CITIC Limited — Annual Report 2006

Apr 16, 2007

• 1 Financial Highlights

• 2 Major Businesses

• 3 Chairman’s Letter to Shareholders

• 6 Business Review

• 28 Financial Review

• 40 10 Year Statistics

• 41 Corporate Governance

• 47 Directors’ Report

• Summary Financial Statements

• 56 Consolidated Profit and Loss Account

• 57 Consolidated Balance Sheet

• Notes to the Summary Financial Statements 58 1 General Information 58 2 Significant Accounting Policies 59 3 Directors’ Emoluments 60 4 Fixed Assets 62 5 Reserves

• 64 Independent Auditor’s Statement on the

• Summary Financial Report

• 65 Definition of Terms

• 66 Corporate Information

Financial Highlights

	in HK$ million 2006 2005
	Profit Attributable to Shareholders 8,272 3,989
	Major Businesses’ Contribution Special Steel 1,333 808
	Property 2,035 1,106
	Aviation 3,288 1,058
	Power Generation 268 368
	Civil Infrastructure 469 413
	Marketing & Distribution 275 232
	Communications 367 (31 )
	Fair Value Change of Investment Properties 1,077 755
	Cash Contributed from all Businesses 15,468 4,488
	Capital Employed 64,803 60,321
	Shareholders’ Funds 46,510 39,103
	Net Debt 14,614 18,639
	Cash & Available Committed Loan Facilities 18,371 11,065
	in HK$
	Earnings per Share 3.77 1.82
	Dividends per Share Regular 1.10 1.10
	Special 0.60 –
	Staff 23,822 19,174

Please refer to Definition of Terms on page 65

CITIC Pacific Summary Financial Report 2006 1

Major Businesses

CITIC Pacific has unrivalled experience and expertise in operating businesses in China both on the mainland and in Hong Kong. With the rapid development of the Chinese economy, CITIC Pacific is increasingly focusing its business activities on the mainland of China. Our major businesses are special steel manufacturing and iron ore mining which supplies the raw material needed in the making of special steel, and property development in mainland China.

Special Steel and Iron Ore Mining

Special Steel CITIC Pacific Special Steel, which operates through three steel groups in mainland China with total production capacity of over seven million tonnes annually, is a leader in the manufacturing of special steel used in bearings and gears among others. Its customer coverage reaches Eastern, Central and Northern China.

Jiangyin Xingcheng Special Steel is a leader in China specializing in the making of high-grade special steel used in bearings, gears, springs and high-pressurized piping steel. Its new line, in cooperation with Sumitomo Metals of Japan, has the most advanced technology in the industry.

Xin Yegang is located in Central China, it has a long history dating back to 1908. Its seamless steel tubes, one of its major products, continues to receive strong demand and remains very profitable.

Shijiazhuang Steel Mill became a member of cp Special Steel in 2006. Built in 1957, it is now a manufacturer of special steel with 2.2 million tonnes in production capacity. Its products are mainly supplied to the auto component industry.

Iron Ore Mining CITIC Pacific owns the mining rights to one billion tonnes of magnetite iron ore with options to another five billion tonnes in the Pilbara region of Western Australia. The one billion tonnes of ore is capable of producing 12 million tonnes of product annually to supply mainland China and CITIC Pacific’s steel groups in particular.

Property

CITIC Pacific’s property team has extensive experience in building and managing medium and large scale residential and commercial projects including Shanghai’s CITIC Square and The New Westgate Garden, and Hong Kong’s CITIC Tower.

In the past few years, the Group has been active in investing in properties in mainland China. Currently CITIC Pacific has a large quality land bank in Shanghai, major secondary cities in the Yangtze Delta area and Hainan Island, totaling over three million square metres of gross floor area for development.

2 CITIC Pacifc Summary Financial Report 2006

Chairman’s Letter to Shareholders

Chairman’s Letter to Shareholders

I am pleased to report that CITIC Pacific achieved excellent results in 2006. Net profit for the year was a historic high of HK$8,272 million, a 107% increase compared with 2005. Earnings per share were HK$3.77. In light of this good performance, our sufficient financial resources, and at the same time considering the need to further expand our businesses in the future, the board has recommended paying a special dividend of HK$0.30 per share in addition to a final dividend of HK$0.80 per share. Including the regular (HK$0.30) and special (HK$0.30) dividend per share already paid at the interim, total dividend per share for the year is HK$1.70.

All of CITIC Pacific’s businesses performed well in 2006, in particular the three core businesses, which made outstanding profit contribution. The Special Steel business recorded an impressive growth in profit of 65% compared to last year. Benefiting from the sale of Festival Walk, profit contribution from our property business rose 84% compared with last year. Also, in accordance with accounting standards, fair value gains on revaluation of the Group’s investment properties were HK$1.08 billion. Infrastructure businesses such as Aviation, Power Generation, Tunnels, and Environmental businesses all recorded growth in recurrent earnings. These businesses provide stable and recurring cash flows to the Group. The restructuring of the aviation industry in 2006 provided CITIC Pacific’s shareholders a satisfactory return on investment. Cash realized from this transaction further strengthened the Group’s financial position for future new investments.

Special Steel

CITIC Pacific’s special steel business had excellent performance in 2006. Through both organic growth and acquisitions, a plan implemented a few years ago, the Group has expanded its operations rapidly. In just a few years, CITIC Pacific’s production capacity has reached over seven million tonnes, commanding a leading position in both product quantity and quality producing a variety of products such as bearing steel, gear steel, spring steel, and other alloy steel. Today, our special steel

business has become a highlight in the Group’s profit growth and is expected to continue its rapid development in the foreseeable future.

Jiangyin Xingcheng’s new production line, in partnership with Sumitomo Metals of Japan, is near completion, with the steel smelting section of the production line already completed and profitable. The steel rolling section is scheduled to complete and become fully operational in 2007. This production line, equipped with the most advanced technologies of similar types both domestically and internationally, is the foundation for the production of high quality and highly energy efficient special steel products in the future.

Through effective management and integration, the businesses of Hubei Xin Yegang (95%) and Daye Special Steel (56.6%), which the Group acquired in 2004 and 2005, improved greatly with significant increases in profitability. A newly built 900,000 tonne coking plant will be completed and become fully operational in 2007. This plant will not only satisfy demand at Xin Yegang and Daye Special Steel, but it can also supply coke to other sister plants within the Group. This will reduce costs and increase the Group’s investment return.

Shijiazhuang Steel Mill officially became a member of the CITIC Pacific group in July 2006. Today, CITIC Pacific has three special steel manufacturing bases that are ideally located in Eastern (Jiangyin Xingcheng), Central (Xin Yegang/Daye Special Steel) and Northern (Shijiazhaung Steel) China. Our plants are positioned to take advantage of the high demand in these three industrial centres. The plants can also utilize the well developed transportation networks nearby to supply products to all regions in China. At the same time, these strategic locations are also beneficial in facilitating product realignment and centralizing purchasing, transportation and sales functions among the plants.

In 2006, the Group’s steel plants sold a total of 5.9 million tonnes of special steel, a 60% increase from 2005. Even though prices of raw materials stayed at

CITIC Pacific Summary Financial Report 2006 3

Chairman’s Letter to Shareholders

high levels, profitability of the Group’s steel business remained at a satisfactory level. CITIC Pacific is optimistic on the future development of this business. The above mentioned three locations will continue to support each other in the coming year to fully realize synergies, and to further strengthen our leading position in China’s special steel industry.

Iron Ore Mining

As previously reported, in March 2006, CITIC Pacific acquired mining rights to one billion tonnes of magnetite ore, and rights and options to a further five billion tonnes in the Western Pilbara region of Western Australia. Stage One, which includes the right to the first billion tonnes of reserves, received approval from the Australian government in June 2006. It will be capable of producing 12 million tonnes of concentrate annually once operational. Pre-construction design work is underway. We have signed a general construction contract with China Metallurgical Group Corporation (‘mcc’). Work on the development of mining, beneficiation plant, pellet plant, desalination plant, power station and material handling system has begun. First shipment of product is expected to be in 2009.

Management and technical teams with Chinese, Australian and international experience have been assembled and will be strengthened step-by-step. The financing framework for the project has been signed, and the bank has undertaken to support the project by providing long-term project finance to shareholders and the project companies. Once completed, this mining project will provide a long-term stable supply of iron ore for the Group’s steel plants.

Property

Property development in mainland China is an important focus in the Group’s businesses. We believe that with the rapid development of the Chinese economy and rising living standards, market demand for high quality commercial and residential properties will continue to be strong. From a long-term perspective, fundamentals of the Chinese property market remain positive. CITIC Pacific is confident in the long-term prospects of the property development business in China. We will continue to actively invest and increase

our land bank in order to establish a solid foundation for the Group’s property development in the long-term.

CITIC Pacific’s property development in mainland China is mainly in the Yangtze River Delta area centered around Shanghai, and large scale development projects in the coastal city of Wanning in Hainan Province.

The Shanghai Lu Jiazui Financial District Project will be one of the Group’s most important development projects in the coming years. The design for Phase I has been finalized comprising of a top grade hotel and two landmark office towers. Government review of Phase I building scheme is in progress, and foundation work will then begin. Meanwhile, preparation work is underway.

Construction of ‘CITIC Square’ in Ningbo is progressing well and foundation work has been completed. Work has also begun on the Group’s projects at Qingpu in Shanghai, Yangzhou, Wuxi and Jiangyin in Jiangsu Province. These development projects will be completed in the coming few years to provide the Group with satisfactory investment returns.

CITIC Pacific’s large scale ‘Shenzhou Peninsula’ project, in the city of Wanning in Hainan is progressing well. A master plan for the development of about 2.5 million square metres in gross floor area received government approval. Infrastructure development related to the project has commenced. Design and commercial negotiation for Phase I, which includes four grade A hotels and auxiliary facilities, are in progress. Site work is expected to commence shortly as well as work on a world class golf course and other related facilities.

Our investment properties in Shanghai, CITIC Square and Royal Pavilion, remain well let and are providing the Group with satisfactory returns. The Group now wholly owns CITIC Square, a well-known building in Shanghai, after acquiring interests from two minority shareholders.

In 2006, the Hong Kong property market remained active with rentals rising steadily, in particular those of premium properties. As current market rates need to be paid by new tenants and renewals, returns on the Group’s overall investment properties will continue to improve. Phase 13 (Chianti) of the Discovery Bay development was completed at the end of 2006 and to date, over half

4 CITIC Pacific Summary Financial Report 2006

Chairman’s Letter to Shareholders

of the units have been sold and delivered. The remaining units will be sold gradually in 2007. The project company has submitted an application to the Government on the development of the next phase. CITIC Pacific’s properties in Kowloon Bay and Yuen Long all have re-development potential and we are exploring opportunities and discussing with the Government regarding the relevant approvals. We believe the re-development of these properties will increase their value and in turn bring better returns for the Group.

Aviation

The restructuring of the aviation industry in the second half of 2006 resulted in a HK$2 billion profit for CITIC Pacific, a satisfactory return on investment for our shareholders. At the same time, the Group realized over HK$5 billion of cash from the transaction, further strengthening our financial position. After the restructuring, CITIC Pacific remains a major shareholder of Cathay Pacific, holding a 17.5% interest.

The business of hactl performed well with an increase in annual profit.

Power Generation

Ligang Phase III (2 x 600MW) passed testing and formally commenced commercial operation in the fourth quarter of 2006. Construction of Ligang Phase IV (2 x 600MW) is progressing well with commercial operation expected in 2007. As the flagship of CITIC Pacific’s power generation business, the Ligang Power Station will have installed capacity of 3,800MW, making it one of the largest coal fired power stations in China.

Zhengzhou Phase III (2 x 200MW) also passed testing and entered commercial operation at the end of 2006. We anticipate that profit contribution from our power business will increase greatly in 2007. CITIC Pacific will continue to seek new investment opportunities to further expand the power business.

Marketing and Distribution

The businesses of Dah Chong Hong and Sims performed well with increased market share in Hong Kong motor vehicles sales, while the distribution networks in mainland China improved. Profit from our joint venture with Shiseido increased substantially to reach yet another high.

Looking to the Future

Looking ahead, we are confident in the future development of the Group. The continuing rapid and healthy growth of the Chinese economy created excellent investment opportunities and a favorable operating environment for us. CITIC Pacific will continue to leverage our expertise and capture business opportunities. We will also focus more on our core businesses such as Steel, Mining, Property in mainland China and infrastructure projects to achieve higher returns for our shareholders.

On behalf of all the directors, I would like to express my sincere thanks to everyone at CITIC Pacific for their hard work, and to our investors, bankers and everyone else for their continuing support.

Let me also take this opportunity to welcome Mr. Chang Zhenming’s return to CITIC Pacific’s board as a Director, effective August 2006. Mr. Chang resigned from CITIC Pacific in June 2005 as an Executive Director when he was appointed as President of China Construction Bank. Mr. Chang returned to CITIC Group in 2006 as Vice Chairman and President. His return to the board is an important asset to CITIC Pacific. In January 2007, Mr. Yuen Kee Tong resigned as Deputy Managing Director of CITIC Pacific to take on the position of ceo at CITIC 1616 Holdings Limited which is to be listed. I would like to thank Mr. Yuen Kee Tong for his valuable contribution to our company.

Civil Infrastructure

The Group’s environmental, water projects and tunnels also performed well in 2006. These infrastructure projects provide CITIC Pacific with stable income and cash contribution.

Larry Yung Chi Kin Chairman

Hong Kong, 15 March 2007

CITIC Pacific Summary Financial Report 2006 5

Business Review

Special Steel and Iron Ore Mining

With an annual production capacity of seven million tonnes, CITIC Pacific Special Steel is a leader in the manufacturing of special steel in China. Major products are used in the making of bearings, gears and seamless steel pipes. With the aim to ensure constant supply of iron ore, one of the major raw materials used in the steel making process, CITIC Pacific is undertaking to mine iron ore in Western Australia.

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Special Steel

	HK$ million 2006 2005
	Turnover 15,278 12,160
	Contribution 1,333 808
	Proportion of total contribution 17% 20%
	Net assets 9,129 5,781
	Capital expenditure 3,674 2,063

CITIC Pacific Special Steel’s (‘cp Special Steel’) profit increased 65% in 2006 compared to 2005 due to a first time contribution from the Shijiazhuang Steel Mill in the second half of the year, strong growth in exports and increased production. An improved product mix and synergies created from better coordination of raw material purchasing, product sales and marketing also contributed to the profit increase.

In 2006, cp Special Steel sold a total of 5.9 million tonnes of special steel, a 60% increase from 2005. This was due primarily to the acquisition of the

Shijiazhuang Steel Mill, which became a member of the Group in July 2006. Exports rose 98% to 725,962 tonnes. Excluding Shijiazhuang Steel, the increase in sales was 6.5%, and the increase in exports was 33%. All three plants operated at close to full capacity.

cp Special Steel, with production capacity of over seven million tonnes, is the largest manufacturer in China of special steel that is used in the making of bearings, gears, springs and steel pipes. The locations of the three steel plants, Jiangyin Xingcheng Special Steel, Xin Yegang Steel and Shijiazhuang Steel, are ideal for market coverage of Eastern, Central and Northern China.

