CITIC Limited - Proxy Solicitation & Information Statement 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This circular is for your information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, your stockbroker or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CITIC Pacific Limited , you should at once hand this circular to the purchaser or transferee or the licensed securities dealer or registered institution in securities or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

STANDBY FACILITY CONNECTED TRANSACTIONS INVOLVING SUBSCRIPTION FOR CONVERTIBLE BOND BY CITIC GROUP APPLICATION FOR WHITEWASH WAIVER VERY SUBSTANTIAL DISPOSAL INVOLVING CERTAIN LEVERAGED FOREIGN EXCHANGE CONTRACTS TO BE ASSUMED BY CITIC GROUP AND INCREASE IN AUTHORISED SHARE CAPITAL

Financial Adviser to CITIC Group

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

A letter from the Board is set out on pages 5 to 30 of the Circular.

A letter from the Listing Rules Independent Board Committee containing its advice to the Independent Shareholders is set out on page 31 of the Circular.

A letter from the Whitewash Independent Board Committee containing its advice to the Independent Shareholders is set out on page 32 of the Circular.

A letter from the Independent Financial Adviser containing its advice to the Independent Board Committees and the Independent Shareholders is set out on pages 33 to 56 of the Circular.

A notice convening the EGM of CITIC Pacific to be held at Island Ballroom, Level 5, Island Shangri-La Hotel, Two Pacific Place, Supreme Court Road, Hong Kong on 19 December 2008 at 10:30 a.m. is set out on pages EGM-1 to EGM-2 of the Circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon and deposit the same at the registered office of CITIC Pacific at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or adjournment thereof. Completion and return of the proxy form will not prevent you from attending and voting at the EGM if you so wish.

3 December 2008

CONTENTS

				Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	1
Letter from	the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	5
2.	The Standby Facility . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	6
3.	The Agreement . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	7
4.	Principal Terms of the Convertible Bond	. . . . .	. . . . . . . . . . . . . . . .	7
5.	Novation and Indemnity . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	10
6.	Impact on CITIC Pacific’s Financials . . .	. . . . .	. . . . . . . . . . . . . . . .	14
7.	Conditions of the Agreement . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	14
8.	Completion . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	16
9.	Covenants . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	16
10.	Takeovers Code Implications . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	17
11.	Use of Proceeds from the Issue of the Convertible Bond . . . . . . . . .			19
12.	Reasons for and Benefits of Entering into
	the Standby Facility and the Agreement	. . . .	. . . . . . . . . . . . . . . .	19
13.	Information on the Remaining Leveraged
	Foreign Exchange Contracts . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	20
14.	Proposed Increase in Authorised Share Capital		. . . . . . . . . . . . . . . .	21
15.	Changes to the Shareholding in CITIC Pacific as
	a Result of Conversion . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	21
16.	Information on the Group . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	23
17.	Information on CITIC Group . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	23
18.	Intentions for the Group . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	24
19.	Maintaining the Listing of CITIC Pacific	. . . . .	. . . . . . . . . . . . . . . .	24
20.	General . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	24
21.	Options, Derivatives, Warrants and
	Other Securities Convertible into the Shares .		. . . . . . . . . . . . . . . .	26
22.	Procedure for Demanding a Poll . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	28
23.	EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	28
24.	Recommendation . . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	29
25.	Additional Information . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	30
Letter from	the Listing Rules Independent Board Committee . . . . . . . . . . . . .			31
Letter from	the Whitewash Independent Board Committee		. . . . . . . . . . . . . . .	32
Letter from	Anglo Chinese Corporate Finance, Limited . .		. . . . . . . . . . . . . . . .	33
Appendix I	– Financial Information of the Group	. . . .	. . . . . . . . . . . . . . . .	I-1
Appendix II – Unaudited Pro Forma Financial Information of
	the Group . . . . . . . . . . . . . . . . . .	. . . . .	. . . . . . . . . . . . . . . .	II-1
Appendix III – Valuation Report . . . . . . . . . . . . . .		. . . . .	. . . . . . . . . . . . . . . .	III-1
Appendix IV – General Information . . . . . . . . . . .		. . . . .	. . . . . . . . . . . . . . . .	IV-1
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . .	. . . . . . . . . . . . . . . .	EGM-1

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the content requires otherwise.

“acting in concert”	has the meaning given to it in the Takeovers Code
“Agreement”	the agreement dated 12 November 2008 between
	CITIC Pacific and CITIC Group relating to, amongst
	other things, the Subscription and the Novation
“Anglo Chinese” or	Anglo Chinese Corporate Finance, Limited, a licensed
“Independent Financial	corporation under the SFO to conduct type 1 (dealing
Adviser”	in securities), 4 (advising on securities), 6 (advising
	on corporate finance) and 9 (asset management)
	regulated activities, the independent financial adviser
	to the Independent Board Committees and the
	Independent Shareholders
“Announcement”	the announcement dated 12 November 2008 of CITIC
	Pacific regarding, among other things, the Agreement
“AUD”	Australian dollars, the lawful currency of the
	Commonwealth of Australia
“Board”	the board of Directors
“Business Day”	a day (other than a Saturday, Sunday or public
	holiday) on which banks are generally open for
	business in Hong Kong and Sydney, Australia
“Circular”	this circular
“CITIC Group”	CITIC Group 中國中信集團公司, a state-owned
	enterprise established under the laws of the PRC and
	the 100% holding company of CITIC HK, the largest
	shareholder of CITIC Pacific holding approximately
	29% of the issued Shares as at the Latest Practicable
	Date
“CITIC Group Concert Parties”	CITIC Group and parties acting in concert with it in
	respect of CITIC Pacific for the purposes of the
	Takeovers Code
“CITIC HK”	CITIC Hong Kong (Holdings) Limited中信（香港集團）
	有限公司, a wholly-owned subsidiary of CITIC Group
“CITIC Pacific” or “Company”	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

– 1 –

DEFINITIONS

“Completion”	completion of the Agreement
“Completion Date”	the date of Completion
“Consumer Price Index”	means the Consumer Price Index (All Groups
	weighted average of eight capital cities) published by
	the Australian Bureau of Statistics in Catalogue No.
	6401.0 or any replacement index published by the
	Australian Bureau of Statistics (or its successor)
“Conversion Price”	the price per Share at which the Convertible Bond
	may be converted into Shares
“Convertible Bond”	the convertible bond of an aggregate principal
	amount of HKD11.625 billion to be subscribed by
	CITIC Group or its designated nominee
“Director(s)”	the director(s) of CITIC Pacific
“EGM”	an extraordinary general meeting to be convened by
	CITIC Pacific on 19 December 2008 for the purpose of
	approving, amongst other things, the Agreement, the
	Whitewash Waiver and the increase in authorised
	share capital of CITIC Pacific
“EUR”	Euros, the lawful currency of the European Union
“Executive”	the Executive Director of the Corporate Finance
	Division of the SFC or any delegate of the Executive
	Director
“Group” or	CITIC Pacific and its subsidiaries
“CITIC Pacific Group”
“HKD”	Hong Kong dollars, the lawful currency of Hong
	Kong
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“Independent Board	the Listing Rules Independent Board Committee and
Committees”	the Whitewash Independent Board Committee
“Independent Shareholders”	Shareholders who are not precluded under the Listing
	Rules or the Takeovers Code, as the case may be, from
	voting on the relevant resolutions at the EGM
“Last Full Trading Day”	30 October 2008, being the last full trading day
	immediately prior to the release of the Announcement

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DEFINITIONS

“Latest Practicable Date”

28 November 2008, being the latest practicable date prior to the date of the Circular for the purpose of ascertaining certain information contained in the Circular

“LIBOR” three month London Inter-bank Offered Rate “Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange

“Listing Rules Independent	an independent committee of the Board advising the
Board Committee”	Independent Shareholders in respect of the
	Agreement comprising Hamilton Ho Hau Hay,
	Alexander Reid Hamilton, Hansen Loh Chung Hon
	and Norman Ho Hau Chong, all being independent
	non-executive Directors
“Maturity Date”	31 January 2009
“Novation”	the economic transfer and/or legal transfer by
	novation, subject to the terms of the Agreement, of the
	liabilities and benefits under certain AUD target
	redemption forward contracts entered into by the
	Group
“Novation Contracts”	the AUD target redemption forward contracts to be
	novated to CITIC Group under the Novation
“PRC” or “China”	the People’s Republic of China
“Proposals”	the Standby Facility and the Agreement
“Reference Date”	26 November 2008, being the latest practicable date
	prior to the date of the Circular for the purpose of
	calculating certain financial information in relation to
	the leveraged foreign exchange contracts contained in
	the Circular
“Relevant Period”	the period beginning six months prior to the date of
	the Announcement and up to the Latest Practicable
	Date
“RMB”	Renminbi, the lawful currency of the PRC
“SFC”	the Securities and Futures Commission of Hong Kong

– 3 –

DEFINITIONS

“SFO” the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong)
“Shareholders” holders of Shares “Share(s)” share(s) of HKD0.40 each in the capital of CITIC Pacific
“Sino Iron” Sino Iron Pty Ltd, at present a wholly owned subsidiary of the Company, 20% of whose shares will be sold to China Metallurgical Group Corp. on completion of the sale disclosed in CITIC Pacific’s announcement dated 20 August 2007
“Standby Facility” the USD1.5 billion standby loan facility agreement entered into on 12 November 2008 between CITIC Group as the lender and CITIC Pacific as the borrower and where the interest rate is LIBOR plus 2.8% per annum
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription” the subscription for the Convertible Bond “Takeovers Code” The Hong Kong Code on Takeovers and Mergers, as amended from time to time
“USD” United States dollars, the lawful currency of the United States of America
“Whitewash Independent Board an independent committee of the Board advising the Committee” Independent Shareholders in respect of the Whitewash Waiver comprising Willie Chang, André Desmarais, Peter Kruyt (alternate director to Mr. André Desmarais), all being non-executive Directors and Hamilton Ho Hau Hay, Alexander Reid Hamilton, Hansen Loh Chung Hon and Norman Ho Hau Chong, all being independent non-executive Directors

“Whitewash Waiver” a waiver from the obligation to make a general offer under the Takeovers Code pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code which will arise if the Convertible Bond is converted into Shares prior to 19 January 2009

– 4 –

LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability) (Stock Code: 00267)

Executive Directors: Larry Yung Chi Kin (Chairman) Henry Fan Hung Ling (Managing Director) Peter Lee Chung Hing (Deputy Managing Director) Carl Yung Ming Jie (Deputy Managing Director) Vernon Francis Moore (Group Finance Director) Li Shilin Liu Jifu Milton Law Ming To Wang Ande Kwok Man Leung

Registered Office: 32nd Floor CITIC Tower 1 Tim Mei Avenue Central Hong Kong

Non-Executive Directors: Willie Chang André Desmarais Chang Zhenming Peter Kruyt (alternate director to André Desmarais)

Independent non-executive Directors: Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong

To the Shareholders

3 December 2008

Dear Sir or Madam,

INTRODUCTION

On 12 November 2008, CITIC Pacific announced that it had entered into the Standby Facility and the Agreement.

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LETTER FROM THE BOARD

The purpose of the Circular is to provide you with, among other things, (i) further information regarding the Standby Facility, the Agreement and the transactions contemplated thereunder and the Whitewash Waiver, (ii) the recommendations of the Independent Board Committees to the Independent Shareholders in relation to the Agreement and the Whitewash Waiver, (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committees and the Independent Shareholders in relation to the terms of the Agreement and the Whitewash Waiver and (iv) the notice of the EGM.

THE STANDBY FACILITY

As stated in CITIC Pacific’s profit warning announcement dated 20 October 2008, CITIC Group had agreed to coordinate a standby loan facility of USD1.5 billion in order to strengthen the liquidity of CITIC Pacific.

CITIC Group entered into the Standby Facility with CITIC Pacific on 12 November 2008 whereby CITIC Pacific would be able to draw up to USD1.5 billion (about HKD11.625 billion) for the sole purpose of funding any commitments and/or liabilities due from CITIC Pacific under the Novation Contracts described below. CITIC Group will either directly advance monies required under the Standby Facility or will procure such monies to be made available. The Standby Facility is unsecured and repayable on demand. Interest payable by CITIC Pacific is LIBOR plus 2.8% per annum. No interest shall be payable by CITIC Pacific if the Standby Facility is not drawn down and no fee is payable by CITIC Pacific to CITIC Group in relation to the Standby Facility.

Barring unforeseen circumstances, CITIC Pacific does not currently contemplate that it would have to draw on the Standby Facility. The intended objective of the Standby Facility, the Convertible Bond and the Novation is to demonstrate CITIC Group’s continuing support for CITIC Pacific, to resolve CITIC Pacific’s commitments and/or liabilities under the Novation Contracts (as described below) and to enhance the liquidity of the Group. As at the Latest Practicable Date, CITIC Pacific had not drawn on the Standby Facility.

In the event that the Agreement proceeds to Completion, the net amount due under the Agreement would be used to repay the amounts outstanding under the Standby Facility. To the extent the Standby Facility is not drawn prior to the issue of the Convertible Bond, it shall no longer be available from and after Completion. If Completion does not take place, the Standby Facility shall be repayable on 31 January 2009.

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LETTER FROM THE BOARD

THE AGREEMENT

Date : 12 November 2008 Parties : CITIC Pacific and CITIC Group

CITIC Pacific and CITIC Group have entered into the Agreement in connection with:–

(i) the issue by CITIC Pacific of the Convertible Bond with an aggregate principal amount of HKD11.625 billion. The principal amount of the Convertible Bond is convertible into Shares at an initial conversion price (subject to adjustment) of HKD8.00 per Share. An interest coupon of 2% per annum is payable from the time of issue of the Convertible Bond up to but excluding the date the Convertible Bond is converted into Shares. The money payable by CITIC Group to CITIC Pacific in respect of the Convertible Bond is HKD11.625 billion; and
(ii) the Novation whereby CITIC Group will economically, or through transfer by novation, assume the liabilities and benefits of the Novation Contracts. As at the Reference Date, the AUD : USD exchange rate was 0.6458 and on that basis, the mark-to-market loss under the Novation Contracts is estimated at HKD11.3 billion. So, on the basis of the target AUD : USD exchange rate described below and not taking into account any interim fixing and delivery of AUD under the Novation Contracts, CITIC Pacific will pay about HKD9.1 billion to CITIC Group in respect of the Novation if the AUD : USD exchange rate on the Business Day prior to the Completion Date is the same as the rate on the Reference Date. CITIC Pacific, however, continues to be responsible for taking deliveries of certain AUD under the Novation Contracts as described below and for any breach of such Novation Contracts before the Completion Date.

Under the terms of the Agreement, CITIC Group is entitled to designate any of its wholly-owned subsidiaries as the subscriber of the Convertible Bond or to be the contracting party to the Novation.

PRINCIPAL TERMS OF THE CONVERTIBLE BOND

Principal Amount

The aggregate principal amount of the Convertible Bond is HKD11.625 billion.

Issue Price

The money payable by CITIC Group to CITIC Pacific in respect of the Convertible Bond is 100% of the principal amount of the Convertible Bond, namely, HKD11.625 billion.

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LETTER FROM THE BOARD

Interest

Interest at the rate of 2% per annum shall accrue from the time of issue of the Convertible Bond up to but excluding the date the Convertible Bond is converted into Shares.

Conversion Price

The Convertible Bond will be convertible into Shares at an initial conversion price of HKD8.00 per Share. The Conversion Price will be subject to adjustment for subdivision or consolidation of Shares.

The Conversion Price represents:–

(i) a premium of approximately 53.3% to the closing price of HKD5.22 per Share on the Latest Practicable Date;
(ii) a premium of approximately 32.0% to the closing price of HKD6.06 per Share after the morning trading session on 31 October 2008, being the day on which CITIC Pacific had requested a suspension in trading of the Shares from 2:30 p.m. that day;
(iii) a premium of 60.0% to the closing price of HKD5.00 per Share on the Last Full Trading Day;
(iv) a premium of approximately 35.1% to the average closing price of HKD5.92 per Share for the 10 trading days from and including 17 October 2008 up to and including the closing price at 2:30 p.m. on 31 October 2008; and
(v) a discount of approximately 71.2% to the unaudited consolidated net asset value per Share of about HKD27.8 as at 30 June 2008.

Conversion and Voting Rights

If the Independent Shareholders approve the Agreement and the Whitewash Waiver and all other conditions are fulfilled or waived (as the case may be), the Convertible Bond shall be converted automatically into Shares on Completion.

To the extent that the Whitewash Waiver is not granted by the Executive or approved by the Independent Shareholders but assuming the other conditions are fulfilled or waived, as the case may be, the Agreement will still proceed to Completion. However, the conversion of the Convertible Bond will be deferred until 19 January 2009, being the first date on which the increase in shareholding by CITIC Group in CITIC Pacific resulting from such conversion would not trigger a general offer obligation under the Takeovers Code pursuant to a waiver under Note 6 to Rule 26.1 of the Takeovers Code granted by the Executive on 12 November 2008.

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LETTER FROM THE BOARD

The aggregate principal amount of the Convertible Bond will, on issue, be convertible into 1,453,125,000 new Shares at the initial Conversion Price of HKD8.00 per Share, representing approximately 66.26% of the existing issued Shares and approximately 39.85% of the issued share capital as enlarged by the Shares to be issued upon full conversion of the Convertible Bond assuming no other changes to the issued share capital of CITIC Pacific before conversion of the Convertible Bond. There is no restriction applicable to the subsequent sale of such Shares issued pursuant to such conversion.

Shares issued on conversion will rank pari passu in all respects with the Shares in issue as at the conversion date and will entitle the holders thereof to receive all future dividends and distributions which are declared, made or paid after the date of allotment of such Shares. The Shares to be issued upon conversion of the Convertible Bond will be allotted and issued pursuant to a specific mandate proposed to be sought from the Shareholders at the EGM. Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Shares to be issued pursuant to the Convertible Bond.

The Directors (including the non-executive Directors) believe that the terms of the Convertible Bond are fair and reasonable and in the interests of the Shareholders as a whole.

Term of Convertible Bond

For the period from Completion up to and including the Maturity Date.

Transfer

The Convertible Bond is transferable to any other person who is a wholly-owned entity of CITIC Group.

Form of the Convertible Bond

The Convertible Bond will be in registered form only.

Ranking of the Convertible Bond

The Convertible Bond will rank as direct, unsubordinated, unconditional and unsecured obligations of CITIC Pacific.

No Listing

The Convertible Bond will not be listed on the Stock Exchange or elsewhere.

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LETTER FROM THE BOARD

NOVATION AND INDEMNITY

Background of the Leveraged Foreign Exchange Contracts

The leveraged foreign exchange contracts that CITIC Pacific has entered into can be classified into 2 categories, namely AUD daily accrual forward contracts and target redemption forward contracts.

Under the AUD daily accrual forward contracts, the strike rate (i.e. the rate at which deliveries of currencies are made) and the accumulation/knock-out rate (i.e. the rate at which no delivery of currencies will be made if such rate is lower than or equal to the spot rate) are fixed. A notional amount of AUD will be delivered at the relevant instalment dates at the strike rate if at the relevant time, the spot rate is between the strike rate and the accumulation/knock-out rates. In the event that the spot rate is lower than the strike rate at the relevant time, a pre-determined amount of AUD (which is greater than the notional amount) will be delivered.

Under the AUD target redemption forward contracts, the strike rates (which may have a step-up feature (i.e. to reflect an appreciation of the currency over the term of the contract)) are fixed. If the spot rate on any given day during the contract period is equal to or above the strike rate, a notional amount of the AUD will be delivered at the strike rate. The difference between the strike rate and the spot rate will be treated as a profit in respect of that particular contract and when the cumulative profit reaches the maximum profit stipulated in the contract, that particular contract will be knocked-out (i.e. the obligation to deliver further currencies will cease). If the spot rate is below the strike rate, a pre-determined amount of the AUD (which is greater than the notional amount) will be delivered at the strike rate.

Dual currency target redemption forward contracts are similar to the AUD target redemption forward contracts except that such contracts have AUD strike rates and EUR strike rates and the weaker of the two currencies (by comparing the spot rate of each currency against its corresponding strike rate) will be delivered.

The RMB target redemption forward contracts are net settled contracts and instead of the delivery of the RMB notional amounts under those contracts, the RMB target redemption forward contracts will be net settled in USD by reference to the gains and losses against the strike rates on a monthly basis.

The values of these outstanding leveraged foreign exchange contracts will be marked to their market values at the end of each relevant period based on valuations provided by the counterparties and will have an impact on the profit and loss account of CITIC Pacific. The mark-to-market value is driven by a number of factors including, among other things, the volatility, liquidity, bid-ask spread and interest rate differential, at the time when such contracts are mark-to-market.

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LETTER FROM THE BOARD

The Novation Contracts

CITIC Pacific and CITIC Group have agreed that CITIC Pacific will, upon Completion, economically transfer, or subject to the agreement of the relevant counterparties, transfer by novation its rights and obligations under the Novation Contracts, which are certain AUD target redemption forward contracts, to CITIC Group at a price to be determined using the target AUD : USD exchange rate and other mark-to-market valuation parameters including without limitation the applicable volatility, liquidity, bid-ask spread and interest rate differentials applying to such contracts, at the time when the price of such contracts are valued. Apart from the AUD : USD exchange rate, the mark-to-market valuation of these Novation Contracts will take into account other parameters as aforesaid but whilst such other parameters will refine the mark-to-market value, the main determinant will still be the AUD : USD exchange rate. The maximum deliverable amount to the Group under the Novation Contracts is, as at the Reference Date, AUD5.5 billion and is deliverable in monthly instalments up to October 2010. The Novation Contracts have a strike price ranging from 0.7725 to 0.9600 and a weighted average strike price of AUD : USD0.9014.

Following Completion, each Novation Contract will either be formally novated to CITIC Group with the consent of the relevant counterparty or failing that, CITIC Pacific would continue to be the contracting party. In the case of the latter, CITIC Group would, under the terms of the Novation, reimburse and indemnify CITIC Pacific for all amounts payable by CITIC Pacific and liabilities arising therefrom under such Novation Contracts from the Completion Date. CITIC Pacific, however, continues to be responsible for taking deliveries of certain AUD under the Novation Contracts as described above and for any breach of such Novation Contracts before the Completion Date and, after Completion, is also subject to the performance and credit risk of CITIC Group in respect of such obligation to reimburse and indemnify it as from the Completion Date. From Completion, CITIC Pacific would no longer bear the economic burden or enjoy the benefits of the Novation Contracts. The effect of the Agreement is such that, depending on the relevant AUD : USD exchange rate after Completion, the Novation Contracts could, after Completion, result in a further loss or profit but CITIC Pacific would no longer, after taking into account the indemnity from CITIC Group and any transfer by novation, economically bear such losses or enjoy such profit.

The target AUD : USD exchange rate is calculated as follows:–

(i) should the AUD : USD spot exchange rate which appears on the Reuters Screen RBA26 Page be 0.7000 or less at 4:00 p.m. Sydney time on the Business Day prior to the Completion Date, the target AUD : USD exchange rate shall be 0.7000. For example, if the spot rate of AUD : USD is 0.6700, the target AUD : USD exchange rate is 0.7000; and

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LETTER FROM THE BOARD

(ii) should the AUD : USD spot exchange rate which appears on the Reuters Screen RBA26 Page at 4:00 p.m. Sydney time on the Business Day prior to the Completion Date be more than 0.7000, the target AUD : USD exchange rate shall be such spot rate plus 100 pips. For example, if the spot rate of AUD : USD is 0.7700, the target AUD : USD exchange rate is 0.7700 + 0.0100 = 0.7800.

If the aggregate deemed mark-to-market value of the Novation Contracts determined by applying the target AUD : USD exchange rate described above shows a loss, CITIC Pacific shall pay CITIC Group an amount equal to such aggregate deemed mark-to-market value for the Novation Contracts. CITIC Group would receive such payment in return for assuming the ongoing obligations of the Novation Contracts which, based on the calculations by reference to the AUD : USD exchange rate on the Business Day prior to Completion, show a deemed mark-to-market loss. On the other hand, if the aggregate deemed mark-to-market value of the Novation Contracts determined by applying the target AUD : USD exchange rate described above shows a profit, CITIC Group shall pay CITIC Pacific an aggregate of HKD100 for the Novation (rather than an amount equal to such aggregate deemed mark-to-market value). As at the Reference Date, the AUD : USD exchange rate was 0.6458 and on that basis, the mark-to-market loss under the Novation Contracts is estimated to be HKD11.3 billion. On the basis described above, the target AUD : USD exchange rate is deemed to be 0.7000 and the deemed mark-to-market loss under the Novation Contracts is estimated to be HKD9.1 billion. In other words, even though the mark-to-market loss of the Novation Contracts is HKD11.3 billion, CITIC Pacific only pays, by reference to the aforesaid, HKD9.1 billion to CITIC Group for assuming the burden of such Novation Contracts. Whilst, as between CITIC Pacific and CITIC Group, the parties have agreed a floor rate of 0.7000 for the AUD : USD exchange rate (if the market AUD : USD spot exchange rates are less than 0.7000), the mark-to-market value would have to be confirmed and calculated by reference to the AUD : USD exchange rate of 0.7000 and other valuation parameters on the Business Day prior to the Completion Date. By way of estimation only and not taking into account any interim fixing and delivery of AUD under the Novation Contracts, it is estimated that CITIC Pacific will pay about HKD9.1 billion to CITIC Group for CITIC Group’s assumption of liabilities and benefits of the Novation Contracts if the AUD : USD exchange rate on the Business Day prior to the Completion Date is the same as the rate at the Reference Date.

The difference between the mark-to-market value of the Novation Contracts on the Completion Date (calculated by reference to the rate on the Business Day prior to the Completion Date) and the consideration paid to or received from CITIC Group for the Novation Contracts as part of the net proceeds for the Shares issued on conversion of the Convertible Bond will be recorded in the balance sheet of CITIC Pacific as shareholders’ equity.

