Kerry Properties Limited — Proxy Solicitation & Information Statement 2008

Mar 31, 2008

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 ESTABLISHMENT OF JOINT VENTURE FOR THE ACQUISITION, HOLDING AND DEVELOPMENT OF LAND IN NANCHANG CITY, JIANGXI PROVINCE, PRC

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

Commerzbank AG Hong Kong Branch

A letter from the Board is set out on pages 5 to 14 of this circular. A letter from the Independent Board Committee is set out on pages 15 and 16 of this circular. A letter from Commerzbank containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 30 of this circular.

A 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, 22 April 2008 at 3:00 p.m. to approve the matters referred to in this circular.

The notice convening the Special General Meeting is set out on pages 37 and 38 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 Tricor Abacus Limited, the Company’s branch share registrar and transfer office in Hong Kong, of 26/F, 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.

* for identification purpose only

1 April 2008

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	Details of the Confirmation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3.	Details of the Shareholders’ Agreement and the Articles of Association. . .	7
4.	Financial Effects of the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
5.	Information on the JVCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
6.	Reasons for and Benefits of the Transactions. . . . . . . . . . . . . . . . . . . . . . .	11
7.	Information about the Company and SA . . . . . . . . . . . . . . . . . . . . . . . . . .	11
8.	Implications under the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
9.	Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
10.	Procedures by which a Poll may be Demanded . . . . . . . . . . . . . . . . . . . . .	12
11.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .		15
Letter from Commerzbank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Appendix	– General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
**Notice of **	Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37

– i –

DEFINITIONS

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

“Affiliate(s)”	in relation to any JV Party, any subsidiary or holding
	company of that JV Party or subsidiary of any such
	holding company, in each case from time to time;
“Agreements”	collectively, the Confirmation Agreement, the
	Shareholders’ Agreement and the Articles of Association;
“Articles of Association”	the articles of association of the JVCO;
“Associated Corporations”	has the meaning ascribed to it in Part XV of the SFO;
“associate(s)”	has the meaning ascribed to it in the Listing Rules;
“Board”	the board of directors of the Company;
“Bye-laws”	the bye-laws of the Company;
“circular”	this circular, including the appendix 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;
“Confirmation Agreement”	the agreement dated 10 March 2008 and entered into by
	KPCL and SACL with Nanchang City Land Resources
	Bureau ( ) confirming the winning of the bid for the Project Site;
“connected person”	has the meaning ascribed to it in the Listing Rules;
“connected transactions”	has the meaning ascribed to it in the Listing Rules;
“Consideration”	the consideration for the acquisition of the Project Site as
	more particularly set out in the section headed “Details of
	the Confirmation Agreement” in the Letter from the
	Board of this circular;
“controlling shareholder”	has the meaning ascribed to it in the Listing Rules;
“Directors”	directors of the Company;

– 1 –

DEFINITIONS

“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”

Hong Kong dollars, the lawful currency of Hong Kong; Hong Kong Special Administrative Region of PRC;

• “Independent Board Committee” the independent committee of the Board consisting of all the independent non-executive Directors;

• “Independent Financial Adviser” or “Commerzbank”

Commerzbank AG, acting through its Hong Kong branch, a licensed bank under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) and an authorised financial institution under the SFO to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities as set out in Schedule 5 to the SFO, and appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions;

“Independent Shareholders” Shareholders who are not required to abstain from voting in respect of the Resolution at the Special General Meeting;

• “JV Parties” collectively, the Company and SA;

• “JVCO”

( ) (Kerry Real Estate (Nanchang) Co., Ltd.), a wholly foreign-owned enterprise to be established by KPCL and SACL in Nanchang City, Jiangxi Province, PRC for the purpose of acquiring, holding and developing the Project Site;

“KHL” Kerry Holdings Limited, a company incorporated in Hong Kong, which as at the Latest Practicable Date is the controlling shareholder of each of KPL and SA;

– 2 –

DEFINITIONS

“KPCL”	Kerry Properties (China) Limited, a company
	incorporated in Hong Kong with limited liability and an
	indirect wholly-owned subsidiary of KPL;
“Latest Practicable Date”	26 March 2008, 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;
“Project Site”	a plot of land no. JDG0806, Lot B-7 located at the
	Central District of Honggutan, Nanchang City, Jiangxi Province, PRC ( JDG0806 B-7 ) with a gross area of approximately
	47,740 sq.m.;
“Resolution”	the resolution to ratify, confirm and approve the
	Agreements and the transactions contemplated
	thereunder by the Independent Shareholders at the
	Special General Meeting;
“RMB”	Renminbi, the lawful currency of PRC;
“SA”	Shangri-La Asia Limited, an exempted company
	incorporated in Bermuda with limited liability, the shares
	of which are primarily listed on the Main Board of the
	Stock Exchange with secondary listing on SGX;
“SA Group”	SA and its subsidiaries;
“SACL”	Shangri-La China Limited, a company incorporated in
	Hong Kong with limited liability and an indirect wholly-
	owned subsidiary of SA;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);

– 3 –

DEFINITIONS

“SGX” Singapore Exchange Securities Trading Limited; “Shang Holdings” Shang Holdings Limited, a company incorporated in Samoa, which is an indirect wholly-owned subsidiary of SA; “Share(s)” ordinary share(s) of HK$1.00 each in the capital of the Company; “Shareholder(s)” holder(s) of Shares; “Shareholders’ Agreement” the shareholders’ agreement to be entered into by KPCL and SACL in relation to the establishment of the 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, 22 April 2008 at 3:00 p.m. at which the Resolution will be proposed, the notice of which is set out on pages 37 and 38 of this circular;

“sq.m.” square metres; “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); “Transactions” the entering into of Agreements by KPCL and SACL and the transactions contemplated thereunder; and “%” per cent.

Note: In this circular, amounts denominated in RMB have been converted into HK$ at the rate of RMB0.91308 = HK$1.00 for illustration purpose only. Such translation should not be construed as a representation that the relevant amounts have been, could have been, or could be, converted at that or any other rate or at all.

– 4 –

LETTER FROM THE BOARD

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

Directors:

Mr. ANG Keng Lam[+] (Chairman)

Mr. WONG Siu Kong[+]

• (President & Chief Executive Officer)

Mr. HO Shut Kan[+]

Registered Office:

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Mr. MA Wing Kai, William[+]

Mr. CHAN Wai Ming, William Mr. QIAN Shaohua

Mr. William Winship FLANZ[#]

Mr. KU Moon Lun[#]

Mr. LAU Ling Fai, Herald[#]

Mr. TSE Kai Chi[@]

Head Office and Principal Place of Business in Hong Kong:

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

1 April 2008

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

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE ESTABLISHMENT OF JOINT VENTURE FOR THE ACQUISITION, HOLDING AND DEVELOPMENT OF LAND IN NANCHANG CITY, JIANGXI PROVINCE, PRC

1. INTRODUCTION

On 11 March 2008, the Board announced that a consortium formed between KPCL and SACL had on 10 March 2008 won a bid at an open bidding to acquire the land use rights of the Project Site in Nanchang City, Jiangxi Province, PRC. Accordingly, on 10 March 2008, KPCL and SACL entered into the Confirmation Agreement with Nanchang City Land Resources Bureau ( ) confirming the winning of the bid for the Project Site.

