CITIC Limited — Capital/Financing Update 2013

Mar 7, 2013

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CITIC Pacific Limited 中信泰富有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

CONNECTED AND DISCLOSEABLE TRANSACTION IN RELATION TO THE ACQUISITION OF 25% INTEREST IN SILVER WINGS

Stenway, a wholly-owned subsidiary of CITIC Pacific, has entered into the Share Purchase Agreement to acquire 25% interest in Silver Wings from its joint venture partner, NSSMC. The Acquisition is in line with the Group’s strategy to focus on the development of its three major businesses, one of which is special steel. Silver Wings is a joint venture between CITIC Pacific (through Stenway) and NSSMC established to build and develop at the site of SteelCo a production line with steel melting, casting and rolling facilities to produce high-end special steel. Silver Wings is currently accounted for as a jointly controlled entity of CITIC Pacific with the remaining 75% of Silver Wings held by Stenway. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of CITIC Pacific.

As CITIC Pacific indirectly holds 75% interest in Silver Wings, it is a subsidiary of CITIC Pacific under the Listing Rules. NSSMC being a substantial shareholder of Silver Wings is therefore a connected person of CITIC Pacific. The Acquisition constitutes a connected and discloseable transaction for CITIC Pacific under the Listing Rules. A circular containing (i) further details of the Acquisition; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser; together with (iv) other information as required under the Listing Rules will be sent to the Shareholders, for their information only, as soon as practicable and is expected to be despatched to the Shareholders within 15 business days after publication of this announcement, i.e. on or before 28 March 2013.

An application will be made to the Stock Exchange for a waiver from strict compliance with the requirement to convene a Shareholders' meeting to approve the Acquisition on the basis that written shareholders’ approval will be given in accordance with Rule 14A.43 of the Listing Rules.

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INTRODUCTION

The Board is pleased to announce that on 7 March 2013, a Share Purchase Agreement was entered into with NSSMC as seller pursuant to which NSSMC has agreed to sell and transfer the Sale Shares to Stenway, a wholly-owned subsidiary of CITIC Pacific.

SUMMARY OF THE SHARE PURCHASE AGREEMENT

Date: 7 March 2013

Parties:

• (1) NSSMC, as the seller;

• (2) Stenway, as the buyer; and

• (3) CITIC Pacific

As at the date of this announcement, NSSMC holds 25% of the issued share capital of Silver Wings. NSSMC, being a substantial shareholder of Silver Wings, a subsidiary of CITIC Pacific, is therefore a connected person of CITIC Pacific under Rule 14A.11(1) of the Listing Rules.

Assets to be Acquired

Pursuant to the Share Purchase Agreement, Stenway has agreed to purchase, and NSSMC has agreed to sell, the Sale Shares, free from all encumbrances and together with all rights and advantages (including the right to receive all dividends, distributions or any return of capital declared, paid or made on or after 31 December 2012) as at the date of completion of the Acquisition.

The Sale Shares represent 25% of the issued share capital of Silver Wings. The remaining 75% of the issued share capital is held by Stenway. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of CITIC Pacific.

Conditions to completion

Completion of the Acquisition is conditional upon CITIC Pacific having complied with all announcement, circular and independent shareholders’ approval requirements under Chapters 14 and 14A of the Listing Rules in connection with purchase of the Sale Shares. If this condition has not been satisfied on or before 31 May 2013 (or such other date as NSSMC and CITIC Pacific may agree), the Share Purchase Agreement shall terminate and no party shall have any claim against the other parties under the Share Purchase Agreement save in respect of any antecedent breaches.

Completion shall take place on the third Business Day after delivery by Stenway and CITIC Pacific to NSSMC of a joint notice stating that the condition has been satisfied (such joint notice to be issued within one Business Day from the satisfaction of the condition), or on such other date the parties may agree.

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Consideration

The consideration for the Acquisition is RMB530 million (equivalent to approximately HK$651.9 million). The consideration shall be settled in the US$ equivalent, calculated at the US$/RMB exchange rate mid-price published by The People's Bank of China on the third Business Day immediately preceding the date of completion of the Acquisition, and shall be payable in full on the date of completion of the Acquisition.

