561 (11,243
				39,318 (419
7,907 N/A	30,824 N/A	74,376 N/A	26,805 N/A

Note: Since Eas PRC is not a company limited by shares, no earnings per share is presented.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Consolidated Balance Sheets

As 2001 RMB’000 366,460 – 49,740 5,320 7,773 29,283	at 31 December 2002 2003 RMB’000 RMB’000 350,669 312,598 4,495 4,258 50,065 53,381 5,000 6,076 7,349 4,181 34,421 30,778	at 31 December 2002 2003 RMB’000 RMB’000 350,669 312,598 4,495 4,258 50,065 53,381 5,000 6,076 7,349 4,181 34,421 30,778	As at 30 June 2004 RMB’000 313,648 4,140 58,617 5,987 3,546 31,037
458,576 - - - - - - - - 6,537 2,757 492,941 36,202 150,870 689,307 - - - - - - - - 253,565 59,391 148,271 392 5,891 457,064	451,999 - - - - - - - - 7,889 4,956 525,005 8,280 236,174 782,304 - - - - - - - - 278,188 81,618 129,881 354 4,527 436,641	411,272 - - - - - - - - 6,791 2,314 611,269 29,480 377,634 1,027,488 - - - - - - - - 306,636 78,920 150,143 12,490 14,331 187,602	416,975 - - - - - - - - 6,307 2,150 625,744 – 286,069
			920,270 - - - - - - - - 261,367 80,066 123,756 13,889 14,374 115,069
924,574 - - - - - - - - (235,267) - - - - - - - - 223,309	931,209 - - - - - - - - (148,905) - - - - - - - - 303,094	750,122 - - - - - - - - 277,366 - - - - - - - - 688,638	608,521 - - - - - - - - 311,749 - - - - - - - -
			728,724

100,000 98,773 11,205 13,203 128	100,000 132,288 16,711 53,500 595	150,000 309,551 18,750 209,660 677	150,000 348,834 19,168 209,660 1,062
223,309	303,094	688,638	728,724

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Consolidated Cash Flow Statements

Notes Cash flows from operating activities Cash generated from/ (used in) operations 20(a) Interest paid Interest income received Tax paid Net cash from/(used in) operating activities Investing activities Disposals/(acquisition) of investment securities Net cash paid for an acquisition of a subsidiary 20(b) (Acquisition)/disposal of associates Purchase of fixed assets Proceeds from disposal of fixed assets Decrease in other non-current assets Dividends received from associates Net cash (used in)/from investing activities	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 98,497 100,512 134,626 (30,948) (23,729) (22,469) 1,704 1,456 1,370 (9,643) (14,480) (11,589)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 98,497 100,512 134,626 (30,948) (23,729) (22,469) 1,704 1,456 1,370 (9,643) (14,480) (11,589)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 98,497 100,512 134,626 (30,948) (23,729) (22,469) 1,704 1,456 1,370 (9,643) (14,480) (11,589)	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 (82,708) (8,976) (12,074) (8,599) 668 542 (11,210) (10,607) (105,324) (27,640) - - - - - - - - - - - - - - - - – 89 – – – (3,725) (24,305) (20,030) 625 1,129 3,043 585 3,005 1,080 (17,632) (20,872) - - - - - - - - - - - - - - - -	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 (82,708) (8,976) (12,074) (8,599) 668 542 (11,210) (10,607) (105,324) (27,640) - - - - - - - - - - - - - - - - – 89 – – – (3,725) (24,305) (20,030) 625 1,129 3,043 585 3,005 1,080 (17,632) (20,872) - - - - - - - - - - - - - - - -
	59,610 - - - - - - - - – – 10,000 (31,688) 14,002 4,804 471	63,759 - - - - - - - - 320 (289) – (30,928) 4,288 – 358	101,938 - - - - - - - - (1,076) – (953) (50,171) 49,616 3,068 3,117	(105,324) - - - - - - - - – – – (24,305) 625 3,043 3,005	(27,640 - - - - - - - - 89 – (3,725 (20,030 1,129 585 1,080
	(2,411) - - - - - - - -	(26,251) - - - - - - - -	3,601 - - - - - - - -	(17,632) - - - - - - - -

−55 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 431,015 444,954 502,602 (435,345) (522,730) (488,481) 44,610 136,960 – (5,300) (39,310) (107,000) (11,020) – – – – 150,000 (36,202) 27,922 (21,200)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 431,015 444,954 502,602 (435,345) (522,730) (488,481) 44,610 136,960 – (5,300) (39,310) (107,000) (11,020) – – – – 150,000 (36,202) 27,922 (21,200)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 431,015 444,954 502,602 (435,345) (522,730) (488,481) 44,610 136,960 – (5,300) (39,310) (107,000) (11,020) – – – – 150,000 (36,202) 27,922 (21,200)	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 178,165 60,609 (98,299) (133,142) – – (53,500) – – – 150,000 – 8,280 29,480 184,646 (43,053) - - - - - - - - - - - - - - - - 61,690 (91,565) 236,174 377,634 297,864 286,069	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 178,165 60,609 (98,299) (133,142) – – (53,500) – – – 150,000 – 8,280 29,480 184,646 (43,053) - - - - - - - - - - - - - - - - 61,690 (91,565) 236,174 377,634 297,864 286,069
(12,242) - - - - - - - - 44,957 105,913	47,796 - - - - - - - - 85,304 150,870	35,921 - - - - - - - - 141,460 236,174	184,646 - - - - - - - - 61,690 236,174	(43,053 - - - - - - - -
				(91,565 377,634
150,870	236,174	377,634	297,864

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Consolidated Statements of Changes in Equity

Paid-in capital RMB’000 100,000 – – –	Capital surplus RMB’000 – – – –	Statutory reserve RMB’000 45,068 – 946 –	Retained profits RMB’000 45,798 7,907 (946) –	Foreign exchange reserve RMB’000 – – – –	Total RMB’000 190,866 7,907 – –
100,000 - - - - - - - - – – 100,000 - - - - - - - - – 50,000 – – 150,000 - - - - - - - - – –	– - - - - - - - - – – – - - - - - - - - – 100,000 – – 100,000 - - - - - - - - – –	46,014 - - - - - - - - – – 46,014 - - - - - - - - – – 1,199 – 47,213 - - - - - - - - – –	52,759 - - - - - - - - 30,824 – 83,583 - - - - - - - - 74,376 – (1,199) – 156,760 - - - - - - - - 38,899 –	– - - - - - - - - – 2,691 2,691 - - - - - - - - – – – 2,887 5,578 - - - - - - - - – 384	198,773 - - - - - - - - 30,824 2,691
					232,288 - - - - - - - - 74,376 150,000 – 2,887
					459,551 - - - - - - - - 38,899 384
150,000	100,000	47,213	195,659	5,962	498,834

100,000 – 50,000 – –	– – 100,000 – –	46,014 – – 1,199 –	83,583 26,805 – (1,199) –	2,691 – – – 591	232,288 26,805 150,000 – 591
150,000	100,000	47,213	109,189	3,282	409,684

Notes:

(a) Funds appropriation are made from retained earnings to statutory reserve at the directors’ discretion.

(b) In the year ended 31 December 2003, a shareholder contributed RMB150,000,000 to Eas PRC in cash. The paid-in capital and capital surplus increased by RMB50,000,000 and RMB100,000,000 respectively.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

II. NOTES TO FINANCIAL INFORMATION

1. Basis of presentation

Eas PRC was established on 27 February 1985 as a sino-foreign joint venture company, with an operating period of 30 years. Eas PRC Group is principally engaged in the business of supply chain management service in PRC including international and domestic freight forwarding, marine transportation, international and domestic express services, Pan-China warehousing and distribution, exhibition and bonded logistic centres.

On 20 September 2004, Kerry Logistics Network Limited and Huatong entered into a sale and purchase agreement pursuant to which Kerry Logistics Network Limited will purchase 70% interest in Eas PRC in two stages at an aggregate consideration of RMB380,000,000 (the “Acquisition”). In the first stage, Kerry Logistics Network Limited will acquire the entire shares of Treasure Lake Limited, a wholly-owned subsidiary of Huatong which holds 50% interest in Eas PRC. In the second stage, Kerry Logistics Network Limited will acquire an additional 20% interest in Eas PRC directly from Huatong. If certain conditions in connection to the completion of the second stage are not satisfied or fulfilled, Huatong is obligated to repurchase the shares in Treasure Lake Limited.

In connection with the Acquisition, Eas PRC and Huatong entered into a restructuring agreement on 10 November 2004 (“Restructuring Agreement”). Eas PRC Group currently undertakes certain activities which are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics Network Limited aims to acquire (“non-core businesses”). Pursuant to the Restructuring Agreement, Eas PRC will transfer certain assets and liabilities that are related to these non-core businesses (“transferred assets and liabilities”) to Huatong ultimately at the net book value at 30 November 2004 and acquire a vehicle which is related to the logistics business that Kerry Logistics Network Limited aims to acquire from Huatong (“Restructuring”). Since the Restructuring has not yet been completed up to the date of this report, the transferred assets and liabilities are included in the financial statements of Eas PRC Group during the Relevant Periods. The net book value of the transferred assets and liabilities as at 30 June 2004 is as follows:

Fixed assets Other non-current assets Goodwill Deferred tax assets Current assets Accounts receivable, prepayments and deposits Cash and bank balances Current liabilities Accounts payable, deposits received and accrued charges Taxation Net current assets Minority interests and loans Net assets	RMB’000 15,882 2,885 4,140 22,381 45,288 115,367 5,128 120,495 (59,367) (86) (59,453) 61,042 (7,214) 99,116

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

2. Principal accounting policies

The principal accounting policies adopted in the preparation of these accounts are set out below:

(a) Basis of preparation

The financial information set out in this report have been prepared under the historical cost convention and in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the HKICPA.

(b) Group accounting

(i) Consolidation

The consolidated accounts include the accounts of Eas PRC and its subsidiaries made up to 31 December.

Subsidiaries are those entities in which Eas PRC, directly or indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove a majority of the members of the board of directors; or to cast a majority of votes at the meetings of the board of directors.

During 2001, Huatong, Eas PRC’s immediate holding company at that time, transferred certain of its wholly-owned subsidiaries operated in Hong Kong to a wholly-owned subsidiary of Eas PRC, namely EAS International Transportation (H.K.) Limited (“EIT”) incorporated in Hong Kong, at net asset value of HK$95,013,093. During 2002, Huatong further transferred certain of its freight forwarding business operated in Hong Kong from Eas Da Tong International Aircargo Company Limited, a wholly-owned subsidiary of Huatong, to EIT at nil consideration. Since both transfers are group restructuring and the ultimate shareholder remained the same immediately before and after the transfers, pursuant to the Statement of Standard Accounting Practice 27 “Group Restructuring”, both transfers are accounted for using merger accounting. Accordingly, the results and financial position of the transferred subsidiaries and business are included in the consolidated financial statements as if the subsidiaries and business were operated by Eas PRC at the beginning of the earliest period presented.

Save for the transfers among entitles under common control, all transactions during the Relevant Periods are accounted for using purchase accounting. The results of subsidiaries acquired or disposed of during the year/period are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within Eas PRC Group are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.

(ii) Associates

An associate is a company, not being a subsidiary, in which an equity interest is held for the long-term and significant influence is exercised in its management.

The consolidated profit and loss account includes Eas PRC Group’s share of the results of associates for the year/period, and the consolidated balance sheet includes Eas PRC Group’s share of the net assets of the associates and goodwill (net of accumulated amortisation) on acquisition.

Equity accounting is discontinued when the carrying amount of the investment in an assoicate reaches zero, unless Eas PRC Group has incurred obligations or guaranteed obligations in respect of the assoicate.

Unrealised gains on transactions between Eas PRC Group and its associates are eliminated to the extent of Eas PRC Group’s interest in the associates; unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(iii) Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The balance sheet of subsidiaries and associates expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss account is translated at an average rate. Exchange differences are dealt with as movements in reserves.

(c) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of Eas PRC Group’s share of the net assets of the acquired subsidiary at the date of acquisition.

Goodwill is amortised using the straight-line method over its estimated useful life and is amortised over 20 years.

Where an indication of impairment exists, the carrying amount of the goodwill is assessed and written down immediately to its recoverable amount.

(d) Investment securities

Investment securities are stated at cost less any provision for impairment losses.

(e) Fixed assets

(i) Construction in progress

Construction in progress are investments in land and buildings on which construction work has not been completed. These properties are carried at cost which includes development and construction expenditure incurred and other direct costs attributable to the development less any accumulated impairment losses. On completion, the properties are transferred to land and buildings at cost less accumulated impairment losses.

(ii) Other fixed assets

Fixed assets other than construction in progress are stated at cost less accumulated depreciation and accumulated impairment losses.

(iii) Depreciation

Leasehold land is depreciated over the period of the lease while other fixed assets are depreciated at rates sufficient to write off their cost less accumulated impairment losses and estimated residual values over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Buildings	3–4.5%
Electronic equipment	20–50%
Motor vehicles	20%
Others	20%

(iv) Impairment and gain or loss on disposal

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in construction in progress and other fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account. Estimated recoverable amounts are determined based on estimated discounted future cash flows of the cash-generating unit at the lowest level to which the assets belongs. The recoverable amount is the higher of value in use or net selling price.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(f) Operating leases

(i) A group company is the lessee

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss account on a straight-line basis over the period of the lease.

(ii) A group company is the lessor

Assets leased out under operating leases are included in fixed assets in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned fixed assets. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.

(g) Inventories

Supplies, consumables and spare parts are stated at the lower of cost or net realised value. Cost is determined by the first-in, first-out method. Net realised value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(h) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(i) Cash and cash equivalents

(j) Pension obligations

The full-time employees of Eas PRC Group employed by the PRC subsidiaries are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulae. The relevant government agencies are responsible for the pension liability to these retired employees. Eas PRC Group contributes on a monthly basis to these pension plans. Under these plans, Eas PRC Group has no obligation for post-retirement benefits beyond the contributions made. Contributions to these plans are expensed as incurred.

Eas PRC Group also operates a mandatory provident fund scheme (“Scheme”) for eligible employees in Hong Kong which is a defined contribution plan. The assets of the Scheme are held in a separate trustee-administered fund. Eas PRC Group’s contributions to the Scheme are expensed as incurred.

(k) Deferred taxation

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(l) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of Eas PRC Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(m) Revenue recognition

Turnover comprises the value of charges for the sale of services to third parties net of disbursements made on behalf of customers. Turnover/revenues are recognised on the following bases:

(i) Freight forwarding

Revenue is recognised when the freight forwarding services are rendered, which generally coincides with the date of departure for outward freight and the date of arrival for inward freight, where Eas PRC Group effectively acts as a principal in arranging transportation of goods for customers, revenue recognised generally includes the carrier’s charges to Eas PRC Group. Where Eas PRC Group effectively acts as an agent for the customers, revenue recognised represents fees for services provided by Eas PRC Group.

(ii) Agency services

Revenue from agency services is recognised upon completion of the agency services, which generally coincides with the date of departure of the relevant vessel from port.

(iii) Express services

Revenue from express services is recognised upon delivery of the relevant document or package.

(iv) Marine transportation

Revenue from liner shipping is recognised when the services are rendered. For uncompleted voyage at the end of a reporting period, revenue is allocated between reporting periods based on relative transit time in each reporting period.

(v) Other logistics services

Revenue from the provision of other logistics services is recognised when the services are rendered.

(vi) Rental income

Rental income under operating leases of warehouses and depots is recognised on a straight-line accrual basis.

(vii) Interest income

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

(viii) Dividend income

Dividend income is recognised when the right to receive payment is established.

−62 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(n) Borrowing costs

All borrowing costs are charged to the profit and loss account in the period/year in which they are incurred.

(o) Segment reporting

In accordance with Eas PRC Group’s internal financial reporting Eas PRC Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format. Unallocated costs represent corporate expenses and operating costs which are common to certain business segments.

In respect of geographical segment reporting, sales are based on the geographical area of operation is located.

Since the balance sheet items cannot be allocated among the business segments and geographical segments, no separate segmental reporting of balance sheet items is presented.

3. Segmental information

By business segment

Air freight forwarding and agency Sea freight forwarding and agency RMB’000 RMB’000 Operating results Turnover – External 777,757 564,838 Turnover – Internal 169,037 120,412 946,794 685,250 Other revenues Segment results 189,240 82,723 Unallocated costs Operating profit Finance costs Group profit before taxation Share of results of associates before taxation Profit before taxation Taxation Profit after taxation Minority interests Profit for the year	For the year ended 31 December 2001 Express and other logistics services Marine transportation Other RMB’000 RMB’000 RMB’000 315,223 121,212 33,802 60,594 5,326 – 375,817 126,538 33,802 214,054 12,034 12,342	Inter- segment elimination RMB’000 − (355,369) (355,369) −	Group RMB’000 1,812,832 –
			1,812,832

			7,618

			510,393 (469,696)
			40,697 (31,374)
			9,323 3,499
			12,822 (3,926)
			8,896 (989)
			7,907

−63 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Air freight forwarding and agency Sea freight forwarding and agency RMB’000 RMB’000 Operating results Turnover – External 729,973 568,099 Turnover – Internal 167,591 127,545 897,564 695,644 Other revenues Segment results 224,825 93,651 Unallocated costs Operating profit Finance costs Group profit before taxation Share of results of associates before taxation Profit before taxation Taxation Profit after taxation Minority interests Profit for the year	For the year ended 31 December 2002 Express and other logistics services Marine transportation Other RMB’000 RMB’000 RMB’000 335,855 161,360 51,601 61,683 4,297 – 397,538 165,657 51,601 245,331 14,854 20,876	Inter- segment elimination RMB’000 − (361,116) (361,116) −	Group RMB’00 1,846,888 –
			1,846,888

			6,809

			599,537 (535,190)
			64,347 (27,786)
			36,561 2,965
			39,526 (9,038)
			30,488 336
			30,824

−64 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Air freight forwarding and agency Sea freight forwarding and agency RMB’000 RMB’000 Operating results Turnover – External 936,163 799,896 Turnover – Internal 179,736 157,964 1,115,899 957,860 Other revenues Segment results 259,347 123,366 Unallocated costs Operating profit Finance costs Group profit before taxation Share of results of associates before taxation Profit before taxation Taxation Profit after taxation Minority interests Profit for the year	For the year ended 31 December 2003 Express and other logistics services Marine transportation Other RMB’000 RMB’000 RMB’000 406,561 190,306 57,430 123,157 47,573 – 529,718 237,879 57,430 324,451 9,435 24,409	Inter- segment elimination RMB’000 − (508,430) (508,430) −	Group RMB’000 2,390,356 –
			2,390,356

			6,109

			741,008 (623,436)
			117,572 (19,775)
			97,797 4,670
			102,467 (26,052)
			76,415 (2,039)
			74,376

−65 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

For the six months ended 30 June 2003

	For the six months ended 30	June 2003
Air freight forwarding and agency Sea freight forwarding and agency RMB’000 RMB’000 Operating results Turnover – External 385,782 321,128 Turnover – Internal 90,925 83,721 476,707 404,849 Other revenues Segment results 117,959 65,728 Unallocated costs Operating profits Finance costs Group profit before taxation Share of results of associates before taxation Profit before taxation Taxation Profit after taxation Minority interests Profit for the period	Express and other logistics services Marine transportation RMB’000 RMB’000 178,050 110,517 55,745 – 233,795 110,517 140,135 4,299	Other RMB’000 26,938 – 26,938 17,986	Inter- segment elimination RMB’000 − (230,391) (230,391) −	Group RMB’000 1,022,415 –
				1,022,415

				979

				346,107 (301,089)
				45,018 (11,007)
				34,011 2,104
				36,115 (8,435)
				27,680 (875)
				26,805

−66 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Air freight forwarding and agency Sea freight forwarding and agency RMB’000 RMB’000 Operating results Turnover – External 542,401 477,152 Turnover – Internal 53,897 70,430 596,298 547,582 Other revenues Segment results 126,978 56,755 Unallocated costs Operating profit Finance costs Group profit before taxation Share of results of associates before taxation Profit before taxation Taxation Profit after taxation Minority interests Profit for the period	For the six months ended 30 Express and other logistics services Marine transportation RMB’000 RMB’000 188,046 121,309 59,889 23,782 247,935 145,091 149,080 15,281	June 2004 Other RMB’000 10,966 – 10,966 9,317	Inter- segment elimination RMB’000 − (207,998) (207,998) −	Group RMB’000 1,339,874 –
				1,339,874

				2,493

				357,411 (299,827)
				57,584 (9,359)
				48,225 2,336
				50,561 (11,243)
				39,318 (419)
				38,899

−67 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

By geographical segment

Eas PRC Group operates its businesses in four main districts within the PRC, Hong Kong Special Administrative Region (“HK”) and overseas as below:

(i) Northern China – Including core strategic locations in Beijing, Tanggu, Tianjin, Shanxi, Hebei, Henan, Xinjiang, Dalian, Ha’erbin, Liaoning, Datong, Jilin and Yingkou, etc.
(ii) Eastern China – Including core strategic locations in Shanghai, Wuxi, Suzhou, Jiangsu, Nantong, Ningbo, Anhui, Hangzhou, Qingdao, Yantai, Shandong and Weifang, etc.
(iii) Southern China – Including core strategic locations in Guangzhou, Xiamen, Hainan, Shenzhen, Zhuhai, Shantou, Chengdu, Yunnan, Chongqing, Guizhou, Mianyang, Leshan, Xichang and Xizang, etc.
(iv) Central China – Including core strategic locations in Hubei, Hunan, Huangshi and Yichang, etc.

Northern China Eastern China Southern China Central China HK Overseas Inter-segment elimination Unallocated costs Operating profit	Turnover − External RMB’000 781,685 415,832 347,668 49,570 42,387 175,690 – 1,812,832	Year ended 31 December 2001 Turnover − Inter-segment Total turnover RMB’000 RMB’000 210,257 991,942 145,112 560,944 – 347,668 – 49,570 – 42,387 – 175,690 (355,369) (355,369) – 1,812,832	Year ended 31 December 2001 Turnover − Inter-segment Total turnover RMB’000 RMB’000 210,257 991,942 145,112 560,944 – 347,668 – 49,570 – 42,387 – 175,690 (355,369) (355,369) – 1,812,832	Segment results RMB’000 181,647 142,859 102,102 11,524 30,095 42,166 –
				510,393
				(469,696
				40,697

Unallocated costs Operating profit

Northern China Eastern China Southern China Central China HK Overseas Inter-segment elimination Unallocated costs Operating profit	Turnover − External RMB’000 754,867 503,355 326,811 27,170 124,985 109,700 – 1,846,888	Year ended 31 December 2002 Turnover − Inter-segment Total turnover RMB’000 RMB’000 215,637 970,504 145,479 648,834 – 326,811 – 27,170 – 124,985 – 109,700 (361,116) (361,116) – 1,846,888	Year ended 31 December 2002 Turnover − Inter-segment Total turnover RMB’000 RMB’000 215,637 970,504 145,479 648,834 – 326,811 – 27,170 – 124,985 – 109,700 (361,116) (361,116) – 1,846,888	Segment results RMB’000 187,315 176,174 106,427 7,360 91,545 30,716 –
				599,537
				(535,190
				64,347

Operating profit

−68 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Northern China Eastern China Southern China Central China HK Overseas Inter-segment elimination Unallocated costs Operating profit Northern China Eastern China Southern China Central China HK Overseas Inter-segment elimination Unallocated costs Operating profit	Turnover − External RMB’000 927,107 652,263 393,155 21,737 248,189 147,905 − 2,390,356 Turnover − External RMB’000 400,899 268,944 176,603 10,377 96,760 68,832 – 1,022,415	Year ended 31 December 2003 Turnover − Inter-segment Total turnover RMB’000 RMB’000 295,405 1,222,512 213,025 865,288 – 393,155 – 21,737 – 248,189 – 147,905 (508,430) (508,430) – 2,390,356 Six months ended 30 June 2003 Turnover − Inter-segment Total turnover RMB’000 RMB’000 139,183 540,082 91,208 360,152 – 176,603 – 10,377 – 96,760 – 68,832 (230,391) (230,391) – 1,022,415	Year ended 31 December 2003 Turnover − Inter-segment Total turnover RMB’000 RMB’000 295,405 1,222,512 213,025 865,288 – 393,155 – 21,737 – 248,189 – 147,905 (508,430) (508,430) – 2,390,356 Six months ended 30 June 2003 Turnover − Inter-segment Total turnover RMB’000 RMB’000 139,183 540,082 91,208 360,152 – 176,603 – 10,377 – 96,760 – 68,832 (230,391) (230,391) – 1,022,415	Segment results RMB’000 222,506 183,383 120,127 6,748 176,697 31,547 − 741,008 (623,436) 117,572 Segment results RMB’000 101,971 93,220 63,577 3,293 68,700 15,346 – 346,107 (301,089) 45,018
				(301,089

−69 −

APPENDIX III

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

Northern China Eastern China Southern China Central China HK Overseas Inter-segment elimination Unallocated costs Operating profit	Turnover − External RMB’000 580,299 438,230 158,187 9,518 120,434 33,206 – 1,339,874	Six months ended 30 June 2004 Turnover − Inter-segment Total turnover RMB’000 RMB’000 121,160 701,459 86,838 525,068 – 158,187 – 9,518 – 120,434 – 33,206 (207,998) (207,998) – 1,339,874	Six months ended 30 June 2004 Turnover − Inter-segment Total turnover RMB’000 RMB’000 121,160 701,459 86,838 525,068 – 158,187 – 9,518 – 120,434 – 33,206 (207,998) (207,998) – 1,339,874	Segment results RMB’000 121,863 105,456 51,430 3,041 68,141 7,480 –
				357,411
				(299,827
				57,584

4. Other revenues

Rental income Interest income Others	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 3,129 2,181 2,820 1,704 1,456 1,370 2,785 3,172 1,919 7,618 6,809 6,109	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 311 1,665 668 542 − 286 979 2,493	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 311 1,665 668 542 − 286 979 2,493
			2,493

5. Directors’ and senior management emoluments

(a) Directors’ emoluments

Details of the emoluments paid or payable to the directors of Eas PRC by Eas PRC Group in respect of their services rendered for managing the business of Eas PRC Group during the Relevant Periods are as follows:

Fees Other emoluments – Basic salaries, housing allowances and other allowances and benefits in kind – Contributions to pension plans – Discretionary bonuses	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 − − − 2,217 696 839 29 15 19 1,491 673 827 3,737 1,384 1,685	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 − − 420 430 9 11 413 456 842 897	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 − − 420 430 9 11 413 456 842 897
			897

−70 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

No directors of Eas PRC waived any remuneration during the years ended 31 December 2001, 2002 and 2003, and the six months ended 30 June 2003 and 2004.

The emoluments of the directors were within the following band:

		Number of directors	Number of directors
				For the six months
	For the year ended 31 December			ended 30 June
	2001	2002	2003	2003	2004
Nil – HK$1,000,000
(equivalent to
RMB1,060,000)	5	5	5	5	5

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in Eas PRC Group for the Relevant Periods are as follows:

				For the six months	For the six months
	For the year ended 31		December	ended 30 June
	2001	2002	2003	2003	2004
Directors	4	2	2	2	2
Senior management	1	3	3	3	3

Details of remuneration to the highest paid individuals who are not directors of Eas PRC are as follows:

Basic salaries, housing allowances and other allowances and benefits in kind Contributions to pension plans Discretionary bonuses	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 346 561 881 10 25 36 272 648 1,015 628 1,234 1,932	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 442 471 17 19 507 583 966 1,073	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 442 471 17 19 507 583 966 1,073
			1,073

The emoluments of these individuals fell within the following band:

		Number of individuals	Number of individuals	Number of individuals
				For the six months
	For the year ended 31 December			ended 30 June
	2001	2002	2003	2003	2004
Nil – HK$1,000,000
(equivalent to
RMB1,060,000)	1	3	3	3	3

During the Relevant Periods, no emoluments have been paid by Eas PRC Group to the directors or any of the five highest paid individuals as an inducement to join or upon joining Eas PRC Group or as compensation for loss of office.

−71 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

6. Staff costs

Staff costs for the Relevant Periods which included remuneration to directors of Eas PRC are as follows:

Note Wages and salaries Contributions to pension plans a Welfare and other expenses	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 121,766 133,938 158,839 19,425 18,556 26,008 42,340 34,998 36,945 183,531 187,492 221,792	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 72,708 76,939 11,834 14,810 15,585 15,807 100,127 107,556	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 72,708 76,939 11,834 14,810 15,585 15,807 100,127 107,556
			107,556

Note a: The PRC employees of Eas PRC Group participate in various pension plans organised by the relevant municipal and provincial governments under which Eas PRC Group was required to make monthly defined contributions at rates ranging from 8% to 30%, dependent upon the applicable local regulations, of the employees’ basic salary for the Relevant Periods.

7. Profit before taxation

Profit before taxation is stated after charging the following:

				For the six months	For the six months
	For the year ended 31		December	ended 30 June
	2001	2002	2003	2003	2004
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Auditors’ remuneration	609	1,247	682	413	307
Depreciation	45,563	44,021	37,716	18,941	17,602
Loss on disposal of fixed assets	5	709	971	88	239
Operating leases
– Land and buildings	25,614	27,155	31,002	15,607	16,173
– Vessels	24,051	30,882	48,282	21,191	29,142
Provision for doubtful debt
– Accounts receivable	16,606	4,490	5,046	1,918	524
– Other receivables	2,669	5,183	369	185	565
Amortisation of goodwill	–	236	237	118	118

8. Finance costs

Interest expense repayable within five years – bank loans – other loans Exchange (gains)/loss, net Bank charges Others	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 30,409 23,781 20,911 539 2,522 1,082 (299) 226 (2,831) 648 1,184 613 77 73 – 31,374 27,786 19,775	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 11,064 8,347 1,010 – (1,396) 451 329 561 – – 11,007 9,359	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 11,064 8,347 1,010 – (1,396) 451 329 561 – – 11,007 9,359
			9,359

−72 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

9. Taxation

Taxation in the consolidated profit and loss accounts represents:

PRC enterprise income tax Hong Kong profits tax Overseas profits tax Deferred tax Share of taxation attributable to associates	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 2,955 11,350 19,227 – 162 416 3,833 1,604 1,750 (3,562) (4,671) 3,725 700 593 934 3,926 9,038 26,052	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 6,804 9,797 – 430 737 423 368 126 526 467 8,435 11,243	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 6,804 9,797 – 430 737 423 368 126 526 467 8,435 11,243
			11,243

The provision for PRC current income tax is based on the statutory rate of 33% of the assessable income of each of the companies and enterprises comprising Eas PRC Group as determined in accordance with the relevant PRC income tax rules and regulations for the years ended 31 December 2001, 2002 and 2003, and the six months ended 30 June 2003 and 2004, except for certain subsidiaries which are taxed at preferential rates ranging from 15% to 30% based on the relevant PRC tax laws and regulations.

Hong Kong profits tax has been provided at the rate of 17.5% (2001–2002: 16%) on the estimated assessable profit for the period/year. Taxation on overseas profits has been calculated on the estimated assessable profit for the period/year at the rates of taxation prevailing in the countries in which the Group operates.

(a) The reconciliation between Eas PRC Group’s actual tax charge and the theoretical amount which is calculated based on the statutory tax rate of 33% in the PRC is as follows:

For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 36,115 50,561	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 36,115 50,561

4,231 (10,088) 9,926 2,338 (208) (4,038) 1,765	13,044 (10,509) 5,175 5,346 (119) (4,991) 1,092	33,814 (6,588) 6,491 1,360 (1,289) (8,389) 653	11,918 (4,360) 5,282 765 (204) (5,798) 832	16,685 (5,428 4,415 612 (259 (4,356 (426
3,926	9,038	26,052	8,435	11,243

−73 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(b) The movement in the deferred taxation accounts is as follows:

Deferred tax assets:

For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 25,593 29,283 34,421 3,690 5,138 (3,643) 29,283 34,421 30,778	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 25,593 29,283 34,421 3,690 5,138 (3,643) 29,283 34,421 30,778	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 25,593 29,283 34,421 3,690 5,138 (3,643) 29,283 34,421 30,778	For the six months ended 30 June 2004 RMB’000 30,778 259
			31,037

25,782 3,487 14	29,909 3,461 1,051	27,339 3,146 293	27,839 2,904 294
29,283	34,421	30,778	31,037

Deferred tax liabilities:

At beginning of year/period Charged to the profit and loss account during the year/period At end of year/period Provided for in respect of: Depreciation on fixed assets	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 – 128 595 128 467 82 128 595 677 128 595 677	For the six months ended 30 June 2004 RMB’000 677 385
		1,062

		1,062

−74 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

10. Fixed assets

(a) Movements

Land and buildings RMB’000 313,442 1,796 (16,795) –	Electronic equipment RMB’000 50,238 10,107 (2,093) (43)	Motor vehicles Construction in progress RMB’000 RMB’000 181,775 2,533 13,139 1,235 (6,299) – (143) –	Motor vehicles Construction in progress RMB’000 RMB’000 181,775 2,533 13,139 1,235 (6,299) – (143) –	Others RMB’000 50,325 5,411 (4,212) (95)	Total RMB’000 598,313 31,688 (29,399 (281
298,443 - - - - - - - 37,690 9,795 (4,486) –	58,209 - - - - - - - 24,978 7,267 (1,831) (40)	188,472 - - - - - - - 115,062 19,472 (5,492) (119)	3,768 - - - - - - - – – – –	51,429 - - - - - - - 26,203 9,029 (3,583) (84)	600,321 - - - - - - - 203,933 45,563 (15,392 (243
42,999 - - - - - - - 255,444	30,374 - - - - - - - 27,835	128,923 - - - - - - - 59,549	– - - - - - - - 3,768	31,565 - - - - - - - 19,864	233,861 - - - - - - -
					366,460

298,443 – 1,685 (694) – 299,434 - - - - - - - 42,999 9,402 (83) –	58,209 – 7,473 (9,492) 61 56,251 - - - - - - - 30,374 10,113 (8,121) 56	188,472 293 5,253 (7,990) 127 186,155 - - - - - - - 128,923 14,296 (6,081) 81	3,768 – 5,343 – – 9,111 - - - - - - - – – – –	51,429 1,854 11,174 (9,328) 459 55,588 - - - - - - - 31,565 10,210 (8,222) 358	600,321 2,147 30,928 (27,504 647
					606,539 - - - - - - - 233,861 44,021 (22,507 495
52,318 - - - - - - - 247,116	32,422 - - - - - - - 23,829	137,219 - - - - - - - 48,936	– - - - - - - - 9,111	33,911 - - - - - - - 21,677	255,870 - - - - - - -
					350,669

−75 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

Land and buildings RMB’000 299,434 – (49,581) –	Electronic equipment RMB’000 56,251 10,095 (3,604) 19	Motor vehicles Construction in progress RMB’000 RMB’000 186,155 9,111 13,186 11,605 (19,516) − 35 –	Motor vehicles Construction in progress RMB’000 RMB’000 186,155 9,111 13,186 11,605 (19,516) − 35 –	Others RMB’000 55,588 15,285 (4,194) 319	Total RMB’000 606,539 50,171 (76,895 373
249,853 - - - - - - - 52,318 9,138 (5,839) –	62,761 - - - - - - - 32,422 7,989 (3,213) 18	179,860 - - - - - - - 137,219 11,162 (13,927) 26	20,716 - - - - - - - – – – –	66,998 - - - - - - - 33,911 9,427 (3,329) 268	580,188 - - - - - - - 255,870 37,716 (26,308 312
55,617 - - - - - - - 194,236	37,216 - - - - - - - 25,545	134,480 - - - - - - - 45,380	– - - - - - - - 20,716	40,277 - - - - - - - 26,721	267,590 - - - - - - -
					312,598

249,853 – – – 249,853 - - - - - - - 55,617 4,232 – –	62,761 3,673 (1,650) (10) 64,774 - - - - - - - 37,216 4,003 (1,212) (8)	179,860 6,912 (3,737) (3) 183,032 - - - - - - - 134,480 5,563 (3,254) (2)	20,716 7,602 – – 28,318 - - - - - - - – – – –	66,998 1,843 (1,090) (80) 67,671 - - - - - - - 40,277 3,804 (643) (73)	580,188 20,030 (6,477 (93
					593,648 - - - - - - - 267,590 17,602 (5,109 (83
59,849 - - - - - - - 190,004	39,999 - - - - - - - 24,775	136,787 - - - - - - - 46,245	– - - - - - - - 28,318	43,365 - - - - - - - 24,306	280,000 - - - - - - -
					313,648

−76 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(b) Land and buildings pledged as security for bank loans (Note 19) were as follows:

				As at
	As at 31 December			30 June
	2001	2002	2003	2004
	RMB’000	RMB’000	RMB’000	RMB’000
Net book value of land and buildings
pledged	132,566	80,318	76,683	71,666

Cost Aggregate depreciation Net book value of land and buildings leased out	As 2001 RMB’000 13,959 (628) 13,331	at 31 December 2002 2003 RMB’000 RMB’000 13,959 13,959 (1,256) (1,885) 12,703 12,074	As at 30 June 2004 RMB’000 13,959 (2,199
			11,760

(d) Included in the net book value of land and buildings as at 30 June 2004 are amounts of RMB36,436,000 (31 December 2001: RMB41,519,000; 31 December 2002: RMB39,456,000, 31 December 2003: RMB37,450,000) which represent properties in respect of which the Eas PRC Group had no property certificates. The directors, having sought legal advice, are of the opinion that Eas PRC should meet all the conditions to apply for the property certificates without having to incur any material costs, and is therefore considered to have all the risks and rewards associated with the ownership of such properties.
(e) All properties are located in the PRC with lease period up to the 50 years.

11. Goodwill

As 2001 RMB’000 – –	at 31 December 2002 2003 RMB’000 RMB’000 – 4,731 4,731 –	at 31 December 2002 2003 RMB’000 RMB’000 – 4,731 4,731 –	As at 30 June 2004 RMB’000 4,731 –
– - - - - - - - - - - – –	4,731 - - - - - - - - - - – 236	4,731 - - - - - - - - - - 236 237	4,731 - - - - - - - - - - 473 118
– - - - - - - - - - - –	236 - - - - - - - - - 4,495	473 - - - - - - - - - 4,258	591 - - - - - - - - -
			4,140

−77 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

12. Associates

Unlisted investments, at cost Share of post-acquisition profits less losses Dividends received	As 2001 RMB’000 45,303 5,925 (1,488) 49,740	at 31 December 2002 2003 RMB’000 RMB’000 45,303 46,256 8,297 12,033 (3,535) (4,908) 50,065 53,381	As at 30 June 2004 RMB’000 49,981 13,902 (5,266)
			58,617

Please refer to note 25(b) for a list of the principal associates of Eas PRC Group.

13. Prepayments, deposits and other current assets

Dividend receivables Prepaid expenses Others Total	As 2001 RMB’000 1,017 5,402 118 6,537	at 31 December 2002 2003 RMB’000 RMB’000 2,706 962 5,183 5,792 – 37 7,889 6,791	As at 30 June 2004 RMB’000 240 6,028 39
			6,307

The prepaid expenses mainly represent rental paid in advance and prepaid insurance premium for staff and vehicles.

14. Inventories

These mainly represent supplies and consumables and spares parts.

Inventory, at cost Less: Provision for obsolescence	As 2001 RMB’000 3,000 (243) 2,757	at 31 December 2002 2003 RMB’000 RMB’000 5,199 2,356 (243) (42) 4,956 2,314	As at 30 June 2004 RMB’000 2,192 (42)
			2,150

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

15. Trade and other receivables

Trade receivables (note (a)) Bills receivable (note (b)) Other receivables (note (c)) Due from group companies (note (d))	As 2001 RMB’000 339,775 250 59,725 93,191 492,941	at 31 December 2002 2003 RMB’000 RMB’000 380,938 441,493 2,394 1,458 43,834 61,744 97,839 106,574 525,005 611,269	As at 30 June 2004 RMB’000 469,306 1,611 45,128 109,699
			625,744

(a) Trade receivables

Trade receivables Less: Provision for doubtful debts	As 2001 RMB’000 368,330 (28,555) 339,775	at 31 December 2002 2003 RMB’000 RMB’000 413,719 468,404 (32,781) (26,911) 380,938 441,493	As at 30 June 2004 RMB’000 495,792 (26,486
			469,306

The credit period of Eas PRC Group’s trade receivables generally ranges from 1 to 3 months.

Aging analyses of trade receivables at the respective balance sheet dates are as follows:

Within 6 months Between 6 and 12 months Between 1 and 2 years Over 2 years	As 2001 RMB’000 319,685 10,014 16,935 21,696 368,330	at 31 December 2002 2003 RMB’000 RMB’000 357,967 417,510 11,761 20,954 14,552 9,651 29,439 20,289 413,719 468,404	As at 30 June 2004 RMB’000 455,354 12,167 7,991 20,280
			495,792

(b) Bills receivable

Bills receivable are bills of exchange with maturity dates of within 6 months.

(c) Other receivables

Deposits receivable Others	As 2001 RMB’000 13,856 45,869 59,725	at 31 December 2002 2003 RMB’000 RMB’000 19,500 24,622 24,334 37,122 43,834 61,744	As at 30 June 2004 RMB’000 26,783 18,345
			45,128

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(d) Due from group companies

The amounts due from group companies can be analysed as follows:

As 2001 RMB’000 – 525	at 31 December 2002 2003 RMB’000 RMB’000 – – 3,025 6,561	at 31 December 2002 2003 RMB’000 RMB’000 – – 3,025 6,561	As at 30 June 2004 RMB’000 575 3,215
525 –	3,025 –	6,561 –	3,790 –
525	3,025	6,561	3,790

91,050 19,016 110,066 (17,400)	93,399 19,302 112,701 (17,887)	98,458 19,442 117,900 (17,887)	104,819 18,977
			123,796 (17,887
92,666	94,814	100,013	105,909

91,050 525 19,016 110,591 (17,400)	93,399 3,025 19,302 115,726 (17,887)	98,458 6,561 19,442 124,461 (17,887)	105,394 3,215 18,977
			127,586 (17,887
93,191	97,839	106,574	109,699

The aging of the amounts due from ultimate holding company and associates, which are trading in nature with similar terms as other trade receivables, is summarised as follows:

Within 6 months Between 6 and 12 months Between 1 and 2 years Over 2 years	As 2001 RMB’000 525 – – – 525	at 31 December 2002 2003 RMB’000 RMB’000 3,025 5,688 – 47 – 826 – – 3,025 6,561	As at 30 June 2004 RMB’000 3,766 5 12 7
			3,790

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

16. Cash and bank deposits

Included in the cash and bank deposits as at 31 December 2001, 2002 and 2003, and 30 June 2004 are Renminbi denominated balances kept in the PRC amounting to RMB166,129,000, RMB188,997,000, RMB288,143,000 and RMB173,991,000 respectively. The conversion of Renminbi denominated balanes into foreign currencies and the remittance of bank balances and cash out of the PRC are subject to the rules and regulation of foreign exchange control promulgated by the PRC government.