+ Executive Director

# Independent Non-executive Director

@ Non-executive Director

* for identification purpose only

– 5 –

LETTER FROM THE BOARD

Following the successful bidding of the Project Site, the Company intends to procure KPCL and SA intends to procure SACL to establish the JVCO for the acquisition, holding and development of the Project Site and enter into the Shareholders’ Agreement and the Articles of Association in connection with the establishment of the JVCO and the development of the Project Site.

KHL is the controlling shareholder of each of the Company and SA. SA is an associate of KHL and therefore a connected person of the Company. Accordingly, the entering into of the Transactions constitutes connected transactions for the Company under the Listing Rules. As the maximum contribution of the Group in the JVCO exceeds 2.5% of the total assets and market capitalisation of the Company, the Transactions are subject to the approval of the Independent Shareholders.

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

2. DETAILS OF THE CONFIRMATION AGREEMENT

Details of the Confirmation Agreement are as follows:

Date: 10 March 2008 Vendor: Nanchang City Land Resources Bureau ( ) Purchaser: KPCL and SACL Project Site: The Project Site is situated at the Central District of Honggutan, Nanchang City, Jiangxi Province, PRC ( ). The Project Site has a gross area of approximately 47,740 sq.m. and is designated for uses as hotels, offices, commercial and high-end apartments. The term for the grant of the land use rights of the Project Site is 40 years for commercial use and 70 years for residential use.

– 6 –

LETTER FROM THE BOARD

Consideration:

The Consideration for the acquisition of the Project Site is approximately RMB258 million (approximately HK$283 million) and will be settled in cash. An initial payment of approximately HK$161 million (approximately RMB147 million) has been paid and the balance of the Consideration shall be payable in accordance with the land contract.

3. DETAILS OF THE SHAREHOLDERS’ AGREEMENT AND THE ARTICLES OF ASSOCIATION

Following the successful bidding of the Project Site, the Company will procure KPCL and SA will procure SACL to establish the JVCO for the acquisition, holding and development of the Project Site and enter into the Shareholders’ Agreement and the Articles of Association in connection with the establishment of the JVCO and the development of the Project Site. The principal terms of the Shareholders’ Agreement and the Articles of Association to be entered into between KPCL and SACL will be as follows:

Name of the JVCO: ( ) (Kerry Real Estate (Nanchang) Co., Ltd.) Parties to the JVCO: KPCL and SACL Registered Capital: The amount of the registered capital will be equal to the Consideration or such amount to be agreed between KPCL and SACL, which will be contributed in the proportions of 80% and 20%, respectively. Maximum Total The maximum total investment amount shall be Investment Amount: approximately RMB2,200 million (approximately HK$2,409 million). Scope of Business: Real estate development, operation, sale, leasing, property management and hotel development, operation and management.

– 7 –

LETTER FROM THE BOARD

Funding and Provision of Securities:

The sources and terms of future funding requirements of the JVCO shall be determined by the board of directors of the JVCO from time to time. 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 (including, without limitation, the provision of collateral or security for the benefit of the JVCO and/or the provision of several corporate guarantees and indemnities by the JV Parties) on a pro rata and several basis based on its equity interest in the JVCO as such lender(s) and the JV Parties may agree. If shareholders’ funding 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 the JVCO.

In the event that any respective funding to be provided by KPCL and SACL to the JVCO is in the form of shareholders’ loans, such shareholders’ loans:

• (a) shall be non-revolving (unless the shareholders of the JVCO agree otherwise);

• (b) shall only be repaid subject to, inter alia , any restrictions imposed by banks or financial institutions which have extended loans or facilities to the JVCO;

• (c) shall only be repaid to the shareholders of the JVCO on a pro rata basis in accordance with their then respective equity interests in the JVCO (as the case may be); and

• (d) where such shareholders’ loans are interestbearing, interest may be charged at such prevailing rate(s) as the shareholders of the JVCO shall agree.

– 8 –

LETTER FROM THE BOARD

Conditions Precedent:

The establishment of the JVCO and the performance of the Shareholders’ Agreement and the Articles of Association are conditional upon:

• (a) approval by the Independent Shareholders in respect of the Transactions and compliance by the Company with the Listing Rules; and

• (b) all necessary approvals from the relevant PRC authorities for the establishment of the JVCO having been obtained.

Termination of Joint Venture:

• (a) In the event that the Company is not able to obtain approval from the Independent Shareholders in respect of the Transactions or the special general meeting to be convened by the Company approving the same is not held on or before 30 June 2008 or such later date as the JV Parties shall agree, the Company may either (i) itself (or through KPCL or any of its Affiliates) acquire the entire interest in the JVCO; or (ii) introduce an independent third party to acquire the interest held by SA or its Affiliates in the JVCO, and reimburse to SA any payment made or expenses incurred in connection with, inter alia , the acquisition of the Project Site or the establishment of the JVCO to acquire the Project Site.

• (b) If all necessary approvals, consents, authorisation and licences required under the Shareholders’ Agreement and the Articles of Association are not obtained within 18 months from the signing thereof or such later date as the JV Parties shall agree, any JV Party may terminate the arrangement in relation to the JVCO by notice in writing to the other JV Party. Upon termination, the Company shall itself (or through KPCL or any of its Affiliates) acquire the entire interest in the JVCO and reimburse to SA any payment made or expenses incurred in connection with the acquisition of the Project Site or the establishment of the JVCO.

The Company will comply with the requirements of the Listing Rules if any of (a) or (b) above happens.

– 9 –

LETTER FROM THE BOARD

4. FINANCIAL EFFECTS OF THE TRANSACTIONS

Based on the maximum total investment amount in the JVCO of approximately RMB2,200 million (approximately HK$2,409 million), the maximum contributions of KPCL and SACL to JVCO are expected to be approximately RMB1,760 million (approximately HK$1,927 million) and approximately RMB440 million (approximately HK$482 million), respectively.

