Kerry Properties Limited - Proxy Solicitation & Information Statement 2006

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 a licensed securities dealer, a 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 and the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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)

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 5 to 20 of this circular. A letter from the Independent Board Committee is set out on page 21 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 40 of this circular.

An ordinary resolution will be proposed at the Special General Meeting of Kerry Properties Limited to be held at Island Ballroom, Level 5, Island Shangri-La Hotel, Pacific Place, Supreme Court Road, Central, Hong Kong on Tuesday, 24 October 2006 at 10:00 a.m. to approve the matters referred to in this circular.

The notice convening the Special General Meeting is set out on pages 52 and 53 of this circular. A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to Abacus Share Registrars Limited, the Company’s branch share registrar and transfer office in Hong Kong, of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Special General Meeting. Completion and return of the accompanying form of proxy will not preclude you from attending and voting at the Special General Meeting should you so wish.

* for identification purpose only

5 October 2006

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	Details of the Sale and Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . .	7
3.	Details of the Shareholders’ Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
4.	Financial Effects of the Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
5.	Information on JVCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
6.	Reasons for and Benefits of the Entering into of the Agreements . . . . . . .	17
7.	Information about the Company, WGL and KHL . . . . . . . . . . . . . . . . . . . .	17
8.	Implications under the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
9.	Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
10.	Procedures by which a Poll may be Demanded . . . . . . . . . . . . . . . . . . . . .	19
11.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .		21
Letter from Platinum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		22
Appendix	I – Property Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Appendix	II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Notice of	Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	52

– i –

DEFINITIONS

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

“Acquisition Cost”	the acquisition cost of the Property under the King’s
	Road Agreement which amounts to HK$718,900,000;
“Agreements”	collectively, the Sale and Purchase Agreement and the
	Shareholders’ Agreement;
“Associated Corporations”	has the meaning ascribed to it in Part XV of the SFO;
“associates”	has the meaning ascribed to it in the Listing Rules;
“Board”	the board of directors of the Company;
“circular”	this circular, including the appendices hereto;
“Company” or “KPL”	Kerry Properties Limited, an exempted company
	incorporated in Bermuda with limited liability, the shares
	of which are listed on the Main Board of the Stock
	Exchange;
“connected persons”	has the meaning ascribed to it in the Listing Rules;
“connected transactions”	has the meaning ascribed to it in the Listing Rules;
“controlling shareholder”	has the meaning ascribed to it in the Listing Rules;
“Directors”	directors of the Company;
“Excluded Businesses”	the businesses of the Directors which, as at the Latest
	Practicable Date, competed or were likely to compete,
	either directly or indirectly, with the businesses of the
	Group, other than those businesses in which (a) the
	Group was interested and (b) the Directors’ only interests
	were as directors appointed to represent the interests of
	the Group;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	Hong Kong Special Administrative Region of PRC;

– 1 –

DEFINITIONS

“Independent Board Committee” the independent committee of the Board consisting of all the independent non-executive Directors;
“Independent Financial Adviser” Platinum Securities Company Limited, a licensed or “Platinum” corporation under the SFO to carry out types 1 and 6 regulated activities, and appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Agreements and the transactions contemplated thereunder;
“Independent Shareholders” Shareholders who are not required to abstain from voting in respect of the KPL Resolution at the Special General Meeting;
“Independent Valuation” independent valuation of the Property as at 31 August 2006 prepared by Savills Valuation and Professional Services Limited;
“JV Parties” collectively, WGL and KHL; “JVCO” Able Time Group Limited, a company incorporated in the British Virgin Islands;
“JVCO Group” JVCO and its subsidiaries from time to time (including Ubagan);
“KHL” Kerry Holdings Limited, a company incorporated in Hong Kong, being the controlling shareholder of the Company;
“King’s Road Agreement” the memorandum of agreement for sale and purchase of the Property dated 13 March 2006 entered into by, inter alia , Ubagan as purchaser and the vendor which is an independent third party;
“KPL Resolution” the resolution(s) to ratify, confirm and approve the Agreements and the transactions contemplated thereunder by the Independent Shareholders at the Special General Meeting of the Company;
“Kuok Group” companies owned or controlled by Mr. Kuok Hock Nien and/or interests associated with him;

– 2 –

DEFINITIONS

“Latest Practicable Date”	29 September 2006, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained in this circular;
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange;
“Model Code”	the Model Code for Securities Transactions by Directors
	of Listed Issuers, as set out in Appendix 10 to the Listing
	Rules;
“PRC”	The People’s Republic of China;
“Property”	the property at Nos. 863-865 King’s Road, Hong Kong
	(Inland Lot Nos. 8687 and 7737);
“Sale and Purchase Agreement”	the sale and purchase agreement dated 8 September 2006
	entered into by WGL and KHL whereby KHL agreed to
	acquire 60% equity interests in JVCO together with the
	same proportion of Shareholder’s Loans from WGL;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Share(s)”	ordinary share(s) of HK$1.00 each in the capital of the
	Company;
“Shareholder(s)”	holder(s) of Shares;
“Shareholder’s Loans”	the shareholder’s loans advanced from WGL to JVCO up
	to the date of the completion of the Sale and Purchase
	Agreement;
“Shareholders’ Agreement”	the shareholders’ agreement to be entered into by WGL,
	KHL and JVCO setting out the rights and obligations of
	the JV Parties in relation to the acquisition and re-
	development of the Property through JVCO;
“Special General Meeting”	the special general meeting of the Company to be held at
	Island Ballroom, Level 5, Island Shangri-La Hotel,
	Pacific Place, Supreme Court Road, Central, Hong Kong
	on Tuesday, 24 October 2006 at 10:00 a.m. at which the
	KPL Resolution will be proposed, the notice of which is
	set out on pages 52 and 53 of this circular;

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DEFINITIONS

“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“subsidiary”	has the meaning ascribed to it in section 2(4) of the
	Companies Ordinance of Hong Kong (Chapter 32 of the
	Laws of Hong Kong);
“Ubagan”	Ubagan Limited, a company incorporated in Hong Kong
	and a direct wholly-owned subsidiary of JVCO;
“WGL”	Whole Grace Limited, a company incorporated in the
	British Virgin Islands and an indirect wholly-owned
	subsidiary of the Company; and
“%”	per cent.

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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 HM12 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: 13th-14th Floors, Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong

Non-Executive Director:

Mr. TSE Kai Chi

5 October 2006

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

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

1. INTRODUCTION

On 13 September 2006, the Company announced that WGL, an indirect wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with KHL on 8 September 2006 whereby KHL agreed to acquire from WGL 60% of the entire equity interest in JVCO together with the same proportion of Shareholder’s Loans.

for identification purpose only

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LETTER FROM THE BOARD

Immediately prior to the entering into of the Sale and Purchase Agreement, WGL was the legal and beneficial owner of the entire issued share capital of JVCO. As at 31 August 2006, WGL has granted Shareholder’s Loans in the amount of HK$73,044,097.32 to JVCO.

The sole asset of JVCO is its interest in the entire issued share capital of Ubagan. The sole asset of Ubagan comprises its rights under the King’s Road Agreement, pursuant to which Ubagan shall acquire the Property upon the terms and conditions therein contained.

The Acquisition Cost amounts to HK$718,900,000, 10% of which in the amount of HK$71,890,000 has been paid by Ubagan to the vendor upon signing of the King’s Road Agreement, and the balance of HK$647,010,000 will be payable by Ubagan upon completion of the King’s Road Agreement, which shall be on or before 31 October 2006.

Based on the Independent Valuation of the Property as at 31 August 2006, WGL and KHL agreed that the Property should be, for the purpose of the Sale and Purchase Agreement, valued at HK$735,000,000 which is intended to represent the estimated amount for which the Property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Pursuant to the Sale and Purchase Agreement, the JV Parties agreed that they will enter into the Shareholders’ Agreement with JVCO upon completion of the Sale and Purchase Agreement. Pursuant to the Shareholders’Agreement, the amount and manner of funding by the JV Parties to JVCO and Ubagan shall be determined by the board of directors of JVCO from time to time provided that the maximum commitment (whether equity, loan, financial assistance or otherwise) which the JV Parties are required to provide to JVCO and Ubagan shall not exceed HK$3,700,000,000.

WGL is an indirect wholly-owned subsidiary of the Company and KHL is the controlling shareholder of the Company. Under the Listing Rules, KHL is regarded as a connected person of the Company. Accordingly, the entering into of each of the Agreements constitutes a connected transaction for the Company under the Listing Rules. Although the consideration for the acquisition by KHL from WGL of 60% of the entire equity interest in JVCO together with the same proportion of Shareholder’s Loans calculated in accordance with the terms of the Sale and Purchase Agreement is currently estimated to be less than 2.5% of the total assets and the market capitalisation of the Company, the maximum commitment of WGL under the Shareholders’ Agreement exceeds 2.5% of the total assets and the market capitalisation of the Company. Therefore, the entering into of the Agreements is subject to the approval of the Independent Shareholders.

The Independent Board Committee has been formed to advise the Independent Shareholders in relation to the Agreements. Platinum has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Agreements.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information in respect of the Agreements and other information prescribed by the Listing Rules. This circular also contains a letter of advice from Platinum to the Independent Board Committee and the Independent Shareholders in respect of the Agreements, a letter of advice containing the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Agreements, an independent valuation of the Property and a notice of the Special General Meeting.