The consideration for the Acquisition was arrived at after arm’s length negotiations between Stenway and NSSMC, with reference to the historical profit performance, the net asset value, as well as the business prospect of Silver Wings.

The Group will fund the Consideration from internal resources of the Group.

Under the Share Purchase Agreement, CITIC Pacific has agreed to unconditionally and irrevocably guarantee to NSSMC, as primary obligor, the due and punctual performance of all the obligations of Stenway under the Share Purchase Agreement and all other transactions contemplated thereunder.

INFORMATION ON SILVER WINGS

Silver Wings is an investment holding company, and is currently accounted for as a jointly controlled entity of CITIC Pacific. Silver Wings was incorporated in 2006 as a joint venture between CITIC Pacific (through Stenway) and Sumitomo Metals (Kokura) Ltd to build and develop Xingcheng Phase II. Xingcheng Phase II has been jointly managed by the representatives of CITIC Pacific and Sumitomo Metal (Kokura) Ltd, and has a steel production capacity of approximately 1.8 million tons per annum. Its products comprise big casting round billet and bar steel products, including bearing steel, gear steel and spring steel. Upon establishment of the joint venture, Sumitomo Metals (Kokura) Ltd subscribed for 25% of the issued shares in Silver Wings, for a subscription amount of the then US$ equivalent of RMB 260 million. As a result of a series of internal corporate reorganisations, share exchanges, mergers and other similar transactions, NSSMC became the legal and beneficial owner of the Sale Shares initially held by Sumitomo Metals (Kokura) Ltd.

Set out below is a summary of the audited consolidated financial information of Silver Wings for the two years ended 31 December 2011 and 2012 (prepared in accordance with Hong Kong accounting standards) :

	For the year ended 31 December	For the year ended 31 December
	2011	2012
	HK$ million	HK$ million
Net profit before taxation	430	465
Net profit after taxation	328	359

The audited consolidated net asset value of Silver Wings as at 31 December 2012, prepared in accordance with Hong Kong accounting standards, was HK$2,836 million.

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REASONS FOR AND BENEFITS OF THE ACQUISITION

CITIC Pacific’s strategy is to focus on the development of its three major businesses, being special steel, iron ore mining and property development in the PRC. The Acquisition is in line with the Group’s strategy, as upon completion of the Acquisition, CITIC Pacific will have 100% control of all production facilities of Xingcheng Phase II through Silver Wings, and therefore full control of the steel manufacturing business of SteelCo and its future development. Upon completion of the Acquisition, Silver Wings will become a wholly owned subsidiary of, and will be accounted for as a subsidiary of CITIC Pacific. CITIC Pacific can therefore benefit fully from the financial results of Silver Wings.

The Directors (excluding the independent non-executive Directors whose views will be provided after consideration of the advice from the Independent Financial Adviser) consider the terms of the Acquisition to be fair and reasonable and in the interests of CITIC Pacific and its Shareholders as a whole.

None of the Directors has any material interest in the Acquisition. Accordingly, none of them were required to abstain from voting on the board resolutions for considering and approving the Acquisition.

INFORMATION ON STENWAY AND CITIC PACIFIC

Stenway is a wholly-owned subsidiary of CITIC Pacific. It is an investment holding company, the principal asset of which is the equity investment in Silver Wings.

The Group’s operational focus is on the PRC, both the mainland and Hong Kong. Its major businesses are special steel, iron ore mining and property development in the PRC. Other businesses include energy and civil infrastructure. CITIC Pacific also holds a controlling interest in Dah Chong Hong Holdings Limited and 41.66% interest in CITIC Telecom International Holdings Limited.

INFORMATION ON NSSMC

NSSMC group comprises mainly five businesses: steelmaking and steel fabrication, engineering, chemicals, new materials and system solutions. NSSMC is one of the leading steelmaking groups in the world.