6 CITIC Pacific Summary Financial Report 2006

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Business Review Special Steel and Iron Ore Mining
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Converter of Jiangyin Xingcheng Special Steel

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CITIC Pacific Special Steel
79% 95% 65% [†]
Jiangyin Xingcheng Xin Yegang Shijiazhuang Steel
Special Steel Daye Special Steel
3m tonnes capacity 2m tonnes capacity 2.2m tonnes capacity
North
Shijiazhuang,
Hebei Province
East
Central Jiangyin,
Huangshi, Jiangsu Province
Hubei Province
CITIC Pacific owns 56.6% of Daye Special Steel
----- End of picture text -----

• Ultimate shareholding after the registered capital expansion awaiting PRC government approval

CITIC Pacific Summary Financial Report 2006 7

Business Review Special Steel and Iron Ore Mining

Key products of CITIC Pacific Special Steel*

	production (’000 tonnes) products 2006 market share 2006 2005
	Alloy tube blank 77% 575 557
	Alloy spring steel 59% 385 326
	Gear steel 42% 716 560
	Bearing steel 31% 604 410

* Includes full year production of Shijiazhuang Steel in which CITIC Pacific had no equity interest until July 2006. Statistics from China Special Steel Enterprises Association, and include only registered enterprises.

Our products are sold to these industries

	2006 sales industries (’000 tonnes) percentage
	Auto components 2,159 37%
	Industrial manufacturing 1,372 23%
	Metal works 1,030 17%
	Power generation 440 8%
	Oil and petrochemical 369 6%
	Others 237 4%
	Railway 185 3%
	Shipbuilding 80 1%
	Construction 67 1%
	Total 5,939 100%

In 2006, the price of special steel products in China declined on average compared with 2005, mainly due to excess capacity in lower quality products. However, for higher quality products, pricing remained firm. Pricing of cp Special Steel’s products reflected the overall market trend.

The key to the success of cp Special Steel in a challenging market is the effort management has placed on building brands, and assuring consistent high quality of its products. Jiangyin Xingcheng Special Steel and Xin Yegang are two well recognized and respected brands in China’s special steel market. Many of their products are certified by worldwide users such as skf (Sweden), fag (Germany), and Caterpillar

(United States). Strong brands and trusted product quality are essential in the market’s continued demand for cp Special Steel’s products. The construction of a new production line at Jiangyin Xingcheng, in co-operation with Sumitomo Metals of Japan, will be completed by the end of the first half of 2007. It will produce premium quality steel for auto components that will be a substitute for similar products that are currently imported. As a result, overall product quality will further improve.

In addition, management’s effort in assessing market needs, anticipating and forecasting future demand has also benefited cp Special Steel. 236% growth in the production of steel used in the fast growing railway

8 CITIC Pacific Summary Financial Report 2006

Business Review Special Steel and Iron Ore Mining

industry was the result of such effort. Coordinated effort among the three plants in sales and marketing also proved to be important.

To manufacture special steel, essential raw materials such as iron ore, coke, scrap steel, and alloy are used in a process that employs a blasting furnace, either a converter or an electric arc furnace, a ladle refining furnace and a vacuum degassing furnace. This is followed by an efficient continuous casting and rolling process, which is a technology used by all three of cp Special Steel’s plants.

Major raw material prices in 2006 remained at high levels. cp Special Steel mainly purchased its scrap steel from the domestic Chinese market. Iron ore was

primarily imported from the three major producers – bhp Billiton and Rio Tinto in Australia and cvrd in Brazil, while some was also sourced from India and locally. Even though the fob price of iron ore supplied to the Asian market that is set by major Australian and Brazilian exporters rose 19.5%, increased Chinese domestic supply and the lower cost of sea freight meant that the overall cost of iron ore did not rise as much. Prices of other raw materials such as scrap steel, coke and alloy declined slightly. For cp Special Steel’s three plants, raw material prices in 2006 were lower relative to 2005 due to the above mentioned reasons. Increased direct imports of iron ore from overseas suppliers was another factor.

Special steel manufacturing process

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Iron Ore ������
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Coke ������� �������
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Scrap Steel ������������
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----- End of picture text -----

• Xin Yegang does not use a converter

• Shijiazhuang Steel Mill does not use RH degassing

Consumption of major raw materials

	2006 type (’000 tonnes) percentage
	Iron ore 8,248 57%
	Scrap steel 1,896 13%
	Coke 1,961 14%
	Coal 2,111 15%
	Alloy 204 1%

CITIC Pacific Summary Financial Report 2006 9

Business Review Special Steel and Iron Ore Mining

Jiangyin Xingcheng Special Steel (‘Jiangyin Xingcheng’): With production capacity of three million tonnes, Jiangyin Xingcheng is a leader in China, manufacturing high-grade special steel used in bearings, gears, springs and high-pressurized tubes. Located in Jiangsu Province, it is strategically situated next to the Yantze River with two 50,000 tonne wharfs, providing efficient transport of its raw materials and finished products.

The plant is equipped with advanced and modern technologies. Its new production line, built in partnership with Sumitomo Metals Kokura of Japan, employs cutting edge technology with the most advanced equipment. Its high-end products will be a substitute for similar products currently imported for use in the manufacturing of auto components. The line is partially operational and will be fully completed by the end of the first half of 2007.

In 2006, Jiangyin Xingcheng sold a total of 2.2 million tonnes of steel, an increase of 17% over 2005. Exports were 304,812 tonnes, a 22% growth. Many of the products have received certification from renowned users worldwide, such as skf, fag, and Caterpillar.

Jiangyin Xingcheng Special Steel’s products

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15% 14%
11%
13%
9%
7%
14%
17%
Bearing steel Tube blank
Gear steel Carbon structure steel
Alloy spring steel Wire
Other alloy steel Others
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Xin Yegang Steel (‘Xin Yegang’): Xin Yegang has production capacity of two million tonnes, which includes the capacity of Daye Special Steel, an A-share company in which CITIC Pacific effectively holds a 56.6% interest. Its products include bearing steel, gear steel, spring steel, alloy structure steel, carbon structure steel and seamless steel tubes that are used in the auto, oil, petrochemical, power and industrial manufacturing sectors.

Located in the city of Huangshi in Hubei Province, it is the oldest steel plant in China, dating back to 1908. It is located next to the Yangtze River, with three 5,000 tonne wharfs enabling it to enjoy an advantage in transportation.

In 2006, Xin Yegang sold 1.7 million tonnes of products, a 4% decline from 2005 due to approximately two months of regular maintenance of certain equipment. Exports grew 57% to 181,036 tonnes. One of Xin Yegang’s main products, seamless steel tube, continued to achieve excellent returns supported by strong demand. Its production is now 22% of Xin Yegang’s product portfolio and is expected to expand further.

Xin Yegang Steel’s products

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3% 9%
22%
14%
10%
21%
13%
8%
Bearing steel Tube blank
Gear steel Carbon structure steel
Alloy spring steel Seamless tube
Other alloy steel Others
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10 CITIC Pacific Summary Financial Report 2006

Business Review Special Steel and Iron Ore Mining

Shijiazhuang Steel Mill (‘Shijiazhuang Steel’):

Located in the city of Shijiazhuang in Hebei Province, Shijiazhuang Steel benefits from the efficient transportation network around Beijing and Tianjin. Established in 1957, Shijiazhuang Steel is now a manufacturer of special steel with a production capacity of over two million tonnes. Its main products, including bearing steel, gear steel, alloy structure steel, carbon structure steel and tube blank, are supplied mainly to the auto component and oil industries.

In July 2006, the Shijiazhuang Steel became a member of the CITIC Pacific Special Steel group. Its performance has improved significantly since then with improvements in product quality, direct sales and marketing. Its new rolling line will further upgrade product quality. The central government’s plans for supporting the Bohai Economic Development Zone is expected to trigger a new wave of industrial activity in the region, and Shijiazhuang Steel is well positioned to take advantage of this. Total sales for 2006 were two million tonnes, an 11% increase over 2005. Profitability increased 177%.

Shijiazhuang Steel Mill’s products

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7%
11%
1%
49%
29%
3%
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Looking ahead: The market for special steel in China has been growing steadily with balanced demand and supply supported by not only domestic demand but also international users. The latter is evident in the sharp increase in exports of cp Special Steel in 2006. In 2006, production of special steel was about 10% of total Chinese steel production of 466 million tonnes. This compares to an average 15–20% in industrialized countries. Demand is from fast growing sectors such as auto, shipping, industrial manufacturing, power generation and railways. As the Chinese economy continues to grow, there is little doubt that more special steel will be needed.

Over the past year, CITIC Pacific has spent much effort setting up infrastructure to further integrate the three steel plants under the cp Special Steel umbrella in order to improve management, product quality and market share. cp Special Steel has also made progress in raw material purchasing and marketing.

Going forward, cp Special Steel aims to become a competitive special steel manufacturer globally, and will work accordingly to improve the quality of its products and services. cp Special Steel will also explore opportunities in down stream products in order to achieve vertical integration. Management is confident that cp Special Steel will continue to be a leader in China’s special steel sector.

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Bearing steel Tube blank
Gear steel Carbon structure steel
Alloy spring steel
Other alloy steel
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CITIC Pacific Summary Financial Report 2006 11

Business Review Special Steel and Iron Ore Mining

Iron Ore Mining

	HK$ million 2006 2005
	Net assets 1,852 –
	Capital expenditure 1,754 –

CITIC Pacific’s three steel plants currently consume approximately eight million tonnes of iron ore annually. In order to secure a stable supply of iron ore for the steel business, CITIC Pacific acquired from an Australian company 100% of a mining right to one billion tonnes of magnetite ore, with rights and options to a further five billion tonnes. The reserve is located in the Pilbara region of northern Western Australia, near the mouth of the Fortescue River. Cape Preston is the name of a point on the coastline about 25km from the inland site of the mine.

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Cape
Preston
Broome
Dampier Port Hedland
Karratha
Western Australia
Perth
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Structure of mining rights

	Stage One Stage Two Stages Three – Six
	Assets Right to mine 1bn tonnes Right to mine 1bn tonnes Options to mining rights of iron ore of iron ore to 4bn tonnes of iron ore subject to proceeding with Stage Two
	Status Proven & approved To be proven. Extensive Resources to by the Australian drilling/assessment to be be proven Government completed by June, 2007
	Consideration Paid Obligated to pay once Obligated to pay once resources proven resources proven and options exercised
	Acquisition cost USD215m paid USD200m (adjusted USD800m (adjusted by Australian CPI) by Australian CPI) not yet paid not yet paid
	Planned production 12mt per annum 12mt per annum 12mt per annum capacity of for each 1bn tonnes processed ore of iron ore
	Production target 2009/2010 2010/2011 –

12 CITIC Pacific Summary Financial Report 2006

Business Review Special Steel and Iron Ore Mining

The right to the first billion tonnes (Stage One) of reserves received approval from the Australian government in June 2006, and the project (‘Cape Preston Iron Ore Project’) was granted Major Project Facilitations status in December 2006. This was a significant milestone and will be extremely helpful in the project’s development.

Additional drilling and tests are being carried out to confirm another one billion tonnes of reserves (Stage Two). This work is expected to be completed in June 2007. Once proven, CITIC Pacific will be under obligation to pay US$200 million for the right.

CITIC Pacific’s plan is to sell at cost part of Stage One and Two to partners who will be major users of iron ore in China. Negotiations with potential partners are progressing and are expected to be completed by mid 2007. CITIC Pacific will take the lead managing the project. According to the current plan, the first shipment from Stage One is expected to be in 2009, with full production in 2010.

The project company, cp Mining Management Pty Limited, was incorporated in Australia in May 2006. An experienced Chief Executive and other senior personnel have been appointed. Offices in both Beijing, China, and Perth, Western Australia have been established and are now working closely together.

Magnetite is a ferromagnetic form of iron ore. It is low in iron content and needs to be processed further into concentrate or pellets, which can then be used as raw material in the steel manufacturing process. The estimated conversion ratio of magnetite ore to concentrate/pellet is 3.4 to 1 for the Cape Preston Iron Ore Project. This translates into an annual production of concentrate of 12 million tonnes over an expected mine life of 25 years.

Despite the requirement for processing, the ore body of this project is attractive as it is near the surface and with low variability. In addition, the project is located within close proximity to a natural gas supply line and

will be just 25 km from a planned port. Therefore a rail line and train unloading facilities are not required and this should reduce the cost. A slurry pipeline will be built to transport the concentrate. The project will also benefit from China’s position as the world leader in magnetite ore processing technology.

In January 2007, CITIC Pacific signed a general construction contract for US$1.1 billion with the China Metallurgical Group Corp. (‘mcc’) under which mcc is responsible for the project’s infrastructure development. This will include the design, construction and installation of the primary crushing plant, concentrator, pellet plant, material handling system, camp and other auxiliary infrastructure facilities. It also includes procurement of certain mining equipment. Other infrastructure such as a dedicated power station and a desalination plant will be negotiated separately. Based in Beijing, mcc is a construction company that has extensive experience and expertise in similarly large scale iron ore projects in China, Brazil, Iran and Venezuela. mcc has already established an office in Australia.

The success of this project will bring significant economic benefits to CITIC Pacific’s special steel business – ensuring a stable supply of this essential raw material, and also, providing a natural hedge to the Group’s overall profitability.

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Exploration drilling at the Cape Preston Iron Ore Project,
Pilbara area of Western Australia
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CITIC Pacific Summary Financial Report 2006

13

Business Review

Property

CITIC Pacific, with its experience and expertise in building and managing properties, is increasingly focusing its effort on mainland China where the Group has a large high quality land bank.

The New Westgate Garden

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14 CITIC Pacific Summary Financial Report 2006

Business Review Property

	HK$ million 2006 2005
	Turnover 8,320 1,409
	Contribution 2,035 1,106
	Proportion of total contribution 25% 28%
	Net assets 20,299 21,766
	Capital expenditure 2,873 2,526

Over the past few years, CITIC Pacific has been increasingly focusing on developing properties in mainland China. The Group’s property team has extensive experience in building and managing medium and large-scale residential, commercial and hotel projects. CITIC Pacific has a large quality land bank mainly in Shanghai, major secondary cities of the Yangtze Delta area and on Hainan Island.

At the end of February 2007, the Group has approximately 7.8 million square metres of land that can be developed into about 3.3 million square metres of gross floor area over the coming years. In addition, CITIC Pacific is also the prime developer for a site on Hainan Island.

Properties in mainland China

	approx. approx. expected site area GFA completion usage ownership (sq. metre) (sq. metre) date
	Investment Property CITIC Square, Shanghai Commercial 100% 14,500 109,000 Completed
	Royal Pavilion, Shanghai Serviced apartment 100% 8,800 35,000 Completed
	The New Westgate Garden, Retail 100% 32,900 16,000 Completed Retail portion (Phase I), Shanghai (includes basement)
	Development Property New Westgate Garden, Shanghai Residential 100% Phase I 32,900 41,000 * Completed Phase II 35,300 137,000 2011
	Qingpu Residential Residential, hotel, 100% 617,500 438,000 2008 to 2011 Development, Shanghai commercial
	Lu Jia Zui Financial District Commercial, hotel, 49% 251,400 847,000 2010 to 2015 Project, Shanghai residential
	Jiang Dong District Commercial 99.3% 39,500 98,000 2008 to 2009 Ningbo, Zhejiang Province
	Yangzhou, Jiangsu Province Residential, 100% 328,600 437,000 2008 to 2010 commercial
	Jiangyin, Jiangsu Province Residential, 56% 87,200 140,000 2009 to 2010 commercial

continued on next page

CITIC Pacific Summary Financial Report 2006 15

Business Review Property

Properties in mainland China continued

	approx. approx. expected site area GFA completion usage ownership (sq. metre) (sq. metre) date
	Development Property Binhu District Residential, 70% 2,110,300 240,000 In phases from Wuxi, Jiangsu Province commercial (Phase I) 2008 onwards
	Shenzhou Peninsula Hotel, retail, 80%– 4,280,400 919,000 In phases from Wanning, Hainan Province residential 99.9% 2008 onwards
	Site at Sichuan Beilu Station Commercial 90% 13,300 53,000 2010 of Metro Line No. 10, Hongkou, Shanghai

* On sale GFA = gross floor area i.e. the total area of permitted construction above ground

Shanghai

Shanghai Lu Jia Zui Financial District Project:

This project occupies the last significant prime site in Pudong on the south shore of Huangpu River. Once completed, the project will include commercial, residential, hotels and grade-A office buildings.