2. DETAILS OF THE SALE AND PURCHASE AGREEMENT

Details of the Sale and Purchase Agreement are as follows:

Date:

8 September 2006

Parties: (a) WGL as vendor; and

(b) KHL as purchaser.

Consideration:

Scenario One

If completion of the Sale and Purchase Agreement takes place before completion of the King’s Road Agreement:

(a) The consideration shall be calculated according to the following formula:

Consideration = (A1 + B1 + C1 – D1) x 60%

Where:

A1 = HK$73,500,000 (being the value of 10% of the Property, as per the Independent Valuation);

B1 = HK$14,490,000 (being the difference between the value of the remaining 90% of the Property as per the Independent Valuation and the value of the remaining 90% of the Property as per the Acquisition Cost);

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LETTER FROM THE BOARD

C1 = the total asset value as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the deposit paid in respect of the acquisition of the Property as set out in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total asset value of JVCO Group excluding the above (i) and (ii) amounted to HK$1,185,497, which principally composed of deferred expenses and cash and bank balances as at 31 August 2006;

D1 = the total liabilities as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the Shareholder’s Loans. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total liabilities of JVCO Group excluding the above (i) and (ii) amounted to HK$40,000, which represents accounts payable as at 31 August 2006.

(b) The consideration shall be payable as follows:
(i) The full value of the consideration, less the value of 60% of the amount referred to in item B1 shall be paid upon completion of the Sale and Purchase Agreement.
(ii) The remaining amount shall be payable upon completion of the King’s Road Agreement.

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LETTER FROM THE BOARD

The following calculation is set out as an illustration of the above formula applicable in Scenario One:

HK$ million

Valuation of the Property 735.00 (a) as at 30 June 2006 10% of the value of the 73.50 (A1) Property per the Independent Valuation The Acquisition Cost 718.90 (b) Total appreciation in the 16.10 (c) = (a) −(b) value of the Property Balance payment of 90% 14.49 (B1) = (c) x 90% of total appreciation in valuation of the Property Equity interest to be 60% acquired by KHL Upon the completion of the Sale and Purchase Agreement, Gain to KPL on disposal of 60% interest in the JVCO Group

= Consideration −(Book value of the Other Assets/Liabilities + 10% of the Acquisition Cost) x 60%
= (A1 + B1 + C1 – D1) x 60% −(C1 −D1 + 10% of the Acquisition Cost) x 60%
= (A1 + B1 −10% of the Acquisition Cost) x 60%
= (HK$73,500,000 + HK$14,490,000 −(HK$718,900,000 x 10%)) x 60%
= HK$9.66 million

Based on the above calculation, a gain of HK$9.66 million to the Company would be recorded by the Group upon the completion of the Sale and Purchase Agreement as a result of the appreciation in the value of the Property.

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LETTER FROM THE BOARD

Scenario Two

If completion of the Sale and Purchase Agreement takes place after completion of the King’s Road Agreement:

(a) The consideration shall be calculated according to the following formula:

Consideration = (A2 + C2 – D2) x 60%

Where:

A2 = HK$735,000,000 (being the value of the Property, as per the Independent Valuation);

C2 = the total asset value as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the Acquisition Cost of the Property as set out in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total asset value of JVCO Group excluding the above (i) and (ii) amounted to HK$1,185,497, which principally composed of deferred expenses and cash and bank balance as at 31 August 2006;

D2 = the total liabilities as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the Shareholder’s Loans. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total liabilities of JVCO Group excluding the above (i) and (ii) amounted to HK$40,000, which represents accounts payable as at 31 August 2006.

(b) The consideration shall be payable in full upon completion of the Sale and Purchase Agreement.

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LETTER FROM THE BOARD

The following calculation is set out as an illustration of the above formula applicable in Scenario Two:

HK$ million

Valuation of the Property 735.00 (A2) as at 30 June 2006 The Acquisition Cost 718.90 Equity interest to be acquired by KHL 60% Upon the completion of the Sale and Purchase Agreement, Gain to KPL on disposal of 60% interest in JVCO

= Consideration −(Book value of the Other Assets/Liabilities + the Acquisition Cost) x 60%
= (A2 + C2 −D2) x 60% −(C2 −D2 + the Acquisition Cost) x 60%
= (A2 −the Acquisition Cost) x 60%
= (HK$735,000,000 −HK$718,900,000) x 60%
= HK$9.66 million

Conditions:

Completion of the Sale and Purchase Agreement is conditional upon, inter alia ,

(a) KHL being satisfied that the King’s Road Agreement will not be amended and/or rescinded as a result of the transfer of the shareholding interests and shareholders’ loans in JVCO;
(b) the passing of the KPL Resolution;
(c) compliance of all the Company’s obligations under the Listing Rules;

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LETTER FROM THE BOARD

(d) KHL receiving evidence, reasonably satisfactory to it, that all authorisation, permits and approvals required by WGL and JVCO to consummate the transactions contemplated under the Agreements have been obtained; and
(e) the simultaneous signing of the Shareholders’ Agreement.

If the above conditions are not fulfilled or waived by 31 October 2006 or such later date as the JV Parties may agree, the Sale and Purchase Agreement shall terminate and no JV Party shall have any claims whatsoever against the other JV Party other than antecedent breaches.

3. DETAILS OF THE SHAREHOLDERS’ AGREEMENT

Pursuant to the Sale and Purchase Agreement, the JV Parties agreed that they will enter into the Shareholders’ Agreement with JVCO upon completion of the Sale and Purchase Agreement. The Shareholders’ Agreement sets out the rights and obligations of the JV Parties in relation to the acquisition and re-development of the Property through JVCO.

Details of the Shareholders’ Agreement are as follows:

Parties: (a) WGL; (b) KHL; and (c) JVCO.

Scope of business:

With effect from the completion of the Sale and Purchase Agreement and unless otherwise agreed, the scope of business of JVCO is solely to invest in Ubagan and the scope of business of Ubagan is solely to acquire the Property in accordance with the terms of the King’s Road Agreement, to undertake its construction and redevelopment and to hold the development for investment purpose.

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LETTER FROM THE BOARD

Total investment commitments:

Pursuant to the Shareholders’ Agreement, if any funding by banks, financial institutions or other third parties is required, each JV Party shall provide or procure the provision of or make available by itself and/or its affiliates such form of financial assistance on a pro rata and several basis in accordance with its equity interest in JVCO and/or Ubagan (as the case may be) upon such terms and conditions as such lender(s) and the JV Parties may agree. If funding from the JV Parties is required, each JV Party shall provide or procure the provision of or make available by itself and/or its affiliates such funding on a pro rata and several basis in accordance with its equity interest in JVCO and/or Ubagan (as the case may be). The amount and manner of funding shall be determined by the board of directors of JVCO from time to time provided that the maximum commitment (whether equity, loan, financial assistance or otherwise) which the JV Parties are required to provide to JVCO and Ubagan shall not exceed HK$3,700,000,000.

In the event that the funding is provided by the JV Parties to JVCO and/or Ubagan by way of shareholders’ loans, such shareholders’ loans may be interest-bearing or interest-free as the JV Parties shall agree, and where such shareholders’ loans are interest-bearing, interest may be charged at such prevailing rate(s) as the JV Parties shall agree, which shall not exceed HIBOR for 3-month interest period plus 2% per annum, unless the JV Parties agree otherwise. Such shareholders’ loans shall be non-revolving and shall only be repaid to the JV Parties on a pro rata basis in accordance with their then respective equity interest in JVCO and/or Ubagan (as the case may be), subject to any restrictions imposed by banks or financial institutions which have extended loans or facilities to JVCO and/or Ubagan.

Board of directors:

The board of directors of JVCO shall initially consist of five directors, of whom two shall be nominated by WGL and three shall be nominated by KHL. If the proportion of voting rights of the JV Parties in JVCO changes, the JV Parties shall have the right to nominate directors to the board of JVCO so as to reflect, materially, their proportional voting rights in JVCO.

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LETTER FROM THE BOARD

Project management:

WGL will procure the Group to provide project development, construction management, project consultancy services, marketing and promotion consultancy services, tenancy management and agency services, bookkeeping and company secretarial services during the period of construction of the project at a fee to be agreed between JVCO and the Group, which should not exceed 2% of the total construction costs. The total construction costs are currently estimated to be not more than HK$1,000,000,000.

Right to lease:

Upon completion of the re-development of the Property, the JV Parties shall procure that JVCO grant to each of the JV Party (or its affiliates) the right to lease upon such terms and conditions as the parties thereto may from time to time agree, subject always to the compliance by the Company with the requirements under the Listing Rules.

4. FINANCIAL EFFECTS OF THE AGREEMENTS

The consideration for the transfer of WGL’s 60% interest in JVCO together with the proportionate Shareholder’s Loans to KHL under the Sale and Purchase Agreement was arrived at after arm’s length negotiations between the JV Parties, taking into account the Independent Valuation and the face value of the existing Shareholder’s Loans owed by JVCO to WGL. The maximum total investment amount under the Shareholders’ Agreement was arrived at after arm’s length negotiations between the JV Parties, taking into account the Acquisition Cost and the estimated re-development costs of the Property.

