Kowloon Development Company Limited — Proxy Solicitation & Information Statement 2007

Apr 3, 2007

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 you should take, you should consult your stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Kowloon Development Company Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or to the agent through whom the sale was effected for transmission to the purchaser.

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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(Incorporated in Hong Kong with limited liability)

(Stock Code: 34)

GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

AND

NOTICE OF ANNUAL GENERAL MEETING

30 March 2007

CONTENTS

		Page
Letter from	the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Appendix I	– Explanatory Statement on Repurchase Mandate . . . . . . . . . . . . . . . . . . . .	4
**Appendix II **	– Right to Demand a Poll. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8

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LETTER FROM THE BOARD OF DIRECTORS

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 34)

Executive Directors

Or Wai Sheun (Chairman) Ng Chi Man Lai Ka Fai Or Pui Kwan

Registered Office 23rd Floor, Pioneer Centre 750 Nathan Road Kowloon Hong Kong

Non-executive Directors

Keith Alan Holman (Deputy Chairman) Tam Hee Chung Yeung Kwok Kwong

Independent Non-executive Directors

Li Kwok Sing, Aubrey Lok Kung Chin, Hardy Seto Gin Chung, John

30 March 2007

To the Shareholders

Dear Sir or Madam

GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES (“Proposals”) AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information reasonably necessary regarding the Proposals and to seek your approval of the Proposals. Your approval will be sought at the annual general meeting (“Annual General Meeting”) of the Company to be held in Hong Kong at Island Ballroom, Level 5, Island Shangri-La Hong Kong, Two Pacific Place, Supreme Court Road, Central, Hong Kong on Thursday, 26 April 2007 at 11:00 a.m.

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LETTER FROM THE BOARD OF DIRECTORS

GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

At the annual general meeting of the Company held on 8 May 2006, resolutions were passed giving general mandates to the directors of the Company (“Directors”) to allot, issue and deal with additional shares of HK$0.10 each in the share capital of the Company (“Shares”) and to exercise the powers of the Company to repurchase its own Shares in accordance with the Rules (“Listing Rules”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

Based on the issued share capital of the Company on 8 May 2006, the general mandate to allot, issue and deal with additional Shares up to a limit of 20% of the then issued share capital, was 113,353,570 Shares. Since then under the mandate, 87,000,000 Shares were allotted and issued at HK$13.25 per Share to raise gross proceeds of HK$1,152,750,000 for property investment and development business in Mainland China. The general mandates will lapse at the conclusion of the Annual General Meeting.

At the Annual General Meeting, separate ordinary resolutions as referred in items (5), (6) and (7) of the notice convening the Annual General Meeting will be proposed to renew the general mandates given to the Directors:–

• (a) a general mandate to allot, issue and deal with additional Shares up to a limit of 20% of the issued share capital of the Company as at the date of passing of the relevant resolution (the “Share Issue Mandate”);

• (b) a general mandate to repurchase on the Stock Exchange Shares representing up to 10% of the issued share capital of the Company as at the date of passing of the relevant resolution (the “Repurchase Mandate”); and

• (c) if the Repurchase Mandate is granted, a general mandate to add the aggregate number of Shares repurchased by the Company under the Repurchase Mandate to the Share Issue Mandate, subject to a maximum of 10% of the issued share capital of the Company as at the date of passing of the relevant resolution.

Assuming no Shares are issued or repurchased prior to the Annual General Meeting, the issued share capital of the Company remained at 1,150,681,275 Shares (as of the latest practicable date prior to the printing of this circular) and the allotment and issue of a maximum of 230,136,255 Shares will be allowed under the Share Issue Mandate. The Directors consider that the Share Issue Mandate provides flexibility for the allotment and issue of Shares for cash as working capital and/or for business expansion or as consideration for acquisitions as and when they think fit and appropriate.