CITIC Pacific formed a joint venture with the China State Shipbuilding Corporation to develop the site. CITIC Pacific’s interest in the joint venture is 49% and is responsible for managing the project.

The project site, previously used as a shipyard, is about 251,400 square metres and a total gross floor area of about 847,000 square metres is approved to be built. Development of the site will be in phases. Phase I (about 260,000 square metres) will have two landmark office towers, a hotel and serviced apartments. Design work for this phase is in progress while site preparation for the foundation work is underway. Subject to government approval of a building scheme, foundation work for this phase could begin as soon as the third quarter of 2007.

Qingpu Residential Project: Through the end of February 2007, CITIC Pacific had acquired a total of 617,500 square metres of land in the Qingpu District in the western part of Shanghai. This area will be

developed into low density residential and commercial buildings with a gross floor area of approximately 438,000 square metres. The approval of the master planning design for the entire development was obtained in October 2006. Foundation work for Phase I (about 10,100 square metres) has been completed, and construction is scheduled to begin in the second quarter of 2007.

The New Westgate Garden residential project is located in the Huangpu District of Shanghai, adjacent to Xizang Nanlu and Jianguo Donglu. It is within walking distance of a future subway station of the new Metro Line 8.

==> picture [290 x 171] intentionally omitted <==

Shanghai Lui Jia Zui Financial District Project

16 CITIC Pacific Summary Financial Report 2006

Business Review Property

Phase I (gross floor area of 127,000 square metres) was completed in June 2006, and, through the end of February 2007, 68% of the residential units had been sold. Phase II will commence after the remaining site is cleared.

Once completed, this project, with a gross floor area of approximately 264,000 square metres, will include residential towers, a multi-storey commercial complex with retail shops, and a basement car park.

Sichuan Beilu Station of Metro Line No. 10, located in Hongkou District, is situated above the Sichuan Beilu Metro Station currently under construction. The development has an area of about 13,300 square metres and will be an office and retail complex with a gross floor area of about 53,000 square metres.

CITIC Pacific and Shanghai Shentong Metro Assets Management Co. jointly acquired the site in January 2007. The design of this property will take advantage of the pedestrian flow generated by the Sichuan Beilu Metro Station. Preliminary design is underway, and completion of the development is planned for 2010, which should coincide with the operational launch of Metro Line No.10.

CITIC Square, 100% owned by CITIC Pacific, is a Grade A office tower in Nanjing Xi Lu. It has an occupancy rate of 100% and rentals have been rising steadily.

Royal Pavilion, 100% owned by CITIC Pacific, is a luxury serviced apartment with 86% occupancy and stable rental income.

Other Cities

In Ningbo, Zhejiang Province, CITIC Pacific is building a commercial office and retail project with a total gross floor area of approximately 98,000 square metres. Construction of the superstructure began in March 2007, and completion is expected in 2008–2009.

In Yangzhou, Jiangsu Province, CITIC Pacific has 328,600 square metres for the development of a

residential and commercial project with a gross floor area of 437,000 square metres. Construction of the Phase I (about 98,000 square metres) superstructure is scheduled to begin in the second quarter of 2007.

In Jiangyin, Jiangsu Province, CITIC Pacific and Wuxi Guolian Group are co-developing Jiangyin Xingcheng’s old steel mill site in the eastern city centre into a residential and commercial property. The site is approximately 87,000 square metres with a gross floor area of about 140,000 square metres. Design work is in progress and site work is expected to begin in the second half of 2007.

In Wuxi, Jiangsu Province, CITIC Pacific and Wuxi Guolian Group have formed a joint venture company to develop a residential and commercial property in the Binhu District. The site, with an area of about 2,110,000 square metres, is located in front of scenic Taihu Lake, and is within 15–20 minutes driving distance from the city centre. The project will be developed in phases. Construction work for Phase I (about 240,000 square metres) is scheduled to begin in the second half of 2007. Site formation work is in progress.

In Hainan Province, a resort type real estate project in Shenzhou Peninsula, Wanning City is progressing well. The site has a planning area of 38 square kilometres, with four south facing beaches and eight kilometres of scenic coastline. About 16 square kilometres can be developed into a world class resort. As part of a new express railway line along the east coast of Hainan connecting cities of Haikou and Sanya, a railway station will be built in Wanning City which is about five to six kilometres from the Shenzhou Peninsula site. This new express railway line, constructed by the Hainan government with a completion target of 2010, will greatly improve the accessibility of the Shenzhou Peninsula site from Hainan’s international airports in Haikou and Sanya.

CITIC Pacific, as the prime developer, is responsible for the overall planning, design, and infrastructure.

CITIC Pacific Summary Financial Report 2006 17

Business Review Property

Government approval for the conceptual master plan for the whole 38 square kilometres and the detailed master plan for 15 square kilometres were obtained.

Through the end of February 2007, CITIC Pacific had acquired 4.28 square kilometres of land. Design work for Phase I, which consists of hotels, retail space and golf courses, is in progress with site work set to begin in the second half of 2007.

Hong Kong

Discovery Bay, 50% owned by CITIC Pacific, is a large residential development jointly developed with hkr International Ltd. Since its launch in 1973, Discovery Bay has become a fully integrated, self-contained suburban multinational residential community. Situated on the northeastern shore of Lantau Island, and adjacent to the Disney Theme Park, Discovery Bay is endowed with open space. Recreational and leisure facilities include a private beach, central park, scenic promenade, golf courses, and a marina.

The current Yi Pak Bay development is located in the northern part of Discovery Bay. It has a gross floor

area of approximately 217,000 square metres, of which 91,000 square metres have been developed as Siena One (Phase 11) and Siena Two (Phase 12). Occupation permit for Chianti (Phase 13), which has a gross floor area of 50,000 square metres, was obtained in April 2006. Sales began in March 2006. Through the end of February 2007, 239 units out of 530 had been sold.

A hotel development of 25,000 square metres of gross floor area at the northern part of Discovery Bay is being planned with construction scheduled to begin in the second quarter of 2007.

CITIC Tower, 40% owned by CITIC Pacific, which serves as the Group’s headquarters, is a landmark on the Hong Kong waterfront. It includes 52,200 square metres of offices, retail shops and restaurants. The building is currently 91% occupied. Rentals improved substantially in 2006.

The robust Hong Kong economy has led to an improvement in rentals of CITIC Pacific’s other investment properties in 2006.

Properties in Hong Kong

	approx. GFA usage ownership (sq. metre)
	Investment Property CITIC Tower Commercial 40% 52,000
	DCH Commercial Centre Commercial 100% 36,000
	Wyler Centre Industrial 100% 37,000
	Broadway Centre Industrial 100% 32,000
	Yee Lim Industrial Centre Industrial 100% 30,000
	Others Various 100% 50,000
	Development Property Discovery Bay Residential township 50% 261,000 including Chianti (Phase 13) 50,000

18 CITIC Pacific Summary Financial Report 2006

Business Review

Aviation

	location ownership
	Cathay Pacifc Hong Kong 17.5%
	HACTL Hong Kong 10%
	Air China Cargo Beijing 25%

	HK$ million 2006 2005
	Cathay Pacifc 941 911
	HACTL 112 103
	Air China Cargo (1 ) 44
	Aviation restructuring 2,236 –
	Contribution 3,288 1,058
	Proportion of total contribution 41% 27%
	Net assets 9,843 12,397

Cathay Pacific (www.cathaypacific.com) is an international passenger and freight carrier based in Hong Kong providing top quality services to 104 destinations around the world. Together with its subsidiaries Dragonair and Air Hong Kong, the Group serves more than 120 destinations with a fleet of 149 aircraft.

In September 2006, Air China, cnac, Cathay Pacific, CITIC Pacific and Swire Pacific concluded the much anticipated restructuring of the Hong Kong aviation industry. As a result, Dragonair is now a wholly owned subsidiary of Cathay Pacific. CITIC Pacific’s interest in the enlarged group has been reduced to 17.5%. The restructuring created one of the strongest airline groups in the world and strengthened Hong Kong and Beijing as twin aviation hubs in the Asia Pacific region. It also provides Cathay Pacific customers access to the world’s fastest growing aviation market in China, strengthening Cathay’s ability to compete globally.

Cathay Pacific achieved record volume in both passenger numbers and freight volume in 2006. Passengers increased by 8% to 16.7 million. Freight volume increased by 7% to 1.2 million tonnes.

HACTL (www.hactl.com) operates SuperTerminal 1, the largest air cargo terminal in the world. In 2006, it set a new record with total cargo tonnage of 2.6 million tonnes, a 5.3% increase from 2005.

SuperTerminal 1 has a potential capacity of 3.5 million tonnes per annum.

Air China Cargo Co., a joint venture in which CITIC Pacific has a 25% interest, handles all of Air China’s international and domestic cargo and related ground service businesses. Total freight volume in 2006 was 817,178 tonnes, an increase of 15% from 2005. At the end of 2006, the Company employed nine freighter planes and used the belly space in Air China’s 196 passenger planes to carry cargo.

CITIC Pacific Summary Financial Report 2006 19

Business Review

Power Generation

	in HK$ million 2006 2005
	Contribution 268 368
	Proportion of total contribution 3% 9%
	Net assets 6,244 5,652

In 2006, CITIC Pacific owned a total attributable capacity of 4,800MW, an increase of 50% from 2005 due to the commissioning of Ligang Phase III (2 x 600MW) and Zhengzhou Phase III (2 x 200MW) at the end of the year.

Total electricity generated in 2006 by all power plants in which CITIC Pacific had an interest was 84 billion kwh, an increase of 10.5% compared with 2005. The increase was due principally to an increase at North United Power. Utilisation rates at most plants experienced a decline as new capacity was added in

most regions in China. However, even at reduced utilization levels, most plants operated above their designed utilisation rates.

During 2006, the price of coal increased modestly over 2005. Tariff increases implemented in early July brought much needed relief to power producers. In addition, management at our plants paid much attention to sourcing better quality coal which in turn lowered standard coal prices at most plants. As a result, performance improved and profitability increased compared with last year.

CITIC Pacific’s attributable capacity

==> picture [254 x 210] intentionally omitted <==

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

MW
7,000 Ligang Phase IV
North United Power
6,000
5,000
4,000
3,000
2,000
1,000
0
02 03 04 05 06 07
Attributable Forecast
----- End of picture text -----

20 CITIC Pacific Summary Financial Report 2006

Business Review Power Generation

The reported lower contribution is a result of an impairment loss on Jilin Power Station which CITIC Pacific sold in the second half of 2006 and a loss arising from the share reform of an A-share company within North United Power.

CITIC Pacific’s total attributable generation capacity will reach 6,161MW by the end of 2007.

Our team of power professionals continues to work to ensure a stable supply of coal and to improve the efficiency of our plants.

Ligang Phase IV (2 x 600MW) is progressing on schedule with completion targeted for the second half of 2007.

Operational statistics of CITIC Pacific’s power plants

	installed power location capacity % utilisation plant (province) (MW) ownership type hours	electricity generated heat generated 2006 2005 % 2006 2005 % (m kWh) (m kWh) change (kGJ) (kGJ) change
	Ligang Jiangsu Coal fired I & II 1,440 * 65 5,600 8,064 8,510 -5 NA NA NA III 1,200 71.4 Operation began in late 2006
	Hanfeng Hebei 1,320 15 Coal fired 6,009 7,931 8,552 -7 NA NA NA
	Huaibei Anhui 600 12.5 Coal fired 5,044 3,026 3,671 -18 NA NA NA
	Kaifeng Henan 125 50 Coal fired 4,761 595 671 -11 NA NA NA
	North United Inner Mongolia 9,988 20 Coal fired 6,490 57,834 47,091 23 43,268 39,417 10
	Zhengzhou Henan Co-generation I & II 600 50 5,546 3,328 3,424 -3 5,082 5,230 -3 III 400 50 Operation began in late 2006
	Hohhot Inner Mongolia 400 35 Co-generation 6,853 2,741 2,891 -5 2,078 2,129 -2
	Weihai Shandong 36 49 Co-generation 4,317 155 161 -4 3,592 3,323 28
	Chenming Shandong 24 49 Co-generation 7,608 183 194 -6 3,275 3,434 -5

* Additional 40MW were added to Ligang Phase II at the beginning of July 2006

CITIC Pacific Summary Financial Report 2006 21

Business Review

Civil Infrastructure

	location ownership franchise till	location ownership franchise till
	Eastern Harbour Tunnel Hong Kong Road 71% 2016 Rail 50% 2008
	Western Harbour Tunnel Hong Kong 35% 2023
	Four waste treatment facilities Hong Kong 20 – 50% –
	Laogang Phase IV Landfill Shanghai 30% –

	in HK$ million 2006 2005
	Contribution 469 413
	Proportion of total contribution 6% 10%
	Net assets 2,533 2,351

==> picture [313 x 102] intentionally omitted <==

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

Kowloon
Western Harbour Tunnel Cross Harbour Tunnel
Eastern Harbour Tunnel
Hong Kong
----- End of picture text -----

The Eastern Harbour Tunnel

(www.easternharbourtunnel.com.hk) registered an average daily traffic of 61,010 vehicles, a 4.5% decline from 2005.

The Western Harbour Tunnel

(www.westernharbourtunnel.com) is a key section of the Route 3 highway linking Hong Kong Island with mainland China and Chek Lap Kok Airport. Average daily traffic in 2006 was 44,373 vehicles, an increase of 7.7% over 2005.

CITIC Pacific has a 35% interest in the company that manages the Cross Harbour Tunnel under contract from the government.

Environmental

CITIC Pacific has an interest in four waste treatment facilities in Hong Kong, including a chemical waste treatment plant and two refuse transfer stations, with a total of 4,000 tonnes daily waste processing capacity, and a landfill site with a 43 million cubic metre capacity. In 2006, a total of 3.1 million tonnes of waste was processed.

In Shanghai, CITIC Pacific has an interest in Phase IV of the Laogang Municipal Waste Landfill. A total of 1.8 million tonnes of municipal waste was processed in 2006.

22 CITIC Pacific Summary Financial Report 2006

Business Review

Marketing and Distribution

	location ownership
	Dah Chong Hong Hong Kong 100%
	Sims Trading Hong Kong 100%

	in HK$ million 2006 2005
	Turnover 13,222 10,984
	Contribution 275 232
	Proportion of total contribution 3% 6%
	Net assets 4,012 3,636

Motor Vehicle Trading

Dah Chong Hong (www.dch.com.hk) is a major distributor of motor vehicles and consumer and food commodity products. It has operations in Hong Kong and mainland China, as well as businesses in Japan, Singapore and Canada.

	in HK$ million 2006 2005
	Turnover 7,738 5,559
	Contribution 199 146

CITIC Pacific Summary Financial Report 2006

23

Business Review Marketing and Distribution

Hong Kong Motor Vehicle Sales

With 30% market share in 2006, Dah Chong Hong is one of the largest distributors of motor vehicles in the territory. It distributes a wide range of vehicles:

	type brands
	Passenger cars Acura, Audi, Bentley, Honda, Nissan, Opel, Saab, Volkswagen
	Commercial vehicles Isuzu, MAN, Nissan, UD Nissan Diesel

Dah Chong Hong vehicle sales in Hong Kong

==> picture [231 x 212] intentionally omitted <==

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

Units
02 03 04 05 06
Passenger Commercial
9,673 9,712
9,439
8,470
2,489 7,005
2,831
2,938
2,931
2,310
7,184 4,695 5,539 6,501 6,881
----- End of picture text -----

In 2006, Dah Chong Hong’s market share increased by 1.2 percentage points, despite an overall decline of 2% in the Hong Kong market for motor vehicles.