Based on the maximum total commitment (whether equity, loan, financial assistance or otherwise) of the JV Parties to JVCO and Ubagan under the Shareholders’ Agreement of HK$3,700,000,000, the maximum commitment of WGL to JVCO and Ubagan is expected to be HK$1,480,000,000 which will be sourced by the Company from the sale proceeds arising from the Sale and Purchase Agreement, internal resources and/or external bank borrowings of the Group. The funding requirement for making the maximum commitment is not expected to have any material impact on the Group.

Following completion of the Sale and Purchase Agreement, WGL will continue to be a wholly-owned subsidiary of the Group whereas JVCO will become an associated company of the Group, and WGL and JVCO will be accounted for accordingly.

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LETTER FROM THE BOARD

5. INFORMATION ON JVCO

Following completion of the Sale and Purchase Agreement, JVCO will be owned by WGL and KHL in the proportions of 40% and 60%, respectively. The shareholding structures of JVCO, immediately before and after completion of the Sale and Purchase Agreement, are as set out below:

Before completion:

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LETTER FROM THE BOARD

After completion:

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Note 1: As at the Latest Practicable Date, KHL is interested in 752,972,645 Shares as disclosed under the SFO, representing approximately 61.36% of the existing issued share capital of the Company.

JVCO was established as a limited liability company on 10 August 2005 in the British Virgin Islands. The sole asset of JVCO is its interest in the entire issued share capital of Ubagan. The sole asset of Ubagan comprises its rights under the King’s Road Agreement, pursuant to which Ubagan shall acquire the Property from the vendor which is an independent third party. Completion of the King’s Road Agreement will take place on any date from 1 August 2006 to 31 October 2006 upon the vendor issuing a written notice of at least 14 days to Ubagan.

Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the loss of the JVCO Group for the period from 10 August 2005, which is the date of incorporation of JVCO, to 31 August 2006 amounted to HK$8,678.14, and the shareholders’ deficiency of JVCO Group as at 31 August 2006 amounted to HK$8,600.14.

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LETTER FROM THE BOARD

6. REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE AGREEMENTS

The purpose of the Agreements is to enable the JV Parties to jointly re-develop the Property into a Grade A office development. The new development is expected to enhance shareholders’ value by providing recurrent income for the Company. By re-developing the Property jointly with KHL, the Company will benefit from the extensive business affiliation and network of KHL in securing a strong and quality tenancy profile for the new development.

It is currently expected that, subject to mutually acceptable terms and conditions, part of the premises after the re-development of the Property may be leased by any member or members of the Group and of the KHL group as their corporate offices. The Company considers that the operational efficiency as a result of grouping the members of KHL group (including the Company) in one building is desirable. If the Group enters into leases with JVCO or its subsidiaries, the transactions contemplated under such leases may constitute continuing connected transactions for the Company. Under such circumstances, the Company will ensure compliance with its obligations under the Listing Rules.

The re-development of the Property is expected to commence in the last quarter of 2006 and is currently estimated to be completed in or around June 2009.

7. INFORMATION ABOUT THE COMPANY, WGL AND KHL

The Group is principally engaged in (i) property development, investment and management in Hong Kong, the PRC and the Asia Pacific region; (ii) logistics, freight, warehouse ownership and operations; (iii) infrastructure-related investment in Hong Kong and the PRC; and (iv) hotel ownership and operations in the PRC.

WGL is an investment holding company established in the British Virgin Islands and an indirect wholly-owned subsidiary of the Company.

KHL is an investment holding company. As at the Latest Practicable Date, KHL is interested in 752,972,645 Shares as disclosed under the SFO, representing approximately 61.36% of the existing issued share capital of the Company and is the controlling shareholder of the Company.

8. IMPLICATIONS UNDER THE LISTING RULES

Under the Listing Rules, KHL is regarded as a connected person of the Company. Accordingly, the entering into of each of the Agreements constitutes a connected transaction for the Company under the Listing Rules. The total assets of the Company as at 31 December 2005 (being the date on which the audited financial statements of the Company were last published) as adjusted by the proposed final dividends for the year ended 31 December 2005 were HK$44,622,410,000 and the market capitalisation of the Company (determined on the basis of the average closing price of the Shares for the five trading days immediately preceding

– 17 –

LETTER FROM THE BOARD

the date of the Sale and Purchase Agreement) is HK$35,990,938,710. Although the consideration for the acquisition by KHL from WGL of 60% of the entire equity interest in JVCO together with the same proportion of Shareholder’s Loans calculated in accordance with the terms of the Sale and Purchase Agreement is currently estimated to be less than 2.5% of the total assets and the market capitalisation of the Company, the maximum commitment of WGL under the Shareholders’ Agreement exceeds 2.5% of the total assets and the market capitalisation of the Company. Therefore, the entering into of the Agreements is subject to the approval of the Independent Shareholders.

9. RECOMMENDATIONS

Having taken into account the recommendation and advice from Platinum in relation to the Agreements and the transactions contemplated thereunder (as contained in the letter from Platinum set out on pages 22 to 40 of this circular), the Independent Board Committee is of the view that the terms of the Agreements are fair and reasonable and the entering into of the Agreements and the transactions contemplated thereunder, in accordance with the terms set out in the Agreements, are in the interests of the Company and its Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, the Directors (including the independent non-executive Directors) consider that the terms of the Agreements are fair and reasonable and the entering into of the Agreements and the transactions contemplated thereunder, in accordance with the terms set out in the Agreements, are in the interests of the Company and its Shareholders as a whole.

Your attention is drawn to the letter from the Independent Board Committee set out on page 21 of this circular, which contains its recommendation to the Independent Shareholders, and the letter from Platinum set out on pages 22 to 40 of this circular, which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Agreements and the transactions contemplated thereunder.

Both the Independent Board Committee and Platinum recommend the Independent Shareholders to vote in favour of the KPL Resolution to be proposed at the Special General Meeting.

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LETTER FROM THE BOARD

10. PROCEDURES BY WHICH A POLL MAY BE DEMANDED

Pursuant to the bye-laws of the Company, a resolution put to the vote of a general meeting of the Company shall be decided on a show of hands, but a poll may be demanded (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll):

(i) by the Chairman of the general meeting of the Company; or
(ii) 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 general meeting of the Company; or
(iii) 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 general meeting of the Company; or
(iv) by any Shareholder or Shareholders present in person or by duly authorised corporate representative or by proxy and holding Shares conferring a right to vote at the general 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.

In addition:

(a) if the aggregate proxies held by (i) the Chairman of a particular meeting, and (ii) the Directors account for 5% or more of the total voting rights at that meeting, and
(b) if on a show of hands in respect of any resolution, the Shareholders at the meeting vote in the opposite manner to that instructed in the proxies referred to in (a) above,

the Chairman of the meeting and/or any Director holding the proxies referred to above shall demand a poll. However, if it is apparent from the total proxies held by the persons referred to in (a) above that a vote taken on a poll will not reverse the vote taken on a show of hands, then no poll shall be required.

11. GENERAL

The notice convening the Special General Meeting is set out on pages 52 and 53 of this circular. At the Special General Meeting, the KPL Resolution will be proposed to confirm, ratify and approve the Agreements and the transactions contemplated thereunder.

A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to Abacus Share Registrars Limited, the Company’s branch share registrar and transfer office in Hong Kong, of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Special General Meeting. Completion and return of the accompanying form of proxy will not prevent you from attending and voting at the Special General Meeting should you so wish.

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LETTER FROM THE BOARD

Under the Listing Rules, any connected person of the Company with a material interest in the Agreements and the transactions contemplated thereunder, and any other Shareholders and their respective associates with a material interest in the Agreements and the transactions contemplated thereunder, shall abstain from voting on the KPL Resolution.

The following persons (the “Abstaining Shareholders”) will abstain from voting in respect of the KPL Resolution:

(i) KHL and its associates, which are interested in 769,895,757 Shares (representing approximately 62.74% of all Shares in issue) as at the Latest Practicable Date; and
(ii) Mr. Ang Keng Lam (a common director of the Company and KHL) who is interested in 120,380 Shares (representing approximately 0.01% of all Shares in issue) as at the Latest Practicable Date.

As far as the Directors are aware, having made all reasonable enquiries, as at the Latest Practicable Date:

(i) the Abstaining Shareholders controlled or were entitled to exercise control over the voting rights in respect of their respective Shares;
(ii) (a) there were no voting trusts or other agreements or arrangements or understandings (other than an outright sale) entered into by or binding upon the Abstaining Shareholders, and (b) there were no obligations or entitlements of the Abstaining Shareholders, whereby such persons have or might have temporarily or permanently passed control over the exercise of the voting right in respect of their Shares to third parties, either generally or on a case-by-case basis; and
(iii) there were no discrepancies between the beneficial shareholding interests in the Company of the Abstaining Shareholders and the number of Shares in respect of which they would control or would be entitled to exercise control over the voting right at the Special General Meeting.

The KPL Resolution will be decided by way of a poll.

The Company will publish an announcement on the results of the Special General Meeting on the business day following the Special General Meeting with respect to whether or not the KPL Resolution has been passed by the Independent Shareholders.