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Accounting Treatment

For illustration purposes, assuming that on the Business Day prior to Completion Date, the AUD : USD exchange rate is 0.6458 and all other valuation parameters are of the same value as those as at the Reference Date, the corresponding mark-to-market loss under the Novation Contracts will be HKD11.3 billion. By applying the deemed target AUD : USD exchange rate of 0.7000 (because, as between CITIC Pacific and CITIC Group, it is agreed that where the AUD : USD rate is less than 0.7000, the parties would apply, as between them the rate of 0.7000), the corresponding consideration payable to CITIC Group for the Novation Contracts will be HKD9.1 billion.

It was stated on page 90 of CITIC Pacific’s annual report for the year ended 31 December 2007 how CITIC Pacific would account for such leveraged foreign exchange contracts:

“Derivatives are stated at fair value. The gain or loss on changes in fair value is recognised generally in the profit and loss account unless the derivative qualifies for hedge accounting.”

The leveraged foreign exchange contracts do not qualify for hedge accounting.

For illustration purposes only, set out below is how CITIC Pacific will account for the Novation Contracts:–

(i) With or without Completion, CITIC Pacific will reflect the mark-to-market loss of HKD11.3 billion in its profit and loss account, correspondingly derivative liabilities of HKD11.3 billion will be recorded;
(ii) (a) Upon Completion but assuming that no legal transfer of the Novation Contracts, a derivative asset of HKD11.3 billion will be recorded, the corresponding credit in the balance sheet will be a HKD9.1 billion payable to CITIC Group while the difference between the HKD11.3 billion and HKD9.1 billion will be credited to shareholders’ equity (see paragraph below); or
(b) Upon Completion and assuming that the legal transfer of all the Novation Contracts is completed at the same time, the HKD11.3 billion derivative liabilities recorded in accordance with (i) will be derecognised, a HKD9.1 billion payable to CITIC Group will be recorded, while the difference between the HKD11.3 billion and HKD9.1 billion will be credited to shareholders’ equity (see paragraph below).

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The difference between the HKD11.3 billion derivative liabilities and HKD9.1 billion payable to CITIC Group at Completion will be accounted for in shareholders’ equity as part of the subscription price paid for Shares to be issued as a result of the Convertible Bond.

IMPACT ON CITIC PACIFIC’S FINANCIALS

After Completion, the Novation Contracts will no longer result in any future net effect on CITIC Pacific’s profit and loss account.

(i) After Completion but before legal transfer of Novation Contracts:–
The underlying derivatives of the Novation Contracts will remain contractual obligations of CITIC Pacific, and thus will be marked-to-market, changes in the mark-to-market value will be recognised in the profit and loss account until legal transfer occurs, which will be upon formal agreement with the counterparties. At the same time, CITIC Pacific will recognise another derivative, being the agreement to transfer the Novation Contracts at the agreed price to CITIC Group, and mark-to-market this derivative, with changes in mark-to-market value recognised in the profit and loss account until legal transfer of the Novation Contracts occurs. As the mark-to-market value of the Novation Contracts will change, the mark-to-market movement of this derivative will move in an opposite direction as compared to that of the Novation Contracts. As a result, the net effect on CITIC Pacific’s profit and loss account will be nil after Completion.
(ii) After Completion and assuming legal transfer of Novation Contracts are completed at the same time:–

The derivative liabilities in relation to the Novation Contracts shall be derecognised as described in the above paragraph (ii)(b) in the sub-section headed “Accounting Treatment”. Subsequently, the Novation Contracts shall have no impact on the profit and loss account of CITIC Pacific after Completion.

CONDITIONS OF THE AGREEMENT

Completion is conditional upon the following conditions being fulfilled (or waived by CITIC Group, as the case may be):–

(a) the Shares remaining listed and traded on the Stock Exchange at all times prior to and on Completion, save for any temporary suspension not exceeding 10 consecutive trading days (or such longer period as CITIC Group may accept in writing) or any temporary suspension in connection with the clearance of the announcement in relation to the Agreement, and no indication being received on or before Completion from the SFC or the Stock Exchange to the effect that the listing of the Shares on the Stock Exchange will or may be withdrawn or objected to (or conditions will or may be attached thereto) as a result of the Completion or in connection with the terms of the Agreement or the Standby Facility;

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(b) the Agreement and any appropriate increase in the authorised capital of CITIC Pacific being approved in general meeting by the Independent Shareholders or the Shareholders, as the case may be;
(c) the Whitewash Waiver being approved in general meeting by the Independent Shareholders;
(d) the Stock Exchange agreeing to grant the listing of and permission to deal in the Shares to be issued pursuant to the Convertible Bond;
(e) all consents or approval of any relevant governmental authorities or other relevant third parties in Hong Kong, the PRC or elsewhere which are required or appropriate for the entry into and the implementation of the Agreement having been obtained, including all filings with any relevant governmental authorities or other relevant third parties in Hong Kong, the PRC or elsewhere which are required for the entering into and the implementation of the Agreement having been made; all waiting periods which are required under the laws of Hong Kong, the PRC or any other relevant jurisdictions for the implementation of the Agreement having expired or terminated;
(f) the Executive granting the Whitewash Waiver and confirming that no general offer is required in connection with CITIC 1616 Holdings Limited and Dah Chong Hong Holdings Limited, two of CITIC Pacific’s subsidiaries whose securities are listed on the Stock Exchange, in connection with the transactions contemplated under the Agreement; and
(g) there being no material breach of the warranties given by CITIC Pacific under the Agreement and no unexpected material adverse change as to, among other things, business, operations and financial condition of the Group as a whole.

CITIC Group may in its absolute discretion at any time waive in writing any of the conditions (or any part thereof) except the requirements for approval by Independent Shareholders under the Listing Rules in relation to condition (b) and such waiver may be made subject to such terms and conditions as are solely determined by CITIC Group. As at the Latest Practicable Date and in respect of condition (f) above, the Executive had, on 12 November 2008, confirmed that there would be no general offer required in connection with CITIC 1616 Holdings Limited and Dah Chong Hong Holdings Limited in connection with the conversion of the Convertible Bond.

CITIC Group has undertaken that in the event the Whitewash Waiver is not granted by the Executive or approved by the Independent Shareholders but assuming the other conditions are fulfilled or waived, as the case may be, the Agreement will still proceed to Completion. If Completion does not take place and to the extent that the Standby Facility is drawn, all outstanding amounts under the Standby Facility shall be repayable on 31 January 2009.

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COMPLETION

Completion will take place on the third Business Day following the day on which the conditions of the Agreement have been satisfied in full (or waived by CITIC Group, as the case may be) or such other date as may be agreed between the parties. It is expected that Completion will take place no later than 31 December 2008. In the event that the conditions to the Agreement are not fulfilled or, where applicable, waived by CITIC Group on or before 31 December 2008, the Agreement will lapse unless extended by CITIC Group.

COVENANTS

For the term of the Standby Facility, CITIC Pacific has covenanted to CITIC Group, among other things, that it shall not:–

(i) issue, repurchase or grant any share or loan capital save for outstanding contractual commitments under CITIC Pacific’s share option scheme;
(ii) borrow or raise new money after the date of the Standby Facility in excess of HKD1 billion save and except for undrawn facilities entered into prior to the date of the Standby Facility;
(iii) enter into any contract or commitment or undertake any contingent liability which is not in the Group’s ordinary and usual course of business;
(iv) declare, pay or make any dividends or other distributions;
(v) grant any security over the assets of CITIC Pacific or grant guarantees other than in relation to banking facilities granted to the Group or for the Group’s obligations in the ordinary and usual course of business;
(vi) waive, compromise, settle or release, any material, civil, criminal or other proceedings or any material liability or claim; or
(vii) dispose of or acquire any material asset

without the prior agreement of all Directors. Under the Agreement, there are similar covenants that, for the period until conversion of the Convertible Bond, CITIC Pacific will undertake not to proceed with the above matters without the prior written consent of CITIC Group provided that CITIC Group shall not unreasonably withhold or delay consent for any action which is consistent with the Group’s ordinary and usual course of business as currently carried on by it. Regardless, the entry into any variation or termination of the Novation Contracts shall be subject to CITIC Group’s consent.

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TAKEOVERS CODE IMPLICATIONS

As at the Latest Practicable Date, the CITIC Group Concert Parties, consisting of CITIC Group, CITIC HK, Larry Yung Chi Kin, Henry Fan Hung Ling, Liu Jifu, Zhuang Shoucang and Cai Xinghai, own 1,115,989,285 Shares in total representing approximately 50.89% of the issued share capital of CITIC Pacific, in addition to CITIC Group’s and CITIC HK’s interests pursuant to the Agreement.

Dealings in Shares by the CITIC Group Concert Parties during the Relevant Period were as follows:–

		Number of	Average Price
	Date	Shares acquired	Per Share
			(HKD)
Larry Yung Chi Kin	21 October 2008	1,000,000	7.370
	5 September 2008	923,000	25.112
	25 June 2008	253,000	28.990
	24 June 2008	1,556,000	29.211
	19 June 2008	305,000	30.011
Henry Fan Hung Ling	27 June 2008	20,000	27.750
	24 June 2008	120,000	28.650
	23 June 2008	500,000	29.797
Cai Xinghai	27 October 2008	100,000	3.730
CITIC HK	21 October 2008	2,000,000	7.392
	25 June 2008	252,000	28.995
	24 June 2008	1,539,000	29.232

Repurchases of Shares by CITIC Pacific during the Relevant Period were as follows:

	Number of	Average Price
Date	Shares acquired	Per Share
		(HKD)
5 September 2008	1,000,000	25.236
25 June 2008	252,000	28.998
24 June 2008	1,590,000	29.254
20 June 2008	995,000	30.019

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LETTER FROM THE BOARD

Each of Larry Yung Chi Kin, Henry Fan Hung Ling, Cai Xinghai and CITIC HK confirms that each of them did not have any knowledge of the transaction which forms the subject of the Whitewash Waiver application made by CITIC Group prior to 28 October 2008. Based on such confirmations, the Executive has confirmed that the above dealings will not constitute “disqualifying transactions” under paragraph 3(a) of Schedule VI to the Takeovers Code.

The Agreement is conditional upon, among other things, the Whitewash Waiver. The Takeovers Code obliges a shareholder to make a mandatory general offer for the shares of a listed company if a shareholder and its concert parties who hold more than 30% but less than 50% of the voting rights in a listed company increases its shareholding by more than 2% in any 12-month period. CITIC Group Concert Parties are subject to this 2% restriction for the period ending on 18 January 2009. The Whitewash Waiver is therefore necessary for CITIC Group to be able to increase its shareholding in CITIC Pacific by more than 2% prior to and including 18 January 2009 without having to incur a general offer obligation under the Takeovers Code upon conversion of the Convertible Bond. An application has been made by CITIC Group to the Executive for the Whitewash Waiver.

CITIC Group Concert Parties will abstain from voting on the resolution to approve the Whitewash Waiver.

The Executive has indicated that it will grant the Whitewash Waiver, which will be subject to the approval of the Independent Shareholders by way of poll. Upon full conversion of the Convertible Bond, CITIC Group’s voting rights in CITIC Pacific will exceed 50% of the voting rights of CITIC Pacific and any further increase in shareholding will not result in CITIC Group incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

Set out in Appendix III is a valuation report relating to a valuation of the properties of the Group in Hong Kong, Singapore and Canada, being those countries where CITIC Pacific was able to commission and have ready a valuation report for inclusion in the Circular prior to its despatch to Shareholders. In respect of its properties in PRC, Australia and Japan, it was not practicable to have obtained such valuation reports for inclusion in the Circular without a delay in its despatch. Such properties, based on the values ascribed to them in CITIC Pacific’s annual report for 2007, comprise approximately 66% of the value of all properties owned by the Group. CITIC Pacific therefore applied to the Executive pursuant to Rule 11.6 of the Takeovers Code for a waiver from including a valuation report on those of the Group’s properties in the PRC, Australia and Japan in the Circular. The Directors do not believe that any delay in the despatch of the Circular and, if the resolutions are approved at the EGM, the consequential delay in the Completion, would be in the interests of Shareholders as a whole. In any event and taking into account the waiver granted by the Executive on 12 November 2008 allowing CITIC Group to increase its shareholding in CITIC Pacific on or after 19 January 2009 without having to incur a general offer obligation under the Takeovers Code, the Directors believe that any delay would deprive Shareholders the opportunity to approve, as soon as possible and prior to 19 January 2009, the Agreement and the Whitewash Waiver at the EGM which, if approved, would allow CITIC Pacific to capitalise the amount under the Convertible Bond as soon as possible. The Independent Financial Adviser has also confirmed that, in its opinion, the exclusion of such properties from the property valuation report does not

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affect its recommendation to the Independent Shareholders. Having taken the above into account and, in particular, the Directors’ views about the interest of Shareholders, the Executive granted the waiver from strict compliance with Rule 11.1(f) of the Takeovers Code so that it is not required to include a valuation of properties held by the Group in PRC, Australia and Japan pursuant to Rule 11.6 of the Takeovers Code.

USE OF PROCEEDS FROM THE ISSUE OF THE CONVERTIBLE BOND

The amount payable by CITIC Group to CITIC Pacific, prior to any application of such funds towards the repayment of any amount owed under the Standby Facility, in connection with the issue of the Convertible Bond is HKD11.625 billion. However, the actual cash received by CITIC Pacific will be reduced by the amounts owed by CITIC Pacific to CITIC Group under the Standby Facility (to the extent the Standby Facility is drawn) and the Novation. If the full amount of the Standby Facility is drawn prior to Completion, then there will be no additional cash injected into CITIC Pacific as a result of the issue of the Convertible Bond and CITIC Pacific would have to pay CITIC Group an estimated amount of HKD9.1 billion in respect of the Novation assuming the target AUD : USD exchange rate described above and such rate on the Business Day prior to the Completion Date is the same on the Reference Date.

To the extent the Standby Facility is not drawn prior to issue of the Convertible Bond, it shall no longer be available from and after Completion. The net proceeds from the issue of the Convertible Bond will be used to discharge any amounts due from CITIC Pacific to CITIC Group under the Standby Facility (to the extent the Standby Facility is drawn) and the Novation with the balance, if any, used as general working capital.

CITIC Pacific has not carried out any equity fund raising activities in the twelve months preceding the Latest Practicable Date.

REASONS FOR AND BENEFITS OF ENTERING INTO THE STANDBY FACILITY AND THE AGREEMENT

In light of the matters referred to in CITIC Pacific’s profit warning announcement of 20 October 2008, the Standby Facility is considered desirable to ensure that the Group can demonstrate that it has access to sufficient liquidity to maintain confidence in the Group’s ability to settle its obligations under certain leveraged foreign exchange contracts until Completion whereupon the Group will have, by virtue of the Novation, restructured and reduced its liability under the Novation Contracts. Furthermore, the Novation will have a floor rate of AUD : USD0.7000, and an additional 100 pips benefit should the AUD : USD exchange rate be higher than 0.7000 on the Business Day prior to Completion. This means that, as between CITIC Pacific and CITIC Group, for the purpose of calculating the deemed mark-to-market value of the Novation Contracts on the Business Day prior to Completion, so long as the actual AUD : USD spot exchange rate results in a mark-to-market loss in respect of the Novation Contracts, CITIC Pacific will pay to CITIC Group an amount which is less than the actual mark-to-market loss of such Novation Contracts and CITIC Group will effectively bear the actual (and greater) mark-to-market loss of such Novation Contracts from Completion. The mark-to-market value of such Novation Contracts may increase or decrease over the period till October 2010. The Novation would, as on and from Completion, eliminate any further economic risk which CITIC Pacific otherwise would have in respect of the Novation Contracts which continue to run until October 2010.

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In view of the current volatility and lack of liquidity in the equity and credit markets globally, the Board believes that it would be difficult to obtain additional banking facilities at this time and that financial support from its largest Shareholder, CITIC Group, is the most feasible option. The costs to CITIC Pacific of such financial support from CITIC Group are (i) the interest rate of LIBOR plus 2.8% per annum on amounts drawn pursuant to the Standby Facility and (ii) the coupon of 2% per annum from the time of issue of the Convertible Bond up to but excluding the date the Convertible Bond is converted into Shares. Further, the outstanding positions on its leveraged foreign exchange contracts could result in additional losses and funding requirements. This would drain the Group’s internal cash resources and the Board believes it is therefore in the interests of CITIC Pacific for CITIC Group to provide the Standby Facility for such contingent liquidity requirements relating to these contracts. The Standby Facility, in itself, is intended to be a temporary measure as the ongoing cost over a long period of time would not only increase the Group’s gearing but also negatively impact its financial performance. For that reason, the issue and conversion of the Convertible Bond would be favourable to CITIC Pacific.

In negotiating the Conversion Price, the Directors took into account, amongst others, CITIC Pacific’s profit warning announcement dated 20 October 2008, the agreement by CITIC Group to take up the Novation Contracts, the current market volatility in equity markets and the tight credit markets globally.

The Board is also of the view that the increase in stake in CITIC Pacific by CITIC Group is a testament of CITIC Group’s commitment and confidence in CITIC Pacific’s future operational prospects.

INFORMATION ON THE REMAINING LEVERAGED FOREIGN EXCHANGE CONTRACTS

After the Completion Date, assuming all the Novation Contracts have been transferred by novation, the Group will, for the purpose of hedging its AUD requirements, have outstanding AUD target redemption forward contracts and daily accrual contracts for AUD with a maximum deliverable amount of AUD3.0 billion. The remaining AUD contracts have a strike price ranging from 0.7680 to 0.9600 and the weighted average strike price is 0.8331. For such AUD contracts, CITIC Pacific intends to monitor the position carefully, restructure contracts (including to enable the restructured contracts to become eligible for hedge accounting) and take delivery of the AUD as required, in order to mitigate any losses to the Group whilst, at the same time, striving to match the AUD requirements of the iron ore project in Australia. The Group does not intend to terminate such contracts.

The maximum deliverable amount to the Group under the dual currency target redemption forward contracts is, as at the Reference Date, AUD270.2 million or EUR149.2 million and is deliverable in monthly instalments up to July 2010. The outstanding dual currency target redemption forward contracts, assuming that the AUD is the weaker currency, have a strike price ranging from 0.8200 to 0.9500 and a weighted average strike price of AUD : USD0.8703. The outstanding dual currency target redemption forward contracts, assuming that the EUR is the weaker currency, have a strike price ranging from 1.4000 to 1.4600 and a weighted average strike price of EUR : USD1.4422. As the dual currency target redemption forward contracts are capable of being terminated with the

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agreement of the Group and the counterparty, the Group intends to terminate the dual currency target redemption forward contracts. Solely for illustrative purposes only, if such dual currency target redemption forward contracts are terminated as of the Reference Date, the compensation payable by the Group would have been approximately HKD505 million.

As some of the RMB target redemption forward contracts have been knocked out (i.e. the obligation to settle such RMB target redemption forward contracts has ceased), the maximum notional amount under the remaining RMB target redemption forward contracts as at the Reference Date is RMB5.7 billion. The amount payable in USD by CITIC Pacific under the remaining RMB target redemption forward contracts (which is the maximum actual exposure of the Group bearing in mind no physical delivery of RMB takes place) is calculated to be not more than USD42.3 million based on an exchange rate of USD : RMB6.83 as at the Reference Date. The outstanding RMB target redemption forward contracts have a weighted average strike price of USD : RMB6.50. The RMB target redemption forward contracts will not be taken over by CITIC Group and the Group currently intends to retain the RMB target redemption forward contracts.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of CITIC Pacific is HKD1,200,000,000 divided into 3,000,000,000 Shares, of which 2,193,149,160 Shares have been issued and fully paid or credited as fully paid. Such issued Shares rank pari passu in all respects with each other and entitle the holders thereof to receive dividends and distributions which are declared, made or paid after the date of allotment of such Shares. Save for 343,000 Shares issued pursuant to the exercise of share options granted pursuant to the employee share option scheme of CITIC Pacific, no Share has been issued since 31 December 2007, the date to which the latest audited financial statements of the Group were made up. In order to fulfill condition precedent (b) referred to in the section headed “Conditions of the Agreement” above, and to provide the Group with flexibility in future expansion and growth by means of issuing new Shares and fund raising activities as the Directors may consider appropriate from time to time, the Directors propose to increase the authorised share capital of CITIC Pacific to HKD2,400,000,000 divided into 6,000,000,000 Shares. Such increase in the authorised share capital of CITIC Pacific will be conditional upon the passing of an ordinary resolution by the Shareholders at the EGM, and save for the Shares which may fall to be issued under the Convertible Bond and CITIC Pacific’s share option scheme, CITIC Pacific has no intention to issue any part of the proposed increase in its authorised share capital.

CHANGES TO THE SHAREHOLDING IN CITIC PACIFIC AS A RESULT OF CONVERSION

Assuming that there are no other changes in the issued share capital of CITIC Pacific before conversion of the Convertible Bond, the holding of CITIC Group after full conversion of the Convertible Bond at the initial Conversion Price will be 2,098,736,285 Shares (approximately 57.56% of the enlarged issued share capital of CITIC Pacific). Such conversion Shares, when allotted and issued pursuant to a conversion of the Convertible Bond, will rank pari passu in all respects among themselves and with the Shares in issue as at the date of allotment and issue of such conversion Shares, including the right to receive all future dividends and distributions which may be declared, made or paid by CITIC Pacific on or after the date of allotment and issue of such Shares.

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The following table illustrates the change of shareholding structure of CITIC Pacific as a result of the conversion (assuming the total number of Shares in issue as at the date of conversion of the Convertible Bond remains unchanged from the Latest Practicable Date other than as a result of such conversion):

As at the Latest Practicable Date No. of Shares Approx. % to issued share capital of CITIC Pacific 645,611,285 29.438% 418,418,000 19.078% 50,640,000 2.309% 840,000 0.038% 280,000 0.013% 200,000 0.009%	As at the Latest Practicable Date No. of Shares Approx. % to issued share capital of CITIC Pacific 645,611,285 29.438% 418,418,000 19.078% 50,640,000 2.309% 840,000 0.038% 280,000 0.013% 200,000 0.009%	Assuming the Convertible Bond is fully converted into Shares at HKD8.00 per Share No. of Shares Approx. % to enlarged issued share capital of CITIC Pacific 2,098,736,285 57.558% 418,418,000 11.475% 50,640,000 1.389% 840,000 0.023% 280,000 0.008% 200,000 0.005% 2,569,114,285 70.458% 1,000,000 0.027% 300,000 0.008% 4,200,000 0.115% 300,000 0.008% 400,000 0.011% 1,550,000 0.043% 10,145,000 0.278% 34,100 0.001% 1,059,230,775 29.051% (approximately) 3,646,274,160 100%	Assuming the Convertible Bond is fully converted into Shares at HKD8.00 per Share No. of Shares Approx. % to enlarged issued share capital of CITIC Pacific 2,098,736,285 57.558% 418,418,000 11.475% 50,640,000 1.389% 840,000 0.023% 280,000 0.008% 200,000 0.005% 2,569,114,285 70.458% 1,000,000 0.027% 300,000 0.008% 4,200,000 0.115% 300,000 0.008% 400,000 0.011% 1,550,000 0.043% 10,145,000 0.278% 34,100 0.001% 1,059,230,775 29.051% (approximately) 3,646,274,160 100%
1,115,989,285 1,000,000 300,000 4,200,000 300,000 400,000 1,550,000 10,145,000 34,100 1,059,230,775	50.885% 0.046% 0.014% 0.192% 0.014% 0.018% 0.071% 0.463% 0.002% 48.295% (approximately)	2,569,114,285 1,000,000 300,000 4,200,000 300,000 400,000 1,550,000 10,145,000 34,100 1,059,230,775	70.458%
			0.027% 0.008% 0.115% 0.008% 0.011% 0.043% 0.278% 0.001% 29.051% (approximately
2,193,149,160	100%	3,646,274,160

Note 1: Of these shareholders, Cai Xinghai who holds 280,000 Shares is a connected person of CITIC Pacific as he is a director of subsidiaries of CITIC Pacific. Zhuang Shoucang who holds 200,000 Shares is considered part of CITIC Pacific’s public float pursuant to rule 8.24 of the Listing Rules since he is not a connected person of CITIC Pacific.

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The number of Shares in issue as at the Latest Practicable Date is 2,193,149,160 Shares. As at the Latest Practicable Date, there are also options granted to participants under CITIC Pacific’s share option scheme entitling the holders thereof, upon exercise in full, to subscribe for 29,760,000 Shares. The exercise price of such options ranges from HKD19.90 to HKD47.32 per Share. Of these share options the CITIC Group Concert Parties accounted for 4 million share options with an exercise price ranging from HKD22.10 to HKD47.32. These 4 million share options are held by Larry Yung Chi Kin as to 2,000,000 options, Liu Jifu as to 1,400,000 options and Cai Xinghai as to 600,000 options. In calculating the Shares held by public Shareholders, CITIC Pacific has included 159,761,669 Shares held by Power Corporation of Canada and its affiliates, representing 7.28% and 4.38% of the issued share capital of CITIC Pacific as at (i) the Latest Practicable Date and (ii) assuming full conversion of the Convertible Bond at HKD8.00 per Share respectively. Power Corporation of Canada is owned and controlled by Paul G. Desmarais, the father of one of the non-executive Directors, André Desmarais. Pursuant to Rule 8.24 of the Listing Rules, the shareholding of Power Corporation of Canada is considered part of CITIC Pacific’s public float.

Pursuant to a waiver under Note 6 to Rule 26.1 of the Takeovers Code granted by the Executive on 12 November 2008, CITIC Group (through CITIC HK or its designated nominee) may increase its shareholding in CITIC Pacific without incurring any further obligation under Rule 26 of the Takeovers Code should the conversion of the Convertible Bond take place on or after 19 January 2009. In the event the Whitewash Waiver is granted and approved by the Independent Shareholders, CITIC Group shall, on Completion, convert the Convertible Bond and the Shares issued pursuant thereto would not result in CITIC Group or its parties acting in concert, having to incur a general offer obligation under the Takeovers Code.

INFORMATION ON THE GROUP

CITIC Pacific is incorporated in Hong Kong with limited liability and its Shares are listed on the Stock Exchange. CITIC Pacific and its subsidiaries are principally engaged in manufacturing of special steel, iron ore mining, property development and investment, basic infrastructure (such as power generation, aviation, tunnels and communications) and marketing and distribution.