17. Trade payables

Trade payables (note (a)) Due to associates (note (b))	As 2001 RMB’000 253,114 451 253,565	at 31 December 2002 2003 RMB’000 RMB’000 277,271 306,474 917 162 278,188 306,636	As at 30 June 2004 RMB’000 259,825 1,542
			261,367

(a) Trade payables

The normal credit period for trade payables generally ranges from 1 to 3 months. Aging analyses of trade payables at the respective balance sheet dates are as follows:

Within 6 months Between 6 and 12 months Between 1 and 2 years Over 2 years	As 2001 RMB’000 211,591 10,844 15,708 14,971 253,114	at 31 December 2002 2003 RMB’000 RMB’000 224,109 250,252 12,035 25,431 15,729 16,272 25,398 14,519 277,271 306,474	As at 30 June 2004 RMB’000 199,023 22,834 22,903 15,065
			259,825

(b) Due to associates

The aging of the amounts due to associates, which are trading in nature with similar credit terms as other trade payables, is summarised as follows:

Within 6 months Between 6 and 12 months Between 1 and 2 years Over 2 years	As 2001 RMB’000 91 13 33 314 451	at 31 December 2002 2003 RMB’000 RMB’000 549 128 8 4 15 24 345 6 917 162	As at 30 June 2004 RMB’000 1,513 11 6 12
			1,542

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

18. Other payables, accruals and other current liabilities

Other payables and accruals (note (a)) Due to group companies (note (b))	As 2001 RMB’000 100,580 47,691 148,271	at 31 December 2002 2003 RMB’000 RMB’000 86,817 106,786 43,064 43,357 129,881 150,143	As at 30 June 2004 RMB’000 83,184 40,572
			123,756

(a) Other payables and accruals

Accrued expenses Customers’ deposits Advances received Other tax payable Others	As 2001 RMB’000 18,457 90 12,000 7,810 62,223 100,580	at 31 December 2002 2003 RMB’000 RMB’000 16,441 36,288 37 932 2,000 2,000 4,901 5,108 63,438 62,458 86,817 106,786	As at 30 June 2004 RMB’000 23,946 2,340 2,000 3,420 51,478
			83,184

(b) Due to group companies

The amounts due to group companies can be analysed as follows:

Ultimate holding company Fellow subsidiaries Associates	As 2001 RMB’000 15,190 20,576 11,925 47,691	at 31 December 2002 2003 RMB’000 RMB’000 16,289 16,289 12,000 12,000 14,775 15,068 43,064 43,357	As at 30 June 2004 RMB’000 16,289 12,000 12,283
			40,572

Amounts due to group companies are of non-trade nature and are generally unsecured and non-interest bearing.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

19. Borrowings

(a) Borrowings include bank loans and other loans which are analysed as follows:

As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 195,700 303,478 157,500 222,054 49,703 142 – 53,500 – 19,310 29,960 29,960 20,000 – –	As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 195,700 303,478 157,500 222,054 49,703 142 – 53,500 – 19,310 29,960 29,960 20,000 – –	As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 195,700 303,478 157,500 222,054 49,703 142 – 53,500 – 19,310 29,960 29,960 20,000 – –	As at 30 June 2004 RMB’000 84,500 609 – 29,960 –
457,064 - - - - - - - - 13,203 –	436,641 - - - - - - - - – 53,500	187,602 - - - - - - - - 209,660 –	115,069 - - - - - - - - 209,660 –
13,203 - - - - - - - - 470,267	53,500 - - - - - - - - 490,141	209,660 - - - - - - - - 397,262	209,660 - - - - - - - -
			324,729

217,625 252,439	321,663 168,478	214,763 182,499	170,229 154,500
470,064	490,141	397,262	324,729

(b) Eas PRC Group’s long-term bank loans were repayable as follows:

Bank borrowings: Within 1 year Between 1 and 2 years Between 2 and 5 years Less: current portion	As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 222,054 49,703 142 13,203 – – – – 209,660	As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 222,054 49,703 142 13,203 – – – – 209,660	As at 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 222,054 49,703 142 13,203 – – – – 209,660	As at 30 June 2004 RMB’000 609 59,660 150,000
	235,257 (222,054)	49,703 (49,703)	209,802 (142)	210,269 (609
	13,203	–	209,660	209,660

The bank loans are mainly denominated in Renminbi or United States Dollar with interest rates ranging from 5.16% to 6.18% per annum.

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

The secured bank loans were secured by the following:

Cash and cash equivalents pledged Land and buildings (note 10(b)) Total	As 2001 RMB’000 36,202 132,566 168,768	at 31 December 2002 2003 RMB’000 RMB’000 8,280 29,480 80,318 76,683 88,598 106,163	As at 30 June 2004 RMB’000 – 71,666
			71,666

(c) Loans from a shareholder are unsecured, interest bearing at Hong Kong Interbank borrowing rate plus 1% per annum and repayable within two years. The loans were fully settled during 2003.

(d) Short-term loans from a fellow subsidiary are unsecured, interest bearing at London Interbank borrowing rate plus 1.5% per annum.

(e) Short-term loan from related party was unsecured, non-interest bearing and fully settled during 2002.

−84 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

20. Notes to consolidated cash flow statements

(a) Reconciliation of profit before taxation to cash generated from/(used in) operations

Profit before taxation Interest income Interest expense Loss on disposal of fixed assets Provision for receivables Depreciation of fixed assets Amortisation of goodwill Decrease in other non-current assets Share of results of associates, before taxation Profit before taxation before working capital change Decrease/(increase) in prepayments, deposits and other current assets Decrease/(increase) in inventories Increase in trade and other receivables Increase/(decrease) in trade payables Increase/(decrease) in other payables accruals and other current liabilities Increase/(decrease) in receipts in advance from customers Increase/(decrease) in salary and welfare payable Exchange difference Cash generated from/ (used in) operations	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467 (1,704) (1,456) (1,370) 30,948 26,303 21,993 5 709 971 19,275 9,673 5,415 45,563 44,021 37,716 – 236 237 402 424 100 (3,499) (2,965) (4,670)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467 (1,704) (1,456) (1,370) 30,948 26,303 21,993 5 709 971 19,275 9,673 5,415 45,563 44,021 37,716 – 236 237 402 424 100 (3,499) (2,965) (4,670)	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 12,822 39,526 102,467 (1,704) (1,456) (1,370) 30,948 26,303 21,993 5 709 971 19,275 9,673 5,415 45,563 44,021 37,716 – 236 237 402 424 100 (3,499) (2,965) (4,670)	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 36,115 50,561 (668) (542) 12,074 8,347 88 239 2,103 1,089 18,941 17,602 118 118 50 50 (2,104) (2,336) 66,717 75,128 893 (238) 2,672 164 (88,634) (15,564) 13,479 (45,269) (68,655) (26,135) (809) 1,399 (8,961) 1,146 590 393 (82,708) (8,976)	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 36,115 50,561 (668) (542) 12,074 8,347 88 239 2,103 1,089 18,941 17,602 118 118 50 50 (2,104) (2,336) 66,717 75,128 893 (238) 2,672 164 (88,634) (15,564) 13,479 (45,269) (68,655) (26,135) (809) 1,399 (8,961) 1,146 590 393 (82,708) (8,976)
	103,812 (5,520) 132 (115,006) 53,849 40,355 392 20,445 38	116,471 337 (2,199) (20,474) 8,197 (26,548) (38) 22,227 2,539	162,859 (646) 2,642 (91,679) 28,448 20,738 12,136 (2,698) 2,826	66,717 893 2,672 (88,634) 13,479 (68,655) (809) (8,961) 590	75,128 (238 164 (15,564 (45,269 (26,135 1,399 1,146 393
	98,497	100,512	134,626	(82,708)

−85 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(b) Acquisition of a subsidiary

Net assets acquired: Fixed assets Cash and cash equivalents Trade receivables Other receivables Trade payables Other payables Minority interests Share of net assets Goodwill on acquisition of a subsidiary Consideration paid Satisfied by cash paid Net cash outflow arising on acquisition: Cash consideration Cash and cash equivalents acquired	During the year ended 31 December 2002 RMB’000 2,147 10,523 17,977 3,286 (16,426) (5,584) 11,923 (5,842) 6,081 4,731 10,812 10,812 (10,812) 10,523 (289)

(c) Analysis of changes in financing during the Relevant Periods

At 1 January New bank borrowings Repayment of bank borrowings At 31 December/30 June	Bank loans For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 435,287 430,957 353,181 431,015 444,954 502,602 (435,345) (522,730) (488,481) 430,957 353,181 367,302	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 353,181 367,302 178,165 60,609 (98,299) (133,142) 433,047 294,769

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

At 1 January New other borrowings Repayment of other borrowings At 31 December/30 June	Other loans For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 – 39,310 136,960 44,610 136,960 – (5,300) (39,310) (107,000) 39,310 136,960 29,960	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 136,960 29,960 – – (53,500) – 83,460 29,960	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 136,960 29,960 – – (53,500) – 83,460 29,960
			29,960

At 1 January lncrease/(decrease) in pledged deposits At 31 December/30 June	Pledged deposits For the year ended 31 December For the six months ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – 36,202 8,280 8,280 29,480 36,202 (27,922) 21,200 (8,280) (29,480) 36,202 8,280 29,480 – –	Pledged deposits For the year ended 31 December For the six months ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – 36,202 8,280 8,280 29,480 36,202 (27,922) 21,200 (8,280) (29,480) 36,202 8,280 29,480 – –
		–

(d) Major non-cash transaction

The transfer of subsidiaries from the ultimate holding company during 2001 was settled by setting off against intercompany balance.

21. Contingent liabilities

(a) Guarantees

											As at
						As	at	31 December			30 June
						2001		2002		2003	2004
						RMB’000		RMB’000	RMB’000		RMB’000
Loan	guarantees	granted	to	third	parties	29,000		13,500		78,700	78,700

Included in the loan guarantees granted to third parties as at 30 June 2004 are amounts of RMB40 million and RMB25 million granted to two borrowers respectively which are in default. In respect of the RMB40 million guarantee, the borrower, its holding company, Eas PRC and the lending bank have been in negotiation for the extension of the loan and for a counter guarantee to be given by the holding company of the borrower to Eas PRC. In respect of the RMB25 million guarantee, the borrower and Eas PRC are in negotiation to seek to recover the assets of the borrower in order to reduce the exposure of Eas PRC. As at the date of this report, the above negotiations are still ongoing. No provision has been made as the directors cannot reliably estimate the ultimate liability, if any, which will be attributable to Eas PRC as a result of these guarantees.

−87 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(b) Pending litigations

At 30 June 2004, Eas PRC Group had contingent liabilities in respect of a number of litigation proceedings. Save for the cases disclosed below, the directors of Eas PRC are of the opinion that there is no other pending litigation which would have a significant financial impact on the Eas PRC Group.

(i) Malaysian Airlines Case

Malaysian Airline System Berhad, together with five other plaintiffs, brought an action in the High Level People’s Court of Beijing on or about 13 March 2002 for damages, costs and interest, against Eas PRC and other defendants (subsequently increased to a total number of six) on a joint and several basis in relation to the damage caused to a Malaysian Airline aircraft on 15 March 2000 in respect of the transportation of certain chemical substance. The amount claimed by the plaintiffs is approximately US$66 million.

A hearing took place in June 2004 but was adjourned on account of certain evidential and procedural issues to be resolved, and no new hearing date has yet been fixed at the date of this report. No provision has been made in respect of this case as the directors, having sought legal advice, are of the opinion that the final outcome of this case is not known.

For details of the case, please refer to the paragraph headed “Litigation” as set out in Appendix VII to this circular.

(ii) Liability as guarantor

Hubei Province Foreign Economic Trading Industrial Company (“Hubei Borrower”) borrowed loans totalling RMB22 million from China Dongfang Asset Management Company Wuhan Office (“the Plaintiff”) where Eas PRC, Hubei Branch acted as the guarantor.

Since Hubei Borrower was unable to repay the loan in accordance with the loan agreements, the Plaintiff filed three separate law suits against Eas PRC, Hubei Branch at Hubei Municipal Intermediate People’s Court.

On 9 July 2004, three judgements were handed down by the Hubei Municipal Intermediate People’s Court, which held that Eas PRC, Hubei Branch and Eas PRC were liable as guarantor with regard to the relevant loan agreements.

The total potential liability, exclusive of interest to be calculated from the judgement date, payable by Eas PRC under the three decisions is approximately RMB15 million.

Eas PRC lodged an appeal against these judgements, and a hearing was held on 28 October 2004 at the Hubei Provincial High Level People’s Court. The Plaintiff has proposed to settle the case for an amount of RMB3 million which has not been agreed by Eas PRC.

At the date of the report, the court has not given its ruling on the case. No provision has been made as the directors, having sought legal advice, are of the opinion that the final outcome of this case is not known.

(c) Indemnity

In connection with the Acquisition as set out in note 1, Huatong had undertaken to idemnify the Eas PRC Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities arising from all litigations against the Eas PRC Group and guarantees granted by the Eas PRC Group before the Acquisition.

−88 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

22. Capital commitments

Eas PRC Group has the following outstanding capital commitments not provided for in the consolidated financial statements:

Authorised and contracted for but not recorded Authorised but not contracted for	As 2001 RMB’000 32,528 – 32,528	at 31 December 2002 2003 RMB’000 RMB’000 26,204 16,626 – – 26,204 16,626	As at 30 June 2004 RMB’000 13,374 –
			13,374

An analysis of the above capital commitments by nature is as follows:

Construction commitment Purchase of software	As 2001 RMB’000 30,432 2,096 32,528	at 31 December 2002 2003 RMB’000 RMB’000 24,782 16,310 1,422 316 26,204 16,626	As at 30 June 2004 RMB’000 12,734 640
			13,374

23. Operating lease commitments

(a) Eas PRC Group as lessee

Eas PRC Group has commitments to make the following future minimum lease payments under non-cancellable operating leases:

As 2001 RMB’000 13,002 11,659 2,663	at 31 December 2002 2003 RMB’000 RMB’000 18,406 16,652 31,619 21,754 19,604 9,159	at 31 December 2002 2003 RMB’000 RMB’000 18,406 16,652 31,619 21,754 19,604 9,159	As at 30 June 2004 RMB’000 15,989 26,323 4,860
27,324 724 769 1,655 3,148 1,086	69,629 165 496 1,681 2,342 4,726	47,565 1,006 1,068 1,568 3,642 4,074	47,172 2,580 732 1,655
			4,967 4,376
31,558	76,697	55,281	56,515

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ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

(b) Eas PRC Group as lessor

Eas PRC Group has contracted with customers for the following future minimum lease receivables:

Land and buildings – Not later than one year – Later than one year but not later than five years – Later than five years	As 2001 RMB’000 2,167 8,667 4,887 15,721	at 31 December 2002 2003 RMB’000 RMB’000 2,167 2,167 7,739 6,772 3,648 2,448 13,554 11,387	As at 30 June 2004 RMB’000 2,167 6,289 1,848
			10,304

24. Related parties transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

In addition to the related party transactions disclosed elsewhere in the Financial Information, the Group had the following related party transactions during the Relevant Periods:

Transactions with associates: Revenue from provision of freight services Revenue from provision of other logistic services Transportation services cost paid Transaction with a shareholder: Transportation services cost paid	For the year ended 31 December 2001 2002 2003 RMB’000 RMB’000 RMB’000 11,506 18,461 35,409 3,487 989 1,991 9,990 15,367 31,511 14,289 3,820 –	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 12,690 26,679 1,196 2,130 11,072 17,466 – –	For the six months ended 30 June 2003 2004 RMB’000 RMB’000 12,690 26,679 1,196 2,130 11,072 17,466 – –

			–

These transactions are entered into at terms agreed with these related parties in the ordinary course of business.

−90 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

25. Particulars of principal subsidiaries and associates

The following table includes the particular of principal subsidiaries and associates of the Eas PRC Group, as of the date of this report which in the opinion of the Directors, were significant to the results of the Eas PRC Group or formed a substantial portion of net asset of the Eas PRC Group. To give details of other subsidiaries and associates would result in particular of excessive length.

		Country/
		place of
		incorporation/
		establishment and		Attributable
		date of	Issued and fully	equity	interest
		incorporation/	paid-up	Directly	Indirectly		Principal	Auditors of the latest
Name		establishment	share capital	held		held	activities	published account
*(a)*	*Subsidiaries*
#EAS	International Logistics	Shanghai, PRC	Registered capital	75.00%	25.00%		Warehousing,	Shanghai Qiuxin
(Shanghai) Co., Ltd.		13 August 1998	of US$6,000,000				depot and cargo	Certified Public
							services	Accountant
^#EAS	International (Beijing)	Beijing, PRC	Registered capital	80.00%		–	Warehousing	N/A
Logistics		20 June 1997	of
Co., Ltd.			RMB30,000,000
†Shenzhen EAS International		Shenzhen, PRC	Registered capital	100.00%		–	Air and marine	Beijing Jing Du
Transportation Ltd.		30 October 1993	of US$1,000,000				transportation	Certified Public
								Accountants Co.,
								Ltd.
^@EAS	International (Shanghai,	Shanghai, PRC	Registered capital	80.00%		–	Trucking	Shanghai Zhong Hui
Songjiang) Logistics Co., Ltd.		29 November 2001	of RMB2,500,000					Certified Public
								Accountants Co.,
								Ltd.
#EAS	International Logistics	Qingdao, PRC	Registered capital	60.00%	40.00%		Distribution,	N/A
(Qingdao) Limited Company		13 March 2003	of US$200,000				warehousing,
							depot and
							international
							trade
*EAS	International	Hong Kong	100,000	100.00%		–	Freight	Deloitte Touche
Transportation (HK) Limited		16 November 1993	ordinary shares of				forwarding and	Tohmatsu
			HK$1 each				logistics
							services
EAS	Transportation (M) Sdn.	Malaysia	1,500,000	69.00%		–	Forwarding,	Peter Chong & Co.
Bhd.		23 October 1996	ordinary shares of				packing,	Chartered
			RM1 each				hauling and	Accountants
							transport
							agency
EAS	International Shipping	Singapore	350,000	60.00%		–	Marine freight	K.S. Ng & Co,
Pte Ltd.		9 November 1993	ordinary shares of				transport	Certified Public
			S$1 each				agencies	Accountants

−91 −

ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP

APPENDIX III

		Country/
		place of
		incorporation/
		establishment and		Attributable
		date of	Issued and fully	equity	interest
		incorporation/	paid-up	Directly	Indirectly		Principal	Auditors of the latest
Name		establishment	share capital	held		held	activities	published account
*(b)*	*Associates*
#Huahan (Tianjin) Container Co.,		Tianjin, PRC	Registered capital	30.00%		–	Freight	Tianjin Xingang
Ltd.		16 November 1993	of US$7,524,500				forwarding,	Certified Public
							shipping	Accountants Ltd.
							agency and
							container
							services
#Dalian Hantong Logistics Co.,		Dalian, PRC	Registered capital	50.00%		–	Warehousing and	Dalian Hengping
Ltd.		13 October 1994	of US$2,720,000				container	United Accounting
							maintenance	Services
Eas System (M) Sdn. Bhd.		Malaysia	10,000	48.95%		–	Customs	Peter Chong & Co.
		2 October 1997	ordinary shares of				brokerage	Chartered
			RM1 each					Accountants
East Asia Shipping International		Madrid	20,000 ordinary	50.00%		–	Transportation	RSM Audihispana
Espana, S.A.		21 February 1995	shares of				forwarding and
			PTA1,000 each				materials
							handing

The financial year end of all subsidiaries/associates is 31 December except that of this subsidiary has been changed from 25 December to 31 December since 26 December 2003.
Sino-foreign equity joint venture enterprise.
Wholly foreign-owned enterprise.
@ Domestic joint venture enterprise.
^ English translation of name only.

26. Subsequent event

On 29 September 2004, Eas PRC declared profit distribution of RMB158 million.

27. Ultimate holding company

As at the date of this report, the directors regard Huatong Industrial Development Co., Ltd. established in the PRC, as being the ultimate holding company.

III. SUBSEQUENT ACCOUNTS

No audited accounts of Eas PRC or any of its subsidiaries have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

−92 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1. FINANCIAL SUMMARY

Set out below is a summary of the published audited consolidated results of the Group for each of the last three financial years ended 31 December 2003, the audited net asset values of the Group as at 31 December 2001, 31 December 2002 and 31 December 2003, the unaudited consolidated results of the Group for the six months ended 30 June 2004 and the unaudited net asset value of the Group as at 30 June 2004:

Six months ended 30 June 2004 HK$’000 2,631,849	Year ended 31 December 2003 HK$’000 4,204,466	Year ended 31 December 2002 As restated HK$’000 5,156,162	Year ended 31 December 2001 As restated HK$’000 5,036,408 527,285 (272,780) 254,505 (83,165) 171,340 (23,910) 147,430 12.85 31 December 2001 As restated HK$’000 35,264,433 (14,448,274) 20,816,159 18.01
694,359 224,241 918,600 (152,364) 766,236 (68,266)	436,564 135,758 572,322 (111,192) 461,130 (66,389)	678,896 108,838 787,734 (175,988) 611,746 (12,075)	527,285 (272,780
			254,505 (83,165
			171,340 (23,910
697,970 58.44	394,741 33.44	599,671 51.50
30 June 2004 HK$’000 31,717,863 (11,298,689)	31 December 2003 HK$’000 30,836,996 (10,954,437)	31 December 2002 As restated HK$’000 31,879,629 (12,083,199)	31 December 2001 As restated HK$’000 35,264,433 (14,448,274
20,419,174 17.08	19,882,559 16.69	19,796,430 16.91

−93 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below is the audited consolidated financial statements of the Group for the year ended 31 December 2003 as extracted from the Company’s 2003 annual report. For the purpose of this Appendix IV, the following expressions correspond with the definitions of this document respectively set opposite them:

“share” or “ordinary shares”

“shareholders”

Shares of the Company

Shareholders

−94 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Consolidated Profit and Loss Account

For the year ended 31 December 2003

Note	2003 HK$’000	As restated 2002 HK$’000
Turnover 2 Cost of sales Direct operating expenses Gross profit Other revenues 2 Other income Provision in respect of stock of completed properties held for sale Revaluation deficit on investment properties and other leasehold land and buildings Administrative expenses Operating profit before finance costs 3 Finance costs 4 Operating profit Share of results of associated companies Share of profits less losses Provision for decline in carrying value Profit before taxation Taxation 5 Profit after taxation Minority interests Profit attributable to shareholders 6 Earnings per share 8	4,204,466 (1,441,512) (1,603,609) 1,159,345 37,436 52,005 (69,346) (290,236) (278,002) 611,202 (174,638) 436,564 246,567 (110,809) 135,758 572,322 (111,192) 461,130 (66,389) 394,741 33.44 cents	5,156,162 (2,387,768) (1,389,164) 1,379,230 55,915 39,697 (266,000) (13,941) (298,875) 896,026 (217,130) 678,896
		108,838 –
		108,838 787,734 (175,988) 611,746 (12,075) 599,671 51.50 cents

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Consolidated Balance Sheet

As at 31 December 2003

Note	2003 HK$’000	As restated 2002 HK$’000
(Negative goodwill)/goodwill 11 Fixed assets 12 Associated companies 14 Other non-current assets 15 Current assets Stock of completed properties held for sale 16 Properties under development for sale 17 Accounts receivable, prepayments and deposits 18 Tax recoverable Tax reserve certificates Trading securities 19 Pledged bank deposits 33 Cash and bank balances Current liabilities Accounts payable, deposits received and accrued charges 20 Taxation Short-term bank loans and current portion of long-term liabilities 27 Unsecured bank overdrafts Net current assets Total assets less current liabilities Financed by: Share capital 21 Share premium 23 Other reserves 24 Retained profits 25 Proposed final dividend 25 Shareholders’ funds Minority interests and loans 26 Long-term liabilities 27 Deferred taxation 28	(42,604) 20,960,492 4,621,841 1,495,763	45,004 20,890,174 5,080,824 1,589,987
	345,202 999,777 790,724 48,561 19,926 3,252 74,003 1,520,059	1,363,328 591,273 862,038 30,764 – 2,043 70,450 1,353,744
	3,801,504	4,273,640
	1,333,956 60,150 804,751 1,921	1,415,574 109,533 1,335,481 2,949
	2,200,778 1,600,726 28,636,218 1,191,527 3,628,591 9,209,944 5,673,768 178,729 19,882,559 2,375,499 22,258,058 5,403,213 974,947 28,636,218	2,863,537 1,410,103 29,016,092 1,170,551 3,478,011 9,386,344 5,621,058 140,466 19,796,430 2,527,566 22,323,996 5,719,091 973,005 29,016,092

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Balance Sheet

As at 31 December 2003

Note	2003 HK$’000	2002 HK$’000
Fixed assets 12 Subsidiaries 13 Current assets Dividends receivable Accounts receivable, prepayments and deposits Tax recoverable Cash and bank balances Current liabilities Accounts payable and accrued charges Short-term bank loans and current portion of long-term liabilities 27 Net current assets Total assets less current liabilities Financed by: Share capital 21 Share premium 23 Other reserves 24(f) Retained profits 25 Proposed final dividend 25 Shareholders’ funds Long-term liabilities 27	1,464 27,881,490 370,000 4,540 276 119,446 494,262	1,753 28,230,796
		360,000 3,031 423 308,423
		671,877
	14,948 472,222	13,856 650,000
	487,170 7,092 27,890,046 1,191,527 3,628,591 17,801,176 490,023 178,729 23,290,046 4,600,000 27,890,046	663,856 8,021 28,240,570 1,170,551 3,478,011 17,801,176 450,366 140,466 23,040,570 5,200,000 28,240,570

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Consolidated Cash Flow Statement

For the year ended 31 December 2003

Note	2003 HK$’000	As restated 2002 HK$’000
Operating activities Net cash generated from operations 29(a) Interest paid Hong Kong profits tax paid PRC and overseas tax paid Net cash from operating activities Investing activities Purchase of fixed assets, excluding interest capitalised Purchase of a subsidiary 29(d) Purchase of additional interest in subsidiaries Additional investments in associated companies Repayment of loans from/(additional loans to) associated companies Purchase of long-term investments Purchase of business Increase in long-term receivables Interest received Dividends received from associated companies Dividends received from listed and unlisted investments (Loans to)/repayment of loans from investee companies Proceeds from sale of trading securities Proceeds from sale of fixed assets Proceeds from sale of long-term investments Net cash used in investing activities Net cash inflow before financing	1,893,830 (264,093) (84,223) (116,440) 1,429,074	2,718,641 (285,204) (41,332) (74,109) 2,317,996
	(918,898) – (110,000) (9,217) 584,738 (155) (1,817) (30,068) 26,118 25,009 11,418 (220) – 159,767 18,573	(354,826) (74,397) – (32,176) (281,981) (2,576) – – 30,849 125,325 27,727 1,300 1,660 151,131 –
	(244,752) 1,184,322	(407,964) 1,910,032

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Note	2003 HK$’000	As restated 2002 HK$’000
Financing activities 29(b) Proceeds from issue of shares Consideration and expenses for purchase of shares for cancellation Repayment of bank loans Redemption of convertible bonds Drawdown of bank loans Dividends paid Capital injection from minority shareholders Dividends paid to minority shareholders in subsidiaries Decrease in loans from minority shareholders Net cash used in financing Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Analysis of balances of cash and cash equivalents Pledged bank deposits Cash and bank balances Unsecured bank overdrafts	37,609 – (2,402,270) – 1,545,681 (161,038) 474 (4,017) (29,865) (1,013,426) 170,896 1,421,245 1,592,141 74,003 1,520,059 (1,921) 1,592,141
		752 (1,251) (7,281,010) (1,993,282) 6,683,486 (227,526) 45,124 (200) (6,500)
		(2,780,407) (870,375) 2,291,620 1,421,245 70,450 1,353,744 (2,949) 1,421,245

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Consolidated Statement of Changes in Equity For the year ended 31 December 2003

Note	2003 HK$’000	As restated 2002 HK$’000
Total equity as at 1 January, as previously reported Effect of adopting revised SSAP 12 1(l) Total equity as at 1 January, as restated Revaluation deficit on properties charged to revaluation reserves 24 Impairment loss 24 Revaluation deficit on non-trading securities 24 Exchange differences arising on translation of the accounts of the PRC and overseas subsidiaries and associated companies 24 Provision for net deferred tax assets/(liabilities) credited/(charged) to revaluation reserves 24 Net losses not recognised in the profit and loss account Profit for the year 25 Relevant portion of properties revaluation reserves realised in the profit and loss account on disposal of properties 24 Dividends 25 Issue of share capital 21, 23 Purchase of shares for cancellation 21, 23 Total equity as at 31 December	21,000,570 (1,204,140) 19,796,430 (16,282) (91,345) (112,296) 26,418 8,322 (185,183) 394,741 – (294,985) 171,556 – 19,882,559
		21,897,390 (1,081,231)
		20,816,159
		(1,121,393) – (194,863) 47,684 (95,770)
		(1,364,342) 599,671 (27,033) (349,362) 122,588 (1,251) 19,796,430

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Notes To The Accounts

31 December 2003

1 PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated accounts are set out below:

(a) Basis of preparation

The accounts have been prepared under the historical cost convention as modified by the revaluation of investment properties, warehouses, logistics centres, freehold land and buildings and investments in securities, in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants (“HKSA”).

In the current year, the Group adopted the revised Statement of Standard Accounting Practice (“SSAP”) 12 “Income Taxes” issued by the HKSA which is effective for accounting periods commencing on or after 1 January 2003.

The changes to the Group’s accounting policies and the effect of adopting this new policy are set out below.

(b) Consolidation

The consolidated accounts include the accounts of the Company and its subsidiaries made up to 31 December.

Subsidiaries are those entities in which the Company, directly and indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; or to cast majority of votes at the meetings of the board of directors.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any unamortised goodwill or negative goodwill or goodwill/negative goodwill taken to reserves which was not previously charged to or recognised in the consolidated profit and loss account and any related accumulated exchange fluctuation reserve.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(b) Consolidation (Continued)

Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

An associated company is a company, not being a subsidiary, in which an equity interest is held for the long-term and significant influence is exercised in its management.

The consolidated profit and loss account includes the Group’s share of the post acquisition results of associated companies for the year and the consolidated balance sheet includes the Group’s share of the net assets of the associated companies and also goodwill/ negative goodwill on acquisition (net of accumulated amortisation).

Equity accounting is discontinued when the carrying amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.

(d) Equity joint ventures in the PRC

Equity joint ventures are Sino-foreign joint ventures in respect of which the partners’ capital contribution ratios are defined in the joint venture contracts and the partners’ profit sharing ratios are in proportion to the capital contribution ratios.

The Group’s investments in equity joint ventures are accounted for as long-term investments, associated companies or subsidiaries depending on the Group’s equity or controlling interest therein.

(e) Wholly foreign owned enterprises in the PRC

Interests in wholly foreign owned enterprises are accounted for as subsidiaries.

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(f) Goodwill/negative goodwill

Goodwill represents the excess of purchase consideration over the fair values ascribed to the net assets of the subsidiaries, associated companies and businesses acquired at the date of acquisition.

Goodwill on acquisitions occurring on or after 1 January 2001 is amortised using the straight-line method over its estimated useful life of not more than twenty years.

Goodwill on acquisitions that occurred prior to 1 January 2001 was written off against reserves.

Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition.

For acquisitions after 1 January 2001, negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognised in the consolidated profit and loss account when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the consolidated profit and loss account over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those non-monetary assets is recognised in the consolidated profit and loss account immediately.

For acquisitions prior to 1 January 2001, negative goodwill was taken directly to reserves on acquisition.

Where an indication of impairment exists, the carrying value of the goodwill, including goodwill previously written off against reserves, is assessed and written down to its recoverable amount.

The gain or loss on disposal of an entity includes the unamortised balance of goodwill or negative goodwill relating to the entity disposed of or, for pre 1 January 2001 acquisitions, the related goodwill or negative goodwill written off against reserves to the extent it has not previously been realised in the consolidated profit and loss account.

– 103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(g) Investments in securities
- (i) Non-trading securities

Investments which are held for non-trading purposes are stated at fair value at the balance sheet date. Changes in the fair value of individual securities are credited or debited to the non-trading securities revaluation reserve until the security is sold, or is determined to be impaired. Upon disposal, the cumulative gain or loss representing the difference between the net sales proceeds and the carrying amount of the relevant security, together with any surplus/deficit transferred from the nontrading securities revaluation reserve, is dealt with in the profit and loss account.

Individual investments are reviewed regularly to determine whether they are impaired. When an investment is considered to be impaired, the cumulative loss recorded in the revaluation reserve is taken to the profit and loss account. Transfers from nontrading securities revaluation reserve to the profit and loss account as a result of impairments are written back in the profit and loss account when the circumstances and events leading to the impairment cease to exist.

(ii) Trading securities

Trading securities are carried at fair value. At each balance sheet date, the net unrealised gains and losses arising from the changes in fair value of trading securities are recognised in the profit and loss account. Profits or losses on disposal of trading securities, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the profit and loss account as they arise.

(h) Properties and other fixed assets
(i) Investment properties

Investment properties, including hotel properties, are interests in land and buildings in respect of which construction work and development have been completed and are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at annual professional valuation at the balance sheet date. Changes in the value of investment properties are dealt with as movements in the investment properties revaluation reserve. If the total of this reserve is insufficient to cover a deficit on revaluation on a portfolio basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged. Investment properties are not depreciated except where the unexpired term of the lease is 20 years or less, in which case depreciation is provided on the carrying value over the remaining term of the lease.

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(h) Properties and other fixed assets (Continued)
- (i) Investment properties (Continued)

The gain or loss on disposal of an investment property, representing the difference between the net sales proceeds and the carrying amount of the relevant assets together with any revaluation reserve balance remaining attributable to the relevant asset, is recognised in the profit and loss account.

In prior years, the changes in the valuation of hotel properties of the Group are dealt with in the revaluation reserves on an individual basis. During the year, the directors have determined that all changes in valuation of the hotel properties should be dealt with in the revaluation reserves on a portfolio basis. The change in the accounting policy does not have material impact on the Group’s prior years and current year accounts.

(ii) Freehold and other leasehold land and buildings

Freehold land and buildings and both warehouses and logistics centres classified as other leasehold land and buildings are stated at valuation, being the open market value at the date of valuation, less subsequent aggregate depreciation and accumulated impairment losses. Changes in the value of freehold land and buildings, warehouses and logistics centres arising from revaluation are dealt with as movements in the freehold land and buildings revaluation reserve and other properties revaluation reserve, respectively. If the reserve is insufficient to cover a deficit on revaluation on an individual basis, the excess of the deficit on revaluation is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account on an individual basis to the extent of the deficit previously charged.

No depreciation is provided on freehold land. Depreciation on buildings situated on freehold land is calculated to write off their valuation less residual value on a straight-line basis over their expected useful lives to the Group. The principal annual rate used for this purpose is 2.5%.

Depreciation on both warehouses and logistics centres which are classified as other leasehold land and buildings is calculated to write off their valuation less residual value on a straight-line basis over their expected remaining useful lives to the Group ranging from ten to twenty-nine years.

Staff quarters are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the staff quarters and other costs incurred to bring them into existing use.

– 105 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(h) Properties and other fixed assets (Continued)
- (ii) Freehold and other leasehold land and buildings (Continued)

Depreciation on staff quarters is calculated to write off their cost on a straight-line basis over their expected useful lives to the Group. The principal annual rate used for this purpose is 5%.

The gain or loss on disposal of freehold and other leasehold land and buildings is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account. Any revaluation reserve balance remaining attributable to the relevant asset is transferred to retained profits and is shown as a movement in reserves.

(iii) Properties held for/under development

Properties held for/under development for long-term purposes are stated at cost less accumulated impairment losses.

Properties under development for sale are included in current assets and are stated at the lower of cost and net realisable value, if presale of properties has not commenced.

Properties under development for sale are included in current assets and are stated at cost plus attributable profits recognised on the basis set out in note 1(t)(i) less sales instalments received and receivable and provision for any foreseeable losses, if presale of properties has commenced.

Cost of properties in the course of development comprises land cost, fees for land use rights and development costs including attributable interest and professional charges capitalised during the development period. Where properties, previously held as investment properties, are subject to redevelopment, they are valued at the date redevelopment commenced. Cost of properties under development includes the carrying value of the properties at the date when redevelopment commences. The properties under development revaluation reserve is transferred to the investment properties revaluation reserve or completed properties revaluation reserve upon completion of redevelopment. If sales of the properties commence before redevelopment is completed, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the properties under development revaluation reserve to the profit and loss account.

– 106 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(h) Properties and other fixed assets (Continued)
- (iii) Properties held for/under development (Continued)

Net realisable value is determined by reference to sales proceeds of properties sold in the ordinary course of business less all estimated selling expenses after the balance sheet date, or by management estimates based on prevailing market conditions.

No depreciation is provided on properties held for/under development.

(iv) Stock of completed properties held for sale

Stock of completed properties held for sale are included in current assets and are stated at the lower of cost and net realisable value. Cost comprises land and development costs and is determined by apportionment of the total land and development costs attributable to the unsold properties.

Upon the disposal of stock of completed properties held for sale, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the completed properties revaluation reserve to the profit and loss account.

(v) Other fixed assets

Other fixed assets are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use.

Depreciation on other fixed assets is calculated to write off their cost on a straightline basis over their expected useful lives to the Group. The principal annual rates used for this purpose are:

Leasehold improvements 15% Warehouse operating equipment 5% to 20% Motor vehicles, furniture, fixtures and office equipment 15% to 20%

The gain or loss on disposal of other fixed assets is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognised in the profit and loss account.

– 107 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(h) Properties and other fixed assets (Continued)
- (vi) Cost of restoring and improving fixed assets

(vii) Impairment of assets

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in freehold and other leasehold land and buildings, properties held for/under development for long-term purposes and other fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account except where the asset is carried at valuation and the impairment loss does not exceed the revaluation surplus for that same asset, in which case it is treated as a revaluation decrease.

(i) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(j) Convertible bonds

Convertible bonds are stated at the aggregate of the net proceeds from the issue plus finance costs provided.

The net proceeds represent the amount received on the issue of the convertible bonds after deduction of direct issue costs. Direct issue costs are amortised to the profit and loss account on a straight-line basis over the period from the date of issue to the date on which the bondholders can exercise their redemption option (the “Bondholders’ Redemption Date”). If any of the convertible bonds are purchased and cancelled, redeemed or converted prior to the Bondholders’ Redemption Date, any remaining unamortised costs attributable to such convertible bonds will be written off immediately to the profit and loss account.

Finance costs represent the premium that is to be paid to the bondholders upon redemption on or before the Bondholders’ Redemption Date. The estimated premium is provided for at a constant rate over the period when the bondholders’ redemption option is outstanding and is charged to the profit and loss account. If any of the convertible bonds are purchased and cancelled or converted prior to the Bondholders’ Redemption Date, any provision of such redemption premium in previous years in respect of the convertible bonds purchased or converted will be taken to the profit and loss account.

– 108 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(j) Convertible bonds (Continued)

The gain or loss on purchase of convertible bonds, representing the difference between the consideration paid and the nominal value of the convertible bonds purchased, is recognised in the profit and loss account.

(k) Borrowing costs

Borrowing costs incurred on assets under active development that take a substantial period of time to be ready for their intended use or sale are capitalised into the carrying value of properties held for/under development. The capitalisation rate is based on attributable cost of the specific borrowings.

All other borrowing costs are charged to the profit and loss account in the year in which they are incurred.

(l) Deferred taxation

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associated companies except where the timing of the reversal of the temporary difference can be controlled and it is probable that temporary difference will not reverse in the foreseeable future.

In prior years, deferred taxation was accounted for at the current taxation rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset was expected to be payable or recoverable in the foreseeable future. The adoption of the revised SSAP 12 represents a change in accounting policy and pursuant to SSAP 2 “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies”, revised SSAP 12 has been applied retrospectively so that the comparatives presented have been restated to conform to the changed policy.

– 109 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(l) Deferred taxation (Continued)

As a result of the retrospective application of revised SSAP 12, an additional provision of HK$1,204,140,000 has been made for net deferred tax liabilities attributable to the Group as at 31 December 2002, of which HK$860,045,000 and HK$344,095,000 have been charged against reserves and retained profits, respectively. Accordingly, associated companies, other non-current assets and minority interests have been reduced by HK$310,294,000, HK$212,651,000 and HK$289,057,000, respectively and deferred taxation has been increased by HK$970,252,000. The previously reported profit attributable to shareholders for the year ended 31 December 2002 has also been reduced by HK$60,639,000.

(m) Employee benefits
(i) Employee leave entitlements

Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.

(ii) Profit sharing and bonus plans

The expected cost of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(iii) Retirement benefit costs

The Group’s contributions to the mandatory provident fund scheme and the defined contribution retirement schemes are expensed as incurred. Contributions to the defined contribution retirement scheme which is operated in Hong Kong are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of all these schemes are held separately and independently from those of the Group.

(iv) Share options

The nominal income received from the grantees as consideration for the grant is recognised as income upon acceptance by the grantees. No employee benefits cost is recognised when options are granted. When the options are exercised, equity is increased by the amount of the proceeds received.

– 110 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(n) Operating leases

(o) Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The balance sheets of subsidiaries and associated companies expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss accounts are translated at average rates. Exchange differences are dealt with as a movement in reserves.

(p) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks less bank overdrafts.