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

Yours faithfully, For and on behalf of

Kerry Properties Limited Ang Keng Lam Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [224 x 122] intentionally omitted <==

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

Independent Board Committee: Mr. LAU Ling Fai, Herald (Chairman) Mr. William Winship FLANZ Mr. Christopher Roger MOSS, O.B.E.

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

5 October 2006

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

We refer to the circular of which this letter forms part. Terms defined in the circular shall have the same meanings when used herein unless the context otherwise requires.

The Independent Board Committee has been formed to advise the Independent Shareholders as to whether, in our opinion, the entering into of the Agreements and the transactions contemplated thereunder, in accordance with the terms set out in the Agreements, are in the interests of the Company and its Shareholders as a whole and the terms of which are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Platinum has been appointed as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Agreements.

In our opinion, the terms of the Agreements are fair and reasonable and the entering into of the Agreements and the transactions contemplated thereunder, in accordance with the terms set out in the Agreements, are in the interests of the Company and its Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the KPL Resolution, which will be proposed as an ordinary resolution at the Special General Meeting, in respect of the Agreements and the transactions contemplated thereunder.

Yours faithfully,

The Independent Board Committee of Kerry Properties Limited Mr. LAU Ling Fai, Herald (Chairman) Mr. William Winship FLANZ Mr. Christopher Roger MOSS , O.B.E.

* for identification purpose only

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LETTER FROM PLATINUM

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation into this circular.

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5 October 2006

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the Agreements (the “Transactions”). Details of the Transactions are set out in the letter from the Board as set out in this circular of the Company dated 5 October 2006, of which this letter forms part. Terms used in this letter shall have the same meanings as defined in this circular unless the context requires otherwise.

In our capacity as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion as to whether the Transactions are entered into in the ordinary and usual course of business of the Group, on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole and whether the Independent Shareholders should vote in favour of the KPL Resolution, which will be proposed at the Special General Meeting, in respect of the Agreements and the Transactions.

In formulating our opinion, we have relied on the information and facts supplied to us by the Company. We have reviewed, inter alia : (i) the Sale and Purchase Agreement, (ii) the Shareholders’ Agreement; (iii) the annual reports of the Group for the financial year ended 31 December 2005 (the “2005 Annual Report”) and the interim results announcement of the Group for the six months ended 30 June 2006 dated 15 September 2006 (the “2006 Interim Results Announcement”); and (iv) the Independent Valuation by Savills Valuation and Professional Services Limited (the “Valuer”). We have also discussed with the management of the Company regarding their plans and prospects for the proposed re-development of the Property.

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LETTER FROM PLATINUM

We have assumed that all information, facts, opinions and representations contained in this circular are true, complete and accurate in all material respects and we have relied on the same. The Directors having collectively and individually accepted full responsibility for the accuracy of the information contained in this circular, and have confirmed, having made all reasonable enquiries, which to their best knowledge and belief, that no material facts have been omitted from the information supplied to us. Further, we have no reason to suspect the reasonableness of the opinions expressed by the Company.

We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy or completeness of the information of all facts as set out in this circular and of the information and representations provided to us by the Company. Furthermore, we have no reasons to suspect that the reasonableness of the opinions and representations expressed by the Company and/or the Directors which have been provided to us. In line with normal practice, we have not, however, conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the Group. We consider that we have been supplied and reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the Transactions.

We are independent from, and are not associated with the Company or any other party to the Transactions, or their respective substantial shareholders or connected person(s), as defined under the Listing Rules and, accordingly, are considered eligible to give independent advice on the Transactions. We will receive a fee from the Company for our role as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions. Apart from this normal professional fee payable to us in connection with this appointment, no arrangements exist whereby we will receive any fees or benefits from the Company and another party to the Transactions or their respective substantial shareholders or connected person(s), as defined under the Listing Rules.

As stated in the letter from the Board, the Independent Board Committee, comprising three independent non-executive Directors, namely, Mr. LAU Ling Fai, Herald, Mr. William Winship FLANZ, and Mr. Christopher Roger MOSS, O.B.E., has been established to advise the Independent Shareholders in respect of the Transactions.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in relation to the Transactions and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors:

A. Reasons for and benefits of the Transactions:

1. Background of the Transactions

The Board announced that on 8 September 2006, WGL, an indirect wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with KHL whereby KHL agreed to acquire from WGL 60% of the entire equity interest in JVCO together with the same proportion of Shareholder’s Loans. Following completion of the Sale and Purchase Agreement, JVCO will be owned by WGL and KHL in the proportions of 40% and 60%, respectively.

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LETTER FROM PLATINUM

The acquisition costs of the Property under the King’s Road Agreement amount to HK$718,900,000 (the “Acquisition Cost”). 10% of the Acquisition Cost in the amount of HK$71,890,000 has been paid by Ubagan to the vendor upon signing of the King’s Road Agreement, and the balance of HK$647,010,000 will be payable by Ubagan upon completion of the King’s Road Agreement, which shall be on or before 31 October 2006.

Based on the Independent Valuation, WGL and KHL agreed that the Property should be, for the purpose of the Sale and Purchase Agreement, valued at HK$735,000,000 which is intended to represent the estimated amount for which the Property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Under the Listing Rules, KHL is regarded as a connected person of the Company. Accordingly, the entering into of the Agreements constitutes a connected transaction for the Company under the Listing Rules. Therefore, the entering into of the Agreements is subject to the approval of the Independent Shareholders.

The following persons will abstain from voting in respect of the KPL Resolution:

(i) KHL and its associates, which are interested in 769,895,757 Shares (representing approximately 62.74% of all Shares in issue) as at the Latest Practicable Date; and
(ii) Mr. Ang Keng Lam (a common director of the Company and KHL) who is interested in 120,380 Shares (representing approximately 0.01% of all Shares in issue) as at the Latest Practicable Date.

2. The Agreements

(i) The Sale and Purchase Agreement

Pursuant to the Sale and Purchase Agreement, WGL agreed to transfer 60% of the entire issued share capital of JVCO to KHL together with the proportionate Shareholder’s Loans at a consideration which was arrived at after arm’s length negotiation between the JV Parties, taking into account the Independent Valuation and the face value of the existing Shareholder’s Loans owed by JVCO to WGL.

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LETTER FROM PLATINUM

Completion of the Sale and Purchase Agreement is conditional upon, inter alia ,

(a) KHL being satisfied that the King’s Road Agreement will not be amended and/or rescinded as a result of the transfer of the shareholding interests and shareholder’s loans in JVCO;
(b) the passing of the KPL Resolution;
(c) compliance of all the Company’s obligations under the Listing Rules;
(d) KHL receiving evidence, reasonably satisfactory to it, that all authorisation, permits and approvals required by WGL and JVCO to consummate the transactions contemplated under the Agreements have been obtained; and
(e) the simultaneous signing of the Shareholders’ Agreement.

Further details on the terms and conditions of the Sale and Purchase Agreement are set out in the letter from the Board.

(ii) The Shareholders’ Agreement

Pursuant to the Sale and Purchase Agreement, the JV Parties agreed that they will enter into the Shareholders’ Agreement with JVCO upon completion of the Sale and Purchase Agreement. The Shareholders’ Agreement sets out the rights and obligations of the JV Parties in relation to the acquisition and re-development of the Property through JVCO.

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LETTER FROM PLATINUM

WGL will procure the Group to provide project development, construction management, project consultancy services, marketing and promotion consultancy services, tenancy management and agency services, book-keeping and company secretarial services (the “Project Management Services”) during the period of construction of the project at a fee to be agreed with between JVCO and the Group, which should not exceed 2% of the total construction costs. The total construction costs are currently estimated to be not more than HK$1,000,000,000.

Further details on the terms and conditions of the Shareholders’ Agreement are set out in the letter from the Board.

3. Parties to the Transactions

(i) JVCO

Before completion:

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– 26 –

LETTER FROM PLATINUM

After completion:

==> picture [251 x 262] intentionally omitted <==

Note 1: As at the Latest Practicable Date, KHL is interested in 752,972,645 Shares as disclosed under the SFO, representing approximately 61.36% of the existing issued share capital of the Company.

JVCO was established as a limited liability company on 10 August 2005 in the British Virgin Islands. The sole asset of JVCO is its interest in the entire issued share capital of Ubagan. The sole asset of Ubagan comprises its rights under the King’s Road Agreement, pursuant to which Ubagan shall acquire the Property from the vendor who is an independent third party. Completion of the King’s Road Agreement will take place on any date from 1 August 2006 to 31 October 2006 upon the vendor issuing a written notice of at least 14 days to Ubagan.

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LETTER FROM PLATINUM

(ii) KHL

(iii) The Company and WGL

WGL is an investment holding company established in the British Virgin Islands and an indirect wholly-owned subsidiary of the Company.

As stated in the letter from the Board, the Group is principally engaged in: (i) property development, investment and management in Hong Kong, PRC and the Asia Pacific region; (ii) logistics, freight, warehouse ownership and operations; (iii) infrastructure-related investment in Hong Kong and PRC; and (iv) hotel ownership and operations in PRC.