In addition to car sales, dch Motor is engaged in after-sales service and inspection centre operations,

parts retail and distribution, leasing, used-car sales, fleet management, and aviation ground support services. The Dah Chong Hong Motor Service Centre in Kowloon Bay is the largest of its type in Hong Kong.

24 CITIC Pacific Summary Financial Report 2006

Business Review Marketing and Distribution

Mainland China Motor Vehicle Sales

Dah Chong Hong distributes imported and domestically manufactured vehicles through local partners. Unlike Hong Kong, most distributorships are not exclusive in the Chinese domestic market.

	type brands (Dah Chong Hong & partners)
	Passenger cars Imports: Bentley, Nissan, Opel, Renault Domestic: Beijing Hyundai, Dongfeng Honda, Dongfeng Nissan, FAW Toyota, Dongfeng Yuda Kia, FAW Audi, FAW Mazda, Guangzhou Honda, Haima, SGM
	Commercial vehicles Imports: Isuzu, Iveco, MAN Domestic: Naveco, Qingling

Dah Chong Hong vehicle sales in mainland China

==> picture [231 x 212] intentionally omitted <==

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

Units
02 03 04 05 06
Passenger Car Commercial Vehicle
17,528
13,740 14,103 2,885
12,527
4,306 9,409
4,902 1,655
7,932
9,434 6,171 7,625 7,754 14,643
----- End of picture text -----

China’s motor vehicle market grew by 25% in 2006, with sales of over seven million vehicles. The passenger car market grew 30% year-on-year with sales of over five million units. Dah Chong Hong sales increased 86% over 2005. This significant increase was due to expansion of its sales and marketing network as well as to the resumption of its Isuzu import business. During the year, Dah Chong Hong successfully secured six dealerships, raising the total number of vehicle dealerships in mainland China to 24. Among the additions were Mercedes-Benz, faw Audi, faw Mazda and Dongfeng Honda.

China’s vehicle market has experienced tremendous growth and Dah Chong Hong is committed to the long-term opportunities in China. In the near term however, the market will become increasingly competitive and challenging. With an established network and over 50 years of expertise, Dah Chong Hong is well positioned to cope with the market changes and challenges of the years ahead.

CITIC Pacific Summary Financial Report 2006 25

Business Review Marketing and Distribution

Non-Motor Trading

	in HK$ million 2006 2005
	Turnover 5,484 5,425
	Contribution 76 86

The non-motor trading business includes Dah Chong Hong and Sims. Dah Chong Hong distributes in Hong Kong, Macau and mainland China a wide range of consumer and commodity food products including frozen meat, rice, edible oils, and Chinese foodstuffs; as well as cosmetics, home electrical appliances, and audio visual equipment.

Sims specializes in the distribution of branded fast moving consumer goods, including food, beverage, household, and healthcare products for the retail and catering markets. Some of the brands represented by Sims are Pocari Sweat, Ovaltine, Almond Roca, Barilla, and Heinz for the Hong Kong market; and Ferrero, Pringles, Wyeth, Almond Roca, Smirnoff, Guinness, and Bailey’s for the domestic Chinese market. Sims also provides third party logistics services to major companies such as 7-Eleven, Heineken, Pizza Hut, Wynn Casino & Resort, Walmart, Unilever, and Lee Kum Kee.

Hong Kong and Macau: Dah Chong Hong’s diversified product portfolio enables it to mitigate business risks. In 2006, animal disease had an adverse impact on its food trading business. Yet in its business selling Shiseido cosmetics, it was able to capitalize on a demand surge due to a rebound in the local economy as well as to an expansion of its distribution network. These factors resulted in record performance in both turnover and profits.

Sims also had an encouraging year in 2006. Its logistics services section won the Hong Kong Trade Development Council’s ‘Hong Kong Logistics Award 2006’ and the Global Institute of Logistics’ ‘2006 Best Regional Third Party Logistics Company’. In Macau, Sims is the biggest logistics services provider for Wynn Casino & Resort, and is providing services to a growing number of hotels and casinos.

Mainland China: In 2006, Dah Chong Hong and Sims made significant progress in the transition from just distribution to providing higher value-added services. A joint venture between Sims and Otsuka of Japan for the production of Pocari Sweat for domestic and export sales began operation in Southern China in July 2006. An edible oil storage and processing plant in Xinhui began operations in the same month. In terms of logistics, Sims’ bonded and non-bonded warehousing, re-packing, customs clearance, and cargo forwarding establishments in Xinhui began full operations in late 2006 providing a one-stop total supply chain management (‘scm’) solution to its principals and third-party customers. The Pearl River delta remains the key region for the further development of Dah Chong Hong and Sims’ scm initiatives but in time will extend to nationwide coverage by linking with the mature operations in Shanghai and Beijing.

26 CITIC Pacific Summary Financial Report 2006

Business Review

Communications

	location ownership
	CITIC 1616 Hong Kong 100%
	CPCNet Hong Kong 100%
	CITIC Guoan Beijing 50%
	CTM (Macau Telecom) Macau 20%

	in HK$ million 2006 2005
	Turnover 1,731 1,219
	Contribution 367 (31 )
	Proportion of total contribution 5% (1)%
	Net assets 2,557 2,218

CITIC 1616 (www.citic1616.com) is a leading telecom hub based provider in Asia, interconnected to about 240 international telecom and mobile carriers in approximately 50 countries/areas. Over 77% of its traffic is inbound to and outbound from mainland China. In January 2007, the Company applied for a listing on the Hong Kong Stock Exchange, which was approved in March.

Companhia de Telecomunicacoes de Macau (‘ctm’), 20% owned by CITIC Pacific, is the provider of choice of fixed line, mobile telephone and Internet access services to the people of Macau sar.

CITIC Guoan’s primary business is its 41.6% interest in CITIC Guoan Information Industry Co., Ltd. (‘Guoan Information’), a Shenzhen Stock Exchange A-share listed company. Guoan Information operates cable tv networks in 18 cities and one province in mainland China with over 6 million subscribers. Guoan Information also has interests in systems integration, software development, hotel management, salt lake consolidated resources developement and property development.

cpcNet Hong Kong (www.cpcnet.com) provides Internet services to corporate customers in the Greater China area.

CITIC Pacific Summary Financial Report 2006 27

Financial Review

Introduction

CITIC Pacific’s 2006 Annual Report includes a letter from the Chairman to shareholders, the final accounts and other information required by accounting standards, legislation, and the Hong Kong Stock Exchange. This Financial Review is designed to assist the reader in understanding the statutory information by discussing the contribution of each business segment, and the financial position of the company as a whole.

Basis of Accounting

CITIC Pacific prepares its financial statements in accordance with generally accepted accounting standards issued by the Hong Kong Institute of Certified Public Accountants (‘hkicpa’) which have been converged with International Financial Reporting Standards.

Profit Attributable to Shareholders

The net profit attributable to shareholders for the year ended 31 December 2006 was HK$8,272 million, an increase of 107% compared with HK$3,989 million in 2005. The reasons for the increase in profit are described below.

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

HK$
million
02 03 04 05 06
8,272
3,835 3,989
3,534
1,148
----- End of picture text -----

28 CITIC Pacific Summary Financial Report 2006

Financial Review

Business Segments Contribution

The Contribution (Note) made by major business segments in 2006, compared with 2005, were:

	actual change HK$ million 2006 2005 2006 – 2005
	Special Steel 1,333 808 525
	Property 2,035 1,106 929
	Aviation 3,288 1,058 2,230
	Power Generation 268 368 (100 )
	Civil Infrastructure 469 413 56
	Marketing & Distribution 275 232 43
	Communications 367 (31 ) 398
	Fair Value change of Investment Properties 1,077 755 322

Note: Please refer to Definition of Terms on page 65.

Compared the contribution for the year 2006 with last year:

• [ Special Steel: Turnover of Special Steel increased from HK$12 billion in 2005 to HK$15 billion in 2006. ] Contribution increased significantly due to continuing good performance of Jiangyin Steel Plant and Xin Yegang Steel Plant including the contribution from Daye Special Steel which was acquired in November 2005. Shijiazhuang Steel Plant acquired during the year contributed HK$119 million.

• [ Property: Excluding the revaluation surplus of investment properties in both year, contribution increased ] by 84% mainly due to the profit from the sale of 50% interest in Festival Walk, and profit recognized on completion of Shanghai Westgate Garden and Chianti at Discovery Bay in 2006. In 2005, there were also profits from the sales of properties including a piece of land at Hung Shui Kui in the New Territories. Excluding the effect due to the disposal of Festival Walk, rental income recorded good growth.

• [ Aviation: Cathay Pacific reported 24% increase in net profit for the year. Despite the fact the Group reduced ] its shareholding in Cathay Pacific from 25.4% to 17.5% and disposed all of its 28.5% interest in Dragonair during the year in connection with the restructuring of aviation business, recurring contribution in 2006 almost levelled that of 2005. In addition, profit of HK$2.2 billion was recognised from the restructuring of aviation business.

• [ Power Generation: Excluding the impairment loss of HK$152 million of Jilin Power Station and a loss of ] HK$56 million arose from the share reform plan of a mainland listed company under North United Power Group, contribution increased by 29% in 2006.

• [ Civil Infrastructure: Contribution from both vehicular tunnels increased. Toll charges of Eastern Harbour ] Tunnel have been increased since May 2005.

CITIC Pacific Summary Financial Report 2006 29

Financial Review

• [ Marketing & Distribution: Turnover increased by 20% to HK$13 billion in 2006 with contribution increased by ] 19%. The contribution from motor business in both Hong Kong and the prc improved. The performance of non-motor businesses during the year was affected by the challenging market and project development costs.

• [ Communications: Profit of C][ITIC][ 1616’s telecom operations increased by 93% in 2006 but was partly offset ] by the costs of the Group’s other developing businesses. The result of ctm was relatively stable. A profit of approximately HK$170 million arose from the share placement by Guoan Information in 2006. There was a loss of approximately HK$190 million in 2005 as a result of Guoan Information’s share reform plan.

• [ Fair value change of investment properties: Increase in fair value of investment properties as a result of a ] revaluation reflecting the current market condition.

Contribution

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

HK$
million
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Special Steel Property Aviation Power Civil Marketing & Communications Fair Value
Generation Infrastructure Distribution Change of
Investment
Properties
2005 2006
----- End of picture text -----

The Annual Report contains business segment information for turnover and profit before net finance charges and taxation for consolidated activities, jointly controlled entities and associated companies.

30 CITIC Pacific Summary Financial Report 2006

Financial Review

Geographical Distribution

The division of contribution and assets between Hong Kong, mainland China and overseas is shown below based on the location of the base of each business’s operations.

==> picture [231 x 229] intentionally omitted <==

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

Contribution % Assets at Book Value %
2005 2006 2005 2006
For the year ended 31 December As at 31 December
Hong Kong Mainland China Overseas
4% 2% 6%
25%
26%
38%
52%
70% 75% 60% 42%
----- End of picture text -----

Interest Expense

The Group’s interest expense net of amount capitalised decreased from HK$596 million to HK$590 million mainly due to the increase in capitalised interest related mainly to various prc property projects while weighted amount of borrowings increased. The weighted average cost of debt in 2006 was 5.2% compared to 4.3% last year.

Treasury Policy and Risk Management

General Policies

The Group’s policy is to maintain a high degree of financial control and transparency. Financing and cash management activities are centralised at head office level to enhance risk management, control and the best utilisation of financial resources of the Group.

We aim to diversify our funding sources through utilisation of both banking and capital markets. To the extent it is possible, financing is arranged to match business characteristics and cash flows. Limited or non-recourse project finance is employed when it is available and appropriate.

CITIC Pacific Summary Financial Report 2006 31

Financial Review

Foreign Currency Exposure

CITIC Pacific conducts business mainly in Hong Kong and mainland China, therefore it is subject to the market risk of foreign exchange rates of the HK Dollar, US Dollar and Renminbi. To minimise currency exposure, non Hong Kong dollar assets are usually financed in the same currency as the asset or cash flow from it, either by borrowing or using foreign exchange contracts. Achieving this objective is not always possible due to limitation in financial markets and regulatory constraints, particularly on investment into mainland China as the Renminbi is currently not a free convertible currency and thus the RMB exchange swap market is not readily available or efficient at this time. In addition, ‘Registered Capital’, which usually accounts for no less than 25% of the total investment amount for projects in mainland China, is required to be paid in US dollars. As the Group’s investment in mainland China is expanding, CITIC Pacific has an increasing exposure to the Renminbi. As at 31 December 2006, around HK$35 billion or 52% of the Group’s total assets were based in mainland China (2005: HK$23 billion, or 38%).

Interest Rate Exposure

The Group aims to maintain a suitable mixture of fixed and floating rate borrowings in order to stabilise interest costs despite rate movements. Interest rate hedging ratio is determined after taking into consideration of the general market trend, the Group’s cash flow pattern, interest coverage ratio and etc.

Employment of Derivative Products

The Group employs a combination of financial instruments, including derivative products, to manage its exposure to fluctuations in interest and currency rates. Derivative transactions are only used for interest rate and currency hedging purposes, speculative trading is prohibited. Counterparties’ credit risks are carefully reviewed and in general, the Group only deals with financial institutions with investment grade credit rating. The amount of counterparties’ lending exposure to the Group is also an important consideration as a means to control credit risk.

32 CITIC Pacific Summary Financial Report 2006

Financial Review

Cash Flow

By design, majority of the Group’s debt is raised at the holding company level (except for project based financing or arrangement limited by regulation such as RMB borrowings). As such, the actual net amount of cash flow from each business to the Group is an important indicator as to the Group’s ability to service its debts. Following is a summary of cash contributions by each business segment in the year 2006 compared to the year 2005:

	HK$ million 2006 2005
	Special Steel 500 143
	Property 7,821 1,996
	Aviation 5,975 767
	Power Generation 213 449
	Civil Infrastructure 476 407
	Marketing & Distribution 57 256
	Communications 347 413
	Others 79 57
	Total 15,468 4,488

For the year ended 31 December 2006, the Group’s cash flow was very strong. Special Steel sector contributed higher cash flow as prior years retained profits were distributed during the year. Property sector continued to generate strong cash flow from both recurring rental income and property sale. In addition, disposal of 50% interest in Festival Walk also contributed HK$6.1 billion. Cash contribution from Aviation sector was stable. In addition, HK$5.2 billion was received from aviation restructuring. Cash contribution from Power Generation sector decreased as the 2005 final dividend declared by Ligang Power Station was retained for reinvestment in Ligang Phase IV. Civil Infrastructure sector also contributed higher cash flow mainly attributable to the strong performance of tunnel operations. Cash contribution to the Group from Marketing & Distribution decreased for the year as cash generated from operations was utilised by the business unit to invest in new project.