(q) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resource will be required or the amount of obligation cannot be measured reliably.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

– 111 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(r) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(s) Segment reporting

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.

Segment assets consist primarily of fixed assets, stock of completed properties held for sale, properties under development for sale, receivables and operating cash, and mainly exclude associated companies, other non-current assets, tax recoverable, tax reserve certificates and trading securities. Segment liabilities comprise operating liabilities and exclude items such as taxation, deferred taxation and minority interests and loans. Capital expenditure comprises additions to fixed assets including additions resulting from acquisitions through purchases of subsidiaries.

In respect of geographical segment reporting, turnover is based on the country of operations. Segment assets and capital expenditure are where the assets are located.

(t) Revenue and profit recognition
(i) The recognition of revenue and profits from the sale of properties under development in advance of completion commences when a legally binding contract of sale has been executed. The revenues and profits recognised in a year are a proportion of the total revenues and profits expected on completion, the proportion used being the percentage of the construction costs incurred at the end of the year to the estimated total construction costs on completion (with due allowances for contingencies). The profit so recognised is restricted to the amount of instalments received.

Where purchasers fail to pay the balances of the purchase price on completion and the Group exercises its right to resell the property, sales deposits received in advance of completion are forfeited and credited to operating profits; any profits recognised so far are reversed.

(ii) Revenue in respect of sale of completed properties and investment properties is recognised upon completion of sale agreements.

– 112 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(t) Revenue and profit recognition (Continued)
- (iii)Rental revenue and other revenues incidental to the letting of properties are recognised on a straight-line basis over the periods of the respective leases.
- (iv) Revenue from general storage and other ancillary services is recognised when the services are rendered. Revenue from leased storage is recognised on a straight-line basis over the periods of the respective leases.
- (v) Income on development consultancy and project management is recognised on a prorata basis according to the progress of the projects.
- (vi) Income from property management is recognised on an accrual basis.
- (vii) Hotel revenue from rooms rental, food and beverage sales and other ancillary services is recognised when the services are rendered.
- (viii)Dividend income is recognised when the right to receive payment is established.
- (ix) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

– 113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS
(a) The principal activities of the Group are disclosed in the Report of the Directors. Revenues recognised during the year are as follows:

	2003 HK$’000	2002 HK$’000
Turnover Proceeds from sale of properties – completed properties – PRC – Hong Kong – properties under development for sale in the PRC – property held for development in the PRC – investment properties – PRC – Hong Kong Rental income Hotel revenue Storage and services income – warehouse – logistics Development consultancy, project management and property management fees Other revenues Dividend income from: – listed investments – unlisted investments Interest income Total revenues	150,654 877,117 1,027,771 356,478 – 89,286 60,480 149,766 1,534,015 788,023 174,628
		299,057 2,294,771
		2,593,828 12,496 25,120
		64,811 37,223
		102,034 2,733,478 828,774 231,974
	358,928 1,307,786	399,094 918,495
	1,666,714 41,086 4,204,466	1,317,589 44,347 5,156,162
	62 11,356	61 27,666
	11,418 26,018 37,436 4,241,902	27,727 28,188 55,915 5,212,077

– 114 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(b) An analysis of the Group’s turnover and contribution to operating profit for the year by principal activities and markets is as follows:

	Turnover 2003 2002 HK$’000 HK$’000	Turnover 2003 2002 HK$’000 HK$’000	Operating profit 2003 2002 HK$’000 HK$’000	Operating profit 2003 2002 HK$’000 HK$’000
Principal activities: Property rental – PRC – Hong Kong Property sales – PRC – Hong Kong Hotel operations Logistics and warehouse operations – warehouse – logistics Infrastructure Project, property management and others Principal markets: PRC Hong Kong United Kingdom Others	470,541 317,482 788,023	456,033 372,741 828,774	270,451 (4,107) 266,344
				271,459 184,141
				455,600
	596,418 937,597	401,484 2,331,994	88,893 (150,283)	70,060 (210,271)
	1,534,015 174,628	2,733,478 231,974	(61,390) 56,163	(140,211) 90,169
	358,928 1,307,786	399,094 918,495	82,988 44,383	162,526 35,005
	1,666,714 – 41,086 4,204,466 1,342,449 2,012,608 595,608 253,801 4,204,466	1,317,589 – 44,347 5,156,162 1,127,025 3,517,120 333,410 178,607 5,156,162	127,371 (614) 48,690 436,564 409,671 13,090 10,275 3,528 436,564	197,531 (300) 76,107 678,896 422,241 245,438 3,508 7,709 678,896

– 115 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(c) Primary reporting format – business segments

				2003	2003
	PRC Property HK$’000	Hong Kong Property HK$’000	Overseas Property HK$’000	Logistics and Warehouse HK$’000	Infrastructure HK$’000	Others HK$’000	Eliminations HK$’000	Consolidated HK$’000
Revenue Turnover Inter-segment revenue Inter-segment interest income Results Segment results before provision and revaluation deficit on properties Provision in respect of stock of completed properties held for sale Revaluation deficit on properties Segment results Dividend income Interest income Interest expenses Operating profit/(loss) Share of results of associated companies – share of profits less losses – provision for decline in carrying value Profit/(loss) before taxation Taxation Profit/(loss) after taxation Minority interests Profit/(loss) attributable to shareholders	1,241,587 447 – 1,242,034 510,919 – (40,378) 470,541 – 4,211 (59,245) 415,507	1,255,079 – – 1,255,079 176,636 (69,346) (158,375) (51,085) 8,077 10,009 (121,391) (154,390)	– – – – 2,106 – – 2,106 3,341 – – 5,447	1,666,714 – – 1,666,714 265,962 – (91,483) 174,479 – 1,599 (48,707) 127,371	– – – – (614) – – (614) – 4,497 (4,497) (614)	41,086 306,862 266,872 614,820 245,211 – – 245,211 – 5,702 (207,670) 43,243	– (307,309) (266,872) (574,181) (266,872) – – (266,872) – – 266,872 –	4,204,466 – – 4,204,466 933,348 (69,346) (290,236) 573,766 11,418 26,018 (174,638) 436,564
	28,133 –	53,918 (110,809)	17,170 –	(2,056) –	149,402 –	– –	– –	246,567 (110,809)
	28,133 443,640 (57,839) 385,801 (86,140) 299,661	(56,891) (211,281) (21,357) (232,638) 19,900 (212,738)	17,170 22,617 3,586 26,203 – 26,203	(2,056) 125,315 (33,874) 91,441 812 92,253	149,402 148,788 381 149,169 – 149,169	– 43,243 (2,089) 41,154 (961) 40,193	– – – – – –	135,758 572,322 (111,192) 461,130 (66,389) 394,741

– 116 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(c) Primary reporting format – business segments (Continued)

					2003	2003
		PRC Property HK$’000	Hong Kong Property HK$’000	Overseas Property HK$’000	Logistics and Warehouse HK$’000	Infrastructure HK$’000	Others HK$’000	Eliminations HK$’000	Consolidated HK$’000
Segment assets Associated companies Other non-current assets Tax recoverable Tax reserve certificates Trading securities Total assets Segment liabilities Taxation and deferred taxation Minority interests and loans Total liabilities Capital expenditure Depreciation Amortisation of goodwill Amortisation of negative goodwill Provision in respect of stock of completed properties held for sale		9,588,907 288,682 470 17,967 – – 9,896,026 2,449,808 964,629 2,041,305 5,455,742 50,888 4,421 – – –	10,379,353 2,640,707 877,015 2,457 19,926 3,111 13,922,569 10,376,924 (34,272) 255,528 10,598,180 784,777 1,046 – – 69,346	2,787 821,974 594,923 – – 141 1,419,825 80,783 – – 80,783 – – – – –	4,240,320 15,433 2,662 – – – 4,258,415 2,683,172 96,995 74,270 2,854,437 138,100 59,391 2,429 (4,465) –	196,053 855,045 – – – – 1,051,098 524,636 – – 524,636 – – – – –	17,025,395 – 20,693 28,137 – – 17,074,225 8,213,680 7,745 4,396 8,225,821 1,138 3,264 – – –	(16,785,162) – – – – – (16,785,162) (16,785,162) – – (16,785,162) – – – – –	24,647,653 4,621,841 1,495,763 48,561 19,926 3,252 30,836,996 7,543,841 1,035,097 2,375,499 10,954,437 974,903 68,122 2,429 (4,465) 69,346

– 117 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(c) Primary reporting format – business segments (Continued)

					2002, as restated	2002, as restated
		PRC Property HK$’000	Hong Kong Property HK$’000	Overseas Property HK$’000	Logistics and Warehouse HK$’000	Infrastructure HK$’000	Others HK$’000	Eliminations HK$’000	Consolidated HK$’000
Revenue Turnover 1,089,491 Inter-segment revenue – Inter-segment interest income – 1,089,491 Results Segment results 519,608 Dividend income – Interest income 4,357 Interest expenses (92,277) Operating profit/(loss) 431,688 Share of results of associated companies 18,970 Profit/(loss) before taxation 450,658 Taxation (124,115) Profit/(loss) after taxation 326,543 Minority interests (89,035) Profit attributable to shareholders 237,508			2,704,735 – – 2,704,735 135,756 6,926 11,191 (180,003) (26,130) (41,159) (67,289) (13,974) (81,263) 81,813 550	– – – – (5,795) 20,796 – – 15,001 25,920 40,921 (8,981) 31,940 – 31,940	1,317,589 – – 1,317,589 254,505 – 1,352 (58,326) 197,531 (2,689) 194,842 (25,869) 168,973 (10,234) 158,739	– – – – (300) – 4,164 (4,164) (300) 107,796 107,496 (6,012) 101,484 – 101,484	44,347 386,809 360,295 791,451 296,632 5 7,124 (242,655) 61,106 – 61,106 2,963 64,069 5,381 69,450	– (386,809) (360,295) (747,104) (360,295) – – 360,295 – – – – – – –	5,156,162 – – 5,156,162 840,111 27,727 28,188 (217,130) 678,896 108,838 787,734 (175,988) 611,746 (12,075) 599,671

– 118 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(c) Primary reporting format – business segments (Continued)

					2002, as restated	2002, as restated
		PRC Property HK$’000	Hong Kong Property HK$’000	Overseas Property HK$’000	Logistics and Warehouse HK$’000	Infrastructure HK$’000	Others HK$’000	Eliminations HK$’000	Consolidated HK$’000
Segment assets Associated companies Other non-current assets Tax recoverable Trading securities Total assets Segment liabilities Taxation and deferred taxation Minority interests and loans Total liabilities Capital expenditure Depreciation Amortisation of goodwill Amortisation of negative goodwill Provision in respect of stock of completed properties held for sale		9,629,416 278,598 470 – – 9,908,484 2,754,243 999,341 1,989,173 5,742,757 4,886 4,071 – – –	10,757,016 3,259,567 942,060 2,457 1,895 14,962,995 10,986,297 (11,569) 275,529 11,250,257 209,930 1,069 – – 266,000	11,035 812,252 603,832 – 148 1,427,267 112,135 – – 112,135 – – – – –	4,200,388 7,529 21,209 – – 4,229,126 2,576,473 88,220 263,414 2,928,107 220,512 48,258 1,754 (21) –	534,467 722,878 – – – 1,257,345 520,052 – – 520,052 – – – – –	17,913,431 – 22,416 28,307 – 17,964,154 9,393,637 6,546 (550) 9,399,633 5,024 3,583 – – –	(17,869,742) – – – – (17,869,742) (17,869,742) – – (17,869,742) – – – – –	25,176,011 5,080,824 1,589,987 30,764 2,043 31,879,629 8,473,095 1,082,538 2,527,566 12,083,199 440,352 56,981 1,754 (21) 266,000

– 119 –

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP

2 PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED)
(d) Secondary reporting format – geographical segments

			2003	2003
		Segment revenue HK$’000	Segment results HK$’000	Segment assets HK$’000	Capital expenditure HK$’000
PRC Hong Kong United Kingdom Others		1,342,449 2,012,608 595,608 253,801 4,204,466	466,027 94,656 9,831 3,252 573,766	9,913,574 14,284,130 277,318 172,631 24,647,653	139,813 808,432 6,497 20,161 974,903

			2002	2002
		Segment revenue HK$’000	Segment results HK$’000	Segment assets HK$’000	Capital expenditure HK$’000
PRC Hong Kong United Kingdom Others		1,127,025 3,517,120 333,410 178,607 5,156,162	509,964 338,493 3,523 (11,869) 840,111	9,827,743 14,971,833 227,338 149,097 25,176,011	128,636 239,853 39,807 32,056 440,352

– 120 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3 OPERATING PROFIT BEFORE FINANCE COSTS

	2003 HK$’000	2002 HK$’000
Operating profit before finance costs is stated after crediting and charging the following: Crediting Gross rental income from investment properties other than hotel properties – PRC – Hong Kong Less: outgoings in respect of investment properties other than hotel properties – PRC – Hong Kong Net rental income from investment properties other than hotel properties – PRC – Hong Kong Interest income Less: amount capitalised in properties under development Gain on sale of investment properties – excess of sales proceeds over book value – Transfer from investment properties revaluation reserve Realised gain on disposal of trading securities Unrealised gain on trading securities Amortisation of negative goodwill Charging Loss on sale of investment properties Cost of sale of completed properties and sale/presale of properties under development Auditors’ remuneration Non-audit service fees paid and payable to auditors Depreciation of fixed assets Less: amount capitalised in properties under development Amortisation of goodwill Unrealised loss on trading securities Operating lease charges – land and buildings Staff costs	470,541 317,482 788,023 (55,243) (35,425) (90,668)
		456,033 372,741
		828,774
		(53,179) (42,436)
		(95,615)
	415,298 282,057	402,854 330,305
	697,355	733,159
	26,118 (100)	30,849 (2,661)
	26,018 – – – – 1,209 4,465 20,926 1,270,819 4,406 1,225	28,188
		(21,657) 24,709
		3,052 636 – 21 – 2,288,786 4,264 2,309
	68,515 (393)	57,348 (367)
	68,122 2,429 – 32,912 418,223	56,981 1,754 897 22,785 375,049

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

4 FINANCE COSTS

	2003 HK$’000	2002 HK$’000
Bank loans and overdrafts wholly repayable within five years Convertible bonds Interest rate swaps Others Less: amount capitalised in properties under development Total finance costs expensed during the year	130,811 – 121,117 12,165 264,093 (89,455) 174,638
		194,582 39,665 65,520 17,912
		317,679 (100,549) 217,130

The capitalisation rate applied to funds borrowed and used for the development of properties held for sale/under development is between 3% and 7% per annum.

5 TAXATION

Hong Kong profits tax has been provided at the rate of 17.5% (2002: 16%) on the estimated assessable profit for the year. In 2003, the government enacted a change in the profits tax rate from 16% to 17.5% for the fiscal year 2003/2004. Taxation on PRC and overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the PRC and the overseas countries in which the Group operates, respectively.

– 122 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

5 TAXATION (CONTINUED)

The amount of taxation charged to the consolidated profit and loss account represents:

	2003 HK$’000	As restated 2002 HK$’000
PRC taxation – Current – Overprovision in prior years – Deferred (note 28) Hong Kong profits tax – Current – Overprovision in prior years – Deferred (note 28) Overseas taxation – Current – Overprovision in prior years – Deferred (note 28) Share of taxation attributable to associated companies – Current – Deferred
	72,608 (375) (22,140)	108,577 (706) 9,093
	50,093	116,964
	39,439 (3,396) 10,909	68,444 (1,434) (32,243)
	46,952	34,767
	5,442 (162) (923)	2,173 – –
	4,357	2,173
	18,532 (8,742)	24,066 (1,982)
	9,790 111,192	22,084 175,988

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of Hong Kong as follows:

	2003 HK$’000	2002 HK$’000
Profit before taxation Calculated at Hong Kong profits tax rate of 17.5% (2002: 16%) Tax effect of different taxation rates in other countries Tax effect of net income/expenses that are not taxable/deductible in determining taxable profit Tax effect on utilisation of previously unrecognised tax losses Tax effect on unrecognised tax losses Overprovision of taxation in prior years Taxation charge	572,322 100,156 63,316 (57,124) (32,150) 40,927 (3,933) 111,192	787,734 126,037 77,454 (87,862) (5,956) 68,455 (2,140) 175,988

– 123 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

6 PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The profit attributable to shareholders dealt with in the accounts of the Company is HK$372,905,000 (2002: HK$575,475,000).

7 DIVIDENDS

	2003 HK$’000	2002 HK$’000
Interim, paid, of HK$0.13 (2002: HK$0.18) per ordinary share (note (a)) Final, proposed, of HK$0.15 (2002: HK$0.12) per ordinary share (note (b))	154,519 178,729	210,675 140,466

(a) Amounts shown in respect of the interim dividend for the year ended 31 December 2003 reflect the cash dividend of HK$0.13 (2002: HK$0.18) per ordinary share. A scrip dividend alternative to the interim dividend was also offered, with the result that only approximately HK$137,129,000 (2002: HK$208,277,000) of the interim dividend was paid in cash.
(b) At a meeting held on 9 March 2004, the directors proposed a final dividend of HK$0.15 per ordinary share. This proposed dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained profits for the year ending 31 December 2004.

8 EARNINGS PER SHARE

The calculation of basic earnings per share is based on the Group’s profit attributable to shareholders of HK$394,741,000 (2002: HK$599,671,000) and the weighted average number of 1,180,548,013 shares (2002: 1,164,439,012 shares) in issue during the year.

There was no dilution arising from the outstanding share options granted by the Company in 1997, 1999 and 2001. The dilution from the outstanding share options granted by the Company in 2000 and 2002 were immaterial. Accordingly, diluted earnings per share had not been shown.

– 124 –

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP

9 RETIREMENT BENEFIT COSTS

Pursuant to the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) (the “MPF Ordinance”), companies within the Group in Hong Kong have enrolled all employees in Hong Kong aged between 18 and 65 into a mandatory provident fund scheme (the “MPF Scheme”) from 1 December 2000.

The MPF Scheme is a master trust scheme established under a trust arrangement and governed by laws in Hong Kong. The assets of the MPF Scheme are held separately from the assets of the employer, the trustees and other service providers. Contributions are made to the MPF Scheme by the employers at 5% of the employees’ relevant income as defined in the MPF Ordinance up to a maximum of HK$1,000 per employee per month (the “MPF Contribution”). The employees also contribute a corresponding amount to the MPF Scheme from 31 December 2000 if their relevant income is HK$5,000 per month (HK$4,000 prior to 1 February 2003) or more. The MPF Contributions are fully and immediately vested in the employees as accrued benefits once they are paid to the approved trustees of the MPF Scheme. Investment income or profit derived from the investment of accrued benefits (after taking into account any loss arising from such investment) is also immediately vested in the employees.

Certain companies within the Group are also participants of the Kerry Trading Co. Limited, Provident Fund Scheme (the “Fund”) which is a defined contribution scheme as defined in the Occupational Retirement Schemes Ordinance (Chapter 426 of the Laws of Hong Kong). The Fund is for certain salaried persons (the “Fund Members”) under the employment of the companies participating in the Fund. The assets of the Fund are managed by the trustees of the Fund. Contributions are made to the Fund by companies participating in the Fund at 10% of the Fund Members’ monthly basic salaries up to a maximum of HK$5,000 per Fund Member per month (the “Basic Contribution”) less the MPF Contribution if the Basic Contribution is higher than the MPF Contribution. Fund Members are entitled to 100% of the employers’ contributions to the Fund plus investment earnings upon leaving employment after completing ten years of service or more, or upon retirement after attaining the retirement age after any number of years of service, or upon retirement due to ill health. Fund Members are also entitled to the employers’ contributions to the Fund plus investment earnings calculated at a reduced scale of between 20% and 90% after completing a period of service of at least two but less than ten years. The unvested benefits of employees terminating employment forfeited in accordance with the terms of the Fund can be utilised by the companies participating in the Fund to reduce future levels of contributions.

The Group also made defined contributions to pension plans as required by the relevant municipality or provincial governments in the PRC. The rates of contributions for the relevant periods ranged from 8% to 23% of the staff’s salary. For overseas subsidiaries, the Group made contributions to defined contribution pension schemes in accordance with the schemes set up by the overseas subsidiaries and/or under statutory requirements.

– 125 –

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP

9 RETIREMENT BENEFIT COSTS (CONTINUED)

The amounts of unvested benefits utilised by the Group during the year to reduce contributions to the Fund, the amount of unvested benefits available for future reduction of employers’ contributions as at 31 December 2003 and the total amount contributed by the Group to the above schemes during the year were as follows:

	2003 HK$’000	2002 HK$’000
Unvested benefits utilised to reduce contributions during the year Unvested benefits available as at 31 December Total contributions during the year	550 88 18,969	972 26 17,111

10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS

(a) Directors

The aggregate amounts of emoluments payable to directors of the Company during the year were as follows:

	2003 HK$’000	2002 HK$’000
Fees Independent non-executive directors For management Basic salaries, housing allowances, other allowances and other benefits in kind Discretionary bonuses Directors’ pensions Share options exercised	681	750
	10,437 7,730 215 5,826	13,590 5,875 240 –
	24,208 24,889	19,705 20,455

– 126 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (CONTINUED)
(a) Directors (Continued)

The emoluments of the directors fell within the following bands:

Emolument bands	Number of 2003	directors 2002
HK$ Nil – HK$1,000,000 HK$ Nil – HK$250,000 HK$250,001 – HK$1,000,000 HK$3,000,001 – HK$3,500,000 HK$4,000,001 – HK$4,500,000 HK$4,500,001 – HK$5,000,000 HK$5,000,001 – HK$5,500,000 HK$5,500,001 – HK$6,000,000 HK$6,000,001 – HK$6,500,000 HK$7,000,001 – HK$7,500,000	4 1 5 – – 1 1 – 1 1 9
		3 1
		4 1 1 – 1 1 – – 8

No directors have waived emoluments in respect of the years ended 31 December 2003 and 2002.

Pursuant to the terms of the share option scheme adopted by the Company on 27 March 1997, following the adjustment events arising from the changes in the Company’s issued share capital on 22 October 2002, in December 2002 and on 30 May 2003, the Company adjusted the respective exercise prices per option share of the unexercised options and the respective number of option shares comprising thereunder with effect from 30 May 2003. The respective exercise prices have been adjusted from HK$15.30 to HK$15.12, from HK$9.88 to HK$9.77, from HK$6.87 to HK$6.79, from HK$11.88 to HK$11.74 and from HK$7.02 to HK$6.94 in respect of the unexercised options granted on 11 April 1997, 27 November 1999, 1 June 2000, 2 March 2001 and 16 April 2002, respectively, with additional corresponding option shares of 77,612, 28,956, 37,010, 1,227 and 36,722 granted to five directors of the Company.

– 127 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (CONTINUED)
(b) Highest paid individuals

The aggregate amounts of emoluments payable to the five highest paid individuals of the Group during the year, of whom four (2002: four) are directors of the Company were as follows:

	2003 HK$’000	2002 HK$’000
Basic salaries, housing allowances, other allowances and other benefits in kind Discretionary bonuses Pensions contributions Share options exercised	12,132 9,120 275 4,941 26,468	15,012 6,770 300 – 22,082

The emoluments of the five highest paid individuals of the Group during the year, of whom four (2002: four) are directors of the Company, fell within the following bands:

Emolument bands	Number of individuals 2003 2002	Number of individuals 2003 2002
HK$3,000,001 – HK$3,500,000 HK$4,000,001 – HK$4,500,000 HK$4,500,001 – HK$5,000,000 HK$5,000,001 – HK$5,500,000 HK$5,500,001 – HK$6,000,000 HK$6,000,001 – HK$6,500,000 HK$7,000,001 – HK$7,500,000	1 – 1 1 – 1 1 5	2 1 – 1 1 – – 5

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

11 (NEGATIVE GOODWILL)/GOODWILL

	Goodwill HK$’000	Negative goodwill HK$’000	Total HK$’000
At 1 January 2002 Arising from purchase of a subsidiary Amortisation At 31 December 2002 At 1 January 2003 Arising from purchase of business Arising from purchase of additional interest in subsidiaries Amortisation	5,698 41,453 (1,754) 45,397 45,397 1,817 – (2,429)	(414) – 21 (393) (393) – (91,461) 4,465	5,284 41,453 (1,733) 45,004 45,004 1,817 (91,461) 2,036
At 31 December 2003	44,785	(87,389)	(42,604)

		2003 HK$’000	2002 HK$’000
At 31 December Cost Accumulated amortisation Net book amount		(42,614) 10 (42,604)	47,030 (2,026) 45,004

– 129 –

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APPENDIX IV

12 FIXED ASSETS

					Group	Group
	Investment properties other than hotel properties HK$’000	Hotel properties HK$’000	Other leasehold land and buildings		Freehold land and buildings HK$’000	Properties held for/under development HK$’000	Leasehold improvements HK$’000	Warehouse operating equipment HK$’000	Motor vehicles, furniture, fixtures and office equipment HK$’000	Total HK$’000
			Warehouses and logistics centre HK$’000	Staff quarters HK$’000
Cost or valuation At 1 January 2003 Exchange adjustment Additions, at cost Adjustment on revaluation Disposals Reclassification	16,565,146 251 9,993 (302,768) (160,532) 51,400	953,000 – 12,337 (12,337) – (51,400)	489,890 – – (17,789) – 182,158	3,650 (17) – – (3,285) 176	14,864 5,468 – 7,494 – 32,952	2,619,766 (2,920) 906,505 – – (497,364)	10,726 (20) 8 – – –	254,153 17,079 15,366 – (13,063) –	250,476 13,926 30,694 – (14,182) (176)	21,161,671 33,767 974,903 (325,400) (191,062) (282,254)
At 31 December 2003 At cost At professional valuation At 31 December 2003	16,163,490 – 16,163,490 16,163,490	901,600 – 901,600 901,600	654,259 – 654,259 654,259	524 524 – 524	60,778 – 60,778 60,778	3,025,987 3,025,987 – 3,025,987	10,714 10,714 – 10,714	273,535 273,535 – 273,535	280,738 280,738 – 280,738	21,371,625 3,591,498 17,780,127 21,371,625
Aggregate depreciation and accumulated impairment losses At 1 January 2003 Exchange adjustment Charge for the year Adjustment on revaluation Impairment loss Disposals Reclassification	– – – – – – –	– – – – – – –	– – 15,215 (15,215) – – –	1,545 (7) 138 – – (1,509) 57	– 173 1,001 (1,174) – – –	– – – – 91,345 – –	6,224 (7) 1,282 – – – –	126,750 8,393 20,989 – – (7,562) –	136,978 4,723 29,890 – – (8,039) (57)	271,497 13,275 68,515 (16,389) 91,345 (17,110) –
At 31 December 2003 Net book value as at 31 December 2003	– 16,163,490	– 901,600	– 654,259	224 300	– 60,778	91,345 2,934,642	7,499 3,215	148,570 124,965	163,495 117,243	411,133 20,960,492
Net book value as at 31 December 2002	16,565,146	953,000	489,890	2,105	14,864	2,619,766	4,502	127,403	113,498	20,890,174

– 130 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

12 FIXED ASSETS (CONTINUED)

	Company	Company
	Motor vehicles, furniture, fixtures Leasehold and office improvements equipment HK$’000 HK$’000		Total HK$’000
Cost At 1 January 2003 Additions, at cost Disposals	196 – –	2,990 798 (826)	3,186 798 (826)
At 31 December 2003	196	2,962	3,158
Aggregate depreciation At 1 January 2003 Charge for the year Disposals	58 30 –	1,375 430 (199)	1,433 460 (199)
At 31 December 2003 Net book value as at 31 December 2003	88 108	1,606 1,356	1,694 1,464
Net book value as at 31 December 2002	138	1,615	1,753

– 131 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

12 FIXED ASSETS (CONTINUED)
(a) The Group’s interests in investment properties, freehold and other leasehold land and buildings and properties held for/under development at their net book values are analysed as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
In PRC, held on: Leases of between 10 to 50 years In Hong Kong, held on: Leases of over 50 years Leases of between 10 to 50 years Overseas freehold land and buildings and properties under development	8,179,664 7,337,641 5,136,986 60,778 20,715,069	8,197,623 6,978,464 5,436,390 32,294 20,644,771

(b) As at 31 December 2003, properties with an aggregate net book value of HK$1,260,150,000 (2002: HK$4,548,431,000) were pledged as security for bank loan facilities granted to the Group (note 33).
(c) All investment properties, warehouses and logistics centre in the PRC and Hong Kong were valued by DTZ Debenham Tie Leung Limited and Chesterton Petty Limited. Freehold land and buildings in Australia and Thailand were valued by Rushton Group and DTZ Debenham Tie Leung Limited, respectively. They are independent professional valuers and the valuation was on an open market value basis as at 31 December 2003.
(d) The carrying amount of the warehouses and logistics centre classified as other leasehold land and buildings would have been HK$532,588,000 (2002: HK$355,471,000) had they been stated in the accounts at cost less aggregate depreciation and accumulated impairment loss.
(e) The carrying amount of freehold land and buildings would have been HK$51,312,000 (2002: HK$11,280,000) had they been stated in the accounts at cost less aggregate depreciation and accumulated impairment loss.

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APPENDIX IV

13 SUBSIDIARIES

	Company 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000
Unlisted shares, at cost (note (a)) Amounts due from subsidiaries (note (b))	18,643,700 9,237,790 27,881,490	18,643,700 9,587,096 28,230,796

(a) Details of subsidiaries are set out in note 36 to the accounts.
(b) The amounts due from subsidiaries are unsecured, not repayable within twelve months from the balance sheet date and interest-free except for an amount of HK$6,588,154,000 (2002: HK$6,914,133,000) which bears interest at prevailing market rates.
14 ASSOCIATED COMPANIES

	Group As restated 2003 2002 HK$’000 HK$’000	Group As restated 2003 2002 HK$’000 HK$’000
Share of net assets other than negative goodwill (note (a)) Negative goodwill (note (b)) Amounts due from associated companies (note (c)) Amounts due to associated companies (note (d))	717,997 (22,383) 3,960,869 (34,642) 4,621,841	771,648 (23,924) 4,478,247 (145,147) 5,080,824

(a) Details of associated companies are set out in note 37 to the accounts.
(b) Negative goodwill

	2003 HK$’000	2002 HK$’000
At 1 January Amortisation At 31 December	23,924 (1,541) 22,383	27,380 (3,456) 23,924

– 133 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

14 ASSOCIATED COMPANIES (CONTINUED)
(c) The amounts due from associated companies are unsecured, not repayable within twelve months from the balance sheet date and interest-free except for amounts totalling HK$1,144,351,000 (2002: HK$1,299,414,000) which bears interest at prevailing market rates.
(d) The amounts due to associated companies are unsecured, interest-free and not repayable within twelve months from the balance sheet date.
15 OTHER NON-CURRENT ASSETS

	Group As restated 2003 2002 HK$’000 HK$’000	Group As restated 2003 2002 HK$’000 HK$’000
Long-term investments Non-trading securities: Unlisted investments, at fair value Amounts due from investee companies (note (a)) Club debentures, at cost Long-term receivables (note (b))	1,205,099 2,886 1,207,985 9,967 1,217,952 277,811 1,495,763	1,321,576 2,666 1,324,242 9,817 1,334,059 255,928 1,589,987

(a) The amounts due from investee companies are unsecured, interest-free and not repayable within twelve months from the balance sheet date.
(b) Amount represents non-current portion of second mortgage loans to buyers of certain properties developed by the Group.
16 STOCK OF COMPLETED PROPERTIES HELD FOR SALE – GROUP

As at 31 December 2003, the carrying amount of stock of completed properties held for sale that was carried at net realisable value amounted to HK$301,194,000 (2002: HK$1,249,181,000).

– 134 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

17 PROPERTIES UNDER DEVELOPMENT FOR SALE

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Cost plus attributable profits less foreseeable losses Less: sales instalments received and receivable	1,375,997 (376,220) 999,777	604,433 (13,160) 591,273

As at 31 December 2003, properties under development for sale with an aggregate net book value of HK$199,364,000 (2002: Nil) were pledged as security for bank loan facilities granted to the Group (note 33).

18 ACCOUNTS RECEIVABLE, PREPAYMENTS AND DEPOSITS

Included in accounts receivable, prepayments and deposits are trade receivables. The Group maintains defined credit policies and applies credit policies appropriate to the particular business circumstances concerned. The ageing analysis of the trade receivables as at 31 December 2003 was as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
0-1 month 2-3 months Over 3 months	137,410 130,200 20,538 288,148	132,360 115,376 9,937 257,673

19 TRADING SECURITIES

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Equity securities: Listed in Hong Kong Listed outside Hong Kong Market value of listed investments	3,111 141 3,252	1,895 148 2,043

– 135 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

20 ACCOUNTS PAYABLE, DEPOSITS RECEIVED AND ACCRUED CHARGES

Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of trade payables as at 31 December 2003 was as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
0-1 month 2-3 months Over 3 months	140,587 33,418 19,171 193,176	116,008 13,756 8,994 138,758

SHARE CAPITAL
			Authorised Ordinary shares of HK$1 each No. of shares HK$’000
At 31 December 2002 and 2003			10,000,000,000		10,000,000

	2003	Issued and Ordinary shares HK$’000	fully paid of HK$1 each		2002
	No. of shares			No. of shares		HK$’000
At 1 January Issue of scrip dividend shares (notes (a) and (b)) Issue of new shares as a result of exercise of share options (note (c)) Purchase of shares for cancellation At 31 December	1,170,550,794 15,538,757 5,437,176 – 1,191,526,727	1,170,551 15,539 5,437 – 1,191,527		1,155,727,489 14,941,805 108,000 (226,500) 1,170,550,794		1,155,727 14,942 108 (226) 1,170,551

(a) On 15 April 2003, the Company approved a final dividend on its issued ordinary shares for the year ended 31 December 2002. The Company offered to its shareholders a scrip dividend alternative under which the shareholders could elect to receive new ordinary shares in lieu of a cash dividend. A total of 13,925,576 ordinary shares of HK$1 each were issued on 30 May 2003 under this scheme.

– 136 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

21 SHARE CAPITAL (CONTINUED)

(b) On 8 September 2003, the Company declared an interim dividend on its issued ordinary shares for the year ended 31 December 2003. The Company offered to its shareholders a scrip dividend alternative under which the shareholders could elect to receive new ordinary shares in lieu of a cash dividend. A total of 1,613,181 ordinary shares of HK$1 each were issued on 11 November 2003 under this scheme.
(c) During the year, a total of 5,437,176 option shares were exercised at exercise prices of HK$6.79, HK$6.94 and HK$9.77, respectively, per share. Details of movement in share options during the year are set out in note 22.
(d) Proceeds received in respect of the shares issued were used as additional working capital for the Group.

22 SHARE OPTIONS

On 17 April 2002, the shareholders of the Company approved the termination (to the effect that no further options shall be offered) of the executive share option scheme adopted by the Company on 27 March 1997 (the “1997 Share Option Scheme”) and the adoption of a new share option scheme (the “2002 Share Option Scheme”).

1997 Share Option Scheme

Under the 1997 Share Option Scheme, the directors of the Company were authorised, at their discretion, to invite executive directors and key employees of the Company or its subsidiaries to subscribe for shares in the Company subject to terms and conditions stipulated therein. The exercise price for any particular option was determined by the Board of Directors of the Company in its absolute discretion subject to the compliance with the requirements for share option schemes under the Listing Rules.

Pursuant to the terms of the 1997 Share Option Scheme, the Company adjusted the respective exercise prices per option share of the unexercised options and the respective number of option shares comprised thereunder on 30 May 2003 following the adjustment events arising from the changes in the Company’s issued share capital on 22 October 2002, in December 2002 and on 30 May 2003.

The 1997 Share Option Scheme was terminated on 17 April 2002 such that no further options shall be offered but the options which had been granted during its life shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.

– 137 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

22 SHARE OPTIONS (CONTINUED)

2002 Share Option Scheme

The 2002 Share Option Scheme was adopted by the Company on 17 April 2002. Under the 2002 Share Option Scheme, the directors of the Company may, at their discretion, grant options to executives and key employees in the service of any member of the Group and other persons who may make a contribution to the Group subject to terms and conditions stipulated therein. The exercise price for any particular option shall be such price as the Board of Directors of the Company may in its absolute discretion determine at the time of grant of the relevant option subject to the compliance with the requirements for share option schemes under the Listing Rules.

No option has been granted under the 2002 Share Option Scheme. The 2002 Share Option Scheme will expire on 16 April 2012.

Details of the movement of the share options under the 1997 Share Option Scheme during the year were as follows:

	2003 Number	2002 Number
At 1 January Granted during the year Additional number of option shares granted for the adjustment during the year Exercised during the year (note (a)) Lapsed during the year At 31 December (note (b))	31,828,769 – 371,014 (5,437,176) (459,100) 26,303,507	27,701,286 4,760,000 413,460 (108,000) (937,977) 31,828,769

– 138 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

22 SHARE OPTIONS (CONTINUED)
(a) Details of share options exercised during the year were as follows:

Exercise period	2003	2003	2003	2003
	Number of share options Market value exercised at the following exercise price per share per share at HK$6.79 HK$6.94 HK$9.77 Total exercise date HK$				Proceeds received HK$
	HK$6.79	HK$6.94	HK$9.77
June 2003 July 2003 August 2003 September 2003 October 2003 November 2003 December 2003	63,355 68,636 258,387 3,500,423 943,761 – – 4,834,562	– 15,345 10,230 295,117 50,000 20,461 – 391,153	– – – – – – 211,461 211,461	63,355 9.25 83,981 9.05 268,617 9.25 to 10.45 3,795,540 10.00 to 11.40 993,761 10.40 to 11.20 20,461 10.40 211,461 9.80 5,437,176	430,180 572,533 1,825,444 25,815,984 6,755,137 141,999 2,065,974 37,607,251

Exercise period	2002
	Number of share options Market value exercised per share at at HK$6.96 exercise date per share HK$	Proceeds received HK$
June 2002 July 2002	48,000 8.10 to 8.20 60,000 7.90 to 8.30 108,000	334,080 417,600 751,680

– 139 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

22 SHARE OPTIONS (CONTINUED)

(b) Terms of share options at balance sheet date were as follows:

Exercise period	2003	Number	2002	2002
	Exercise price HK$		Exercise price HK$	Number
11 April 1999 to 26 March 2007 27 May 2000 to 26 March 2007 27 May 2001 to 26 March 2007 1 June 2001 to 31 May 2010 1 June 2002 to 31 May 2010 1 June 2003 to 31 May 2010 2 March 2002 to 1 March 2011 2 March 2003 to 1 March 2011 2 March 2004 to 1 March 2011 16 April 2003 to 15 April 2012 16 April 2004 to 15 April 2012	15.12 9.77 9.77 6.79 6.79 6.79 11.74 11.74 11.74 6.94 6.94	11,481,428 2,849,446 2,849,415 706,770 1,238,000 1,712,957 378,000 378,000 369,058 1,992,547 2,347,886 26,303,507	15.30 9.88 9.88 6.87 6.87 6.87 11.88 11.88 11.88 7.02 7.02	11,460,743 2,984,984 2,985,020 2,824,000 2,824,000 2,761,148 420,000 420,000 395,340 2,376,750 2,376,784 31,828,769

23 SHARE PREMIUM

	2003 HK$’000	2002 HK$’000
At 1 January Arising from scrip dividend (notes 21(a) and (b)) Arising from exercise of share options (note 21(c)) Application on purchase of shares for cancellation At 31 December	3,478,011 118,408 32,172 – 3,628,591	3,371,498 106,894 644 (1,025) 3,478,011

– 140 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

24 OTHER RESERVES

	Investment properties (other than hotel properties) revaluation reserve HK$’000				Group
		Hotel properties revaluation reserve HK$’000	Other properties revaluation reserve HK$’000	Freehold land and buildings revaluation reserve HK$’000	Properties under development revaluation reserve HK$’000	Share of post acquisition revaluation reserve of associated companies HK$’000	Non-trading securities revaluation reserve HK$’000	Others (note (a)) HK$’000	Total HK$’000
At 1 January 2002, as previously reported Effect of adopting revised SSAP 12 At 1 January 2002, as restated On revaluation of properties (note (b)) Arising from valuation of non-trading securities (note (c)) Transfer to profit and loss account on disposal of properties Transfer from retained profits Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies Deferred taxation (charged)/credited directly to reserves At 31 December 2002 Company and subsidiaries Associated companies At 31 December 2002	1,661,656 (448,496) 1,213,160 (1,079,930) – (27,033) – – (106,197) – – – –	76,481 (59,918)	550,240 (32,912)	– – – 3,775 – – – – – 3,775 3,775 – 3,775	95,619 –	40,543 (40,543)	1,360,336 (215,906) 1,144,430 – (194,863) – – – 3,255 952,822 952,822 – 952,822	7,786,976 – 7,786,976 – – – 3,643 47,684 – 7,838,303 7,824,483 13,820 7,838,303	11,571,851 (797,775) 10,774,076 (1,121,393) (194,863) (27,033) 3,643 47,684 (95,770) 9,386,344 9,372,524 13,820 9,386,344
		16,563 – – – – – 1,699	517,328 (45,238) – – – – 5,473		95,619 – – – – – –	– – – – – – –
		18,262	477,563		95,619	–
		18,262 –	477,563 –		95,619 –	– –
		18,262	477,563		95,619	–

– 141 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

24 OTHER RESERVES (CONTINUED)

	Investment properties (other than hotel properties) revaluation reserve HK$’000				Group
		Hotel properties revaluation reserve HK$’000	Other properties revaluation reserve HK$’000	Freehold land and buildings revaluation reserve HK$’000	Properties under development revaluation reserve HK$’000	Share of post acquisition revaluation reserve of associated companies HK$’000	Non-trading securities revaluation reserve HK$’000	Others (note (a)) HK$’000	Total HK$’000
At 1 January 2003, as previously reported Effect of adopting revised SSAP 12 At 1 January 2003, as restated On revaluation of properties (note (b)) Impairment loss (note 1(h)(vii)) Arising from valuation of non-trading securities (note (c)) Transfer from retained profits Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies Deferred taxation (charged)/credited directly to reserves	554,693 (554,693) – – – – – – –	76,481 (58,219)	505,002 (27,439)	3,775 – 3,775 6,922 – – – – –	95,619 –	7,043 (7,043)	1,165,473 (212,651) 952,822 – – (112,296) – – 14,523	7,838,303 – 7,838,303 – – – 8,783 26,418 –	10,246,389 (860,045) 9,386,344 (16,282) (91,345) (112,296) 8,783 26,418 8,322
		18,262 (8,790) – – – – (9,472)	477,563 (14,414) – – – – 3,271		95,619 – (91,345) – – – –	– – – – – – –

At 31 December 2003 Company and subsidiaries Associated companies At 31 December 2003	– – – –	–	466,420	10,697 10,697 – 10,697	4,274	–	855,049 855,049 – 855,049	7,873,504 7,850,899 22,605 7,873,504	9,209,944 9,187,339 22,605 9,209,944
		– –	466,420 –		4,274 –	– –
		–	466,420		4,274	–

– 142 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

24 OTHER RESERVES (CONTINUED)
(a) Others

			Group
	Capital reserve (note (d)) HK$’000	Exchange fluctuation reserve HK$’000	Enterprise expansion and general reserve funds (note (e)) HK$’000	Capital redemption reserve (note (g)) HK$’000	Total HK$’000
At 1 January 2002 Transfer from retained profits Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies At 31 December 2002 Company and subsidiaries Associated companies At 31 December 2002 At 1 January 2003 Transfer from retained profits Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies	7,975,089 – – 7,975,089 7,975,089 – 7,975,089 7,975,089 – –	(210,722) – 47,168 (163,554) (163,836) 282 (163,554) (163,554) – 26,318	14,967 3,417 516 18,900 5,362 13,538 18,900 18,900 8,783 100	7,642 226 – 7,868 7,868 – 7,868 7,868 – –	7,786,976 3,643 47,684 7,838,303 7,824,483 13,820 7,838,303 7,838,303 8,783 26,418
At 31 December 2003 Company and subsidiaries Associated companies At 31 December 2003	7,975,089 7,975,089 – 7,975,089	(137,236) (137,481) 245 (137,236)	27,783 5,423 22,360 27,783	7,868 7,868 – 7,868	7,873,504 7,850,899 22,605 7,873,504

(b) These represent surplus/(deficit) arising from revaluation of properties at the balance sheet date. The accounting policies in respect of revaluation of properties are set out in note 1(h)(i) to (ii) to the accounts.
(c) This represents the deficit arising from valuation of the Group’s non-trading securities at the balance sheet date. The accounting policy in respect of valuation of non-trading securities is set out in note 1(g)(i) to the accounts.