The particulars of the contribution of the Group’s business segments to the Group’s total turnover are set out in Table 1 below:

Table 1: Turnover of the Group by business segment

Properties Property sales Property rental Sub-total Logistics and Warehouse Others Total	For the year ended 31 December 2005 Turnover % of total turnover of the Group HK$ million % 1,212.44 15.14 893.43 11.16	For the year ended 31 December 2005 Turnover % of total turnover of the Group HK$ million % 1,212.44 15.14 893.43 11.16	For the six months ended 30 June 2006 Turnover % of total turnover of the Group HK$ million % 458.51 12.16 473.64 12.57	For the six months ended 30 June 2006 Turnover % of total turnover of the Group HK$ million % 458.51 12.16 473.64 12.57
	2,105.87 5,541.21 361.74	26.30 69.19 4.51	932.15 2,648.35 188.53	24.73 70.27 5.00
	8,008.82	100.00	3,769.03	100.00

Source: 2005 Annual Report and the 2006 Interim Results Announcement

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LETTER FROM PLATINUM

As illustrated in Table 1 above, the properties business segment of the Group accounted for approximately 26.30% and 24.73% of the turnover of the Group for the financial year ended 31 December 2005 and for the six months ended 30 June 2006 respectively. In particular, among the properties business segment, we note that turnover generated from the property rental division accounted for approximately 11.16% and approximately 12.57% of the total turnover respectively during these two periods under review.

Furthermore, we note that the aggregate book value of the Group’s investment properties amounted to approximately HK$20,510.6 million and HK$20,400.8 million as at 31 December 2005 and as at 30 June 2006 respectively, which already represents approximately 45.3% and 44.5% of the book value of the total assets of the Group of approximately HK$45,230.7 million and HK$45,842.0 million as at 31 December 2005 and as at 30 June 2006 respectively.

Accordingly, we consider that the Group’s property rental division accounts for a significant portion of the business and operations of the Group.

4. Reasons for and benefits of the entering into of the Agreements

As stated in the Letter from the Board, the purpose of the Agreements is to enable the JV Parties to jointly re-develop the Property into a Grade A office development. The new development is expected to enhance shareholders’ value by providing recurrent income for the Company. By re-developing the Property jointly with KHL, the Company will benefit from the extensive business affiliation and network of KHL in securing a strong and quality tenancy profile for the new development.

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LETTER FROM PLATINUM

5. Overview of the Hong Kong Grade A private office market

According to the Census and Statistics Department of Hong Kong, the gross domestic product (the “GDP”) and private consumption expenditure of Hong Kong have been improving from 2004 to the first half of 2006, which are summarized in Table 2 below:

Table 2: GDP and Private Consumption Expenditure of Hong Kong

	2003	2004	2005	2006 1H
	%	%	%	%
GDP growth rate	(3.35)	4.67	7.01	6.48
Private consumption
expenditure growth
rate	(3.82)	6.74	4.81	6.57

Source: Hong Kong Census and Statistics Department

In light of the above, namely the GDP and the private consumption expenditure of Hong Kong growing from 2004 to the first half of 2006 (compared to the first half of 2005), we are of the view that the underlying growth of Hong Kong economy, in terms of the GDP and the private consumption expenditure, has been strong.

Given that the Property is intended to be re-developed into a Grade A office property, we have conducted further research into the Hong Kong Grade A private office market, details of which are illustrated in Table 3 below:

Table 3: Hong Kong Grade A private office completions, take-up and vacancy

GRADE A COMPLETIONS, TAKE-UP AND VACANCY

	2001	2002	2003	2004	2005
Completions
(’000 m2)	61	117	265	235	30
Take-up Note 1
(’000 m2)	53_Note 2_	2	62_Note 2_	250_Note 2_	324
Vacancy (’000 m2)	451	566	752	756	462
% Note 3	8.7	10.8	13.7	13.1	8.1

Source: Rating and Valuation Department of Hong Kong

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LETTER FROM PLATINUM

Notes:

Take-up represents the net increase in the occupied floor space in the year under review and is arrived at by adding the completions in that year to the vacancy figures at the beginning of the year, then subtracting the year’s demolition and the year-end vacancy figures.
The take-up figures had been adjusted to reflect regradings and building conversions.
Vacancy at the end of the year as a percentage of stock.
Projections made by Rating and Valuation Department.

According to the Rating and Valuation Department of Hong Kong, the total area of Grade A offices completed in 2005 was approximately 30,000 sq.m. compared to the overall take-up of 324,000 sq.m. during the year. As such, the overall vacancy for Grade A office space at the year end of 2005 dropped significantly to 462,000 sq.m., representing approximately 8.1% of stock.

In addition, we have conducted research on the rents of Grade A office in the North Point/Quarry Bay District, Hong Kong, where the Property is located. The average monthly rents of Grade A offices in North Point/Quarry Bay District, Hong Kong, are illustrated in Chart 1 below:

Chart 1: Average monthly rents of Grade A office in North Point/ Quarry Bay District, Hong Kong

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Source: Rating and Valuation Department of Hong Kong

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LETTER FROM PLATINUM

The data represented in Chart 1 above are further illustrated in Table 4 below:

Table 4: Annual growth rates of average annual rents of Grade A office in North Point/Quarry Bay District, Hong Kong

	2001	2002	2003	2004	2005	1H2006
						(Note 1)
	%	%	%	%	%	%
Annual growth rate
of average rents
of Grade A office	16.8	(20.6)	(20.6)	(4.3)	23.9	29.7

Note 1: Provisional figures provided by Rating and Valuation Department.

Source: Rating and Valuation Department of Hong Kong

As shown in Table 4 above, we note that the average annual rents of Grade A office in North Point/Quarry Bay District, Hong Kong, has been growing from 2005 to the first half of 2006.

In light of the above, we are of the view that the Hong Kong Grade A office market has in the past few years been strong.

B. Basis of the considerations of the Transactions

As stated in the letter from the Board, the consideration for the transfer of WGL’s 60% interest in JVCO together with the proportionate Shareholder’s Loans to KHL under the Sale and Purchase Agreement (the “Total Consideration”) was arrived at after arm’s length negotiations between the JV Parties, taking into account the Independent Valuation and the face value of the existing Shareholder’s Loans owed by JVCO to WGL.

Based on the Independent Valuation, WGL and KHL agreed that the Property should be valued at HK$735,000,000 for the purpose of the Sale and Purchase Agreement. From our discussion with the management of the Company, we understand that the Total Consideration is based on:

(i) the value of the Property based on the Independent Valuation;
(ii) the face value of the 60% of the Shareholder’s Loan; and
(iii) the book value of the 60% of other assets and liabilities as set out in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement, other than: (a) deferred taxation; (b) the acquisition cost of the property; and (c) the Shareholder’s Loan (the “Other Assets/Liabilities”).

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LETTER FROM PLATINUM

Scenario One

If completion of the Sale and Purchase Agreement takes place before the completion of the King’s Road Agreement:

(a) The Total Consideration shall be calculated according to the following formula:

Total Consideration = (A1 + B1 + C1 – D1) x 60%

Where:

A1 = HK$73,500,000 (being the value of 10% of the Property, as per the Independent Valuation);
B1 = HK$14,490,000 (being the difference between the value of the remaining 90% of the Property as per the Independent Valuation and the value of the remaining 90% of the Property as per the Acquisition Cost);
C1 = the total asset value as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the deposit paid in respect of the acquisition of the Property as set out in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total asset value of JVCO Group excluding the above (i) and (ii) amounted to HK$1,185,497, which principally composed of deferred expenses and cash and bank balances as at 31 August 2006;
D1 = the total liabilities as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the Shareholders’ Loans. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total liabilities of JVCO Group excluding the above (i) and (ii) amounted to HK$40,000, which represents accounts payable as at 31 August 2006.

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LETTER FROM PLATINUM

(b) The Total Consideration shall be payable as follows:
(i) The full value of the Total Consideration, less the value of 60% of the amount referred to in item B1 shall be paid upon completion of the Sale and Purchase Agreement.
(ii) The remaining amount shall be payable upon completion of the King’s Road Agreement.

Based on the formula for the Total Consideration for Scenario One, we note that C1 and D1 are based on the book value as at the completion of the Sale and Purchase Agreement, as such, there would be no gain or loss in respect of C1 and D1. Nevertheless, based on our discussion with the management of the Company, the Group would record a gain from the Transactions as a result of the appreciation of the value of the Property based on the Independent Valuation, details of which are set out in Table 5 below:

Table 5: Scenario One – Gain from the Transactions (if the completion of the Sale and Purchase Agreement takes place before the completion of the King’s Road Agreement)

	HK$ million
Valuation of the Property as at 30 June 2006	735.00	(a)
10% of the value of the Property
per the Independent Valuation	73.50	(A1)
The Acquisition Cost	718.90	(b)
Total appreciation in the value of the Property	16.10	(c) = (a) −(b)
Balance payment of 90% of total appreciation in valuation
of the Property	14.49	(B1) = (c) x 90%
Equity interest to be acquired by KHL	60%
Upon the completion of the Sale and Purchase Agreement,
Gain to KPL on disposal of 60% interest in the JVCO Group
= Total Consideration −(Book value of the Other Assets/Liabilities +	10% of the Acquisition Cost) x 60%

= (A1 + B1 + C1 −D1) x 60% −(C1 −D1 + 10% of the Acquisition Cost) x 60%
= (A1 + B1 −10% of the Acquisition Cost) x 60%
= (HK$73,500,000 + HK$14,490,000 −(HK$718,900,000 x 10%)) x 60%
= HK$9.66 million

Source: the Company and the Independent Valuation

Based on the above calculation, we note that a gain of HK$9.66 million to the Company would be recorded by the Group upon the completion of the Sale and Purchase Agreement as a result of the appreciation in the value of the Property.