CITIC Pacific Summary Financial Report 2006 33

Financial Review

Summary of Consolidated Cash Flow Statement

	HK$ million 2006 2005
	Net Cash generated from / (invested in) consolidated activities 4,302 2,063
	jointly controlled entities 220 (59 )
	associated companies 1,132 1,504
	other financial assets 11 1
	Sale of business interests and marketable securities 12,313 481
	Capital expenditure and investment in new businesses (9,451 ) (5,971 )
	Tax (315 ) (227 )
	Net interest paid (751 ) (601 )
	7,461 (2,809 )
	Dividends paid (3,072 ) (2,412 )
	(Decrease) / Increase in borrowings (3,376 ) 5,330
	Repurchase of shares (35 ) –
	Share options exercised 87 16
	(6,396 ) 2,934
	Increase in cash and cash equivalents 1,065 125

Cash Flow from Operations

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HK$
billion
15
10
5
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02 03 04 05 06
Special Steel Civil Infrastructure
Property Marketing & Distribution
Aviation Communications & Others
Power Generation Sale of Businesses
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Cash Flow per Share

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HK$
02 03 04 05 06
Cash Flow per Share from the Sale of Businesses
Cash Flow per Share from regular operations
7.0
4.6 2.3
4.0
1.1
2.1
1.7 0.1
0.1
2.8
3.5 1.2 1.6 2.0 4.7
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34 CITIC Pacific Summary Financial Report 2006

Financial Review

Group Debt and Liquidity

The financial position of the Group as at 31 December 2006, as compared to 31 December 2005, is summarised as follows:

	HK$ million 2006 2005
	Total debt 18,293 21,218
	Cash and bank deposits 3,679 2,579
	Net debt 14,614 18,639

Leverage

Net debt divided by total capital was 24% at 31 December 2006 compared with 32% at the end of 2005.

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HK$
billion
70
60
50
40
32%
30
25% 24%
20
14% 12%
10
Total Capital
0 Net Debt / Total Capital %
02 03 04 05 06
Net Debt
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CITIC Pacific Summary Financial Report 2006 35

Financial Review

Total Debt

Total debt decreased mainly due to strong cash flow. As at 31 December 2006, outstanding loans maturing within one year amounted to HK$1.7 billion or 9% of the total debt. On the other hand, the Group had cash and deposits with banks of HK$3.7 billion on that date.

For the year ended 31 December 2006, the Group’s average borrowing costs was about 5.2% compared with 4.3% for the last year. For the description on the Group’s average borrowing costs, please refer to ‘Interest Rate Exposure’.

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HK$
billion
25
5.2%
20 4.6% 4.6%
4.3%
3.4%
15
10
5
0
02 03 04 05 06
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After fifth year
In the third to fifth year inclusive
In the second year
In the first year
Average borrowing costs
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Maturity Profile of Outstanding Debt

The Group actively manages and extends its debt maturity profile to ensure that the Group’s maturing debt each year will not exceed the anticipated cash flow and the Group’s ability to refinance the debt in that year.

	2012 and HK$ million 2007 2008 2009 2010 2011 beyond total percentage
	Parent Company 27 8 624 3,052 3,5101 6,2942 13,515 74%
	Subsidiaries 1,662 1,351 958 249 558 0 4,778 26%
	Total Maturing Debt 1,689 1,359 1,582 3,301 4,068 6,294 18,293 100%

1. Including a US$450 million global bond due in 2011 which was issued by a wholly owned special purposes vehicle.

2. Including a JPY8.1 billion floating rate note due in 2035 which was issued by a wholly owned special purposes vehicle.

36 CITIC Pacific Summary Financial Report 2006

Financial Review

Available Sources of Financing

In addition to cash and deposits balance of HK$3.7 billion as at 31 December 2006, the Group had undrawn available loan facilities totaling HK$16.8 billion, of which HK$14.7 billion was in committed long term loans and HK$2.1 billion of money market lines. Besides, available trade facilities amounted to HK$2.2 billion. Borrowings by sources of financing as at 31 December 2006 is summarised as follows:

	HK$ million total facilities outstandings available facilities
	Committed Facilities Term Loans 28,020 13,328 14,692
	Global Bonds 3,510 3,510 0
	Private Placement 406 406 0
	Total Committed 31,936 17,244 14,692
	Uncommitted Facilities Money Market Lines and Short Term Facilities 3,134 1,027 2,107
	Trade Facilities 2,766 591 2,175

Undrawn Available Committed Facilities by Maturity (Total HK$14.7 billion)

Undrawn Available Facilities by Type (Total HK$19 billion)

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HK$
billion
11% 12%
77%
2007 2008 2009 to 2012 &
2011 beyond
As at 31 December 2006 As at 31 December 2006
Term Loan Money Market Trade
7.8
5.9
0.9
0.1
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In addition to the above summarised facilities, the Company established Cooperative Agreements with major prc banks. Under such agreements, general credit limits have been granted to us to support the Group’s funding requirements. Utilisation of these facilities will be subject to the banks’ approval on a project-by-project basis in accordance with prc banking regulations. As at 31 December 2006, total of around RMB66 billion credit limit under such arrangements remained available, of which RMB30 billion have been specifically allocated to Iron Ore Mining, Special Steel, Hainan property projects, and various other projects in the mainland.

CITIC Pacific Summary Financial Report 2006 37

Financial Review

Loan Covenants

Over the years, CITIC Pacific has developed a set of standard loan covenants to facilitate the management of its loan portfolio and debt compliance. The financial covenants are generally limited to three major categories, namely, a minimum net worth undertaking, a maximum ratio of total borrowings to net worth and a limit on the amount of pledged assets as a percentage of the Group’s total assets. CITIC Pacific has been in compliance with all of its loan covenants.

	actual covenant limits 2006
	Minimum Consolidated Net Worth: Consolidated Net Worth ≥HK$25 billion HK$49 billion
	Gearing: Consolidated Borrowing / Consolidated Net Worth ≤ 1.5 0.37
	Negative Pledge: Pledged Assets / Consolidated Total Assets ≤ 30% 1%

For the purpose of the above covenant limits, as defined in the relevant borrowing agreements: ‘Consolidated Net Worth’ means the aggregate of shareholders’ funds and goodwill from acquisitions and developments having been written off against reserves or profit and loss account. ‘Consolidated Borrowing’ means the aggregate of all consolidated indebtedness for borrowed money and all contingent obligations in respect of indebtedness for borrowed money other than aforesaid consolidated indebtedness for borrowed money.

Interest Cover

ebitda divided by interest expense for year ended 31 December 2006 was 20 compared to 11 in 2005, due to the 85% increase in ebitda and a 1% decrease of interest expenses.

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14
12
10
8
20x
6
15x
4
12x 11x
2 8x
0
02 03 04 05 06
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EBITDA
EBITDA/Interest Expense (x = times)
Interest Expense
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38 CITIC Pacific Summary Financial Report 2006

Financial Review

Credit Ratings

The current long term credit ratings of the Company are Ba1 by Moody’s Investor Service and BB+ by Standard & Poor’s. For both ratings, the credit outlook is stable. The Group’s new investments, which focus mainly in the areas where CITIC Pacific has greatest expertise, are expected to contribute significantly in both profit and cash flow to the Group in the coming years. The credit profile of the Group will be improved in due course. The Group’s objective is to maintain its financial discipline when expanding its businesses.

Forward Looking Statements

This Annual Report contains certain forward looking statements with respect to the financial condition, results of operations and business of the Group. These forward looking statements represent the Company’s expectations or beliefs concerning future events and involve know and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.

Forward looking statements involve inherent risks and uncertainties. Readers should be cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward looking statement.

CITIC Pacific Summary Financial Report 2006 39

Ten Year Statistics

	At year end (HK$ million) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
	Shareholders’ funds 39,827 41,426 37,580 40,650 40,781 41,742 37,848 36,921 39,103 46,510
	per share (HK$) 18.72 19.47 17.67 18.51 18.62 19.07 17.29 16.84 17.83 21.18
	Debt Debt 23,302 22,075 18,563 15,709 14,639 9,267 10,528 14,580 21,218 18,293
	Bank deposits 710 900 8,044 5,201 4,631 2,545 5,511 2,417 2,579 3,679
	Net debt / total capital 36% 34% 22% 21% 20% 14% 12% 25% 32% 24%
	Interest cover (times) 6 4 4 5 6 12 8 15 11 20
	Capital employed 63,129 63,501 56,143 56,359 55,420 51,009 48,376 51,501 60,321 64,803
	Property, plant and equipment 4,642 5,085 5,157 6,530 7,782 5,601 5,696 7,344 10,063 10,593
	Investment properties 3,534 5,299 5,374 5,531 5,357 8,493 7,923 8,115 8,645 9,604
	Properties under development 1,225 227 240 246 460 586 679 1,672 1,849 2,712
	Leasehold land 1,055 1,135 1,123 1,102 1,076 1,094 1,194 1,596 1,618 1,712
	Jointly controlled entities 859 831 1,396 2,019 2,365 3,582 4,085 7,852 10,583 15,051
	Associated companies 38,682 38,732 20,859 23,497 22,704 22,183 22,584 21,439 23,300 16,506
	Other financial assets 11,170 11,548 14,511 9,264 8,070 7,092 1,027 1,121 929 2,819
	Stockmarket capitalisation 65,520 35,530 62,230 60,720 37,993 31,514 43,332 48,444 47,038 58,952
	Number of shareholders 8,642 14,987 13,506 9,808 11,044 12,260 12,198 11,554 11,262 10,433
	Staff 11,800 11,871 10,490 11,354 11,733 11,643 12,174 15,915 19,174 23,822
	For the year (HK$ million)
	Net profit after tax Net profit after tax 7,195 2,622 2,729 3,283 2,084 3,835 1,148 3,534 3,989 8,272
	per share (HK$) 3.37 1.23 1.28 1.49 0.95 1.75 0.52 1.61 1.82 3.77
	Contribution by major businesses Special Steel 2 18 22 29 95 126 178 438 808 1,333
	Property 1,581 264 734 414 625 886 355 559 1,106 2,035
	Aviation 702 (11 ) 659 1,475 324 1,263 421 1,398 1,058 3,288
	Power Generation 170 230 440 314 281 245 229 439 368 268
	Civil Infrastructure 1,099 1,382 1,292 1,320 1,362 1,238 635 329 413 469
	Marketing& Distribution 360 330 230 226 119 227 264 284 232 275
	Communications 322 65 51 92 277 521 230 133 (31 ) 367
	Consumer Credit 84 167 – – – – – – – –
	Fair value change of investment properties – – – – – – (587 ) 181 755 1,077
	EBITDA 5,706 4,739 4,763 5,238 3,921 5,691 3,126 5,666 6,412 11,882
	Dividends per share (HK$)
	Regular 0.70 0.70 0.75 0.85 0.80 1.00 1.00 1.10 1.10 1.10
	Special 0.30 – 2.00 – – 1.00 – – – 0.6
	Cover (times) 2.7 1.8 1.7 1.8 1.2 1.8 0.5 1.5 1.7 3.4

Note:

Prior years’ figures have been restated to reflect the Group’s adoption of Hong Kong Financial Reporting Standards except the figures have not been adjusted for years 2001 and before following the adoption of revised accounting standard of HKAS 12 ‘Income Tax’ in year 2002.

40 CITIC Pacific Summary Financial Report 2006

Corporate Governance

Corporate Governance Practices

CITIC Pacific is committed to ensuring high standards of corporate governance and first class business practices. The Board believes that good corporate governance practices are increasingly important for maintaining and promoting investor confidence. Corporate governance requirements keep changing, therefore the Board reviews its corporate governance practices to ensure they meet stakeholders’ expectations, comply with legal and professional standards and reflect the latest local and international developments. The Board will continue to commit itself to achieving a high quality of corporate governance.

Throughout the year of 2006, CITIC Pacific has complied with all Code Provisions in the Code of Corporate Governance Practices (‘the Code’) contained in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. CITIC Pacific has also applied all the principles in the Code and the manner in which they are applied are explained in the following parts of the Corporate Governance Report.

Directors’ Securities Transactions

The Group has adopted the Model Code for Securities Transactions by Directors of Listed Companies (‘the Model Code’) contained in Appendix 10 of the Listing Rules. Having made specific enquiry, all Directors have fully complied with the required standard set out in the Model Code throughout the year of 2006.

Board of Directors

The Board currently comprises eleven executive and seven non-executive directors of whom four are independent as defined by the Stock Exchange (the biographies of the directors, together with information about the relationship among them, are set out in the 2006 Annual Report). Independent non-executive directors are nearly one-quarter and the non-executive directors are about one-third of the Board.

Under the Company’s Articles of Association, every director is subject to retirement by rotation at least once every three years. One-third of the directors must retire from office at each annual general meeting and their re-election is subject to a vote of shareholders.

The Board determines the overall strategies, monitors and controls operating and financial performance and sets appropriate policies to manage risks in pursuit of the Group’s strategic objectives. Day-to-day management of the Group’s businesses is delegated to the executive director or officer in charge of each division. The functions and power that are so delegated are reviewed periodically to ensure that they remain appropriate. Matters reserved for the Board are those affecting the Group’s overall strategic policies, finances and shareholders including financial statements, dividend policy, significant changes in accounting policy, material contracts and major investments. All Board members have separate and independent access to the Group’s senior management to fulfil their duties. They also have full and timely access to relevant information about the Group and are kept abreast of the conduct, business activities and development of the Group. Independent professional advice can be sought at the Group’s expense upon their request.

CITIC Pacific Summary Financial Report 2006 41

Corporate Governance

The Board meets regularly to review the financial and operating performance of the Group and other business units, and approve future strategy. Four Board meetings were held in 2006. Individual attendance of each director at the Board meetings, the Audit Committee meetings and the Remuneration Committee meeting during 2006 is set out below:

	Director	Attendance / Number of Meetings
		Audit Remuneration Board Committee Committee
	Executive Director Mr Larry Yung Chi Kin – Chairman	4/4
	Mr Henry Fan Hung Ling – Managing Director	4/4
	Mr Peter Lee Chung Hing	4/4
	Mr Carl Yung Ming Jie	4/4
	Mr Leslie Chang Li Hsien	4/4
	Mr Vernon Francis Moore	4/4
	Mr Li Shilin	2/4
	Mr Liu Jifu	4/4
	Mr Chau Chi Yin (appointed on 1st April 2006)	3/3
	Mr Milton Law Ming To (appointed on 1st April 2006)	3/3
	Mr Wang Ande (appointed on 1st April 2006)	3/3
	Mr Norman Yuen Kee Tong (resigned on 8th January 2007)	4/4
	Mr Yao Jinrong (resigned on 1st April 2006)	0/1
	Independent Non-executive Director Mr Hamilton Ho Hau Hay	3/4
	Mr Alexander Reid Hamilton (Chairman of the Audit Committee)	3/4 4/4 2/2
	Mr Hansen Loh Chung Hon	4/4 4/4
	Mr Norman Ho Hau Chong (Chairman of the Remuneration Committee)	4/4 2/2
	Non-executive Director Mr Willie Chang	4/4 3/4 2/2
	Mr André Desmarais (Two of the meetings were attended by the alternate of Mr André Desmarais)	4/4
	Mr Chang Zhenming (appointed on 21st August 2006)	0/1

To implement the strategies and plans adopted by the Board effectively, an executive committee of selected executive directors and senior managers meets monthly to review the performance of the businesses of the Group, co-ordinate overall resources and make financial and operational decisions.