The Consideration has been arrived at following a successful bid by a consortium formed between KPCL and SACL at an open bidding after taking into account the location and potential value of the Project Site. It is currently expected that the funding required by the Company for making the maximum contribution to the JVCO will be sourced by the Company from its internal cash reserves and/or external bank borrowings. The Company is not able to ascertain the proportion between internal cash reserves and external bank borrowings at this stage. The funding requirement for making the maximum contribution is not expected to have any material impact on the Group.

Following completion of the Transactions, JVCO will become an indirect 80% owned subsidiary of the Group.

5. INFORMATION ON THE JVCO

Following completion of the Transactions, the JVCO will be owned by the Company and SA in the proportions of 80% and 20%, respectively. The shareholding structure of the JVCO, immediately after completion of the Transactions, will be as set out below:

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– 10 –

LETTER FROM THE BOARD

6. REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Directors believe that the joint acquisition of the Project Site will enable the Group to participate in the development of a piece of prime land in Nanchang City, Jiangxi Province, PRC. The Project Site is capable of being developed into a mixed development comprising hotels, offices, commercial and high-end apartments. With the combined experience, standing and expertise of the JV Parties in commercial, hotel and residential projects, the development of the Project Site is expected to enhance the Shareholders’ value and provide recurrent income for the Group. The establishment of the JVCO for the development of the Project Site allows the Company to spread the project risk and maintain the borrowing at a reasonable level so that the Company can take up other investment opportunities as and when such opportunities arise.

In connection with the development and project management of the Project Site, it is expected that the Group will provide certain on-going project management, construction management and project consultancy services to the JVCO during the period of construction of the Project Site at a fee of not more than 2% of the total construction costs. In this connection, the Company will comply with the relevant requirements under the Listing Rules. In addition, it is currently contemplated by the JV Parties that a hotel will be built on the Project Site. In connection with the operation and management of such hotel, it is expected that the SA Group will provide certain on-going hotel management services during the period of operation of such hotel.

7. INFORMATION ABOUT THE COMPANY AND SA

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

The SA Group is principally engaged in the ownership and operation of hotel and associated properties and the provision of hotel management and related services. SA’s subsidiaries are also the registered proprietors of various trademarks and service marks in various countries, including the brand names “Shangri-La”, “Traders”, “Rasa”, “Summer Palace” and “Shang Palace” and other related devices and logos.

8. IMPLICATIONS UNDER THE LISTING RULES

KHL is the controlling shareholder of each of the Company and SA. SA is an associate of KHL and therefore a connected person of the Company. Accordingly, the entering into of the Agreements constitutes connected transactions for the Company under the Listing Rules. As the maximum contribution by the Group in the JVCO exceeds 2.5% of the total assets and market capitalisation of the Company, the Transactions are subject to the approval of the Independent Shareholders.

– 11 –

LETTER FROM THE BOARD

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

9. RECOMMENDATIONS

Having taken into account the recommendation and advice from Commerzbank in relation to the Agreements and the transactions contemplated thereunder (as contained in the letter from Commerzbank set out on pages 17 to 30 of this circular), the Independent Board Committee is of the view that the terms of the Agreements are on normal commercial terms and are fair and reasonable and the Transactions 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 on normal commercial terms and are fair and reasonable and the Transactions 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 pages 15 and 16 of this circular, which contains its recommendation to the Independent Shareholders, and the letter from Commerzbank set out on pages 17 to 30 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 Commerzbank recommend the Independent Shareholders to vote in favour of the Resolution to be proposed at the Special General Meeting. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the Resolution to be proposed at the Special General Meeting.

10. PROCEDURES BY WHICH A POLL MAY BE DEMANDED

Pursuant to the Bye-laws, 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

– 12 –

LETTER FROM THE BOARD

• (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 37 and 38 of this circular. At the Special General Meeting, the Resolution will be proposed to confirm, ratify and approve the Transactions.

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 Tricor Abacus 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.

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

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

• (i) KHL and Shang Holdings and their respective associates, which are interested in 763,010,542 Shares (representing approximately 53.56% of all Shares in issue) as at the Latest Practicable Date;

• (ii) Mr. Ang Keng Lam (a common director of the Company and KHL) and his associates, who are interested in 45,367 Shares (representing approximately 0.003% of all Shares in issue) as at the Latest Practicable Date; and

– 13 –

LETTER FROM THE BOARD

• (iii) Lochtenny Investments Limited, a company indirectly owned by a discretionary trust whose contingent beneficiaries include Mr. Ang Keng Lam and Mr. Wong Siu Kong (common directors of the Company and KHL), which is interested in 50,000 Shares (representing approximately 0.004% of all the 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) 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 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 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 Resolution has been passed by the Independent Shareholders.

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

Yours faithfully, For and on behalf of

Kerry Properties Limited Ang Keng Lam Chairman

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

Independent Board Committee:

Mr. LAU Ling Fai, Herald (Chairman) Mr. William Winship FLANZ Mr. KU Moon Lun

Registered Office:

Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

1 April 2008

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS RELATING TO THE ESTABLISHMENT OF JOINT VENTURE FOR THE ACQUISITION, HOLDING AND DEVELOPMENT OF LAND IN NANCHANG CITY, JIANGXI PROVINCE, PRC

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 Transactions, in accordance with the terms set out in the Agreements, is 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. Commerzbank has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Transactions.

* for identification purpose only

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the recommendation and advice of Commerzbank, in our opinion, the terms of the Agreements are on normal commercial terms and are fair and reasonable and the entering into of the Transactions, in accordance with the terms set out in the Agreements, is 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 Resolution, which will be proposed as an ordinary resolution at the Special General Meeting, in respect of the Transactions.

Yours faithfully,

The Independent Board Committee of Kerry Properties Limited Mr. LAU Ling Fai, Herald (Chairman) Mr. William Winship FLANZ Mr. KU Moon Lun

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LETTER FROM COMMERZBANK

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

Hong Kong Branch

21st Floor, Hong Kong Club Building 3A Chater Road, Central Hong Kong

1 April 2008

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONNECTED TRANSACTIONS RELATING TO THE ESTABLISHMENT OF JOINT VENTURE FOR THE ACQUISITION, HOLDING AND DEVELOPMENT OF LAND IN NANCHANG CITY, JIANGXI PROVINCE, PRC

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the connected transactions relating to the establishment of JVCO and the entering into of the Shareholders’ Agreement and the Articles of Association by KPCL and SACL and the transactions contemplated thereunder, the definitions of which, amongst other things, are set out in the circular, of which this letter forms part. Terms defined in the circular will have the same meanings when used in this letter unless the context requires otherwise.

On 10 March 2008, a consortium comprising KPCL and SACL won the bid at an open bidding to acquire the land use rights of the Project Site in Nanchang City, Jiangxi Province, PRC. Following the successful bidding of the Project Site, the Company intends to procure KPCL and SA intends to procure SACL to establish JVCO for the acquisition, holding and development of the Project Site and enter into the Shareholders’ Agreement and the Articles of Association in connection with the establishment of JVCO and the development of the Project Site.