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LETTER FROM PLATINUM

Scenario Two

If the completion of the Sale and Purchase Agreement takes place after the completion of the King’s Road Agreement:

(a) The Total Consideration shall be calculated according to the following formula:

Total Consideration = (A2 + C2 – D2) x 60%

Where:

A2 = HK$735,000,000 (being the value of the Property, as per the Independent Valuation);
C2 = the total asset value as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation, and (ii) the Acquisition Cost of the Property as set out in the completion accounts of the JVCO Group as at the completion of the Sale and Purchase Agreement. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total asset value of JVCO Group excluding the above (i) and (ii) amounted to HK$1,185,497, which principally composed of deferred expenses and cash and bank balances as at 31 August 2006;
D2 = the total liabilities as shown in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement excluding, for the purposes of this calculation, the following items: (i) deferred taxation; and (ii) the Shareholder’s Loans. Based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the total liabilities of JVCO Group excluding the above (i) and (ii) amounted to HK$40,000, which represents accounts payable as at 31 August 2006.
(b) The Total Consideration shall be payable in full upon the completion of the Sale and Purchase Agreement.

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LETTER FROM PLATINUM

Based on the formula for the Total Consideration for Scenario Two, as discussed above, C2 and D2 are based on book value as at the completion of the Sale and Purchase Agreement and there will be no gain or loss in respect of C2 and D2. Nevertheless, based on our discussion with the management of the Company, the Group would record a gain from the Transactions as a result of the appreciation of the value of the Property based on the Independent Valuation as set out in Table 6 below:

Table 6: Scenario 2 – Gain from the Transactions (if the completion of the Sale and Purchase Agreement takes place after the completion of the King’s Road Agreement)

HK$ million Valuation of the Property as at 30 June 2006 735.00 (A2) The Acquisition Cost 718.90 Equity interest to be acquired by KHL 60% Upon the completion of the Sale and Purchase Agreement, Gain to KPL on disposal of 60% interest in JVCO

= Total Consideration −(Book value of the Other Assets/Liabilities + the Acquisition Cost) x 60%

= (A2 + C2 −D2) x 60% −(C2 −D2 + the Acquisition Cost) x 60%

= (A2 −the Acquisition Cost) x 60%

= (HK$735,000,000 −HK$718,900,000) x 60%

= HK$9.66 million

Source: the Company and the Independent Valuation

In view of the above, in particular:

(i) the Total Consideration payable by KHL under the Sale and Purchase Agreement was arrived at after arm’s length negotiations between the JV Parties, and taking into account the Independent Valuation and the face value of the existing Shareholder’s Loan owed by JVCO to WGL;
(ii) the Total Consideration is based on the book value of the Other Assets/Liabilities as at the completion of the Sale and Purchase Agreement; and
(iii) the Group would record a gain of HK$9.66 million from the Transactions under both Scenario One and Scenario Two,

we are of the view that the Total Consideration is fair and reasonable, and the Transactions are entered into on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM PLATINUM

C. Other material terms of the Agreements

1. Board of directors of JVCO

As stated in the letter from the Board, pursuant to the Shareholders’ Agreement, the board of directors of JVCO shall initially consist of five directors, of whom two shall be nominated by WGL and three shall be nominated by KHL. If the proportion of voting rights of the JV parties in JVCO changes, the JV parties shall have the right to nominate directors to the board of JVCO so as to reflect, materially, their proportional voting rights in JVCO.

Upon completion of the Sale and Purchase Agreement, the JVCO will be owned as to 40% by WGL and 60% by KHL. In view of the JV parties’ respective equity interest in JVCO, we are of the view that, their respective proportionate nomination rights for board members of JVCO is fair and reasonable.

2. Project management

As stated in the letter from the Board, pursuant to the Shareholders’ Agreement, WGL will procure the Group to provide the Project Management Services during the period of construction of the project at a fee to be agreed between JVCO and the Group, which should not exceed 2% of the total construction costs. The total construction costs are currently estimated to be not more than HK$1,000,000,000. On this basis, the project management fee to be received by KPL would not exceed HK$20 million during the construction period.

As such, the Group will generate an income from the provision of the Project Management Services during the re-development period of the Property, which is expected to be commenced in the last quarter of 2006 and is currently estimated to be completed in or around June 2009.

D. Financial impacts of the Transactions

1. Effect on net asset value

According to the 2006 Interim Results Announcement, the unaudited net asset value (the “NAV”) of the Group as at 30 June 2006 was approximately HK$26,223.3 million.

As discussed above, the Total Consideration is based on:

(i) the value of the Property based on the Independent Valuation;
(ii) the face value of the 60% of the Shareholder’s Loan; and

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LETTER FROM PLATINUM

(iii) the book value of the 60% of other assets and liabilities as set out in the completion accounts of JVCO Group as at the completion of the Sale and Purchase Agreement, other than: (a) deferred taxation; (b) the acquisition cost of the property; and (c) the Shareholder’s Loan.

As stated above, the Group would record a gain of HK$9.66 million from the Transactions upon the completion of the Sale and Purchase Agreement.

In light of the above, we are of the view that the Transactions would have a positive effect on the NAV of the Group.

2. Effect on earnings

According to the 2005 Annual Report, the profit attributable to the Shareholders amounted to approximately HK$3,066.9 million.

As stated in the letter from the Board, the sole asset of the JVCO is its interest in the entire issued share capital of Ubagan. The sole asset of Ubagan comprises its rights under the King’s Road Agreement. In accordance with the letter from the Board, based on the unaudited consolidated management accounts of JVCO Group as at 31 August 2006, the loss of the JVCO Group for the period from 10 August 2005, which is the date of the incorporation of JVCO, to 31 August 2006 amounted to HK$8,678.14, and the shareholders’ deficiency of JVCO Group as at 31 August 2006 amounted to HK$8,600.14, which are immaterial to the Group. In view of the redevelopment of the Property has not commenced, the future effect on earnings from the re-development of the Property cannot be determined at this stage, although the Property would generate a recurrent income for the Group upon completion of the re-development and a fee in providing the Project Management Services during the construction period. Furthermore, the Group would record a gain of HK$9.66 million from the Transactions upon the completion of the Sale and Purchase Agreement.

Based on our discussion with the management of the Company, we understand that during the construction period, KPL will bear 40% of any pre-completion operating costs, which will be offset by the project management fee to be received by KPL. However, the operating costs and the project management fee cannot be determined at this stage.

In light of the above, we are of the view that the Transactions would have a positive effect on the earnings of the Group based on the gain of HK$9.66 million from the Transactions upon the completion of the Sale and Purchase Agreement.

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LETTER FROM PLATINUM

3. Effect on working capital and gearing

According to the 2006 Interim Results Announcement, the working capital of the Group (current assets less current liabilities) as at 30 June 2006 was approximately HK$2,131.7 million.

Upon completion of the Sale and Purchase Agreement, the Group’s cash level would increase as a result of the receipt of the Total Consideration and the NAV of the Group would be enhanced due to the gain of HK$9.66 million as discussed above, which would improve the Group’s working capital and gearing.

In view of above, in particular:

(i) the positive effect on the NAV of the Group as a result of the Transactions;
(ii) (a) future earnings cannot be determined at this stage due to the fact that the re-development of the Property has not commenced; and (b) the fee for the provision of the Project Management Services to be received by the Group during the construction period will be offset by the pre-completion operating costs;
(iii) the Transactions would have a positive effect on the Group’s earnings as a result of the gain of HK$9.66 million from the Transactions; and
(iv) the positive effects on the Group’s working capital and gearing,

we are of the opinion that, the overall financial effects of the Transactions are positive and in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

In summary, we have considered the principal factors and reasons, in particular:

(i) the Hong Kong Grade A office market has been strong;
(ii) by re-developing the Property jointly with KHL, the Company will benefit from the extensive business affiliation and network of KHL in securing a strong and quality tenancy profile for the new development;
(iii) the Total Consideration is fair and reasonable;
(iv) other material terms of the Agreements are fair and reasonable; and
(v) the overall financial effects of the Transactions are positive.

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LETTER FROM PLATINUM

Having considered the above, we are of the view that the Transactions are: (i) on normal commercial terms; and (ii) fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favour of the KPL Resolution at the Special General Meeting. We also recommend the Independent Shareholders to vote in favour of the KPL Resolution in approving the Agreements and the Transactions at the Special General Meeting.

Yours faithfully, For and on behalf of

Platinum Securities Company Limited Liu Chee Ming Ross Cheung Managing Director Director

– 40 –

APPENDIX I

PROPERTY VALUATION

The following is the text of a letter with the summary of valuation and valuation certificates from Savills Valuation and Professional Services Limited, an independent property valuer, in connection with its valuation as at 31 August 2006 for the purpose of incorporation into this circular.

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The Directors Ubagan Limited 14th Floor Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong

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5 October 2006

Dear Sirs,

RE: 863 AND 865 KING’S ROAD, NORTH POINT, HONG KONG

In accordance with your instructions for us to value the above captioned property, we confirm that we have caused land searches at the Land Registry and made relevant enquiries and investigations as we consider necessary for the purpose of providing you with our opinion of the market value of the captioned property as at 31 August 2006.