– 143 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

24 OTHER RESERVES (CONTINUED)
(d) Capital reserve of the Group arose from the Group’s reorganisation in preparation for its listing on the Stock Exchange of Hong Kong in August 1996, adjusted by the excess or deficit of the fair values of the net assets of subsidiaries and associated companies subsequently acquired over the cost of investment at the date of acquisition before 1 January 2001 (note 1(f)).
(e) Enterprise expansion and general reserve funds represent funds set up by a subsidiary and associated companies established and operating in the PRC. According to the PRC Foreign Enterprise Accounting Standards, upon approval, the enterprise expansion reserve fund may be used for increasing capital while the general reserve fund may be used for making up losses and increasing capital.
(f) Other reserves

		Company
	Contributed surplus HK$’000	Capital redemption reserves (note (g)) HK$’000	Total HK$’000
At 1 January 2002 Transfer from retained profits At 31 December 2002	17,793,308 – 17,793,308	7,642 226 7,868	17,800,950 226 17,801,176
At 1 January 2003 and 31 December 2003	17,793,308	7,868	17,801,176

(i) The contributed surplus of the Company arose when the Company issued shares in exchange for the shares of companies being acquired, and represents the difference between the nominal value of the Company’s shares issued and the value of net assets of the companies acquired. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to the shareholders. At Group level, the contributed surplus is reclassified into its components of reserves of the underlying subsidiaries.
(ii) As at 31 December 2003, the reserves of the Company available for distribution amounted to approximately HK$18,469,928,000 (2002: HK$18,392,008,000).
(g) The capital redemption reserve arose from the purchase of the Company’s shares for cancellation during 1998 and 2002 and represents a transfer from the Company’s retained profits equivalent to the nominal value of the shares purchased for cancellation.

– 144 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

25 RETAINED PROFITS

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000
At 1 January, as previously reported Effect of adopting revised SSAP 12 At 1 January, as restated Transfer to other reserves Profit for the year 2002/2001 final dividend paid 2003/2002 interim dividend paid At 31 December 2003/2002 final dividend proposed Company and subsidiaries Associated companies	6,105,619 (344,095) 5,761,524 (8,783) 394,741 (140,466) (154,519) 5,852,497 (178,729) 5,673,768 5,675,894 (2,126) 5,673,768	5,798,314 (283,456) 5,514,858 (3,643) 599,671 (138,687) (210,675) 5,761,524 (140,466) 5,621,058 5,588,209 32,849 5,621,058	590,832 – 590,832 – 372,905 (140,466) (154,519) 668,752 (178,729) 490,023 490,023 – 490,023	364,945 – 364,945 (226) 575,475 (138,687) (210,675) 590,832 (140,466) 450,366 450,366 – 450,366

26 MINORITY INTERESTS AND LOANS

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Share of equity Loans from minority shareholders	419,609 1,955,890 2,375,499	323,811 2,203,755 2,527,566

The loans from minority shareholders represent proportionate funding from the minority shareholders of joint venture projects, including an amount of approximately HK$610,296,000 (2002: HK$654,042,000) received from a subsidiary of Shangri-La Asia Limited, a related company whose shares are listed on the Stock Exchange of Hong Kong. These loans are unsecured, subordinated to the bank loans of the relevant subsidiaries, have no fixed terms of repayment, and interest-free except for an amount of HK$264,103,000 (2002: HK$298,681,000) which bears interest at prevailing market rates.

– 145 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

27 LONG-TERM LIABILITIES

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000
Bank loans – unsecured Bank loans – secured (note 33) Total bank loans (note (a)) Short-term bank loans and current portion of long-term liabilities (note (a))	6,033,808 174,156 6,207,964 (804,751) 5,403,213	6,407,773 646,799 7,054,572 (1,335,481) 5,719,091	5,072,222 – 5,072,222 (472,222) 4,600,000	5,850,000 – 5,850,000 (650,000) 5,200,000

(a) At 31 December 2003, the Group’s bank loans were repayable as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000
Within one year In the second to fifth year In the second year In the third year In the fourth year In the fifth year Over five years	804,751	1,335,481	472,222	650,000
	315,822 650,244 4,208,933 224,292	870,279 26,178 270,634 4,552,000	– 450,000 4,150,000 –	450,000 – 250,000 4,500,000
	5,399,291 3,922 6,207,964	5,719,091 – 7,054,572	4,600,000 – 5,072,222	5,200,000 – 5,850,000

(b) As at 31 December 2003, the Group had total available cash resources of approximately HK$8.2 billion (2002: HK$7.6 billion) comprising net cash and bank balances (including pledged bank deposits) of approximately HK$1.6 billion (2002: HK$1.4 billion) and undrawn bank loan facilities of approximately HK$6.6 billion (2002: HK$6.2 billion).

(c) Convertible bonds

During the year ended 31 December 2002, bondholders holding guaranteed redeemable convertible bonds issued by Kerry Properties Capital Limited (“KPCL”), a wholly owned subsidiary of the Company, with a principal amount of US$196,780,000 exercised their option to require KPCL to redeem the bonds and the Group redeemed these bonds on 25 March 2002 at a redemption price of 129.712%. KPCL also exercised its option to redeem the remaining bonds with a principal amount of US$400,000 on 27 June 2002 at a redemption price of 100%. All the bonds had been duly redeemed as at 31 December 2002.

– 146 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

28 DEFERRED TAXATION

	Group As restated 2003 2002 HK$’000 HK$’000	Group As restated 2003 2002 HK$’000 HK$’000
At 1 January Purchase of a subsidiary (note 29(c)) Deferred taxation credited to profit and loss account (note 5) Deferred taxation charged directly to reserves Deferred taxation charged directly to minority interests At 31 December	973,005 – (12,154) 6,201 7,895 974,947	840,087 2,156 (23,150) 99,025 54,887 973,005

Deferred income tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group has unrecognised tax losses of HK$1,521,909,000 (2002: HK$1,391,100,000) to be carried forward for offset against future taxable income.

The movement in deferred tax assets and liabilities during the year was as follows:

			Group
	Revaluation HK$’000	Accelerated depreciation allowances HK$’000	Presale of properties HK$’000	Tax losses Total HK$’000 HK$’000
At 1 January 2002, as previously stated Effect of adopting revised SSAP 12 At 1 January 2002, as restated Purchase of a subsidiary Deferred taxation charged/(credited) to profit and loss account Deferred taxation charged directly to reserves Deferred taxation charged directly to minority interests At 31 December 2002	– 821,181 821,181 – 53,098 63,133 54,887 992,299	– 51,119 – 51,119 142,670 – (174,883) 788,968 142,670 51,119 (174,883) 840,087 2,156 – – 2,156 (38,124) (50,522) 12,398 (23,150) 35,892 – – 99,025 – – – 54,887 142,594 597 (162,485) 973,005

– 147 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

28 DEFERRED TAXATION (CONTINUED)

			Group
	Revaluation HK$’000	Accelerated depreciation allowances HK$’000	Presale of properties HK$’000	Tax losses Total HK$’000 HK$’000
At 1 January 2003, as previously stated Effect of adopting revised SSAP 12 At 1 January 2003, as restated Deferred taxation charged/(credited) to profit and loss account Deferred taxation charged directly to reserves Deferred taxation charged directly to minority interests	– 992,299 992,299 6,869 6,201 7,895	2,156 140,438 142,594 (8,989) – –	597 –

At 31 December 2003	1,013,264	133,605	–	(171,922) 974,947

NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
29
(a) Reconciliation of profit before taxation to net cash generated from operations

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Profit before taxation Amortisation of goodwill Amortisation of negative goodwill Depreciation Dividend income from listed and unlisted investments Finance costs Interest income Loss on sale of fixed assets Gain on sale of trading securities Unrealised (gain)/loss on valuation of trading securities Provision in respect of stock of completed properties held for sale Revaluation deficit on investment properties and other leasehold land and buildings Share of results of associated companies Operating profit before working capital changes Decrease in stock of completed properties held for sale, properties under development for sale and accounts receivable, prepayments and deposits Decrease in accounts payable, deposits received and accrued charges Net cash generated from operations	572,322 2,429 (4,465) 68,122 (11,418) 174,638 (26,018) 24,345 – (1,209) 69,346 290,236 (135,758) 1,022,570 918,681 (47,421) 1,893,830	787,734 1,754 (21) 56,981 (27,727) 217,130 (28,188) 1,366 (636) 897 266,000 13,941 (108,838) 1,180,393 1,606,786 (68,538) 2,718,641

– 148 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

(b) Analysis of changes in financing during the year

	Share capital (including share premium) 2003 2002 HK$’000 HK$’000	Share capital (including share premium) 2003 2002 HK$’000 HK$’000	Long-term borrowings (including current portion) 2003 2002 HK$’000 HK$’000	Long-term borrowings (including current portion) 2003 2002 HK$’000 HK$’000	Minority interests and loans 2003 2002 HK$’000 HK$’000	Minority interests and loans 2003 2002 HK$’000 HK$’000
At 1 January Non-cash movement: Issue of scrip dividend Share of profit Share of revaluation reserves Release of revaluation reserve on disposal of properties Share of deferred taxation Exchange adjustment Loans of subsidiaries acquired Purchase of subsidiaries Purchase of additional interest in subsidiaries Provision of premium and amortisation of issue cost of convertible bonds Purchase of shares for cancellation Proceeds from issue of shares Repayment of bank loans Redemption of convertible bonds Drawdown of bank loans Capital injection from minority shareholders Decrease in loans from minority shareholders Dividends paid to minority shareholders in subsidiaries At 31 December	4,648,562	4,527,225	7,054,572	9,607,071	2,527,566	2,488,235
	133,947 – – – – – – – – –	121,836 – – – – – – – – –	– – – – – 9,981 – – – –	– – – – – 3,469 2,363 – – 32,475	– 66,389 21,264 – (7,895) 3,079 – – (201,496) –	– 12,075 37,733 2,324 (54,887) (667) – 4,329 – –
	133,947 – 37,609 – – – – – – 4,820,118	121,836 (1,251) 752 – – – – – – 4,648,562	9,981 – – (2,402,270) – 1,545,681 – – – 6,207,964	38,307 – – (7,281,010) (1,993,282) 6,683,486 – – – 7,054,572	(118,659) – – – – – 474 (29,865) (4,017) 2,375,499	907 – – – – – 45,124 (6,500) (200) 2,527,566

– 149 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
(c) Purchase of a subsidiary

	2003 HK$’000	2002 HK$’000
Net assets acquired: Fixed assets Other investments Accounts and other receivables Cash and bank balances Accounts and other payables Taxation Bank loans Deferred taxation Less: Minority interests Goodwill Satisfied by: Cash	– – – – – – – – – – – – – –	33,631 1 82,573 10,772 (72,444) (1,969) (2,363) (2,156) 48,045 (4,329) 43,716 41,453 85,169 85,169

(d) Analysis of the net outflow in respect of the purchase of a subsidiary

	2003 HK$’000	2002 HK$’000
Cash consideration Cash and bank balances acquired Net cash outflow in respect of the purchase of a subsidiary	– – –	85,169 (10,772) 74,397

– 150 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

30 RELATED PARTY TRANSACTIONS

Significant related party transactions, in addition to those connected transactions (where applicable) disclosed in the Report of the Directors, which were carried out in the normal course of the Group’s business during the year were as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
(Income)/expenses Rental and storage income (note (a)) Project management and consultancy fees income (note (b)) Administration and management service fees – income (note (c)) – expense (note (d)) Rent and related service charges (note (d)) Marketing, consultancy and administrative management fees expense (note (e)) Insurance premiums expense (note (f))	(5,278) (592) (910) 485 344 9,753 11,285	(4,149) (2,307) (793) 259 315 10,240 18,524

(a) This represents rental and storage income arising from the leasing of commercial, residential, carparks and warehouse storage space to various subsidiaries and associated companies of Kerry Group Limited, the ultimate holding company of the Company, and other related parties at market rates.
(b) The Group provided project management, project consultancy, leasing, renovation, refurbishment and maintenance services to various subsidiaries of Kerry Group Limited and other related parties. The fees are determined on a cost reimbursement basis or with reference to relevant industry practice.
(c) The Group provided management services to certain subsidiaries and associated companies of Kerry Group Limited. In consideration for these services, the Group received fees, which have been determined on a cost reimbursement basis.
(d) Kerry Trading Co. Limited (“Kerry Trading”), a fellow subsidiary of the Company, provided administration and management services to certain members of the Group. In consideration for these services, members of the Group paid Kerry Trading a fee, which has been determined on a cost reimbursement basis. In addition, the Company reimbursed rent and related service charges to Kerry Trading for the use of office space, which has been determined on a cost reimbursement basis. Such fees are subject to review on an annual basis.

– 151 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

30 RELATED PARTY TRANSACTIONS (CONTINUED)
(e) This represents payment of services fee to Shangri-La International Hotel Management Limited, a subsidiary of Shangri-La Asia Limited, a related company of the Group, which provided marketing, consultancy and administrative management services to a member of the Group. The service fees payable during the year were determined at either a fixed amount or a certain percentage of the gross operating revenue of the relevant company in accordance with the agreement for the provision of the above services.
(f) This represents payment of insurance premiums at market rates to Jerneh Insurance (HK) Limited and Taishan Insurance Brokers Limited, related companies of the Group.

31 COMMITMENTS

(a) At 31 December 2003, the Group had capital commitments in respect of committed investments and construction in progress not provided for in these accounts as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Contracted but not provided for Authorised but not contracted for	688,596 83,760 772,356	1,137,474 1,275 1,138,749

(b) At 31 December 2003, the Group had future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Within one year In the second to fifth year, inclusive Over five years	36,782 81,283 88,279 206,344	29,076 84,780 100,880 214,736

– 152 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

31 COMMITMENTS (CONTINUED)
(c) At 31 December 2003, the Group had future aggregate minimum lease rental receivable under non-cancellable operating leases in respect of land and buildings as follows:

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000
Within one year In the second to fifth year, inclusive Over five years	702,816 502,452 566,185 1,771,453	728,958 616,931 610,817 1,956,706

(d) As at 31 December 2003, the Group had interest rate swap contracts with principal sums of HK$3,760,000,000 (2002: HK$3,760,000,000). The remaining life of these contracts was within 1-2 years (2002: 2-3 years) at fixed rates of 3.620% to 5.510% (2002: 3.620% to 5.510%).

32 CONTINGENT LIABILITIES

(a) Banking facilities

	Group 2003 2002 HK$’000 HK$’000	Group 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000	Company 2003 2002 HK$’000 HK$’000
Guarantees for banking and other facilities of certain subsidiaries, associated companies and investee companies (notes (i) and (ii)) Guarantees to certain banks for mortgage facilities granted to first buyers of certain properties in the PRC (note (iii))	789,061 210,041 999,102	912,431 83,569 996,000	1,355,659 10,380 1,366,039	1,674,063 34,944 1,709,007

– 153 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

32 CONTINGENT LIABILITIES (CONTINUED)
(a) Banking facilities (Continued)
- (i) The Group has executed guarantees for banking and other facilities granted to certain associated companies and investee companies. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$789,061,000 (2002: HK$912,431,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$1,406,842,000 (2002: HK$1,609,938,000).
- (ii) The Company has executed guarantees to banks for facilities granted to certain subsidiaries, associated companies and investee companies. The utilised amount of such facilities covered by the Company’s guarantees which also represented the financial exposure of the Company at the balance sheet date amounted to approximately HK$1,355,659,000 (2002: HK$1,674,063,000). The total amount of such facilities covered by the Company’s guarantees amounted to approximately HK$2,203,428,000 (2002: HK$2,437,299,000).
- (iii)The Group and the Company have executed guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Group in the PRC. The utilised amount of such facilities covered by the Group’s and the Company’s guarantees which also represented the financial exposure of the Group and the Company at the balance sheet date amounted to approximately HK$210,041,000 (2002: HK$83,569,000) and HK$10,380,000 (2002: HK$34,944,000), respectively. The total amount of such facilities covered by the Group’s and the Company’s guarantees amounted to approximately HK$1,416,925,000 (2002: HK$384,246,000) and HK$62,737,000 (2002: HK$275,780,000), respectively.
(b) Guarantees and undertakings
- (i) A wholly owned subsidiary of the Company, through its associated company, has a 20% interest in a company which is engaged in the development of a site in the Olympic Mass Transit Railway Station Development. Another wholly owned subsidiary of the Company, through its associated company, has a 32.5% interest in another company which is engaged in the development of an adjacent site. The companies developing the sites (the “Developers”) were each granted exclusive rights to develop the relevant sites pursuant to separate development agreements (the “Development Agreements”) entered into by each of the Developers and MTR Corporation Limited (“MTRC”).

– 154 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

32 CONTINGENT LIABILITIES (CONTINUED)

(b) Guarantees and undertakings (Continued)

Pursuant to two deeds of guarantee in relation to each of the above developments, the Company has provided several guarantees in favour of MTRC for the due and punctual performance and observance by each of the Developers of 20% and 32.5%, respectively, of the Developer’s obligations, liabilities, stipulations, acts and duties under or in connection with the respective Development Agreements and the due and punctual payment of 20% and 32.5%, respectively, of all monies and liabilities due, owing or payable to MTRC from or by each of the Developers under or in connection with the respective Development Agreements.

In consideration of MTRC entering into and agreeing to the terms of the sale and purchase agreement (the “S & P Agreement”) and certain trust arrangements (the “Trust Arrangements”) in relation to the sale of an office development developed by the Developer in which the Group has a 20% interest, the Company has agreed to provide several guarantees and indemnities to indemnify MTRC against 20% of all claims, demands, cost, damages, losses, expenses and/or liabilities which the MTRC may incur or suffer and which are in any way connected with or result from the entering into and/or the observance and/or performance of the S & P Agreement and/or the carrying out by MTRC of the Trust Arrangements. The Company has also guaranteed the payment on demand of 20% of the full amount of such costs, losses, expenses or liabilities.

(ii) The Group has a 15% effective interest in Western Harbour Tunnel Company Limited (“WHTCL”) which acquired a 30-year franchise from the Government of the Hong Kong Special Administrative Region (the “Government”) to build and operate the Western Harbour Crossing (the “Crossing”). Pursuant to a deed of guarantee dated 2 September 1993 as amended by a deed of novation dated 27 June 1995, a second deed of novation dated 12 October 1998 and a third deed of novation dated 30 May 2000 (the “Guarantee”), the Company together with the other beneficial shareholders of WHTCL have jointly and severally undertaken to the Government that if the aggregate of all costs incurred by WHTCL up to the operating date of the Crossing and all maintenance and repair costs incurred by WHTCL after the operating date of the Crossing but before the issuance of the maintenance certificate exceeds HK$7,534,000,000 then they will pay to WHTCL such excess amount.

– 155 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

32 CONTINGENT LIABILITIES (CONTINUED)

(b) Guarantees and undertakings (Continued)

 - Pursuant to a shareholders agreement dated 30 December 1992 as amended by a cross-indemnity deed dated 20 December 1993, a supplemental deed dated 8 September 1994, a second supplemental deed dated 12 October 1998 and a third supplemental deed dated 23 May 2000 in respect of WHTCL, the Company together with the other beneficial shareholders have agreed that in relation to any claim made or asserted under the Guarantee, as between themselves, the total of all liabilities in respect of such claim and of all costs, charges and expenses suffered or incurred by any of them resulting therefrom or attributable thereto shall be shared by them in proportion to their respective ultimate ownership of the issued capital of WHTCL.

(iii)A wholly owned subsidiary of the Company, through its associated company, has a 40% interest in a company (the “Hang Hau Developer”) which is engaged in the development of a site at the Hang Hau Mass Transit Railway Station Development. The Hang Hau Developer was granted exclusive rights to develop the site pursuant to a development agreement (the “Hang Hau Development Agreement”) entered into by the Hang Hau Developer with, amongst others, MTRC.

Pursuant to a deed of guarantee in relation to the above development, the Company has provided several guarantees in favour of MTRC for the due and punctual performance and observance by the Hang Hau Developer of 40% of its obligations, liabilities, stipulations, acts and duties under or in connection with the Hang Hau Development Agreement and the due and punctual payment of 40% of all monies and liabilities due, owing or payable to MTRC from the Hang Hau Developer under or in connection with the Hang Hau Development Agreement.

(iv) The Group has 38.2% interest in a company (the “Seller”) which, pursuant to a sale and purchase agreement (the “Mortgage S&P Agreement”), has sold certain loans (the “Loans”) to The Hong Kong Mortgage Corporation Limited (the “HKMC”). Pursuant to a support agreement (the “Support Agreement”) entered into by the Company with, amongst others, the HKMC, the Company has severally undertaken (i) if the Seller fails to repurchase any Loans in accordance with the Mortgage S&P Agreement, to, or to procure a third party approved by the HKMC to, complete repurchase of such Loans; and (ii) if the Seller fails to pay when due any amount in full in respect of the Loans required to be paid by it to the HKMC, to pay on behalf of the Seller on a several basis an amount equal to 38.2% of the amount that the Seller has failed to pay to the HKMC.

– 156 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

32 CONTINGENT LIABILITIES (CONTINUED)

(b) Guarantees and undertakings (Continued)

The Company has also severally undertaken with the HKMC that it shall indemnify and keep indemnified the HKMC, its directors, officers and employees and its successors and assignees from and against 38.2% of all liabilities, losses, damages, actions, proceedings, demands, claims, costs and expenses which may be brought against, suffered or incurred by such indemnified person by reason of any breach of the Seller’s undertakings, representations and warranties in the Mortgage S&P Agreement and the Support Agreement or of any breach of the Company’s representations, warranties and undertakings in the Support Agreement.

(v) The Group has a 50% interest in a company (“Party 1”) which owns a piece of land in Cheung Sha Wan while another company (“Party 2”) owns an adjacent piece of land. Party 1 and Party 2 are negotiating the joint redevelopment of the two pieces of land. Prior to the joint redevelopment, the parties need to surrender the existing two pieces of land to the Government in exchange for the grant of a new lot for commercial/residential development with public car park facilities (the “Proposed Land Exchange”). The Proposed Land Exchange involves the grant of a street and its associated footpaths as part of the new lot and requires the permanent closure of the above-mentioned street and its associated footpaths.

Pursuant to an undertaking (the “Undertaking”) dated 24 May 2002, in consideration of the Government entering into and continuing the negotiations with Party 1 and Party 2 on the Proposed Land Exchange, the Company and other parties, including the holding companies of the shareholders of Party 1 and Party 2, have jointly and severally undertaken, covenanted and agreed that they shall indemnify and keep indemnified the Government and any of its officers from and against all and any actions (including judicial reviews), liabilities, demands, claims, expenses, costs and losses arising directly or indirectly out of or in connection with the gazetting of the permanent closure of the above-mentioned street and its associated footpaths under the Roads (Works, Use and Compensation) Ordinance and the authorisation of such closure.

Pursuant to a deed of cross indemnity and a collateral deed of cross indemnity, both dated 24 May 2002, the Group’s liabilities under the Undertaking shall be several and shall be determined based on its share of interest in the joint redevelopment.

– 157 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

33 PLEDGE OF ASSETS – GROUP

At 31 December 2003, the Group’s total bank loans of HK$6,207,964,000 (2002: HK$7,054,572,000) included an aggregate amount of HK$6,033,808,000 (2002: HK$6,407,773,000) which is unsecured and an aggregate amount of HK$174,156,000 (2002: HK$646,799,000) which is secured by the following:

(i) legal charges over certain fixed assets (note 12(b)) and properties under development for sale (note 17);
(ii) charges on all assets, including bank balances amounting to HK$74,003,000 (2002: HK$70,450,000), of certain subsidiaries. Such bank balances can be used for payment of construction and other operating costs or for repayment of outstanding bank loans of the respective subsidiaries; and
(iii) assignments of insurance proceeds of certain properties.

34 ULTIMATE HOLDING COMPANY

The directors regard Kerry Group Limited, a company incorporated in the Cook Islands, as being the ultimate holding company.

35 APPROVAL OF ACCOUNTS

The accounts were approved by the board of directors on 9 March 2004.

– 158 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES

At 31 December 2003, the Company held interests in the following subsidiaries:

*
λ^*
µ^
µ^

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Aberporth Resources
British Virgin Islands
Dormant
US$1
100%
Limited
Able Plus
British Virgin Islands
Investment holding
US$1
100%
Holdings Limited
Amble Aim Sdn. Bhd.
Malaysia
Investment holding
RM2
100%
Ansellman Limited
British Virgin Islands
Investment holding
US$1
100%
Architectural Design
Hong Kong
Provision of architectural
HK$2
100%
and Management
services
Services Limited
Auto Plaza Limited
Hong Kong
Investment holding,
Ordinary HK$4,998
100%
property investment
Non-voting
and carpark operation
deferred HK$2
Balkis Limited
British Virgin Islands
Investment holding
US$10,000
100%
Baron Development
British Virgin Islands
Investment holding
US$1
100%
Limited
Barriedale Limited
British Virgin Islands
Investment holding
US$10,000
100%
Barrowdale Limited
British Virgin Islands
Investment holding
US$1,000
100%
Beaverton Limited
British Virgin Islands
Investment holding
US$1
100%
Beihai Kerry Property
The People’s
Property ownership
RMB1,708,616
100%
Development Ltd.
Republic of China
Beijing Jia Ao Real
The People’s
Property investment
US$77,967,600
71.25%
Estate Development
Republic of China
Co., Ltd.
Beijing Kerry Centre
The People’s
Hotel ownership
US$33,000,000
71.25%
Hotel Co., Ltd.
Republic of China

– 159 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Beijing Kerry
The People’s
Operation of
US$2,100,000
100%
Datalinks Limited
Republic of China
internet data centre
Belminton Inc.
British Virgin Islands
Investment holding
US$1,000
100%
Bestford Resources Limited
British Virgin Islands
Investment holding
HK$1
100%
Bethan Company Limited
Hong Kong
Dormant
HK$2
100%
Betterise Limited
Hong Kong
Dormant
HK$2
100%
(formerly known as Kerry
Warehouse (Yuen
Long 2) Limited)
Big Sky Resources Limited
British Virgin Islands
Investment holding
US$100
100%
Burgo Inc
British Virgin Islands
Dormant
US$1,000
100%
Busyhigh Limited
Samoa
Investment holding
HK$1
100%
Calistock Limited
British Virgin Islands
Investment holding
US$1
100%
in Hong Kong
Capabletech Limited
British Virgin Islands
Investment holding
US$1
100%
Cashel Assets Limited
British Virgin Islands
Investment holding
US$1
100%
in Hong Kong
Catren Company Limited
Hong Kong
Carpark ownership
Voting class “A”
100%
HK$9,998
Non-voting class “B”
HK$2
Chance Brilliant Limited
British Virgin Islands
Investment holding
US$1
100%
Charlicks New Guinea Ltd.
Papua New Guinea
Dormant
PGK54,000
99.99%
Chipelli Investments
Hong Kong
Property investment
HK$100,000
80%
Limited

– 160 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Clavering Services	British Virgin Islands	Investment holding	US$1,000	100%
Limited		in Hong Kong
Close Encounters Limited	British Virgin Islands	Investment holding	HK$10,000	100%
Comphor Company	British Virgin Islands	Investment holding	US$10	100%
Limited
Cremorne Investments	British Virgin Islands	Investment holding	US$100	100%
Limited
Darcey Investments	British Virgin Islands	Investment holding	US$100	100%
Limited
Dec Limited	British Virgin Islands	Investment holding	US$10,000	100%
Denleigh Limited	British Virgin Islands	Investment holding	US$1	100%
Denver Rose	British Virgin Islands	Investment holding	US$1	100%
Investments Limited		in Hong Kong
Errol Company Ltd.	British Virgin Islands	Investment holding	US$1	100%
Ever Asset Group Limited	British Virgin Islands	Investment holding	US$1	100%
Fair Page Limited	Hong Kong	Property investment	HK$2	100%
Garden Streams Limited	British Virgin Islands	Investment holding	US$1	100%
		in Hong Kong
Goldash Holdings Limited	British Virgin Islands	Investment holding	US$1	100%
Golden Explorer Group	British Virgin Islands	Investment holding	US$1	100%
Limited
Harvard Developments	British Virgin Islands	Dormant	US$12	75%
Limited
Hong Kong Shanghai	Samoa	Investment holding	HK$8,000,000	55%
Development Co Ltd.

– 161 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
_i_be-Datalinks (Beijing)
Samoa
Investment holding
HK$1
100%
Limited
_i_be-Tech Investments
British Virgin Islands
Investment holding
US$1
100% ∆
Limited
_i_be-Tech Limited
Hong Kong
Dormant
HK$2
100%
ISA Investments Limited
British Virgin Islands
Investment holding
US$1
100%
Insightful Investments
British Virgin Islands
Dormant
US$1
100%
Limited
Intelligain Investments
British Virgin Islands
Investment holding
US$1
100%
Limited
Intelliocean Investments
British Virgin Islands
Investment holding
US$1
100%
Limited
International Enterprise
Hong Kong
Investment holding
Ordinary HK$10
100%
Co. Limited
Non-voting deferred
HK$10,000
Interseed Company
Hong Kong
Property trading
HK$2
100%
Limited
Irrewarra Holdings Limited
British Virgin Islands
Investment holding
US$1
100%
Julian Holdings Limited
British Virgin Islands
Investment holding
US$1
100%
KLN Container Line
British Virgin Islands
Freight forwarding
HK$1,200,000
100%
Limited
business
KLN Siam Holdings
Thailand
Investment holding
Common Baht49,000
49% #
Limited
Preference Baht51,000
Kanya Corp.
British Virgin Islands
Investment holding
US$1,000
100%
Kerry Beijing
Samoa
Investment holding
HK$1,000,000
75%
(Guang Hua) Ltd

– 162 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^
λ^
λ^
λ^
^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Beijing
Samoa
Investment holding
HK$1
100%
(Shibalidian)
Development Ltd.
Kerry Beijing (Shibalidian)
Samoa
Investment holding
US$1
100%
Housing Ltd.
Kerry Cao Jia Yan
The People’s
Property development
US$13,400,000
100%
Properties (Shanghai)
Republic of China
Co., Ltd.
Kerry Cargo Centre
Hong Kong
Warehouse ownership
HK$2
100%
Limited
Kerry Centre Real Estate
The People’s
Property investment
HK$142,000,000
100%
(Shenzhen) Co. Ltd.
Republic of China
Kerry Chemquest
British Virgin Islands
Investment holding
US$1,000
100%
Investments Ltd.
Kerry Cold Store
Hong Kong
Warehouse operation
HK$20
100%
(Hong Kong) Limited
(formerly known as Kerry
BCI Warehouse Limited)
Kerry D.G. Warehouse
Hong Kong
Warehouse ownership
HK$20,000,000
100%
(Kowloon Bay) Limited
Kerry Development
The People’s
Property trading
US$40,000,000
100%
(Shanghai) Co., Ltd.
Republic of China
Kerry Development
The People’s
Property ownership
HK$40,000,000
100%
(Shenzhen) Co., Ltd.
Republic of China
Kerry Distribution
Hong Kong
Provision of
HK$500,000
100%
(Hong Kong) Limited
distribution services
Kerry Distribution
Thailand
Provision of
Baht20,000,000
60% #
(Thailand) Limited
distribution services

– 163 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

*
^
^

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Estate Management
British Virgin Islands
Investment holding
HK$10,000
100% ∆
Limited
Kerry Facilities
Hong Kong
Building management
HK$2
100%
Management
(Hong Kong) Limited
Kerry Freight (Australia)
Australia
Freight forwarding
A$2
100%
Pty Ltd
Kerry Freight
Hong Kong
Freight forwarding
Ordinary HK$10,000
100%
(Hong Kong) Limited
business
Non-voting deferred
HK$2,750,000
Kerry Freight (Korea) Inc.
Korea
Freight forwarding
Won500,000,000
50.999%
Kerry Freight (Thailand)
Thailand
Freight forwarding
Baht11,500,000
49% #
Limited
Kerry Freight (USA) Inc.
Delaware, U.S.A.
Freight forwarding
US$1
100%
Kerry Freight International
British Virgin Islands
Dormant
US$1
100%
(Taiwan) Limited (formerly
known as Siemens
Holdings Limited)
Kerry Freight
Hong Kong
Freight forwarding
HK$2
100%
International Limited
Kerry Freight Services
British Virgin Islands
Investment holding
HK$1
100%
(China) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
US$1
100%
(Europe) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
US$1
100%
(HKSAR) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
HK$1
100%
(Korea) Limited

– 164 –

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Freight Services
British Virgin Islands
Investment holding
US$1
100%
(Philippines) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
HK$10,000
100%
(Taiwan) Limited
(formerly known as
Sedan Chair Limited)
Kerry Freight Services
British Virgin Islands
Investment holding
HK$1
100%
(Thailand) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
US$1
100%
(U.K.) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
HK$1
100%
(USA) Limited
Kerry Freight Services
British Virgin Islands
Investment holding
HK$1
100%
Limited
Kerry Fuzhou (Gutian) Ltd.
Samoa
Investment holding
HK$6,000,000
100%
Kerry Global Freight
British Virgin Islands
Freight forwarding
HK$100,000
70%
Limited
and agency business
and customs brokerage
Kerry Guangxi
Samoa
Investment holding
HK$1,500,000
100%
(Beihai) Ltd
Kerry Infrastructure
British Virgin Islands
Investment holding
HK$10,000
100%
(China) Limited
Kerry Infrastructure
British Virgin Islands
Investment holding
HK$595,026,381
100% ∆
Limited
Kerry Logistics (Australia)
Australia
Operation of logistics
A$2,000,000
100%
Pty Ltd
services, rail terminal
and container depot

– 165 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

^
λ^
λ^
^
λ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Logistics
Samoa
Investment holding
US$1
100%
(Beijing) Ltd.
Kerry Logistics (China)
British Virgin Islands
Investment holding
US$1
100%
Limited
Kerry Logistics (Futian FTZ)
Samoa
Dormant
HK$1
100%
Investments Ltd.
(formerly known as
Kerry Warehouse
(Shanghai) Ltd.)
Kerry Logistics (HKSAR)
British Virgin Islands
Investment holding
US$1
100%
Limited
Kerry Logistics
Hong Kong
Operation of logistics
HK$10,000,000
100%
(Hong Kong) Limited
business
Kerry Logistics
Korea
Dormant
Won100,000,000
100%
(Korea) Inc.
Kerry Logistics
The People’s
Operation of logistics
HK$32,000,000
100%
(Shanghai
Republic of China
business
Waigaoqiao) Co., Ltd.
Kerry Logistics
Samoa
Investment holding
HK$1
100%
(Shenzhen Futian)
Investments Ltd.
Kerry Logistics
Samoa
Investment holding
HK$1
100%
(Shenzhen Yantian) Ltd.
Kerry Logistics
The People’s
Operation of logistics
–
100%
(Shenzhen) Co., Ltd.
Republic of China
business
Kerry Logistics
Thailand
Operation of logistics
Baht135,000,000
60% #
(Thailand) Limited
business
Kerry Logistics
The People’s
Operation of logistics
HK$1,600,000
100%
(Tianjin) Co., Ltd.
Republic of China
business

– 166 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Logistics (Tianjin)
Samoa
Investment holding
HK$10,000
100%
Investments Ltd.
Kerry Logistics (UK)
United Kingdom
Sea and air freight forwarding
£20,000
91%
Limited (formerly
known as Trident
International Limited)
Kerry Logistics
Samoa
Investment holding
HK$1
100%
(Waigaoqiao) Ltd.
Kerry Logistics Holdings
Australia
Investment holding
A$100
100%
(Australia) Pty Ltd
Kerry Logistics Limited
British Virgin Islands
Investment holding
HK$42,430,000
100%
Kerry Logistics
Bermuda
Investment holding
HK$500,000
100% ∆
Network Limited
in Hong Kong
Kerry Logistics Services
British Virgin Islands
Investment holding
HK$1
100%
(Australia) Limited
Kerry Logistics Services
British Virgin Islands
Investment holding
HK$1
100%
(Korea) Limited
Kerry Logistics Services
British Virgin Islands
Investment holding
HK$1
100%
(Thailand) Limited
Kerry Logistics Services
British Virgin Islands
Investment holding
US$2
100%
Limited
Kerry Logistics Shanghai
Samoa
Investment holding
HK$1
100%
Corporation
Kerry Overseas Project
Liberia
Project management
US$100
100%
Management Limited
in Asia
(Jia Li Hai Wai
Xiang Mu Guan Li
Limited)

– 167 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Project Management
Hong Kong
Project management
HK$300,000
100%
(H.K.) Limited
Kerry Project Services
Hong Kong
Project management
HK$2
100%
Limited
Kerry Properties
British Virgin Islands
Investment holding
HK$1
100%
(Australia) Limited
Kerry Properties
British Virgin Islands
Investment holding
HK$4,554,642,958
100% ∆
(China) Limited
Kerry Properties
Hong Kong
Investment holding
Ordinary HK$1,000
100%
(H.K.) Limited
Non-voting deferred
HK$200,000,000
Kerry Properties
British Virgin Islands
Investment holding
HK$413,179
100% ∆
(Hong Kong) Limited
Kerry Properties
British Virgin Islands
Investment holding
US$1
100%
(Philippines) Limited
Kerry Properties
Samoa
Investment holding
HK$1
100%
(Shenzhen Central
District) Ltd.
Kerry Properties
The People’s
Property trading and
HK$112,082,975
100%
(Shenzhen) Co., Ltd.
Republic of China
development
Kerry Properties
Australia
Investment holding
A$1
100%
(Sydney) Pty Ltd
Kerry Properties Beijing
British Virgin Islands
Investment holding
US$1
100%
(Shibalidian) Holdings
Company Limited
(formerly known as
Sophonica International
Corp.)

– 168 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^
λ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Properties Beijing
Samoa
Dormant
HK$1
100%
Kerry Centre Ltd.
Kerry Properties
British Virgin Islands
Dormant
US$10,000
100%
Capital Limited
Kerry Properties
The People’s
Real estate management
US$350,000
100%
Development
Republic of China
Management
(Shanghai) Co., Ltd.
Kerry Properties
British Virgin Islands
Dormant
US$10,000
100%
Finance Limited
Kerry Properties
British Virgin Islands
Investment holding
HK$1
100% ∆
International Limited
Kerry Properties
British Virgin Islands
Provision of nominee
HK$1,000
100%
Nominees Limited
services
Kerry Properties
Hong Kong
Investment holding
HK$5,000,000
100%
Shenzhen Kerry
Centre Limited
Kerry Properties
British Virgin Islands
Group financing
HK$4,670,665,187
100% ∆
Treasury Limited
Kerry Property
Hong Kong
Property management
HK$20
100%
Management
Services Limited
Kerry Real Estate
Hong Kong
Estate agency
HK$2
100%
Agency Limited
Kerry Real Estate
The People’s
Real estate management
HK$3,000,000
100%
Management
Republic of China
(Shenzhen) Ltd.
Kerry Real Estate
Samoa
Dormant
HK$1
100%
Services (Beijing) Ltd.