KHL is an investment holding company and the controlling shareholder of each of the Company and SA. As at the Latest Practicable Date, KHL was interested in 757,398,587 shares of the Company as disclosed under the SFO, representing approximately 53.16% of the existing issued share capital of the Company. By virtue of KHL being the controlling shareholder of SA,

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LETTER FROM COMMERZBANK

SA is an associate of KHL and is therefore a connected person (as defined in the Listing Rules) of the Company. Accordingly, SACL, being an indirect wholly-owned subsidiary of SA, is a connected person (as defined in the Listing Rules) of the Company and the entering into of the Transactions constitute connected transactions for the Company under the Listing Rules.

As the maximum contribution by the Group to JVCO is greater than 2.5% of the total assets and market capitalization of the Company for the purposes of Rule 14.07 of the Listing Rules, the Transactions are subject to reporting, announcement and Independent Shareholders’ approval requirements as set out in Rule 14A.45-54 of the Listing Rules. KHL, Shang Holdings, Mr. Ang Keng Lam and Lochtenny Investments Limited, together with their respective associates, shall abstain from voting on the Resolution at the Special General Meeting.

The Independent Board Committee, comprising all the independent non-executive Directors, namely, Mr. William Winship Flanz, Mr. Ku Moon Lun and Mr. Lau Ling Fai, Herald, has been established to advise the Independent Shareholders on the Transactions. We, Commerzbank AG Hong Kong Branch, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Transactions as to whether they are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

In formulating our recommendation, we have relied on the information and facts supplied to us by the Company. We have reviewed, among other things, (i) the Confirmation Agreement; (ii) the Shareholders’ Agreement and the Articles of Association in connection with the establishment of JVCO and the development of the Project Site; and (iii) the published financial information of the Company contained in its annual report (the “2006 Annual Report”) for the year ended 31 December 2006 (the “2006 Financial Year”) and financial statements (the “2007 Annual Results”) for the year ended 31 December 2007 (the “2007 Financial Year”). We have also discussed with the management of the Company their plans and prospects for the proposed development of the Project Site. We have assumed that all information, opinion and representations contained or referred to in the circular are true, complete and accurate in all material respects and we have relied on the same. Also, we have relied on the representations made by the Directors that having made all reasonable enquiries and careful decisions, and to the best of their information, knowledge and belief, there is no other fact or representation or the omission of which would make any statement contained in the circular, including this letter, misleading. We have also assumed that all information, statements and representations made or referred to in the circular, which have been provided to us by the Company, and for which it is wholly responsible, are true, complete and accurate in all material respects at the time they were made and continue to be so as at the Latest Practicable Date.

We consider that we have (i) taken reasonable steps as required under Rule 13.80 of the Listing Rules in obtaining all necessary information from the Company and (ii) reviewed sufficient information to enable us to reach an informed view regarding the Transactions and to provide us with a reasonable basis for our recommendation. We have no reason to suspect

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LETTER FROM COMMERZBANK

that any material facts have been omitted or withheld, nor are we aware of any facts or circumstances, which would render the information and the representations made to us untrue, inaccurate or misleading. We have not, however, carried out any independent verification of the information provided by the Company; nor have we conducted any independent in-depth investigation into the business and affairs of the Group and their respective associates.

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 taken into account the following principal factors:

1. Reasons for and benefits of the Transactions

• 1.1 Business and corporate strategy of the Group

The Group is principally engaged in property development, investment and management in Hong Kong, PRC and the Asia Pacific region. Over the years, the Group has been successfully developing large scale and quality integrated property projects comprising of residential, commercial and mixed-used properties in PRC. In addition to the property development, the Group is also engaged in (i) logistics, freight and warehouse ownership and operations; (ii) infrastructure-related investments in Hong Kong and PRC; and (iii) hotel ownership in Hong Kong and hotel ownership and operations in PRC.

Set out below is the contribution of the Group’s business segments as a percentage to the Group’s total turnover based on the 2006 Annual Report and the financial statements for the 2007 Annual Results:

PRC Property Hong Kong Property Logistics and warehouse operations Others Total	2007 Financial Year Turnover % of total turnover of the Group HK$ million % 1,187 9.5 3,503 28.0 4,690 37.5 7,683 61.5 123 1.0 12,496 100.0	2007 Financial Year Turnover % of total turnover of the Group HK$ million % 1,187 9.5 3,503 28.0 4,690 37.5 7,683 61.5 123 1.0 12,496 100.0	2006 Financial Year Turnover % of total turnover of the Group HK$ million % 1,006 9.9 2,827 27.7 3,833 37.6 6,316 62.0 44 0.4 10,193 100.0
	1,187 3,503	9.5 28.0	1,006 2,827
	4,690 7,683 123 12,496	37.5 61.5 1.0 100.0	3,833 6,316 44 10,193

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LETTER FROM COMMERZBANK

According to the above table, contribution from property business of the Group was approximately 37.6% for the 2006 Financial Year and approximately 37.5% for the 2007 Financial Year, of which approximately 9.5% (the 2006 Financial Year: 9.9%) from PRC and approximately 28.0% (the 2006 Financial Year: 27.7%) from Hong Kong. For the 2007 Financial Year, the profit contribution of the Group’s PRC and Hong Kong property business was approximately HK$5,857.3 million, representing approximately 85.1% of the Group’s net profit for the same period. As such, we consider the properties business segment accounted for a significant portion of the business and operations of the Group.

We have also reviewed PRC property portfolio composition, which the Group has equity interests in the 2007 Annual Results, comprising investment properties, completed properties for sale and properties under development.

Property projects under development

Property projects under development
Cities Shanghai (Note 1) Shenzhen Manzhouli Hangzhou Yangzhou Tianjin Beijing Chengdu (Note 2) Qinhuangdao Total Shenyang (Note 3)	Approximate gross floor area (“GFA”) of the projects Square Feet (“sq.ft.”) 6,826,000 1,657,000 927,000 4,917,000 1,161,000 5,705,000 334,000 6,478,000 4,760,000
	32,765,000
	1,859,000

Note 1: Based on the 2007 Annual Results, there are three property projects (the Kerry Everbright City Phase III project, which is currently at the conceptual design stage, is excluded) under development in Shanghai, namely the Kerry Everbright City Phase II project with a GFA of approximately 1,600,000 sq.ft., a mixed-use development project in Jing An District with a GFA of approximately 2,750,000 sq.ft. and a mixed-use development project in Pudong District with a GFA of approximately 2,476,000 sq.ft. (as disclosed in the interim report of the Company for the six months ended 30 June 2007).