LISTING RULES IMPLICATIONS

As at the date of this announcement, NSSMC holds the Sale Shares, which represent 25% of the issued shares of Silver Wings. Although Silver Wings is accounted for as a jointly controlled entity of CITIC Pacific, as CITIC Pacific indirectly holds 75% interest in Silver Wings, it is a subsidiary of CITIC Pacific under the Listing Rules. NSSMC, being a substantial shareholder of Silver Wings, is therefore a connected person of CITIC Pacific under Rule 14A.11(1) of the Listing Rules. Further, the applicable percentage ratios under the Share Purchase Agreement are more than 5% but less than 25%. The Acquisition is therefore a discloseable and connected transaction for CITIC Pacific, and is subject to the reporting and announcement requirements and the independent shareholders’ approval requirement under the Listing Rules.

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So far as CITIC Pacific is aware having made all reasonable enquires, if CITIC Pacific were to convene a general meeting and a resolution was proposed for the approval of the Acquisition, no Shareholder has a material interest in, and would be required to abstain from voting on, the resolution.

Written shareholders’ approval of the Acquisition will be obtained from CITIC Group Corporation, the ultimate beneficial owner of the Closely Allied Group. The Acquisition will therefore be approved by way of written shareholders’ approval given in accordance with Rule 14A.43 of the Listing Rules, in lieu of holding a general meeting of CITIC Pacific.

An application will be made to the Stock Exchange for a waiver from strict compliance with the requirement to convene a Shareholders' meeting to approve the Acquisition on the basis that written shareholders’ approval will be given in accordance with Rule 14A.43 of the Listing Rules.

The Independent Board Committee, comprising Messrs Alexander Reid Hamilton, Gregory Lynn Curl, Francis Siu Wai Keung and Dr. Xu Jinwu, being all the independent nonexecutive Directors, has been established to advise the Independent Shareholders as to whether the terms of the Acquisition are fair and reasonable and whether the Acquisition is in the interests of CITIC Pacific and the Shareholders as a whole, after taking into account the recommendations of the Independent Financial Adviser. CITIC Pacific has appointed the Independent Financial Adviser to make recommendations to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Acquisition are fair and reasonable and whether the Acquisition is in the interests of CITIC Pacific and the Shareholders as a whole.

A circular containing (i) further details of the Acquisition; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser; together with (iv) other information as required under the Listing Rules will be sent to the Shareholders, for their information only, as soon as practicable and is expected to be despatched to the Shareholders within 15 business days after publication of this announcement, i.e. on or before 28 March 2013.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms have the following meanings:

“Acquisition”	the acquisition of the Sale Shares by Stenway from
	NSSMC pursuant to the terms of the Share Purchase
	Agreement
“Board”	the board of Directors
“Business Day”	means any day other than a Saturday, Sunday or other
	day on which commercial banks in the PRC, Hong
	Kong, Japan or New York are required or authorized by
	law or executive order to be closed or on which a
	tropical cyclone warning no. 8 or above or a "black"
	rainstorm warning signal is hoisted in Hong Kong at
	any time between 9:00 a.m. and 5:00 p.m. Hong Kong
	time

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• “ CITIC Pacific ”

CITIC Pacific Limited ( 中信泰富有限公司 ), a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange (stock code: 00267)

• “ Closely Allied Group ”

the closely allied group of Shareholders, comprising Honpville Corporation (holding 310,988,221 Shares), Winton Corp. (holding 30,718,000 Shares), Westminster Investment Inc. (holding 101,960,000 Shares), Jetway Corp. (holding 122,336,918 Shares), Cordia Corporation (holding 32,258,064 Shares), Raymondford Company Limited (holding 2,823,000 Shares), Affluence Limited (holding 43,266,000 Shares), Southpoint Enterprises Inc. (holding 10,000,000 Shares), Hainsworth Limited (holding 93,136,000 Shares), Full Chance Investments Limited (holding 450,416,694 Shares), Newease Investments Limited (holding 450,416,694 Shares), and Skyprofit Holdings Limited (holding 450,416,694 Shares) which, in aggregate, are interested in 2,098,736,285 Shares, representing approximately 57.51% of the issued Shares at the date of this announcement