– 169 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Kerry Real Estate	Samoa	Investment holding	HK$1	100%
Services (Fuzhou) Ltd.
Kerry Real Estate	Samoa	Investment holding	HK$1	100%
Services (Shanghai) Ltd.
Kerry Real Estate Services	Samoa	Investment holding	HK$1	100%
(Shenzhen) Ltd.
Kerry Records	Hong Kong	Documents storage	HK$2	100%
Management Services
Limited (formerly known
as_i_be-Datalinks (H.K.)
Limited)
Kerry Residences	Hong Kong	Dormant	HK$2	100%
Limited (formerly known
as Rhosilli Company
Limited)
Kerry Shanghai	Samoa	Investment holding	US$2	100%
(Cao Jia Yan) Ltd.
Kerry Shanghai	Samoa	Dormant	HK$1	100%
(Caohejing) Ltd.
Kerry Shanghai	Samoa	Dormant	HK$1	100%
(Heng Shan) Ltd.
Kerry Shanghai	Samoa	Investment holding	HK$6,000,000	60%
(Hongkou) Ltd.
Kerry Shanghai	Samoa	Investment holding	HK$1,000,000	75%
(Jingan Beili) Ltd
Kerry Shanghai	Samoa	Investment holding	HK$1,000,000	100%
Development Ltd
Kerry Suzhou	Samoa	Investment holding	HK$1,000,000	100%
(Gucheng) Ltd

– 170 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Kerry TC Warehouse 1	British Virgin Islands	Warehouse	US$1	100%
(Block A) Limited		ownership in
(formerly known as		Hong Kong
Kerry BCI Warehouse
(Tsuen Wan) Limited)
Kerry TC Warehouse 1	British Virgin Islands	Warehouse	US$1	100%
(Block B) Limited		ownership in
(formerly known as		Hong Kong
Kerry BCI Cold Store
(Tsuen Wan) Limited)
Kerry TC Warehouse 2	Hong Kong	Warehouse	HK$10,000	100%
Limited (formerly		ownership
known as Kerry BCI
Cold Store (Kwai
Chung) Limited)
Kerry TC Warehouse	British Virgin Islands	Investment holding	HK$10,000,000	100%
Holdings Limited
(formerly known as
Kerry BCI Warehouse
Holdings Limited)
Kerry Warehouse	Hong Kong	Warehouse ownership	HK$10,000,000	100%
(Chai Wan) Limited
Kerry Warehouse	Hong Kong	Warehouse ownership	HK$2	100%
(Fanling 1) Limited
Kerry Warehouse	Hong Kong	Warehouse ownership	HK$2	100%
(Fanling 2) Limited
Kerry Warehouse	British Virgin Islands	Investment holding	HK$1	100%
(HKSAR) Limited
Kerry Warehouse	Hong Kong	Warehouse operation	HK$25,000,000	100%
(Hong Kong) Limited
Kerry Warehouse	Hong Kong	Warehouse ownership	HK$30,000	100%
(Kwai Chung) Limited

– 171 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Kerry Warehouse
Hong Kong
Warehouse ownership
HK$10,000,000
100%
(Shatin) Limited
Kerry Warehouse
Hong Kong
Warehouse ownership
HK$5,000,000
100%
(Sheung Shui) Limited
Kerry Warehouse
Hong Kong
Warehouse ownership
HK$2
100%
(Tsuen Wan) Limited
Kerry Warehouse
Hong Kong
Warehouse ownership
HK$2
100%
(Yuen Long 1) Limited
Kerry Warehouse Limited
British Virgin Islands
Investment holding
US$1
100%
KerryFlex Supply Chain
Hong Kong
Provision of agency and
HK$5,000,000
100%
Solutions Limited
distribution services
(formerly known as
LINC Group Holdings
Limited)
Kildare Limited
Hong Kong
Property trading
HK$2
100%
Kimberley Inc.
British Virgin Islands
Investment holding
US$1,000
100%
La Corte Investments
British Virgin Islands
Investment holding
US$1
100%
Limited
Licotar Company Limited
Hong Kong
Dormant
HK$2
100%
Logistics (Thailand)
Thailand
Investment holding
Common Baht49,000
49% #
Limited
Preference Baht51,000
Longstone Holdings
British Virgin Islands
Investment holding
US$100
100%
Limited
Lynart Group Limited
British Virgin Islands
Dormant
HK$10,000
100%

– 172 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Mable Road Company	Hong Kong	Property investment	Ordinary HK$10	100%
Limited		Non-voting deferred
			HK$10,000
Madigan Company	Hong Kong	Property trading	HK$2	100%
Limited
Magnifair Company	Hong Kong	Dormant	HK$10,000	100%
Limited
Mainco Management	Hong Kong	Building management	HK$10,000	100%
Limited
Maple Crest Development	British Virgin Islands	Investment holding and	US$120	75%
Limited		properly trading
		in Hong Kong
Marrakesh Limited	British Virgin Islands	Investment holding	US$1	100%
Mazlo Holdings Limited	British Virgin Islands	Investment holding	US$1	100%
Merlin Limited	Samoa	Investment holding in the	HK$1,000,000	100%
		People’s Republic of China
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Aigburth) Holdings
Limited
Mid-Levels Portfolio	Cook Islands	Property investment	US$9	100%
(Aigburth) Limited		in Hong Kong
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Branksome)
Holdings Limited
Mid-Levels Portfolio	Hong Kong	Property investment	HK$1,000	100%
(Branksome) Limited		and development
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Century Tower II)
Holdings Limited

– 173 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Gladdon) Holdings
Limited
Mid-Levels Portfolio	Hong Kong	Property investment	HK$1,000	100%
(Gladdon) Limited
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(May Tower I)
Holdings Limited
Mid-Levels Portfolio	Hong Kong	Dormant	HK$100	100%
(May Tower I) Limited
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Tavistock) Holdings
Limited
Mid-Levels Portfolio	Hong Kong	Property investment	HK$1,000	100%
(Tavistock) Limited
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$100	100%
(Tregunter Towers
1 & 2) Holdings Limited
Mid-Levels Portfolio	British Virgin Islands	Property investment	US$1	100%
(Tregunter Towers		in Hong Kong
1 & 2) Limited
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
(Valverde) Holdings
Limited
Mid-Levels Portfolio	Hong Kong	Property investment	HK$1,000	100%
(Valverde) Limited		and trading
Mid-Levels Portfolio	British Virgin Islands	Investment holding	US$1	100%
Holdings Limited

– 174 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

		Principal activities and
		place of operation (if
	Place of	different from place of	Particulars of	Indirect interest
	incorporation/	incorporation/	issued capital/	held unless
Name	establishment	establishment)	registered capital	denoted with ∆
Mighty Gold	British Virgin Islands	Investment holding	US$1	100%
Investments Limited
Muman Holdings Limited	British Virgin Islands	Dormant	US$1	100%
NMC 6 Limited	British Virgin Islands	Property investment	Ordinary US$1	100%
		in Hong Kong
NMC 7 Limited	British Virgin Islands	Property investment	Ordinary US$1	100%
		in Hong Kong
NMC 8 Limited	British Virgin Islands	Property investment	Ordinary US$1	100%
		in Hong Kong
NMC 9 Limited	British Virgin Islands	Property investment	Ordinary US$1	100%
		in Hong Kong
Nettlefold Limited	British Virgin Islands	Investment holding	US$10,000	100%
Newtonmore Investments	British Virgin Islands	Investment holding	HK$1	100%
Limited
Nite Lites Limited	British Virgin Islands	Investment holding	HK$10,000	100%
Norbiton Group Limited	British Virgin Islands	Investment holding	HK$10,000	100%
Norminster Limited	Hong Kong	Investment holding	HK$1,000	100%
Norwarth Investments	British Virgin Islands	Provision of management	US$1	100%
Limited		services
Ocean City Investments	British Virgin Islands	Investment holding	US$1	75%
Limited
Olsen Holdings Limited	British Virgin Islands	Investment holding	US$1	100%
Omisoka Holdings Limited	British Virgin Islands	Investment holding	US$1	100%
Pacific Worth Group	British Virgin Islands	Investment holding	US$1	100%
Limited

– 175 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Pembrooke Development
British Virgin Islands
Investment holding
HK$10,000
100%
Investments Limited
in Hong Kong
Pettico Limited
Hong Kong
Provision of
HK$20
100%
finance services
Pirton Resources Limited
British Virgin Islands
Investment holding
US$1
100%
Pola Company Limited
British Virgin Islands
Investment holding
US$1,000
100%
Ponnelle Limited
British Virgin Islands
Investment holding
US$1
100%
Port Destiny Limited
Hong Kong
Property trading
HK$2
100%
Princeton Investment
Hong Kong
Property development
HK$2
100%
Company Limited
Prismatic Limited
Hong Kong
Property development
HK$20
100%
Quintoll Limited
British Virgin Islands
Investment holding
US$1
100%
Rayhay Company Limited
Hong Kong
Provision of finance services
HK$2
100%
Renmark Limited
British Virgin Islands
Investment holding
US$1
100%
Rightful Investments
British Virgin Islands
Investment holding
US$1
100%
Limited
Risenland Development
The People’s
Property development
HK$44,000,000
100%
(Fuzhou) Co., Ltd.
Republic of China
Rodder Holdings Limited
British Virgin Islands
Investment holding
US$1
100%
in Hong Kong
Roving Spirit Limited
British Virgin Islands
Investment holding
HK$10,000
100%
Sageman Limited
British Virgin Islands
Investment holding
US$1
100%
Scene View Limited
British Virgin Islands
Investment holding
US$1
100%
Senworld Investment
Hong Kong
Property investment
HK$2
100%
Limited

– 176 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

µ^
µ^
µ^
µ^*

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Shabu Inc.
British Virgin Islands
Investment holding
US$1
100%
Shanghai Gang Hu
The People’s
Property investment
US$155,300,000
54.45%
Properties Co., Ltd.
Republic of China
and development
Shanghai Kerry Real
The People’s
Property investment
US$12,000,000
55.20%
Estate Development
Republic of China
Co., Ltd.
Shanghai Xin Ci Hou
The People’s
Property investment
US$60,000,000
74.25%
Properties Co., Ltd.
Republic of China
Shenzhen Kerry Yantian
The People’s
Operation of logistics
RMB88,000,000
55%
Port Logistics Company
Republic of China
business
Limited
Shine Concept
British Virgin Islands
Investment holding
US$1
100%
Investments Limited
Silverstone Assets Limited
British Virgin Islands
Investment holding
US$100,000
100%
in Hong Kong
Sky Wealth Investments
British Virgin Islands
Investment holding
US$1
100%
Limited
Southwark Profits Limited
British Virgin Islands
Investment holding
US$100
100%
Spring Champion Limited
British Virgin Islands
Investment holding
US$1
100%
Taskan Limited
Hong Kong
Property development
HK$2
100%
Tellico Investment Limited
Liberia
Investment holding
US$1
100%
Tellson International
British Virgin Islands
Investment holding
US$1
100%
Limited
Templepatrick Limited
Hong Kong
Financing
HK$100
100%
Terowie Holdings Limited
British Virgin Islands
Investment holding
HK$10,000
100%

– 177 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

Principal activities and
place of operation (if
Place of
different from place of
Particulars of
Indirect interest
incorporation/
incorporation/
issued capital/
held unless
Name
establishment
establishment)
registered capital
denoted with ∆
Toccate Company
Hong Kong
Financing
Ordinary HK$10
100%
Limited
Non-voting deferred
HK$1,000,000
Torres Investments Limited
British Virgin Islands
Investment holding
HK$10,000
100%
Travel Aim Investment B.V.
Netherlands
Investment holding
NLG40,000
100%
Trebanos Investment
Hong Kong
Dormant
HK$2
100%
Company Limited
Trident International
United Kingdom
Dormant
£1
91%
Limited
Twindale Limited
British Virgin Islands
Investment holding
US$1
100%
Ubagan Limited
Hong Kong
Dormant
HK$10,000
100%
Upsmart Investments
Hong Kong
Lease holding
HK$2
100%
Limited
Viola Developments
British Virgin Islands
Investment holding
US$1
100%
Limited
Washers Limited
British Virgin Islands
Investment holding
HK$10,000
100%
Win House Industries
Hong Kong
Investment holding and
HK$1,000,000
100%
Limited
provision of construction
work
Win House/Kai Tai
Hong Kong
Provision of construction
HK$100
75%
(Joint Venture)
work
Company Limited
Wing Tak Cheung Limited
Hong Kong
Property development
HK$10,000
100%
Wing Tsing Financial
British Virgin Islands
Group financing in
US$1
100%
Services Limited
Hong Kong
Wirabay Limited
British Virgin Islands
Provision of trustee services
US$1
100% #

– 178 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)

λ^*

companies not audited by PricewaterhouseCoopers
^ English translation of name only
deemed subsidiary
∆ direct interest
λ wholly foreign-owned enterprise
µ sino-foreign equity joint venture enterprise

– 179 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3[7] GROUP STRUCTURE – ASSOCIATED COMPANIES

At 31 December 2003, the Company held interests in the following associated companies:

±
±
±
µ^

Principal
activities and
place of operation
Particulars of
(if different
class of
Place of
from place of
issued shares/
incorporation/
incorporation/
registered
Interest held
Name
establishment
establishment)
capital
indirectly
Adwood Company Limited
Hong Kong
Investment holding
10 shares of
30%
HK$10 each
Ariel Investments Limited
Hong Kong
Investment holding
1,000,000 shares
45%
of HK$1 each
Asia Airfreight Services
Hong Kong
Provision of air cargo
10,000 shares
15% β
Limited
services
of HK$1 each
Asia Airfreight Terminal
Hong Kong
Air cargo handling
360,000,000
15% β
Company Limited
terminal operation
shares of
HK$1 each
Bay Tower Properties
British Virgin Islands
Investment holding
1,000 shares of
33.33%
Limited
US$1 each
Beijing BHL Logistics
The People’s
Land resettlement
US$20,000,000
20%
Limited
Republic of China
Benefit Bright (B.V.I.)
British Virgin Islands
Investment holding
1,000 shares of
32.50%
Limited
in Hong Kong
US$1 each
Benefit Bright Limited
Hong Kong
Property investment
2 shares of
32.50%
and trading
HK$1 each
Brisbane Trading
Hong Kong
Property development
100,000 ordinary
50%
Company Limited
and trading
shares of HK$10 each
108,376,196
non-voting
deferred shares
of HK$1 each
Capital Fun Limited
Hong Kong
Provision of nominee
2 shares of
20%
services
HK$1 each
Cardiff Investments Limited
Hong Kong
Investment holding
100,000 shares
30%
of HK$1 each

– 180 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3[7] GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)

*
µ^

±
±
±
*±

Cavalcade Holdings Limited
British Virgin Islands
Investment holding
100 shares of
45%
US$1 each
Cheerjoy Development
Hong Kong
Property development
2 shares of
35%
Limited
HK$1 each
Chiwan Container
The People’s
Port terminal operation
US$44,000,000
25%
Terminal Co., Ltd.
Republic of China
Cushion Company Limited
Hong Kong
Dormant
10,000 shares
33.33%
of HK$1 each
EDSA Parking Services, Inc.
Philippines
Carpark operations
2,500 shares of
39.12%
Pesos 100 each
EDSA Properties
Philippines
Property development,
4,215,222,612
39.12%
Holdings Inc.
investment holding
shares of
and real estate
Peso 1 each
management
EPHI Logistics Holdings,
Philippines
Investment holding
15,000 shares
40%∆
Inc.
of Pesos 100 each
Enterprico Investment
Hong Kong
Loan financing
100,000 ordinary
45%
Limited
shares of HK$1 each
Grand Creator
British Virgin Islands
Investment holding
10 shares of
40%
Investment (BVI) Limited
US$1 each
Grand Creator
Hong Kong
Property development
2 shares of
40%
Investment Limited
and trading
HK$1 each
Hang Hau Station
Hong Kong
Project management
2 shares of
40%
(Project Management)
HK$1 each
Limited
Hang Hau Station
Hong Kong
Dormant
2 shares of
40%
Construction Limited
HK$1 each

– 181 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3[7] GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)

*

±
±
±
µ^

*

Principal
activities and
place of operation
Particulars of
(if different
class of
Place of
from place of
issued shares/
incorporation/
incorporation/
registered
Interest held
Name
establishment
establishment)
capital
indirectly
Harvest Sun (B.V.I.)
British Virgin Islands
Investment holding
100 shares of
20%
Limited
in Hong Kong
US$1 each
Harvest Sun Limited
Hong Kong
Property investment and
2 shares of
20%
trading
HK$1 each
Hilaire Inc.
British Virgin Islands
Investment holding
900 shares of
33.33%
US$1 each
Hong Kong Tunnels and
Hong Kong
Tunnel management
1,000,000 shares
15% β
Highways Management
of HK$1 each
Company Limited
Jacksons Landing
Australia
Property development
400 ordinary
25%
Development Pty.
shares of
Limited
A$1 each
Jacksons Landing Estate
Australia
Property management
10 ordinary
25%
Management Pty
shares of
Limited
A$1 each
Kerry BHL Logistics
The People’s
Provision of
US$2,650,000
50%
Limited
Republic of China
logistics services
Kerry Freight
Philippines
Freight forwarding
20,000 shares
20.40%
Philippines, Inc.
business
of Pesos 100 each
Kerry Hung Kai Warehouse
Hong Kong
Warehouse operation
5,000,000 shares
50%
(Cheung Sha Wan) Limited
of HK$1 each
Kerry Rhenus Logistics
British Virgin Islands
Operation of logistics
100,000 shares
50%
(Far East) Limited
business
of HK$1 each
Kosco Limited
British Virgin Islands
Provision of nominee
1 share of US$1
32.50%
services
KUMM International
Samoa
Investment holding
7,000,000 shares
25%
Co., Ltd.
of US$1 each

– 182 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3[7] GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)

*

±
±
µ^*

Olympian City 1 (Project
Hong Kong
Project management
2 shares of
20%
Management) Limited
HK$1 each
Olympian City 1
Hong Kong
Leasing and estate
2 shares of
20%
Management
management
HK$1 each
Company Limited
Olympian City 2 (Project
Hong Kong
Project management
2 shares of
32.50%
Management) Limited
HK$1 each
Olympian City 2
Hong Kong
Provision of
1,000 shares of
38.20%
Finance Company Limited
finance services
HK$1 each
Olympian City 2
Hong Kong
Leasing and estate
1,000 shares of
32.50%
Management Company
management
HK$1 each
Limited
Point Perfect Investments
British Virgin Islands
Investment holding
10 shares
35%
Limited
of US$1 each
Portstewart Limited
Hong Kong
Provision of finance
2 shares
50%
services
of HK$1 each
Reca Limited
British Virgin Islands
Provision of nominee
1 share of US$1
40%
services
Residence Oasis Finance
Hong Kong
Provision of finance
2 shares of
40%
Company Limited
services
HK$1 each
Shanghai Kerry CHJ
The People’s Republic
Operation of logistics
HK$14,040,000
50%
Logistics Limited
of China
business
Shangri-La Plaza
Philippines
Operation of shopping
1,229,500,000
30.80%
Corporation
mall and other related
preferred shares
activities
of Peso 1 each
235,000,000
common shares
of Peso 1 each

– 183 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3[7] GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)

λ
±

±

±

Principal
activities and
place of operation
Particulars of
(if different
class of
Place of
from place of
issued shares/
incorporation/
incorporation/
registered
Interest held
Name
establishment
establishment)
capital
indirectly
Tianjin Jialing Union
The People’s
Property holding
US$6,900,000
25%
Industries Co., Ltd.
Republic of China
Time Rank Limited
Hong Kong
Property trading
2 shares of
50%
HK$1 each
Top Spring Development
Hong Kong
Investment holding
22,000,000 shares
25%
(Beijing) Limited
of HK$1 each
Twin Luck Worldwide Ltd.
British Virgin Islands
Investment holding
2 shares of
50%
US$1 each
Western Harbour Tunnel
Hong Kong
Tunnel operation
40,000,000 shares
15% β
Company Limited
and management
of HK$10 each
Win Chanford Enterprises
Hong Kong
Property investment
1,000,000 ordinary
45%
Limited
shares of HK$1 each
Wolver Hollow Company
Hong Kong
Warehouse
10,000 shares
50%
Limited
ownership
of HK$1 each
Wu Wing International
Hong Kong
Property trading
30,000,000
45%
Company, Limited
and investment
shares of
HK$1 each

companies not audited by PricewaterhouseCoopers
^ English translation of name only
β deemed associated company
λ wholly foreign-owned enterprise
µ sino-foreign equity joint venture enterprise
± companies having a financial accounting period which is not coterminous with the Group
∆ being the interest fully controlled by the Group

– 184 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below is the unaudited consolidated financial statements of the Group for the six months ended 30 June 2004 as extracted from the Company’s 2004 interim report.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Notes Turnover 2 Cost of sales Direct operating expenses Gross profit Other revenues Other income Provision in respect of stock of completed properties held for sale Revaluation deficit on properties Administrative expenses Operating profit/(loss) before finance costs Finance costs Operating profit/(loss) 2,3 Share of results of associates – share of profits less losses – provision for decline in carrying value Profit/(loss) before taxation Taxation 4 Profit/(loss) after taxation Minority interests Profit/(loss) attributable to shareholders Transfer to reserves 5 Interim dividend Earnings/(loss) per share 6 Interim dividend per share	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000 2,631,849 1,814,468 (747,491) (545,501) (1,005,766) (719,114) 878,592 549,853 16,846 14,368 2,695 20,165 – (69,346) – (962,458) (142,132) (126,103) 756,001 (573,521) (61,642) (95,550) 694,359 (669,071) 224,241 115,700 – (136,585) 224,241 (20,885) 918,600 (689,956) (152,364) 73,267 766,236 (616,689) (68,266) 25,627 697,970 (591,062) (80) (8,783) 697,890 (599,845) 239,031 153,990 58.44 cents (50.39) cents 20 cents 13 cents	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000 2,631,849 1,814,468 (747,491) (545,501) (1,005,766) (719,114) 878,592 549,853 16,846 14,368 2,695 20,165 – (69,346) – (962,458) (142,132) (126,103) 756,001 (573,521) (61,642) (95,550) 694,359 (669,071) 224,241 115,700 – (136,585) 224,241 (20,885) 918,600 (689,956) (152,364) 73,267 766,236 (616,689) (68,266) 25,627 697,970 (591,062) (80) (8,783) 697,890 (599,845) 239,031 153,990 58.44 cents (50.39) cents 20 cents 13 cents
		115,700 (136,585)
		(20,885) (689,956) 73,267 (616,689) 25,627 (591,062) (8,783) (599,845) 153,990 (50.39) cents 13 cents

– 185 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

CONSOLIDATED BALANCE SHEET

Notes Fixed assets Associates Other non-current assets Negative goodwill Current assets Stock of completed properties held for sale Properties under development for sale Accounts receivable, prepayments and deposits 7 Tax recoverable Tax reserve certificates Trading securities Pledged bank deposits Cash and bank balances Current liabilities Accounts payable, deposits received and accrued charges 8 Taxation Short-term bank loans and current portion of long-term liabilities 9 Unsecured bank overdrafts Net current assets Total assets less current liabilities Financed by: Share capital Share premium Other reserves Retained profits Proposed dividend Shareholders’ funds Minority interests and loans Long-term liabilities 9 Deferred taxation FINANCIAL HIGHLIGHTS Shareholders’ equity Net borrowings Net asset value per share Gearing Issued shares_(in millions)_	Unaudited 30 June 2004 *HK$’000* 21,377,953 4,386,154 1,430,922 (13,073)	Unaudited 30 June 2004 *HK$’000* 21,377,953 4,386,154 1,430,922 (13,073)	Audited 31 December 2003 HK$’000 20,960,492 4,621,841 1,495,763 (42,604)
	166,554 741,682 1,252,486 43,142 21,873 3,023 47,058 2,260,089		345,202 999,777 790,724 48,561 19,926 3,252 74,003 1,520,059
	4,535,907		3,801,504
	1,493,665 113,853 664,325 –		1,333,956 60,150 804,751 1,921
	2,271,843 2,264,064 29,446,020 1,195,157 3,655,078 9,197,731 6,132,177 239,031 20,419,174 2,335,971 22,755,145 5,678,469 1,012,406 29,446,020 30 June 2004 *HK$M* 20,419 4,036 HK$17.08 20% 1,195		2,200,778 1,600,726 28,636,218 1,191,527 3,628,591 9,209,944 5,673,768 178,729 19,882,559 2,375,499 22,258,058 5,403,213 974,947 28,636,218 31 December 2003 HK$M 19,883 4,616 HK$16.69 23% 1,192

– 186 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

CONSOLIDATED CASH FLOW STATEMENT

Operating activities Net cash generated from operations Interest paid Profits tax paid Net cash from operating activities Investing activities Purchase of fixed assets, excluding interest capitalised Purchase of a subsidiary (net of cash and cash equivalents acquired) Purchase of additional interest in subsidiaries Additional investments in associates Repayment of loans from associates Purchase of long-term investments Repayment of loans from/(loans to) investee companies Decrease/(increase) in long-term receivables Interest received Dividends received from associates Dividends received from unlisted investments Dividends received from listed investments Proceeds from sale of fixed assets Proceeds from sale of an associate Proceeds from sale of long-term investments Net cash generated from/(used in) investing activities Net cash inflow before financing Financing activities Proceeds from issue of shares Repayment of bank loans Drawdown of bank loans Capital injection from minority shareholders Dividends paid Dividends paid to minority shareholders in subsidiaries Decrease in loans from minority shareholders Net cash used in financing Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 30 June Analysis of balances of cash and cash equivalents Pledged bank deposits Cash and bank balances	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000
	939,695 (111,194) (36,312)		854,030 (137,235) (63,626)
	792,189		653,169
	(223,256) (106,656) – (34,401) 460,867 – 364 57,835 12,934 15,018 3,859 66 54,827 4,336 –		(782,149) – (110,000) (7,070) 280,360 (1,655) (700) (23,983) 10,566 6,482 3,750 56 35,684 – 18,573
	245,793 1,037,982		(570,086) 83,083
	26,355 (2,499,356) 2,486,789 1,941 (175,418) (1,368) (161,919)		430 (1,345,456) 1,205,410 474 (23,909) (2,264) (14,247)
	(322,976) 715,006 1,592,141 2,307,147 47,058 2,260,089 2,307,147		(179,562) (96,479) 1,421,245 1,324,766 35,154 1,289,612 1,324,766

– 187 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Total equity as at 1 January Revaluation deficit on properties charged to revaluation reserves Deferred tax charged to revaluation reserves Revaluation deficit on non-trading securities Exchange differences arising on translation of the accounts of the PRC and overseas subsidiaries and associates Net losses not recognised in the profit and loss account Profit/(loss) attributable to shareholders Dividends Issue of share capital Total equity as at 30 June	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000 19,882,559 19,796,430 – (124,049) (457) – (5,326) (120,619) (6,510) 29,894 (12,293) (214,774) 697,970 (591,062) (179,179) (140,466) 30,117 116,987 20,419,174 18,967,115	Unaudited Six months ended 30 June 2004 2003 *HK$’000* HK$’000 19,882,559 19,796,430 – (124,049) (457) – (5,326) (120,619) (6,510) 29,894 (12,293) (214,774) 697,970 (591,062) (179,179) (140,466) 30,117 116,987 20,419,174 18,967,115
		(124,049) – (120,619) 29,894
		(214,774) (591,062) (140,466) 116,987 18,967,115

– 188 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

NOTES TO THE ACCOUNTS

1. Principal Accounting Policies

These unaudited consolidated interim accounts are prepared in accordance with Hong Kong Statement of Standard Accounting Practice 25 – “Interim financial reporting” issued by the Hong Kong Society of Accountants and Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

These condensed interim accounts should be read in conjunction with the 2003 annual financial statements. The accounting policies and methods of computation used in the preparation of these condensed interim accounts are consistent with those used in the annual accounts for the year ended 31 December 2003.

2. Principal Activities and Segmental Analysis of Operations

An analysis of the Group’s turnover and contribution to operating profit/(loss) for the period by principal activities and markets is as follows:

Turnover Six months ended 30 June 2004 2003 *HK$’000* HK$’000	Turnover Six months ended 30 June 2004 2003 *HK$’000* HK$’000	Operating profit/(loss) Six months ended 30 June 2004 2003 *HK$’000* HK$’000	Operating profit/(loss) Six months ended 30 June 2004 2003 *HK$’000* HK$’000
242,895 149,943	237,932 172,090	180,604 54,737	(133,424) (468,016)
392,838	410,022	235,341	(601,440)
422,449 590,845	203,779 377,766	79,762 141,987	33,296 (105,843)
1,013,294 124,274	581,545 61,543	221,749 51,462	(72,547) (26,273)
200,769 880,195	179,899 560,921	108,282 49,315	(19,983) 15,690
1,080,964 – 20,479 2,631,849 870,637 1,233,558 330,120 197,534 2,631,849	740,820 – 20,538 1,814,468 536,503 909,635 255,580 112,750 1,814,468	157,597 (236) 28,446 694,359 316,397 360,416 6,812 10,734 694,359	(4,293) (247) 35,729 (669,071) (131,902) (535,613) 641 (2,197) (669,071)

– 189 –

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP

An analysis of the Group’s revenue and results for the period by business segments is as follows:

		Six months ended 30 June 2004 *HK$’000*	Six months ended 30 June 2004 *HK$’000*	Six months ended 30 June 2004 *HK$’000*	Six months ended 30 June 2004 *HK$’000*
PRC Property 789,618 225 – 789,843 327,834 – 2,958 (18,964) 311,828 9,895 321,723 (75,707) 246,016 (54,022) 191,994	Hong Kong Property 740,788 – – 740,788 253,525 892 4,527 (62,220) 196,724 96,762 293,486 (40,004) 253,482 (6,030) 247,452	Overseas Property – – – – (4,465) 3,033 – – (1,432) 16,041 14,609 (4,024) 10,585 – 10,585	Logistics and Warehouse 1,080,964 – – 1,080,964 179,132 – 458 (21,993) 157,597 84,267 241,864 (28,855) 213,009 (8,215) 204,794	Infrastructure – – – – (236) – 2,255 (2,255) (236) 17,276 17,040 (3,337) 13,703 – 13,703	Others 20,479 107,022 138,296 265,797 121,661 – 2,723 (94,506) 29,878 – 29,878 (437) 29,441 1 29,442	Eliminations – (107,247) (138,296) (245,543) (138,296) – – 138,296 – – – – – – –	Consolidated 2,631,849 – –
							2,631,849
							739,155 3,925 12,921 (61,642)
							694,359 224,241
							918,600 (152,364)
							766,236 (68,266)
							697,970

– 190 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

2. Principal Activities and Segmental Analysis of Operations (continued)

			Six months ended 30 June 2003 HK$’000	Six months ended 30 June 2003 HK$’000			Consolidated 1,814,468 – – 1,814,468 443,915 (69,346) (962,458) (587,889) 3,806 10,562 (95,550) (669,071)
PRC Property 503,254 – – 503,254 231,626 – (328,125) (96,499) – 1,648 (31,550) (126,401)	Hong Kong Property 549,856 – – 549,856 82,819 (69,346) (527,581) (514,108) 3,806 4,897 (68,454) (573,859)	Overseas Property – – – – (2,449) – – (2,449) – – – (2,449)	Logistics and Warehouse 740,820 – – 740,820 129,038 – (106,752) 22,286 – 173 (26,752) (4,293)	Infrastructure – – – – (247) – – (247) – 2,221 (2,221) (247)	Others 20,538 129,285 140,993 290,816 144,121 – – 144,121 – 1,623 (107,566) 38,178	Eliminations – (129,285) (140,993) (270,278) (140,993) – – (140,993) – – 140,993 –
11,696 –	26,100 (136,585)	19,436 –	(982) –	59,450 –	– –	– –	115,700 (136,585)
11,696 (114,705) 73,037 (41,668) 8,892 (32,776)	(110,485) (684,344) 1,583 (682,761) 17,005 (665,756)	19,436 16,987 (1,035) 15,952 – 15,952	(982) (5,275) 3,409 (1,866) (270) (2,136)	59,450 59,203 (3,692) 55,511 – 55,511	– 38,178 (35) 38,143 – 38,143	– – – – – –	(20,885) (689,956) 73,267 (616,689) 25,627 (591,062)

– 191 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

3. Operating Profit/(Loss)

Operating Profit/(Loss)
Operating profit/(loss) is stated after crediting/charging the following: Crediting Dividend income from listed and unlisted investments Interest income Gain/(loss) on sale of properties – Investment properties – Properties under development and completed properties for sale Amortisation of negative goodwill Charging Depreciation Amortisation of goodwill Total finance costs incurred _Less:_amount capitalised in properties under development Total finance costs expensed during the period Taxation The taxation (charge)/credit comprises: PRC taxation Current Overprovision in prior years Deferred Hong Kong profits tax Current Overprovision in prior years Deferred Overseas taxation Current Deferred Share of taxation attributable to associates Current Deferred	Six months ended 30 June 2004 2003 *HK$’000* HK$’000 3,925 3,806 12,921 10,562 (3,381) (7,824) 269,184 43,868 265,803 36,044 2,270 2,158 38,713 32,892 1,637 1,195 111,194 137,235 (49,552) (41,685) 61,642 95,550 Six months ended 30 June 2004 2003 *HK$’000* HK$’000 (49,962) (27,881) 1,380 375 (23,015) 97,450 (71,597) 69,944 (43,038) (20,367) 2,032 4,401 (7,879) 23,991 (48,885) 8,025 (3,899) (612) 887 – (3,012) (612) (28,870) (14,196) – 10,106 (28,870) (4,090) (152,364) 73,267
		(49,962) 1,380 (23,015)		(27,881) 375 97,450
			69,944
		(43,038) 2,032 (7,879)		(20,367) 4,401 23,991
			8,025
		(3,899) 887		(612) –
			(612) (14,196) 10,106 (4,090) 73,267

4. Taxation

Hong Kong profits tax has been provided at the rate of 17.5% (2003: 17.5%) on the estimated assessable profit for the period. Taxation on PRC and overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the PRC and the overseas countries in which the Group operates, respectively.

– 192 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

5. Transfer to Reserves

Transfer to: Enterprise expansion reserve Share of surplus and capital reserves of associates	Six months ended 30 June 2004 2003 *HK$’000* HK$’000 (80) (61) – (8,722) (80) (8,783)	Six months ended 30 June 2004 2003 *HK$’000* HK$’000 (80) (61) – (8,722) (80) (8,783)
		(8,783)

6. Earnings/(Loss) per Share

The calculation of basic earnings/(loss) per share is based on the Group’s profit attributable to shareholders of HK$697,970,000 (2003: loss of HK$591,062,000) and the weighted average number of 1,194,366,901 shares (2003: 1,173,021,525 shares) in issue during the period.

There was no dilution arising from the outstanding share options granted by the Company in 1997. For the six months ended 30 June 2004, the dilution from the outstanding share options granted by the Company in 1999, 2000, 2001 and 2002 was immaterial (2003: the relevant share options were anti-dilutive). Accordingly, diluted earnings/(loss) per share had not been shown.

7. Accounts Receivable, Prepayments and Deposits

Included in accounts receivable, prepayments and deposits are trade receivables. The Group maintains a defined credit policy. The ageing analysis of trade receivables as at 30 June 2004 was as follows:

0–1 month 2–3 months Over 3 months	30 June 2004 *HK$’000* 296,008 129,071 20,836 445,915	31 December 2003 HK$’000 137,410 130,200 20,538
		288,148

8. Accounts Payable, Deposits Received and Accrued Charges

Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of trade payables as at 30 June 2004 was as follows:

0–1 month 2–3 months Over 3 months	30 June 2004 *HK$’000* 131,076 25,734 38,552 195,362	31 December 2003 HK$’000 140,587 33,418 19,171
		193,176

– 193 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

9. Long-Term Liabilities

Bank loans – unsecured Bank loans – secured Total bank loans_(note (i)) Short-term bank loans and current portion of long-term liabilities (i) At 30 June 2004, the Group’s bank loans were repayable as follows: Within one year In the second to fifth year In the second year In the third year In the fourth year In the fifth year Over five years 10. Contingent Liabilities Banking facilities Guarantees for banking and other facilities of certain associates and investee companies(note (i)) Guarantees to certain banks for mortgage facilities granted to first buyers of certain properties in the PRC(note (ii))_	30 June 2004 *HK$’000* 6,036,265 306,529 6,342,794 (664,325) 5,678,469 30 June 2004 *HK$’000* 664,325 674,435 4,345,046 382,994 274,086 5,676,561 1,908 6,342,794 30 June 2004 *HK$’000* 480,438 390,991 871,429	30 June 2004 *HK$’000* 6,036,265 306,529 6,342,794 (664,325) 5,678,469 30 June 2004 *HK$’000* 664,325 674,435 4,345,046 382,994 274,086 5,676,561 1,908 6,342,794 30 June 2004 *HK$’000* 480,438 390,991 871,429	30 June 2004 *HK$’000* 6,036,265 306,529 6,342,794 (664,325) 5,678,469 30 June 2004 *HK$’000* 664,325 674,435 4,345,046 382,994 274,086 5,676,561 1,908 6,342,794 30 June 2004 *HK$’000* 480,438 390,991 871,429	31 December 2003 HK$’000 6,033,808 174,156 6,207,964 (804,751) 5,403,213 31 December 2003 HK$’000 804,751	31 December 2003 HK$’000 6,033,808 174,156 6,207,964 (804,751) 5,403,213 31 December 2003 HK$’000 804,751
		674,435 4,345,046 382,994 274,086			315,822 650,244 4,208,933 224,292
				5,399,291 3,922 6,207,964 31 December 2003 HK$’000 789,061 210,041 999,102

(i) The Group has executed guarantees for banking and other facilities granted to certain associates and investee companies. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$480,438,000 (31 December 2003: HK$789,061,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$530,723,000 (31 December 2003: HK$1,406,842,000).

– 194 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

10. Contingent Liabilities (continued)

(ii) The Group has executed guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Group in the PRC. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$390,991,000 (31 December 2003: HK$210,041,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$1,271,838,000 (31 December 2003: HK$1,416,925,000).

Apart from the above, there are no material changes in contingent liabilities of the Group since 31 December 2003.

11. Pledge of Assets

At 30 June 2004, the Group’s total bank loans of HK$6,342,794,000 (31 December 2003: HK$6,207,964,000) included an aggregate amount of HK$6,036,265,000 (31 December 2003: HK$6,033,808,000) which is unsecured and an aggregate amount of HK$306,529,000 (31 December 2003: HK$174,156,000) which is secured by the following:

(i) legal charges over certain properties with an aggregate net book value of HK$1,560,018,000 (31 December 2003: HK$1,459,514,000);
(ii) charges on all assets, including bank balances amounting to HK$47,058,000 (31 December 2003: HK$74,003,000), of certain subsidiaries; and
(iii) assignments of insurance proceeds of certain properties.

– 195 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group as at 30 June 2004

The following unaudited pro forma statement of assets and liabilities of the Enlarged Group at 30 June 2004 is based on the unaudited consolidated balance sheet of the Group as set out in the published interim report as of 30 June 2004, the audited balance sheet of Eas HK and the audited consolidated balance sheet of Eas PRC Group as at 30 June 2004 as set out in the Accountants’ Reports in Appendices II and III to this circular respectively. The unaudited balance sheet of Treasure Lake is not included in the preparation of the unaudited pro forma statement of assets and liabilities of the Enlarged Group as Treasure Lake did not have any assets and liabilities material to the Enlarged Group as at 30 June 2004. This unaudited pro forma statement of assets and liabilities has been prepared to illustrate the effect of the Acquisition on the assets and liabilities of the Group, as if the Acquisition had taken place on 30 June 2004. It has been prepared for illustrative purpose only and, because of its nature, may not give a true picture of the financial position of the Enlarged Group as at 30 June 2004, or at any future date.

The Group Eas PRC Group (Note (i)) Eas HK HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Audited) 21,377,953 295,894 – 4,386,154 55,299 160,843 1,430,922 8,993 – (13,073) 3,906 – – 29,280 –	Pro forma adjustments	Pro forma adjustments
	Restructure adjustment (Note (ii)) Acquisition adjustment (Note (iii))	Pro Forma Total
	HK$’000 HK$’000 (14,983) (b) 68,319 (b) – (160,843) (c) (2,722) (b) – (3,906) (b) 122,343 (b) (21,114) (b) –
166,554 – – 741,682 – – 1,252,486 598,303 – 43,142 – 44 21,873 – – 3,023 – – 47,058 – – 2,260,089 269,876 1	– – – – (108,837) (b) – – – – – – – – – (4,838) (b) (358,491) (a)
4,535,907 868,179 45	(113,675) (358,491)

−196 −

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

	Eas PRC		Pro forma adjustments	Pro forma adjustments	Pro forma adjustments
The Group HK$’000 (Unaudited)	Group (Note (i)) HK$’000 (Audited)	Eas HK HK$’000 (Audited)	Restructure adjustment (Note (ii)) HK$’000	Acquisition adjustment (Note (iii)) HK$’000	Pro Forma Total HK$’000
1,493,665 113,853 664,325 –	450,838 13,560 108,556 1,122	44 – – –	(56,007) (b) (81) (b) – 46,274 (a)	– – – –	1,888,540 127,332 772,881 47,396
2,271,843 2,264,064 (5,678,469) (1,012,406) (2,335,971) –	574,076 294,103 (197,792) (1,002) (18,083) –	44 1 – – – (142,732)	(9,814) (103,861) – – 6,806 (b) –	– (358,491) – (22,545) (b) (140,445) 142,732 (c)	2,836,149 2,095,816 (5,876,261) (1,035,953) (2,487,693) –
20,419,174	470,598	18,112	(139,780)	(348,930)

Notes:

(i) Extracted from the accountants’ report on the Eas PRC Group and translated to Hong Kong Dollars at an exchange rate of 1.06 as appropriate.
(ii) To record the Restructuring of the Eas PRC Group which will involve transferring various companies, assets and liabilities that are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics aims to acquire out of the Eas PRC Group (before Restructuring) to Huatong, transferring from Huatong a motor vehicle with net book value of RMB146,000 as at 30 June 2004 relating to the logistics businesses that Kerry Logistics aims to acquire to the Eas PRC Group, and the declaration of a dividend by Eas PRC to Huatong.

The amounts shown in the adjustment reflect the above transfers based on the net book values of the assets and liabilities being transferred as at 30 June 2004.

(a) According to the Restructuring Agreement, the board of directors of Eas PRC, subsequent to 30 June 2004, has declared a dividend of approximately RMB158,499,000 and will declare a dividend of approximately RMB35,108,000 payable to Huatong. The distribution of the dividends in aggregate of approximately RMB193,607,000 (equivalent to approximately HK$182,648,000) will be settled partly by the net transfer out of assets from Eas PRC to Huatong under the Restructuring based on the book value of the net assets from the unaudited management accounts prepared under PRC GAAP as at 30 November 2004. As at 30 June 2004, the book value of the net assets to be transferred out, based on the unaudited management accounts prepared under PRC GAAP was HK$136,374,000. The remaining dividend payable of HK$46,274,000 would be paid in cash.