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LETTER FROM COMMERZBANK

• Note 2: The property projects to be developed include: (i) two residential sites in the southern part of Chengdu High-Tech Industrial Development Zone with maximum permitted GFA of approximately 3,831,000 sq.ft. (these two sites, together with the residential sites in Qinhuangdao City and Shenyang City, were announced by the Company in December 2007 to be jointly developed with subsidiaries of KHL and Allgreen Properties Limited (“APL”)); and (ii) a residential and commercial property project with subsidiaries of KHL and APL with maximum permitted GFA of approximately 2,647,000 sq.ft., which was announced by the Company in October 2007.

• Note 3: Based on the 2007 Annual Results, the figure represents the developable site area of the mixed-use site in Shenyang City and is therefore excluded from the calculation of the GFA of the property projects under development.

Based on the above table, the total GFA of the property projects under development in PRC which the Group has equity interests, in aggregate, amounted to approximately 32.77 million sq.ft. and we note that approximately 15.91 million sq.ft., representing approximately 48.6% of the total GFA of property projects under development, are designated for large-scale mixed-use development projects comprising hotel, apartment and other residential accommodation, office and retail spaces. The management of the Company expects large-scale and quality mixed-use property development projects in key locations in PRC not only to make significant contribution to the financial performance of the Group in the future and but also to differentiate the Group from its competitors.

Having considered that (i) the Group’s property business segment being a significant portion of the Group’s business and operations; and (ii) the successful track record of the Group on the development of high-end mixed-use properties in key cities in PRC, we are of the view that the entering into of the Transactions is in line with the business and corporate strategy of the Group.

1.2 Business of the SA Group

The SA Group is principally engaged in the ownership and operation of hotels and associated properties and the provision of hotel management and related services. SA’s subsidiaries are also the registered proprietors of various trademarks and service marks in various countries, including the brand names “Shangri-La”, “Traders”, “Rasa”, “Summer Palace” and “Shang Palace” and related devices and logos.

We note from the interim report of the SA Group for the six months ended 30 June 2007 that as at 30 June 2007, the SA Group had equity interests in 39 operating hotels with 20,229 available guest rooms. During 2007, the SA Group opened four hotels and all of them are located in PRC, namely Guangzhou, Beijing, Chengdu and Huhhot (the Inner Mongolia). We also note that 17 hotels with approximately 4,925 rooms under development are expected for business commencement between late 2007 and 2011, 10 of which with approximately 3,684 rooms are located in PRC.

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LETTER FROM COMMERZBANK

1.3 Co-investment with the SA Group

We note that the Project Site will be the sixth co-investment arrangement between the Group and the SA Group in PRC since 1996. The table below illustrates the projects co-invested by the Group and the SA Group (including the Project Site) in PRC:

					% held
			Project’s total	% held	by the
			investment	by the	SA
Project		Year	amount	Group	Group
			HK$ million	%	%
1.	Beijing Kerry Centre,	1998*	2,558.4	71.25	23.75
	Beijing, PRC &
	Beijing Kerry Centre
	Hotel, Beijing, PRC
2.	Shanghai Kerry Centre,	1998*	1,248.0	74.25	24.75
	Shanghai, PRC
3.	Mixed-use development	2004	4,680.0	51.00	49.00
	project in Jingan,
	Shanghai, PRC
4.	Mixed-use development	2006	3,818.9	40.80	23.20
	project in Pudong,
	Shanghai, PRC
5.	Mixed-use development	2006	4,390.8	49.00	20.00
	project in Hedong,
	Tianjin, PRC
6.	Mixed-use development	2008	2,409.0	80.00	20.00
	project in Nanchang		Note
	City, Jiangxi Province,
	PRC

Note: It represents the maximum total investment amount for the project.

* Year in which commercial operations commenced

Source: the Company

In addition to co-investment in property projects, the Group has also engaged the SA Group to provide hotel management and related services for Beijing Kerry Centre Hotel. Furthermore, in November 2007, the Group entered into agreements with relevant members of the SA Group for provision of project management services and project consultancy services by the Group.

Given (i) the proven track records of successful co-investment in mixed-use property projects in PRC between the Group and the SA Group since 1996; (ii) prior co-operations between the Group and the SA Group having involved hotel management,

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LETTER FROM COMMERZBANK

project management services and project consultancy services; and (iii) the SA Group’s experience, expertise and reputation in the hotel industry in PRC, we concur with the Directors’ view that the SA Group has the necessary experience, standing and expertise for the development of the Project Site which is expected to enhance the Shareholders’ value.

1.4 The Project Site

As set out in the section headed “Letter from the Board” of the circular, the Project Site is located at Honggutan, the central area of Nanchang City, Jiangxi Province, PRC ( ) with a gross area of approximately 47,740 sq.m. and is designated for uses as hotels, offices, commercial and high-end apartments. The term of the land use rights of the Project Site is 40 years for commercial use and 70 years for residential use. Based on our discussion with the Company, we understand that the Project Site is a piece of prime land in Nanchang City and the development of which is expected to provide recurrent income for the Group in the future.

Honggutan is a new zone located at the bank of Gan River, northern region of Nanchang. According to Honggutan New District Management Committee ( ) administered by the Nanchang municipal government, Honggutan is ten minutes drive from Changbei Airport and Nanchang Railways Station, respectively. Star of Nanchang, the world’s second largest operating ferris wheel is also situated in Honggutan. It is expected that Honggutan will become a new central district of Nanchang City for both commercial and residential developments.

2. Overview of Nanchang City, Jiangxi Province, PRC

Nanchang City, is the capital city of Jiangxi Province in the southeastern region of PRC. According to the Department of Civil Affairs of Jiangxi Province ( ), Nanchang City has a total area of approximately 7,402 square kilometers with a population of approximately 4.8 million.

The economy of Nanchang City has been growing rapidly in recent years. Based on the statistics published by the Bureau of Statistics of Jiangxi Province ( ), the gross domestic product (“GDP”) of Nanchang City was approximately RMB118.5 billion in 2006, representing an increase of approximately 15.2% as compared with the GDP in 2005, and the

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LETTER FROM COMMERZBANK

GDP per capita of Nanchang City amounted to approximately RMB26,145 in 2006. It is expected that the GDP of Nanchang City would reach RMB135.8 billion and RMB156.7 billion in 2007 and 2008 respectively.