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LETTER FROM THE BOARD OF DIRECTORS

The authority conferred on the Directors by the general mandates in paragraphs (a) and (b) above would continue in force until whichever is the earliest of the conclusion of the next annual general meeting of the Company; the expiration of the period within which the next annual general meeting of the Company is required by law to be held; and the revocation or variation of the authority given under such resolutions by ordinary resolution of the shareholders in general meeting. The Directors believe that the grant of the general mandates is in the interests of the Company.

An explanatory statement as required under the Listing Rules giving certain information regarding the Repurchase Mandate is set out in Appendix I.

ACTION TO BE TAKEN

Notice of the Annual General Meeting is set out on pages 8 to 12 of this circular.

A form of proxy for the Annual General Meeting is enclosed for your use. Whether or not you intend to attend the Annual General Meeting, you are requested to complete and return the proxy form in accordance with the instructions printed thereon. Proxy forms should be returned as soon as possible and in any event so as to be received not later than 48 hours before the time appointed for holding the Annual General Meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you desire.

RECOMMENDATION

The Directors consider that the Proposals are in the best interests of the Company and its shareholders and recommend that all shareholders vote in favour of the resolutions relating to the Proposals to be proposed at the Annual General Meeting of the Company.

Yours faithfully

By Order of the Board Kowloon Development Company Limited Or Wai Sheun Chairman

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APPENDIX I EXPLANATORY STATEMENT ON REPURCHASE MANDATE

The following is the explanatory statement required to be sent to shareholders under the Listing Rules in connection with the Repurchase Mandate.

• (i) As at 23 March 2007 (the latest practicable date prior to the printing of this circular), the issued share capital of the Company comprised 1,150,681,275 Shares. Subject to the passing of the necessary ordinary resolutions and on the basis that no further Shares are issued or repurchased prior to the Annual General Meeting, exercise in full of the Repurchase Mandate could accordingly result in up to 115,068,127 Shares being repurchased by the Company during the course of the period prior to the next annual general meeting.

• (ii) A repurchase of Shares may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and/or its earnings per share and will only be made when the Directors believe that such purchase will be to the benefit of the Company and its shareholders.

• (iii) The Company may only apply funds legally available for the repurchase of Shares in accordance with its Memorandum and Articles of Association, the Listing Rules and the applicable laws of Hong Kong.

• (iv) There might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited financial statements as at 31 December 2006) in the event that the Repurchase Mandate is exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

• (v) There are no Directors or (to the best of the knowledge of the Directors, having made all reasonable enquiries) any associates (within the meaning of the Listing Rules) of Directors who have a present intention to sell Shares to the Company if the Repurchase Mandate is approved by shareholders.

• (vi) The Directors have undertaken to the Stock Exchange to exercise the power of the Company to make purchases pursuant to the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Hong Kong.

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APPENDIX I EXPLANATORY STATEMENT ON REPURCHASE MANDATE

• (vii) If as a result of a repurchase of securities a shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). As a result, a shareholder or a group of shareholders acting in concert could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 and 32 of the Takeovers Code. As at 23 March 2007 (the latest practicable date prior to the printing of this circular), the Company’s single largest shareholder, Intellinsight Holdings Limited (ultimately wholly-owned by a discretionary family trust of which Mr Or Wai Sheun, Chairman, Ms Ng Chi Man and Mr Or Pui Kwan, Executive Directors, and their family members are beneficiaries), together with parties acting in concert with it held 689,937,124 Shares which represented approximately 59.96% of the issued share capital of the Company. In the event that the Directors exercise in full the power to repurchase Shares pursuant to the Repurchase Mandate, the percentage shareholding of Shares held by Intellinsight Holdings Limited together with parties acting in concert would increase to approximately 66.62% of the total issued Shares of the Company. Save as aforesaid, the Directors are not aware of any other consequences that would arise under the Takeover Code as a result of a repurchase pursuant to the Repurchase Mandate.

• (viii) The Company has not purchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this circular.

• (ix) No connected person (as defined in the Listing Rules) of the Company has notified the Company that he has a present intention to sell Shares to the Company and no such person has undertaken not to sell any such Shares to the Company, if the Repurchase Mandate is approved by shareholders.