• “ connected person ”

has the meaning ascribed to it by the Listing Rules

• “ Directors ” the directors of CITIC Pacific

• “ Group ” CITIC Pacific and its subsidiaries

• “ HK$ ” Hong Kong dollars, the lawful currency of Hong Kong

• “ Hong Kong ”

• the Hong Kong Special Administrative Region of the PRC

• “ Independent Board Committee ” a committee of the Board, comprising all the

• independent non-executive Directors, namely Messrs Alexander Reid Hamilton, Gregory Lynn Curl, Francis Siu Wai Keung and Dr. Xu Jinwu, constituted to make recommendations to the Independent Shareholders on the fairness and reasonableness of the terms of the Acquisition

• “ Independent Financial Adviser ” Somerley Limited, an independent financial adviser appointed by the Board and approved by the Independent Board Committee to make recommendations to the Independent Board Committee and Independent Shareholders as to whether the terms of the Acquisition are fair and reasonable and whether the Acquisition is in the interests of CITIC Pacific and the Shareholders as a whole

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“ Independent Shareholders ”

the Shareholders other than those Shareholders who have a material interest in the Acquisition, if any

• “ Listing Rules ”

the Rules Governing the Listing of Securities on the Stock Exchange

• “NSSMC ”

Nippon Steel & Sumitomo Metal Corporation, a limited liability company incorporated in Japan, which legally and beneficially owns the Sale Shares as at the date of this announcement

• “ percentage ratio(s) ”

has the meaning ascribed to it by the Listing Rules

• “ PRC ” the People’s Republic of China

• “ RMB ” Renminbi, the lawful currency of the PRC

• “ Sale Shares ” 25 ordinary shares of par value of US$1.00 each in Silver Wings representing 25% of the issued share capital of Silver Wings

• “ Share Purchase Agreement ”

the share purchase agreement entered into between NSSMC, CITIC Pacific and Stenway on 7 March 2013 in relation to the acquisition of the Sale Shares by Stenway from NSSMC

• “ Shares ”

• share(s) of HK$0.40 each in the share capital of CITIC Pacific

• “ Shareholders ”

shareholders of CITIC Pacific

• “ Silver Wings ”

• Silver Wings Enterprises Inc., a limited liability company incorporated in the British Virgin Islands, accounted for as jointly-controlled entity, and a subsidiary (as defined under the Listing Rules), of CITIC Pacific as at the date of this announcement

• “ SteelCo ”

• 江陰興澄特種鋼鐵有限公司 Jiangyin Xingcheng Special Steel Works Co., Ltd., a limited company incorporated in the PRC principally engaged in steel manufacturing and trading

• “ Stenway ”

• Stenway Holdings Inc., a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of CITIC Pacific

• “ Stock Exchange ”

The Stock Exchange of Hong Kong Limited

• “ subsidiary ”

has the meaning ascribed to it by the Listing Rules

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“ substantial shareholder ”

has the meaning ascribed to it by the Listing Rules

“ US$ ”

United States dollars, the lawful currency of the United States of America

“Xingcheng Phase II”

production line at the site of SteelCo with steel melting, casting and rolling facilities to produce high-end special steel

By Order of the Board CITIC Pacific Limited Ricky Choy Wing Kay Company Secretary

Hong Kong, 7 March 2013

In this announcement, the conversion of RMB into Hong Kong dollars have been made at a rate of RMB1 to HK$1.23. Such conversion are for reference only and should not be construed as representations that the RMB amount could be converted into Hong Kong dollars at that or any other rate.

As at the date of this announcement, the executive directors of CITIC Pacific are Messrs Chang Zhenming (Chairman), Zhang Jijing, Vernon Francis Moore and Liu Jifu; the non-executive directors of CITIC Pacific are Messrs André Desmarais, Ju Weimin, Yin Ke, Carl Yung Ming Jie, and Peter Kruyt (alternate director to Mr André Desmarais); and the independent non-executive directors of CITIC Pacific are Messrs Alexander Reid Hamilton, Gregory Lynn Curl, Francis Siu Wai Keung and Dr. Xu Jinwu.

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