==> picture [191 x 151] intentionally omitted <==

==> picture [185 x 161] intentionally omitted <==

Note: The foreign investment amount was based on contractual value

Source: Bureau of Statistics of Jiangxi Province

We note from the above that the domestic capital investments in Nanchang City grew from approximately RMB13.5 billion in 2003 to RMB31.0 billion in 2006, representing a compound annual growth rate (“CAGR”) of approximately 31.9%. Concurrently, foreign capital investments grew from approximately RMB6.2 billion in 2003 to RMB9.4 billion in 2006, representing a CAGR of approximately 14.9%. The tourism industry in Nanchang has also experienced a continuous growth with revenue generated increased from approximately RMB3.4 billion in 2003 to approximately RMB5.4 billion in 2006, representing a CAGR of approximately 16.7%. In addition, the Seventh Chinese City Game ( ) will be held in Nanchang City in 2011, which is expected to further drive the overall economy and the tourism industry of Nanchang City.

Having considered (i) the location of the Project Site; and (ii) the favorable economic environment and tourism industry of Nanchang City, we concur with the Company’s view that the development of the Project Site, which is designated for uses as hotels, offices, commercial and high-end apartments is beneficial to the Group.

2.1 Austerity measures

We note that PRC government has imposed various measures in May 2007 on foreign invested enterprises engaged in the property development and trading so as to monitor and regulate PRC’s construction market and these include, among other things, (i) the foreign invested enterprise must obtain the relevant land use rights or property rights before establishment of the enterprise; (ii) no profit guarantee or any form of fixed return guarantee is allowed to be offered to any of the joint venture partners (either PRC party or foreign partner) in any form of arrangements for sino-foreign joint venture; (iii) foreign invested enterprises which are ultimately controlled by PRC citizens are strictly prohibited from investing in PRC property markets; (iv) all duly established foreign

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LETTER FROM COMMERZBANK

invested enterprises which are engaged in property development and trading must register with the Ministry of Commerce in due course; and (v) foreign invested enterprises which failed to register with the Ministry of Commerce are not allowed to register with the State Administration of Foreign Exchange. We have discussed with the Directors the impact of these austerity measures, and understand from the Directors that such measures substantially raise the entry barrier for new foreign investments in PRC property market, in particular, the small players in the property market. With a strong capital base and a reputable national brand, the Directors are of the view that the Group will continue to be a key player in PRC real estate market, and expect that blue-chip developers, such as the Company, will be the ultimate beneficiaries in the market consolidation process as a result of the austerity measures.

It is uncertain whether PRC government will introduce more austerity measures for the property sector and the likely impact on the property market as a whole. Nevertheless, we concur with the Directors’ view that, taking into consideration the expected investment amount and development size of JVCO, it would be commercially prudent to diversify its development risks by co-investing with the SA Group.

3. Major terms of the Shareholders’ Agreement and the Articles of Association

• 3.1 Consideration for the Project Site

As mentioned above, the right to acquire the Project Site, which is zoned for a mixture of uses such as hotels, offices, commercial and high-end apartments, was won by a consortium comprising KPCL and SACL through an open bidding. We are advised by the Company that the bidding is a public auction and such process complies with the relevant regulations for property development in PRC.

We note that the Consideration (i.e. RMB258 million or approximately HK$283 million) was arrived at through the open bidding process, the minimum bidding price of which was set out in the announcement by Nanchang City Land Resources Bureau ( ) in February 2008. We understand that such minimum bidding price is made in accordance with the relevant regulations of PRC, including the (Land Management Law), (Urban Real Estate Management Law), (Provisional Regulations on the Sale and Transfer of State-owned Urban Land Use Rights),

(Regulations on the Transfer of State-owned Building Land-use Rights by Auction) and (Standards on the Transfer of State-owned Land Use Rights by Auction) and the overall land bidding process was approved by Nanchang Municipal Government. Given that the Consideration was arrived at through open bidding process, we are of the view that the Consideration represents the fair market value of the Project Site.

3.2 Registered capital of JVCO

The amount of the registered capital of JVCO will be equal to the Consideration or such amount to be agreed between KPCL and SACL and will be contributed in the proportions of 80% and 20%, respectively. Given that the registered capital of JVCO will

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LETTER FROM COMMERZBANK

be agreed by the JV Parties and is subject to the maximum commitment of each of the JV Parties based on their respective proportion of equity interest in JVCO, we consider this arrangement of the registered capital being normal commercial terms and in line with market practice.

• 3.3 Maximum total investment amount

Pursuant to the Shareholders’Agreement, the total investment amount of JVCO shall be approximately RMB2,200 million (approximately HK$2,409 million), which will be contributed by KPCL and SACL in the proportions of 80% and 20%, respectively, in accordance with their respective proportions in the equity interest of JVCO. The maximum commitment of each of the JV Parties is calculated pro-rata to its equity interest in JVCO by reference to the land costs (i.e. the Consideration) and the expected development costs of the Project Site. In view of the apportionment of the total development costs (including the Consideration) of the Project Site based on the equity interest of the JV Parties in JVCO, we consider such arrangement being on normal commercial terms and in line with market practice.

Based on the maximum total commitment for developing the Project Site of approximately RMB2,200 million (approximately HK$2,409 million), the maximum contribution by KPCL to JVCO will be 80% of such total investment amount i.e. approximately RMB1,760 million (approximately HK$1,927 million) (the “Maximum Investment”). Such commitment can be made by the Group in the form of equity, loan or otherwise. As at the Latest Practicable Date, the Group had not contributed any money to JVCO. On 10 March 2008, an initial payment of approximately HK$161 million (approximately RMB147 million) (“Initial Payment”) had been paid to settle part of the Consideration (i.e. the land cost of HK$283 million or approximately RMB258 million) and 80% of the Initial Payment being approximately HK$129 million (approximately RMB118 million), had been contributed by KPCL. The remaining balance of the Consideration, being approximately HK$122 million (approximately RMB111 million) after netting of the Initial Payment, will be made by the JV Parties in accordance with the land contract.

According to the 2007 Annual Results, as at 31 December 2007, the Group had cash and bank balances of approximately HK$4,237 million and pledged bank deposits of approximately HK$64 million. The total undrawn bank loan and overdraft facilities of the Group were approximately HK$9,949 million. If the estimated aggregate investment amount of RMB2,200 million (approximately HK$2,409 million) were to be contributed solely by the Group, the Group’s undrawn bank loan and overdraft facilities or cash and bank balances would decrease by the same amount accordingly. In addition, as at 31 December 2007, the Group had capital commitments not provided for in its accounts of approximately HK$7,063 million.

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Given the total expected investment amount of JVCO, together with the existing capital commitments of the Group, will be very substantial when compared with the current financial conditions as described above, it is necessary and commercially prudent for the Group to spread the project risk of JVCO with other parties. Accordingly, the co-investment with the SA Group will allow the Group to diversify its project development risk while maintaining a reasonable level of working capital and gearing so that the Company can take up other investment opportunities as and when such opportunities arise.