INFORMATION ON CITIC GROUP

CITIC Group is a state-owned enterprise established in 1979 with the approval of the State Council of the PRC. CITIC Group operates a wide range of businesses in the financial services and industrial investment sectors. CITIC Group’s industrial investment sectors include real estate, contracting, raw materials and resources, information, manufacturing and the services industry.

CITIC HK is incorporated in Hong Kong and is a wholly-owned subsidiary of CITIC Group. CITIC HK owns approximately 29% of the issued Shares as at the Latest Practicable Date.

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INTENTIONS FOR THE GROUP

Business

It is the intention of the existing Directors and CITIC Group that the Group will continue its existing businesses. CITIC Group does not intend to introduce any major changes to the business of the Group or re-deploy or dispose of any of the assets of the Group other than in the ordinary course of business. With regard to the acquisition by the Group of further assets, CITIC Group has no current plans to do so but such acquisition may be a possibility in the future. Any acquisition or disposal of the assets or business of the Group, if any, will be in compliance with the Listing Rules and the Takeovers Code (where applicable). CITIC Group has no intention for redundancies nor similar proposals for employees of the Group notwithstanding current market conditions.

Establishment of committee

The Board has resolved to set up a committee for the purpose of dealing with all matters concerning the Group’s leveraged foreign exchange contracts. Mr Chang Zhenming, currently a non-executive Director and the Vice-Chairman and President of CITIC Group, has been appointed to chair such a committee. The committee is empowered to receive recommendations from internal and external parties as to how to improve the Group’s internal management and risk controls, monitor the Group’s ongoing and future leveraged foreign exchange contracts and negotiate terms of the Novation Contracts with the relevant counterparties.

MAINTAINING THE LISTING OF CITIC PACIFIC

It is the intention of CITIC Group to maintain the listing of CITIC Pacific on the Stock Exchange after Completion.

GENERAL

The terms of the Standby Facility, the Agreement, including the Conversion Price and the terms of the Novation, were negotiated on an arm’s length basis after taking into consideration the above factors. Accordingly the Directors (including the non-executive Directors) consider that the terms of the Standby Facility, the Agreement, including the Conversion Price and the terms of the Novation, are fair and reasonable and are in the interests of CITIC Pacific and the Shareholders as a whole.

CITIC Pacific and CITIC Group originally envisaged a standby loan facility of USD1.5 billion in order to strengthen the liquidity of CITIC Pacific on normal commercial terms as to interest and security, in order for CITIC Pacific to be able to itself resolve the issue of the leveraged foreign exchange contracts. However, during the course of the negotiations for the standby loan facility, CITIC Pacific and CITIC Group concluded that with the volatility in the equity and credit markets, (i) a standby loan facility of USD1.5 billion may not be sufficient for CITIC Pacific to itself resolve the issue of the foreign exchange leveraged exchange contracts; (ii) the Novation Contracts were perceived as very high risk to CITIC Pacific and (iii) that any loan would need to be repaid. It was

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LETTER FROM THE BOARD

uncertain whether CITIC Pacific could negotiate the unwinding of the Novation Contracts with existing counterparties or an investment bank on more attractive terms than the terms offered by CITIC Group for the Novation. CITIC Group offered, in conjunction with the Novation, the Standby Facility and the Agreement. The terms of the Novation, the Standby Facility and the Agreement were negotiated together. Taking into account the fact that the Novation, the Standby Facility and the Agreement are being entered into with CITIC Group together, the Directors (including the non-executive Directors) consider that the terms of the Standby Facility are on normal commercial terms.

Up to 30 June 2008, the Group did not incur any losses in relation to the leveraged foreign exchange contracts entered into since 2007. For the period between 1 July 2008 to 17 October 2008, an aggregate realised loss of HKD807.7 million (including HKD124.1 million arising from the Novation Contracts) was incurred by the Group, further details of which are set out in CITIC Pacific’s profit warning announcement dated 20 October 2008.

During the period from 18 October 2008 (being the date immediately after the latest practicable date which was used in CITIC Pacific’s profit warning announcement of 20 October 2008) to 11 November 2008 (being the reference date which was used for the purpose of calculating the relevant financial information pursuant to the leveraged foreign exchange contracts contained in the Announcement), CITIC Pacific has taken delivery of AUD266.1 million from leveraged foreign exchange contracts and performed monthly net settlement in respect of its RMB target redemption forward contracts. The total realised loss incurred from taking delivery of such currencies and net settling the RMB target redemption forward contracts is HKD259.0 million. CITIC Pacific has also incurred a loss of HKD1.9 million from selling AUD185.5 million delivered in such period. CITIC Pacific terminated further AUD target redemption forward contracts at a loss of HKD277.5 million.

Accordingly, for the period between 18 October 2008 to 11 November 2008, an aggregate loss of approximately HKD538.4 million arising from the leveraged foreign exchange contracts only (including HKD474.6 million arising from the Novation Contracts) was therefore incurred by the Group as a result of the above actions, resulting in a total realised loss (from the leveraged foreign exchange contracts only) from 1 July 2008 to 11 November 2008 of HKD1.3 billion. For further information in relation to the Group’s leveraged foreign exchange contracts up to 11 November 2008, please refer to the Announcement.

During the period from 12 November 2008 (being the date immediately after the reference date which was used in the Announcement) to the Reference Date, CITIC Pacific has taken delivery of AUD228.8 million from leveraged foreign exchange contracts and performed monthly net settlement in respect of its RMB target redemption forward contracts. The total realised loss incurred from taking delivery of such currencies and net settling the RMB target redemption forward contracts is HKD253.2 million. CITIC Pacific has also incurred a loss of HKD31.8 million from selling AUD110.1 million delivered in such period.

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LETTER FROM THE BOARD

Accordingly, for the period between 12 November 2008 to the Reference Date, an aggregate loss of approximately HKD285.0 million arising from the leveraged foreign exchange contracts only (including HKD161.3 million arising from the Novation Contracts) was therefore incurred by the Group as a result of the above actions, resulting in a total realised loss (from the leveraged foreign exchange contracts only) from 1 July 2008 to the Reference Date of HKD1.6 billion.

Solely by way of illustration, assuming Completion takes place one Business Day after the Reference Date, the mark-to-market loss under the Novation Contracts as at the Reference Date (being one Business Day prior to such assumed Completion date), is estimated to be HKD11.34 billion and the mark-to-market loss of the remaining outstanding leveraged foreign exchange contracts of the Group as at the Reference Date is estimated to be HKD5.63 billion. Accordingly, taking into account the total realised loss of HKD1.6 billion referred to above, the realised loss and the mark-to-market losses for all of the Group’s leveraged foreign exchange contracts in aggregate is HKD18.6 billion. Shareholders and potential investors should note that the above description is solely for illustrative purpose and the actual losses (realised or mark-to-market) of the Group arising from its leveraged foreign exchange contracts shall be subject to foreign exchange rate prevailing from time to time and may therefore be different from the figures described in the above illustrative example.

As CITIC Group, through CITIC HK, is the largest shareholder of CITIC Pacific, indirectly holding approximately 29% of the issued Shares as at the Latest Practicable Date, the transactions contemplated pursuant to the Agreement constitute a connected transaction for CITIC Pacific under the Listing Rules. In view of the amounts payable by CITIC Pacific in connection with the Novation, the Agreement also constitutes a very substantial disposal under the Listing Rules. The Standby Facility, although a connected transaction, is exempt, under the Listing Rules, from further announcement or shareholders’ approval as it is on normal commercial terms and is unsecured.

OPTIONS, DERIVATIVES, WARRANTS AND OTHER SECURITIES CONVERTIBLE INTO THE SHARES

As at the Latest Practicable Date, there are options granted to participants under CITIC Pacific’s share option scheme entitling the holders thereof, upon exercise in full, to subscribe for 29,760,000 Shares. Of these share options the CITIC Group Concert Parties accounted for 4 million share options with an exercise price range from HKD22.10 to HKD47.32. These 4 million share options are held by Larry Yung Chi Kin as to 2,000,000 options, Liu Jifu as to 1,400,000 options and Cai Xinghai as to 600,000 options.

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LETTER FROM THE BOARD

Details of outstanding share options granted to Directors are set out in Appendix IV of the Circular. Outstanding share options granted to grantees other than Directors are set out below:–

(A) Employees (other than the Directors) of the Company working under continuous contracts (as defined in the Employment Ordinance, Cap 57 of the Laws of Hong Kong):

				Number of
				share options
				outstanding
				as at the
		Exercise		Latest
		price per		Practicable
	Date of grant	share	Exercise period	Date
		(HKD)
	1.11.2004	19.90	1.11.2004 – 31.10.2009	1,030,000
	20.6.2006	22.10	20.6.2006 – 19.6.2011	2,046,000
	16.10.2007	47.32	16.10.2007 – 15.10.2012	6,750,000
(B)	Others
				Number of
				share options
				outstanding
				as at the
		Exercise		Latest
		price per		Practicable
	Date of grant	share	Exercise period	Date
		(HKD)		(Note)
	1.11.2004	19.90	1.11.2004 – 31.10.2009	1,050,000
	20.6.2006	22.10	20.6.2006 – 19.6.2011	1,600,000
	16.10.2007	47.32	16.10.2007 – 15.10.2012	1,600,000

Note: These are in respect of options granted to (i) a former employee under continuous contracts who has subsequently retired and (ii) former Directors. Since 1 January 2008 and up to the Latest Practicable Date, 50,000 share options granted to a former employee have lapsed.

Save as disclosed in the Circular and in respect of the share options which may be granted pursuant to the share option scheme of CITIC Pacific, CITIC Pacific does not have any outstanding options, derivatives, warrants and other securities convertible into the Shares or any other derivatives of CITIC Pacific at the Latest Practicable Date.

– 27 –

LETTER FROM THE BOARD

PROCEDURE FOR DEMANDING A POLL

Pursuant to article 75 of the new articles of association of CITIC Pacific, at any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

(i) by the chairman of the meeting; or
(ii) by at least three members present in person or by proxy for the time being entitled to vote at the meeting; or
(iii) by any member or members present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or
(iv) by a member or members present in person or by proxy and holding Shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

The results of the poll will be published on the websites of CITIC Pacific and the Stock Exchange on the day of the EGM.

EGM

Pursuant to the Listing Rules, where a transaction or arrangement of an issuer is subject to shareholders’ approval under the provisions of the Listing Rules, any shareholder who has a material interest in the transaction or arrangement shall abstain from voting on the resolution(s) approving the transaction or arrangement at the general meeting. There will be a resolution, which is separate from the resolution to approve the Whitewash Waiver, to approve the Agreement and the transactions contemplated thereunder including the issue of the Convertible Bond, the issue of Shares upon conversion of the Convertible Bond, the Novation and the increase in authorised share capital of CITIC Pacific. As Larry Yung Chi Kin, Henry Fan Hung Ling, Liu Jifu, Zhuang Shoucang and Cai Xinghai do not have a material interest in the Agreement and the transactions contemplated thereunder (as they are not a party to the Agreement and the Agreement and the transactions contemplated thereunder do not confer any benefit on them which are not available to other Shareholders) they can vote on the separate resolution for the Agreement, the transactions contemplated thereunder and the increase in authorised share capital of CITIC Pacific. Each of Larry Yung Chi Kin, Henry Fan Hung Ling, Liu Jifu, Zhuang Shoucang and Cai Xinghai has indicated to CITIC Pacific his intention to vote in favour of such resolution. However CITIC Group and CITIC HK will abstain from voting on such resolution. The issue of the Convertible Bond and the Novation is dependent on Independent Shareholders’ approval and accordingly may or may not proceed.

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LETTER FROM THE BOARD

Pursuant to the Takeovers Code, any Shareholder who is involved in, or interested in, the transaction in question shall abstain from voting on the Whitewash Waiver. Consequently, CITIC Group Concert Parties have confirmed that they will abstain from voting on the resolution for the Whitewash Waiver. CITIC Group Concert Parties consist of CITIC Group, CITIC HK, Larry Yung Chi Kin, Henry Fan Hung Ling, Liu Jifu, Zhuang Shoucang and Cai Xinghai.

A proxy form for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to CITIC Pacific’s registered office at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the proxy form will not preclude Shareholders from attending and voting at the EGM if they so wish.

RECOMMENDATION

The Independent Board Committees have been established to advise the Independent Shareholders regarding the Agreement and the Whitewash Waiver respectively. The Listing Rules Independent Board Committee comprises all of the four independent non-executive Directors, namely Messrs Hamilton Ho Hau Hay, Alexander Reid Hamilton, Hansen Loh Chung Hon and Norman Ho Hau Chong and the Whitewash Independent Board Committee comprises three of the four non-executive Directors, being Messrs Willie Chang, Andre´ Desmarais and Peter Kruyt (alternate director to Mr. Andre´ Desmarais) and all of the four independent non-executive Directors. None of the members of the respective Independent Board Committees is directly or indirectly interested or involved in the Agreement and the Whitewash Waiver.

The Independent Financial Adviser has been appointed to advise the Independent Board Committees and the Independent Shareholders regarding the terms of the Agreement and Whitewash Waiver. The Independent Board Committees have approved the appointment of the Independent Financial Adviser.

Your attention is drawn to (i) the letter from the Listing Rules Independent Board Committee which contains the recommendation of the Listing Rules Independent Board Committee to the Independent Shareholders regarding the resolutions to approve the Agreement and the transactions contemplated thereunder, (ii) the letter from the Whitewash Independent Board Committee which contains the recommendation of the Whitewash Independent Board Committee to the Independent Shareholders regarding the resolution to approve the Whitewash Waiver, and (iii) the letter from the Independent Financial Adviser which contains its advice to the Independent Board Committees and the Independent Shareholders regarding the terms of the Agreement and the Whitewash Waiver.

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LETTER FROM THE BOARD

The Board considers that (i) the Agreement, the transactions contemplated thereunder and the proposed increase in authorised share capital and (ii) the Whitewash Waiver are in the interests of CITIC Pacific and the Shareholders as a whole, and recommends that the Shareholders vote in favour of the resolutions relating to the foregoing matters at the EGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the information set out in the appendices to the Circular.

Yours faithfully By order of the Board CITIC Pacific Limited Larry Yung Chi Kin Chairman

– 30 –

LETTER FROM THE LISTING RULES INDEPENDENT BOARD COMMITTEE

==> picture [182 x 58] intentionally omitted <==

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

3 December 2008

To the Independent Shareholders

Dear Sir or Madam,

STANDBY FACILITY CONNECTED TRANSACTIONS INVOLVING SUBSCRIPTION FOR CONVERTIBLE BOND BY CITIC GROUP APPLICATION FOR WHITEWASH WAIVER VERY SUBSTANTIAL DISPOSAL INVOLVING CERTAIN LEVERAGED FOREIGN EXCHANGE CONTRACTS TO BE ASSUMED BY CITIC GROUP AND INCREASE OF AUTHORISED SHARE CAPITAL

We refer to the circular dated 3 December 2008 (the “ Circular ”) of CITIC Pacific Limited, of which this letter forms part. Capitalised terms used in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed to form the Listing Rules Independent Board Committee to advise you in connection with the Agreement, details of which are set out in the letter from the Board in the Circular.

We wish to draw your attention to the letter from the Board, as set out on pages 5 to 30 of the Circular, and the letter from the Independent Financial Adviser, as set out on pages 33 to 56 of the Circular. Having considered the terms of the Agreement and the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving at its advice, we are of the opinion that the terms of Agreement (including the Convertible Bond, the Conversion Price and the terms of the Novation) are fair and reasonable and in the interests of CITIC Pacific and the Shareholders as a whole as far as the Independent Shareholders are concerned. Accordingly, we recommend that, unless a better proposal is made by anyone else, the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve, among other things, the Agreement and the transactions contemplated thereunder.

Yours faithfully, Listing Rules Independent Board Committee CITIC Pacific Limited Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong Independent Non-executive Directors

– 31 –

LETTER FROM THE WHITEWASH INDEPENDENT BOARD COMMITTEE

==> picture [182 x 58] intentionally omitted <==

(Incorporated in Hong Kong with limited liability) (Stock Code: 00267)

To the Independent Shareholders

3 December 2008

Dear Sir or Madam,

STANDBY FACILITY CONNECTED TRANSACTIONS INVOLVING SUBSCRIPTION FOR CONVERTIBLE BOND BY CITIC GROUP APPLICATION FOR WHITEWASH WAIVER VERY SUBSTANTIAL DISPOSAL INVOLVING CERTAIN LEVERAGED FOREIGN EXCHANGE CONTRACTS TO BE ASSUMED BY CITIC GROUP AND INCREASE OF AUTHORISED SHARE CAPITAL

We have been appointed to form the Whitewash Independent Board Committee to advise you in connection with the Whitewash Waiver, details of which are set out in the letter from the Board in the Circular.

We wish to draw your attention to the letter from the Board, as set out on pages 5 to 30 of the Circular, and the letter from the Independent Financial Adviser, as set out on pages 33 to 56 of the Circular. Having considered the opinion of the Listing Rules Independent Board Committee, the Whitewash Waiver and the advice given by the Independent Financial Adviser and the principal factors and reasons taken into consideration by it in arriving at its advice, we are of the opinion that the Whitewash Waiver is in the interests of CITIC Pacific and the Shareholders as a whole as far as the Independent Shareholders are concerned. Accordingly, we recommend that, unless a better proposal is made by anyone else, the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Whitewash Waiver.

Yours faithfully, Whitewash Independent Board Committee CITIC Pacific Limited

Willie Chang André Desmarais Peter Kruyt (alternate director to André Desmarais) Non-executive Directors

Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong Independent Non-executive Directors

– 32 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

The following is the text of the letter from Anglo Chinese to the Independent Board Committees and the Independent Shareholders prepared for the purpose of inclusion in the Circular.

www.anglochinesegroup.com

40th Floor, Two Exchange Square, 8 Connaught Place, Central, Hong Kong

==> picture [40 x 63] intentionally omitted <==

The Independent Board Committees and the Independent Shareholders CITIC Pacific Limited 32/F., CITIC Tower 1 Tim Mei Avenue, Central Hong Kong

3rd December, 2008

Dear Sirs,

Standby Facility, connected transactions involving the Subscription by CITIC Group of a Convertible Bond issued by CITIC Pacific, an application for a Whitewash Waiver and a Very Substantial Disposal involving leveraged foreign exchange contracts to be assumed by CITIC Group and an increase in authorised share capital for CITIC Pacific

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committees and Independent Shareholders in relation to the Agreement and the Whitewash Waiver details of which are contained in the circular from CITIC Pacific dated 3rd December, 2008 (the “Circular”) of which this letter forms a part. Expressions used in this letter have the same meanings as defined in the Circular unless the context requires otherwise.

The Agreement gives rise to a connected transaction and very substantial disposal for CITIC Pacific under Chapters 14A and 14 of the Listing Rules and the conversion of the Convertible Bond under the Agreement prior to 19th January, 2009 would give rise to a mandatory general offer in terms of Rule 26 of the Takeovers Code were the SFC not to grant a Whitewash Waiver under that Rule.

Accordingly, the Agreement and the Whitewash Waiver, which the SFC has indicated that it will grant, are subject to the reporting and announcement requirements of the Listing Rules and require the prescribed approvals of Independent Shareholders under the Listing Rules and the Takeovers Code, respectively.

– 33 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

The connected transaction and very substantial disposal for CITIC Pacific arise because CITIC Group is a connected person under the Listing Rules by virtue of its approximately 29 per cent shareholding in CITIC Pacific and by virtue of the amounts payable under the Novation it gives rise to a very substantial disposal for CITIC Pacific under the Listing Rules. Although the Standby Facility is also a connected transaction under the Listing Rules, it is exempt from further announcement or shareholders’ approval since it is on normal commercial terms and is unsecured.

The Independent Board Committees have been established to advise the Independent Shareholders regarding the Agreement and the Whitewash Waiver respectively. The Listing Rules Independent Board Committee comprises all of the four independent non-executive Directors, namely Messrs Hamilton Ho Hau Hay, Alexander Reid Hamilton, Hansen Loh Chung Hon and Norman Ho Hau Chong and the Whitewash Independent Board Committee comprises three of the four non-executive Directors, being Messrs Willie Chang, Andre´ Desmarais and Peter Kruyt (alternate director to Mr. Andre´ Desmarais) and all of the four independent non-executive Directors. None of the members of the respective Independent Board Committees is directly or indirectly interested in or involved in the Agreement or the Whitewash Waiver.

The Listing Rules Independent Board Committee has been formed to consider whether the Agreement is fair and reasonable and in the interests of CITIC Pacific and its Shareholders as a whole including the Independent Shareholders. The Whitewash Independent Board Committee has been formed to consider whether the Whitewash Waiver is in the interests of CITIC Pacific and in the interests of Shareholders as a whole including the Independent Shareholders. We have been appointed to advise the Independent Board Committees and Independent Shareholders in respect of these matters.

In formulating our opinion and recommendation, we have relied on the information and facts supplied to us by CITIC Pacific and the opinions expressed by the Directors. We have assumed that the information and representations contained in or referred to in the Circular were true and accurate at the time they were made and continued to be so at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have also been advised by the Directors that and believe that no material facts have been omitted from the Circular. We have not conducted an independent investigation into the affairs of the CITIC Pacific Group or verified any of the information that we have considered or that has been provided to us.

We consider we have reviewed sufficient information to reach an informed view to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation.

Apart from normal professional fees for our services to CITIC Pacific in connection with this appointment, no arrangement exists whereby Anglo Chinese will receive any benefits from CITIC Pacific or any of its associates.

– 34 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

PRINCIPAL FACTORS

We have set out below the principal factors that we have taken into account in arriving at our advice to the Independent Board Committees and to Independent Shareholders.

Background

CITIC Pacific is an investment holding company with businesses or investments in, or related to, business in China, including manufacturing special steel, iron ore mining, developing and investing in properties, power generation, aviation, tunnels, communication and distribution of motor vehicles and consumer products throughout China. In recent years, steel manufacturing has become the largest contributor to CITIC Pacific’s profits.

As part of its investment in manufacturing steel in mainland China, CITIC Pacific owns the mining rights to two billion tonnes of magnetic iron ore with options to another four billion tonnes in Western Australia. The two billion tonnes of ore is capable of producing 27.6 million tonnes of product annually to supply mainland China and CITIC Pacific’s steel plants in particular when the mine is completed.

According to the interim report as at 30th June, 2008 of CITIC Pacific, the construction of the infrastructure for the iron ore mining project in Australia is continuing. The latest estimated capital expenditure for the first two phases is USD3.5 billion, equivalent to about HKD27.3 billion, of which approximately 75% has been committed. An additional amount of capital expenditure of approximately USD0.35 billion, equivalent to about HKD2.7 billion, will be incurred in anticipation of the third phase of the project (for another one billion tonnes of magnetite resources). This investment will fund processing infrastructure and supporting infrastructure including port facilities, a slurry pipeline, a power station and a desalination plant.

This investment has given rise to a substantial currency management challenge for CITIC Pacific since substantial commitments have been made in AUD and RMB, and to a lesser extent EUR, for expenditure there whilst the project loan is in USD the currency of account for CITIC Pacific is HKD which is linked via the Hong Kong currency peg to the USD and the currency in which iron ore is priced globally is USD.

Accordingly, as the Directors plan the future of this investment they will require approximately AUD3.5 billion and EUR123 million over five years. When measured against the total consolidated assets of the CITIC Pacific Group as shown in the unaudited accounts dated 30th June, 2008 set out in Appendix I of the Circular of about HKD124.2 billion, the Australian iron ore project represents a substantial part of CITIC Pacific’s assets.

As set out in the announcement made by CITIC Pacific on 20th October, 2008, CITIC Pacific entered into various leveraged foreign exchange contracts in AUD and EUR with a view to minimising currency exposure arising from the Australian iron ore mining project and RMB currency exposure, which have resulted in substantial unrealised losses. CITIC Pacific explains that this has resulted from its currency management policies not having

– 35 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

been followed by key staff who have since resigned from the Company. Investors should refer to the announcement made by CITIC Pacific on 20th October, 2008 which contained a profit warning.

Since these leveraged foreign exchange contracts have no limit to the losses that could result to the Company in the event of a decline in the parity or exchange rate as between the AUD and the USD, and since CITIC Pacific has received legal advice that these contracts cannot readily be closed out without the consent of the counterparties, CITIC Pacific is exposed to potentially very substantial unrealised losses through to 2010, which, if they become realised, would require substantial asset sales or new capital to enable these liabilities to be met as they fell due since they could exceed normal recurrent projected cash flow from operations. The possible scale of these unrealised losses is set out below in the section headed “Background on the leveraged foreign exchange contracts”.

In view of these developments, it was announced on 12th November, 2008 that CITIC Group, the largest shareholder in CITIC Pacific would make available the Standby Facility in an amount up to USD1.5 billion in terms set out in the Circular and would agree, under the Agreement, comprising a conditional subscription of HKD11.625 billion for the Convertible Bond and the Novation, to recapitalise CITIC Pacific and enable it to meet these obligations without undue disruption to its business or prospects. These arrangements are subject to the approvals and consents set out in the Circular and in this letter, as described below.

CITIC Group is a state owned enterprise established under the laws of the PRC and is the largest shareholder of CITIC Pacific holding approximately 29 per cent of its Shares as at the Latest Practicable Date. CITIC Group operates a wide range of businesses in the financial services and industrial investment sectors. CITIC Group’s industrial investment sectors include real estate, contracting, raw materials and resources, information, manufacturing and the services industry. CITIC Group is widely regarded as one of China’s leading commercial enterprises and is owned by the Government of the PRC. According to the annual report of CITIC Group, as at 31st December, 2007, CITIC Group had total assets of about RMB1,322 billion and net profits stood at approximately RMB16 billion, equivalent to approximately HKD1,493 billion and HKD18 billion respectively.

Recent developments in markets and current market circumstances

It is important to consider the Proposals in the light of recent events.