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APPENDIX I EXPLANATORY STATEMENT ON REPURCHASE MANDATE

• (x) The highest and lowest prices at which the Shares have traded on the Stock Exchange in each of the previous twelve months were as follows:

	Highest	Lowest
	HK$	HK$
March 2006	13.47	11.40
April 2006	14.13	13.07
May 2006	13.67	12.47
June 2006	13.60	12.50
July 2006	14.93	12.97
August 2006	14.59	13.43
September 2006	14.59	13.48
October 2006	14.39	13.57
November 2006	16.16	14.31
December 2006	15.93	13.76
January 2007	17.38	13.93
February 2007	16.46	14.30
March 2007 (up to the latest practicable date)	15.70	13.80

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RIGHT TO DEMAND A POLL

APPENDIX II

Article 75 of the Articles of Association of the Company sets out the procedure by which shareholders may demand a poll:

At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

• (i) by the Chairman of the meeting; or

• (ii) by at least three members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (iii) by any member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

• (iv) by a member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Unless a poll be so demanded and not withdrawn, a declaration by the Chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution.

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NOTICE OF ANNUAL GENERAL MEETING

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 34)

NOTICE IS HEREBY GIVEN that the annual general meeting (“Meeting”) of Kowloon Development Company Limited (the “Company”) will be held at Island Ballroom, Level 5, Island Shangri-La Hong Kong, Two Pacific Place, Supreme Court Road, Central, Hong Kong on Thursday, 26 April 2007 at 11:00 a.m. for the following purposes:

As Ordinary Business

Ordinary Resolutions

• (1) To receive and consider the Audited Accounts and the Report of the Directors and Independent Auditor’s Report for the year ended 31 December 2006.

• (2) To declare a final dividend.

• (3) To re-elect Directors and authorise the Board of Directors of the Company to fix their remuneration.

• (4) To re-appoint Auditors and to authorise the Board of Directors of the Company to fix their remuneration.

As Special Business

Ordinary Resolutions

To consider and, if thought fit, to pass the following resolutions as ordinary resolutions:

• (5) THAT :

• (A) subject to paragraph (C) of this Resolution, the exercise by the Directors of the Company during the Relevant Period of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are convertible into shares in the Company) which would or might require the exercise of such power be generally and unconditionally approved;

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NOTICE OF ANNUAL GENERAL MEETING

• (B) the approval in paragraph (A) of this Resolution shall authorise the Directors of the Company during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are convertible into shares in the Company) which would or might require the exercise of such power after the end of the Relevant Period;

• (C) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors of the Company pursuant to the approval in paragraph (A) of this Resolution, otherwise than pursuant to (i) a Rights Issue (as defined in paragraph (D) of this Resolution); or (ii) the exercise of options granted under any share option scheme adopted by the Company; or (iii) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the articles of association of the Company; or (iv) an issue of shares in the Company upon the exercise of rights of subscription or conversion under the terms of any of the securities which are convertible into shares of the Company, shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this Resolution and the said approval shall be limited accordingly; and

• (D) for the purpose of this Resolution:

• “Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by law and/or the Company’s articles of association to be held; and

• (iii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders in general meeting; and

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NOTICE OF ANNUAL GENERAL MEETING

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to holders of shares of the Company or any class thereof on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusion or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, Hong Kong or any territory outside Hong Kong).

(6) THAT :

• (A) subject to paragraph (B) of this Resolution, the exercise by the Directors of the Company during the Relevant Period of all the powers of the Company to repurchase its own shares, subject to and in accordance with all applicable laws and requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, be generally and unconditionally approved;

• (B) the aggregate nominal amount of shares which may be repurchased on The Stock Exchange of Hong Kong Limited or any other stock exchange on which the securities of the Company may be listed and which is recognised for this purpose by the Securities and Futures Commission of Hong Kong and The Stock Exchange of Hong Kong Limited under the Hong Kong Code on Share Repurchases pursuant to the approval in paragraph (A) of this Resolution shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this Resolution and the said approval shall be limited accordingly;

• (C) for the purpose of this Resolution:

• “Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by law and/or the Company’s articles of association to be held; and

• (iii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders in general meeting.