3.4 Funding requirements

Pursuant to the Shareholders’ Agreement, the sources and terms of future funding requirements of JVCO shall be determined by the board of directors of JVCO from time to time. If any funding is provided by a third party, each of the JV Parties is expected to provide (on a pro-rata and several basis in accordance with each JV Party’s equity interest in JVCO) such form of financial assistance including the provision of security or several corporate guarantee. In addition, if any funding is provided by the JV Parties in the form of shareholders’ loans, the JV Parties shall provide such funding on a pro-rata basis in accordance with their respective equity interest in JVCO and interest may be charged at prevailing rates as agreed by the JV Parties.

We noted that the obligations of each of the JV Parties shall only extend to their respective proportion of funding up to a maximum total investment amount of RMB2,200 million (approximately HK$2,409 million) for JVCO and, accordingly, the maximum obligation of KPCL to JVCO will be the Maximum Investment in accordance with its 80% equity interest in JVCO. Based on the above, we consider the terms governing the Group’s obligations to fund the development of JVCO being on normal commercial terms.

Given that (i) all funding contribution and payment schedule will be decided by the board of directors of JVCO; (ii) all loans and/or guarantees and/or financial contribution provided by the JV Parties will be provided on a several basis, pro-rata to their then respective capital contributions of the JV Parties and on the same terms and conditions; (iii) profits will be distributed to the JV Parties in proportion to their respective capital contributions to the registered capital of JVCO; and (iv) the maximum obligation of KPCL to JVCO will be its 80% equity interest in JVCO, we are of the opinion that the entering into of the Transactions is on normal commercial terms and in the interests of the Company and the Independent Shareholders as a whole.

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4. Financial impacts of the Transactions

4.1 Net asset value

As at 31 December 2007, the net asset value of the Group was approximately HK$44,011 million. Pursuant to the Shareholders’ Agreement, the Group will be required to make a total maximum commitment (whether equity, loan or otherwise) to JVCO up to the Maximum Investment, which is presently intended to be funded by internal cash resources and/or external borrowings. Based on the current development plan of the Project Site, the Directors believe that the Group will have the financial capabilities to fund the Maximum Investment. In addition, as stated in the Shareholders’ Agreement, the sources and terms of future funding requirements of JVCO will be determined by the board of directors of JVCO.

Upon establishment of JVCO, the Group will account for JVCO as a subsidiary and the financial results of it will be consolidated into the Company’s consolidated financial statements. Accordingly, the maximum total investment amount of RMB2,200 million (approximately HK$2,409 million) will be accounted for in the consolidated financial statements of the Group.

Based on the above, we are of the opinion that the Transactions will comprise a significant part of the Group’s assets and has the potential to contribute positively to the Group’s net asset value in the future when the Project Site is developed.

4.2 Gearing

According to the 2007 Annual Results, the gearing ratio of the Group amounted to approximately 20.3% (calculated based on net debt divided by the shareholders’ equity). As mentioned in section 4.1 above, the funding required by the Group for the establishment of JVCO will be financed by internal cash resources and/or external bank borrowings. Therefore, if a large part of the investment amount is financed by external bank borrowings, the gearing ratio of the Group may be increased as a result of its investment in JVCO.

4.3 Working capital

Based on the 2007 Annual Results, the current assets and current liabilities of the Group as at 31 December 2007 were approximately HK$13,369 million and HK$5,631 million, respectively. As mentioned in section 4.1 above, it is expected that the funding required by the Group for the establishment of JVCO will be financed by internal cash resources and/or external bank borrowings. As such, the current assets of the Group may be decreased and/or the total liabilities of the Group may be increased, as the case may be.

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In addition, we note that the Group had total cash and cash equivalent (including cash and bank balances and pledged bank deposits (collectively, the “Cash Balance”)) of approximately HK$4,301 million as at 31 December 2007. The Maximum Investment, which is equivalent to approximately HK$1,927 million, accounted for approximately 45% of the Group’s Cash Balance. Based on the available cash resources of the Group and the undrawn bank loan and facilities as at 31 December 2007 and taking into account: (i) our understanding from the discussion with the management of the Company that the Group’s capital commitment for the Project Site is payable in stages during the course of development; (ii) the cash inflows arising from the Group’s existing business operations; and (iii) the committed bank borrowing facilities of the Group, we are of the view that the Group has sufficient funding sources to cover the Maximum Investment as and when required.

Having considered the above as a whole, given that (i) the Transactions are expected to have positive impact on the Group’s net asset value in the future when the Project Site is developed; (ii) the Transactions may provide additional earnings to the Group in the future when the Project Site is developed; and (iii) the Group has sufficient cash resources to satisfy its proportionate funding requirements of JVCO notwithstanding that the potential increase in net debt to equity ratio, decrease in current assets and/or increase in total liabilities upon establishment of JVCO, we are of the view that the financial impacts of the Transactions, on balance, are in the interests of the Company and the Shareholders as a whole.

OUR RECOMMENDATION

Having considered the principal factors referred to above, in particular:

• (i) the Transactions are in line with the business and corporate strategy of the Group, namely, the development of large-scale mixed-use properties in the primary and secondary cities in PRC;

• (ii) the SA Group has the necessary experience, standing and expertise for the development of the Project Site and the participation of the SA Group as joint venture partner to the Company represents the extension of good co-investment relationship between the Group and the SA Group;

• (iii) the total capital investments and the tourism industry of Nanchang City have shown considerable growth in recent years and are expected to register significant growth potential in the foreseeable future;

• (iv) the Consideration is fair and reasonable and on normal commercial terms;

• (v) the other terms of the Transactions (including the registered capital, the Maximum Investment and the funding requirements) are on normal commercial terms and in line with market practice; and

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• (vi) the financial impacts of the Transactions are acceptable,

we are of the view that the terms of the Transactions are on normal commercial terms and fair and reasonable and the entering into of the Transactions is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the Resolution to be proposed at the Special General Meeting.