−197 −

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(b) The net carrying value of the assets and liabilities to be transferred, as shown in the pro forma adjustment, amounted to RMB99,116,000 (equivalent to approximately HK$93,506,000) as extracted from Section II note 1 to the accountants’ report of Eas PRC Group. This differs from the unaudited PRC GAAP book value of HK$136,374,000 by HK$42,868,000 which represents primarily provisions on doubtful debts and deferred tax assets recognised thereon as required under HK GAAP.
(iii) (a) To record the investment in effective 70% equity interest in Eas PRC, which will be settled in cash amounting to RMB380,000,000 (equivalent to about HK$358,491,000).
(b) The Acquisition will result in goodwill amounting to HK$122,343,000. This is calculated based on the consideration of HK$358,491,000, and share of fair value of assets and liabilities of the Eas PRC Group at 30 June 2004 acquired by the Group as adjusted for the Restructuring and the revaluation on the land and buildings of Eas PRC Group based on the independent professional valuation as at 30 June 2004. Goodwill arising from the Acquisition will be subject to annual impairment test under the new Hong Kong Financial Reporting Standard 3 which will take effect from 1 January 2005.

The final amount of goodwill, which may be different to the one presented above, to be recorded by the Group on completion will be determined by the final consideration amount and the Group’s interest in the fair value of the identifiable assets and liabilities of Eas PRC Group on the date of completion.

(c) As at 30 June 2004, Eas HK held 50% interest in Eas PRC. Its investment in 50% interest Eas PRC at cost of HK$160,843,000 and amount due to its immediate holding company of HK$142,732,000, which on completion of the Acquisition are both in respect of transactions entirely within the Target Group, and thus are eliminated in the pro forma financial information.

−198 −

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

(B) Letter on Pro Forma Statement of Assets and Liabilities of the Enlarged Group

The following is the text of a letter from PricewaterhouseCoopers, the reporting accountants, prepared for the purpose of incorporation in this circular in respect of the unaudited pro forma statement of assets and liabilities of the Enlarged Group.

29 December 2004

The Directors

Kerry Properties Limited

Dear Sirs

We report on the unaudited pro forma financial information of Kerry Properties Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out on pages 196 to 198 under the heading of “Unaudited pro forma statement of assets and liabilities of the Enlarged Group as at 30 June 2004” in Appendix V to the Company’s circular dated 29 December 2004 in connection with the proposed acquisition of Treasure Lake Shares and Eas PRC Shares. The unaudited pro forma financial information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the proposed acquisition of the entire issued share capital of Treasure Lake Limited and a 20% equity interest in Eas International Transportation Ltd. resulting in the formation of an enlarged group (the “Enlarged Group”) might have affected the relevant financial information of the Group as at 30 June 2004.

RESPONSIBILITIES

It is the responsibility of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“the Listing Rules”).

It is our responsibility to form an opinion, as required by paragraph 4.29 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

−199 −

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

BASIS OF OPINION

We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.

Our work does not constitute an audit or review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared on the bases set out in Section 1(A) of Appendix V of the Circular for illustrative purpose only and, because of its nature, it may not be indicative of the financial position of the Group as at 30 June 2004, or at any future date.

OPINION

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29 of the Listing Rules.

Yours faithfully

PricewaterhouseCoopers

Certified Public Accountants Hong Kong

−200 −

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

2. INDEBTEDNESS

Borrowings

At the close of business on 31 October 2004, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding borrowings of approximately HK$6,029 million comprising bank loans of approximately HK$6,027 million and overdrafts of approximately HK$2 million. Bank loans amounting to approximately HK$4,213 million were unsecured. Bank loans amounting to approximately HK$1,399 million and bank overdrafts of approximately HK$2 million were proportionately guaranteed by companies within the Group and minority shareholders of certain subsidiaries of the Group whilst bank loans amounting to approximately HK$415 million to the Enlarged Group were secured by legal charges over certain properties and fixed deposits, floating charges on certain accounts receivable of Eas PRC, all assets of a subsidiary of the Company and an assignment of insurance proceeds. In addition, certain of the Company’s subsidiaries have proportionate unsecured advances from minority shareholders of approximately HK$1,785 million.

Contingent Liabilities

Banking Facilities

The Enlarged Group has provided guarantees for banking and other facilities granted to associates, investee companies and the set-up office of a project undertaken by the Group. The Enlarged Group’s financial exposure represented by the Enlarged Group’s portion of the utilised amount of such facilities at 31 October 2004 amounted to approximately HK$623 million. The total amount of such facilities covered by the Enlarged Group’s guarantees amounted to approximately HK$668 million.

The Enlarged Group has also provided guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Enlarged Group in the PRC. The Enlarged Group’s financial exposure represented by the Enlarged Group’s portion of the utilised amount of such facilities as at 31 October 2004 amounted to approximately HK$401 million. The total amount of such facilities covered by the Enlarged Group’s guarantees amounted to approximately HK$1,245 million.

The Enlarged Group has provided guarantees for banking facilities granted to and being utilised by third party companies amounting to approximately HK$74 million as at 31 October 2004.

Guarantees and Undertakings

Save as disclosed in the annual report of the Group for the year ended 31 December 2003 and the accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group, the Enlarged Group did not have any material guarantees and undertakings as at 31 October 2004.

−201 −

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

Pending Litigations

Other than those disclosed in Note 21 of the Accountants’ Report on the Eas PRC Group as set out in Appendix III to this circular and under the heading “Litigation” in Appendix VII to this circular, the Directors are not aware of any significant pending litigations that the Enlarged Group was involved in as at 31 October 2004.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any debt securities, any other outstanding loan capital, any other borrowings or indebtedness in the nature of borrowing of the Group including bank overdrafts and liabilities under acceptances (other than normal trade bills) or other similar indebtedness, debentures, mortgages, charges, loans, acceptance credits, hire purchase commitments, guarantees or other material contingent liabilities at the close of business on 31 October 2004.

The Directors have confirmed that there has not been any material adverse change in the indebtedness or contingent liabilities of the Enlarged Group since 31 October 2004.

For the purpose of the above statement of indebtedness, foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on 31 October 2004.

3. WORKING CAPITAL

The Directors are of the opinion that the Enlarged Group will have sufficient working capital for its present requirements.

4. MATERIAL CHANGE

The Directors are not aware as at the Latest Practicable Date of any material adverse change in the financial or trading position or prospect of the Enlarged Group since 31 December 2003, the date to which the latest published audited financial statements of the Group were made up.

5. MANAGEMENT DISCUSSION AND ANALYSIS

The Group put in a strong performance during the first six months of 2004. As stated in the Company’s 2004 interim report, the unaudited turnover of the Group for the six months ended 30 June 2004 was HK$2,632 million (compared to HK$1,814 million recorded for the six months ended 30 June 2003) which comprised largely of proceeds from the sale of properties, rental income, revenue from hotel operations, warehouse rental and logistics services. The increase in turnover during the period was mainly due to the launching of Enterprise Square 3 for sale, continuing sales of Arcadia Court in Shenzhen, the improved performance of Beijing Kerry Centre Hotel after SARS, growth in logistics revenue and the contribution from the newly acquired Siam Seaport Terminal & Warehouses Co., Ltd. in the Logistics Network Division.

As Hong Kong’s economy continues to recover and demand for quality housing in the PRC and the demand for logistics services continues to increase as the economy prospers, the Group is optimistic that it will be able to maintain its profitability during the second half of 2004.

−202 −

PROPERTY VALUATION REPORT

APPENDIX VI

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this circular, received from DTZ Debenham Tie Leung Limited, an independent valuer, in connection with its valuations as at 30 June 2004 and 31 October 2004 respectively of the property interests of the Target Group.

==> picture [156 x 86] intentionally omitted <==

10th Floor Jardine House 1 Connaught Place Central Hong Kong

29 December 2004

The Board of Directors Kerry Properties Limited 13-14/F., Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong

Dear Sirs,

We refer to your instructions for us to value the interests in the properties held by Eas International Transportation Ltd. (referred to as “Eas PRC”) or its subsidiaries and associates (together referred to as the “Eas PRC Group”). We confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you (“Kerry Properties Limited”) with our opinion of the values of such property interests as at 30 June 2004 and 31 October 2004 respectively (each a “Date of Valuation”).

Unless otherwise stated, our valuation of each of the property interests represents its open market value which we would define as intended to mean “an opinion of the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the Date of Valuation, assuming:

(a) a willing seller;
(b) that, prior to the Date of Valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;

−203 −

PROPERTY VALUATION REPORT

APPENDIX VI

(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the Date of Valuation;
(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

Unless otherwise stated, our valuations have been made on the assumption that the Eas PRC Group sells the property interests on the open market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which could serve to affect the values of the property interests. In addition, no forced sale situation in any manner is assumed in our valuations.

In valuing the property interests in Hong Kong which are held under Government Leases expiring before 30 June 1997, we have taken account of the provisions contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of People’s Republic of China on the Question of Hong Kong and the New Territories Leases (Extension) Ordinance 1988 that such leases have been extended without premium until 30 June 2047 and that a rent of three per cent of the rateable value for the time being of each of such properties is charged per annum from the date of extension.

We have relied on the information given by the Eas PRC Group and the advice provided by Kerry Properties Limited’s legal advisers on the laws of the People’s Republic of China (the “PRC”), Fangda Partners, PRC Lawyers, regarding the title to each of the property interests in the PRC and the interests of the Eas PRC Group in the properties in the PRC. The status of titles and grant of major approvals and licences, in accordance with the information provided by the Eas PRC Group are set out in the notes in the valuation certificate.

In valuing the property interests in Group I, we have adopted, wherever appropriate (i) the direct comparison approach by making reference to comparable sales evidence as available in the relevant market; (ii) by investment approach of valuation by considering the capitalized rental derived from the existing tenancies with due provision for the reversionary income potential of the property interests; (iii) the Depreciated Replacement Costs (“DRC”) approach. A DRC approach requires an estimate of the open market value of the land in its existing use and an estimate of the new replacement cost of the buildings and structures, from which deductions are made to allow for the age, condition and functional obsolescence. The value is subject to adequate potential profitability of the undertaking.

We have assigned no commercial value to the property interests without complete title document in Group II as per the guidance of the Stock Exchange of Hong Kong Limited.

−204 −

PROPERTY VALUATION REPORT

APPENDIX VI

We have also assigned no commercial value to the property interests sold to the staff of the Eas PRC Group in Group III because the title will be transferred to the respective staff. The purchase considerations are to be paid by the staff to the Eas PRC Group within 5 years.

The property interests in Group IV, V and VI, which are leased to the Eas PRC Group in the PRC, Hong Kong and overseas countries respectively, have no commercial value due to prohibition against assignment or lack of substantial profit rent.

In respect of the property interests owned by the Eas PRC Group in the PRC, we have been provided with extracts of documents in relation to the titles to the property interests. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us.

In the course of our valuation, we have relied to a very considerable extent on the information given by the Eas PRC Group and the advice provided by the legal adviser on PRC law and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, completion date of buildings, identification of buildings, development schemes, site and floor plans, site and floor areas, number of parking spaces, particulars of occupancy, lettings, rental incomes and revenue, terms of joint venture agreements or development agreements, total construction costs and professional fees, construction costs and professional fees expended, estimated outstanding construction costs and professional fees, interest attributable to the Eas PRC Group and all other relevant matters. Dimensions, measurements and areas included in the valuation certificates are based on information provided to us and are therefore only approximations. We have no reason to doubt the truth and accuracy of the information provided to us by the Eas PRC Group which is material to the valuations. We were also advised by the Eas PRC Group that no material facts have been omitted from the information provided.

We have inspected the exterior and, wherever possible, the interior of all the property interests owned by the Eas PRC Group. However, we have not carried out investigations on site to determine the suitability of the soil conditions and the services etc. for any development. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No tests were carried out to any of the services. Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the documents handed to us are correct.

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

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APPENDIX VI

Unless otherwise stated, all sums stated in our valuation certificates are in Renminbi (RMB) which is the lawful currency of the PRC.

Our valuations are summarized below and the valuation certificates are attached.

Yours faithfully, for and on behalf of

DTZ Debenham Tie Leung Limited Chiu Kam Kuen Registered Professional Surveyor China Real Estate Appraiser F.H.K.I.S., F.R.I.C.S., F.H.K.F.A. Executive Director

Note: Mr. Chiu Kam Kuen is a Registered Professional Surveyor who has about 19 years’ experience in valuation of properties in Hong Kong and about 12 years’ experience in valuation of properties in the PRC.

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APPENDIX VI

SUMMARY OF VALUATIONS

Each property is assigned a property number in this circular for identification purpose. The properties setting out below are thus not listed in numerical order due to different grouping of property interests.

Group I – Property interests held for Owner-occupation by the Eas PRC Group with complete title document in the PRC

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
4.	No. 21 Xiao Yun Road,	125,092,000	125,092,000	100	125,092,000
	Chaoyang District,
	Beijing
9.	House No. 200,	2,116,000	2,116,000	100	2,116,000
	No. 8 Xiangyang
	South Road,
	Shunyi District,
	Beijing
11.4.	Carpark No. 11	110,000	110,000	100	110,000
	on Basement,
	No. 9 Chaoyang Park
	West Road,
	Chaoyang District,
	Beijing
58.	Unit 13F, Level 13,	472,000	472,000	100	472,000
	No. 22 Gonghe Road,
	Kaiyuan District,
	Xiamen,
	Fujian Province

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APPENDIX VI

Property 68. Block 1, Nos. 55 & 56 (Left Front Portion) Yanghe 1st Village, Jiangbei District, Chongqing 70a. 4 Blocks of Buildings situated at No. 48 Hebei Road, Tanggu District, Tianjin 83. Unit 1A, Tairan Block 213, Che Gong Miao Industrial Zone, Futian District, Shenzhen, Guangdong Province 86. Units 101, 201, 301, 501 and 601, Block 17, Beili Garden, Shuibei 2nd Road, Luohu District, Shenzhen, Guangdong Province 93. No. 18 Tianzhu Road, Area A, Beijing Tianzhu Airport Industrial Zone, Shunyi District, Beijing Sub-total:	Capital value in existing state as at 30 June 2004 RMB 417,000 30,711,000 7,820,000 996,000 45,000,000	Capital value in existing state as at 31 October 2004 Interest attributable to the Eas PRC Group RMB % 417,000 100 30,711,000 100 7,820,000 100 996,000 100 45,000,000 100	Capital value in existing state attributable to the Eas PRC Group as at 31 October 2004 RMB 417,000 30,711,000 7,820,000 996,000 45,000,000
	212,734,000	212,734,000	212,734,000

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APPENDIX VI

Group II – Property interests held for Owner-occupation by the Eas PRC Group without complete title document in the PRC

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
1.	Unit E, No. 10,	Note 1	Note 1	100	Note 1
	Level 10, Block J,
	No. 8 Beichen East Road,
	Chaoyang District,
	Beijing
7.	Type D on Level 7,	Note 1	Note 1	100	Note 1
	Type D on Level 12 and
	Carpark No. D26,
	Maple Court,
	Citichamp Palace,
	Northwest of Madian
	Bridge,
	Haidian District,
	Beijing
10.	House No. 3,	Note 1	Note 1	100	Note 1
	Woodlands Villa,
	Outer North Gate,
	Shunyi District,
	Beijing
11.	House No. 93,	Note 1	Note 1	100	Note 1
	Woodlands Villa,
	Outer North Gate,
	Shunyi District,
	Beijing

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APPENDIX VI

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
11.1.	Unit 1545, Level 4,	Note 1	Note 1	100	Note 1
	5th Gate, Construction
	Section West 1, Phase 1,
	Green Lake Garden,
	Mianzidian Road,
	North of Nongzhan
	South Road,
	Chaoyang District,
	Beijing
11.2.	Unit 1345, Phase 1,	Note 1	Note 1	100	Note 1
	Green Lake Garden,
	Lower Group,
	West Zone of
	Chaoyang Company
	Chaoyang District,
	Beijing
11.3.	Unit 1563, Level 6,	Note 1	Note 1	100	Note 1
	5th Gate, Construction
	Section West 1, Phase 1,
	Green Lake Garden,
	Mianzidian Road,
	North of Nongzhan
	South Road,
	Chaoyang District,
	Beijing
12.	No. 54 Wuwu Road,	Note 1	Note 1	100	Note 1
	Zhongshan District,
	Dalian,
	Liaoning Province

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APPENDIX VI

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
12a.	Level 1,	Note 1	Note 1	100	Note 1
	No. 80 Xinghe Street,
	Zhongshan District,
	Dalian,
	Liaoning Province
14.	Unit 11-6-10, Levels 1 to 3,	Note 1	Note 1	100	Note 1
	No. 29 Fushun Street,
	Taikai,
	Dalian,
	Liaoning Province
17.	Unit 503, 4th Gate,	Note 1	Note 1	100	Note 1
	Block 2,
	Linsheng Lane,
	Jintang Highway,
	Hedong District,
	Tianjin
18.	Unit 504, 4th Gate,	Note 1	Note 1	100	Note 1
	Block 2,
	Linsheng Lane,
	Jintang Highway,
	Hedong District,
	Tianjin
18a.	Unit 203, 4th Gate,	Note 1	Note 1	100	Note 1
	Block 2,
	Linsheng Lane,
	Jintang Highway,
	Hedong District,
	Tianjin

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APPENDIX VI

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
20.	Unit 602, 3rd Gate,	Note 1	Note 1	100	Note 1
	Block 5, Xiaode Lane,
	Weiguo Road,
	Hedong District,
	Tianjin
29.	Room 101, Unit 1,	Note 1	Note 1	100	Note 1
	Block 9,
	Tianzhu Sub-District,
	Shunyi District,
	Beijing
29a.	Blocks 1 to 24,	Note 2	Note 2	100	Note 2
	Jinmi East Road
	(formerly known as
	Tianzhu Village),
	Shunyi District,
	Beijing
57.	Unit 603,	Note 1	Note 1	100	Note 1
	No. 4 Rongfangli,
	Lianhua New Village,
	Siming District,
	Xiamen,
	Fujian Province
59.	Room 409,	Note 1	Note 1	100	Note 1
	Level 4, Block 1,
	Xinqiao Building,
	Heping North Road,
	Haikou,
	Hainan Province
60.	Unit C, Level 22,	Note 1	Note 1	100	Note 1
	Dihao Plaza,
	No. 2 Longkun North
	Road,
	Haikou,
	Hainan Province

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APPENDIX VI

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
61.	Level 18, Block B,	Note 2	Note 2	100	Note 2
	Wuhan International
	Building (formerly
	known as Asia Plaza),
	Dandong Road,
	Jianghan District,
	Wuhan,
	Hubei Province
62.	Block 1,	Note 1	Note 1	100	Note 1
	No. 64 Biaoshan Road,
	Taidong District,
	Qingdao,
	Shandong Province
63.	South No. 1,	Note 1	Note 1	100	Note 1
	Ancillary Commercial
	Unit, Exhibition Hall,
	New Era Sub-District,
	Development District,
	Qingdao,
	Shandong Province
64.	Portion of Levels 1 and 2,	Note 1	Note 1	100	Note 1
	No. 8 Shandong Road,
	Shinan District,
	Qingdao,
	Shandong Province
65.	Room 502, Unit 3,	Note 1	Note 1	100	Note 1
	Block 4,
	No. 7 Taiwan Road,
	Shinan District,
	Qingdao,
	Shandong Province

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APPENDIX VI

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
66.	Units 1 & 3, Level 1,	Note 1	Note 1	100	Note 1
	Nanyi Building,
	No. 2 Lingshiquan Road,
	Section 4 of Renmen
	South Road,
	Wuhou District,
	Chengdu,
	Sichuan Province
67.	Units 1-1, 1-2 & 1-4,	Note 1	Note 1	100	Note 1
	No. 58 Yanghe 1st
	Village,
	Jiangbei District,
	Chongqing
69.	Block No. 8,	Note 1	Note 1	100	Note 1
	Commercial Street,
	Xinying South District,
	Kunmin,
	Yunnan Province
74.	Unit 9-2-202,	Note 1	Note 1	100	Note 1
	Changchun Lane,
	Tanggu District,
	Tianjin
84.	Unit 505, Block B,	Note 2	Note 2	100	Note 2
	Xinzhou Garden
	Building,
	Xinzhou Road,
	Futian District,
	Shenzhen,
	Guangdong Province

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APPENDIX VI

Property 85. Unit 506, Block B, Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, Guangdong Province 88. Units 2-1, 4-1, 5-1 and 6-1, No. 15-4, Block No. 4, Xinghuo Street, Xigang District, Dalian, Liaoning Province 89. Units 1-3, 3-3, 4-3, 5-3 & 7-3 of No. 17-4 and Unit 4-3 of No. 17-3, Block No. 3, Xinghuo Street, Xigang District, Dalian, Liaoning Province 90. Rooms 1 & 2 of Levels 1 to 6, Unit 2, Block 24, No. 8 Minyun Alley, Zhongshan District, Dalian, Liaoning Province Sub-total:	Capital value in existing state as at 30 June 2004 RMB Note 2 Note 1 Note 1 Note 2	Capital value in existing state as at 31 October 2004 Interest attributable to the Eas PRC Group RMB % Note 2 100 Note 1 100 Note 1 100 Note 2 100	Capital value in existing state attributable to the Eas PRC Group as at 31 October 2004 RMB Note 2 Note 1 Note 1 Note 2
	Notes 1 & 2	Notes 1 & 2	Notes 1 & 2

Notes:

(1) As the property has not obtained complete title document, we have not assigned any value to the property.

(2) As the property cannot be freely transferred, we have not assigned any value to the property.

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APPENDIX VI

Group III – Residential units sold to the staff of the Eas PRC Group but title not yet changed in the PRC

Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB sold As the properties As the properties N/A As the properties PRC have been sold, have been sold, have been sold, we have not we have not we have not assigned value to assigned value to assigned any the properties. the properties. value to the properties. Sub-total: No commercial No commercial No commercial value value value

Property

26 residential properties sold to the staff of the Eas PRC Group in Beijing, Tianjin, Shanghai and Shenzhen

Group IV – Property leased by the Eas PRC Group in the PRC

Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB Various properties leased by No commercial No commercial N/A No commercial the Eas PRC Group in 28 value value value Provinces/Municipalities/ Autonomous Regions in the PRC Sub-total: No commercial No commercial No commercial value value value

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APPENDIX VI

Group V – Property leased by the Eas PRC Group in Hong Kong

Property Capital value in existing state as at 30 June 2004 RMB 1. The whole of 22nd Floor, Shanghai Industrial Investment Building, Nos. 48-62 Hennessy Road, Hong Kong No commercial value 2. Unit 11, 5th Floor, Commercial Building of Airport Freight Forwarding Centre, Chek Lap Kok Airport, Chek Lap Kok, Lantau Island, New Territories, Hong Kong No commercial value 3. Unit Nos. 1809-1817, Level 18, Tower 1, Metroplaza, Kwai Chung, New Territories, Hong Kong No commercial value 4. D.D. 99 Lot 769, Mai Po, San Tin, New Territories, Hong Kong No commercial value 5. Loading & Unloading Platform and First Floor, Block D, Nos. 52-62 Tsing Yi Road, Tsing Yi Island, New Territories, Hong Kong No commercial value Sub-total: No commercial value	Property Capital value in existing state as at 30 June 2004 RMB 1. The whole of 22nd Floor, Shanghai Industrial Investment Building, Nos. 48-62 Hennessy Road, Hong Kong No commercial value 2. Unit 11, 5th Floor, Commercial Building of Airport Freight Forwarding Centre, Chek Lap Kok Airport, Chek Lap Kok, Lantau Island, New Territories, Hong Kong No commercial value 3. Unit Nos. 1809-1817, Level 18, Tower 1, Metroplaza, Kwai Chung, New Territories, Hong Kong No commercial value 4. D.D. 99 Lot 769, Mai Po, San Tin, New Territories, Hong Kong No commercial value 5. Loading & Unloading Platform and First Floor, Block D, Nos. 52-62 Tsing Yi Road, Tsing Yi Island, New Territories, Hong Kong No commercial value Sub-total: No commercial value	Capital value in existing state as at 31 October 2004 Interest attributable to the Eas PRC Group RMB % No commercial value N/A No commercial value N/A No commercial value N/A No commercial value N/A No commercial value N/A	Capital value in existing state attributable to the Eas PRC Group as at 31 October 2004 RMB No commercial value No commercial value No commercial value No commercial value No commercial value
	No commercial value	No commercial value	No commercial value

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APPENDIX VI

Group VI −Property leased by the Eas PRC Group in overseas countries

					Capital value in
					existing state
					attributable to
			Capital value in	Interest	the Eas PRC
		Capital value in	existing state as	attributable	Group as at
		existing state as	at 31 October	to the Eas	31 October
	Property	at 30 June 2004	2004	PRC Group	2004
		RMB	RMB	%	RMB
1.	A business/office	No commercial	No commercial	N/A	No commercial
	premise at Lot B6B-2,	value	value		value
	Malaysia Airlines
	Advanced Cargo Centre,
	KLIA, Free Commercial
	Zone, Kuala Lumpur
	International Airport,
	43900 Sepang, Selangor,
	Malaysia
2.	The business premise at	No commercial	No commercial	N/A	No commercial
	Lot No. B-4, No. 99,	value	value		value
	Jalan Batu Maung,
	Dis3plex Free
	Commercial Zone,
	Air Freight Forwarders
	Warehousing Cargo
	Complex,
	11960 Penang,
	Malaysia
3.	4th Floor,	No commercial	No commercial	N/A	No commercial
	Centro Carga Aerea	value	value		value
	Madrid-Barajas Edificio
	Servicios Generales
	Oficina 416
	Aeropuerto De Barajas
	28042 Madrid
	Spain

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APPENDIX VI

Property 4. No. 9 Airline Road, Unit #05-02 Cargo Agents Building D, Singapore Changi Airport, 819827 Singapore 5. No. 9 Airline Road, Unit #01-27 Cargo Agents Building D, Singapore Changi Airport, 819827 Singapore 6. Centre De Carrega Aeria Barcelona Edifici De Serveis Generals – Of. B306 Aeroport De Barcelona – El Prat 08820 El Pray De Llobregat Barcelona Spain Sub-total Grand Total:	Capital value in existing state as at 30 June 2004 RMB No commercial value No commercial value No commercial value	Capital value in existing state as at 31 October 2004 Interest attributable to the Eas PRC Group RMB % No commercial value N/A No commercial value N/A No commercial value N/A	Capital value in existing state attributable to the Eas PRC Group as at 31 October 2004 RMB No commercial value No commercial value No commercial value
	No commercial value	No commercial value	No commercial value
	212,734,000	212,734,000 Grand Total:	212,734,000

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PROPERTY VALUATION REPORT

APPENDIX VI

VALUATION CERTIFICATE

Group I – Property interests held for Owner-occupation by the Eas PRC Group with completed title document in the PRC

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

No. 21 Xiao Yun The property comprises one Road, 9-storey and one 4-storey office Chaoyang District, building erected upon a plot of Beijing site having a site area of approximately 4,163.6 sq.m. (44,817 sq.ft.).

The property is RMB125,092,000 currently occupied by the Eas PRC Group as office use.

The property has a total gross floor area of approximately 13,899.1 sq.m. (149,610 sq.ft.) completed in 1994 and 1995 respectively.

The land use rights of the property have been granted for a term expiring on 17 July 2044 for office use.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (2000) 10157 dated 9 April 2001, the land use rights of the property comprising a site area of 4,163.6 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 17 July 2044 for office use.
(2) According to Building Ownership Certificate No. 10113 dated 9 April 2001, the building ownership rights of the property comprising a 9-storey and a 4-storey office buildings having a total gross floor area of 13,899.1 sq.m. are held by Eas International Transportation Ltd. ( ). The details are summarized as follows:

Block no. Usage 1 Office 2 Office Grand total:	Gross floor area (sq.m.) (sq.ft.) 11,918.80 128,294.00 1,980.30 21,316.00 13,899.10 149,610.00	Gross floor area (sq.m.) (sq.ft.) 11,918.80 128,294.00 1,980.30 21,316.00 13,899.10 149,610.00
		149,610.00

(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.

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PROPERTY VALUATION REPORT

APPENDIX VI

(ii) The property is located at No. 21 Xiao Yun Road, Chaoyang District, Beijing, which comprises a site area of 4,163.6 sq.m. and a total gross floor area of 13,899.1 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2000) 10157 and Building Ownership Certificate No. 10113 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 17 July 2044 for office use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Bank of China Banking Department for a term from 18 August 2003 to 18 August 2008 for a loan of RMB150,000,000. Prior written consent shall be obtained from the mortgagee bank before Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes

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APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

House No. 200, The property comprises a The property is RMB2,116,000 No. 8 Xiangyang 2-storey house with basement. currently occupied South Road, by the Eas PRC Shunyi District, The property has a gross floor Group as villa use. Beijing area of approximately 352.59 sq.m. (3,795 sq.ft.) completed in 1996.

The land use rights of the property have been granted for a term expiring on 16 June 2063 for villa use.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (2000) 0200173, the land use rights of the property comprising a site area of 511.33 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 16 June 2063 for villa use.
(2) According to Building Ownership Certificate No. 0200173 dated 8 July 2000, the building ownership rights of the property comprising a 2-storey house with basement having a total gross floor area of 352.59 sq.m. are held by Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 200, No. 8 Xiangyang South Road, Shunyi District, Beijing, which comprises a gross floor area of 352.59 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2000) 0200173 and Building Ownership Certificate No. 0200173 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 16 June 2063 for villa use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;

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APPENDIX VI

(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes

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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 11.4. Carpark No. 11 The property comprises a carpark The property is RMB110,000 on Basement, on the basement of a 9-storey currently occupied No. 9 Chaoyang residential building. by the Eas PRC Park West Road, Group as car park Chaoyang District, The property has a gross floor use. Beijing area of approximately 23.61 sq.m. (254 sq.ft.) completed in 1998. The land use rights of the property have been granted for a term expiring on 14 April 2064 for car park use.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (2001) 1990016 dated 23 September 2004, the land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 14 April 2064 for car park use.
(2) According to Building Ownership Certificate No. 1990016 dated 24 October 2001, the building ownership rights of the property having a gross floor area of 23.61 sq.m. are held by Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Carpark No. 11 on Basement, No. 9 Chaoyang Park West Road, Chaoyang District, Beijing, which comprises a gross floor area of 23.61 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2001) 1990016 and Building Ownership Certificate No. 1990016 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 14 April 2064 for car park use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;

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(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes

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Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 13F, The property comprises a Level 13, residential unit on Level 13 of a No. 22 Gonghe 22-storey residential building. Road, Kaiyuan District, The property has a gross floor Xiamen, area of approximately 109.7 Fujian Province sq.m. (1,180 sq.ft.) completed in 1998.

The property is RMB472,000 currently occupied by the Eas PRC Group as residential use.

The land use rights of the property have been granted for a term expiring on 21 April 2063 for residential use.

Notes:

(1) According to Real Estate Title Certificate No. 00145992 dated 29 March 2001, the land use rights and building ownership rights of a residential unit comprising a gross floor area of 109.7 sq.m. are held by Eas International Transportation Ltd. ( ) for a term expiring on 21 April 2063 for residential use.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 13F, Level 13, No. 22 Gonghe Road, Kaiyuan District, Xiamen, which comprises a gross floor area of 109.7 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Real Estate Title Certificate No. 00145992 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 21 April 2063 for residential use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;

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(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate Yes Business Licence Yes

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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 68. Block 1, The property comprises a The property is RMB417,000 Nos. 55 & 56 2-storey office building erected currently occupied (Left Front upon a plot of rectangle-shaped by the Eas PRC Portion) Yanghe site having a site area of Group. 1st Village, approximately 96.72 sq.m. (1,041 Jiangbei District, sq.ft.). Chongqing The property has a total gross floor area of approximately 185 sq.m. (1,991 sq.ft.) completed in 1990s. The land use rights of the property have been granted for a term of 50 years for residential use.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (1996) 173 dated 17 September 1996, the land use rights of the property comprising a site area of 96.72 sq.m. have been granted to Eas International Transportation Ltd. Chongqing Branch ( ) for a term of 50 years for residential use.
(2) According to Building Ownership Certificate No. 12193 dated 22 April 1995, the building ownership rights of the property comprising a 2-storey building having a total gross floor area of 185 sq.m. is held by Eas International Transportation Ltd. Chongqing Branch ( ).
(3) According to Business Licence No. 01143 ( ) dated 21 May 2003, Eas International Transportation Ltd. Chongqing Branch ( ) was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 22 January 2005.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Chongqing Branch ( ) has obtained Business Licence No. 01143 ( ) dated 21 May 2003 and was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 22 January 2005. Eas International Transportation Ltd. Chongqing Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Block 1, Nos. 55 & 56 (Left Front Portion) Yanghe 1st Village, Jiangbei District, Chongqing, which comprises a site area of 96.72 sq.m. and a total gross floor area of 185 sq.m..
(iii) Eas International Transportation Ltd. Chongqing Branch ( ) has obtained Certificate for the Use of State-owned Land No. (1996)173 and Building Ownership Certificate No. 12193 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. Chongqing Branch ( ) for a term of 50 years for residential use.
(iv) Eas International Transportation Ltd. Chongqing Branch ( ) has duly settled all the land premium.

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(v) Eas International Transportation Ltd. Chongqing Branch ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. Chongqing Branch ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes

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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 70a. 4 Blocks of The property comprises a The 2-storey office RMB30,711,000 Buildings 6-storey and 2-storey office building with a gross situated at No. 48 buildings and 2 single-storey floor area of 1,815.85 Hebei Road, ancillary buildings erected upon sq.m. (19,546 sq.ft.) Tanggu District, a plot of rectangle-shaped site is currently occupied Tianjin having a site area of by the Eas PRC approximately 8,108.58 sq.m. Group as office use, (87,281 sq.ft.). whilst the 2 singlestorey ancillary The property has a total gross buildings with a gross floor area of approximately floor area of 1,502.39 7,677.68 sq.m. (82,642 sq.ft.) sq.m. (16,171 sq.ft.) completed in 1990s. are currently occupied by the Eas PRC The land use rights of the Group as warehouse property have been granted for a use. term expiring on 11 December 2047 for composite use. The 6-storey office building with a total gross floor area of 4,359.44 sq.m. (46,925 sq.ft.) is currently vacant.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (95) 011 dated 17 January 1998, the land use rights of the property comprising a site area of 8,108.58 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 11 December 2047 for composite use.
(2) According to Building Ownership Certificate No. 0004440 dated 29 December 1997, the building ownership rights of the property comprising a 6-storey and 2-storey office buildings and 2 single-storey ancillary buildings having a total gross floor area of 7,677.68 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ) with details as follows:

Block Usage No. of storey 1 Office 6 2 Office 2 3 Ancillary 1 4 Ancillary 1 Grand total:	Gross floor area (sq.m.) (sq.ft.) 4,359.44 46,925 1,815.85 19,546 787.28 8,474 715.11 7,697 7,677.68 82,642	Gross floor area (sq.m.) (sq.ft.) 4,359.44 46,925 1,815.85 19,546 787.28 8,474 715.11 7,697 7,677.68 82,642
		82,642

(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.

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(5) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated
25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd.
( ).
(ii) The property is located at No. 48 Hebei Road, Tanggu District, Tianjin, which comprises a site area of 8,108.58 sq.m. and a total gross floor area of 7,677.68 sq.m..
(iii) Eas PRC Group has obtained Certificate for the Use of State-owned Land No. (95)011 and Building Ownership Certificate No. 0004440 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas PRC Group for a term expiring on 11 December 2047 for composite use.
(iv) Eas PRC Group has duly settled all the land premium.
(v) Eas PRC Group is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(6) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas PRC Group is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(7) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Right Certificate Yes Registration Certificate Yes Business Licence Yes

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Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 1A, The property comprises an Tairan Block 213, industrial unit on Level 1 of a Che Gong Miao 7-storey industrial building. Industrial Zone, Futian District, The property has a gross floor Shenzhen, area of approximately 1,818.72 Guangdong sq.m. (19,577 sq.ft.) completed Province in 1996.

The property is RMB7,820,000 currently vacant.

The land use rights of the property have been granted for a term expiring on 16 November 2038 for industrial and warehouse uses.

Notes:

(1) According to Real Estate Title Certificate No. 3000031372 dated 5 April 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 1,818.72 sq.m. have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 16 November 2038 for industrial and warehouse uses.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 1A, Tairan Block 213, Che Gong Miao Industrial Zone, Futian District, Shenzhen, which comprises a gross floor area of 1,818.72 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained Real Estate Title Certificate No. 3000031372 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 16 November 2038 for industrial and warehouse uses.
(iv) Shenzhen Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Shenzhen Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Shenzhen Development Bank Co., Ltd. Huaqiao City Branch for a term from 29 August 2003 to 29 August 2004 for a loan of RMB5,000,000. Prior written consent shall be obtained from the mortgagee bank before Shenzhen Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.

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(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Shenzhen Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate Yes Business Licence Yes

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Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Units 101, 201, The property comprises 5 301, 501 and 601, residential units on Levels 1, 2, Block 17, 3, 5 and 6 of a 6-storey Beili Garden residential building. Shuibei 2nd Road, Luohu District, The property has a total gross Shenzhen, floor area of approximately Guangdong 354.55 sq.m. (3,816 sq.ft.) Province completed in 1989.

The property is RMB996,000 currently occupied by the Eas PRC Group as staff quarters.

The land use rights of the property have been granted for a term expiring on 21 December 2034 for residential use.

Notes:

(1) According to 5 Real Estate Title Certificates dated 16 November 1999, the land use rights and building ownership rights of the property, comprising a total gross floor area of 354.55 sq.m. have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 21 December 2034 for residential use. The details are summarized as follows:

No. Certificate no. Unit no./ Block no. 1 2000042114 101/17 2 2000042118 201/17 3 2000042119 301/17 4 2000042121 501/17 5 2000042122 601/17 Grand total:	Gross floor area (sq.m.) 70.91 70.91 70.91 70.91 70.91
	354.55

(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property comprises Units 101, 201, 301, 501 and 601 of Block 17, Belin Garden, Shuibei 2nd Road, Luohu District, Shenzhen, with a total gross floor area of 354.55 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained 5 Real Estate Title Certificates Nos. 2000042114, 2000042118, 2000042119, 2000042121 and 2000042122 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 21 December 2034 for residential use.

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(iv) Shenzhen Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Shenzhen Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Shenzhen Development Bank Co., Ltd. Huaqiao City Branch. Prior written consent shall be obtained from the mortgagee bank before Shenzhen Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.
(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Shenzhen Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificates Yes Business Licence Yes

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Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

No. 18 The property is planned to Tianzhu Road, comprise a 5-storey (including a Area A, basement) warehouse building Beijing Tianzhu and an office building erected Airport Industrial upon a rectangular-shaped plot of Zone, site having a site area of Shunyi District, approximately 35,654 sq.m. Beijing (383,780 sq.ft.).

The completed portion is currently occupied by the Eas PRC Group as warehouse use.

RMB45,000,000 (Please see note 3)

The permitted total gross floor area of the property is approximately 23,658.82 sq.m. (254,664 sq.ft.) (Please see note 3). Only the warehouse building with a gross floor area of 18,078.86 sq.m. was completed in 2004.

The planned office building has not been developed as at the date of valuation yet.

The land use rights of the property have been granted for a term expiring on 20 March 2047 for warehouse use.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (2002) 0004 dated 13 January 2002, the land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 20 March 2047 for warehouse use.
(2) According to Planning Permit for Construction Works No.2000-0073 issued to Eas International Transportation Ltd. ( ) on 30 October 2000, the design scheme of the property comprising a total gross floor area of 23,658.82 sq.m. has been approved.
(3) According to a Completion Compliance Record, portion of the property with a gross floor area of 18,078.86 sq.m. was completed in 2004. We have taken into account the land with a site area of 35,654 sq.m. and the completed building portion with a gross floor area of 18,078.86 sq.m. only in our valuation.
(4) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(5) As advised, the total development costs of the property incurred up to 30 June 2004 was approximately RMB43,748,000. We have taken into account such costs in our valuation.
(6) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.

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(ii) The property is located at No. 18 Tianzhu Road, Area A, Beijing Tianzhu Airport Industrial Zone Shunyi District, Beijing, which comprises a site area of 35,654 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained the land use rights of the property with a site area of 35,654 sq.m..
(iv) According to the Completion Compliance Record, the construction of warehouse building with gross floor area of 18,078.86 sq.m. complied with the relevant regulation. Eas International Transportation Ltd. ( ) is under application for the Building Ownership Certificate. Upon obtaining the Building Ownership Certificate, the property can be transferred, leased or mortgaged to a third party.
(7) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(8) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Planning Permit for Construction Works Yes Building Ownership Certificate No Business Licence Yes

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Group II – Property interests held for Owner-occupation by the Eas PRC Group without complete title document in the PRC

				Capital value in
				existing state as at
			Particulars of	30 June 2004 and
	Property	Description and tenure	occupancy	31 October 2004
1.	Unit E, No. 10,	The property comprises a	The property is	As the property has
	Level 10, Block J,	residential unit on Level 10 of a	currently occupied	not obtained complete
	No. 8 Beichen	15-storey composite building.	by the Eas PRC	title document, we
	East Road,		Group as residential	have not assigned
	Chaoyang District,	The property has a total gross	use.	value to the property.
	Beijing,	floor area of approximately
		107.92 sq.m. (1,162 sq.ft.)
		completed in 1990s.
		The land use rights of the
		property have been granted for a
		term of 70 years from 30
		September 1993 to 1 October
		2063 for residential use.

Notes:

(1) According to Sales and Purchase Agreement No. J-144 dated 6 April 1994, the land use rights and the building ownership rights of the property, comprising a gross floor area of 107.92 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$145,692 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit E, No. 10, Level 10, Block J, No. 8 Beichen East Road, Beijing, which comprises a total gross floor area of 107.92 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificates and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate	No
Sales and Purchase Agreement	Yes
Business Licence	Yes

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Description and tenure

Property

Type D on Level 7, The property comprises two Type D on Level 12 residential units on Levels 7 and and Carpark No. D26, 12 of a 24-storey composite Maple Court, building. Citichamp Palace, Northwest of The property has a total gross Madian Bridge, floor area of approximately Haidian District, 289.04 sq.m. (3,111 sq.ft.) Beijing completed in 1990s.