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NOTICE OF ANNUAL GENERAL MEETING

(7) THAT :

conditional upon the passing of Resolutions (5) and (6) as set out in this notice convening the Meeting of which this Resolution forms part, the general mandate granted to the Directors of the Company pursuant to Resolution (5) as set out in this notice convening the Meeting of which this Resolution forms part be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of share capital of the Company repurchased by the Company under the authority granted pursuant to Resolution (6) as set out in this notice convening the Meeting of which this Resolution forms part, provided that such amount shall not exceed 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing this Resolution.

By Order of the Board Kowloon Development Company Limited Wai Yuk Hing, Monica Company Secretary

Hong Kong, 30 March 2007

Notes:

1. Any member entitled to attend and vote at the Annual General Meeting to be held on 26 April 2007 (“AGM”) is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.

2. To be valid, the form of proxy, together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof, must be deposited at the office of the Company’s registrars, Computershare Hong Kong Investor Services Limited, at Rooms 1806-1807, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or adjourned meeting thereof.

3. All Directors are subject to retirement by rotation and re-election at annual general meetings of the Company pursuant to the Company’s Articles of Association. At each annual general meeting, approximately one-third of the Directors who have been longest in office since their last election or re-election expiring at the conclusion of the third annual general meeting of the Company after his election or re-election shall retire from office. In addition, any Director appointed by the Board to fill a casual vacancy or as an addition to the Board prior to the annual general meeting, shall retire from office.

In relation to item (3) set out in this Notice regarding re-election of Directors, Mr Or Wai Sheun (Chairman), Mr Li Kwok Sing, Aubrey (Independent Non-executive Director), Mr Lok Kung Chin, Hardy (Independent Nonexecutive Director) and Mr Seto Gin Chung, John (Independent Non-executive Director) will retire at the AGM by rotation. Mr Or Wai Sheun, Mr Li Kwok Sing, Aubrey, Mr Lok Kung Chin, Hardy and Mr Seto Gin Chung, John being eligible, offer themselves for re-election.

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NOTICE OF ANNUAL GENERAL MEETING

The biographical details and interests in the shares of the Company of all the retiring Directors are provided in the “Profile of Directors and Senior Management” section and the “Report of the Directors” section of the 2006 Annual Report of the Company, save for an additional disclosure from Mr Li Kwok Sing, Aubrey regarding his resignation as independent non-executive director from Value Partners China Greenchip Fund Limited with effect from 26 March 2007. None of the retiring Directors have signed any service contract with the Company and being Independent Non-executive Directors, except Mr Or Wai Sheun, their Director’s emoluments are reviewed by the Remuneration Committee and to be determined by the Board with reference to the prevailing market practice, their duties and responsibilities with the Company and their contribution to the Company upon approval by the shareholders at the AGM. In 2006, each Independent Non-executive Director received a Director’s fee of HK$200,000 from the Company. All the retiring Directors have no fixed term of Director’s service but are subject to retirement by rotation pursuant to the Company’s Articles of Association. Moreover, none of the retiring Directors, except Mr Or Wai Sheun, are related to any Directors, senior management, substantial or controlling shareholders of the Company.

Mr Or Wai Sheun is entitled to a Director’s emoluments to be determined by the Board with reference to the prevailing market practice, his duties and responsibilities with the Company and his contribution to the Company upon approval by the shareholders at the AGM. In 2006, Mr Or had elected not to receive any emoluments from the Company. His relationships with the other Directors, senior management, substantial or controlling shareholders of the Company are disclosed under the “Profile of Directors and Senior Management” section and the “Report of the Directors” section of the Company’s 2006 Annual Report.

Save as disclosed herein, there are no other matters relating to the re-election of the above retiring Directors that need to be brought to the attention of the members pursuant to Rule 13.51(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

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