42 CITIC Pacific Summary Financial Report 2006

Corporate Governance

Chairman and Chief Executive Officer

The Group has appointed a Chairman, Mr Larry Yung and a Managing Director, Mr Henry Fan, who is the Chief Executive Officer described in Appendix 14 of the Listing Rules. The roles of the Chairman and the Managing Director are segregated. The primary role of the Chairman is to provide leadership for the Board and to ensure that it works effectively in the discharge of its responsibilities. The Managing Director is responsible for the dayto-day management of the Group’s business. Their respective roles and responsibilities are set out in writing which has been approved and adopted by the Board.

Non-executive Directors

There are currently seven non-executive directors of whom four are independent. Under Article 104(A) of the Company’s Articles of Association, every director, including the non-executive director, shall be subject to retirement by rotation at least once every three years. This means that the specific term of appointment of a director cannot exceed three years.

Remuneration of Directors

The Remuneration Committee, established in August 2003, has clear terms of reference and is accountable to the Board. The terms of reference can be found in the Group’s website (www.citicpacific.com). The principle role of the committee is to exercise the powers of the Board to determine and review the remuneration packages of individual executive directors and senior management, including salaries, bonuses, benefits in kind and the terms on which they participate in any share option and other plans considering factors such as salaries paid by comparable companies, time commitment and responsibilities of the directors and senior management, employment conditions elsewhere in the Group and desirability of performance-based remuneration so as to align management incentives with shareholder interests.

During 2006, the Remuneration Committee reviewed the remuneration policies and approved the salary and bonus of the executive directors and senior management. No executive director has taken part in any discussion about his own remuneration. Its members comprise:

Mr Norman Ho Hau Chong – Chairman Mr Alexander Reid Hamilton Mr Willie Chang

Two meetings were held in 2006. All Committee members are non-executive directors and a majority including the Chairman are independent.

The fee for each individual director sitting on the Board is HK$150,000 per annum. The additional fees for the directors serving in the Audit Committee and the Remuneration Committee are HK$100,000 per annum and HK$50,000 per annum respectively.

CITIC Pacific Summary Financial Report 2006 43

Corporate Governance

Nomination of Directors

There is no nomination committee in the Group for the time being.

Candidates to be nominated as directors are experienced, high calibre individuals. During the year, appointment of Mr Chau Chi Yin, Mr Milton Law Ming To and Mr Wang Ande as new directors was put to the full Board for approval. They were re-elected by shareholders at the first annual general meeting after their appointment. Mr Chang Zhenming is a director appointed by the Board on 21st August 2006 and will be subject to re-election at the forthcoming annual general meeting.

Auditor’s Remuneration

PricewaterhouseCoopers has been appointed by the shareholders annually as CITIC Pacific’s external auditors since 1989. During the year, the fees charged to the accounts of the Company and its subsidiaries for PricewaterhouseCoopers’ statutory audit amounted to approximately HK$9 million (2005: HK$8 million), in addition approximately HK$3 million (2005: HK$1 million) was charged for other services. The non-statutory audit services mainly consist of special audits, tax compliance and the interim review. The cost of recurring audit services of subsidiaries performed by other auditors amounted to approximately HK$9 million (2005: HK$8 million).

Audit Committee

The Board established an Audit Committee in 1995. The Audit Committee has clear terms of reference and is accountable to the Board. The terms of reference can be found in the Group’s website (www.citicpacific.com). It assists the Board in meeting its responsibilities for ensuring an effective system of internal control and compliance, and in meeting its external financial reporting objectives. All Committee members are nonexecutive directors and a majority including the Chairman are independent. Its members comprise:

Mr Alexander Reid Hamilton – Chairman

Mr Hansen Loh Chung Hon Mr Willie Chang

The Committee members possess diversified industry experience and the Chairman has appropriate professional qualifications and experience in accounting matters. The Committee meets four times each year, together with senior management and auditors, both internal and external.

During 2006, the Audit Committee considered the external auditors’ projected audit fees; discussed with the external auditors their independence and the nature and scope of the audit; reviewed the interim and annual financial statements, particularly judgmental areas, before submission to the Board; reviewed the internal audit programme, findings and management’s response; reviewed the Group’s adherence to the Code Provisions in the Code of Corporate Governance Practices. As a result, they recommended the Board to adopt the interim and annual report for 2006.

Internal Controls

The Board is responsible for maintaining an adequate system of internal control and reviewing its effectiveness.

44 CITIC Pacific Summary Financial Report 2006

Corporate Governance

The internal control system is designed to facilitate the effectiveness and efficiency of operations, safeguard assets against unauthorized use and disposition, ensure the maintenance of proper accounting records and the truth and fairness of the financial statements, and ensure compliance with relevant legislation and regulations. It provides reasonable, but not absolute, assurance against material mis-statement or loss and management rather than elimination of risks associated with its business activities.

During the year, the Board has reviewed the effectiveness of the Group’s internal control system covering all material controls and risk management functions. The review is conducted annually in accordance with the requirement of the Code of Corporate Governance Practices. The responsible management of the various business divisions and subsidiaries are required to assess the risks and the internal controls with reference to the five components of the coso (The Committee of Sponsoring Organisations of the Treadway Commission) internal control framework. The result of the review has been summarised and reported through the Group Internal Audit Department to the Audit Committee and the Board.

In addition, the Group Internal Audit Department conducts regular and independent reviews of the effectiveness of the Group’s internal control system. The Audit Committee reviews the findings and opinion of Group Internal Audit Department on the effectiveness of the Group’s internal control system quarterly and reports to the Board on such reviews.

Internal Audit

The Group Internal Audit Department supports management by carrying out systematic independent reviews of all business units and subsidiaries in the Group on an ongoing basis. The frequency of review of individual business unit or subsidiary is determined after an assessment of the risks involved. The Audit Committee endorses the internal audit programme annually. The Group Internal Audit Department has unrestricted access to all parts of the business, and direct access to any level of management including the Chairman, or the Chairman of the Audit Committee, as it considers necessary. The Group Internal Audit Department submits regular reports for the Audit Committee’s review in accordance with the approved internal audit programme. Concerns which have been reported by the Group Internal Audit Department are monitored quarterly by management until appropriate remedial actions have been taken.

Codes

To ensure the highest standard of integrity in our businesses, the Group adopted a Code of Conduct defining the ethical standards expected of all employees, and the Group’s non-discriminatory employment practices. Training courses on the Code of Conduct are held regularly for all employees and the Audit Committee receives a report on the operation, and the need for revision, of the Code of Conduct every year.

Throughout the year of 2006, the Group has complied with the Code Provisions in the Code of Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of the Hong Kong Limited.

The Group has endorsed the guide to good employment practices issued by the Employers’ Federation of Hong Kong to promote good and responsible employment standards.

CITIC Pacific Summary Financial Report 2006 45

Corporate Governance

Notifiable Transactions and Connected Transactions

During the year 2006, CITIC Pacific has issued press announcements in respect of a number of ‘notifiable transactions’ and ‘connected transactions’ which can be viewed in the Group’s website (www.citicpacific.com).

Communication with Shareholders

The Company’s Annual General Meeting (‘agm’) is one of the principal channels of communication with its shareholders. It provides an opportunity for shareholders to ask questions about the Company’s performance. Separate resolutions were proposed for each substantially separate issue at the agm.

The Company’s Articles of Association contain the rights of shareholders to demand and the procedures for a poll voting on resolutions at shareholders’ meetings. Details of such rights to demand a poll and the poll procedures are included in all circulars in relation to shareholders’ meetings and will be explained during the proceedings of shareholders’ meetings. In case poll voting is conducted, the poll results will be published in newspapers on the business day following the shareholders’ meeting and posted on the websites of the Stock Exchange and the Company.

Fair Disclosure and Investor Relations

CITIC Pacific uses its best endeavours to distribute material information about the Group to all interested parties as widely as possible. When announcements are made through the Hong Kong Stock Exchange the same information will be sent to journalists and investment analysts where an e-mail address or fax number is known and will be available to shareholders on the Company’s website.

CITIC Pacific recognises its responsibility to explain its activities to those with a legitimate interest and to respond to their questions. Investors are regularly received and visited to explain the Group’s businesses. In 2006, CITIC Pacific’s management met over 230 investors and investment analysts in our office, as well as during conferences and roadshows in the U.S., Europe, China, Japan and Singapore. In addition, questions received from the general public and individual shareholders were answered promptly. In all cases great care has been taken to ensure that no price sensitive information is disclosed.

Information about CITIC Pacific can be found in the Group’s website including descriptions of each business and the Annual Reports for last eight years.

Financial Reporting

The Directors acknowledge their responsibility for preparing the Company’s accounts which give a true and fair view and are in accordance with generally accepted accounting standards published by the Hong Kong Institute of Certified Public Accountants. The Directors endeavour to ensure a balanced, clear and understandable assessment of the Group’s performance, position and prospects in financial reporting. Accordingly, appropriate accounting policies are selected and applied consistently; judgments and estimates made are prudent and reasonable. Hong Kong accounting standards have always broadly followed international accounting standards. The adoption of new or amended accounting standards that became effective during the year has not resulted in substantial changes to the Group’s accounting policies and has no significant impact on the results reported for the year ended 31 December 2006.

The responsibilities of the external auditors with respect to financial reporting are set out in the Independent Auditor’s Statement on the Summary Financial Report on page 64.

46 CITIC Pacific Summary Financial Report 2006

Directors’ Report

The Directors have pleasure in presenting to shareholders their report for the year ended 31 December 2006.

Principal Activities

The principal activity of the Company is holding its subsidiary companies and the principal activities of its subsidiary companies and associated companies and their major areas of operation are set out in the Business Review on pages 6 to 27.

Dividends

The Directors declared an interim dividend of HK$0.30 per share and a special dividend of HK$0.30 per share in respect of the year ended 31 December 2006 which were paid on 15 September 2006. The Directors recommended, subject to the approval of the shareholders at the forthcoming Annual General Meeting, the payment of a final dividend of HK$0.80 per share and a special dividend of HK$0.30 per share in respect of the year ended 31 December 2006 payable on 18 May 2007 to shareholders on the Register of Members at the close of business on 16 May 2007.

Reserves

The amounts and particulars of transfer to and from reserves during the year are set out in Note 5 to the summary financial statements.

Donations

Donations made by the Group during the year amounted to HK$11 million.

Fixed Assets

Movements of fixed assets are set out in the summary financial statements on pages 60 to 61.

Issue of Debt Securities

On 1 June 2001, CITIC Pacific Finance (2001) Limited, a wholly owned subsidiary of the Company, issued and sold a total of US$450 million principal amount of 7.625% guaranteed notes due 2011 (‘Guaranteed Notes’) for refinancing the indebtedness of the Company and for general corporate purposes, to investors pursuant to the purchase agreements dated 24 May 2001 and 1 June 2001. All of the Guaranteed Notes remained outstanding at the end of the year.

CITIC Pacific Summary Financial Report 2006 47

Directors’ Report

On 26 October 2005, CITIC Pacific Finance (2005) Limited, a wholly owned subsidiary of the Company, issued and sold jpy 8.1 billion in aggregate principal amount of guaranteed floating rate notes due 2035 (‘jpy Notes’) to investors for general corporate purposes pursuant to a subscription agreement dated 26 October 2005. The coupon and principal of the jpy Notes was swapped into Hong Kong Dollar through cross currency swap and net proceeds equivalent to HK$400 million was received. The jpy Notes holders have a one time right to put the jpy Notes to the issuer at 81.29% of the principal amount together with accrued interest on 28 October 2015. All of the jpy Notes remained outstanding at the end of the year.

Save as aforesaid, neither the Company nor its subsidiary companies have issued any debt securities.

Directors

The Directors of the Company in office during the financial year ended 31 December 2006 were:

Mr Larry Yung Chi Kin Mr Henry Fan Hung Ling Mr Peter Lee Chung Hing Mr Carl Yung Ming Jie Mr Leslie Chang Li Hsien Mr Norman Yuen Kee Tong Mr Vernon Francis Moore Mr Yao Jinrong, resigned on 1 April 2006 Mr Li Shilin Mr Liu Jifu Mr Chau Chi Yin, appointed on 1 April 2006 Mr Milton Law Ming To, appointed on 1 April 2006 Mr Wang Ande, appointed on 1 April 2006 Mr Willie Chang Mr Hamilton Ho Hau Hay Mr Alexander Reid Hamilton Mr Hansen Loh Chung Hon Mr Norman Ho Hau Chong Mr André Desmarais Mr Chang Zhenming, appointed on 21 August 2006 Mr Peter Kruyt (Alternate Director to Mr André Desmarais)

Mr Norman Yuen Kee Tong resigned as director with effect from 8 January, 2007.

In accordance with Article 95 of the New Articles of Association of the Company, Mr Chang Zhenming will hold office only until the forthcoming Annual General Meeting and is then eligible for re-election. In addition, pursuant to Article 104(A) of the New Articles of Association of the Company, Messrs Larry Yung Chi Kin, Peter Lee Chung Hing, Vernon Francis Moore, Liu Jifu, Willie Chang and Norman Ho Hau Chong shall retire by rotation in the forthcoming Annual General Meeting and all, being eligible, offer themselves for re-election.

48 CITIC Pacific Summary Financial Report 2006

Directors’ Report

The Company has received from each independent non-executive director an annual confirmation of his independence pursuant to the new independence guidelines under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (‘Listing Rules’) and that the Company still considers such directors to be independent.

Management Contract

The Company entered into a management agreement with CITIC Hong Kong (Holdings) Limited (‘CITIC hk’) on 11 April 1991 but with retrospective effect from 1 March 1990 in which CITIC hk agreed to provide management services to the Company and its subsidiary companies for a management fee calculated on a cost basis to CITIC hk payable quarterly in arrears. The management agreement is terminable by two months’ notice by either party. Messrs Larry Yung Chi Kin, Henry Fan Hung Ling, Vernon Francis Moore and Liu Jifu had indirect interests in the management agreement as they are directors of CITIC hk. A copy of the management agreement will be available for inspection at the Annual General Meeting of the Company to be held on 16 May 2007.

Directors’ Interests in Contracts of Significance

None of the directors of the Company has or at any time during the year had, an interest which is or was material, either directly or indirectly, in any contract with the Company or any of its subsidiary companies, which was significant in relation to the business of the Company, and which was subsisting at the end of the year or which had subsisted at any time during the year.

Share Option Plan

The Company adopted the CITIC Pacific Share Incentive Plan 2000 (‘the Plan’) on 31 May 2000.

Since the adoption of the Plan, the Company has granted three lots of share options:

		exercise price
date of grant	number of share options	HK$
28 May 2002	11,550,000	18.20
1 November 2004	12,780,000	19.90
20 June 2006	15,930,000	22.10

All options granted and accepted can be exercised in whole or in part within 5 years from the date of grant. The closing price of the Company’s shares immediately before the grant on 20 June 2006 was HK$22.50.