Since 31st December, 2007, the date of the most recent audited accounts of CITIC Pacific, and the interim unaudited accounts as at 30th June, 2008, world markets have experienced unusually high levels of volatility and trend reversals in many markets. Currency parities have moved sharply as against each other and stock markets and commodity prices that have generally been in a rising trend for some while have fallen sharply around the world and in all CITIC Pacific’s major markets and the Baltic Exchange, a widely used measure of the condition and outlook for world trade has fallen by approximately 93 per cent (see Table 10) since its high in May, 2008. This volatility and the many substantial trend reversals have resulted in widespread losses worldwide and in illiquidity in global credit and capital markets and have put pressure on property prices and other capital assets in China and elsewhere.

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LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

During 2008, unprecedented intervention has become widespread in OECD countries with Governments investing tens or hundreds of billions of USD to defray a collapse in the banking system.

Set out below in Table 1 is the rise or fall in major trading currencies at 31st December, 2005, 2006 and 2007 and in the year to date in 2008 as against the close in the previous period. The movement in the year to date in AUD has been highly and unusually negative. This is illustrated by the chart of the AUD : USD parity shown in Table 2.

Table 1, below: USD performance versus other currencies

USD exchange rate or parity

	31st December,	31st December,	31st December,	28th November,
	2005	2006	2007	2008
				(Latest Practicable
				Date)
CNY	8.0702	7.8045	7.3036	6.8346
JPY	117.75	119.05	111.75	95.46
AUD	0.7328	0.7885	0.8751	0.6530
NZD	0.6837	0.7039	0.7659	0.5487
CAD	1.1620	1.1657	0.9984	1.2432
GBP	1.7230	1.9588	1.9850	1.5331
EUR	1.1849	1.3197	1.4589	1.2734
CHF	1.3134	1.2201	1.1335	1.2144

USD exchange rate performance (%) (Note: Positive percentage means foreign currency strength)

	31st December,	31st December,	28th November,
	2006	2007	2008
			(Latest Practicable
			Date)
CNY	3.4%	6.9%	6.9%
JPY	-1.1%	6.5%	17.1%
AUD	7.6%	11.0%	-25.4%
NZD	3.0%	8.8%	-28.4%
CAD	-0.3%	16.8%	-19.7%
GBP	13.7%	1.3%	-22.8%
EUR	11.4%	10.5%	-12.7%
CHF	7.6%	7.6%	-6.7%

Source: Bloomberg, Date: 28th November, 2008

– 37 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 2, below: AUD : USD Chart with Fibonacci

==> picture [311 x 162] intentionally omitted <==

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

1.0
0.9
0.8
0.7
0.6
0.5
0.4
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
USD
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

We believe that this chart indicates that there is a significant possibility of the AUD : USD parity testing lower levels shown in Table 2 within the next twelve months. In the absence of the Agreement having been completed and a viable hedging strategy having been put in place, this parity would translate into a greater unrealised mark to market loss to CITIC Pacific.

Set out in Table 3, is the year to date percentage movements of CITIC Pacific’s share price, major stock market indices, and selected publicly listed comparable companies with primary listings in Hong Kong or Singapore, which we regard as comparable to a useful degree with CITIC Pacific by virtue of engaging in similar activities as CITIC Pacific, having a conglomerate corporate structure and geographic location with a business focus in greater China.

– 38 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 3, below: CITIC Pacific – Changes in Share prices and index levels

	31st December,	28th November,
	2007	2008	Change
		(Latest	(%)
		Practicable Date)
CITIC Pacific	HKD43.55	HKD5.22	-88%
Indices
Hang Seng Index	27,812.65	13,888.24	-50%
Hang Seng Mainland Free
Float Index	8,927.61	3,907.43	-56%
Hang Seng China Enterprises
Index	16,124.72	7,207.48	-55%
Shanghai Composite	5,261.56	1,871.16	-64%
Dow Jones Industrial Average	13,264.80	8,829.04	-33%
S&P 500	1,468.36	896.24	-39%
W-iltshire 5000	14,753.60	8,835.38	-40%
Nikkei 225	15,307.78	8,512.27	-44%
FTSE All Share	3,286.67	2,098.01	-36%
MSCI World ex Japan	1,574.55	871.15	-45%
MSCI World	1,588.80	892.93	-44%
S&P/ASX 300 Metal &
Mining Index	5,286.50	2,998.30	-43%
China Iron Ore Fines
(China port $ per tonne)	188.00	72.50	-61%
FIBER US Commodity Steel Price	270.33	101.67	-62%
Baltic Dry Index	9,143.00	715.00	-92%
Listed Affliates
Cathay Pacific	HKD20.40	HKD7.52	-63%
CITIC 1616	HKD2.16	HKD0.78	-64%
Dah Chong Hong	HKD3.50	HKD1.00	-71%
CITIC Guoan	RMB17.25	RMB6.02	-65%

– 39 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

	31st December,	28th November,
	2007	2008	Change
		(Latest	(%)
		Practicable Date)
Comparables
Hutchison	HKD88.45	HKD38.90	-56%
Cheung Kong	HKD144.20	HKD73.00	-49%
Jardine Matheson	USD27.70	USD17.80	-36%
Jardine Strategic	USD15.70	USD9.58	-39%
Swire Pacific	HKD107.50	HKD52.00	-52%
Wharf	HKD40.85	HKD18.40	-55%
China Merchants	HKD48.50	HKD14.76	-70%
China Resources Enterprises	HKD33.50	HKD11.98	-64%
Wheelock	HKD24.00	HKD14.70	-39%
New World Development	HKD27.65	HKD6.10	-78%
Hopewell	HKD29.79	HKD20.10	-33%
Shanghai Industrial	HKD34.00	HKD14.64	-57%
Fosun International	HKD7.30	HKD1.81	-75%
China Travel	HKD5.04	HKD0.97	-81%
Tianjin Development	HKD9.30	HKD2.16	-77%
	Average share price fall		-57.3%
	Median share price fall		-56.0%

Source: Bloomberg, Metal Bulletin Date: 28th November, 2008

The percentage falls are indicative of a sharp fall in equity values or asset prices worldwide since 31st December, 2007 and are useful in assessing the fairness and reasonableness of the Conversion Price of the Convertible Bond. The median fall in the comparable companies share prices is 56.0 per cent since 31st December, 2007.

– 40 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 4 below illustrates the unprecedented rise in volatility in the VIX Index, which became extreme in 2008 and is a reflection of the unprecedented, simultaneous falls in markets everywhere in 2008.

Table 4, below: VIX Index

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

90
80
70
60
50
40
30
20
10
0
2003 2004 2005 2006 2007 2008
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index.

This index is a widely used measure of the implied volatility of index option prices on the S&P500 Index of leading publicly traded shares on the New York Stock Exchange.

The higher the value on the VIX, the more volatile the market and thus the more costly are options which are used to hedge or counter or insure against risk from changes in share prices.

If investors perceive a high likelihood of a change in prices, they demand a larger premium to hedge or counter or insure against such an event by selling options. Thus, the VIX is a widely used measure of the market’s expectation of price movements or volatility over the following 30 days period for the market as a whole.

Table 5 below shows the performance of CITIC Pacific against the Hang Seng Index over the last five years. We believe that this is the most useful benchmark for the Company since China focused shares have historically been valued differently as between mainland China and Hong Kong Indices as illustrated by the valuation differences which are often seen between H-shares and domestic China shares. CITIC Pacific’s Shares prices performed broadly in line with this index until the profit warning announcement on 20th October, 2008.

– 41 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 5, below: CITIC Pacific Share price in black versus the Hang Seng Index in red – 5 year chart (year 2003 based at 100)

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

450
400
350
300
250
200
150
100
50
0
2003 2004 2005 2006 2007 2008
267 HK HSI
Percentage Change (%)
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

Table 6, below shows the price performance and volume of purchases in Shares since 2002 was well above HKD8, and illustrates the scale of the dilution which would occur for existing Shareholders who have invested in the Company in that period, if the Convertible Bond is subscribed at HKD8 per Share.

Table 6 below: CITIC Pacific – 5 year Share price chart (HKD)

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

60
50
40
30
20
10
0
200
150
100
50
0
2003 2004 2005 2006 2007 2008
Share Price (HKD)
Million Shares
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

Table 7, 8 and 9 below show the sharp fall in Australian metal and mining shares and in steel and iron ore prices respectively in 2008. These developments will have a negative impact on the carrying value of CITIC Pacific’s assets.

– 42 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 7, below: Standard and Poor’s/Australian Stock Exchange Metal and Mining Index

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

6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
Aug 06 Feb 07 Aug 07 Feb 08 Aug 08
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

Table 8, below: China Iron Ore Fines

==> picture [309 x 153] intentionally omitted <==

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

250
200
150
100
50
0
Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08
USD per tonne
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

– 43 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Table 9, below: FIBER US Commodity Steel Price

==> picture [311 x 151] intentionally omitted <==

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

600
500
400
300
200
100
0
2003 2004 2005 2006 2007 2008
USD per tonne
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

Table 10, below: The Baltic Dry Bulk Index

==> picture [296 x 144] intentionally omitted <==

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

12,000
10,000
8,000
6,000
4,000
2,000
0
Jan-08 Feb-08 Mar-08 Apr-08 Jun-08 Jul-08 Aug-08 Oct-08 Nov-08
----- End of picture text -----

Source: Bloomberg Date: 28th November, 2008

Taken together, these tables illustrate the highly unusual trading environment in which CITIC Pacific has operated since 31st December, 2007 and the likely impact of events on the carrying values of assets in the books of account of CITIC Pacific since that date which are likely to have been very substantially reduced if CITIC Pacific were to have to sell major assets now to meet unexpected and unbudgeted losses arising from leveraged foreign exchange contracts or to make a capital raising of about USD1.5 billion or about HKD11.625 billion in the equity capital markets.

– 44 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

We have considered these developments in making our assessment of the Proposals and in particular, the Conversion Price of the Convertible Bond and based on current market conditions we have concluded that any alternative forced sale of assets in the current market by CITIC Pacific to meet unbudgeted liabilities arising from leveraged foreign exchange contracts or capital raising of about HKD11.625 billion would be problematic and likely to produce unsatisfactory results for Shareholders of CITIC Pacific, which cannot be reliably quantified now.

We have also considered the leveraged foreign exchange contracts and the obligations presently and potentially arising from them in the context of CITIC Pacific’s financial resources, assets and liabilities, profitability and cash flow as recorded in the last audited accounts as at 31st December, 2007 and as adjusted as at 30th June, 2008 in Appendix I of the Circular and the price performance of Shares before and after the Announcement.

Background on the leveraged foreign exchange contracts

The profile and details of the leveraged foreign exchange contracts have been described in the announcement made by CITIC Pacific on 20th October, 2008, in the Announcement and in the Circular.

CITIC Pacific has received legal advice that these agreements cannot readily be varied without the agreement of the counterparties. Accordingly, as things stand and without the Proposals, CITIC Pacific is required to discharge the following obligations as at the Reference Date:

deliver AUD8.4 billion in monthly instalments until October, 2010 in respective of AUD target redemption forward contracts, of which AUD5.5 billion is deliverable under the Novation Contracts;
deliver AUD92.6 million in monthly instalments until September, 2009 in respect of daily accrual contracts;
deliver both at an average weighted price of AUD : USD0.8775;
deliver the weaker of AUD or EUR in the amounts of either AUD270.2 million or EUR149.2 million at a weighted average price of AUD : USD0.8703 or EUR : USD1.4422 respectively under dual currency target redemption forward contracts;
deliver in US Dollars any difference between RMB5.7 billion until July, 2010 at a weighted average rate of USD : RMB6.50 and the rate prevailing then in respect of outstanding RMB target redemption forward contracts.

Based on the valuations received from the counterparties as at the Reference Date the marked to market unrealised loss of the outstanding leveraged foreign exchange contracts, after realised losses of HKD1.6 billion since 1st July, 2008, is HKD17.0 billion based on an exchange rate of AUD : USD0.6458 an exchange rate of USD : RMB6.83 and EUR : USD1.2978.

– 45 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

In the absence of the Proposals, CITIC Pacific would be faced with this contingency now and the risk which exists from there being no limit to the potential losses facing CITIC Pacific from a rising US Dollar or a falling AUD, RMB or EUR. Whatever the probability risk of such developments, the downside risk or possible impact of a sharp change in parities measured against the resources of the CITIC Pacific Group as set out in the last reported audited accounts of CITIC Pacific and as at the interim unaudited 30th June, 2008 and the recent developments described above in world markets represents a grave risk that CITIC Pacific might not be able to manage or reposition without the prospect of the Proposals. Once a currency exposure of this size is known, it is difficult to restructure and hedge.

Prior to agreeing the Proposals, the Directors explored various other alternatives including other equity capital raising and concluded that the Proposals represent the only option available in the current tight liquidity market to address the liabilities presently arising under the leveraged foreign exchange transactions.

REASONS FOR ENTERING INTO THE AGREEMENT AND THE STANDBY FACILITY

The challenging trading conditions of 2008 and the non-observance of CITIC Pacific Group hedging policies have given rise to the obligations presently outstanding under the leveraged foreign exchange contracts. These obligations are of an actual and potential scale that cannot be easily met from the normal cash flow from operations of the CITIC Pacific Group.

The Proposals provide a means whereby:

confidence in the CITIC Pacific Group’s financial stability can be maintained;
liquidity sufficient to meet these obligations can be obtained now;
a permanent solution can be obtained to the downside risk facing the CITIC Pacific Group from the unlimited liability arising from the Novation Contracts; and
all of the above can be achieved rapidly and on a relatively assured basis through the provisions of the Agreement via the Convertible Bond and the Novation and immediately through the liquidity offered by the Standby Facility until the necessary approvals have been obtained from Independent Shareholders.

The Proposals are particularly timely in view of the severe contraction presently being experienced in the equity capital markets and debt markets with no financings being completed with the size or scale of this one in the Far East ex-Japan since the start of 2008 and the severe contraction in the availability of credit in the banking market for transactions of this size.

– 46 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Principal terms of the Agreement and the Standby Facility

The principal terms of the Agreement and its important parts are set out below.

The Standby Facility

The Standby Facility is not a part of the Agreement but is related to it. The parties to the Standby Facilities are: CITIC Pacific as borrower and CITIC Group as lender. This agreement was entered into on 12th November, 2008 and comprises a facility agreement in respect of a USD1.5 billion standby loan facility, equivalent to about HKD11.625 billion, which is the same amount as that to be subscribed by CITIC Group for the Convertible Bond.

Proceeds from the Standby Facility may only be used to fund the any commitments and, or, liabilities due from CITIC Pacific under the leveraged foreign exchange contracts until Completion.

The Standby Facility is unsecured and is repayable upon demand. Interest on the facility is payable at the London Interbank Offered Rate plus 2.8 per cent per annum. No interest shall be payable by CITIC Pacific if the Standby Facility is not drawn down and no fee is payable by CITIC Pacific to CITIC Group in relation to the Standby Facility. The Standby Facility has a maturity date of 31st January, 2009 and is not available after Completion.

The Standby Facility includes covenants given by CITIC Pacific that should be noted. These are in relation to the conduct of business for the term of the Standby Facility and state that: CITIC Pacific shall not during such period, unless with the unanimous prior approval by all Directors:

(a) issue, repurchase or agree to issue any share or loan capital or grant or agree to grant or redeem any option or amend the terms of any existing option over or right to acquire or subscribe any of its share or loan capital save for outstanding contractual commitments under the Company’s share option scheme;
(b) borrow or raise money after the date of the Standby Facility in excess of HKD1 billion save and except for undrawn facilities entered into prior to the date of the Standby Facility;
(c) enter into any contract or other transaction or capital commitment or undertake any contingent liability which is not in the Group’s ordinary and usual course of business;
(d) terminate any agreement, arrangement or understanding to which it is a party or waive any of its rights exceeding an aggregate value of HKD100 million;
(e) declare, pay or make any dividends or other distributions;

– 47 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

(f) create or permit to arise any mortgage, charge, lien, pledge, other form of security or encumbrance of equity of whatsoever nature, whether similar to the foregoing or not, on or in respect of any part of its undertaking, property or assets other than those arising as a matter of law;
(g) give any guarantee, indemnity or surety other than guarantees, indemnity or surety given in relation to (i) banking facilities made available to any member of the Group or (ii) the obligations of any other member of the Group in the ordinary and usual course of business of the group;
(h) dispose or agree to dispose of or acquire or agree to acquire any material asset;
(i) dispose of the ownership, possession, custody or control of any corporate books or records;
(j) compromise, settle, release, discharge or compound any material civil, criminal, arbitration or other proceedings or any material liability, claim, action, demand or dispute or waive any right in relation to any of the foregoing;
(k) release, compromise or write off any material amount recorded in the books of account of the relevant member of the Group as owing by any debtors of such member of the Group; or
(l) terminate any or allow to lapse any insurance policy material for the business of the Group now in effect or default under any provision thereof.

Notwithstanding the aforesaid, any variation or termination of any of the Novation Contracts shall be subject to CITIC Group’s prior written consent.

It is important to note that if drawdown is made under the Standby Facility and the Agreement is not approved by Independent Shareholders and completed, the Standby Facility is repayable in full on 31st January, 2009, or earlier, on demand by CITIC Group.

The Agreement

The parties are: CITIC Group and CITIC Pacific and the Agreement, which was entered into on 12th November, 2008, provides for (i) the conditional subscription by CITIC Group of a Convertible Bond to be issued by CITIC Pacific at the Completion Date in the amount of HKD11.625 billion and (ii) the Novation, which is a very substantial disposal for CITIC Pacific under the Listing Rules. The Agreement contains conditions precedent that amongst other things deal with the conduct of business by CITIC Pacific prior to Completion and these undertakings from CITIC Pacific mirror those set out above in relation to the Standby Facility.

– 48 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

The Convertible Bond

If the Agreement and the Whitewash Waiver are approved by Independent Shareholders, the Convertible Bond will be converted into Shares at the Completion Date. The Conversion Price is HKD8 per Share. The coupon payable on the Convertible Bond prior to Conversion is two per cent per annum.

At Completion, the Convertible Bond will be converted into 1,453,125,000 new Shares, which will represent 66.26 per cent of the existing issued share capital and 39.85 per cent of the enlarged issued share capital.

The Convertible Bond is transferable as between wholly owned subsidiaries of CITIC Group, is in registered form and is an unsubordinated, unconditional and unsecured obligation of CITIC Pacific. The Convertible Bond is not listed on or tradable on a stock exchange. The exercise of conversion rights under the Convertible Bond will be delayed until 19th January, 2009 if the Whitewash Waiver is not granted by the Executive and approved by Independent Shareholders but cannot proceed unless the Agreement is approved by Independent Shareholders as described below.

The Conversion Price

We have considered the conversion price in the following manner. The tables set out in this letter and recent events suggest to us that the last consolidated audited accounts for the CITIC Pacific Group or the unaudited interim accounts as at 30th June, 2008 are unlikely, as with most companies, to reflect values today.

Accordingly, if one adjusts those accounts for falls in markets and comparable company shares set out in Table 3 taking the median fall in comparable company share prices of 56.0 per cent up until the Latest Practicable Date, the realised and unrealised losses arising from the leveraged foreign exchange contracts of about HKD18.6 billion, as at the Reference Date, and a market placing or rights issue discount for a financially stressed company of 30 to 40 per cent, as we believe would be necessary for raising equity capital in current market conditions, then the result is an adjusted contingent net asset value calculated on this basis of about HKD5.71 to HKD6.91 per Share, after taking account of the dilution arising from the Shares which would be issued to CITIC Group under the Convertible Bond, translates into a Conversion Price that is favourable to CITIC Pacific.

In our view, no other methodology is appropriate when based on publicly available information for a publicly traded company and given the performance of CITIC Pacific’s listed investments as set out in Table 3 above. This assessment is necessarily subject to the comparability of the comparable companies and the applicability of the market falls and placing discount or rights issue but considering the foregoing, we find the Conversion Price fair and reasonable so far as the Independent Shareholders are concerned.

In our view, varying any of the foregoing adjustments would have justified a lower conversion price than the Conversion Price. We do not consider a control premium normal in a financially stressed situation or where the CITIC Group Concert Parties already hold over 50 per cent of the issued Shares.

– 49 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

We have also considered the Conversion Price in the light of the price performance of the Share both before and after the Announcement and this confirms our view that the Conversion Price is appropriate.

The Conversion Price represents:

(a) a premium of approximately 53.3% to the closing price of HKD5.22 per Share on the Latest Practicable Date;
(b) a premium of approximately 32.0% to the closing price of HKD6.06 per Share after the morning trading session on 31st October, 2008, being the day on which CITIC Pacific had requested a suspension in trading of the Shares from 2:30 p.m. that day;
(c) a premium of 60.0% to the closing price of HKD5.00 per Share on the Last Full Trading Day;
(d) a premium of approximately 35.1% to the average closing price of HKD5.92 per Share for the 10 trading days from and including 17th October, 2008 up to and including the closing price at 2:30 p.m. on 31st October, 2008; and
(e) a premium of approximately 40.1% and 15.8% to the adjusted contingent net asset value range per Share of about HKD5.71 to HKD6.91 as described above.

The property valuation report contained in Appendix III of the Circular, sets out the value of the CITIC Pacific Group’s properties as at 31st October, 2008. The properties of the CITIC Pacific Group located in the PRC, Australia and Japan have been excluded from this valuation report as the valuations of these properties could not be completed in a timely matter for inclusion in the Circular. The exclusion of a valuation of these properties does not have a significant impact on our advice.

The Whitewash Waiver

As at the Latest Practicable Date, the CITIC Group Concert Parties own 1,115,989,285 Shares representing about 50.89 per cent of the issued share capital of CITIC Pacific. The Takeovers Code obliges a shareholder to make a mandatory general offer for shares of a company to which the Takeovers Code applies if a shareholder and persons acting in concert with it who hold between 30 per cent and 50 per cent of the voting rights of such a company increases such a shareholding by more than two per cent in any 12 month period. CITIC Group Concert Parties are subject to this restriction until 18th January, 2009 and thus the acquisition of voting rights after this date will not trigger a mandatory general offer under the Takeovers Code pursuant to a waiver under Note 6 to Rule 26.1 of the Takeovers Code granted by the Executive on 12th November, 2008. Accordingly, a Whitewash Waiver must be obtained from the Executive and sanctioned by Independent Shareholders for CITIC Group to increase its shareholdings in CITIC Pacific as contemplated in the Agreement and the exercise of conversion rights of the Convertible Bond prior to 19th January, 2009 without making a general offer for all the shares in CITIC Pacific not already held by the CITIC Group Concert Parties.

– 50 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

An application has been made by CITIC Group to the Executive for the Whitewash Waiver which, if granted will be subject to approval by an ordinary resolution of Independent Shareholders at the EGM. In the event that the Whitewash Waiver is not granted or approved in this way, conversion of the Convertible Bond will be delayed and take place on or after 19th January, 2009. Otherwise, conversion is expected to take place before 31st December, 2008, providing the Agreement and the Whitewash Waiver is approved by Independent Shareholders. Accordingly, the Whitewash Waiver is necessary to comply with the Takeovers Code but is not essential for the Proposals to become effective once the need for the waiver has passed on and after 19th January, 2009.

The Novation

The Novation contemplated under the Agreement is set out in a Deed to be entered into at Completion. The parties to the Deed are CITIC Group, or any of its wholly-owned subsidiaries, and CITIC Pacific.

In terms of the Deed, CITIC Group will assume the liabilities of and accept the benefits of the Novation Contracts, which comprise 11 foreign exchange contracts under which the maximum deliverable amount to CITIC Pacific is about AUD5.5 billion as at the Reference Date deliverable in monthly instalments until October, 2010 at a weighted average strike price of AUD : USD 0.9014. In the event that counterparties do not consent to a novation of the Novation Contracts, CITIC Group will undertake to indemnify CITIC Pacific for liabilities arising under them, effectively drawing a line under any further loss to CITIC Pacific after the consideration for the Novation has been paid.

The consideration for the Novation has been fixed by reference to an AUD : USD exchange rate or parity of 0.70 as at the Completion Date.

If on the Completion Date the parity is below 0.70, the Novation will still take place at a parity of 0.70. If however on the Completion Date the parity is above 0.70, then the Novation will take place at whatever the parity is then plus 100 pips.

If the Novation were to take place at a parity of 0.70 then the consideration payable by CITIC Pacific to CITIC Group would be HKD9.1 billion.

In this way, under the Novation, CITIC Pacific is protected from any further losses on the Novation Contracts below a parity of 0.70 and as at the Reference Date this position translates into a gain or benefit to CITIC Pacific of HKD2.2 billion since the parity stood at 0.6458. If however the parity rises so that it is above 0.70 on the Completion Date, CITIC Pacific enjoys the benefit of that rise plus 100 pips up to its cost.

In the current market, this arrangement is beneficial to CITIC Pacific and its Independent Shareholders and if this is not so at the date of the EGM, Independent Shareholders may elect to vote against the resolutions to approve the Agreement.

– 51 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Proposed increase in authorised share capital and the effect on shareholdings

As at the Latest Practicable Date the authorised share capital of CITIC Pacific is HKD1,200,000,000 divided into 3,000,000,000 Shares of which 2,193,149,160 Shares have been issued and fully paid or credited as fully paid. Under and subject to the terms of the Agreement, an ordinary resolution will be put to Shareholders to increase the authorised share capital of CITIC Pacific to HKD2,400,000,000 divided into 6,000,000,000 Shares.

Set out below is a diagram illustrating the effect on shareholdings in CITIC Pacific if the Proposals are completed and conversion of the Convertible Bond is effected.

Diagram 1: Shareholdings

Before

==> picture [367 x 115] intentionally omitted <==

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

Other CITIC Group
CITIC Group Concert Parties Other Shareholders
645,611,285 Shares 1,077,159,875 Shares
470,378,000 Shares
29.438% 21.447% 49.115%
50.885%
CITIC Pacific
----- End of picture text -----

Note: Number of issued Shares – 2,193,149,160

After

==> picture [367 x 114] intentionally omitted <==

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

Other CITIC Group
CITIC Group Concert Parties Other Shareholders
2,098,736,285 Shares 1,077,159,875 Shares
470,378,000 Shares
57.558% 12.900% 29.542%
70.458%
CITIC Pacific
----- End of picture text -----

Note: Number of issued Shares – 3,646,274,160

– 52 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Other regulatory issues

At the EGM, the following resolutions will be put to Shareholders in relation to the Proposals.