Yours faithfully,

For and on behalf of Commerzbank AG Hong Kong Branch Kenneth Chan Andrew Yu Head of Corporate Finance – Asia Pacific Corporate Finance – Asia Pacific

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of each of the Directors and the chief executive 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, 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 Approximate % of shareholding(6) (Personal interests) (Other interests) 45,367(1) 50,000(5) 2,536,495(2) 2,631,862 0.18 – 50,000(5) 912,000(2) 962,000 0.07 – 50,000(5) – 50,000 0.00 1,020(1) 50,000(5) 720,000(2) 771,020 0.05 4,000(1) 50,000(5) – 54,000 0.00 – 50,000(5) – 50,000 0.00
	held under equity derivatives Total % of shareholding (Personal interests) (Other interests)
Mr. ANG Keng Lam Mr. WONG Siu Kong Mr. HO Shut Kan Mr. MA Wing Kai, William Mr. CHAN Wai Ming, William Mr. QIAN Shaohua

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GENERAL INFORMATION

(ii) Associated Corporations

Name of Associated Corporation Name of Director	Number of ordinary shares Approximate % of shareholding Personal interests Family interests Corporate interests Other interests Total 1,570(1) – – – 1,570 0.00 – 7,300,000(3) 5,540,716(4) 8,000,000(5) 20,840,716 1.36(7) 4,617,263(1) – 8,504,300(4) – 13,121,563 0.86(7) 1,388,452(1) – – – 1,388,452 0.09(7) 1,010,620(1) – – – 1,010,620 0.07(7) 100,000(1) – – – 100,000 0.01(7) 500,000(1) – – – 500,000 0.03(7) 600,000(1) – – – 600,000 0.04(7) 1(1) – – – 1 0.00 1(1) – − – 1 0.00
	% of shareholding Personal interests Family interests Corporate interests Other interests Total
Shang Properties, 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 CHAN Wai Ming, William Mr. QIAN Shaohua Mr. TSE Kai Chi Kerry Siam Seaport Limited Mr. ANG Keng Lam Mr. MA Wing Kai, William

Notes:

• (1) This represents interests held by the relevant director as beneficial owner.

• (2) This represents interests in options held by the relevant director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the options granted by the Company.

• (3) This represents interests held by the relevant director and his spouse through a discretionary trust of which the relevant director and his spouse are contingent beneficiaries.

• (4) This represents interests held by the relevant director through his controlled corporation(s).

• (5) This represents interests held by the relevant director through a discretionary trust of which the relevant director is a contingent beneficiary.

• (6) 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. 1,424,628,046 ordinary shares).

• (7) 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. 1,528,033,628 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.

Saved as disclosed herein, as at the Latest Practicable Date, none of the Directors and the chief executive 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.

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GENERAL INFORMATION

APPENDIX

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 31 December 2007 (being 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 SGX as at the Latest Practicable Date;

• (b) Messrs. Ang Keng Lam and Wong Siu Kong were directors of subsidiaries of SA and Mr. Ang had interests in shares of SA, the businesses of which consisted of hotel ownership and operation. The Directors believe that as the size of that part of these Excluded Businesses in Beijing, where the Group has hotel businesses, is not insignificant when compared with the hotel business of the Group in Beijing, it is likely that these Excluded Businesses may compete with the hotel business of the Group in Beijing. SA was listed on the Stock Exchange as at the Latest Practicable Date; and

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APPENDIX

GENERAL INFORMATION

• (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 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 PRC, it is likely that these Excluded Businesses may compete with the property and hotel businesses of the Group in PRC.

The Excluded Businesses are operated and managed by companies (and in the case of Allgreen Properties Limited and SA, by publicly listed companies) with independent management and administration. On this basis, the Directors believe that the Group is capable of carrying on its businesses independently of the Excluded Businesses and at arm’s length from the Excluded Businesses.

6. LITIGATION

Kerry EAS Logistics Limited (“ KEAS ”), 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 damages, costs and interest, against six defendants, including KEAS, 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$7.8) caused to an aircraft in 2000 in respect of the transportation of certain chemical substance.

The alleged damages of approximately US$65.6 million sought by the plaintiffs 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.

In the court judgment given by Beijing High Level People’s Court (the “ Court ”) on 5 December 2007, it was stated that KEAS had fulfilled all its obligations in this case and it had no liability to any of the plaintiffs. All claims brought by the airline operator together with the other five plaintiffs against KEAS, and the other three defendants were all dismissed by the Court. Judgment was entered by the Court in favour of all plaintiffs against the other two defendants for the amount of US$65.1 million. All the six plaintiffs and one of the defendants had lodged their appeal.

Based on the opinion of the legal advisers to the Group, neither the allegation nor the said amount claimed by the plaintiffs against KEAS was substantiated and the legal advisers to the Group also advised that it is unlikely that KEAS will be found liable for the claimed damages and losses. Accordingly, no provision has been made in the financial statements.

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APPENDIX

GENERAL INFORMATION

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 KEAS, the vendor of KEAS 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 pieces of litigation against KEAS, 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. EXPERT AND CONSENT

The following is the qualification of the expert who has been named in this circular or has given opinion or advice which are contained in this circular:

Name Qualification Commerzbank a licensed bank under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) and an authorised financial institution under the SFO to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities as set out in Schedule 5 to the SFO, and appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions

Commerzbank 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.

Commerzbank 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 2006 (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 31 December 2007 (being 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.

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GENERAL INFORMATION

APPENDIX

9. MISCELLANEOUS

• (a) The Qualified Accountant of the Company is Mr. Yu Kam Wah. Mr. Yu is a Fellow of the Hong Kong Institute of Certified Public Accountants, a Fellow of the Association of Chartered Certified Accountants, a member of The American Institute of Certified Public Accountants, and holds a Master of Professional Accounting degree from The Hong Kong Polytechnic University. Mr. Yu is also an associate member of both the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries.

• (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 Chartered Secretaries.

• (c) The Company’s Hong Kong branch share registrar and transfer office is Tricor Abacus Limited of 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Confirmation Agreement, the Shareholders’ Agreement and the Articles of Association are available for inspection during normal business hours at any weekday (public holidays excepted) at the office of the Company at 13/F., Cityplaza 3, 14 Taikoo Wan Road, Taikoo Shing, Hong Kong up to and including Tuesday, 22 April 2008.

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NOTICE OF SPECIAL GENERAL MEETING

==> picture [224 x 123] intentionally omitted <==

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, 22 April 2008 at 3:00 p.m. for the following purposes:

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

“ THAT

• (1) 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

• (2) the Board 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 1 April 2008.”

By order of the Board Li Siu Ching, Liz

Company Secretary

Hong Kong, 1 April 2008

* for identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

Head Office and Principal Place

of Business in Hong Kong:

13-14/F, Cityplaza 3

• 14 Taikoo Wan Road

Taikoo Shing

Hong Kong

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) 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 were 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.

• (3) 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, Tricor Abacus Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for 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.

• (4) The registers of members of the Company will be closed from Monday, 21 April 2008 to Tuesday, 22 April 2008, 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, Tricor Abacus Limited, at the above address not later than 4:00 p.m. on Friday, 18 April 2008.

• (5) Shareholders are advised to read the circular to the shareholders of the Company dated 1 April 2008 which contains information concerning the resolution to be proposed in this notice.

• (6) The Resolution to be proposed at the meeting shall be decided by way of a poll.

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