CITIC Pacific Summary Financial Report 2006 49

Directors’ Report

None of the share options granted under the Plan were cancelled or lapsed during the year up to 31 December 2006. A summary of the movements during the year ended 31 December 2006 of the share options is as follows:

A. Directors of the Company

A. Directors of the Company
exercise date of price name of director grant HK$	number of share options	percentage of balance as at issued share 31.12.06 capital %
	granted during exercised during balance as at the year ended the year ended 1.1.06 31.12.06 31.12.06
Larry Yung Chi Kin 28.5.02 18.2 1.11.04 19.9 5.12.05 20.5 20.6.06 22.1	2,000,000 – – 2,000,000 – – 100,000,000 – – (Note 1) – 2,000,000 –	2,000,000 2,000,000 100,000,000 2,000,000 106,000,000 4.828
Henry Fan Hung Ling 20.6.06 22.1	– 1,600,000 1,600,000 (Note 2)	– –
Peter Lee Chung Hing 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	1,000,000 – – 1,000,000 – – – 1,200,000 –	1,000,000 1,000,000 1,200,000 3,200,000 0.146
Carl Yung Ming Jie 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	300,000 – – 500,000 – – – 600,000 –	300,000 500,000 600,000 1,400,000 0.064
Leslie Chang Li Hsien 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	300,000 – – 500,000 – – – 800,000 –	300,000 500,000 800,000 1,600,000 0.073
Norman Yuen Kee Tong 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	500,000 – – 500,000 – – – 500,000 –	500,000 500,000 500,000 1,500,000 0.068
Vernon Francis Moore 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	1,000,000 – – 1,000,000 – – – 700,000 –	1,000,000 1,000,000 700,000 2,700,000 0.123
Yao Jinrong 28.5.02 18.2 1.11.04 19.9	300,000 – – 500,000 – –	(Note 3) (Note 3)
Li Shilin 28.5.02 18.2	300,000 – –	300,000 0.014
Liu Jifu 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	300,000 – 300,000 (Note 2) 500,000 – – – 700,000 –	– 500,000 700,000 1,200,000 0.055

50 CITIC Pacific Summary Financial Report 2006

Directors’ Report

exercise date of price name of director grant HK$	number of share options	percentage of balance as at issued share 31.12.06 capital %
	granted during exercised during balance as at the year ended the year ended 1.1.06 31.12.06 31.12.06
Chau Chi Yin 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	300,000 – – (Note 4) 500,000 – – (Note 4) – 800,000 – (Note 4)	300,000 500,000 800,000 1,600,000 0.073
Milton Law Ming To 28.5.02 18.2 1.11.04 19.9 20.6.06 22.1	250,000 – – (Note 4) 500,000 – – (Note 4) – 800,000 – (Note 4)	250,000 500,000 800,000 1,550,000 0.071
Wang Ande 1.11.04 19.9 20.6.06 22.1	200,000 – – (Note 4) – 500,000 – (Note 4)	200,000 500,000 700,000 0.032

Note:

1. These share options were granted by CITIC HK, a substantial shareholder of the Company, and can be exercised during the period from 5 December 2008 to 4 December 2010.

2. The weighted average closing price of the shares of the Company immediately before the dates on which the options were exercised was HK$ 22.918.

3. The Director resigned as a director on 1 April 2006. During the period from 1 January 2006 to 1 April 2006, the Director has not exercised any of his share options and his holding has subsequently been included under Section C below.

4. Messrs Chau Chi Yin, Milton Law Ming To and Wang Ande were appointed as director of the Company on 1 April 2006. Thus, this is in respect of the balance as of 1 April 2006.

B. Employees of the Company working under continuous contracts (as defined in the Employment Ordinance), other than the Directors

B. Employees of the Company working Ordinance), other than the Directors	under continuous contracts (as defined in the Employment
exercise price date of grant HK$	number of share options
	exercised during granted during the year ended balance as at the year ended 31.12.06 balance as at 1.1.06 31.12.06 (Note 5) 31.12.06
28.5.02 18.2	1,550,000 – 750,000 800,000
1.11.04 19.9	3,070,000 – 651,000 2,419,000
20.6.06 22.1	– 5,730,000 – 5,730,000

Note:

5. The weighted average closing price of the shares of the Company immediately before the dates on which the options were exercised was HK$25.55.

CITIC Pacific Summary Financial Report 2006 51

Directors’ Report

C. Others

C. Others
exercise price date of grant HK$	number of share options
	balance as at exercised during 1.1.06 the year ended 31.12.06 balance as at (Note 6) (Note 7) 31.12.06
28.5.02 18.2	600,000 510,000 90,000
1.11.04 19.9	700,000 500,000 200,000

Note:

6. These are in respect of options granted to former employees under continuous contracts, who had subsequently retired.

7. The weighted average closing price of the shares of the Company immediately before the dates on which the options were exercised was HK$22.78.

Directors’ Interests In Securities

The interests of the directors in shares of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (‘sfo’)) as at 31 December 2006 as recorded in the register required to be kept under section 352 of the sfo were as follows:

1. Shares in the Company

1. Shares in the Company
name of director	number of shares percentage to the personal interests unless issued share capital otherwise stated %
Larry Yung Chi Kin	400,381,000 18.236 (Note 1)
Henry Fan Hung Ling	48,000,000 2.186 (Note 2)
Peter Lee Chung Hing	500,000 0.023
Leslie Chang Li Hsien	30,000 0.001
Norman Yuen Kee Tong	33,000 0.002
Vernon Francis Moore	3,200,000 0.146 (Note 3)
Liu Jifu	340,000 0.015
Chau Chi Yin	236,000 0.011
Milton Law Ming To	3,000 0.0001
Wang Ande	50,000 0.002
Hansen Loh Chung Hon	1,550,000 0.071 (Note 4)
André Desmarais	5,075,000 0.231 (Note 5)
Peter Kruyt (alternate director to Mr André Desmarais)	34,100 0.002

Note:

1. Corporate interest.

2. Corporate interest in respect of 3,000,000 shares and trust interest in respect of 45,000,000 shares.

3. Trust interest.

4. Personal interest in respect of 1,050,000 shares; corporate interest in respect of 500,000 shares and family interest in respect of 500,000 shares which duplicate each other.

• 5.Corporate interest in respect of 5,000,000 shares and family interest in respect of 75,000 shares.

52 CITIC Pacific Summary Financial Report 2006

Directors’ Report

2. Share Options in the Company

The interests of the directors in the share options (being regarded as unlisted physically settled equity derivatives) of the Company are stated in detail in the preceding section of Share Option Plan.

3. Share Options in an associated corporation, CITIC Capital Holdings Limited

			number	of share options
				lapsed / cancelled /
		balance	granted during	exercised during	balance	percentage of
		as at	the year ended	the year ended	as at	issued share
name of director	date of grant	1.1.06	31.12.06	31.12.06	31.12.06	capital %
Peter Lee Chung Hing	2.3.05	15,000	–	–	25,000	0.089
	4.4.06	–	10,000
Leslie Chang Li Hsien	2.3.05	15,000	–	–	25,000	0.089
	4.4.06	–	10,000
Vernon Francis Moore	2.3.05	15,000	–	–	25,000	0.089
	4.4.06	–	10,000

Save as disclosed above, as at 31 December 2006, none of the directors of the Company had nor were they taken to or deemed to have, under Part XV of the sfo, any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations or any interests which are required to be entered into the register kept by the Company pursuant to section 352 of the sfo or any interests which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules.

Save as disclosed above, at no time during the year was the Company or any of its subsidiary companies a party or parties to any arrangement to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Substantial Shareholders

As at 31 December 2006, the interests of the substantial shareholders, other than the directors of the Company or their respective associate(s), in the shares of the Company as recorded in the register of interests in shares and short positions required to be kept under section 336 of the sfo were as follows:

		percentage to the
	number of shares	issued share capital
name	of the Company	%
CITIC Group	635,919,285	28.963
CITIC HK	635,919,285	28.963
Heedon Corporation	496,386,285	22.608
Honpville Corporation	310,988,221	14.164
Power Corporation of Canada	110,412,000	5.029
Gelco Enterprises Ltd.	110,412,000	5.029
Nordex Inc.	110,412,000	5.029
Paul G. Desmarais	110,412,000	5.029

CITIC Pacific Summary Financial Report 2006 53

Directors’ Report

CITIC hk is a substantial shareholder of the Company indirectly through the following wholly owned subsidiary companies:

companies:
		percentage to the
	number of shares	issued share capital
name of subsidiary companies of CITIC HK	of the Company	%
Affluence Limited	46,089,000	2.099
Winton Corp.	30,718,000	1.399
Westminster Investment Inc.	101,960,000	4.644
Jetway Corp.	20,462,000	0.932
Cordia Corporation	32,258,064	1.469
Honpville Corporation	310,988,221	14.164
Hainsworth Limited	83,444,000	3.801
Southpoint Enterprises Inc.	10,000,000	0.455
Raymondford Company Limited	2,823,000	0.129

Each of Affluence Limited, Winton Corp., Westminster Investment Inc., Jetway Corp., Cordia Corporation, Honpville Corporation, Hainsworth Limited, Southpoint Enterprises Inc. and Raymondford Company Limited holds the shares of the Company beneficially. Accordingly, Honpville Corporation is a substantial shareholder of the Company.

CITIC Group is the direct holding company of CITIC hk. CITIC hk is the direct holding company of Heedon Corporation, Hainsworth Limited, Affluence Limited and Barnsley Investments Limited. Heedon Corporation is the direct holding company of Winton Corp., Westminster Investment Inc., Jetway Corp., Kotron Company Ltd. and Honpville Corporation and Kotron Company Ltd. is the direct holding company of Cordia Corporation. Affluence Limited is the direct holding company of Man Yick Corporation which is the direct holding company of Raymondford Company Limited. Barnsley Investments Limited is the direct holding company of Southpoint Enterprises Inc. Accordingly, the interests of CITIC Group in the Company duplicate the interests of CITIC hk in the Company. The interests of CITIC hk in the Company duplicate the interests in the Company of all its direct and indirect subsidiary companies as described above. The interests of Heedon Corporation in the Company duplicate the interests in the Company of all its direct and indirect subsidiary companies as described above. The interests of Affluence Limited in the Company duplicate the interests in the Company of its direct subsidiary company as described above. The interests of Man Yick Corporation in the Company duplicate the interests in the Company of its direct subsidiary company as described above. The interests of Barnsley Investments Limited in the Company duplicate the interests in the Company of its direct subsidiary company as described above and the interests of Kotron Company Ltd. in the Company duplicate the interests in the Company of its direct subsidiary company as described above.

54 CITIC Pacific Summary Financial Report 2006

Directors’ Report

Power Corporation of Canada is a company 54.18% controlled by Gelco Enterprises Ltd. which in turn is 94.95% controlled by Nordex Inc. and the remainder by Mr Paul G. Desmarais. Nordex Inc. in turn is 68% controlled directly by Mr Paul G. Desmarais and indirectly as to 32% by the latter. Thus, the aforesaid interests of Power Corporation of Canada, Gelco Enterprises Ltd., Nordex Inc. and Mr Paul G. Desmarais in the Company duplicate each other.

Share Capital

During the year ended 31 December 2006, the Company made the following repurchases of its own shares on the Stock Exchange for purpose of enhancing its earnings per share:

number of shares month / year repurchased	priceper share aggregate highest (HK$) lowest (HK$) price paid (HK$)
June 2006 1,627,000	22.00 21.50 35,402,100

These repurchased shares were cancelled upon repurchase and accordingly the issued share capital of the Company was reduced by the nominal value of these shares. The premium payable on repurchase was charged against retained profit. An amount equivalent to the nominal value of the shares cancelled of approximately HK$1 million was transferred from retained profit to capital redemption reserve.

Save as disclosed above, neither the Company nor any of its subsidiary companies has purchased or sold any of the Company’s shares during the year ended 31 December 2006 and the Company has not redeemed any of its shares during the year ended 31 December 2006.

During the year, 4,311,000 shares were issued under the Share Option Plan as described above.

Auditors

The accounts for the year have been audited by PricewaterhouseCoopers who shall retire and, being eligible, shall offer themselves for re-appointment.

By Order of the Board, Larry Yung Chi Kin Chairman Hong Kong, 15 March 2007

CITIC Pacific Summary Financial Report 2006 55

for the year ended 31 December 2006

Consolidated Profit and Loss Account

in HK$ million 2006 2005	in HK$ million 2006 2005
Turnover 47,049 26,564
Cost of Sales (37,019 ) (21,226 )
Distribution and Selling Expenses (995 ) (824 )
Other Operating Expenses (2,845 ) (2,196 )
Change in Fair Value of Investment Properties 735 520
Profit from Consolidated Activities 6,925 2,838
Share of Results of Jointly Controlled Entities 1,033 327
Associated Companies 1,882 1,984
Profit before Net Finance Charges and Taxation 9,840 5,149
Finance Charges	(640 ) (560 )
Finance Income	159 53
Net Finance Charges (481 ) (507 )
Profit before Taxation 9,359 4,642
Taxation (644 ) (345 )
Profit for the Year 8,715 4,297
Attributable to: Shareholders of the Company 8,272 3,989
Minority Interests 443 308
8,715 4,297
Dividends (3,731 ) (2,412 )
Earnings per Share for Profit attributable to Shareholders of the Company during the year (HK$) Basic 3.77 1.82
Diluted 3.77 1.82

56 CITIC Pacific Summary Financial Report 2006

Consolidated Balance Sheet

as at 31 December 2006

in HK$ million note 2006 2005	in HK$ million note 2006 2005
Non-Current Assets Fixed Assets 4 Property,plant and equipment 10,593 10,063
Investmentproperties 9,604 8,645
Properties under development 2,712 1,849
Leasehold land 1,712 1,618
24,621 22,175
Jointlycontrolled entities 15,051 10,583
Associated companies 16,506 23,300
Other financial assets 2,819 929
Intangible assets 2,986 603
Deferred tax assets 103 158
Derivative financial instruments 117 168
62,203 57,916
Current Assets
Properties held for sale	705 1,055
Inventories	3,920 3,427
Debtors, accounts receivable, deposits andprepayments	6,153 5,691
Cash and bank deposits	3,679 2,579
14,457 12,752
Current Liabilities Bank loans, other loans and overdrafts
secured	285 183
unsecured	1,404 2,223
Creditors, accountspayable, deposits and accruals	8,030 6,628
Provision for taxation	319 199
10,038 9,233
Net Current Assets 4,419 3,519
Total Assets Less Current Liabilities 66,622 61,435
Non-Current Liabilities
Longterm borrowings	16,604 18,812
Deferred tax liabilities	1,954 1,387
Derivative financial instruments	55 40
18,613 20,239
Net Assets 48,009 41,196
EQUITY Share capital 878 877
Reserves 5 43,217 36,472
Proposed dividend 2,415 1,754
Equityattributable to Shareholders of the Company 46,510 39,103
MinorityInterests 1,499 2,093
Total Equity 48,009 41,196

Larry Yung Chi Kin Director

Henry Fan Hung Ling Director

CITIC Pacific Summary Financial Report 2006 57

Notes to the Summary Financial Statements

Notes to the Summary Financial Statements

1 General Information

These summary financial statements from page 56 to 63 are not the Group’s statutory financial statements and they do not contain sufficient information to allow as full an understanding of the results and state of affairs of the Group as would be provided by the full Annual Report.

2 Significant Accounting Policies

Basis of Preparation

These summary financial statements have been prepared from the consolidated financial statements of the Group for the year ended 31 December 2006 (‘the Accounts’).

The Accounts are consistent with those adopted in the annual accounts for the year ended 31 December 2005 except for the adoption of certain new standards and amendments of Hong Kong Financial Reporting Standards issued and became effective during the year ended 31 December 2006.

The adoption of such standards or amendments does not result in substantial changes to the Group’s accounting policies and has no significant effect on the results reported for the year ended 31 December 2006.

The Group has not early adopted the amendments, new standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants that are not yet effective for the year ended 31 December 2006, and is in the process of assessing their impact on future accounting periods.