An ordinary resolution to approve the Whitewash Waiver

Under the Takeovers Code, the CITIC Group Concert Parties cannot vote on this resolution.

An ordinary resolution to approve the Agreement and the transactions contemplated in it, including the issue of the Convertible Bond and the Novation, and the increase in authorised share capital

All Shareholders other than CITIC Group and CITIC HK are entitled to vote on this resolution.

The Agreement requires approval by Independent Shareholders and will not proceed without it.

FINANCIAL EFFECTS OF THE PROPOSALS ON CITIC PACIFIC

Net assets

As at 31st December, 2007, the audited net asset value of the CITIC Pacific Group attributable to Shareholders was HKD59,793 million. The unaudited accounts of the CITIC Pacific Group as at 30th June, 2008 show that figure had risen to HKD61,060 million.

If the Agreement is completed the shareholders’ equity of CITIC Pacific will be increased by HKD11.625 billion through the subscription and conversion of the Convertible Bond, and the Novation Contracts will effectively have been disposed of by CITIC Pacific at a price to be calculated at the Completion Date and which cannot be estimated here save to say that, subject to the risk factors below, the price to be paid by CITIC Pacific cannot be more than HKD9.1 billion (as at the Reference Date) and could be less or nothing if by Completion the AUD : USD parity has risen above 0.7000.

Accordingly, taken together the Proposals are likely to increase the net assets of CITIC Pacific but be significantly dilutive to Independent Shareholders on a per Share basis due to the increase of the number of Shares in issue following the conversion of the Convertible Bond.

If the Agreement is not completed, CITIC Pacific faces the risk but not the certainty that net assets would be substantially reduced from any further strengthening of the USD versus the AUD, EUR or RMB so increasing liabilities due under the leveraged foreign exchange contracts in the absence of any viable hedging strategy to offset such an event.

– 53 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

Earnings

According to the 2007 annual report of the CITIC Pacific Group, net profit after tax attributable to Shareholders for the year ended 31st December, 2007 was HKD10,843 million. The unaudited accounts of the CITIC Pacific Group for the six months ended 30th June, 2008 showed net profit attributable to Shareholders of HKD4,377 million. Since that date and up to the Reference Date, the Company has incurred realised and unrealised losses on leveraged foreign exchange contracts of HKD1.6 billion and HKD17.0 billion, respectively.

If the Agreement is completed, it is not possible to calculate now the effect on the earnings of the CITIC Pacific Group since the price is yet to be fixed as described in this letter and in the Circular but the Agreement is likely to result in significant dilution in earnings for Independent Shareholders in future due to the increase in Shares issued under the Convertible Bond.

Liquidity

If the Agreement is completed, the effect on liquidity would be to increase it substantially for the CITIC Pacific Group by removing a potentially large liability and reducing leverage and freeing up gearing capacity so permitting CITIC Pacific Group to borrow more easily and more cheaply than would otherwise be the case due to the large increase in share capital from the Subscription.

In the absence of the Agreement and based on the financial statements referred to in this letter, we believe that CITIC Pacific would be unable to meet obligations arising from the leveraged foreign exchange contracts as they fell due from cash flow from operations.

The remaining leveraged foreign exchange contracts

The remaining foreign exchange contracts do not qualify for hedge accounting.

The accounting treatment of the leveraged foreign exchange contracts is described in the Circular.

Following the Novation, the Novation Contracts will no longer be accounted for in the books of account of the CITIC Pacific Group if the relevant counterparties give their consent, until then the Novation Contracts will continue to be treated as before.

The remaining AUD leveraged foreign exchange contracts have a maximum deliverable amount of AUD3.0 billion and an average weighted cost of AUD : USD0.8331. These remaining contracts will be part of CITIC Pacific Group’s continuing currency management programme and are not expected to be terminated. These contracts are intended to be restructured to become eligible for hedge accounting. The contracts provide for settlement in parts, monthly until September, 2010.

– 54 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

In addition, the Group will continue to hold dual currency target redemption forward contracts in the amount of AUD270.2 million or EUR149.2 million and RMB target redemption forward contracts in a net settlement amount of not more than USD42.3 million based on an exchange rate of USD : RMB6.83 as at the Reference Date. However, the Group intends to close out its position in its dual currency target redemption forward contracts.

In the meantime, the profit or loss arising from these remaining contracts will fluctuate with the movement, if any, of the AUD : USD and USD : RMB parities. As at the Reference Date the unrealised marked to market loss on these remaining contracts was HKD5.6 billion at a spot rate of AUD : USD0.6458 and USD : RMB6.83.

Gearing

Based on the unaudited financial statements of the CITIC Pacific Group as at 30th June, 2008, the ratio of net debt to Shareholders’ funds of the CITIC Pacific Group stood at approximately 47 per cent, up from 32 per cent as at 31st December, 2007. Upon Completion, the CITIC Pacific Group will incur a net cash inflow of approximately HKD2.5 billion, assuming the AUD : USD exchange rate is at or below 0.7000 on the Business Day prior to Completion and the marked to market loss on the Novation Contracts is the same as on the Reference Date.

Completion would, in the absence of other factors, including the risk factors below, reduce the gearing of the CITIC Pacific Group by the amount of the Subscription less the money paid to CITIC Group under the Novation, which cannot be calculated here due to the price not yet having been fixed as described in this letter and in the Circular.

RISK FACTORS

The Proposals contain various undertakings from CITIC Pacific, conditions precedent and representations and warranties in the Agreement, the Standby Facility, the Deed (for the Novation) and the Convertible Bond. Breaches of any of these by CITIC Pacific could result in the Proposals not becoming effective or in an increase in costs for CITIC Pacific. We have reviewed these agreements and consider the terms to be normal in the circumstances.

Up to and following Completion, CITIC Pacific will rely on the standing and financial stability and ability of CITIC Group to complete its obligations under the Proposals.

Following Completion, CITIC Pacific will become a subsidiary of CITIC Group, which will not be required to make any general offer to Shareholders of CITIC Pacific in terms of the Takeovers Code should CITIC Group continue to increase its shareholding and take full management control of CITIC Pacific.

The Agreement is subject to consents and conditions, which may not be fulfilled.

– 55 –

LETTER FROM ANGLO CHINESE CORPORATE FINANCE, LIMITED

In view of the size of the present marked to market losses arising from the leveraged foreign exchange contracts when compared to the past profits, net assets and liquidity of the CITIC Pacific Group and the nature of these contracts with no limit to the liability that can arise from them, and without a viable hedging strategy, it is likely that CITIC Pacific would experience difficulty in meeting the obligations arising from the Novation Contracts as they fell due from cash flow from operations, which is a financial stress that cannot be quantified here if the Agreement were to be rejected by Independent Shareholders.

RECOMMENDATION

Having considered the principal factors and reasons for the Agreement and the Whitewash Waiver which are set out above, including the alternatives facing the Company and the risk factors, we consider that the Standby Facility, the Agreement, including the Convertible Bond, the Conversion Price and the Novation are on normal commercial terms, in the ordinary and usual course of business and are fair and reasonable and in the interests of CITIC Pacific and Independent Shareholders and Shareholders as a whole and therefore that the Whitewash Waiver is in their interests too. Accordingly, we recommend that unless a better proposal is made by anyone else that the Independent Shareholders vote in favour of the resolutions to be proposed at the EGM to approve the Agreement and to sanction the Whitewash Waiver and that the Independent Board Committees advise the Independent CITIC Pacific Shareholders accordingly.

Yours faithfully, for and on behalf of Anglo Chinese Corporate Finance, Limited Christopher J. Howe Managing Director

– 56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Set out below is the information in relation to the indebtedness, financial and trading prospects of the Group and working capital which is updated as of the relevant dates post 2008 interim report disclosures of CITIC Pacific. Set out thereafter is the financial information and management discussions and analysis of the Group which include certain information extracted from the 2008 interim report and 2007 annual report of CITIC Pacific.

A. INDEBTEDNESS OF THE GROUP

As at the close of business on 31 October 2008, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of the Circular, the Group had outstanding borrowings of approximately HK$51,597 million, comprising bank loans of approximately HK$47,638 million (being secured bank loans of approximately HK$4,776 million and unsecured bank loans of approximately HK$42,862 million respectively) and unsecured other loans of HK$3,886 million and bank overdrafts of HK$73 million.

Save as disclosed in the Circular, the Directors confirm that there has been no material change in the contingent liabilities of the Group since 31 December 2007. The details of the contingent liabilities of the Group as at 31 December 2007 is set out in Note 33 to CITIC Pacific’s audited consolidated financial statements for the year ended 31 December 2007 on page I-60 of the Circular.

As at 31 October 2008, certain of the Group’s fixed assets, intangible assets, debtors, accounts receivable, deposits and prepayments, assets held for sale, inventories, cash and bank deposits with an aggregate carrying value of HK$12,053 million were pledged to secure banking facilities granted to subsidiary companies.

As at 31 October 2008, save as disclosed in the Circular and apart from intra-group liabilities, the Group did not have any material debt securities issued and outstanding, or authorized/otherwise created but un-issued, any other material term loans (secured, unsecured, guaranteed or not), any other material borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments (whether secured/unsecured, guaranteed or not), any other material mortgage and charges, or any other material contingent liabilities.

Foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on 31 October 2008.

B. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Since 31 December 2007, the date to which the latest published audited consolidated financial statements of the Group were made up, up to the Latest Practicable Date, there have been material changes in the financial or trading position or outlook of the Group arising from certain leveraged foreign exchange contracts of the Group, details of which are set out in (i) CITIC Pacific’s announcement dated 20 October 2008; (ii) the Announcement; and (iii) the Circular.

As disclosed in the 2008 interim report of the Group for the six months ended 30 June 2008 (the “Interim Report”), faced with significant increases in the price of oil and coal, the aviation and power generation businesses of the Group incurred losses. The operating environment for those two businesses remains challenging in the second half of 2008.

– I-1 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At an operating level the third quarter of the year was satisfactory, but the fourth quarter is expected to be difficult due to (i) the further deterioration in some markets such as aviation; (ii) the abrupt decline in the price and demand in the steel business since October has resulted in reduced margins which is also affected by high costs of raw materials acquired previously; and (iii) the general deteriorating global economy which is expected to have a negative impact on businesses (including the property business) of the Group.

Set out in Appendix III to the Circular is a valuation report (“Valuation Report”) relating to valuation of certain properties of the Group in Hong Kong, Singapore and Canada. Based on the Valuation Report, the valuation of those investment properties included in the Valuation Report as at 31 October 2008 was approximately HK$4.8 billion, which falls short of their aggregate carrying value in the consolidated balance sheet of the Group as at 30 June 2008 of approximately HK$5.1 billion by approximately HK$0.3 billion.

While the short term is difficult to predict due to unusual economic conditions, in the long run the Group is expected to continue to have a significant share of the market for the specialized steel products that it produces which are essential for China’s expansion, to construct an iron ore mine that will provide raw material to our own steel mills and others in China from 2010 and beyond, and to continue to develop its projects in excellent property development locations in China mainly in and around Shanghai and the Yangtse river basin as well as Hainan.

The Directors confirm that, save as aforesaid and as disclosed in the Interim Report, since 31 December 2007 and up to the Latest Practicable Date, there has been no material change in the financial or trading position or outlook of the Group.

Sino Iron, which holds the mining rights for the first phase of the Group’s Australian Iron Ore Mining project, has been continuing negotiations, started by a fellow subsidiary of Sino Iron over a year ago in respect of a gas supply contract which, if and when it is finally agreed, should meet a substantial portion of the gas supply needs of the project for a period of approximately 7 years commencing in July 2011. The current terms under negotiation consists of a gas price linked up with Consumer Price Index and Tapis Benchmark crude oil price. Assuming the Tapis Benchmark price of US$47.78 per barrel as quoted on the Reference Date, the value of the contract could be in the region of US$1.32 billion. The current terms under negotiation require a CITIC Pacific company guarantee of US$500 million and a bank standby letter of credit of US$100 million initially. There is no guarantee that an agreement will be reached on such terms or at all, but Sino Iron does intend to enter into such an agreement once the terms are finally agreed. An announcement will be made to keep Shareholders informed as soon as such an agreement is entered into. Various other gas contracts have been and will be entered into to satisfy the gas needs in the start up period of the project before July 2011.

C. WORKING CAPITAL

As at the Latest Practicable Date, after taking into account the financial resources available to the Group, including internally generated funds and the available banking facilities and financial support from CITIC Group pursuant to the Agreement, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements for at least the next 12 months from the date of the Circular, in the absence of unforeseeable circumstances.

– I-2 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

D. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Summary of Consolidated Financial Information For The Three Years Ended 31 December 2007 and The Six Months Ended 30 June 2008

The following is a summary of the consolidated financial information of the Company for each of the three years ended 31 December 2005, 2006 and 2007 as extracted from the respective audited annual accounts of CITIC Pacific and the unaudited consolidated financial information of the Company for the six months ended 30 June 2008 as extracted from the unaudited interim accounts of CITIC Pacific. The abovementioned annual accounts have been audited and the abovementioned interim accounts have been reviewed by PricewaterhouseCoopers without qualification.

RESULTS

Year ended 31 December 2005 (Audited) 2006 (Audited) 2007 (Audited) HK$ million HK$ million HK$ million 26,564 47,049 44,933	Year ended 31 December 2005 (Audited) 2006 (Audited) 2007 (Audited) HK$ million HK$ million HK$ million 26,564 47,049 44,933	Year ended 31 December 2005 (Audited) 2006 (Audited) 2007 (Audited) HK$ million HK$ million HK$ million 26,564 47,049 44,933	6 months ended 30 June 2008 (Unaudited) HK$ million 28,318 5,443 (496) 4,947 4,377 570 4,947 0.30 – 658 1.99
4,642 (345)	9,359 (644)	12,337 (770)	5,443 (496
4,297	8,715	11,567
3,989 308	8,272 443	10,843 724	4,377 570
4,297 1.10 – 2,412 1.82	8,715 1.10 0.60 3,731 3.77	11,567 1.20 0.20 3,097 4.91

– I-3 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

ASSETS AND LIABILITIES

Total Assets Total Liabilities Minority Interests Equity Attributable to Shareholders of the Company	At 31 December 2005 (Audited) 2006 (Audited) HK$ million HK$ million 70,668 76,665 (29,472) (28,656) 41,196 48,009 (2,093) (1,499) 39,103 46,510	2007 (Audited) HK$ million 106,835 (42,136) 64,699 (4,906) 59,793	At 30 June 2008 (Unaudited) HK$ million 124,219 (57,482) 66,737 (5,677) 61,060

– I-4 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

E. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the full text of the consolidated financial statements of the Company for the year ended 31 December 2007 as extracted from the Company’s annual report for the year ended 31 December 2007:

CONSOLIDATED PROFIT AND LOSS ACCOUNT

for the year ended 31 December 2007

note Turnover 3 Cost of Sales Distribution and Selling Expenses Other Operating Expenses Change in Fair Value of Investment Properties Profit from Consolidated Activities 4 & 5 Share of Results of 4 Jointly Controlled Entities Associated Companies Profit before Net Finance Charges and Taxation Finance Charges Finance Income Net Finance Charges 6 Profit before Taxation Taxation 7 Profit for the Year Attributable to: Shareholders of the Company 8 Minority Interests Dividends 9 Earnings per Share for Profit attributable to Shareholders of the Company during the year (HK$) 10 Basic Diluted		2007 HK$ million 44,933 (32,409) (1,025) (3,733) 1,002	2006 HK$ million 47,049 (37,019) (995) (2,845) 735 6,925 1,033 1,882 9,840 (640) 159 (481) 9,359 (644) 8,715 8,272 443 8,715 (3,731) 3.77 3.77
		8,768 1,344 2,257 12,369	6,925 1,033 1,882
			9,840
		(258) 226	(640 159
		(32) 12,337 (770)	(481
			9,359 (644
		11,567
		10,843 724	8,272 443
		11,567 (3,097) 4.91 4.90

– I-5 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

as at 31 December 2007

note Non-Current Assets Fixed Assets 13 Property, plant and equipment Investment properties Properties under development Leasehold land Jointly controlled entities 15 Associated companies 16 Other financial assets 17 Intangible assets 18 Deferred tax assets 30 Derivative financial instruments 29 Non-current deposits 19 Current Assets Properties held for sale 13 Assets held for sale 20 Inventories 21 Debtors, accounts receivable, deposits and prepayments 22 Cash and bank deposits Current Liabilities Bank loans, other loans and overdrafts secured 26 unsecured 26 Creditors, accounts payable, deposits and accruals 23 Liabilities held for sale Provision for taxation Net Current Assets Total Assets Less Current Liabilities		2007 HK$ million 13,158 10,895 4,288 1,641	2007 HK$ million 13,158 10,895 4,288 1,641
		29,982 17,446 17,941 7,502 4,105 100 150 5,723 82,949	24,621 14,922 16,416 2,819 2,986 103 117 –
			61,984
		440 1,127 5,982 8,292 8,045	705 – 3,920 6,377 3,679
		23,886	14,681
		328 3,326 10,727 2 590	285 1,404 8,035 – 319
		14,973 8,913 91,862	10,043
			4,638
			66,622

– I-6 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

note Non-Current Liabilities Long term borrowings 26 Deferred tax liabilities 30 Derivative financial instruments 29 Net Assets 4 EQUITY Share capital 24 Reserves 25 Proposed dividend Equity attributable to Shareholders of the Company Minority Interests Total Equity		2007 HK$ million	2006 HK$ million 16,604 1,954 55 18,613 48,009 878 43,217 2,415 46,510 1,499 48,009
		25,000 2,094 69
		27,163 64,699 885 57,138 1,770 59,793 4,906 64,699

– I-7 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

as at 31 December 2007

note Non-Current Assets Fixed Assets Property, plant and equipment 13 Subsidiary companies 14 Jointly controlled entities 15 Associated companies 16 Derivative financial instruments 29 Current Assets Debtors, accounts receivable, deposits and prepayments 22 Cash and bank deposits Current Liabilities Bank loans, other loans and overdrafts unsecured 26 Creditors, accounts payable, deposits and accruals 23 Provision for taxation Net Current (Liabilities)/Assets Total Assets Less Current Liabilities Non-Current Liabilities Long term borrowings 26 Derivative financial instruments 29 Net Assets EQUITY Share capital 24 Reserves 25 Proposed dividend Equity attributable to Shareholders of the Company		2007 HK$ million 19 50,600 4,016 5,632 112	2007 HK$ million 19 50,600 4,016 5,632 112
		60,379	50,330
		304 297	259 30
		601	289
		1,686 210 13	27 99 13
		1,909 (1,308) 59,071	139
			150
			50,480

		15,799 55	9,572 55
		15,854	9,627
		43,217
		885 40,562 1,770	878 37,560 2,415
		43,217

– I-8 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2007

Cash Flows from Consolidated Activities Profit from Consolidated Activities after Net Finance Charges Net interest expense Income from other financial assets Depreciation Amortisation of leasehold land Impairment losses on financial assets Impairment losses on property, plant and equipment Impairment losses on properties under development Impairment losses on goodwill Impairment losses on jointly controlled entities and associated companies Impairment losses on loan to an associated company Expected losses on construction contracts Share-based payment Loss/(profit) on disposal of property, plant and equipment Change in fair value of investment properties Fair value gain on financial instruments Profit on disposal of subsidiary companies and associated companies Profit on disposal of other financial assets Profit on disposal of jointly controlled entities Operating Profit before Working Capital Changes Increase in inventories (Increase)/decrease in debtors, accounts receivable, deposits and prepayments Increase in creditors, accounts payable, deposits and accruals Effect of foreign exchange rates Cash Generated from Consolidated Activities Interest received Interest paid Income taxes paid Net cash from consolidated activities	2007 HK$ million 8,736 79 (86) 1,122 45 99 103 353 – 282 – 8 184 271 (1,002) (55) (4,595) – (1)	2006 HK$ million 6,444 431 (11) 1,034 47 105 120 – 25 152 8 23 62 (17) (735) (8) (3,507) (3) – 4,170 (364) 38 413 45 4,302 152 (903) (315) 3,236
	5,543 (1,904) (1,666) 2,872 (42) 4,803 230 (1,027) (459)	4,170 (364 38 413 45
		4,302 152 (903 (315
	3,547

– I-9 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2007 2006 HK$ million HK$ million

Cash Flows from Investing Activities
Purchase of subsidiary companies (net of cash
and cash equivalents acquired) (note a)		–	(1,721)
Purchase of additional interests in
subsidiary companies		(165)	(290)
Purchase of property under development	(1,460)		(971)
Purchase of property, plant and equipment	(3,604)		(2,077)
Increase in leasehold land		(331)	–
Purchase of intangible assets		(886)	(214)
Investment in jointly controlled entities	(2,093)		(3,579)
Investment in associated companies		(27)	(7)
Increase in other financial assets	(1,409)		(998)
Increase in non-current deposits	(5,707)		–
Proceeds on disposal of property,
plant and equipment		125	406
Proceeds on disposal of other financial assets		4	43
Proceeds on disposal of interests in
associated companies		–	5,151
Disposal of subsidiary companies (net of cash
and cash equivalents disposed) (note b)		55	7,119
Gross proceeds from spin-off of
subsidiary companies	6,083		–
Issue of subsidiaries shares		665	–
Decrease in loans to jointly controlled entities		726	112
Decrease in loans to associated companies		231	190
Dividend income from associated companies		805	942
Dividend income from jointly controlled entities		868	108
Income received from other financial assets		86	11
Net Cash (used in)/from Investing Activities	(6,034)		4,225
Cash Flows from Financing Activities
Issue of shares pursuant to the Plan		430	87
Repurchase of shares		(110)	(35)
New borrowings	14,992		6,592
Repayment of loans	(4,966)		(9,741)
Increase/(decrease) in minority interests		23	(227)
Dividends paid	(3,756)		(3,072)
Net cash from/(used in) Financing Activities	6,613		(6,396)

– I-10 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at 1 January Effect of Foreign Exchange Rate Changes Cash and Cash Equivalents at 31 December Analysis of the Balances of Cash and Cash Equivalents Cash and bank deposits Bank overdrafts (note c)	2007 HK$ million 4,126 3,634 257 8,017 8,045 (28) 8,017	2006 HK$ million 1,065 2,524 45 3,634 3,679 (45) 3,634

– I-11 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO CONSOLIDATED CASH FLOW STATEMENT

a Purchase of Subsidiary Companies

In 2006, the Group’s main acquisition was a 100% interest in Sino Iron Pty Ltd. (“Sino”). The fair value of Sino’s net assets at date of acquisition in July 2006 was HK$1,170 million.

The acquired business contributed aggregate revenues of HK$1,126 million and aggregate net loss of HK$3 million since acquisition. The aggregate revenue and net loss of the acquired companies as though the acquisition for the business combinations effected during the year had been at the beginning of that year are HK$1,475 million and HK$4 million respectively.

Details of net assets acquired and goodwill are as follows:

Purchase consideration Cash paid Amount due to a jointly controlled entity Total purchase consideration Fair value of net assets acquired Goodwill	2006 HK$ million 1,815 (23) 1,792 (1,273) 519

The goodwill is attributable to the development potential of business acquired.

– I-12 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Net Assets Acquired
Property, plant and equipment
Intangible assets
Inventories
Debtors, accounts receivable, deposits and prepayments
Cash and bank deposits
Assets
Bank loans
Creditors, accounts payable, deposits and accruals
Minority interests
Deferred tax liabilities
Liabilities
Less: Interest in a jointly controlled entity
Goodwill
Satisfied by
Cash
Amount due to a Jointly Controlled Entity

2006
HK$ million
140
1,737
87
102
94
2,160
(94)
(273)
(13)
(507)
(887)
1,273
(9)
519
1,783
1,815
(32)
1,783

Analysis of the net outflow of cash and cash equivalents in respect of the purchase of subsidiary companies

Cash consideration Cash and bank deposits acquired	2006 HK$ million 1,815 (94) 1,721

– I-13 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b Disposal of Subsidiary Companies

Net Assets Disposed Leasehold land Property, plant and equipment Properties under development Intangible assets Associated companies Inventory Debtors, accounts receivable, deposits and prepayments Cash and bank deposits Creditors, accounts payable, deposits and accruals Minority interests Goodwill Profit on disposal Release of reserve Satisfied by Cash Accounts Payable Analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiary companies Cash consideration Cash and bank deposits disposed of	2007 HK$ million – 65 – 48 1 1 34 53 (326) (6) –	2006 HK$ million 164 13 819 – 4,862 – 5 – (34) (3) 22 5,848 1,271 – 7,119 7,119 – 7,119 2006 HK$ million 7,119 – 7,119
	(130) 43 64	5,848 1,271 –
	(23)
	108 (131)	7,119 –
	(23) 2007 HK$ million 108 (53) 55

c Reconciliation of the Balance of Cash and Cash Equivalents in Respect of Bank Loans, Other Loans and Overdrafts

Bank loans, other loans and overdrafts Bank loans and other loans Bank overdrafts	2007 HK$ million 3,654 (3,626) 28	2006 HK$ million 1,689 (1,644) 45

– I-14 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

				2007	2006
		note		HK$ million	HK$ million
At 1 January				48,009	41,196
Share of Reserves of Associated
Companies
Fair value gain on other financial assets				28	183
Loss on cash flow hedge of
financial instruments				(5)	(129)
Capital reserve				30	–
Retained profits				–	106
Reserves released on disposal of
associated companies				6	(72)
Exchange fluctuation reserve				24	–
Share of Reserves of Jointly Controlled
Entities
Fair value gain on other financial assets				9	–
Gain/(loss) on cash	flow hedge of
financial instruments				3	(1)
General reserve				1	1
Exchange fluctuation reserve				46	–
Capital reserve				6	17
Fair Value Gain on Other Financial Assets				3,292	1,064
Exchange Translation Differences				2,168	870
Transfer to Profit And Loss Account on
Impairment of Other Financial Assets				77	103
Gain/(Loss) on Cash Flow Hedge of
Financial Instruments				57	(50)
Disposal of Interest in Subsidiaries
Companies				(46)	–
Net Gains Not Recognised in the
Consolidated Profit and Loss Account				5,696	2,092
Profit for the year
Attributable to shareholders of the Company				10,843	8,272
Minority interest				724	443
Dividends to Shareholders of
the Company			9	(3,756)	(3,071)

– I-15 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

note Share Repurchase Par value Premium paid Share-based Payment Minority Interests Share Options Exercised Premium received Share capital issued At 31 December Representing At 31 December after Proposed Final and Special Dividend Proposed Final and Special Dividend 9	2007 HK$ million (1) (109) 179 2,683 423 8 64,699 62,929 1,770 64,699	2006 HK$ million (1) (35) 62 (1,037) 86 2 48,009 45,594 2,415 48,009

– I-16 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE ACCOUNTS

1 SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these accounts are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a Basis of Preparation

The accounts have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”), and under the historical cost convention, except as disclosed in the accounting policies below.