Our valuation is our opinion of the market value of the property concerned which we would define as intended to mean “the estimated amount for which a Property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, joint ventures, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

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APPENDIX I

PROPERTY VALUATION

Our valuation is prepared in accordance with The HKIS Valuation Standards on Properties (1st Edition 2005) published by the Hong Kong Institute of Surveyors and in compliance with the requirements of Chapter 5 of Listing Rules published by the Stock Exchange of Hong Kong.

We have valued the property in its existing state with reference to sales evidence as available on the market assuming that the vacant possession of the property would be readily available upon completion of a sale.

Since the property has not yet assigned to you and hence we have not been provided with any title document relating to the property by you. However we have caused searches to be made at the Land Registry, the result of which is stated in the valuation certificate attached. We have not, however, inspected the original documents to verify ownership or to ascertain the existence of any amendment which does not appear on the copies obtained by us.

We have relied to a very considerable extent on information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupancy, building plans, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations.

We have inspected the exterior of the property and where possible, we have also inspected the interior of the premises. However, no structural survey has been made but in the course of our inspection, we did not note any serious defect. We are not, however, able to report that the property is free of rot, infestation or any other structural defect. No test was carried out on any of the services.

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

We enclose herewith our valuation certificate.

Yours faithfully,

For and on behalf of

Savills Valuation and Professional Services Limited

Charles Chan

MSc FRICS FHKIS MCIArb RPS (GP) Managing Director

Note: Mr. Charles C K Chan, chartered estate surveyor, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been a qualified valuer since June 1987 and has about 21 years experience in the valuation of properties in Hong Kong.

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PROPERTY VALUATION

APPENDIX I

VALUATION CERTIFICATE

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 August 2006

863 and 865 King’s “863 and 865 King’s Road” is an Road, industrial development with North Point, ancillary parking facilities erected Hong Kong on two adjoining sites with a total registered site area of approximately Inland Lots Nos. 7737 3,165.88 sq m (34,078 sq ft). The and 8687 property was completed in two phases.

We have valued the property on vacant possession basis.

HK$735,000,000

Phase I of the development (Inland Lot No. 7737) is a 12-storey industrial building completed in 1965. The Ground Floor of the building are designated as parking spaces and offices; 1st Floor as storeroom/ workshop and dining room while the upper 2nd to 10th Floors are planned for workshops / storerooms. The 11th Floor of the building is planned as staff quarters.

Phase II of the development (Inland Lot No. 8687) is an 11-storey godown building completed in 1989. The Ground Floor of the building are designated as car parking spaces and the upper 1st to 10th Floors are planned as godown units.

The property comprises whole of the development with a total gross floor area of approximately 29,996.95 sq m (322,887 sq ft).

The property also comprises 24 parking spaces on the Ground Floor of Phase I and 10 parking spaces on the Ground Floor of Phase II of the development.

Inland Lot No. 7737 is held under a Government lease for a term of 75 years commencing from 26 September 1961 renewable for a further term of 75 years. The annual Government rent payable for the lot is HK$2,084.

Inland Lot No. 8687 is held under Conditions of Sale No. 11947 for a term commencing on 29 May 1987 and expiring on 30 June 2047 at an annual Government rent at 3% of the rateable value for the time being of the lot.

Notes:

(1) The registered owner of the property is Hong Kong Tobacco Company Limited as per the land search records.
(2) The property is subject to a Memorandum of Agreement for Sale and Purchase in favour of Ubagan Limited at a consideration of HK$718,900,000 dated 13 March 2006 as per the land search records.
(3) The property lies within an area zoned “Commercial” under Quarry Bay Outline Zoning Plan.

– 43 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

(a) the information contained in this circular is accurate and complete in all material respects and not misleading in any material respect;
(b) there are no other matters the omission of which would make any statement in this circular misleading in any material respect; and
(c) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DIRECTORS’ DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of each of the Directors of the Company in the Shares, underlying Shares and 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,

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GENERAL INFORMATION

APPENDIX II

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 were as follows:

(i) The Company

Name of Director	Number of ordinary shares Number of underlying ordinary shares held under equity derivatives Total Percentage of aggregate interests to the total number of ordinary 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 Mr. William Winship FLANZ Mr. LAU Ling Fai, Herald Mr. Christopher Roger MOSS, O.B.E. Mr. TSE Kai Chi	120,3801 – – – 4,442,4973 4,562,877 0.37 – – – – 1,500,0003 1,500,000 0.12 30,0001 – – – 550,0003 580,000 0.05 10,2751 – – – 1,164,4803 1,174,755 0.10 – – – – – – – – – – – – – – – – – – – – – – – – – – – –

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GENERAL INFORMATION

APPENDIX II

(ii) Associated Corporations

Name of Associated Corporation Name of Director	Number of ordinary shares Number of underlying ordinary shares held Percentage of aggregate interests to the total number of ordinary
	under equity derivatives Total shares in issue (%) Personal interests Family interests Corporate interests Other interests
EDSA Properties Holdings Inc. Mr. HO Shut Kan Kerry Group Limited Mr. ANG Keng Lam Mr. WONG Siu Kong Mr. HO Shut Kan Mr. MA Wing Kai, William Mr. TSE Kai Chi Kerry Siam Seaport Limited Mr. ANG Keng Lam Mr. MA Wing Kai, William	1,5701 – – – – 1,570# 0.00 – 7,050,0004 – 8,000,0002 5,540,7165 20,590,716 1.43@ – – 6,254,3006 – 4,617,2635 10,871,563 0.75@ 1,688,4521 – – – – 1,688,452 0.12@ 1,010,6201 – – – – 1,010,620 0.07@ 400,0001 – – – – 400,000 0.03@ 11 – – – – 1 0.00 11 – – – – 1 0.00

Notes:

This represents interests held by the relevant director(s) as a beneficial owner.
This represents interests held by the relevant director(s) through a discretionary trust of which the relevant director is a contingent beneficiary.
This represents interests in options held by the relevant director(s) as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the option shares granted by the Company.
This represents interests held by the relevant director(s) and his spouse through a discretionary trust of which the relevant director and his spouse are contingent beneficiaries.
This represents interests in options held by the relevant director(s) as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the option shares granted by Kerry Group Limited.
This represents interests held by the relevant director(s) through his controlled corporation(s).
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. 1,227,105,575 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. 1,442,249,357 ordinary shares).

All the interests disclosed in sections (i) and (ii) above represent long positions in the shares of the Company or the Associated Corporations.

– 46 –

APPENDIX II

GENERAL INFORMATION

Saved 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.

3. DIRECTORS’ INTEREST IN THE AGREEMENTS

(a) As at the Latest Practicable Date, no Director was materially interested in any contract or arrangement subsisting which is significant in relation to the business of the Group taken as a whole.
(b) Since the date to which the latest published audited financial statements of the Group were made up, none of the Directors has or has had any direct or indirect interest in any assets acquired or disposed of by or leased to or proposed to be acquired or disposed of by any member of the Group.

4. 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.

5. COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors were considered to have interests in the following Excluded Businesses:

(a) Mr. Ang Keng Lam was a director of and had interests in shares in Allgreen Properties Limited, the businesses of which consisted of property investment and development, project and property management and leasing 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 Properties Limited 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 group of companies, the businesses of which consisted of hotel ownership and operation. The Directors believe that as the size of

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GENERAL INFORMATION

APPENDIX II

that part of these Excluded Businesses in Beijing, where the Group has hotel businesses, is not insignificant when compared with the hotel business of the Group in Beijing, it is likely that these Excluded Businesses may compete with the hotel business of the Group in Beijing. Shangri-La Asia Limited 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;
(d) Mr. Wong Siu Kong was a director of and had interests in shares in Kuok (Singapore) Limited. One of the activities of the Kuok (Singapore) Limited group of companies consisted of ownership and operation of warehouses in Malaysia. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the warehouse businesses of the Group in the South East Asian market, it is likely that these Excluded Businesses may compete with the warehouse businesses of the Group in the South East Asian market; and
(e) the Executive Directors of the Company 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 and similar businesses of the Group to be significant.

The Excluded Businesses are operated and managed by companies (and in the case of Allgreen Properties Limited and Shangri-La Asia Limited, 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 arm’s length from the Excluded Businesses.

6. LITIGATION

Kerry EAS Logistics Limited, a company in which the Group has a 70% interest, is involved in a legal case in which an airline operator, together with five other plaintiffs, including the insurers of the aircraft, are claiming for damages, costs and interest, against six defendants, including Kerry EAS Logistics Limited, on a joint and several basis in relation to the alleged damages amounting to approximately US$65.6 million (approximately HK$511.7 million at the exchange rate of US$1.00 = HK$7.75) caused to an aircraft in 2000 in respect of the transportation of certain chemical substance.

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APPENDIX II

GENERAL INFORMATION

The alleged damages sought by the plaintiffs of approximately US$65.6 million represent the market value of the aircraft at the time when the damage occurred less the resale value of the aircraft after repairs. According to the pleadings and the affidavits of the five other plaintiffs, the airline operator was compensated by these plaintiffs for 15% of the total loss. The remaining 85% of the total loss was compensated by other reinsurers. These reinsurers have not brought any legal action against the six defendants as at the Latest Practicable Date.