58 CITIC Pacific Summary Financial Report 2006

Notes to the Summary Financial Statements

3 Directors’ Emoluments

The remuneration of every Director for the year ended 31 December 2006 is set out below:

		salaries,
		allowances
in hk$ million name of director	fees	and benefts in kind	discretionary bonuses	retirement benefts	share-based payment	2006 total	2005 total
Larry Yung Chi Kin#	0.15	3.21	40.00	0.01	7.84	51.21	28.96
Henry Fan Hung Ling#	0.15	3.00	34.00	0.01	6.27	43.43	24.94
Peter Lee Chung Hing#	0.15	1.69	27.00	0.08	4.70	33.62	18.91
Carl Yung Ming Jie#	0.15	0.84	5.00	0.04	2.35	8.38	2.53
Leslie Chang Li Hsien#	0.15	1.38	10.00	0.06	3.14	14.73	7.23
Vernon Francis Moore#	0.15	2.00	5.00	0.01	2.74	9.90	6.15
Li Shilin#	0.15	0.49	1.00	–	–	1.64	1.64
Liu Jifu#	0.15	0.55	7.00	0.07	2.74	10.51	5.65
Chau Chi Yin#	0.11	1.07	6.00	0.05	3.14	10.37	–
Milton Law Ming To#	0.11	0.98	6.00	0.05	3.14	10.28	–
Wang Ande#	0.11	0.40	3.00	–	1.96	5.47	–
Norman Yuen Kee Tong#	0.15	4.31	5.00	0.14	1.96	11.56	9.58
Yao Jinrong#	0.04	0.16	–	–	–	0.20	2.29
Willie Chang	0.30	–	–	–	–	0.30	0.30
Hamilton Ho Hau Hay	0.15	–	–	–	–	0.15	0.15
Alexander Reid Hamilton	0.30	–	–	–	–	0.30	0.30
Hansen Loh Chung Hon	0.25	–	–	–	–	0.25	0.25
Norman Ho Hau Chong	0.20	–	–	–	–	0.20	0.20
André Desmarais	0.15	–	–	–	–	0.15	0.15
Chang Zhenming	0.06	–	1.00	–	–	1.06	0.43
	3.13	20.08	150.00	0.52	39.98	213.71	109.66

The five highest paid individuals of the Group during the year were also directors and their emoluments are reflected in the analysis presented above.

During the year, 10,200,000 share options were granted (2005: Nil) to directors of the Company under the CITIC Pacific Share Incentive Plan 2000.

Mr Yao Jinrong resigned during the year.

The executive directors marked ‘[#] ’ of the above being considered as key management personnel of the Group.

CITIC Pacific Summary Financial Report 2006 59

Notes to the Summary Financial Statements

4 Fixed Assets

Group

Group
In hk$ million	property, plant and equipment properties self-used vehicular plant and investment under leasehold properties tunnel machinery others sub-total properties development land total
Cost or valuation
At 1 January 2005	2,363 1,992 3,869 2,773 10,997 8,115 1,725 1,802 22,639
Exchange adjustments	16 – 83 18 117 (35 ) 18 13 113
Additions through acquisition of subsidiary companies	491 – 1,095 3 1,589 – 271 30 1,890
others	30 8 413 1,533 1,984 – 1,323 21 3,328
Capitalised leasehold land amortisation	– – – – – – 27 – 27
Disposals through disposal of subsidiary companies	– – – (31 ) (31 ) – (520 ) – (551 )
others	(10 ) – (42 ) (210 ) (262 ) (3 ) (56 ) – (321 )
Change in fair value of investment properties	– – – – – 520 – – 520
Transfer from / (to) other assets	– – – – – 6 (910 ) – (904 )
Reclassifcation	276 – (139 ) (169 ) (32 ) 42 (2 ) (8 ) –
At 31 December 2005	3,166 2,000 5,279 3,917 14,362 8,645 1,876 1,858 26,741
Accumulated depreciation, amortisation and impairment
At 1 January 2005	519 714 1,004 1,416 3,653 – 53 206 3,912
Exchange adjustments	2 – 24 6 32 – – – 32
Charge for the year	69 94 347 264 774 – 27 34 835
Written back on disposals through disposal of subsidiary companies	– – – (4 ) (4 ) – – – (4 )
others	(5 ) – (21 ) (130 ) (156 ) – – – (156 )
Transfer to property held for sale	– – – – – – (53 ) – (53 )
Reclassifcation	1 – (1 ) – – – – – –
At 31 December 2005 586 808 1,353 1,552 4,299 – 27 240 4,566
Net book value At 31 December 2005 2,580 1,192 3,926 2,365 10,063 8,645 1,849 1,618 22,175
Represented by Cost 3,166 2,000 5,279 3,917 14,362 – 1,876 1,858 18,096
Valuation – – – – – 8,645 – – 8,645
3,166 2,000 5,279 3,917 14,362 8,645 1,876 1,858 26,741

60 CITIC Pacific Summary Financial Report 2006

Notes to the Summary Financial Statements

4 Fixed Assets continued

Group continued

In hk$ million	property, plant and equipment properties self-used vehicular plant and investment under leasehold properties tunnel machinery others sub-total properties development land total
Cost or valuation
At 1 January 2006	3,166 2,000 5,279 3,917 14,362 8,645 1,876 1,858 26,741
Exchange adjustments	81 – 219 68 368 109 37 27 541
Additions through acquisition of subsidiary companies	79 – 9 67 155 – – 50 205
others	323 – 586 774 1,683 18 1,849 61 3,611
Capitalised leasehold land amortisation	– – – – – – 21 – 21
Disposals through disposal of subsidiary companies	– – – – – – (165 ) – (165 )
others	(125 ) – (289 ) (216 ) (630 ) (18 ) (313 ) – (961 )
Change in fair value of investment properties	– – – – – 735 – – 735
Transfer to properties held for sales / inventories	– – – (6 ) (6 ) – (442 ) – (448 )
Transfer upon completion	736 – 818 (1,554 ) – 115 (110 ) (5 ) –
At 31 December 2006	4,260 2,000 6,622 3,050 15,932 9,604 2,753 1,991 30,280
Accumulated depreciation, amortisation and impairment
At 1 January 2006	586 808 1,353 1,552 4,299 – 27 240 4,566
Exchange adjustments	22 – 86 9 117 – 1 2 120
Charge for the year	159 90 520 265 1,034 – 28 37 1,099
Acquisition of subsidiary companies	11 – 2 6 19 – – – 19
Written back on disposals others	(6 ) – (105 ) (135 ) (246 ) – (15 ) – (261 )
Impairment loss	– – 88 32 120 – – – 120
Transfer to other assets	– – – (4 ) (4 ) – – – (4 )
Reclassifcation	(2 ) – 2 – – – – – –
At 31 December 2006 770 898 1,946 1,725 5,339 – 41 279 5,659
Net book value At 31 December 2006 3,490 1,102 4,676 1,325 10,593 9,604 2,712 1,712 24,621
Represented by Cost 4,260 2,000 6,622 3,050 15,932 – 2,753 1,991 20,676
Valuation – – – – – 9,604 – – 9,604
4,260 2,000 6,622 3,050 15,932 9,604 2,753 1,991 30,280

CITIC Pacific Summary Financial Report 2006 61

Notes to the Summary Financial Statements

5 Reserves

Group

Group
		capital		investment	exchange
	share	redemption		revaluation	fuctuation	hedging	general	retained
in hk$ million	premium	reserve	goodwill	reserve	reserve	reserve	reserve	profts	total
At 1 January 2005	24,848	19	(2,494 )	168	(325 )	(152 )	244	13,698	36,006
Share of reserves of
associated companies	–	–	–	(67 )	–	350	–	–	283
Share of reserves of
jointly controlled entities	–	–	–	–	–	40	–	–	40
Exchange translation differences	–	–	–	–	158	–	–	–	158
Gain on cash fow hedge of
fnancial instruments	–	–	–	–	–	163	–	–	163
Fair value loss on other
fnancial assets	–	–	–	(17 )	–	–	–	–	(17 )
Transfer from profts	–	–	–	–	–	–	57	(57 )	–
Issue of share pursuant
to the Plan	16	–	–	–	–	–	–	–	16
Proft attributable to
shareholders of the Company	–	–	–	–	–	–	–	3,989	3,989
Dividends	–	–	–	–	–	–	–	(2,412 )	(2,412 )
At 31 December 2005	24,864	19	(2,494 )	84	(167 )	401	301	15,218	38,226
Representing
At 31 December 2005
after proposed fnal dividend									36,472
2005 Final dividend proposed									1,754
									38,226
Retained by
Company and subsidiary
companies	24,864	19	(2,494 )	25	164	62	283	7,305	30,228
Jointly controlled entities	–	–	–	–	–	3	15	996	1,014
Associated companies	–	–	–	59	(331 )	336	3	6,917	6,984
	24,864	19	(2,494 )	84	(167 )	401	301	15,218	38,226

62 CITIC Pacific Summary Financial Report 2006

Notes to the Summary Financial Statements

5 Reserves continued

Group continued

Group_continued_
		capital			investment	exchange
	share	redemption	capital		revaluation	fuctuation	hedging	general	retained
in hk$ million	premium	reserve	reserve	goodwill	reserve	reserve	reserve	reserve	profts	total
At 1 January 2006	24,864	19	–	(2,494 )	84	(167 )	401	301	15,218	38,226
Share of reserves of
associated companies	–	–	–	–	183	–	(129 )	–	106	160
Share of reserves of
jointly controlled entities	–	–	17	–	–	–	(1 )	1	–	17
Exchange translation differences	–	–	–	–	–	870	–	–	–	870
Reserves released on disposal of
associated companies	–	–	–	–	(84 )	103	(91 )	–	–	(72 )
Loss on cash fow hedge of
fnancial instruments	–	–	–	–	–	–	(50 )	–	–	(50 )
Fair value gain on other
fnancial assets	–	–	–	–	1,064	–	–	–	–	1,064
Transfer to Proft and Loss
account on impairment of
other fnancial assets	–	–	–	–	103	–	–	–	–	103
Transfer from profts	–	–	–	–	–	–	–	163	(163 )	–
Issue of share pursuant
to the Plan	92	–	(6 )	–	–	–	–	–	–	86
Proft attributable to
shareholders of the Company	–	–	–	–	–	–	–	–	8,272	8,272
Dividends	–	–	–	–	–	–	–	–	(3,071 )	(3,071 )
Share repurchase	–	1	–	–	–	–	–	–	(36 )	(35 )
Share-based payment	–	–	62	–	–	–	–	–	–	62
At 31 December 2006	24,956	20	73	(2,494 )	1,350	806	130	465	20,326	45,632
Representing
At 31 December 2006 after
proposed fnal and
special dividend										43,217
2006 Final and special
dividend proposed										2,415
										45,632
Retained by
Company and subsidiary
companies	24,956	20	56	(2,494 )	1,192	1,034	12	446	9,392	34,614
Jointly controlled entities	–	–	17	–	–	–	2	16	2,029	2,064
Associated companies	–	–	–	–	158	(228 )	116	3	8,905	8,954
	24,956	20	73	(2,494 )	1,350	806	130	465	20,326	45,632

CITIC Pacific Summary Financial Report 2006 63

Independent Auditor’s Statement on the Summary Financial Report

Independent auditor’s statement on the summary financial report to the shareholders of CITIC Pacific Limited (incorporated in Hong Kong with limited liability)

We have examined the summary financial report of CITIC Pacific Limited for the year ended 31 December 2006 on pages 1 to 63 and the front and back cover pages.

Respective Responsibilities of Directors and Auditors

Under the Hong Kong Companies Ordinance, the directors are responsible for preparing the summary financial report which complies with section 141CF(1) of the Hong Kong Companies Ordinance. In preparing the summary financial report, section 141CF(1) of the Hong Kong Companies Ordinance requires that the summary financial report be derived from the annual accounts and the independent auditor’s report thereon and the directors’ report for the year ended 31 December 2006, be in such form and contain such information and particulars as specified in section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation, and be approved by the board of directors.

It is our responsibility to form an independent opinion on the summary financial report, based on our examination, and to report our opinion solely to you, as a body, and we are also required to state whether the independent auditor’s report on the annual accounts for the year ended 31 December 2006 is qualified or otherwise modified, in accordance with section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this statement.

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standards on Assurance Engagements and with reference to Practice Note 710 ‘The auditors’ statement on the summary financial report’ issued by the Hong Kong Institute of Certified Public Accountants.

Our examination includes examining evidence supporting the consistency of the summary financial report with the annual accounts and the independent auditor’s report thereon and the directors’ report for the year ended 31 December 2006 and the compliance of the summary financial report with the requirements of section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation, and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

Opinion

Based on the foregoing, in our opinion the summary financial report on pages 1 to 63 and the front and back cover pages:

a) is consistent with the annual accounts and the independent auditor’s report thereon and the directors’ report of CITIC Pacific Limited for the year ended 31 December 2006 from which it is derived; and

b) complies with the requirements of section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation.

We have audited the annual accounts of CITIC Pacific Limited for the year ended 31 December 2006 and have issued an independent auditor’s report thereon dated 15 March 2007 which is unqualified or otherwise unmodified.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 15 March 2007

64 CITIC Pacific Summary Financial Report 2006

Definition of Terms

Terms

Capital employed	Shareholders’ funds + total debt
Cash contributed from all businesses	Cash infow to CITICPacifc Ltd. from its subsidiary companies, jointly
	controlled entities, associated companies and other investments, including
	proceeds from sale of businesses
Total debt	Short term and long term loans, notes and bonds
Net debt	Total debt less cash and bank deposits
Total capital	Shareholders’ funds + net debt
EBITDA	Net proft less interest expense, taxation, depreciation and amortisation
Contribution	A business’s after tax proft that contributes to unallocated central interest,
	overhead and goodwill
Ratios
Earnings per share	= Proft attributable to shareholders
	Weighted average number of shares (by days) in issue for the year
	Shareholders’ funds
Shareholders’ funds per share	=
	Total issued and fully paid shares at end of the year
	Net debt
Leverage	=
	Total capital
Cashfow per share	= Cash contributed from all businesses
	Total issued and fully paid shares at end of the year
	EBITDA
Interest cover	=
	Interest expense

CITIC Pacific Summary Financial Report 2006 65

Corporate Information

Headquarters and Registered Office

32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong Telephone: 2820 2111 Fax: 2877 2771

Investor Relations

Investors, shareholders and research analysts may contact the Investor Relations Department by telephone at 2820 2004, by fax: 2522 5259 or at investor.relations@citicpacific.com.

Website

www.citicpacific.com contains a description of CITIC Pacific’s business, copies of both the full and summary reports to shareholders, announcements, press releases and other information.

Stock Codes

The Stock Exchange of Hong Kong: 0267 Bloomberg: 267 HK Reuters: 0267. HK

American Depository Receipts: CTPCY CUSIP Reference No: 17304K102

Financial Calendar

Closure of Register:

10 May 2007 to 16 May 2007 16 May 2007, 10:30 a.m. Island Ballroom, Level 5, Island Shangri-La Hotel, Two Pacific Place, Supreme Court Road, Hong Kong

Annual General Meeting:

Final Dividend and Special Dividend payable: 18 May 2007

Share Registrars

Shareholders should contact our Registrars, Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong on 2980 1333, or by fax: 2810 8185, on matters such as transfer of shares, change of name or address, or loss of share certificates.

66 CITIC Pacific Summary Financial Report 2006

Shareholders may at any time choose to receive the Summary Financial Report or the Annual Report in printed form or to rely on their versions posted on the Company’s website. They may also at any time choose to receive the Summary Financial Report or the Annual Report in place of the other. Shareholders may change their choice on these matters by writing to the Company’s Share Registrars, Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

If Shareholders have already chosen to reply on the versions of the Summary Financial Report or the Annual Report posted on the Company’s website and have difficulty in gaining access to those documents, they will, promptly upon request, be sent those documents in printed form free of charge. Please send the request to the Company’s Share Registrars.