In 2007, the Group adopted certain new or revised standards and amendments of HKFRSS which were issued and became effective during the year ended 31 December 2007, and among which the following will have disclosure impacts in the accounts.

HKFRS 7 “Financial Instrument: Disclosures”; and
Amendment to HKAS 1 “Presentation of Financial Statements – Capital Disclosures”

The adoption of these accounting 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 2007.

The Group has not early adopted the amendments, new standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are not yet effective for the year ended 31 December 2007, and is in the process of assessing their impact on future accounting periods.

b Basis of Consolidation

The consolidated accounts incorporate the accounts of the Company and all its subsidiary companies made up to the balance sheet date. The results of subsidiary companies acquired or disposed of during the year are included as from the effective dates of acquisition or up to the effective dates of disposal respectively.

c

Goodwill

Positive goodwill arising on acquisition of subsidiary companies, jointly controlled entities and associated companies represents the excess of the cost of the acquisition over the Group’s share of the fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Negative goodwill arising on acquisition of subsidiary companies, jointly controlled entities and associated companies represents the excess of the Group’s share of the fair value of the identifiable assets, liabilities and contingent liabilities acquired over the cost of the acquisition.

Positive goodwill will be stated in the consolidated balance sheet as a separate asset or included within jointly controlled entities and associated companies at cost less accumulated impairment losses and subject to impairment testing at least annually. Negative goodwill is recognised in profit and loss immediately on acquisition.

d Subsidiary Companies

A subsidiary company is a company which is controlled by the Company through direct or indirect interest. Control represents the power to govern the financial and operating policies of that company.

– I-17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investments in subsidiary companies are carried in the Company’s balance sheet at cost less any impairment losses. The results of subsidiary companies are accounted for by the Company on the basis of dividends received and receivable.

e

Jointly Controlled Entities

A jointly controlled entity is a joint venture in which the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity.

The consolidated profit and loss account includes the Group’s share of the results of the jointly controlled entities for the year adjusted by impairment losses, if any. The consolidated balance sheet includes the Group’s share of the net assets of the jointly controlled entities and goodwill on acquisition.

In the Company’s balance sheet the investments in jointly controlled entities are stated at cost less any impairment losses. The results of jointly controlled entities are accounted for by the Company on the basis of dividends received and receivable.

f Associated Companies

Associated companies are companies, other than subsidiary companies and jointly controlled entities, in which the Group holds not more than 50 per cent of their equity share capital for the long term and can exercise significant influence in their management.

The consolidated profit and loss account includes the Group’s share of the results of associated companies for the year adjusted by impairment losses, if any. The consolidated balance sheet includes the Group’s share of net assets of the associated companies, after attributing fair values to the net assets at the date of acquisition.

In the Company’s balance sheet the investments in associated companies are stated at cost less impairment losses. The results of associated companies are accounted for by the Company on the basis of dividends received and receivable.

g

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses.

Freehold land is not amortised.

Depreciation of the vehicular tunnel was provided with reference to projected usage of the tunnel as compared to the actual tunnel usage.

Property, plant and equipment are depreciated at rates sufficient to write off their cost, less impairment losses, if any, over their estimated useful lives on a straight line basis at the following annual rates:

Buildings: 2% – 4% or the remaining lease period of the land
Plant and machinery: 9% – 20%
Other property, plant and equipment, comprising telecommunications equipment, traffic equipment, cargo lighters, computer installations, motor vehicles, furniture, fixtures and equipment: 10% – 25%

The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

h Investment Properties

Investment properties are interests in land and/or buildings in respect of which construction work and development have been completed and which are held for their investment potential, these include land held for a currently undetermined future use.

– I-18 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investment properties are stated in the balance sheet at fair value and reviewed annually. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss account.

i

Properties under Development

Properties under development consist of investments in land for development and buildings under construction and development pending any positive intention either to retain them for investment purposes or to sell them for proceeds. Investments in leasehold land are amortised over the lease term of the land, and are stated at cost less accumulated amortisation and any accumulated impairment losses. Such amortisation cost will be capitalised as the cost of buildings during the construction period. The investments in buildings under construction and development are stated at cost less any accumulated impairment losses.

j Capitalisation of Development Costs

Property development expenditure, inclusive of interest and professional fees, is capitalised as cost of development.

Borrowing costs incurred on assets under development that take a substantial period of time to get ready for their intended use or sale are capitalised into the carrying value of the assets under development.

The capitalisation rate applied to funds borrowed for the development of the assets is based on the attributable cost of funds to the Group.

All other borrowing costs are charged to the profit and loss account in the period in which they are incurred.

k Properties Held for Sale

Properties held for sale consisting of leasehold land and building cost are classified under current assets and stated at the lower of cost and net realisable value. Leasehold land is stated at cost less accumulated amortisation and any impairment loss. Building costs are stated at cost less any impairment loss.

l Leasehold Land

Leasehold land comprise land held under operating lease arrangements and are amortised on a straight-line basis over the lease terms.

m

Intangible Assets

Intangible assets comprise goodwill and expenditure on mining assets. The accounting policy for goodwill is outlined in accounting policy 1(c).

Expenditure on mining assets which gives rise to future economic benefits is capitalised as part of intangible assets and is amortised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

n

Trade and Other Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flow, discounted at the effective interest rate. The amount of the provision is recognised in the profit and loss account.

– I-19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

o

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

p Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss account over the period of the borrowings using the effective interest method.

q

Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

r Revenue Recognition

i) Motor vehicles

Revenue arising from the sale of motor vehicles is recognised when the registration document is issued or on delivery of motor vehicles, whichever is earlier, which are taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes any government taxes and is after deduction of any trade discounts.

ii) Sales of properties under development and properties held for sale

Revenue from sales of properties under development is only recognised when the significant risks and rewards of ownership have been transferred to the buyer. The Group considers that the significant risks and rewards of ownership are transferred when the buildings contracted for sales are completed and the relevant permits essential for the delivery of the properties have been issued by the authorities.

Income from properties held for sale is recognised at the date when sale agreement is signed.

iii) Sales of goods

Revenue arising from the sale of goods is recognised on the delivery of goods to customers. Revenue is determined after deduction of any trade discounts.

iv) Income from co-operative joint venture

Other income or dividend from co-operative joint venture is recognised when the right to receive is established.

Income from disposal of co-operative joint venture is recognised at the date when sale agreement is signed.

– I-20 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

v) Rendering of services

Commission income and revenue arising from the rendering of repairing services are recognised when the goods concerned are sold to customers and when the relevant work is completed respectively.

vi) Revenue from the provision of telecommunications services is recognised upon delivery of the services.

vii) Rental income

Rental income is recognised on a straight-line basis over the period of the relevant leases.

viii) Dividend income

Dividend income is recognised when the right to receive the dividend is established.

Dividends proposed or declared after their balance sheet date by companies in which the Group has an investment are not recognised as revenue at the balance sheet date but on the date when the right to receive is established.

s Financial Instruments

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

i) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realized within 12 months of the balance sheet date.

ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in debtors, accounts receivable, deposits and prepayments in the notes to the accounts.

iii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs and are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all

– I-21 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

risks and rewards of ownership. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Available-for-sale investments are carried at fair value or cost less impairment loss if their fair value cannot be reliably measured. Gains and losses arising from changes in fair value are recognised in investment revaluation reserve. On the disposal of the investment or when an investment is determined to be impaired, the cumulative gain or loss previously recognised in investment revaluation reserve will be transferred to the profit and loss account.

iv) Derivative financial instruments

Derivatives are stated at fair value. The gain or loss on changes in fair value is recognised generally in the profit and loss account unless the derivative qualifies for hedge accounting. Where a derivative qualifies for hedge accounting and is designated as a cash flow hedge, the effective part and the ineffective part of any unrealised gain or loss on the instrument is recognised directly in hedging reserve and in the profit and loss account respectively. The cumulative gain or loss associated with the effective part of the cash flow hedge recorded in hedging reserve will be recognised in the profit and loss account in the same period or periods during which the gain or loss arising from the hedged transaction is recognised in the profit and loss account.

The fair values of various derivative instruments used for hedging purposes are disclosed in Note 29. Movements on the hedging reserve in shareholders’ equity are shown in Note 25. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedge item is more than 12 months.

t Operating Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Rentals payable and receivable under operating leases are accounted for on a straight line basis over the respective periods of the leases.

u

Impairment of Assets

The Group reviews the carrying amounts of assets including goodwill for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognised in the profit and loss account is measured by the amount by which the carrying amount of the assets exceeds the recoverable amount.

v

Inventories

Inventories comprising mainly motor vehicles, spare parts, electrical appliances, food, trading items and steels are valued at the lower of cost and net realisable value. Cost represents the actual cost of purchase or production and is calculated on the first-in first-out, specific identification or weighted average basis as appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

w

Foreign Currencies

The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.

Transactions in foreign currencies are translated into Hong Kong dollars at the rates ruling at the transaction dates.

– I-22 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Assets and liabilities of subsidiary companies, jointly controlled entities and associated companies, together with all other monetary assets and liabilities expressed in foreign currencies, are translated into Hong Kong dollars at the rates of exchange ruling at the balance sheet date. Results in foreign currencies are translated at the average rates of exchange ruling during the year.

Exchange differences arising from the retranslation of the net investment in foreign entities, and of financial instruments which are designated as hedges of such investment, are taken directly to exchange reserve. On the disposal of these investments, such exchange differences are recognised in the consolidated profit and loss account as part of the profit or loss on disposal. All other exchange differences are dealt with in the consolidated profit and loss account.

Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1 January 2005 are treated as assets and liabilities of the foreign entity and translated at the rate of exchange ruling at the balance sheet date, such differences are taken directly to exchange reserve.

x

Deferred Taxation

A balance sheet liability method is adopted whereby deferred tax is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts. Provision for withholding tax that will arise on the remittance of retained earnings is only made where there is a current intention to remit such earnings. Deferred tax assets are recognised to the extent that the future utilisation is probable.

Deferred tax arising from revaluation of the investment properties is recognised on the basis that the recovery of the carrying amount of the properties would be through use and calculated at the applicable profits tax rate.

y Share-based Payment

The Group operates a share option scheme. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense over the vesting period with a corresponding increase in capital reserve. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable and recognises the impact of the revision, if any, in the consolidated profit and loss account.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

i) Investment properties

The fair values of investment properties are determined annually by independent qualified valuers on open market value in existing use basis calculated on the net income allowing for reversionary potential.

In making the judgement, considerations have been given to assumptions that are mainly based on market conditions existing at the balance sheet date and appropriate capitalisation rates.

– I-23 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

ii) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 1(u). For the purposes of impairment testing goodwill acquired has been allocated to individual cash-generated units which are reviewed for impairment based on forecast operating performance and cash flows. The recoverable amount of an asset or a cash-generating unit has been determined based on value-in-use calculations. Cash flow projections are prepared on the basis of reasonable assumptions reflective of prevailing and future market conditions, and are discounted appropriately.

iii) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Recognition of deferred tax assets, which principally related to tax losses, depends on the management’s expectation of future taxable profit that will be available against which the tax losses can be utilised. The outcome of their actual utilisation may be different.

3 TURNOVER

The principal activity of the Company is holding its subsidiary companies and the principal activities of its principal subsidiary companies are set out in Note 35 to the accounts.

Turnover of the Group comprises the total invoiced value of goods supplied net of government taxes where applicable, and services rendered to customers, fees from provision of telecommunication services, gross proceeds from sale of investments and properties, amounts received and receivable in respect of dividends in respect of investments, income from co-operative joint ventures, toll income, gross property rental and godown and cold storage income, analysed as follows:

Sales of goods Services rendered to customers Gross proceeds from aviation restructuring Gross proceeds from spin-off of subsidiary companies Properties sales and rental income Toll income Others	Group 2007 2006 HK$ million HK$ million 33,957 27,613 2,635 2,214 – 7,731 6,083 – 1,362 8,320 708 679 188 492 44,933 47,049	Group 2007 2006 HK$ million HK$ million 33,957 27,613 2,635 2,214 – 7,731 6,083 – 1,362 8,320 708 679 188 492 44,933 47,049
		47,049

– I-24 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4 SEGMENT INFORMATION

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

a Turnover and Segment Profit

An analysis of the Group’s turnover and profit from consolidated activities and share of results of jointly controlled entities and associated companies by business are as follows:

turnover 2007 2006 HK$ million HK$ million 18,501 15,278 1,321 8,320 1,221 8,817 3,625 1,364 20,119 13,222 146 48 – – – – 44,933 47,049	segment allocations 2007 2006 HK$ million HK$ million – – 97 84 – – – – (97) (84) – – – – – – – –	segment allocations 2007 2006 HK$ million HK$ million – – 97 84 – – – – (97) (84) – – – – – – – –
47,049

	(32) (770)	(481 (644
	11,567

Note: The presentation of segment turnover is same as turnover with an exception of segment allocations attributable to the property segment as disclosed above.

An analysis of the Group’s turnover by geographical area is as follows:

Hong Kong Mainland China Overseas	Group 2007 2006 HK$ million HK$ million 15,126 23,106 27,592 22,278 2,215 1,665 44,933 47,049	Group 2007 2006 HK$ million HK$ million 15,126 23,106 27,592 22,278 2,215 1,665 44,933 47,049
		47,049

– I-25 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b Assets and Liabilities

An analysis of the Group’s segment assets and liabilities by business segment is as follows:

segment assets 2007 2006 HK$ million HK$ million 17,237 12,835 10,287 2,390 18,696 14,925 1,780 1,979 1,047 776 6,528 5,508 7,109 2,586	segment assets 2007 2006 HK$ million HK$ million 17,237 12,835 10,287 2,390 18,696 14,925 1,780 1,979 1,047 776 6,528 5,508 7,109 2,586	investments in jointly controlled entities 2007 2006 HK$ million HK$ million 4,252 3,158 – – 4,324 2,347 6,955 7,744 – – 165 160 1,750 1,513	investments in jointly controlled entities 2007 2006 HK$ million HK$ million 4,252 3,158 – – 4,324 2,347 6,955 7,744 – – 165 160 1,750 1,513	investments in associated companies 2007 2006 HK$ million HK$ million – – – – 5,058 4,676 12,772 11,620 – – 138 112 (27) 8	investments in associated companies 2007 2006 HK$ million HK$ million – – – – 5,058 4,676 12,772 11,620 – – 138 112 (27) 8	segment liabilities total 2007 2006 2007 2006 HK$ million HK$ million HK$ million HK$ million (5,381) (3,831) 16,108 12,162 (702) (60) 9,585 2,330 (1,507) (1,109) 26,571 20,839 (70) (227) 21,437 21,116 (472) (373) 575 403 (2,185) (1,649) 4,646 4,131 (176) – 8,656 4,107	segment liabilities total 2007 2006 2007 2006 HK$ million HK$ million HK$ million HK$ million (5,381) (3,831) 16,108 12,162 (702) (60) 9,585 2,330 (1,507) (1,109) 26,571 20,839 (70) (227) 21,437 21,116 (472) (373) 575 403 (2,185) (1,649) 4,646 4,131 (176) – 8,656 4,107	segment liabilities total 2007 2006 2007 2006 HK$ million HK$ million HK$ million HK$ million (5,381) (3,831) 16,108 12,162 (702) (60) 9,585 2,330 (1,507) (1,109) 26,571 20,839 (70) (227) 21,437 21,116 (472) (373) 575 403 (2,185) (1,649) 4,646 4,131 (176) – 8,656 4,107
62,684	40,999	17,446	14,922	17,941	16,416	(10,493) (7,249) 87,578		65,088

8,664	4,225	–	–	–	–	(28,959) (19,134) (20,295) (14,909) (590) (319) (1,994) (1,851)
							64,699	48,009

An analysis of the Group’s segment assets by geographical area is as follows:

Hong Kong Mainland China Overseas – Australia – Others	Group 2007 2006 HK$ million HK$ million 18,707 13,342 32,499 24,240 10,287 2,390 1,191 1,027 62,684 40,999	Group 2007 2006 HK$ million HK$ million 18,707 13,342 32,499 24,240 10,287 2,390 1,191 1,027 62,684 40,999
		40,999

– I-26 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5 PROFIT FROM CONSOLIDATED ACTIVITIES

The profit from consolidated activities is arrived at after crediting Dividend income from other financial assets Rental income from investment properties Gross income Less: Direct outgoings other operating leases Profit on disposal of subsidiary companies and associated companies And after charging Cost of sales Operating activities Disposal of subsidiary companies and associated companies Cost of inventories The following expenses are included in cost of sales, distribution and selling expenses and other operating expenses: Staff costs Depreciation of property, plant and equipment Amortisation of leasehold land Other operating expenses Auditors’ remuneration Contributions to staff retirement schemes Impairment losses on other financial assets (Note) Impairment losses on property, plant and equipment (Note) Impairment losses on property under development (Note) Impairment losses on jointly controlled entities and associates (Note) Management fee payable to CITIC Hong Kong (Holdings) Limited (“CITIC HK”), a substantial shareholder of the Company Operating lease rentals land and buildings		Group 2007 2006 HK$ million HK$ million 86 9 586 515 (80) (77) 506 438 133 133 4,595 3,507 Group 2007 2006 HK$ million HK$ million 30,878 25,638 1,531 11,381 32,409 37,019 29,029 23,458 2,410 1,868 1,122 1,034 45 47 3,733 2,845 26 18 107 99 99 105 103 120 353 – 282 152 2 2 205 136
		586 (80)

Note: Impairment losses represents to special steel of HK$71 million (2006: HK$88 million), property of HK$353 million (2006: HK$Nil), infrastructure of HK$268 million (2006: HK$186 million) and others of HK$145 million (2006: HK$103 million).

– I-27 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s total future minimum lease payments receivable under non-cancellable operating leases are as follows:

Within 1 year After 1 year but within 5 years After 5 years	Group 2007 2006 HK$ million HK$ million 564 428 633 353 169 17 1,366 798	Group 2007 2006 HK$ million HK$ million 564 428 633 353 169 17 1,366 798
		798

6 NET FINANCE CHARGES

Finance charges Interest expense Bank loans and overdrafts wholly repayable within five years Bank loans not wholly repayable within five years Other loans wholly repayable within five years Other loans not wholly repayable within five years Amount capitalised Exchange gain Other finance charges Fair value gains on financial instruments Finance income Interest income	Group 2007 2006 HK$ million HK$ million 526 520 237 35 201 338 21 20	Group 2007 2006 HK$ million HK$ million 526 520 237 35 201 338 21 20
	985 (680) 305 (31) 39 (55) 258 (226)	913 (323
		590 (5 63 (8
		640 (159
	32	481

7 TAXATION

Hong Kong profits tax has been calculated at the rate of 17.5% (2006: 17.5%) on the estimated assessable profit for the year. Overseas taxation has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates. Tax provisions are reviewed regularly to take into account changes in legislation, practice and status of negotiations.

Current income tax Hong Kong profits tax Overseas taxation Deferred taxation (Note 30) Change in fair value of investment properties Origination and reversal of other temporary difference Effect on tax rate change	Group 2007 2006 HK$ million HK$ million 308 188 450 309 173 123 19 24 (180) – 770 644	Group 2007 2006 HK$ million HK$ million 308 188 450 309 173 123 19 24 (180) – 770 644
		644

– I-28 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of the home country of the Company as follows:

Profit before taxation Less: share of results of jointly controlled entities associated companies Calculated at taxation rate of 17.5% (2006: 17.5%) Effect of different taxation rates in other countries Income and expenses not subject to taxation Utilisation of unrecognised tax losses this year and net of tax losses not recognised Over provision in prior years Effect of tax rate change Others Taxation charge	Group 2007 2006 HK$ million HK$ million 12,337 9,359 (1,344) (1,033) (2,257) (1,882) 8,736 6,444	Group 2007 2006 HK$ million HK$ million 12,337 9,359 (1,344) (1,033) (2,257) (1,882) 8,736 6,444
		6,444

	1,529 84 (761) 8 (6) (180) 96	1,128 119 (550) (42) (26) – 15
	770	644

8 PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY

The Group’s profit attributable to shareholders of the Company is dealt with in the accounts of the Company to the extent of HK$5,713 million (2006: HK$7,965 million).

9 DIVIDENDS

2006 Final dividend paid: HK$0.80 (2005 HK$0.80) per share 2006 Special dividend paid: HK$0.30 (2005: HK$Nil) per share Interim 2007 Interim dividend paid: HK$0.40 (2006: HK$0.30) per share 2007 Special dividend paid: HK$0.20 (2006: HK$0.30) per share Final 2007 Final dividend proposed: HK$0.80 (2006: HK$0.80) per share 2007 Special dividend proposed: HK$Nil (2006: HK$0.30) per share Dividend per share (HK$)	2007 HK$ million 1,767 662 2,429	2006 HK$ million 1,755 –
		1,755

	885 442 1,770 – 3,097	658 658 1,756 659
		3,731
	1.40	1.70

– I-29 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10 EARNINGS PER SHARE

The calculation of earnings per share is based on profit attributable to shareholders of HK$10,843 million (2006: HK$8,272 million).

The basic earnings per share is based on the weighted average number of 2,207,542,455 shares in issue during the year (2006: 2,193,921,689 shares in issue). The diluted earnings per share is based on 2,213,084,305 shares (2006: 2,198,341,170 shares) which is the weighted average number of shares in issue during the year plus the weighted average number of 5,541,850 shares (2006: 4,419,481 shares) deemed to be issued at no consideration if all outstanding options had been exercised.

11 DIRECTORS’ EMOLUMENTS

The remuneration of every Director for the year ended 31 December 2007 is set out below:

name of director Larry Yung Chi Kin# Henry Fan Hung Ling# Peter Lee Chung Hing# Carl Yung Ming Jie# Leslie Chang Li Hsien# Vernon Francis Moore# Li Shilin# Liu Jifu# Chau Chi Yin# Milton Law Ming To# Wang Ande# Chang Zhenming Willie Chang Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong André Desmarais Norman Yuen Kee Tong Yao Jinrong	fees salaries, allowances and benefits in kind HK$ million HK$ million 0.15 3.21 0.15 3.01 0.15 1.75 0.15 1.12 0.15 1.54 0.15 2.08 0.15 0.49 0.15 0.58 0.15 1.49 0.15 1.43 0.15 1.03 0.15 – 0.30 – 0.15 – 0.30 – 0.25 – 0.20 – 0.15 – – 0.10 – – 3.15 17.83	dis- cretionary bonuses HK$ million 48.00 41.00 33.00 9.00 15.00 5.00 1.00 7.00 9.00 9.00 9.00 – – – – – – – – – 186.00	retire- ment benefits HK$ million 0.01 0.01 0.08 0.05 0.07 0.01 – 0.01 0.07 0.06 – – – – – – – – – – 0.37	share- based payment HK$ million 15.62 12.50 9.37 6.25 6.25 4.69 3.91 5.47 6.25 6.25 6.25 3.91 – – – – – – – – 86.72	2007 total HK$ million 66.99 56.67 44.35 16.57 23.01 11.93 5.55 13.21 16.96 16.89 16.43 4.06 0.30 0.15 0.30 0.25 0.20 0.15 0.10 – 294.07	2006 total HK$ million 51.21 43.43 33.62 8.38 14.73 9.90 1.64 10.51 10.37 10.28 5.47 1.06 0.30 0.15 0.30 0.25 0.20 0.15 11.56 0.20
						213.71

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, 18,500,000 share options were granted (2006: 10,200,000 share options) to directors of the Company under the CITIC Pacific Share Incentive Plan 2000.

Mr Norman Yuen Kee Tong resigned during the year.

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

12 RETIREMENT BENEFITS

With the consent of the majority of its members, the Group ceased making contributions to The CITIC Group Retirement Plan (“ORSO Plan”), one of its principal retirement schemes in Hong Kong, with effect from 1 August 2003. The ORSO Plan will be operated as a closed fund and continue to be managed by an independent trustee according to the provisions of the Trust Deed and Rules.

– I-30 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13 FIXED ASSETS

All ORSO Plan members were enrolled onto the CITIC Group Mandatory Provident Fund Scheme (“MPF Scheme”), with a choice of either the Fidelity Retirement Master Trust or the Hang Seng Mandatory Provident Fund – SuperTrust Plus. Contributions to the MPF Scheme as well as forfeited amounts derived from the employer voluntary contributions are administered in accordance with the terms and provisions of the master trusts.

Assets of the ORSO Plan and the MPF Scheme are held separately in funds under the custody of the respective trustees.

