The Group's turnover in 2004 also increased by 21% to HK$5,102 million. During the year, the Group's three core business operations, property investment and development and project and property management, logistics network and infrastructure, contributed 76%, 22% and 2%, respectively, to the Group's attributable profits.

Hong Kong Property Division

2004 was a positive year for the Hong Kong property division, recording net profit attributable to shareholders of HK$855 million which turnarounded from the net loss of HK$213 million in 2003. Operating profit from Hong Kong property rental amounted to HK$346 million (2003 : operating loss of HK$4 million) and operating profit from Hong Kong property sales amounted to HK$312 million (2003 : operation loss of HK$150 million).

2004 saw the completion of the Branksome Crest in Mid-Levels, a prestigious addition to the Group's investment properties portfolio in Hong Kong. Occupancy rates for the Group's leased residential, retail and office investment property portfolios in Hong Kong were 97%, 89% and 93% respectively as at 31 December 2004, as compared with 90%, 91% and 99% respectively as at 31 December 2003.

2004 also marked the successful sales of residential properties at three principal developments: Residence Oasis in Tseung Kwan O and Olympian City I and II in West Kowloon, which were sold as to 92%, 97% and 97% of their total gross floor area ("GFA"), respectively. During the year the Group commenced the development of a 155,000 square feet luxury residential property at 15 Homantin Hill Road, Kowloon, and is in preliminary planning stages in respect of two further residential projects in Tsuen Wan and Ap Lei Chau which would add 715,000 square feet to the Group's development portfolio.

In the Hong Kong office sector, 56% of the office GFA of Enterprise Square 3 had been sold as at the end of 2004, and the Group has commenced the development of the 1.6 million square feet Enterprise Square 5, a prestigious office and retail project adjacent to Enterprise Square 3 in Kowloon Bay.

Mainland China Property Division

In 2004, the Mainland China property business operation recorded a 9% year-on-year increase in revenue to HK$1,351 million, accounting for 26% of the Group's turnover. Net profit attributable to shareholders increased by 88% from HK$300 million in 2003 to HK$563 million in 2004. Operating profit from Mainland China property rental amounted to HK$427 million (2003: operating profit of HK$270 million) and operating profit from Mainland China property sales amounted to HK$196 million (2003: operating profit of HK$89 million). The Mainland China investment property portfolio enjoyed occupancies of 97%, 97% and 72% for the office, retail and residential properties as at 31 December 2004, respectively, as compared with 95%, 97% and 63% as at 31 December 2003, respectively.

PRC property sales proceeds were principally derived from three projects: Central Residences Phase I in Shanghai, Central Residences in Fuzhou and Arcadia Court in Shenzhen. New development projects undertaken during the year include a 3.6 million square feet mixed-use joint venture project in Jingan District, Shanghai. Projects under continuing development include the 642,000 square feet Central Residences Phase II, Kerry Everbright City Phase II in Shanghai (in which the Group has a 64.35% interest measuring a GFA of 1.03 million square feet) and the 807,000 square feet office and commercial project in Shenzhen's Futian District. The Group is in the preliminary project planning stages of a joint venture project in Shibalidian, Chaoyang District, Beijing, which is scheduled for completion in phases up to 2011.

Logistics

2004 has also been a year of rapid growth and important developments for the Group's logistics business. Income from warehouse and logistics increased by 50% to HK$2,502 million, of which revenue from logistics operations increased by 61% to HK$2,106 million. As at 31 December 2004, the division had a portfolio of completed warehouses, logistics centres and port facilities of 9.78 million square feet, of which 6.74 million square feet is located in Hong Kong and which achieved an average occupancy of over 95% in 2004.

In September 2004, Kerry Logistics announced the acquisition of a 70% interest in EAS International Transportation Limited ("EAS"), one of the largest logistics, warehousing, parcel express and freight forwarding operator in Mainland China. The acquisition was completed in January 2005. EAS is renamed Kerry EAS Logistics Limited and serves customers in over 1,100 cities from 120 offices covering all provinces of Mainland China.

Other acquisitions completed during the year include a 55% interest in Siam Seaport Terminal and Warehouses Company Limited ("SSP") in Thailand which provides loading, unloading and other ancillary services to bulk carriers, as well as warehousing and transportation services in Thailand. This acquisition builds on the Group's coverage of the South East Asian market and capitalises on the growth in international and intra-Asia trade. SSP was subsequently renamed as Kerry Siam Seaport Limited.

In Mainland China, the Group has completed the construction of a 152,700 square feet bonded logistics centre in Shanghai's Waigaoqiao Free Trade Zone. The Group also acquired a 129,200 square feet bonded warehouse facility in Beijing through the acquisition of a subsidiary by Kerry BHL Logistics Limited, an associated company in which the Group has a 50% interest. Current developments are under way for a 173,300 square feet logistics centre in Tianjin's Free Trade Zone, which is scheduled for completion in mid 2005. Development of a 269,000 square feet logistics centre in Shenzhen's Futian Free Trade Zone, in which the Group has 51% interest, has commenced and is scheduled for completion in the first quarter of 2006.

During the year, the Group transferred its investments in Asia Airfreight Terminal (AAT) and Chiwan Container Terminal (CCT) from the Infrastructure division to the Logistics Division, to enable the division to take a more active role in their management and to leverage off the synergies and business opportunities arising from enhanced integration and cooperation between the two operations.

Infrastructure

On the infrastructure side, the Group entered into two new investments in Mainland China during 2004. The first investment is in a partnership with China Guodian Corporation, a major state-owned power plant operator in Mainland China, for the development, construction and operation of a coal-fired electricity power plant in Yugan County, Jiangxi province. The second investment is a partnership engaged in the ownership, operation and maintenance of a joint-venture water treatment facility in Hohhot, Inner Mongolia. The Group will continue to identify and evaluate other utilities and environmental-related project opportunities in Mainland China, which are capable of generating attractive financial returns and stable recurrent income to the Group.

Prospects

The Group will continue to develop and expand its core business operations of property investment and development and logistics network services, and will seek to develop its infrastructure business by investing in high quality projects which are capable of generating stable and recurrent income contribution. The Group will also continue to focus on maintaining a well-balanced portfolio of quality assets and earnings whilst having regard to careful risk management, project evaluation and risk control measures.

About Kerry Properties Limited
Kerry Properties Limited is a company listed on the Main Board of The Stock Exchange of Hong Kong Limited in August 1996. The principle business activities of Kerry Properties Limited and its subsidiaries are (i) property development and investment in Hong Kong, Mainland China and the Asia Pacific region; (ii) the provision of independent third party logistics and freight services and warehouse operations; and (iii) investments in infrastructure projects in Hong Kong and Mainland China.

Issued by :
Kerry Properties Limited
Michelle Lam / Ivy Cheung
tel: 2967 2383 / 2967 2382 / fax: 2967 8376