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property have been granted for a term of 70 years from 30 June 1994 to 29 June 2064 for residential use.

Notes:

(1) According to Commodity Housing Pre-sale Contracts Nos. 017372 and 017374 both dated 28 January 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 289.04 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$401,703 in total. The details are summarized as follows:

No. Agreement no. Type/Level 1 017372 D/7 2 017374 D/12 Grand total:	Purchase price (US$) 197,848 203,855 401,703	Gross floor area (sq.m.) 144.52 144.52 289.04	Gross floor area (sq.ft.) 1,555 1,555
			3,111

(2) According to Appendix 4 of Supplemental Agreement to the Sales and Purchase Agreement No. 017374 dated 28 January 1997, Carpark No. D26 is currently leased to Eas International Transportation Ltd. ( ) at a total rent of US$22,000.
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Type D on Level 7, Type D on Level 12 and Carpark No. D26, Maple Court, Citichamp Palace, Northwest of Madian Bridge, Haidian District, Beijing, which comprises a total gross floor area of 289.04 sq.m..
(iii) Carpark No. D26 is currently leased to Eas International Transportation Ltd. ( ) at a total rent of US$22,000.
(iv) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificates and does not possess the proper legal title of the property.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificates No Commodity Housing Pre-sale Contracts Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

House No. 3, The property comprises a Woodlands Villa, 2-storey house. Outer North Gate, Shunyi District, The property has a gross floor Beijing area of approximately 297.75 sq.m. (3,204 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as villa use. have not assigned value to the property.

The land use rights of the property have been granted for a term of 70 years from 30 July 1994 to 29 July 2064 for villa use.

Notes:

(1) According to Commodity Housing Pre-sale Contract dated 27 September 1996, the land use rights and the building ownership rights of the property, comprising a total gross floor area of approximately 297.75 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$390,000 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 3, Woodlands Villa, Outer North Gate, Shunyi District, Beijing, which comprises a total gross floor area of 297.75 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes

−240 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

House No. 93, The property comprises a Woodlands Villa, 2-storey house. Outer North Gate, Shunyi District, The property has a gross floor Beijing area of approximately 465 sq.m. (5,005 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as villa use. have not assigned value to the property.
The land use rights of the property have been granted for a term of 70 years from 30 July 1994 to 29 July 2064 for villa use.

Notes:

(1) According to Commodity Housing Pre-sale Contract No. 012033 dated 27 September 1996, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 465 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$568,000 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 93, Woodlands Villa, Outer North Gate, Shunyi District, Beijing, which comprises a total gross floor area of 465 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes

−241 −

PROPERTY VALUATION REPORT

APPENDIX VI

Description and tenure

Property

11.1. Unit 1545, The property comprises a Level 4, residential unit on Level 4 of a 5th Gate, 6-storey composite building. Construction Section West 1, The property has a gross floor Phase 1, area of approximately 129.01 Green Lake sq.m. (1,389 sq.ft.) completed in Garden, 1990s. Mianzidian Road, North of Nongzhan The land use rights of the South Road, property have been granted for a Chaoyang District, term of 70 years from 15 April Beijing 1994 to 14 April 2064 for residential use.

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004 The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

Notes:

(1) According to Commodity Housing Pre-sale Contract No. 019647 dated 1 July 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$210,673.33 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1545, Level 4, 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes

−242 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

11.2. Unit 1345, The property comprises a Phase 1, residential unit of a 6-storey Green Lake composite building. Garden, Lower Group, The property has a gross floor West Zone of area of approximately 129.01 Chaoyang sq.m. (1,389 sq.ft.) completed in Company 1990s. Chaoyang District, Beijing The land use rights of the property have been granted for a term of 70 years from 15 April 1994 to 15 April 2064 for residential use.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

Notes:

(1) According to Commodity Housing Pre-sale Contract No. 010826 dated 30 April 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$206,416 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1345, Phase 1, Green Lake Garden, Lower Group, West Zone of Chaoyang Company Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes

−243 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

11.3. Unit 1563, The property comprises a Level 6, residential unit on Level 6 of a 5th Gate, 6-storey composite building. Construction Section West 1, The property has a gross floor Phase 1, area of approximately 129.01 Green Lake sq.m. (1,389 sq.ft.) completed in Garden, 1990s. Mianzidian Road, North of Nongzhan The land use rights of the South Road, property have been granted for a Chaoyang District, term of 70 years from 15 April Beijing 1994 to 14 April 2064 for residential use.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

Notes:

(1) According to Commodity Housing Pre-sale Contract No. 019644 dated 1 July 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$206,416 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1563, Level 6, 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes

−244 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

No. 54 The property comprises a Wuwu Road, 7-storey office building erected Zhongshan upon a plot of land. District, Dalian, The property has a total gross Liaoning Province floor area of approximately 1,809.92 sq.m. (19,482 sq.ft.) completed in 1990s.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as office use. have not assigned value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 2000130390 dated 17 May 1999, the building ownership rights of the property comprising a 7-storey office building having a total gross floor area of 1,809.92 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at No. 54 Wuwu Road, Zhongshan District, Dalian, which comprises a total gross floor area of 1,809.92 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

−245 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

12a. Level 1, No. 80 The property comprises an office Xinghe Street, unit on Level 1 of an 8-storey Zhongshan commercial building. District, Dalian, The property has a gross floor Liaoning Province area of approximately 270 sq.m. (2,906 sq.ft.) completed in 1990s.
The property is As the property has currently vacant. not obtained complete title document, we have not assigned
value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 2000130390 dated 3 March 2000, the building ownership rights of the property comprising a gross floor area of 270 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Level 1, No. 80 Xinghe Street, Zhongshan District, Dalian, which comprises a gross floor area of 270 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

−246 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 11-6-10, The property comprises a Portion of the right As the property has Levels 1 to 3, commercial unit on Levels 1 to 3 hall on level 1 of the not obtained complete No. 29 Fushun of a 3-storey commercial property with a gross title document, we Street, building. floor area of 150 have not assigned Taikai, sq.m. (1,245 sq.ft.) is value to the property. Dalian, The property has a total gross currently vacant. Liaoning Province floor area of approximately 528.34 sq.m. (5,687 sq.ft.) The remaining portion completed in 1990s. of the property is currently occupied by

The land use rights of the the Eas PRC Group as property is unspecified. office use.

Notes:

(1) According to Building Ownership Certificate No. 140057 dated 4 September 2002, the building ownership rights of the property comprising a gross floor area of 528.34 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Unit 11-6-10, Levels 1 to 3, No. 29 Fushun Street, Taikai, Dalian, which comprises a total gross floor area of 528.34 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

−247 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 503, The property comprises a 4th Gate, residential unit on Level 5 of a Block 2, 6-storey residential building. Linsheng Lane, Jintang Highway, The property has a gross floor Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 503 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated
25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd.
( ).
(ii) The property is located at Unit 503, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes

−248 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 504, The property comprises a 4th Gate, residential unit on Level 5 of a Block 2, 6-storey residential building. Linsheng Lane, Jintang Highway, The property has a gross floor Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 504 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated
25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd.
( ).
(ii) The property is located at Unit 504, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes

−249 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

18a. Unit 203, The property comprises a 4th Gate, residential unit on Level 2 of a Block 2, 6-storey residential building. Linsheng Lane, Jintang Highway, The property has a gross floor Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 203 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated
25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd.
( ).
(ii) The property is located at Unit 203, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes

−250 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 602, The property comprises a 3rd Gate, residential unit on Level 6 of a Block 5, 6-storey residential building. Xiaode Lane, Weiguo Road, The property has a gross floor Hedong District, area of approximately 44.94 Tianjin sq.m. (484 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 3416 dated 21 July 1997, the building ownership rights of the property comprising a gross floor area of 44.94 sq.m. are held by Eas International Transportation Ltd. Tianjin Branch ( ).
(2) According to Business Licence No. 00017 ( ) dated 14 October 2004, Eas International Transportation Ltd. Tianjin Branch ( ) was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 26 October 2008.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tianjin Branch ( ) has obtained the Business Licence No. 00017 ( ) dated 14 October 2004 and was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 26 October 2008. Eas International Transportation Ltd. Tianjin Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Unit 602, 3rd Gate, Block 5, Xiaode Lane, Weiguo Road, Hedong District, Tianjin, which comprises a gross floor area of 44.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

−251 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Room 101, Unit 1, The property comprises a Block 9, residential unit on Level 1 of a Tianzhu 6-storey residential building. Sub-District, Shunyi District, The property has a gross floor Beijing area of approximately 108.8 sq.m. (1,171 sq.ft.) completed in 1990s.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 00912 dated 1 June 1996, the building ownership rights of the property comprising a gross floor area of 108.8 sq.m. are held by Eas International Transportation Ltd. ( ).
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Room 101, Unit 1, Block 9, Tianzhu Sub-District, Shunyi District, Beijing, which comprises a gross floor area of 108.8 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

29a. Blocks 1 to 24, The property comprises 24 Jinmi East Road blocks of buildings erected upon (formerly known a plot of site having a site area as Tianzhu Village), of approximately 15,415.9 sq.m. Shunyi District, (165,937 sq.ft.). Beijing

The property has a total gross floor area of approximately 4,402.9 sq.m. (47,393 sq.ft.) completed in the period from 1970s to 1992.

The property is As the property currently occupied comprises an by the Eas PRC allocated land and the Group as warehouse Eas PRC Group is not and ancillary uses. entitled to freely transfer the property, we have not assigned value to the property.

The land use rights of the property have been allocated for public transport use for an unspecified term.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (93) 0005, the land use rights of the property comprising a site area of 15,415.9 sq.m. have been allocated to Eas International Transportation Ltd. ( ) for public transport use.
(2) According to Building Ownership Certificate dated 20 May 1993, the building ownership rights of the property comprising 24 blocks of buildings having a total gross floor area of 4,402.9 sq.m. are held by Eas International Transportation Ltd. ( ). The details are summarized as follows:

	Year of
No.	completion	No.	of storey	Gross floor area
				(sq.m.)
1	1991		1	116.5
2	1991		1	668.8
3	1970s		1	177.7
4	1970s		1	177.7
5	1970s		1	180.0
6	1970s		1	239.9
7	1970s		1	26.8
8	1970s		1	84.0
9	1970s		1	95.7
10	1970s		2	687.5
11	1992		1	394.9
12	1992		1	24.7
13	1992		1	235.1
14	1992		1	85.8
15	1970s		1	240.2
16	1970s		1	20.0
17	1970s		1	77.8
18	1992		1	84.4
19	1970s		1	177.7
20	1970s		1	177.7
21	1970s		1	177.8
22	1970s		1	171.1
23	1992		1	44.6
24	1970s		1	36.5

Grand total: 4,402.9

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APPENDIX VI

(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Blocks 1 to 24 Jinmi East Road (formerly known as Tianzhu Village), Shunyi District, Beijing, which comprises a total gross floor area of 4,402.9 sq.m..
(iii) The building ownership certificate of the property has been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. ( ) cannot freely transfer, lease and mortgage the property to a third party.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 603, The property comprises a No. 4 Rongfangli, residential unit on Level 6 of a Lianhua New 6-storey composite building. Village, Siming District, The property has a gross floor Xiamen, area of approximately 76.43 Fujian Province sq.m. (822.69 sq.ft.) completed in 1980s.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property have been granted for a term of 50 years from 14 May 1987 to 13 May 2037 for residential use.

Notes:

(1) According to Building Ownership Certificate No. 006341 dated July 1992, the building ownership rights of the property comprising a residential unit having a gross floor area of 76.43 sq.m. are held by Eas Express Aircargo System China Ltd. Xiamen Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 0158 ( ) dated 11 February 2003, Eas International Transportation Ltd. Xiamen Branch ( ) was registered on 27 June 1988 and the operation period is currently from 27 February 2002 to 27 February 2006.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Xiamen Branch ( ) has obtained the Business Licence No. 0158 ( ) dated 11 February 2003 and was registered on 27 June 1988 and the operation period is currently from 27 February 2002 to 27 February 2006. Eas International Transportation Ltd. Xiamen Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Unit 603, No. 4 Rongfangli, Lianhua New Village, Siming District, Xiamen, Fujian Province, which comprises a gross floor area of 76.43 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Room 409, The property comprises a Level 4, Block 1, residential unit on Level 4 of a Xinqiao Building, residential building. Heping North Road, The property has a gross floor Haikou, area of approximately 79.46 Hainan Province sq.m. (855 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 5573 dated 6 February 1990, the building ownership rights of the property comprising a gross floor area of 79.46 sq.m. are held by Eas Express Aircargo System China Ltd. Hainan Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 00203 ( ) dated 22 October 2004, Eas International Transportation Ltd. Hainan Branch ( ) was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hainan Branch ( ) has obtained the Business Licence No. 00203 ( ) dated 22 October 2004 and was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015. Eas International Transportation Ltd. Hainan Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Room 409, Level 4, Block 1, Xinqiao Building, Heping North Road, Haikou, which comprises a gross floor area of 79.46 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit C, Level 22, The property comprises an office Dihao Plaza, unit on Level 22 of a commercial No. 2 Longkun building. North Road, Haikou, The property has a gross floor Hainan Province area of approximately 335.86 sq.m. (3,615 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as office use. have not assigned value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 34616 dated 10 March 1998, the building ownership rights of the property comprising a gross floor area of 335.86 sq.m. are held by Eas International Transportation Ltd. Hainan Branch ( ).
(2) According to Business Licence No. 00203 ( ) dated 22 October 2004, Eas International Transportation Ltd. Hainan Branch ( ) was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hainan Branch ( ) has obtained the Business Licence No. 00203 ( ) dated 22 October 2004 and was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015. Eas International Transportation Ltd. Hainan Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Unit C, Level 22, Dihao Plaza, No. 2 Longkun North Road, Haikou, which comprises a gross floor area of 335.86 sq.m..
(iii) The building ownership rights of the property has been obtained.
(iv) The land use rights of the property have not been registered under the name of Eas PRC Group. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 61. Level 18, Block B, The property comprises an office The property is As the property Wuhan unit on the entire Level 18 of a currently leased for a comprises an International 23-storey commercial building. term from 5 March allocated land and the Building (formerly 2004 to 4 March 2007 Eas PRC Group is not known as Asia The property has a gross floor to a third party at a entitled to freely Plaza), area of approximately 742.83 monthly rent of transfer the property, Dandong Road, sq.m. (7,996 sq.ft.) completed in RMB19,313, we have not assigned Jianghan District, 1990s. exclusive of utility value to the property. Wuhan, charges and Hubei Province The land use rights of the management fees, as property have been allocated for office use. residential use for an unspecified term.

Notes:

(1) According to Certificate for the Use of State-owned Land No. (2004) 83514 dated 17 September 2004, the land use rights of the property have been allocated to Eas International Transportation Ltd. Hubei Branch ( ) for residential use.
(2) According to Building Ownership Certificate No. 200406119 dated 10 August 2004, the building ownership rights of the property comprising a gross floor area of 742.83 sq.m. are held by Eas International Transportation Ltd. Hubei Branch ( ).
(3) According to Business Licence No. 000015 ( ) dated 22 March 2004, Eas International Transportation Ltd. Hubei Branch ( ) was registered on 1 March 1999 and the valid operation period is currently from 1 March 2004 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hubei Branch ( ) has obtained the Business Licence No. 000015 ( ) dated 22 March 2004 and was registered on 1 March 1999 and the valid operation period is currently from 1 March 2004 to 26 February 2015. Eas International Transportation Ltd. Hubei Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Level 18, Block B, Wuhan International Building, Dandong Road, Jianghan District, Wuhan, which comprises a gross floor area of 742.83 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. Hubei Branch ( ) cannot freely transfer, lease and mortgage the property to a third party.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land Yes Building Ownership Right Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Capital value in
existing state as at
Particulars of 30 June 2004 and
Property Description and tenure occupancy 31 October 2004
1. Block 1, The property comprises a The property is As the property has No. 64 Biaoshan 3-storey commercial building currently leased to a not obtained complete Road, erected upon a plot of rectanglethird party for a term title document, we Taidong District, shaped site. from 28 October 2003 have not assigned Qingdao, to 28 October 2008 at value to the property. Shandong Province The property has a total gross an annual rental of floor area of approximately RMB170,000, 470.68 sq.m. (5,066 sq.ft.) exclusive of utility completed in 1990s. charges and management fees as
The land use rights of the an entertainment property is unspecified. complex use.

Notes:

(1) According to Building Ownership Certificate No. 2962 dated 27 October 1992, the building ownership rights of the property comprising a total gross floor area of 470.68 sq.m. are held by Eas Express Aircargo System Ltd. Qingdao Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Block 1, No. 64 Biaoshan Road, Taidong District, Qingdao, which comprises a total gross floor area of 470.68 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

South No. 1, The property comprises a Ancillary commercial unit of a 3-storey Commercial Unit, composite building. Exhibition Hall, New Era The property has a gross floor Sub-District, area of approximately 123 sq.m. Development (1,324 sq.ft.) completed in 1990s. District, Qingdao, The land use rights of the Shandong Province property is unspecified.

The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as commercial have not assigned use. value to the property.

Notes:

(1) According to Building Ownership Certificate No. 85 dated 12 August 1998, the building ownership rights of the property comprising a gross floor area of 123 sq.m. are held by Eas International Transportation Ltd. Qingdao Branch ( ).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at South No. 1, Ancillary Commercial Unit, Exhibition Hall, New Era Sub-District, Development District, Qingdao, which comprises a gross floor area of 123 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Portion of The property comprises portion Levels 1 and 2, of levels 1 and 2 of a 15-storey No. 8 Shandong office building erected upon a Road, plot of rectangle-shaped site Shinan District, having a site area of Qingdao, approximately 3,684 sq.m. Shandong Province (39,655 sq.ft.).

The property comprises portion Level 1 of the As the property has of levels 1 and 2 of a 15-storey property with a gross not obtained complete office building erected upon a floor area of 200 title document, we plot of rectangle-shaped site sq.m. (2,153 sq.ft.) is have not assigned having a site area of leased to a third party value to the property. approximately 3,684 sq.m. for a term from 1 (39,655 sq.ft.). March 2004 to 28 February 2005 at an The property has a gross floor annual rental of area of approximately 2,122.82 RMB136,000 sq.m. (22,850 sq.ft.) completed exclusive of utility in 1990s. charges and management fees as The land use of the whole office use.

The land use rights of the whole office use. building have been granted for a term due to expire on 27 The remaining portion November 2045 for research use. of the property is currently occupied by the Eas PRC Group as office use.

Notes:

(1) According to a Contract entered into between Eas International Transportation Ltd. Qingdao Branch ( ) (Party A) and Jinan Military Zone Taishan Group Qingdao Company ( ) (Party B) on 9 May 1997, Party A agreed to invest an amount of RMB9,140,806 in return for the possession of the property with a gross floor area of 2,122.82 sq.m. (22,850 sq.ft.).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Portion of Levels 1 and 2, No. 8 Shandong Road, Shinan District, Qingdao, which comprises a gross floor area of 2,122.82 sq.m..
(iii) Eas International Transportation Ltd. Qingdao Branch ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate No Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Room 502, Unit 3, The property comprises a The property is As the property has Block 4, residential unit on Level 5 of a currently leased to a not obtained complete No. 7 Taiwan 6-storey residential building. third party for a term title document, we Road, from 16 February have not assigned Shinan District, The property has a gross floor 2004 to 15 February value to the property. Qingdao, area of approximately 91.63 2005 at an annual Shandong Province sq.m. (986 sq.ft.) completed in rental of RMB14,000, 1990s. exclusive of utility charges and

The land use rights of the management fees as property is unspecified. residential use.

Notes:

(1) According to Building Ownership Certificate No. 1383 dated 26 February 2000, the building ownership rights of the property comprising a gross floor area of 91.63 sq.m. are held by Eas International Transportation Ltd. Qingdao Branch ( ).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Room 502, Unit 3, Block 4, No. 7 Taiwan Road, Shinan District, Qingdao, which comprises a gross floor area of 91.63 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Right Certificate Yes Business Licence Yes

−262 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure
1. Units 1 & 3, The property comprises two Level 1, office units on Level 1 of a 10Nanyi Building, storey (including a basement) No. 2 Lingshiquan office building. Road, Section 4 of The property has a gross floor Renmen South area of approximately 267.5 Road, sq.m. (2,879 sq.ft.) completed in Wuhou District, 1990s. Chengdu, Sichuan Province The land use rights of the property is unspecified.

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004 The property is As the property has currently vacant. not obtained complete title document, we have not assigned value to the property.

Notes:

(1) According to Building Ownership Certificates No. 0013486 dated 25 December 1995, the building ownership rights of the property having a gross floor area of 267.5 sq.m. are held by Eas International Transportation Ltd. Chengdu Branch ( ).
(2) According to Business Licence No. 00034 ( ) dated 1 November 2004, Eas International Transportation Ltd. Chengdu Branch ( ) was registered on 1 July 1993 and the valid operation period is currently from 27 February 2003 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Chengdu Branch ( ) has obtained the Business Licence No. 00034 ( ) dated 1 November 2004 and was registered on 1 July 1993 and the valid operation period is currently from 27 February 2003 to 26 February 2015. Eas International Transportation Ltd. Chengdu Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Units 1 & 3, Level 1, Nanyi Building, No. 2 Lingshiquan Road, Section 4 of Renmen South Road, Wuhou District, Chengdu, which comprises a gross floor area of 267.5 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Units 1-1, 1-2 & The property comprises three Units 1-1 and 1-2 is As the property has 1-4, residential units on Level 1 of a currently leased for a not obtained complete No. 58 Yanghe 1st 11-storey composite building. term of one year at a title document, we Village, monthly rent of have not assigned Jiangbei District, The property has a gross floor RMB3,500 exclusive value to the property. Chongqing area of approximately 255.63 management fee and sq.m. (2,752 sq.ft.) completed in utility charges for 1990s. restaurant use whilst Unit 1-4 is currently

The land use rights of the occupied by the Eas property is unspecified. PRC Group as staff quarters and warehouse.

Notes:

(1) According to Building Ownership Certificate No. 100-100907 dated 21 October 2003, the building ownership rights of the property having a gross floor area of 255.63 sq.m. are held by Eas International Transportation Ltd. ( ).
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Units 1-1, 1-2 and 1-4, No. 58 Yanghe 1st Village, Jiangbei District, Chongqing, which comprises a gross floor area of 255.63 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

−264 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Block No. 8, The property comprises a Commercial Street, 4-storey office and warehouse Xinying South building erected upon a plot of District, rectangular shaped site. Kunmin,
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as office and have not assigned warehouse uses. value to the property.
Yunnan Province The property has a total gross floor area of approximately 1,083.9 sq.m. (11,667 sq.ft.) completed in 1990s.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 200121519 dated 21 September 2001, the building ownership rights of the property having a total gross floor area of 1,083.9 sq.m. are held by Eas International Transportation Ltd. Yunnan Branch ( ).
(2) According to Business Licence No. 00043 ( ) dated 11 November 2004, Eas International Transportation Ltd. Yunnan Branch ( ) was registered on 25 March 1993 and the valid operation period is currently from 25 March 1993 to 11 October 2005.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Yunnan Branch ( ) has obtained the Business Licence No. 00043 ( ) dated 11 November 2004 and was registered on 25 March 1993 and the valid operation period is currently from 25 March 1993 to 11 October 2005. Eas International Transportation Ltd. Yunnan Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Block No. 8, Commercial Street, Xinying South District, Kunmin, which comprises a total gross floor area of 1,083.9 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 9-2-202, The property comprises a Changchun Lane, residential unit on Level 2 of a Tanggu District, 6-storey residential building. Tianjin
The property has a gross floor area of approximately 64 sq.m. (689 sq.ft.) completed in 1990s.
The property is As the property has currently occupied not obtained complete by the Eas PRC title document, we Group as residential have not assigned use. value to the property.

The land use rights of the property is unspecified.

Notes:

(1) According to Building Ownership Certificate No. 00003998 dated 15 April 1997, the building ownership rights of the property having a gross floor area of 64 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated
25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd.
( ).
(ii) The property is located at Unit 9-2-202, Changchun Lane, Tanggu District, Tianjin, which comprises a gross floor area of 64 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property

Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 505, Block B, The property comprises a Xinzhou Garden residential unit on Level 5 of a Building, 30-storey residential building Xinzhou Road, erected on a 3-storey podium. Futian District, Shenzhen, The property has a gross floor Guangdong area of approximately 91.92 Province sq.m. (989 sq.ft.) completed in 1996.

The property is As the property is not currently occupied entitled to freely by the Eas PRC transfer, we have not Group as staff assigned value to the quarters. property.

The land use rights of the property have been transferred in the nature of Economically Affordable Housing for a term expiring on 17 November 2068 for residential use.

Notes:

(1) According to Real Estate Title Certificate No. 3000042358 dated 1 November 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 91.92 sq.m. have been transferred in the nature of Economically Affordable Housing to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 17 November 2068 for residential use.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 505, Block B, Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, which comprises a gross floor area of 91.92 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained the building ownership rights and land use rights of the property.
(iv) The property is in the nature of Economically Affordable Housing ( ), which cannot be freely transferred, mortgaged and leased.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate Yes Business Licence Yes

−267 −

PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Unit 506, Block B, The property comprises a Xinzhou Garden residential unit on Level 5 of a Building, 30-storey residential building Xinzhou Road, erected on a 3-storey podium. Futian District, Shenzhen, The property has a gross floor Guangdong area of approximately 108.81 Province sq.m. (1,171 sq.ft.) completed in 1996.

The property is As the property is not currently occupied entitled to freely by the Eas PRC transfer, we have not Group as staff assigned value to the quarters. property.

The land use rights of the property have been transferred in the nature of Economically Affordable Housing for a term expiring on 17 November 2068 for residential use.

Notes:

(1) According to Real Estate Title Certificate No. 3000042356 dated 1 November 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 108.81 sq.m. have been transferred in the nature of Economically Affordable Housing to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 17 November 2068 for residential use.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 506, Block B, Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, which comprises a gross floor area of 108.81 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained the building ownership rights and land use rights of the property.
(iv) The property is in the nature of Economically Affordable Housing ( ), which cannot be freely transferred, mortgaged and leased.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Real Estate Title Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Property Description and tenure

Capital value in existing state as at Particulars of 30 June 2004 and occupancy 31 October 2004

Units 2-1, 4-1, 5-1 The property comprises 4 and 6-1, residential units on Levels 2, 4, 5 No. 15-4, and 6 of a 7-storey residential Block No. 4, building. Xinghuo Street, Xigang District, The property has a total gross Dalian, floor area of approximately 363.4 Liaoning Province sq.m. (3,912 sq.ft.) completed in 1990s.

The property is As the property has currently vacant. not obtained complete title document, we have not assigned value to the property.

The land use rights of the property have been granted for a term from 19 January 1996 to 24 September 2063 for residential and ancillary facility uses.

Notes:

(1) According to Building Ownership Certificate No. 1998007192 dated 17 August 1998, the building ownership rights of the property having a total gross floor area of 363.4 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Units 2-1, 4-1, 5-1 and 6-1, Block No. 4, No. 15-4 Xinghuo Street, Xigang District, Dalian, which comprises a total gross floor area of 363.4 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 89. Units 1-3, 3-3, The property comprises 6 4-3 of No. 17-3 and As the property has 4-3, 5-3 & 7-3 of residential units on Levels 2, 4, 5 3-3 of No. 17-4 with not obtained complete No. 17-4 and and 6 of a 7-storey residential a total gross floor title document, we Unit 4-3 of building. area of 139.08 sq.m. have not assigned No. 17-3, (1,497 sq.ft.) are value to the property. Block No. 3, The property has a total gross currently vacant, Xinghuo Street, floor area of approximately whilst the remaining 4 Xigang District, 417.24 sq.m. (4,491 sq.ft.) units with a total Dalian, completed in 1990s. gross floor area of Liaoning Province 278.16 sq.m. (2,994 The land use rights of the sq.ft.) are currently property have been granted for a occupied by the Eas term from 19 January 1996 to 24 PRC Group as staff September 2063 for residential quarters. and ancillary facility uses.

Notes:

(1) According to Building Ownership Certificate No. 1998007193 dated 17 August 1998, the building ownership rights of the property having a total gross floor area of 417.24 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Units 1-3, 3-3, 4-3, 5-3 & 7-3 of No. 17-4 and Unit 4-3 of No. 17-3, Block No. 3, Xinghuo Street, Xigang District, Dalian, which comprises a total gross floor area of 417.24 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 90. Rooms 1 & 2 of The property comprises 12 Rooms 1 & 2 on As the property Levels 1 to 6, residential units on Levels 1 to 6 Level 1 with a total comprises an Unit 2, Block 24, of a 6-storey residential building. gross floor area of allocated land and the No. 8 Minyun 189.58 sq.m. (2,041 Eas PRC Group is not Alley, The property has a total gross sq.ft.) is currently entitled to freely Zhongshan floor area of approximately vacant, whilst the transfer the property, District, 1,137.48 sq.m. (12,244 sq.ft.) remaining 10 rooms we have not assigned Dalian, completed in 1990s. with a total gross value to the property. Liaoning Province floor area of 947.9 The land use rights of the sq.m. (10,203 sq.ft.) property have been allocated for are currently occupied residential use for an unspecified by the Eas PRC term. Group as staff quarters.

Notes:

(1) According to Building Ownership Certificate No. 2001161335 dated 17 December 2001, the building ownership rights of the property having a total gross floor area of 1,137.48 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. (
).
(ii) The property is located at Rooms 1 & 2 of Levels 1 to 6, Unit 2, Block 24, No. 8 Minyun Alley, Zhongshan District, Dalian, Liaoning Province which comprises a total gross floor area of 1,137.48 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. Dalian Branch ( ) cannot freely transfer, lease and mortgage the property to a third party.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:

Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes

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PROPERTY VALUATION REPORT

APPENDIX VI

Valuation Certificate

Group III – Residential units sold to the staff of the Eas PRC Group but title not yet changed in the PRC

Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004 26 residential properties The properties comprise 26 The properties have As the properties sold to the staff of the residential properties completed been sold to the staff were sold, we have Eas PRC Group in between 1980’s to 1990’s of the Eas PRC not assigned value to Beijing, Tianjin, respectively. Group. The purchase the properties. Shanghai and Shenzhen See Note 1 considerations are to be paid by the staff to the Eas PRC Group within 5 years.

Notes:

(1) Details of the properties are as follows:

Property		Gross
no.	Address	floor area
		(sq.m.)
5.	Room 202, Unit 2, Level 2, Block 202, Wangjing West Park,	112.94
	Chaoyang District, Beijing
19.	Units 506-510, Level 5, Unit 3, Block 3, Xiangxie Lane, Diantai	136.51
	Road, Heping District, Tianjin
21.	Room 403, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong	72.84
	District, Tianjin
22.	Room 203, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong	72.84
	District, Tianjin
23.	Room 503, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong	72.84
	District, Tianjin
24.	No. 6-5-603, Jinyu Lane, Chuxiong Road, Nankai District, Tianjin	98.25
25.	Room 403, Level 4, Unit 1, Block 4, Liuyuan Apartment, Dagu	102.14
	South Road, Hexi District, Tianjin
26.	Rooms 401-404, Unit 2, No. 18 Jiahua Lane, Chenglinzhuang,	73.98
	Hedong District, Tianjin
45.	Units 1601-1606, No. 1 of Alley 444 Miyun Road, Yangpu District,	395.62
	Shanghai
46.	Unit 1403, No. 10 of Alley 1310 Dingxi Road, Changning District,	82.20
	Shanghai
47.	Unit 601, No. 8 of Alley 408 Yishan Road, Xuhui District, Shanghai	82.77
48.	Unit 101, No. 64 Pingji 1st Village, Hongshen Road, Minheng	80.55
	District, Shanghai

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PROPERTY VALUATION REPORT

APPENDIX VI

Property
no.
Address
49.
Unit 4, Level 5, Block 1, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
50.
Unit 2, Level 25, Block 1, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
51.
Unit 5, Level 25, Block 1, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
52.
Unit 3, Level 26, Block 1, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
53.
Unit 1, Level 5, Block 3, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
54.
Unit 3, Level 5, Block 1, Dongan Apartment, Alley 645 Changping
Road, Jinan District, Shanghai
71b.
Room 703, Unit 1, Block 13, Jinsha Lane, Nankai District, Tianjin
75.
Room 301,Unit 1,No. 108 Changcheng Lane, Hexi District, Tianjin
76.
Room 505, Level 5, Block 505, Unit 4, Block 3, Yichang Garden,
Yichang Road, Heping District, Tianjin
77.
Room 302 (also known as Rooms 305-307), Level 3, Unit 4, No. 1
Shiping Lane, Yuanyang Road, Hongqi Road, Nankai District,
Tianjin
78.
Unit 405, Level 4, Block 1, No. 12, Dieqiao Apartment, Hedong
District, Tianjin
80.
Room 501, Level 5, Unit 3, Block 7, Lusheng Sub-District,
Zhongshanmen 2nd Road, Hedong District, Tianjin
81.
Room 605, Unit 2, Block 3, No. 2 Longchuan Road, Nankai
District, Tianjin
86a.
Unit 401, Residential Block 17, Suibei 2nd Road, Luohu District,
Shenzhen
Grand total:

Gross
floor area
(sq.m.)
77.53
106.62
106.62
83.44
76.59
77.53
55.78
88.50
43.23
61.34
52.31
79.99
63.25
70.91

2,427.12

(2) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:

According to the documents and information provided by the Eas PRC Group, the sale and purchase contracts of the properties have been entered into between the Eas PRC Group and the staff of the Eas PRC Group. The purchase considerations are to be paid by the staff to the Eas PRC Group within 5 years. Eas PRC Group should register the transfer of the land use rights and building ownership rights of the properties after the staff have fully paid for the properties. However, the land use rights and building ownership rights of the properties belong to the Eas PRC Group of the properties before any registration of title transfer.

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PROPERTY VALUATION REPORT

APPENDIX VI

Group IV – Property leased by the Eas PRC Group in the PRC

Property Description and tenure

Particulars of occupancy

Capital value in existing state as at 30 June 2004 and 31 October 2004

Various properties leased The properties comprise 171 by the Eas PRC Group premises for use as warehouses, in 28 Provinces/ industrial, offices, residential, Municipalities/ commercial, research, operation, Autonomous Regions carpark and production located in in the PRC Beijing, Chongqing, Shanghai, Tianjin, Jiangsu Province, Zhejiang Province, Liaoning Province, Hubei Province, Jiangxi Province, Hunan Province, Shandong Province, Heilongjiang Province, Jilin Province, Hebei Province, Gansu Province, Shanxi Province, Henan Province, Qinghai Province, Shaanxi Province, Guangdong Province, Guangxi Province, Fujian Province, Sichuan Province, Guizhou Province, Yunnan, Province, Anhui Province, Xinjiang Autonomous Region and Inner Mongolia Autonomous Region.

The properties are No commercial value leased and occupied by the Eas PRC Group for warehouses, industrial, offices, residential, commercial, research, operation, carpark and production uses.

The properties are leased by the Eas PRC Group under various tenancy agreements for different terms with the latest tenancy due to expire in February 2028 at a total monthly rent of approximately RMB2,896,001.74.

Notes:

(1) The Eas PRC Group has leased a total of 171 properties in the PRC with a total lease area of approximately 128,218.39 sq.m. as at 31 October 2004.
(2) Details of the properties leased by the Eas PRC Group in the PRC are summarized as follows:

			Gross
No.	Address	Usage	floor area
			(sq.m.)
1.	No. 58 Huqingping Road, Shanghai, the PRC	Office and	4,913.00
		warehouse
2.	Warehouse I1, I2 & I3, Pudong Logistics Centre Agent	Office and	5,569.00
	Warehouse, Cargo Avenue, Pudong New Area, Shanghai,	warehouse
	the PRC

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APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
3.	Unit 706(A), Level 7, Xinyin Building, No. 888 Tishan Road,	Office	39.27
	Xuhui District, Shanghai, the PRC
4.	Portion of Level 1-2, No. 18 Huachangxi Road,	Operation	200.00
	Songjiang Export Processing Zone, Shanghai, the PRC
5.	Unit 516, Level 5, Modern Communication Building, No. 201	Office	169.80
	Jinqiao Road, Pudong New Area, Shanghai, the PRC
6.	Level 5, No. 1000 Qihang Road, Pudong New Area, the PRC	Office	2,055.34
7.	Unit 218, Level 2, East Podium, Lujiazuixi Road,	Office	27.10
	Pudong New Area, Shanghai, the PRC
8.	Unit 316, Level 3, No. 2015 Yanggaobei Road,	Office	10.00
	Pudong New Area, Shanghai, the PRC
9.	Area 05B-06B & B8-B9, China Air-cargo Hongqiao	Warehouse	4,392.00
	Warehouse, Hongqiao, Shanghai, the PRC
10.	Area 16 & 18, Warehouse C, Express Processing Centre,	Warehouse	270.00
	Pudong International Airport, Shanghai, the PRC
11.	Level 2, No. 31 Nanle Road, Songjiang Export Processing	Office	55.00
	Area, Shanghai, the PRC
12.	Level 26, Passenger Building Main Tower, No. 18 Yangshe	Office	685.90
	Road, Hongkou District, Shanghai, the PRC
13.	South side of Songjiang Export Processing Administration	Office and	400.00
	Area, Shanghai, the PRC	carpark
14.	Unit 404 & 405, Level 4, Coal Import & Export Building,	Office	110.00
	No. 36 Shifuxi Street, Taiyuan, Shanxi Province, the PRC
15.	Shop on Level 1, No. 236 Shenglidong Street,	Office	109.00
	Weifang, Shandong Province, the PRC
16.	Unit 1103, 1105 & 1107, Level 11, Yili Building,	Office	174.00
	No. 80 Chaoyang Street, Yintei, Shandong Province, the PRC
17.	Conference Room on Level 3, south side 2 rooms and 309,	Office	45.00
	Level 3, Business Building, Laishan Airport Hotel,
	Yintai, Shandong Province, the PRC
18.	Unit 18, Block 5, Fulai Development Area, Yintai,	Office	120.00
	Shandong Province, the PRC
19.	A warehouse unit at Custom Administration Warehouse,	Warehouse	33.00
	Yintai, Shandong Province, the PRC
20.	Unit 1719, Weihai International Business Building,	Office	49.00
	No. 106 Haibinbei Road, Weihai, Shandong Province,
	the PRC
21.	Level 1, Tianhai Cargoes Centre and 2 car parks,	Office	416.56
	Gaojia Village, Liuting, Qingdao, Shandong Province,
	the PRC

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PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
22.	Liuting Airport Administration Warehouse, Qingdao,	Warehouse	360.00
	Shandong Province, the PRC
23.	No. 16 Zhonglao Road, Licang, Qingdao, Shandong Province,	Warehouse	2,433.43
	the PRC
24.	Unit 201, Post Office Building Office East Level 1,	Office	22.04
	No. 222 Yananshan Road, Shinan District, Qingdao,
	Shandong Province, the PRC
25.	Unit 206, Level 2, Liuting Airport Custom Office Building,	Office	3.60
	Maiotou Village, Liuting Town, Chenyang District, Qingdao,
	Shandong Province, the PRC
26.	The 4th Block on the east side of No. 7 Factory,	Warehouse	2,002.00
	Hong Kong Industrial Park, Qingdao, Shandong Province,
	the PRC
27.	Unit 2013 & 2014, Level 20, Lixia Building,	Office	108.00
	109 Jiefang Raod, Jinan, Shandong Province, the PRC
28.	Unit 103, Level 1, Custom Airport Office, Jinan,	Office	20.00
	Shandong Province, the PRC
29.	Warehouse at Phase II Project, Gaijiagou, Jiqing Highway,	Warehouse	2,000.00
	Jinan, Shandong Province, the PRC
30.	Area F, Freight Concentration Administration, Jinan,	Warehouse	56.00
	Shandong Province, the PRC
31.	Portion of Level 2 of a Building, No. 48 Shandanan Road,	Warehouse	170.00
	Jinan, Shandong Province, the PRC	and office
32.	Unit 211, Block 45, at the side of Zhujia Village Flyover,	Office	23.00
	Kunming, the PRC
33.	Unit 0204, Level 2, Custom Business Building, Kunming,	Office	28.67
	the PRC
34.	Two rooms on the West Side of Level 1 Shop,	Office and	61.00
	No. 27 Mianfang Sub-District, Gangti Avenue, Baotou,	warehouse
	Inner Mongolia Autonomous Region, the PRC
35.	Unit H, I, J, K & L, Level 8 Taida Building, No. 256	Office	741.76
	Jiefangnan Road, Tianjin, the PRC
36.	Shop Unit 14, Level 1, Phase II, Shengtai Apartment,	Office	264.09
	No. 82 Dongting Road, Tianjin Development Zone,
	Tianjin, the PRC
37.	Unit 401-402, Level 4, Go Out & Entry Examination	Office	63.05
	Quarantine Building, Tianjian Airport, Tianjin, the PRC
38.	Printing Building at the northeast corner of Industrial	Office	2,369.00
	Complex, 204 Weiguo Road, Dongli District, Tianjin, the PRC