Retirement benefits for employees in mainland China and other locations are based primarily on local mandatory requirements.

a Group

property,	property,	plant and equipment	plant and equipment
self-used properties vehicular tunnel HK$ million HK$ million		plant and machinery HK$ million	others (Note iii) HK$ million	sub-total HK$ million	investment properties HK$ million	properties under develop- ment HK$ million	leasehold land HK$ million	total HK$ million
3,166 2,000 81 – 79 – 323 – – – – – (125) – – – – – 736 –		5,279 219 9 586 – – (289) – – 818	3,917 68 67 774 – – (216) – (6) (1,554)	14,362 368 155 1,683 – – (630) – (6) –	8,645 109 – 18 – – (18) 735 – 115	1,876 37 – 1,849 21 (165) (313) – (442) (110)	1,858 27 50 61 – – – – – (5)	26,741 541 205 3,611 21 (165 (961 735 (448 –
4,260 2,000 nd impairment		6,622	3,050	15,932	9,604	2,753	1,991	30,280
586 22 159 11 (6) – – (2)	808 – 90 – – – – –	1,353 86 520 2 (105) 88 – 2	1,552 9 265 6 (135) 32 (4) –	4,299 117 1,034 19 (246) 120 (4) –	– – – – – – – –	27 1 28 – (15) – – –	240 2 37 – – – – –	4,566 120 1,099 19 (261 120 (4 –
770	898	1,946	1,725	5,339	–	41	279	5,659
3,490	1,102	4,676	1,325	10,593	9,604	2,712	1,712
4,260 –	2,000 –	6,622 –	3,050 –	15,932 –	– 9,604	2,753 –	1,991 –	20,676 9,604
4,260	2,000	6,622	3,050	15,932	9,604	2,753	1,991

– I-31 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

property, plant and equipment

	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment	property, plant and equipment

Cost or valuation At 1 January 2007 Exchange adjustments Additions others Capitalised leasehold land amortisation Disposals through disposal of subsidiary companies others Change in fair value of investment properties Transfer to assets held for sale Transfer upon completion At 31 December 2007 Accumulated depreciation, amortisation and impairment At 1 January 2007 Exchange adjustments Charge for the year Disposal of subsidiary companies Written back on disposals others Impairment loss Transfer to other assets Reclassification At 31 December 2007 Net book value At 31 December 2007 Represented by Cost Valuation	self-used properties HK$ million	vehicular tunnel HK$ million	plant and machinery HK$ million	others (Note iii) HK$ million	sub-total HK$ million	investment properties HK$ million	properties under develop- ment HK$ million	leasehold land HK$ million	total HK$ million
	4,260 245 172 – – (29) – (37) 258	2,000 – – – – – – – –	6,622 564 657 – (15) (132) – – (38)	3,050 69 2,665 – (231) (186) – – (243)	15,932 878 3,494 – (246) (347) – (37) (23)	9,604 385 – – – (27) 1,002 – (69)	2,753 141 1,851 39 – (24) – – (22)	1,991 70 358 – – (238) – (336) 114	30,280 1,474 5,703 39 (246 (636 1,002 (373 –
	4,869	2,000	7,658	5,124	19,651	10,895	4,738	1,959	37,243
	770 56 170 – (16) 6 (4) (5)	898 – 98 – – – – –	1,946 206 564 (7) (89) 68 (46) 5	1,725 21 290 (116) (114) 29 38 –	5,339 283 1,122 (123) (219) 103 (12) –	– – – – – – – –	41 3 60 – (7) 353 – –	279 4 42 – – – (7) –	5,659 290 1,224 (123 (226 456 (19 –
	977	996	2,647	1,873	6,493	–	450	318	7,261
	3,892	1,004	5,011	3,251	13,158	10,895	4,288	1,641
	4,869 –	2,000 –	7,658 –	5,124 –	19,651 –	– 10,895	4,738 –	1,959 –	26,348 10,895
	4,869	2,000	7,658	5,124	19,651	10,895	4,738	1,959

Notes:

i) Interest capitalised in properties under development amounts to HK$188 million (2006: HK$81 million).
ii) As at 31 December 2007, certain of the Group’s self-used properties and plant and machinery with the aggregate carrying value of HK$11 million (2006: HK$500 million) were pledged to secure banking facilities granted to a subsidiary company.
iii) Other property, plant and equipment comprise mining assets, construction in progress, traffic equipment, cargo lighters, computer installations, telecommunications equipment, motor vehicles and furniture, fixtures and equipment.
iv) The capital commitments of authorised but not contracted for and contracted but not provided for of the Group in respect of property, plant and equipment, properties under development and leasehold land amount to HK$254 million (2006: HK$17 million) and HK$21,147 million (2006: HK$3,941 million) respectively.

– I-32 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Analysis of additions by business Special Steel Iron Ore Mining Property Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong Others Analysis of additions by geographical area Hong Kong Mainland China Overseas Analysis of depreciation and amortisation by business Special Steel Property Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong Others	Group 2007 2006 HK$ million HK$ million 1,062 1,716 1,990 8 2,161 1,471 56 126 62 42 360 444 12 9 5,703 3,816	Group 2007 2006 HK$ million HK$ million 1,062 1,716 1,990 8 2,161 1,471 56 126 62 42 360 444 12 9 5,703 3,816
		3,816

	837 2,876 1,990	215 3,580 21
	5,703	3,816

	702 130 143 79 157 13	652 91 132 73 139 12
	1,224	1,099

b Company

Cost At 1 January Additions Disposals At 31 December Accumulated depreciation At 1 January Charge for the year Written back on disposals At 31 December Net book value At 31 December		motor vehicles, equipment, furniture and fixtures 2007 2006 HK$ million HK$ million 103 101 7 7 (4) (5) 106 103 79 74 12 10 (4) (5) 87 79 19 24
		103 7 (4)
		106
		79 12 (4)
		87 19

– I-33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

c

The tenure of the properties of the Group is as follows:

Leasehold properties held In Hong Kong Leases of over 50 years Leases of between 10 to 50 years Leases of less than 10 years In Mainland China Leases of over 50 years Leases of between 10 to 50 years Leases of less than 10 years Properties held overseas Freehold	self-used properties 2007 2006 HK$ million HK$ million 23 24 1,046 1,032 20 76 32 – 3,506 2,875 24 28 218 225	self-used properties 2007 2006 HK$ million HK$ million 23 24 1,046 1,032 20 76 32 – 3,506 2,875 24 28 218 225	investment properties 2007 2006 HK$ million HK$ million 858 751 4,057 3,743 – – 1,384 1,184 4,214 3,611 – – 382 315	investment properties 2007 2006 HK$ million HK$ million 858 751 4,057 3,743 – – 1,384 1,184 4,214 3,611 – – 382 315	properties under development 2007 2006 HK$ million HK$ million – – 77 24 – – 3,213 2,333 1,448 396 – – – –	properties under development 2007 2006 HK$ million HK$ million – – 77 24 – – 3,213 2,333 1,448 396 – – – –	leasehold land 2007 2006 HK$ million HK$ million – – 1,114 1,143 – – – – 845 848 – – – –	leasehold land 2007 2006 HK$ million HK$ million – – 1,114 1,143 – – – – 845 848 – – – –	total 2007 2006 HK$ million HK$ million 881 775 6,294 5,942 20 76 4,629 3,517 10,013 7,730 24 28 600 540	total 2007 2006 HK$ million HK$ million 881 775 6,294 5,942 20 76 4,629 3,517 10,013 7,730 24 28 600 540
	4,869	4,260	10,895	9,604	4,738	2,753	1,959	1,991	22,461	18,608

d Property Valuation

The investment properties were revalued at 31 December 2007 by the following independent, professionally qualified valuers.

properties located in valuers

Hong Kong and Shanghai Knight Frank Petty Limited Japan Tekko Building Co., Limited

e Fixed assets and properties held for sale under current assets of the Group let under operating leases to generate rental income are as follows:

investment properties HK$ million 9,604 –	self-used properties HK$ million 22 (3)	other fixed assets HK$ million 232 (124)	fixed assets total HK$ million 9,858 (127)	properties held for sale HK$ million 310 (58
9,604	19	108	9,731	252

–	1	38	39	3

10,895 –	22 (2)	212 (119)	11,129 (121)	310 (61
10,895	20	93	11,008	249

–	–	32	32	3

– I-34 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14 SUBSIDIARY COMPANIES

Unlisted shares, at cost less impairment losses Amounts due by subsidiary companies (Note a, b) Amounts due to subsidiary companies (Note a)	Company 2007 2006 HK$ million HK$ million 986 868 59,230 48,458 (9,616) (7,192) 50,600 42,134

Particulars of the principal subsidiary companies are shown in Note 35.

Note:

a. Amounts due by subsidiary companies and amounts due to subsidiary companies are interest bearing at market rates except for amounts due by subsidiary companies of approximately HK$42,888 million (2006: HK$39,760 million) and amounts due to subsidiary companies of an amount of approximately HK$6,113 million (2006: HK$3,687 million), which are non-interest bearing. These loans have no fixed repayment terms and were not in default or impaired.
b. None of these amounts are in default or impaired as at 31 December 2007 and 2006.

15 JOINTLY CONTROLLED ENTITIES

Share of net assets Goodwill At 1 January Additions Disposal At 31 December Loans due from jointly controlled entities (Note b) Loans due to jointly controlled entities (Note b) Unlisted shares, at cost Loans due from jointly controlled entities Loans due to jointly controlled entities		Group 2007 2006 HK$ million HK$ million 15,147 12,632 533 341 18 192 (39) – 512 533 15,659 13,165 1,963 1,902 (176) (145) 17,446 14,922 Company 2007 2006 HK$ million HK$ million 3,687 2,115 504 477 (175) (147) 4,016 2,445	Group 2007 2006 HK$ million HK$ million 15,147 12,632 533 341 18 192 (39) – 512 533 15,659 13,165 1,963 1,902 (176) (145) 17,446 14,922 Company 2007 2006 HK$ million HK$ million 3,687 2,115 504 477 (175) (147) 4,016 2,445
		533 18 (39)
		512
		15,659 1,963 (176)	13,165 1,902 (145

– I-35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note:

a. Included in jointly controlled entities is Western Harbour Tunnel Company Limited (“WHTCL”) whose year end is 31 July which is not coterminous with the Group. The results of WHTCL has been equity accounted for based on its management accounts for the period from 1 January 2007 to 31 December 2007.
b. Loans due from jointly controlled entities and loans due to jointly controlled entities are interest bearing at market rates except for loans to jointly controlled entities of an amount of approximately HK$264 million (2006: HK$465 million loans to jointly controlled entities), which are non-interest bearing. These loans have no fixed repayment terms and were not in default or impaired except for a provision for impairment loss of HK$132 million (2006: HK$Nil) has been provided.
c. The following amounts represent the Group’s share of the assets and liabilities, and sales and results of jointly controlled entities and are included in the consolidated balance sheet and profit and loss account using the equity method:

Assets Non-current assets Current assets Liabilities Non-current liabilities Current liabilities Net assets Revenue Expenses Profit for the year Proportionate share of jointly controlled entities’ capital commitments		2007 HK$ million 20,409 16,328	2006 HK$ million 18,114 14,620 32,734 (10,276) (10,357) (20,633) 12,101 8,308 (7,425) 883 402
		36,737	32,734
		(10,038) (11,786)	(10,276 (10,357
		(21,824)	(20,633
		14,913
		15,532 (13,986)	8,308 (7,425
		1,546 378

d. Particulars of the principal jointly controlled entities are shown in Note 35.

– I-36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16 ASSOCIATED COMPANIES

Share of net assets Goodwill At 1 January Disposal At 31 December Loans due from associated companies (Note b) Loans due to associated companies (Note b) Investment at cost Unlisted shares Shares listed in Hong Kong Market value of listed shares Investment at cost Unlisted shares Shares listed in Hong Kong Loans due from associated companies Loans due to associated companies Market value of listed shares		Group 2007 2006 HK$ million HK$ million 13,768 12,114 1,444 1,829 (5) (385) 1,439 1,444 2,746 2,879 (12) (21) 17,941 16,416 4,744 4,593 6,252 6,253 10,996 10,846 14,033 13,194 Company 2007 2006 HK$ million HK$ million 2,197 2,197 931 931 3,128 3,128 2,513 2,516 (9) (18) 5,632 5,626 1,461 1,373	Group 2007 2006 HK$ million HK$ million 13,768 12,114 1,444 1,829 (5) (385) 1,439 1,444 2,746 2,879 (12) (21) 17,941 16,416 4,744 4,593 6,252 6,253 10,996 10,846 14,033 13,194 Company 2007 2006 HK$ million HK$ million 2,197 2,197 931 931 3,128 3,128 2,513 2,516 (9) (18) 5,632 5,626 1,461 1,373
		1,444 (5)
		1,439 2,746 (12) 17,941
		4,744 6,252	4,593 6,253
		3,128 2,513 (9)	3,128 2,516 (18
		5,632 1,461

Dividend income from associated companies during the year is as follows:

Listed associated companies Unlisted associated companies	Group 2007 2006 HK$ million HK$ million 392 632 399 262 791 894	Group 2007 2006 HK$ million HK$ million 392 632 399 262 791 894
		894

– I-37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note:

a. Included in associated companies is Hong Kong Resort Company Limited (“HKR”) whose year end is 31 March which is not coterminous with the Group. The results of HKR has been equity accounted for based on its management accounts for the period from 1 January 2007 to 31 December 2007.
b. Loans due from associated companies and loans due to associated companies are interest bearing at market rates except for loans from/to associated companies of an amount of approximately HK$9 million (2006: HK$17 million), which are non-interest bearing. These loans have no fixed repayment terms and were not in default or impaired except for a provision for impairment loss of HK$24 million (2006: HK$Nil) has been provided for the loans due from an associated company.
c. Particulars of the principal associated companies are shown in Note 35.

Summarised financial information of the associated companies on a gross basis:

Assets Liabilities Revenue Profit	Group 2007 2006 HK$ million HK$ million 207,747 176,945 136,952 114,552 95,778 77,903 10,000 6,184	Group 2007 2006 HK$ million HK$ million 207,747 176,945 136,952 114,552 95,778 77,903 10,000 6,184

		114,552

		77,903

		6,184

17 OTHER FINANCIAL ASSETS

Co-operative joint ventures Unlisted investments, at fair value Amounts due by co-operative joint ventures Listed investments, at fair value Shares listed in Hong Kong Shares listed in overseas Unlisted investments Shares, at cost Add: Advances made Less: Impairment Less: Advances received Loans receivable
		72	102
		6,991 35	2,591 112
		7,026	2,703
		26 – 26 – 26 –	26 14
			40 (25
			15 (1
		26 378	14 –
		7,502

– I-38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Particulars of the principal co-operative joint ventures are shown in Note 35.

Other financial assets are denominated in the following currencies:

Hong Kong dollar Renminbi Other currencies	2007 HK$ million 7,049 418 35 7,502	2006 HK$ million 2,635 72 112
		2,819

18 INTANGIBLE ASSETS

goodwill HK$ million 1,146 –	mining assets HK$ million 1,865 1,119	total HK$ million 3,011 1,119 4,130 25 4,105 603 2,430 (22) 3,011 – 25 25 2,986
1,146 25	2,984 –	4,130 25
1,121	2,984
603 565 (22) 1,146	– 1,865 – 1,865	603 2,430 (22
		3,011
– 25	– –	– 25
25	–	25
1,121	1,865

– I-39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Analysed by:

Special Steel Iron Ore Mining Property Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong	2007 goodwill mining assets HK$ million HK$ million 57 – 507 2,984 297 – 7 – 83 – 170 – 1,121 2,984	2006 goodwill mining assets HK$ million HK$ million 57 – 507 1,865 297 – 7 – 83 – 170 – 1,121 1,865	2006 goodwill mining assets HK$ million HK$ million 57 – 507 1,865 297 – 7 – 83 – 170 – 1,121 1,865
			1,865

19 NON-CURRENT DEPOSITS

Non-current deposits represented deposit payments for construction works for fixed assets and PRC land acquisitions.

20 ASSETS HELD FOR SALE

As at 31 December 2007, an interest in a jointly controlled entity in PRC is presented as an asset held for sale following the approval of the Group’s management to dispose of the interests and is expected to be completed in January 2008.

As at 31 December 2007, a property situated in Hong Kong is presented as an asset held for sale and carried at the lower of its carrying amount and fair value less costs to sell, following the approval of the Group’s management to dispose of the property and is expected to be completed in March 2008.

21 INVENTORIES

Raw materials Work-in-progress Finished goods Others	2007 HK$ million 1,977 947 2,971 87 5,982	2006 HK$ million 842 520 2,482 76
		3,920

– I-40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

22 DEBTORS, ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

Trade debtors Within 1 year Over 1 year Accounts receivable, deposits and prepayments	Group 2007 2006 HK$ million HK$ million 3,008 2,150 42 24	Group 2007 2006 HK$ million HK$ million 3,008 2,150 42 24	Company 2007 2006 HK$ million HK$ million – – – –	Company 2007 2006 HK$ million HK$ million – – – –
	3,050 5,242	2,174 4,203	– 304	– 259
	8,292	6,377	304	259

Note:

i) Trade debtors are net of provision and the ageing is classified based on invoice date.
ii) The Group has a defined credit policy for the respective business units.
iii) The carrying amounts of debtors, accounts receivable, deposits and prepayments approximates their fair value.
iv) Accounts receivable, deposits and prepayments include derivative financial assets of HK$251 million (2006: HK$14 million), amounts due from jointly controlled entities of HK$138 million (2006: HK$134 million), which are unsecured, interest free and recoverable on demand, except for an amount of HK$1 million (2006: HK$65 million) which is interest bearing, and amounts due from associated companies of HK$90 million (2006: HK$90 million) which are unsecured, interest free and recoverable on demand, except for an amount of HK$Nil (2006: HK$12 million) which is interest bearing.

As of 31 December 2007, trade receivables of HK$560 million (2006: HK$700 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

3 to 6 months Over 6 months	2007 HK$ million 528 32 560	2006 HK$ million 448 252
		700

– I-41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Movements on the provision for impairment of trade receivables are as follows:

At 1 January Exchange adjustments Provision for impairment loss Receivables written off during the year Unused amounts reversed At 31 December	2007 HK$ million 207 13 26 (158) (5) 83	2006 HK$ million 195 – 24 (12 –
		207

The creation and release of provision for impairment loss have been included in other operating expenses (Note 5) in the consolidated profit and loss account. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

As of 31 December 2007, trade receivables of HK$91 million (2006: HK$192 million) were individually determined to be impaired. The individually impaired receivables mainly relate to customers, which are in unexpected difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Consequently, specific provision for impairment loss of HK$60 million (2006: HK$185 million) was recognised. The Group does not held any collateral over these balances.

23 CREDITORS, ACCOUNTS PAYABLE, DEPOSITS AND ACCRUALS

Trade creditors Within 1 year Over 1 year Accounts payable, deposits and accruals	Group 2007 2006 HK$ million HK$ million 4,055 2,553 329 314	Group 2007 2006 HK$ million HK$ million 4,055 2,553 329 314	Company 2007 2006 HK$ million HK$ million – – – –	Company 2007 2006 HK$ million HK$ million – – – –
	4,384 6,343	2,867 5,168	– 210	– 99
	10,727	8,035	210	99

Note:

i) Accounts payable, deposits and accruals include derivative financial liabilities of HK$66 million (2006: HK$9 million).
ii) The carrying amounts of creditors, accounts payable, deposits and accruals approximate their fair value.

– I-42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

24 SHARE CAPITAL

Authorised At 31 December 2006 and 2007 Issued and fully paid At 1 January 2007 Issue of shares pursuant to the Plan Repurchase during the year At 31 December 2007	number of shares of HK$0.40 each 3,000,000,000	HK$ million 1,200

	2,195,604,160 19,336,000 (2,813,000)	878 8 (1
	2,212,127,160	885

Changes during the year:

During the year, the Company repurchased a total of 2,813,000 of its own shares on The Stock Exchange of Hong Kong Limited, all of which have been cancelled, as follows:

	number of
	shares	total purchase	purchase price per share
month/ year	repurchased	prices	highest	lowest
		HK$ million	HK$	HK$
November 2007	2,813,000	109	39.35	38.25

Changes subsequent to the year end:

Since 1 January 2008 to the date of this report, the Company issued and allotted a total of 270,000 shares at HK$22.10 per share upon the exercise of share options which were granted under the Plan.

Since 1 January 2008 to the date of this report, the Company repurchased a total of 15,484,000 of its own shares on The Stock Exchange of Hong Kong Limited, all of which have been cancelled. The total consideration paid for the above repurchase was approximately HK$545 million.

Share Option Plan:

Under the CITIC Pacific Share Incentive Plan 2000 (‘the Plan’) adopted on 31 May 2000, the Board may invite any director, executive or employee of the Company or any of its subsidiary companies to subscribe for options over the Company’s shares on payment of HK$1 per acceptance. The subscription price determined by the Board will be at least the higher of (i) the closing price of the Company’s share as stated in the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average closing price of the Company’s share as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant and (iii) the nominal value of the Company’s shares. The maximum number of shares over which options may be granted under the Plan shall not exceed 10% of (i) the issued share capital of the Company from time to time or (ii) the issued share capital of the Company as at the date of adopting the Plan, whichever is the lower.

– I-43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Since adoption of the Plan, the Company has granted four lots of share options on 28 May 2002, 1 November 2004, 20 June 2006 and 16 October 2007 respectively. On 28 May 2002 options to subscribe for a total of the 11,550,000 shares in the Company representing 0.52% of the issued share capital, at the exercise price of HK$18.20 per share, were granted under the Plan. The closing price of the Company’s shares immediately before the date of grant was HK$18.10. On 1 November 2004 options to subscribe for a total of the 12,780,000 shares in the Company representing 0.58% of the issued share capital, at the exercise price of HK$19.90 per share, were granted under the Plan. The closing price of the Company’s shares immediately before the date of grant was HK$19.90. On 20 June 2006 options to subscribe for a total of the 15,930,000 shares in the Company representing 0.72% of the issued share capital, at the exercise price of HK$22.10 per share, were granted under the Plan. The closing price of the Company’s shares immediately before the date of grant was HK$22.50. On 16 October 2007 options to subscribe for a total of the 18,500,000 shares in the Company representing 0.84% of the issued share capital, at the exercise price of HK$47.32 per share, were granted under the plan. The closing price of the Company’s shares immediately before the date of grant was HK$47.65. All options granted and accepted can be exercised in whole or in part within 5 years from the date of grant. All were accepted, and none were cancelled or lapsed in the period up to 31 December 2007.

Other than the Plan, certain of the Company’s subsidiary companies have issued equity-settled share-based payments to certain employees. The aggregate amount of the share-based payments recognised by these companies are not material to the Group.

a Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

	2007		2006
	average		average
	exercise		exercise
	price in		price in
	HK$ per		HK$ per
	share	options	share	options
At 1 January		30,989,000		19,370,000
Granted	47.32	18,500,000	22.10	15,930,000
Exercised	22.25	(19,336,000)	20.10	(4,311,000)
At 31 December		30,153,000		30,989,000

Details of share options exercised during the year:

period exercise price HK$ 26 January to 9 May 2007 18.20 2 January to 26 October 2007 19.90 12 January to 20 December 2007 22.10 16 October 2007 47.32	number of shares 2007 2006 6,840,000 1,560,000 4,905,000 1,151,000 5,991,000 1,600,000 1,600,000 – 19,336,000 4,311,000	number of shares 2007 2006 6,840,000 1,560,000 4,905,000 1,151,000 5,991,000 1,600,000 1,600,000 – 19,336,000 4,311,000
		4,311,000

– I-44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b Fair value of share options and assumptions

The fair value of an option on one CITIC Pacific share granted in the current period measured as at the date of grant of 16 October 2007 was HK$7.81 based on the following data and assumptions using the Binomial Lattice Model:

The share price at the grant date is HK$46.85
The exercise price is HK$47.32
The option’s contractual life is 5 years
Taking into account the probability of early exercise behaviour, the average expected term of the grant was determined to be 4 years
Expected volatility of CITIC Pacific’s share price at 25% per annum (based on historical movements of share prices and the trend of the volatility rate in recent years)
Expected annual dividend yield of 5% (based on historical dividend payments)
Rate of eligible grantees leaving service assumed at 1% per annum
Early exercise assumption for option holders to exercise their options when the share price is at least 150% of the exercise price
Risk-free interest rate of 4% per annum (based on linearly interpolated yields of the Hong Kong Exchange Fund Notes as at the grant date)

The result of the fair value valuation can be materially affected by changes in these assumptions so an option’s actual value may differ from the estimated fair value of the options due to the Model and assumptions adopted.

All the options forfeited before expiry of the Plan will be treated as lapsed options which will not be added back to the number of shares available to be issued under the Plan.

The total expense to be recognised in the Company’s profit and loss account for the year ended 31 December 2007 in respect of the grant of the aforesaid 18,500,000 options is HK$144,485,000 (2006: 15,930,000 options is HK$62,445,600).