The hearing of the above legal case was taken place on 26 September 2006 at the Beijing High Level People’s Court pending delivery of judgement.

Based on the opinion dated 30 September 2006 of J&J Law Firm, the legal advisers to the Group, the allegation and the said amount claimed by the plaintiffs against Kerry EAS Logistics Limited were not substantiated and it is unlikely that Kerry EAS Logistics Limited will be found liable for the claimed damages and losses.

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 for the acquisition of Kerry EAS Logistics Limited, the vendor of Kerry EAS Logistics Limited has undertaken to indemnify the Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities arising in respect of various litigations against Kerry EAS Logistics Limited, including the one referred to above.

As at the Latest Practicable Date, save as disclosed above, neither the Company nor any of its subsidiaries 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 Group.

7. EXPERTS AND CONSENTS

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
Platinum Securities Company	a licensed corporation under the SFO to carry out
Limited	types 1 and 6 regulated activities
Savills Valuation and	professional surveyors and valuers
Professional Services Limited
J&J Law Firm	qualified PRC lawyers

Each of the experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion prepared for the purpose of incorporation in this circular, and the references to its name and opinion in the form and context in which they respectively appear.

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APPENDIX II

GENERAL INFORMATION

Each of the experts has confirmed that as at the Latest Practicable Date, it did not have any beneficial 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 nor did it have any direct or indirect interests in any assets which have since 31 December 2005 (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.

8. NO MATERIAL ADVERSE CHANGE

Since the date to which the latest published audited accounts of the Company have been made up, there has been no material adverse change in the financial or trading position of the Group.

9. MISCELLANEOUS

(a) The Qualified Accountant of the Company is Ms. Chang Yin Wa. Ms. Chang is a Fellow 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 Ms. Li Siu Ching, Liz. Ms. Li is a solicitor qualified in Hong Kong and holds a Master of Laws from the University of Northumbria at Newcastle, England. Ms. Li is also an associate member of both the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries.
(c) The ultimate controlling shareholder of KHL is Kerry Group Limited (a company incorporated in the Cook Islands and whose shareholders comprise Mr. Kuok Hock Nien and his relatives, other members of the Kuok family in Hong Kong and elsewhere, executives and employees (past and present) of the Kuok Group of companies, related trusts of some or all of the aforesaid and/or companies owned or controlled by any of them, and charitable foundations established by the Kuok family). Mr. Kuok Hock Nien, his relatives, related trusts and companies owned or controlled by any of them collectively control 30% or more of Kerry Group Limited. There are no other shareholders of Kerry Group Limited who hold 30% or more of the shares in Kerry Group Limited. The directors of Kerry Group Limited are Messrs. Kuok Hock Nien, Kuok Khoon Chen, Kuok Khoon Ean, Kuok Khoon Ho and Lee Yong Sun.
(d) The Company’s Hong Kong branch share registrar and transfer office is Abacus Share Registrars Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(e) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

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GENERAL INFORMATION

APPENDIX II

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at any weekday (public holidays excepted) at the office of the Company at 13th Floor, Cityplaza 3, 14 Taikoo Wan Road, Taikoo Shing, Hong Kong up to and including Tuesday, 24 October 2006:

(a) the Sale and Purchase Agreement; and
(b) the Shareholders’ Agreement.

– 51 –

NOTICE OF SPECIAL GENERAL MEETING

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

NOTICE IS HEREBY GIVEN that a special general meeting of Kerry Properties Limited (the “Company”) will be held at Island Ballroom, Level 5, Island Shangri-La Hotel, Pacific Place, Supreme Court Road, Central, Hong Kong on Tuesday, 24 October 2006 at 10:00 a.m. for the following purposes:

To consider, and if thought fit, passing with or without modification the following resolution as an ORDINARY RESOLUTION :

“ THAT

(A) the Agreements (copies of which have been produced to this meeting marked “A” and signed by the Chairman hereof for the purpose of identification) and the transactions contemplated thereunder be and are hereby confirmed, ratified and approved; and
(B) the Board of Directors of the Company be and is hereby authorised to take all such actions as it considers necessary or desirable to implement and give effect to the Agreements and the transactions contemplated thereunder.

For the purposes of this resolution, the term “Agreements” shall have the same definition as defined in the circular to the shareholders of the Company dated 5 October 2006.”

By order of the Board Li Siu Ching, Liz Company Secretary

Hong Kong, 5 October 2006

Head Office and Principal Place

of Business in Hong Kong: 13th-14th Floor, Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong

for identification purpose only

– 52 –

NOTICE OF SPECIAL GENERAL MEETING

Notes:

(1) Every member entitled to attend and vote at the above meeting (or at any adjournment thereof) is entitled to appoint up to two individuals as his proxies to attend and vote instead of him. A proxy need not be a member of the Company. The number of proxies appointed by a clearing house (or its nominee) is not subject to the aforesaid limitation.
(2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.
(3) Where there are joint registered holders of any share, any one of such persons may vote at the above meeting (or at any adjournment thereof), either personally or by proxy, in respect of such share as if he was solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the registers of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member, and several trustees in bankruptcy or liquidators of a member in whose name any share stands will for this purpose be deemed joint holders thereof.
(4) In order to be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority must be deposited at the Company’s branch share registrar and transfer office in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for the holding the above meeting (or at any adjournment thereof). Completion and return of the form of proxy will not preclude a member from attending the meeting and voting in person if he so wishes. In the event that a member attends the meeting after having lodged his form of proxy, his form of proxy will be deemed to have been revoked.
(5) The registers of members of the Company will be closed from Friday, 20 October 2006 to Tuesday, 24 October 2006, both days inclusive, during which period no transfer of shares will be effected. In order to be entitled to attend and vote at the meeting, all transfers accompanied by the relevant share certificates must be lodged for registration with the Company’s branch share registrar and transfer office in Hong Kong, Abacus Share Registrars Limited, at the above address not later than 4:00 p.m. on Thursday, 19 October 2006.
(6) Members are advised to read the circular to the shareholders of the Company dated 5 October 2006 which contains information concerning the resolution to be proposed in this notice.
(7) The resolution to be proposed at the meeting shall be decided by way of a poll.

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AI assistant

Kerry Properties Limited — Proxy Solicitation & Information Statement 2006

49390_rns_2006-10-05_1ce3a519-14dd-4527-a07c-73869a76182c.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Executive Directors:

Registered Office:

Head Office and Principal Place

Independent Non-Executive Directors:

Non-Executive Director:

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

1. INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

2. DETAILS OF THE SALE AND PURCHASE AGREEMENT

Consideration:

Scenario One

If completion of the Sale and Purchase Agreement takes place before completion of the King’s Road Agreement:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Scenario Two

If completion of the Sale and Purchase Agreement takes place after completion of the King’s Road Agreement:

The following calculation is set out as an illustration of the above formula applicable in Scenario Two:

LETTER FROM THE BOARD

3. DETAILS OF THE SHAREHOLDERS’ AGREEMENT

LETTER FROM THE BOARD

Total investment commitments:

LETTER FROM THE BOARD

4. FINANCIAL EFFECTS OF THE AGREEMENTS

5. INFORMATION ON JVCO

After completion:

6. REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE AGREEMENTS

7. INFORMATION ABOUT THE COMPANY, WGL AND KHL

8. IMPLICATIONS UNDER THE LISTING RULES

LETTER FROM THE BOARD

9. RECOMMENDATIONS

10. PROCEDURES BY WHICH A POLL MAY BE DEMANDED

11. GENERAL

LETTER FROM THE BOARD

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

To the Independent Shareholders

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

LETTER FROM PLATINUM

CONNECTED TRANSACTIONS RELATING TO THE JOINT RE-DEVELOPMENT OF THE PROPERTY AT NOS. 863-865 KING’S ROAD, HONG KONG

INTRODUCTION

LETTER FROM PLATINUM

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. Reasons for and benefits of the Transactions:

1. Background of the Transactions

2. The Agreements

LETTER FROM PLATINUM

3. Parties to the Transactions

(i) JVCO

Before completion:

(ii) KHL

(iii) The Company and WGL

Table 1: Turnover of the Group by business segment

LETTER FROM PLATINUM

4. Reasons for and benefits of the entering into of the Agreements

5. Overview of the Hong Kong Grade A private office market

Table 3: Hong Kong Grade A private office completions, take-up and vacancy

GRADE A COMPLETIONS, TAKE-UP AND VACANCY

LETTER FROM PLATINUM

Table 4: Annual growth rates of average annual rents of Grade A office in North Point/Quarry Bay District, Hong Kong

B. Basis of the considerations of the Transactions

LETTER FROM PLATINUM

Scenario One

LETTER FROM PLATINUM

Scenario Two

LETTER FROM PLATINUM

Table 6: Scenario 2 – Gain from the Transactions (if the completion of the Sale and Purchase Agreement takes place after the completion of the King’s Road Agreement)

C. Other material terms of the Agreements

1. Board of directors of JVCO

2. Project management

D. Financial impacts of the Transactions

1. Effect on net asset value

Kerry Properties Limited Proxy Solicitation & Information Statement 2006