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PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
39.	Unit 106-104, Area A, Composite Building, Zhaotong	Office	54.00
	Composite Buidling, Xiaoyuan Road, First Street,
	Tianjin Economical & Development Area, the PRC
40.	Custom Administration Warehouse A4A5, Zone D,	Office and	1,100.00
	19 Third Avenue, Logistics Area, Tianjin Airport, the PRC	warehouse
41.	China Leather & Shoe Research Institute, No. 18 Jiangtei	Office	600.00
	Road, Chaoyang District, Beijing, the PRC
42.	Unit 306, Level 3 and 6 car parks, Tianruijia Business Centre,	Office	211.00
	No. 1 Qianyi Street, Shunyi District, Beijing, the PRC
43.	Unit 305, Level 3, Composite Office Building, Beijing,	Office	21.60
	the PRC
44.	East side of lobby, Beijing Asia Hotel, No. 8 Zhongxi Street,	Office	30.00
	Gongtibei Road, Beijing, the PRC
45.	Level 1, Beijing Aerography Composite Building,	Office	300.00
	No. 44 Zhizhuyuan Road, Haidian District, Beijing, the PRC
46.	Shop Unit L218, Level 2, International Trade Commerce City,	Operation	40.08
	China International Trade Centre, No. 1 Jianguomenwai
	Avenue, Chaoyang District, Beijing, the PRC
47.	Unit 6, Level 1, Eastern Trade West 2 Tower, Dongfang	Office	53.00
	Square, No. 1 Changan Street, Dongcheng District,
	Beijing, the PRC
48.	An office unit at Sichuan Province Electronic Computer	Office	131.00
	Research Centre, No. 3 Kexi Road, Sichuan Province,
	the PRC
49.	Unit 201, Shuangliu County Airport Custom Office,	Office	57.50
	Chengdu, Sichuan Province, the PRC
50.	Sichuan Province Electronic Computer Research Centre,	Office	307.00
	Block A, No. 3 Kexi Road, Chengdu, Sichuan Province,
	the PRC
51.	Units 308 and 310, Level 3, Chengdu Railway Custom	Office	45.54
	Clearance Building, No. 61 Balizhuang, Chengdu,
	Sichuan Province, the PRC
52.	An unit on Level 4, Liangshanzhou Handicapped Persons	Office	97.00
	Composite Service Building, 32 Changan Road, Xichang,
	the PRC
53.	A warehouse and an office unit on Level 1,	Office	88.00
	Custom Building, Fayuan Road, Fucheng District,
	Mianyang, Sichuan Province, the PRC
54.	Unit 105 & 207, Leshan Custom Building, 36 Annan Road,	Office	50.00
	Leshan, Sichuan Province, the PRC
55.	5 rooms on Level 2 and 1 room on Level 1, No. 7 Dongganxi	Office	134.00
	Road, Chengguan District, Nanzhou, Gansu Province, the PRC

−277 −

PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
56.	Unit 614, Science 7 Technology City, No. 76 Shuncheng	Office	47.00
	Street, Chuanying, Jilin Province, the PRC
57.	A 30 sq.m. room at the back yard, 5 rooms on	Office	447.00
	Level 3, 6 rooms on Level 2, lobby on Level 1 of
	a 3-storey building, No. 1927 Zhenyang Street, Changchun,
	Jilin Province, the PRC
58.	Level 1, No. 669 Changjiangxi Road, Hefei,	Office and	1,100.00
	Anhui Province, the PRC	warehouse
59.	A shop at right side of Level 1, No. 288 Jiuhua Road,	Operation	70.00
	Wuhu, Anhui Province, the PRC
60.	No. 108 Qibei Road, Donghu District, Nanchang,	Office	164.00
	Jiangxi Province, the PRC
61.	2 units on North Level 1, Building 4, No. 385 Tongjiang	Operation	159.00
	Avenue, Xinbei District, Changzhou, Jiangsu Province,
	the PRC
62.	An office unit on North Level 1, 385 Tongjiang Avenue,	Office	159.00
	Xinbei District, Changzhou, Jiangsu Province, the PRC
63.	Factory Block B, Lot 27, Wuxi New Area, Wuxi,	Production	2,376.00
	Jiangsu Province, the PRC
64.	Unit 105, Office Building, Wuxi Export Processing Zone,	Office	15.00
	Wuxi, Jiangsu Province, the PRC
65.	Unit 107, Office Building, Wuxi Export Processing Zone,	Office	10.00
	Wuxi, Jiangsu Province, the PRC
66.	Unit 118, 288 Gaolang Road, Wuxi New Area, Wuxi,	Office	28.00
	Jiangsu Province, the PRC
67.	Factory Block 4, Area A, Lot 100, Changjiangnan Road,	Production	3,353.00
	Wuxi New Area, Jiangsu Province, the PRC
68.	Counter 8, Area C, Level 2, Office Building No. 2,	Operation	4.00
	Hubin Road, Wuxi, Jiangsu Province, the PRC
69.	Unit 116, No. 288 Gaolang Road, Wuxi New Area,	Office	28.00
	Jiangsu Province, the PRC
70.	Unit 106, Custom Direct Point Administration Building,	Office	20.00
	Old Coal Pier, Jiangyang, Jiangsu Province, the PRC
71.	Warehouse 1, Yinbin Road, Wuxi New Area,	Warehouse	3,200.00
	Jiangsu Province, the PRC
72.	Warehouse, 518 Yunhedong Road, Wuxi New Area,	Warehouse	2,700.00
	Jiangsu Province, the PRC
73.	Rear workshop & north portion of production workshop,	Office and	4,068.00
	2 levels of office building, west of Lot 11055,	production
	Tongyuan Road, Weifeng Ancillary Area, Suzhou Industrial
	Park, Jiangsu Province, the PRC

−278 −

PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
74.	Unit 425, Custom Office Building, Suzhou Industrial Park,	Office	71.00
	Jiangsu Province, the PRC
75.	Unit 217, Logistic Centre Composite Building,	Office	20.50
	Suzhou Industrial Park, Jiangsu Province, the PRC
76.	No. 15-1, Ningnan Industrial Centre Road, Yuhuatei,	Office and	2,180.00
	Nanjing, Jiangsu Province, the PRC	warehouse
77.	Unit 403, 405, 407, 408, 410, Custom Building,	Office	110.00
	Lukou Airport, Nanjing, Jiangsu Province, the PRC
78.	Level 1, Administration Warehouse, Lukou Airport,	Warehouse	100.00
	Nanjing, Jiangsu Province, the PRC
79.	Level 4, No. 100 Hujuebei Road, Nanjing, Jiangsu Province,	Office	750.00
	the PRC
80.	No. 1 Guangshan Road, Xuzhou, Jiangsu Province, the PRC	Office	160.00
81.	Level 1, 20-8, 9 Shiyou New Village, No. 1 Wenhui Road,	Operation	77.40
	Yangzhou, Jiangsu Province, the PRC
82.	20-7, Shiyou New Village, No. 1 Wenhui Road, Yangzhou,	Operation	38.86
	Jiangsu Province, the PRC
83.	Level 1, Hongqiao Building, No. 36 Qingnin Road, Nantong,	Office	440.00
	Jiangsu Province, the PRC
84.	Level 2, No. 227 Qingfengxi Road, Kunshan,	Office and	1,454.00
	Jiangsu Province, the PRC	industrial
85.	Unit 103, Block 3, Taichunhua Apartment, Shanghai Road,	Office	124.00
	Taicang, Jiangsu Province, the PRC
86.	An unit on the west side of Level 1, Block 4 West Section,	Office	80.00
	Bishuiyuan Sub-District, Qinhuangdao Economical &
	Development Area, Hebei Province, the PRC
87.	No. 8, Block B, Xiulan City Garden, Wuyi Road, Baoding,	Office	256.00
	Hebei Province, the PRC
88.	The First Unit on the East Facing the Street, Block 1,	Office	110.00
	Dongyuan Sub-District, No. 156 Xingkai Road, Shijiazhuang,
	Hebei Province, the PRC
89.	Units 101 and 106, Level 1, Hebei Zhongji Building,	Office	102.50
	No. 152 Xingkai Road, Shijiazhuang, Hebei Province,
	the PRC
90.	Zhulinsi, Chengde, Hebei Province, the PRC	Office	80.82
91.	Unit 4006 and car park 1, 2 & 3 on Level 2,	Office	226.00
	Fazhan Building, No. 159 Jiankang Road, Jinshui District,
	Zhenzhou, Henan Province, the PRC
92.	Unit 204 & 205, Block 1, No. 28 Shengli Road,	Office	52.00
	Xining, Qinghai Province, the PRC

−279 −

PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
93.	Unit D1-11 & 12, Xiexintianjun Park, Honghuang Road,	Commercial	164.00
	Yubei District, Chongqing
94.	Standard Factory Block 28, Huatai Industrial Area,	Office and	1,100.00
	No. 788 Xiqi Road, Hangzhou, Zhejiang Province, the PRC	production
95.	Unit 321, Custom Block 2, Qiaoshan International Airport,	Office	20.00
	Hangzhou, Zhejiang Province, the PRC
96.	Unit 321, Custom Block 2, Qiaoshan International Airport,	Office	18.13
	Hangzhou, Zhejiang Province, the PRC
97.	East side of Science & Technology Building, Youyibei Street,	Research	160.71
	Jiaxing Economical & Development Area, Jiaxing, Zhejiang
	Province, the PRC
98.	1549-1553 & 1553-1, 2, 3, Jiefangnan Road, East Area,	Office	280.00
	Binjiang Garden, Chengnan, Shaoxing, Zhejiang, the PRC
99.	No. 151 Tangxi Road, Haishu Section, Nanbo,	Office	600.00
	Zhejiang Province, the PRC
100.	Level 29, Zhongnongxin International Commercial Building,	Office	127.53
	No. 181 Zhongshan Road, Ningbo, Zhejiang Province,
	the PRC
101.	107-108 Block 4B, Yuningjia Small Area, Zhanxi Road,	Operation	88.00
	Wenzhou, Zhejiang Province, the PRC
102.	Level 1, No. 36 Gaoxin Road, Xian, Shaanxi Province,	Office	281.00
	the PRC
103.	No. 4, Level 2, Unit 3, Block 39, Ershisuo, Baisha Road,	Residential	60.00
	Xian, Shaanxi Province, the PRC
104.	A counter at Custom Lobby, Level 1 of a warehouse,	Office and	140.00
	3 office units on Level 6, Yichang Custom Building,	warehouse
	87 Xiningyi Road, Nanchang, Hubei Province, the PRC
105.	28 Yangsigang Road, Hanyang District, Wuhan,	Office	20.00
	Hubei Province, the PRC
106.	Basement of Experiment Building, Snail Fever Preventorium	Warehouse	255.00
	Research Centre, Neixisheng, Zhuodaoquan Province Hygiene
	and Anti-Epidemics Station, Wuchang District, Wuhan,
	Hubei Province, the PRC
107.	10 Buildings, No. 294 Changqing Road, Wuhan,	Office	2,090.00
	Hubei Province, the PRC
108.	Level 1, Custom Building, Tianhe Airport, Wuhan,	Office	145.00
	Hubei Province, the PRC
109.	Unit C, D, I & J, Block A, Wuhan International Building	Office	288.00
	Block A, Dandong Road, Jiefang Avenue, Wuhan,
	Hubei Province, the PRC

−280 −

PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
110.	Room 2nd & 3rd, East Side Building, Xiangfan Custom,	Office	36.00
	No. 186 Chunyuanxi Road, Xiangfan, Hubei Province,
	the PRC
111.	Unit 3-3-11, Composite Building, Sancha Road,	Office	110.00
	Shashi District, Jingzhou
112.	Shop 4, 5 & 6, Office Building Block 1, Retired Cadre	Operation	100.00
	Activities Centre, No. 1 Gongyuan Road, Huangshi,
	Hubei Province, the PRC
113.	Unit 2111B, 2112, 2113, 2114, 2115 & 2117, Level 1,	Office and	164.72
	Rear Office Building, Hangfu Building, 228 Renminzhong	warehouse
	Road, Changsha, Hunan Province, the PRC
114.	Level 1, Block 12, Jixing Small Area, Heilongjiang, Haerbin,	Office	140.00
	Heilongjiang Province, the PRC
115.	A flat and Level 2 of north side of Old Office Building,	Operation	469.00
	No. 16 Beijingnan Road, Urumqi, Xinjiang Autonomous
	Region, the PRC
116.	Carpark and a 3-storey industrial building behind Andou	Office and	4,530.00
	Jianfa Warehouse, No. 2 Fanghu Xiamen, Fujian Province,	warehouse
	the PRC
117.	Level 4 of an industrial building behind Andou Jianfa	Office and	792.00
	Warehouse, No. 2 Fanghu Xiamen, Fujian Province, the PRC	warehouse
118.	Office Unit 236, Level 2, Export and Import Dispatch	Office	39.00
	Surveillance Centre, No. 10 Changhong Road, Huli District,
	Xiamen, Fujian Province, the PRC
119.	Office and Temporary Custom Class 2 Surveillance	Office and	334.62
	Warehouse of No. 1 Air Terminal	warehouse
120.	Greating Custom Clearance Company, Level 1,	Office and	16.00
	Examination and Custom Clearance Centre Building, Haicang,	operation
	Xiamen, Fujian Province, the PRC
121.	Factory Unit A, Level 3, Storage and Processing Complex	Production	1,049.00
	Block A (Moufu Building), Xiangyu Free Trade Zone,
	Xiamen, Guangdong Province, the PRC
122.	Unit 4B, Block D, Xiangyu Free Trade Zone, Xiamen,	Warehouse	1,337.55
	Guangdong Province, the PRC	and
		industrial
123.	Unit A, Level 3, Block D, Storage and Processing Composite	Warehouse	743.00
	Building, Xiangyu Free Trade Zone, Xiamen, Fujian Province,
	the PRC
124.	The whole of Level 5, Warehouse Block B, Xiangyu Taiping	Warehouse	2,225.91
	Logistic, Xiamen, Guangdong Province, the PRC
125.	Unit 1B of No. 19 Xiangxing 1st Road and Unit 1A of	Office and	1,818.33
	No. 4 Xiangxing 3rd Road, Xiangyu Free Trade Zone,	warehouse
	Huli District, Xiamen, Fujian Province, the PRC

−281 −

PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
126.	Factory Unit B, Level 6, Storage and Processing Composite	Production	1,080.00
	Building, Block A (Moufu Building), Xiangyu Free Trade
	Zone, Xiamen, Fujian Province, the PRC
127.	Unit 5B, Block D, Xiangyu Free Trade Zone, Xiamen,	Office and	1,337.55
	Fujian Province, the PRC	warehouse
128.	Unit AB, Level 4, Factory E, No. 25 1st Road, Xiangyu Free	Warehouse	1,909.75
	Trade Zone, Huli District, Xiamen, Fujian Province, the PRC
129.	Unit 3A, Block D, Xiangyu Free Trade Zone, Xiamen,	Warehouse,	1,117.42
	Fujian Province, the PRC	industrial
		and office
130.	Unit B, Level 3, Block 26G (Block F) and Storage Level 2,	Office and	1,126.34
	Xiangyu Free Trade Zone, Xiamen, Fujian Province, the PRC	warehouse
131.	Unit 4B, Block F, Xiangyu Free Trade Zone, Xiamen,	Industrial	1,126.34
	Fujian Province, the PRC	and
		warehouse
132.	Unit 5B, Block F, Xiangyu Free Trade Zone, Xiamen,	Industrial	1,126.34
	Fujian Province, the PRC	and
		warehouse
133.	Unit 1A, No. 14 Xiangxing 1st Road, Huli District, Xiamen,	Office and	903.41
	Fujian Province, the PRC	warehouse
134.	Units 2A and 3A, No. 29 Xiangxing 1st Road and	Warehouse	2,296.68
	No. 14 Xiangxing 3rd Road, Xiangyu Free Trade Zone,
	Huli District, Xiamen, Fujian Province, the PRC
135.	Unit 5A, No. 29 Xiangxing 1st Road and No. 14 Xiangxing	Warehouse	1,148.34
	3rd Road, Xiangyu Free Trade Zone, Huli District, Xiamen,
	Fujian Province, the PRC
136.	Shop 26, Yida Commercial Building, Citong East Road,	Office	193.60
	Quanzhou, Fujian Province, the PRC
137.	Half portion of Levels 1 and 2, Huqian Arcade (West),	Operation	1,348.00
	No. 163 Huqian, Fufei Road, Gulou District, Fuzhou,
	Fujian Province, the PRC
138.	Unit 1016, Dongshan Plaza, No. 69 Xianlei Central Road,	Office	80.25
	Dongshan District, Guangzhou, Guangdong Province, the PRC
139.	A factory situated at Yongtai Industrial Zone, Guangzhou,	Warehouse	720.00
	Guangdong Province, the PRC
140.	Unit 10, Level 1, Block 4, Nos. 8-16 Shierling Road	Industrial	985.00
	(Taifokou), Yongping Street, Baiyuan North Avenue,
	Guangzhou, Guangdong Province, the PRC
141.	Block 5, Yongtai Industrial Zone, Tongtai Road, Guangzhou,	Warehouse	2,280.00
	Guangdong Province, the PRC

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PROPERTY VALUATION REPORT

APPENDIX VI

			Gross
No.	Address	Usage	floor area
			(sq.m.)
142.	Unit 23E on Level 2 of Composite Business Building and	Office and	424.00
	No. 11 Warehouse of Agency Services Warehouse inside	warehouse
	Customs Surveillance Zone, Baiyuan International Airport,
	North Exit West Avenue, Huadu Town Airport,
	Huadu District, Guangzhou, Guangdong Province, the PRC
143.	D1 and West C1, No. 263 Zhongshan Central Avenue,	Office and	1,500.00
	Tianhe District, Guangzhou, Guangdong Province, the PRC	warehouse
144.	No. 8 Beizhentou, Taili Village, Taihe Town, Baiyuan District,	Office and	8,570.00
	Guangzhou, Guangdong Province, the PRC	warehouse
145.	East of Level 3, Block 212, Tairan 9th Road, Che Gong Miao	Industrial	1,401.44
	Industrial Zone, Futian District, Shenzhen,
	Guangdong Province, the PRC
146.	Levels 1 and 2, Office Level 3, Staff Quarters on Office	Office and	3,500.00
	Level 3, West Security Quarter, 25 Carparking Spaces and	warehouse
	Advertisement Place, Warehouse No. 1, Zhonglu Warehouse,
	Kaiping Street, Huaqiao City Eastern Industrial Zone,
	Shenzhen, Guangdong Province, the PRC
147.	Level 3, Warehouse No. 1, Zhonglu Warehouse,	Warehouse	1,700.00
	Kaiping Street, Huaqiao City Eastern Industrial Zone,
	Shenzhen, Guangdong Province, the PRC
148.	Portion of Level 4, Warehouse No. 1, Zhonglu Warehouse,	Warehouse	2,200.00
	Kaiping Street, Huaqiao City Eastern Industrial Zone,
	Shenzhen, Guangdong Province, the PRC
149.	Room 618, Units 230 and 231, Level 2, National	Office	588.00
	Cargo Village, Shenzhen Airport Logistic Park Zone,
	Baoan District, Shenzhen, Guangdong Province, the PRC
150.	Portion of Level 1 of Office Building, No. 10 Taohua Road,	Office	158.50
	Futian Free Trade Zone, Futian District, Shenzhen,
	Guangdong Province, the PRC
151.	Room 114, Level 1, National Cargo Village, Shenzhen Airport	Warehouse	604.00
	Logistic Park Zone, Baoan District, Shenzhen, Guangdong
	Province, the PRC
152.	Level 1 Office of Zhuhai Qiheng Logistic Company Limited,	Office	20.00
	No. 48 Zone of Zhuhai Free Trade Zone, Zhuhai,
	Guangdong Province, the PRC
153.	Storage Unit 14, Level 2, No. 47 Haizhou Road,	Warehouse	714.00
	Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC
154.	Warehouse No. 51, Haizhou Road, Jiuzhou Warehouse,	Office and	320.00
	Zhuhai, Guangdong Province, the PRC	warehouse
155.	Storage Unit 6, Level 2, No. 47 Haizhou Road,	Warehouse	306.00
	Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC
156.	Storage Unit 8, Level 2, No. 47 Haizhou Road,	Warehouse	408.00
	Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC

−283 −

PROPERTY VALUATION REPORT

APPENDIX VI

No.
Address
Usage
157.
Unit 202, Block 5, No. 51 Jitaihaizhou Road, Zhuhai,
Guangdong Province, the PRC
Office and
warehouse
158.
Shops 20 and 21, Tianshahe Road, Jiangmen,
Guangdong Province, the PRC
Office and
operation
159.
Factory and Dormitory Building, Baima Huangjin Industrial
Zone, Dongguan, Guangdong Province, the PRC
Residential
160.
Factory and Dormitory Building, Baima Huangjin Industrial
Zone, Dongguan, Guangdong Province, the PRC
Warehouse
161.
A shop situated at Baima Guantai Road, Dongguan,
Guangdong Province, the PRC
Commercial
162.
2 units of the 14th and 15th shops of South Gate of Land
Reclamation and Cultivation Central Hospital, Zhanjian,
Guangdong Province, the PRC
Commercial
163.
Levels 1 and 2, No. 4 Xinsong Road, Xinsong South First
Alley, Xinsong Management Zone, Tailiang Town, Shunde,
Guangdong Province, the PRC
Office
164.
Units 701-703, Level 7, Resources and Training Building,
No. 118 Lunnan Road, Huhhot, Inner Mongolia Autonomous
Region, the PRC
Office
165.
Portion of Block 11 & 12, Baoshan Road, Guiyang, the PRC
Office and
warehouse
166.
2 rooms on the east side, west side of North Lobby on Level
1, office on the east side on Level 2, Office Building,
Nos. 8-12 Antu Street, Heping District, Shenyang,
Liaoning Province, the PRC
Office and
operation
167.
Blocks 18 & 19, Shenti Trading Composite Building,
Bayuquan District, Yingkou, Liaoning Province, the PRC
Office
168.
A room, a toilet and portion of corridor on west side of Level
5, West Building, Dongshengli, Zhanqian District, Yingkou,
Liaoning Province, the PRC
Office
169.
Level 1, Nos. 19-32 Hepan Garden, Nandongli, Taihe District,
Jinzhou, Liaoning Province, the PRC
Office
170.
Unit 103, No. 20 Yanjiang Development Area, Dandong,
Liaoning Province, the PRC
Office
171.
West side of No. S1 Warehouse (Block 39), Shenyang,
Liaoning Province, the PRC
Warehouse
Total:

Gross
floor area
(sq.m.)
320.00
241.63
4,740.00
890.00
96.00
78.36
180.00
90.00
360.00
578.00
150.98
30.00
107.55
151.00
1,000.00

128,218.39

−284 −

PROPERTY VALUATION REPORT

APPENDIX VI

Group V – Properties leased by the Eas PRC Group in Hong Kong

			Capital value in
			existing state as at
			30 June 2004 and
	Property	Description and tenancy particulars	31 October 2004
1.	The whole of 22nd Floor,	The property comprises a total gross floor area of	No commercial value
	Shanghai Industrial	approximately 371.61 sq.m. (4,000 sq.ft.) completed
	Investment Building,	in 1977 for office use.
	Nos. 48-62 Hennessy
	Road,	The property is leased by Eas PRC Group for a term
	Hong Kong	of three years from 16 May 2002 to 15 May 2005 at
		a monthly rent of HK$39,325.
2.	Unit 11, 5th Floor,	The property comprises a total gross floor area of	No commercial value
	Commercial Building of	approximately 122 sq.m. (1,313 sq.ft.) completed in
	Airport Freight	1997 for office use.
	Forwarding Centre,
	Chek Lap Kok Airport,	The property is leased by Eas PRC Group for a term
	Chek Lap Kok,	of one year from 16 December 2003 to 15
	Lantau Island,	December 2004 at a monthly rent of HK$11,817.
	New Territories,
	Hong Kong
3.	Unit Nos. 1809-1817,	The property comprises a total gross floor area of	No commercial value
	Level 18, Tower 1,	approximately 500 sq.m. (5,384 sq.ft.) completed in
	Metroplaza,	1992 for office use.
	Kwai Chung,
	New Territories,	The property is leased by Eas PRC Group for a term
	Hong Kong	of two years from 16 April 2003 to April 2005 at a
		monthly rent of HK$53,840.
4.	D.D.99 Lot 769,	The property comprises a plot of land with a site	No commercial value
	Mai Po, San Tin,	area of approximately 2,125.60 sq.m. (22,880 sq.ft.)
	New Territories,	for open storage use.
	Hong Kong
		The property is leased by Eas PRC Group for a term
		of two years from 15 August 2003 to 14 August
		2005 at a monthly rent of HK$37,000.
5.	Loading & Unloading	The property comprises a total gross floor area of	No commercial value
	Platform and First Floor,	approximately 1,697 sq.m. (18,266 sq.ft.) completed
	Block D, Nos. 52-62	in 2000s for warehouse use.
	Tsing Yi Road,
	Tsing Yi Island,	The property is leased by Eas PRC Group for a term
	New Territories,	of five years from 1 February 2004 to 31 January
	Hong Kong	2009 at a monthly rent of HK$155,000 for the
		period from 1 February 2004 to 31 January 2007
		inclusive of a 2-month rent free period and at a
		monthly rental of HK$162,750 for the period from 1
		February 2007 to 31 January 2009.

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PROPERTY VALUATION REPORT

APPENDIX VI

Group VI – Properties leased by the Eas PRC Group in overseas countries

			Capital value in
			existing state as at
			30 June 2004 and
	Property	Description and tenancy particulars	31 October 2004
1.	A business/office premise	The property comprises a business premise with	No commercial value
	at Lot B6B-2,	total gross floor area of approximately 186 sq.m.
	Malaysia Airlines	(2,000 sq.ft.) completed between 1980s and 1990s
	Advanced	for warehouse use.
	Cargo Centre, KLIA,
	Free Commercial Zone,	The property is leased by Eas PRC Group for a term
	Kuala Lumpur	of two years, four months and fifteen days from 15
	International Airport,	March 2003 to 31 July 2005 at a monthly rent of
	43900 Sepang, Selangor,	RM9,000.
	Malaysia
2.	The business premise at	The property comprises a business premise with	No commercial value
	Lot No. B-4, No. 99,	total gross floor area of approximately 357 sq.m.
	Jalan Batu Maung,	(3,844 sq.ft.) completed between 1980s and 1990s
	Dis3plex Free	for logistic business use.
	Commercial Zone,
	Air Freight Forwarders	The property is leased by Eas PRC Group for a term
	Warehousing Cargo	of two years from 18 December 2003 to 17
	Complex,	December 2005 at a monthly rent of RM9,610.
	11960 Penang,
	Malaysia
3.	4th Floor,	The property comprises an office unit with total	No commercial value
	Centro Carga Aerea	gross floor area of approximately 181 sq.m. (1,948
	Madrid-Barajas Edificio	sq.ft.) completed between 1980s and 1990s for
	Servicios Generales	office use.
	Oficina 416
	Aeropuerto De Barajas	The property is leased by Eas PRC Group for a term
	28042 Madrid	of ten years from 22 September 1997 to 22
	Spain	September 2007 at a monthly rent of EUR2,982.24.
4.	No. 9 Airline Road,	The property comprises a business premise with	No commercial value
	Unit #05-02 Cargo	total gross floor area of approximately 160 sq.m.
	Agents Building D,	(1,722 sq.ft.) completed between 1980s and 1990s
	Singapore Changi	for warehouse/office uses.
	Airport,
	819827	The property is leased by Eas PRC Group for a term
	Singapore	of two years from 1 October 2003 to 30 September
		2005 at a monthly rent of S$15,000.
5.	No. 9 Airline Road,	The property comprises a business premise with	No commercial value
	Unit #01-27	total gross floor area of approximately 343 sq.m.
	Cargo Agents	(3,692 sq.ft.) completed between 1980s and 1990s
	Building D,	for warehouse/office use.
	Singapore Changi
	Airport,	The property is leased by Eas PRC Group for a term
	819827	of two years from 1 July 2003 to 30 June 2005 at a
	Singapore	monthly rent of S$8,850.
6.	Centre De Carrega Aeria	The property comprises a business premise with	No commercial value
	Barcelona	total gross floor area of approximately 101 sq.m.
	Edifici De Serveis	(1,087 sq.ft.) completed between 1980s and 1990s
	Generals –	for office use.
	Of. B306
	Aeroport De Barcelona –	The property is leased by Eas PRC Group for a term
	El Prat 08820 El Pray De	of ten years from 11 January 2001 to 11 January
	Llobregat	2011 at a monthly rent of EUR1,316.97.
	Barcelona
	Spain

−286 −

GENERAL INFORMATION

APPENDIX VII

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

DISCLOSURE OF DIRECTORS’ INTERESTS

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

(i) The Company

Name of Director	Number of ordinary shares Number of underlying ordinary shares held Percentage of aggregate interests to total number of ordinary
	under share options Total shares in issue Personal interests Family interests Corporate interests Other interests* %
Mr. ANG Keng Lam+ Mr. WONG Siu Kong+ Mr. HO Shut Kan Mr. MA Wing Kai, William	2,6211 – – 531,1772 4,701,8773 5,235,675 0.43 – – – – 2,119,7943 2,119,794 0.18 – – – – 1,004,3003 1,004,300 0.08 2,6691 – – – 987,0113 989,680 0.08

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GENERAL INFORMATION

APPENDIX VII

Name of Director	Number of ordinary shares Number of underlying ordinary shares held Percentage of aggregate interests to total number of ordinary
	under share options Total shares in issue Personal interests Family interests Corporate interests Other interests* %
Mr. William Winship FLANZ Mr. LAU Ling Fai, Herald Mr. Christopher Roger MOSS, O.B.E.	– – – – – – – – – – – – – – – – – – – – –

(ii) Associated Corporations

								Percentage
							of aggregate
						Number of		interests
						underlying		to total
Name of		Number of ordinary shares				ordinary shares held		number of ordinary
Associated	Name of	Personal	Family	Corporate	Other	under share		shares in
Corporation	Director	interests	interests	interests	interests	options	Total	issue
								%
EDSA Properties	Mr. HO Shut	1,5701	–	–	–	–	1,570#	0.00
Holdings Inc.	Kan
Kerry Group	Mr. ANG	–	7,050,0004	–	7,000,0002	6,000,0005	20,050,000	1.40@
Limited	Keng Lam
	Mr. WONG	–	–	5,254,3006	–	5,000,0005	10,254,300	0.72@
	Siu Kong
	Mr. HO Shut	465,0001	–	–	–	1,000,0005	1,465,000	0.10@
	Kan
	Mr. MA Wing	710,6201	–	–	–	–	710,620	0.05@
	Kai, William

−288 −

GENERAL INFORMATION

APPENDIX VII

Name of Associated Corporation Name of Director	Number of ordinary shares Number of underlying ordinary Percentage of aggregate interests to total number of
	shares held under share options Total ordinary shares in issue Personal interests Family interests Corporate interests Other interests %
Kerry Siam Seaport Limited (formerly known as Siam Seaport Terminal & Warehouses Co., Ltd.) Mr. ANG Keng Lam 11 – – – – 1 0.00 Mr. MA Wing Kai, William 11 – – – – 1 0.00

Notes:

This represents interests held by the relevant director as beneficial owner.
This represents interests held by the relevant director through a discretionary trust of which the relevant director is a beneficiary.
This represents interests in options held by the relevant director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the options granted by the Company under the executive share option scheme adopted by the Company on 27 March 1997.
This represents interests held by the relevant director’s spouse.
This represents interests in options held by the relevant director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the options granted by Kerry Group Limited.
This represents interests held by the relevant director through his controlled corporations.
The percentage has been adjusted based on the total number of ordinary shares of the Company in issue as at the Latest Practicable Date (i.e. 1,211,116,330 ordinary shares).
# The relevant notification was filed under the repealed Securities (Disclosure of Interests) Ordinance.
@ The percentage has been adjusted based on the total number of ordinary shares of Kerry Group Limited in issue as at the Latest Practicable Date (i.e. 1,433,774,352 ordinary shares).
+ As at the Latest Practicable Date, Mr. Ang Keng Lam and Mr. Wong Siu Kong were directors of Kerry Holdings, which had an interest in the shares of the Company which were required under the provisions of Divisions 2 and 3 of Part XV of the SFO to be disclosed to the Company.

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

−289 −

GENERAL INFORMATION

APPENDIX VII

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

As at the Latest Practicable Date, none of the Directors:

(a) had any direct or indirect interests in any assets which had since 31 December 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any members of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any members of the Enlarged Group; and
(b) was materially interested in any contracts or arrangements subsisting at the date of this circular which is significant in relation to the business of the Enlarged Group.

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to the bye-laws of the Company, a resolution put to the vote of a general meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

(a) by the chairman of the meeting; or
(b) by at least three shareholders present in person or by duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(c) by any shareholder or shareholders present in person or by duly authorised corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the meeting; or
(d) by any shareholder or shareholders present in person or by duly authorised corporate representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

−290 −

GENERAL INFORMATION

APPENDIX VII

MATERIAL CONTRACTS

The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by members of the Enlarged Group within the two years preceding the date of this circular and is or may be material:

(a) the Sale and Purchase Agreement; and
(b) the Restructuring Agreement.

LITIGATION

Malaysian Airline System Berhad (“ Malaysian Airline ”), together with five other plaintiffs, brought an action in the High Level People’s Court of Beijing on or about 13 March 2002 for damages, costs and interest, against six defendants (including Eas PRC as the second defendant) on a joint and several basis in relation to the alleged damage caused to a Malaysian Airline aircraft on 15 March 2000 in respect of the transportation of certain chemical substance.

Beijing Fulgence Law Firm, the legal counsel representing Eas PRC in the court action, has issued a legal opinion to Kerry Logistics stating that:

(a) according to the plaintiffs’ claim, the damages sought in the amount of US$65,634,736.84 represent the market value of the aircraft at the time when the damage occurred less the resale value of the aircraft after repairs;
(b) a hearing took place in June 2004 but it was adjourned on account of certain evidential and procedural issues to be resolved, and no new hearing date has yet been fixed;
(c) there is a pending appeal on a jurisdictional issue and the court has not yet provided a ruling on appeal; and
(d) in their opinion, the evidence currently put forward by the plaintiffs is seriously deficient and does not prove (i) the course of events leading to the damage, the extent of the damage and the cause of the damage as alleged by the plaintiffs and (ii) the locus standi of the plaintiffs other than Malaysian Airline.

Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of any further development of this legal action. Pursuant to the Sale and Purchase Agreement, Huatong has agreed to indemnify Kerry Logistics and each member of the Target Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities, arising in respect of various litigations against the Target Group, including this court action.

−291 −

GENERAL INFORMATION

APPENDIX VII

As at the Latest Practicable Date, save as disclosed above, none of the members of the Enlarged Group was engaged in any litigation or arbitration or claim of material importance and, so far as the Directors were aware, no litigation or arbitration or claim of material importance was pending or threatened by or against any member of the Enlarged Group.

EXPERTS

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

Name	Qualification
PricewaterhouseCoopers	Certified Public Accountants
DTZ Debenham Tie Leung	property valuer and member of The Hong Kong
Limited	Institute of Surveyors
Fangda Partners	qualified PRC lawyers
Jianda Law Firm	qualified PRC lawyers
Beijing Fulgence Law Firm	qualified PRC lawyers

Each of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm has given and has not withdrawn its written consent to the issue of the circular with the inclusion herein of its opinion, letter or valuation report (as the case may be) prepared for the purpose of incorporation in this circular, and the references to its name, opinion, letter or valuation report in the form and context in which they respectively appear.

As at the Latest Practicable Date, none of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm had any direct or indirect interests in any assets which have since 31 December 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any members of the Group, or were proposed to be acquired or disposed of by or leased to any members of the Group.

−292 −

GENERAL INFORMATION

APPENDIX VII

SERVICE CONTRACTS

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

COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors were considered to have interests in the following businesses (the “Excluded Businesses”), being businesses which competed or were likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses in which (a) the Group was interested and (b) the Directors’ only interests were as directors appointed to represent the interests of the Group.

As at the Latest Practicable Date:

(a) Mr. Ang Keng Lam was a director of and had interests in shares in the Allgreen Properties Limited (“Allgreen”) group of companies, the businesses of which consisted of property investment and development, property and project management and operation of office premises, retail space and serviced apartments in Singapore. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the property businesses of the Group, it is likely that these Excluded Businesses may compete with the property businesses of the Group in the Asia Pacific region. Allgreen was listed on the Singapore Exchange Securities Trading Limited as at the Latest Practicable Date;
(b) Messrs. Ang Keng Lam and Wong Siu Kong were directors of and had interests in shares in the Shangri-La Asia Limited (“SA”) group of companies, the businesses of which consisted of hotel ownership and operation. The Directors believe that as the size of that part of these Excluded Businesses in Beijing, where the Group has hotel businesses, is not insignificant when compared with the hotel businesses of the Group in Beijing, it is likely that these Excluded Businesses may compete with the hotel businesses of the Group in Beijing. SA was listed on the Stock Exchange as at the Latest Practicable Date;
(c) Messrs. Ang Keng Lam and Wong Siu Kong were directors of (but did not have any interests in shares in) the China World Trade Center Ltd. group of companies, the businesses of which consisted of property investment and development and hotel ownership and operation in the PRC. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the property and hotel businesses of the Group in the PRC, it is likely that these Excluded Businesses may compete with the property and hotel businesses of the Group in the PRC; and

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GENERAL INFORMATION

APPENDIX VII

(d) the executive Directors were directors of and/or had interests in shares in the Kerry Group Limited group of companies, the businesses of which consisted of property investment and development, hotel ownership and operation, warehouse ownership and operation, port terminal ownership and operation and freight operations. The size of these Excluded Businesses is considered to be insignificant when compared with similar businesses of the Group. On this basis, the Directors do not consider any competition between these Excluded Businesses as specified under this paragraph (d) and similar businesses of the Group to be significant.

The Excluded Businesses are operated and managed by companies (and in the case of Allgreen and SA, by publicly listed companies) with independent management and administration. On this basis, the Directors believe that the Group is capable of carrying on its businesses independently of the Excluded Businesses and at arms length from the Excluded Business.

The Directors, including those interested in the Excluded Businesses, will, as and when required under the bye-laws of the Company, abstain from voting on any resolution of the Board in respect of any contract, arrangement or proposal in which he or any of his associates has a material interest.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday (except public holidays) at the office of the Company in Hong Kong at 13/F., Cityplaza 3, 14 Taikoo Wan Road, Taikoo Shing, Hong Kong up to and including 12 January 2005.

the Company’s memorandum of association and bye-laws;
the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
the accountants’ report from PricewaterhouseCoopers on Treasure Lake, the text of which is set out in Appendix I to this circular;
the accountants’ report from PricewaterhouseCoopers on Eas HK, the text of which is set out in Appendix II to this circular;
the accountants’ report from PricewaterhouseCoopers on the Eas PRC Group, the text of which is set out in Appendix III to this circular;
the letter on the pro forma statement of assets and liabilities of the Enlarged Group signed by PricewaterhouseCoopers setting out their opinion in Paragraph 1(B) of Appendix V to this circular;
the property valuation report of DTZ Debenham Tie Leung Limited, the text of which is set out in Appendix VI to this circular;

−294 −

GENERAL INFORMATION

APPENDIX VII

the legal opinion (in Chinese) prepared by Fangda Partners dated 29 December 2004 in respect of the property interest of the Target Group referred to in the property valuation report of DTZ Debenham Tie Leung Limited;
the legal opinion (in Chinese) prepared by Jianda Law Firm dated 29 December 2004 in respect of, among other things, the approval by the Ministry of Commerce of the PRC of the transfer of the Eas PRC Shares and that the title of the Eas PRC Shares will only be transferred to Eas HK upon the issue of the amended business licence of Eas PRC;
the legal opinion (in Chinese) prepared by Beijing Fulgence Law Firm dated 29 December 2004 in respect of the legal action referred to in the paragraph headed “Litigation” in this appendix;
the letter of consents referred to under the section headed “Experts” in this appendix;
the statement of adjustments made by PricewaterhouseCoopers in arriving at the figures set out in the accountants’ reports set out in Appendix II to this circular;
the annual report of the Company for each of the two years ended 31 December 2003;
the interim report of the Company for the six months ended 30 June 2004; and
the circulars issued by the Company dated 31 May 2004 and 27 October 2004 respectively.

MISCELLANEOUS

(a) The Qualified Accountant of the Company is Ms. Chang Yin Wa. Ms. Chang is a member of the Hong Kong Institute of Certified Public Accountants and a Fellow of the Association of Chartered Certified Accountants.
(b) The Secretary of the Company is Chow Yin Ping, Anita. Ms. Chow is an associate member of both the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries.
(c) The Company’s Hong Kong branch share registrar is Abacus Share Registrars Limited, G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(d) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

−295 −

AI assistant

Kerry Properties Limited — Proxy Solicitation & Information Statement 2004

49390_rns_2004-12-29_c53f264f-82bd-4535-a419-82d850a545ea.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR TRANSACTION

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 00683)

Executive Directors:

Registered Office:

Head Office and Principal Place

Independent Non-executive Directors:

of Business in Hong Kong:

MAJOR TRANSACTION

INTRODUCTION

THE SALE AND PURCHASE AGREEMENT

Date:

Parties:

Assets to be purchased by Kerry Logistics:

Conditions:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Consideration:

LETTER FROM THE BOARD

Basis of Consideration:

Payment Terms:

Completion:

Restructuring:

Repurchase Obligations:

COMPANY AND OWNERSHIP STRUCTURE

Existing structure of the Target Group

Structure of the Target Group immediately after First Closing

Structure of the Target Group immediately after Second Closing

INFORMATION ABOUT THE BUSINESS OF THE TARGET GROUP

LETTER FROM THE BOARD

INFORMATION ABOUT HUATONG

INFORMATION ABOUT THE GROUP

REASONS FOR AND BENEFITS OF THE ACQUISITION

LETTER FROM THE BOARD

COMPLIANCE WITH THE LISTING RULES

Major Transaction:

LETTER FROM THE BOARD

Connected Transactions:

APPROVAL FROM MAJOR SHAREHOLDER

ADDITIONAL INFORMATION

29 December 2004

Dear Sirs,

I. FINANCIAL INFORMATION

Profit and Loss Account

Balance Sheet

Statement of Changes in Equity

Cash Flow Statement

II. NOTES TO FINANCIAL INFORMATION

1. Basis of preparation

2. Principal accounting policy

Translation of foreign currencies

3. Share capital

4. Subsequent events

III. SUBSEQUENT ACCOUNTS

29 December 2004

Dear Sirs,

I. FINANCIAL INFORMATION

Profit and Loss Accounts

Balance Sheets

Statements of Changes in Equity

Cash Flow Statements

ACCOUNTANTS’ REPORT ON EAS HK

II. NOTES TO FINANCIAL INFORMATION

1. Principal activity and change of financial year end

2. Principal accounting policies

(a) Basis of preparation

(b) Associate

(c) Fixed assets

(d) Accounts receivable

(e) Borrowing costs

(f) Deferred taxation

(g) Employee benefits

(ii) Profit sharing and bonus plans

(h) Operating leases

Kerry Properties Limited Proxy Solicitation & Information Statement 2004