– I-45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25 RESERVES

a Group

At 1 January 2006 Share of reserves of associated companies Share of reserves of jointly controlled entities Exchange translation differences Reserves released on disposal of associated companies Loss on cash flow hedge of financial instruments Fair value gain on other financial assets Transfer to Profit and Loss account on impairment of other financial assets Transfer from profits Issue of share pursuant to the Plan Profit attributable to shareholders of the Company Dividends_(Note 9)_ Share repurchase Share-based payment At 31 December 2006	share premium HK$ million 24,864 – – – – – – – – 92 – – – – 24,956	capital redemption reserve HK$ million 19 – – – – – – – – – – – 1 – 20	capital reserve HK$ million – – 17 – – – – – – (6) – – – 62 73	goodwill HK$ million (2,494) – – – – – – – – – – – – – (2,494)	investment revaluation reserve HK$ million 84 183 – – (84) – 1,064 103 – – – – – – 1,350	exchange fluctuation reserve HK$ million (167) – – 870 103 – – – – – – – – – 806	hedging reserve HK$ million 401 (129) (1) – (91) (50) – – – – – – – – 130	general reserve HK$ million 301 – 1 – – – – – 163 – – – – – 465	retained profits HK$ million 15,218 106 – – – – – – (163) – 8,272 (3,071) (36) – 20,326	total HK$ million 38,226 160 17 870 (72) (50) 1,064 103 – 86 8,272 (3,071) (35) 62
										45,632

										45,632

Representing At 31 December 2006 after proposed final and special dividend 2006 Final and special dividend proposed Retained by Company and subsidiary companies Jointly controlled entities Associated companies	24,956 – –									43,217 2,415
										45,632

		20 – –	56 17 –	(2,494) – –	1,192 – 158	1,034 – (228)	12 2 116	446 16 3	9,392 2,029 8,905	34,614 2,064 8,954
	24,956	20	73	(2,494)	1,350	806	130	465	20,326	45,632

– I-46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

share premium HK$ million 24,956 – – – – – – – – 459 – – – – 25,415 25,415 – –	capital redemption reserve HK$ million 20 – – – – – – – – – – – 1 – 21	capital reserve HK$ million 73 30 6 – 6 (18) – – – (36) – – – 179 240	goodwill HK$ million (2,494) – – – – 756 – – – – – – – – (1,738)	investment revaluation reserve HK$ million 1,350 28 9 – – – – 3,292 77 – – – – – 4,756	exchange fluctuation reserve HK$ million 806 24 46 2,168 – (28) – – – – – – – – 3,016	hedging reserve HK$ million 130 (5) 3 – – – 57 – – – – – – – 185	general reserve HK$ million 465 – 1 – – – – – 299 – – – – – 765	retained profits HK$ million 20,326 – – – – (756) – – (299) – 10,843 (3,756) (110) – 26,248	total HK$ million 45,632 77 65 2,168 6 (46 57 3,292 77 423 10,843 (3,756 (109 179
									58,908

									57,138 1,770
									58,908

	21 – –	181 23 36	(1,738) – –	4,561 9 186	3,174 46 (204)	69 5 111	745 17 3	11,713 3,373 11,162	44,141 3,473 11,294
25,415	21	240	(1,738)	4,756	3,016	185	765	26,248	58,908

– I-47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b Company

capital redemption reserve HK$ million At 1 January 2006 19 Share-based payment – Issue of shares pursuant to the Plan – Loss on cash flow hedge of financial instruments – Profit for the year available for distribution (Note 8) – Dividends (Note 9) – Share repurchase 1 At 31 December 2006 20 Representing At 31 December 2006 after proposed final and special dividend 2006 Final and special dividend proposed At 1 January 2007 20 Share-based payment – Issue of shares pursuant to the Plan – Loss on cash flow hedge of financial instruments – Profit for the year available for distribution (Note 8) – Dividends (Note 9) – Share repurchase 1 At 31 December 2007 21 Representing At 31 December 2007 after proposed final dividend 2007 Final dividend proposed	capital reserve HK$ million – 62 (6) – – – – 56	hedging reserve HK$ million 63 – – (55) – – – 8	share premium HK$ million 24,864 – 92 – – – – 24,956	retained profits HK$ million 10,077 – – – 7,965 (3,071) (36) 14,935	total HK$ million 35,023 62 86 (55 7,965 (3,071 (35
					39,975

					37,560 2,415
					39,975

	56 144 (36) – – – –	8 – – (58) – – –	24,956 – 459 – – – –	14,935 – – – 5,713 (3,756) (110)	39,975 144 423 (58 5,713 (3,756 (109
21	164	(50)	25,415	16,782	42,332

					40,562 1,770
					42,332

– I-48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26 BORROWINGS

a

Group 2007 2006 HK$ million HK$ million 21,246 12,529 211 795	Group 2007 2006 HK$ million HK$ million 21,246 12,529 211 795	Company 2007 2006 HK$ million HK$ million 15,799 9,599 – – 15,799 9,599 – – 15,799 9,599 – (27) 15,799 9,572	Company 2007 2006 HK$ million HK$ million 15,799 9,599 – – 15,799 9,599 – – 15,799 9,599 – (27) 15,799 9,572
21,457 3,945 25,402 (402)	13,324 3,920 17,244 (640)	15,799 – 15,799 –	9,599 –
			9,599 (27
25,000	16,604	15,799

Note:

i) Bank loans and other loans of the Group not wholly repayable within five years amounted to HK$9,677 million (2006: HK$6,294 million).
ii) 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.
iii) On 26 October 2005, CITIC Pacific Finance (2005) Limited, a wholly owned subsidiary of the Company, issued and sold JPY8.1 billion in aggregate principal amount of guaranteed floating rate note due 2035 (“JPY Notes”) to investors for general corporate purposes pursuant to the subscription agreement dated 26 October 2005. All of the JPY Notes remained outstanding at the end of the year.
iv) Bank loans and other loans, other than the JPY Notes, are fully repayable up to 2032 and bear interest at the prevailing market rate.
v) As at 31 December 2007, certain of the Group’s inventories, accounts receivable and self-used properties with the aggregate carrying value of HK$327 million (2006: HK$696 million) were pledged to secure loans and banking facilities granted to certain subsidiary companies of the Group.

– I-49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b The maturity of the Group’s and the Company’s long term liabilities is as follows:

Group 2007 2006 HK$ million HK$ million	Group 2007 2006 HK$ million HK$ million	Group 2007 2006 HK$ million HK$ million
397 2,527 9,286 9,247	636 1,359 5,441 5,888	– 570 5,991 9,238
21,457	13,324	15,799
5 – 3,510 430	4 – 3,510 406	– – – –
3,945 25,402	3,920 17,244	– 15,799

c The exposure of the Group’s total borrowings to interest-rate changes and the contractual repricing dates are as follows:

	One year or less
	HK$ million
At 31 December 2006
Total borrowings	13,990

Effect of interest rate swap	5,125

At 31 December 2007
Total borrowings	24,273

Effect of interest rate swap	5,342

Part of the interest rate exposure is hedged by interest rate swaps.

The effective interest rates per annum of the Group’s borrowings were as follows:

		2007	2006
Total	borrowings	5.5%	5.2%

d The carrying amounts of borrowings approximate their fair value. The fair values are estimated as the present value of future cash flows, discounted at current market interest rates for similar financial instruments.

– I-50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

e The carrying amounts of the total borrowings are denominated in the following currencies:

Hong Kong dollar US dollar Renminbi Other currencies	Group 2007 2006 HK$ million HK$ million 8,575 8,147 14,016 5,348 4,833 3,684 1,230 1,114 28,654 18,293	Company 2007 2006 HK$ million HK$ million 7,255 7,429 9,780 1,665 – – 450 505 17,485 9,599	Company 2007 2006 HK$ million HK$ million 7,255 7,429 9,780 1,665 – – 450 505 17,485 9,599
			9,599

The Group has the following undrawn borrowing facilities:

Floating rate expiring within one year expiring beyond one year	2007 HK$ million 5,572 15,018 20,590	2006 HK$ million 2,184 14,614
		16,798

27 FINANCIAL RISK MANAGEMENT

Financial Risk Factors

The Group is exposed to a variety of financial risk. The Group employs a combination of financial instruments, including derivative products, to manage its exposure to financial risk.

Risk management is centralised at head office level in accordance with the Group’s risk management policy. The policy includes written principles and guidelines for financial risk management, use of derivative transactions and measurement of derivative transactions.

a Exposure to Interest Rate Fluctuations

The Group aims to maintain a suitable mixture of fixed rate and floating rate borrowings in order to stabilise interest costs despite rate movements. Interest rate hedging ratio is determined after taking into consideration of general market trend, the Group’s cash flow patterns and interest coverage ratio. The Group uses interest rate swaps, forward rate agreements, interest rate option contracts and other instruments to hedge exposures or to modify the interest rate characteristics of its borrowings. As at 31 December 2007, after the swaps, HK$7.8 billion of the Group’s total borrowings were effectively paying fixed rate and the remaining were effectively paying floating rate of interest.

– I-51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2007, if interest rates on HK dollar-denominated borrowings had been 100 basis points higher/lower with all other variables held constant, the Group’s profit would have been HK$20 million (2006: HK$23 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings for operating activities. If interest rates on US dollar-denominated borrowings had been 100 basis points higher/lower with all other variables held constant, the Group’s profit would have been HK$44 million (2006: HK$20 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings for operating activities. Other components of consolidated equity would not be materially affected by the changes in interest rates.

Exposure to Foreign Currency Fluctuations

CITIC Pacific conducts business mainly in Hong Kong, mainland China and Australia, therefore it is subject to the market risk of foreign exchange rates in HK Dollar, US Dollar, Renminbi and Australia Dollar. To minimise currency exposure, non HK 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 limitations in financial markets and regulatory constraints, particularly on investment into mainland China as the Renminbi is currently not a free convertible currency and “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.

The functional currency and future cash flow for Group’s Australian Iron Ore Mining project is denominated in USD. Substantial portion of the project infrastructure/ pre-completion operating expenditure is projected to be denominated in non-USD currencies. Foreign exchange forward contracts and structured forward instruments are employed to hedge or minimise the non-USD currency exposure.

On liability management, CITIC Pacific funded the Iron Ore Mining project and the acquisition of vessels by USD loans to match the future cash flow of these assets. Foreign exchange forward contracts are employed to minimise currency exposure for other USD loans and a Yen Bond.

At 31 December 2007, the Group had no material currency risk arising from the operating activities. Such exposures are always kept to an acceptable level by entering into foreign currency forward contracts in the subsidiary companies level and they are usually matched with anticipated future cash flows in foreign currencies.

Price Risk

The Group is exposed to equity securities price risk because investments held by the Group are classified on the consolidated balance sheet as available-for-sale. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

d Credit Exposure

The Group’s credit risk is primarily attributable to cash and bank deposits, trade and accounts receivables, and derivative financial instruments entered into for hedging purposes. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

The Group’s cash and bank deposits are placed with major financial institutions. 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.

– I-52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Trade receivables are presented net of the allowance for bad and doubtful debts. Credit risk in respect of trade and accounts receivables is limited since the customer base is comprised of a large number of customers disperse across different industries and geographical areas. Accordingly, the Group has no significant concentration of credit risk. In addition, credit evaluations are performed on all customers requiring credit over a certain amount. These receivables are due within 15 to 90 days from the date of billing. Normally, the Group does not obtain collateral from customers.

The maximum exposure to credit risk at the reporting date is the fair value of each financial asset, including derivative financial instruments, in the balance sheet after deducting any impairment allowance. None of the financial assets that are fully performing has been renegotiated in the last year.

Liquidity Risk

Liquidity risk is prudently managed by maintaining a sufficient amount of available committed credit facilities.

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

The table below analyses the Group’s financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 31 December 2007 Bank borrowings Derivative financial instruments Trade creditors and accounts payable At 31 December 2006 Bank borrowings Derivative financial instruments Trade creditors and accounts payable	less than 1 year HK$ million 5,129 56 10,270 2,596 5 7,652	between 1 and 2 years HK$ million 3,833 7 156 2,187 8 82	between 2 and 5 years HK$ million 15,321 40 301 10,760 25 301	over 5 years HK$ million 13,239 2 –

				7,525 – –

– I-53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

less than 1 year HK$ million (3,307) 3,489 (4,009) 4,081	between 1 and 2 years HK$ million (219) 216 (2,101) 2,123	between 2 and 5 years HK$ million (15) 15 (3,045) 3,049	over 5 years HK$ million – –
			– –

(718) 729	– –	– –	– –
(1,464) 1,467	(2,025) 2,015	(2,651) 2,641	– –

f Fair Value Estimation

i) The fair value of outstanding derivative transactions is calculated at least semi-annually based on the price quotations obtained from major financial institutions. Fair value of loans receivable is estimated as the present value of future cash flows, discounted at the current market interest rates for similar financial instruments.

The carrying amounts of borrowings approximate their fair value. The fair values are estimated as the present value of future cash flows, discounted at current market interest rates for similar financial instruments.

ii) The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.

iii) The carrying value less impairment provision of trade and other receivables and trade and other payables are a reasonable approximation of their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

– I-54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

28 CAPITAL RISK MANAGEMENT

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.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and bank deposits. Total capital is calculated as equity, as shown in the consolidated balance sheet, plus net debt.

The gearing ratios at 31 December 2007 and at 31 December 2006 were as follows:

Total borrowings Less: cash and bank deposits Net debt Equity attributable to Shareholders of the Company Total capital Gearing ratio	2007 HK$ million 28,654 8,045	2006 HK$ million 18,293 3,679
	20,609 59,793	14,614 46,510
	80,402 26%	61,124

		24%

29 DERIVATIVE FINANCIAL INSTRUMENTS

Qualified for hedged accounting Not qualified for hedged accounting	Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 179 60 22 13 222 75 109 51 401 135 131 64	Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 179 60 22 13 222 75 109 51 401 135 131 64
		64

– I-55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 116 105 120 38 285 30 11 26 401 135 131 64 – 57 4 5 251 9 10 4 251 66 14 9 150 69 117 55 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 3 52 22 13 135 60 87 48 138 112 109 61 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 78 105 104 38 60 7 5 23 138 112 109 61 – 57 4 5 26 – 4 1 26 57 8 6 112 55 101 55	Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 116 105 120 38 285 30 11 26 401 135 131 64 – 57 4 5 251 9 10 4 251 66 14 9 150 69 117 55 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 3 52 22 13 135 60 87 48 138 112 109 61 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 78 105 104 38 60 7 5 23 138 112 109 61 – 57 4 5 26 – 4 1 26 57 8 6 112 55 101 55	Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 116 105 120 38 285 30 11 26 401 135 131 64 – 57 4 5 251 9 10 4 251 66 14 9 150 69 117 55 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 3 52 22 13 135 60 87 48 138 112 109 61 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 78 105 104 38 60 7 5 23 138 112 109 61 – 57 4 5 26 – 4 1 26 57 8 6 112 55 101 55	Group 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 116 105 120 38 285 30 11 26 401 135 131 64 – 57 4 5 251 9 10 4 251 66 14 9 150 69 117 55 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 3 52 22 13 135 60 87 48 138 112 109 61 Company 2007 2006 assets liabilities assets liabilities HK$ million HK$ million HK$ million HK$ million 78 105 104 38 60 7 5 23 138 112 109 61 – 57 4 5 26 – 4 1 26 57 8 6 112 55 101 55
116 285	105 30	120 11
401	135	131
– 251	57 9	4 10

78 60	105 7	104 5
138	112	109

– 26	57 –	4 4	5 1
26	57	8	6
112	55	101

– I-56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

i) Forward foreign exchange contracts

The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2007 were HK$13,463 million (2006: HK$6,256 million).

The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next 26 months. Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange contracts as of 31 December 2007 are recognised in the profit and loss account in the period or periods during which the hedged transaction affects the profit and loss account. This is generally within 26 months from the balance sheet date unless the gain or loss is included in the initial amount recognised for the purchase of fixed assets, in which case recognition is over the lifetime of the asset.

ii) Interest rate swaps

The main floating rates of our borrowings are HIBOR and LIBOR. The notional amounts of the outstanding interest rate swap contracts at 31 December 2007 were HK$12,806 million (2006: HK$10,780 million). At 31 December 2007, the fixed interest rates under interest rate swaps varied from 2.95% to 7.23% per annum (2006: 2.65% to 7.23% per annum). Gains and losses recognised in the hedging reserve in equity (Note 25) on interest rate swap contracts qualified for hedge accounting as of 31 December 2007 will be released to the income statement until the repayment of the bank borrowings (Note 26).

30 DEFERRED TAXATION

a Group

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5% (2006: 17.5%). The components of deferred tax (assets) and liabilities recognised in the consolidated balance sheet and the movements during the year is as follows:

Deferred tax arising from At 1 January Exchange adjustment Charged to reserve Charged to goodwill Effect of tax rate change Charged/ (credited) to consolidated profit and loss account Others At 31 December	depreciation allowances in excess of related depreciation 2007 2006 HK$ million HK$ million 528 573 1 (1) – – – – – – (25) (14) – (30) 504 528	depreciation allowances in excess of related depreciation 2007 2006 HK$ million HK$ million 528 573 1 (1) – – – – – – (25) (14) – (30) 504 528	losses 2007 2006 HK$ million HK$ million (186) (240) – (1) – – – – – – (53) 55 – – (239) (186)	losses 2007 2006 HK$ million HK$ million (186) (240) – (1) – – – – – – (53) 55 – – (239) (186)	revaluation of investment properties and valuation of other properties 2007 2006 HK$ million HK$ million 1,010 886 54 (29) – – – – (180) – 173 123 26 30 1,083 1,010	revaluation of investment properties and valuation of other properties 2007 2006 HK$ million HK$ million 1,010 886 54 (29) – – – – (180) – 173 123 26 30 1,083 1,010	mining assets and others 2007 2006 HK$ million HK$ million 499 10 (1) – 51 – – 507 – – 97 (17) – (1) 646 499	mining assets and others 2007 2006 HK$ million HK$ million 499 10 (1) – 51 – – 507 – – 97 (17) – (1) 646 499	total 2007 2006 HK$ million HK$ million 1,851 1,229 54 (31) 51 – – 507 (180) – 192 147 26 (1) 1,994 1,851	total 2007 2006 HK$ million HK$ million 1,851 1,229 54 (31) 51 – – 507 (180) – 192 147 26 (1) 1,994 1,851
	504	528	(239)	(186)	1,083	1,010	646	499	1,994	1,851

– I-57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Net deferred tax assets recognised on the consolidated balance sheet Net deferred tax liabilities recognised on the consolidated balance sheet	Group 2007 2006 HK$ million HK$ million (100) (103) 2,094 1,954 1,994 1,851

b Deferred Tax Assets Unrecognised

The Group has not recognised deferred tax assets in respect of the following items:

Deductible temporary difference Tax losses Taxable temporary difference Deductible temporary difference Tax losses	Group 2007 2006 HK$ million HK$ million 37 309 2,499 2,360 (109) (82) 2,427 2,587 Company 2007 2006 HK$ million HK$ million 19 17 494 452 513 469

Note: Deductible temporary differences and tax losses in certain tax jurisdictions of HK$196 million (2006: HK$125 million) will expire within the next five years. The rest of the amount does not expire under current tax legislation.

c Deferred Tax Liabilities not Recognised

At 31 December 2007, temporary differences relating to the undistributed profits of subsidiary companies amounted to HK$613 million (2006: HK$627 million). Deferred tax liabilities of HK$123 million (2006: HK$128 million) have not been recognised in respect of the tax that would be payable on the distribution of these retained profits as the company controls the dividend policy of these subsidiary companies and it has been determined that it is probable that profits will not be distributed in the foreseeable future.

– I-58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31 CAPITAL COMMITMENTS

Authorised but not contracted for (Note a) Contracted but not provided for (Note b) Contracted but not provided for Note a Authorised but not contracted for Analysis by business Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong Note b Contracted but not provided for Analysis by business Special Steel Iron Ore Mining Property Infrastructure Listed subsidiary companies CITIC 1616 Dah Chong Hong Others	Group 2007 2006 HK$ million HK$ million 254 17 27,338 4,359 Company 2007 2006 HK$ million HK$ million 557 2,015 2007 2006 HK$ million HK$ million 13 – 9 17 232 – 254 17 2007 2006 HK$ million HK$ million 1,904 289 19,476 139 4,229 3,786 1,672 62 8 24 13 32 36 27 27,338 4,359	Group 2007 2006 HK$ million HK$ million 254 17 27,338 4,359 Company 2007 2006 HK$ million HK$ million 557 2,015 2007 2006 HK$ million HK$ million 13 – 9 17 232 – 254 17 2007 2006 HK$ million HK$ million 1,904 289 19,476 139 4,229 3,786 1,672 62 8 24 13 32 36 27 27,338 4,359

		2006 HK$ million – 17 –
		17

		2006 HK$ million 289 139 3,786 62 24 32 27
		4,359

– I-59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32 OPERATING LEASE COMMITMENTS

The future aggregate minimum lease payments under non-cancellable operating leases at 31 December are as follows:

Group 2007 2006 HK$ million HK$ million	Group 2007 2006 HK$ million HK$ million	Group 2007 2006 HK$ million HK$ million	Group 2007 2006 HK$ million HK$ million
159 257 137	147 187 90	2 – –
553	424	2

21 46 11	38 65 27	– – –	– – –
78	130	–	–
631	554	2

33 CONTINGENT LIABILITIES

a The Company together with other beneficial shareholders of Western Harbour Tunnel Company Limited (“WHTCL”) have agreed jointly and severally to guarantee the Government of the Hong Kong Special Administrative Region that WHTCL will complete the Western Harbour Crossing (“Crossing”) within budget of approximately HK$7.5 billion including repair costs to be incurred after the operation date of the Crossing but before the issuance of the Maintenance Certificate. The Crossing was completed in April 1997 with total cost of approximately HK$6.8 billion, pending the issuance of the Maintenance Certificate.

The beneficial shareholders of WHTCL have agreed that in relation to any claim made or asserted under the aforesaid guarantee, as between themselves, the total of all liabilities in respect of a claim thereunder and of all costs, charges and expenses suffered or incurred by any of them resulting therefrom or attributable thereto shall be shared by them in proportion to their respective ultimate ownership in WHTCL.

b The Company has provided a guarantee on the US$450 million Guaranteed Notes issued by a wholly owned subsidiary of the Company.

– I-60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

c The Company has provided a guarantee on the JPY8.1 billion Guaranteed Floating Rate Notes issued by a wholly owned subsidiary of the Company.
d The Company has provided guarantees to support banking facilities of up to HK$393 million granted to a subsidiary of the Company.
e Hubei Xin Yegang Co. Ltd., a wholly owned subsidiary of the Company, has provided guarantees to support banking facilities of up to RMB150 million granted to another subsidiary of the Company, Hubei Xin Hua Neng.
f The Company has provided guarantees to support banking facilities of up to RMB193 million granted to a wholly owned subsidiary of the Company. These facilities were not utilized as at 31 December 2007.
g The Company has provided a guarantee to support a banking facility of RMB400 million granted to a subsidiary of the Company.
h The Company has provided guarantees to support bank guarantee/standby letter of credit facilities of up to approximately HK$750 million granted to a subsidiary of the Company.
i The Company has provided a guarantee to support banking facility of US$45 million granted to a wholly owned subsidiary of the Company.

34 APPROVAL OF ACCOUNTS

The accounts were approved by the Board of Directors on 17 March 2008.

– I-61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35 PRINCIPAL SUBSIDIARY COMPANIES, JOINTLY CONTROLLED ENTITIES AND ASSOCIATED COMPANIES

The following are the principal subsidiary companies, jointly controlled entities and associated companies of the Group which in the opinion of the directors, principally affect the results and net assets of the Group. To give full details of all companies would in the opinion of the directors result in particulars of excessive length.

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
Special Steel
Subsidiary companies
Daye Special Steel Co., Ltd.	People’s Republic of China	58.13	–	58.13	N/A	N/A	Steel making
	Sino-foreign joint stock limited
	company*
Hubei Xin Yegang Steel Co., Ltd.	People’s Republic of China	100	–	100	N/A	N/A	Steel making
(Formerly Hubei Xin Yegang	Sino-foreign equity joint
Co., Ltd.)	venture*
Jiangyin Xingcheng Special Steel	People’s Republic of China	79	–	79	N/A	N/A	Steel making
Works Co., Ltd.	Sino-foreign equity joint
	venture*
Jiangyin Xingcheng Steel	People’s Republic of China	80	–	80	N/A	N/A	Steel making
Products Co., Ltd.	Sino-foreign equity joint
	venture*
Jiangyin Xingcheng Storage and	People’s Republic of China	80	–	80	N/A	N/A	Loading and
Transportation Co., Ltd.	Sino-foreign equity joint						unloading
	venture*						business
Jiangsu CP Xingcheng Special	People’s Republic of China	77.78	–	77.78	N/A	N/A	Steel making
Steel Co., Ltd.	Sino-foreign equity joint
	venture*
Wuxi Xingcheng Steel Products	People’s Republic of China	80	–	80	N/A	N/A	Production and sale
Co., Ltd.	Sino-foreign equity joint						of ferrous metal
	venture*						materials
Silver Wings Enterprises Inc.	British Virgin Islands	75	–	75	100	US$ 1	Investment holding
江陰泰富興澄特種材料有限公司	People’s Republic of China	79	–	79	N/A	N/A	Production and sale
	Sino-foreign equity joint						of hot iron and the
	venture*						related products
湖北中特新化能科技有限公司	People’s Republic of China	100	–	100	N/A	N/A	Production and sale
	Wholly foreign-owned						of coal gas, coke
	enterprise*						and chemical
							related products

– I-62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
湖北新冶鋼特種鋼管有限公司	People’s Republic of China	100	–	100	N/A	N/A	Production of
	Wholly foreign-owned						seamless steel tube
	enterprise*
黄石中特國貿有限公司	People’s Republic of China	100	–	100	N/A	N/A	Investment holding
	Wholly foreign-owned
	enterprise*
Jointly controlled entities
Shijiazhuang Iron & Steel	People’s Republic of China	65	–	65	–	–	Production and sale
Co., Ltd.	Sino-foreign equity joint						of special steel and
	venture*						related products
Iron Ore Mining
Subsidiary companies
Bolein Corp.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Bright Treasure Assets Holdings	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Inc.
Burgeon Investments Ltd.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
CITIC Pacific Mining	Australia	100	–	100	1	N/A	Mining management
Management Pty Ltd
(Formerly CP Mining
Management Pty Limited)
Cobikin Corp.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Cosmos Light Holdings Corp.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Long Glory Assets Limited	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Master Champ Assets Ltd.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
MetaGas Pty Ltd	Australia	100	–	100	5,000,010	N/A	Gas procurement
							and trading
Palesto Holdings Inc.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Parmigan Corp.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Pastoral Management Pty Ltd	Australia	100	–	100	5,000,010	N/A	Pastoral lease
							management
Silver Bliss Enterprises Inc.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Sino Iron Pty Ltd	Australia	100	–	100	11,526	N/A	Mining extraction
							and processing of
							magnetite

– I-63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
Tridot Enterprises Inc.	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Winrich Investments Holdings	British Virgin Islands	100	–	100	1	US$1	Vessel owning
Ltd.
Property
Subsidiary companies
Admarch Limited	Hong Kong	100	–	100	2	HK$ 10	Property investment
Admarch Property Management	Hong Kong	100	–	100	2	HK$ 1	Property
Company, Limited							management
Borgia Limited	Hong Kong	100	–	100	2	HK$ 10	Property investment
Broadway Centre Property	Hong Kong	100	–	100	2	HK$ 1	Property
Management Company							management
Limited
CITIC Pacific (Yangzhou)	People’s Republic of China	100	–	100	N/A	N/A	Property
Properties Co., Ltd.	Wholly foreign-owned						development
	enterprise*
Famous Land Limited	Hong Kong	100	–	100	2	HK$ 1	Property investment
Glenridge Company Limited	Hong Kong	100	–	100	2	HK$ 10	Property investment
Hang Luen Chong Investment	Hong Kong	100	–	100	80,000	HK$ 100	Property investment
Company, Limited
Hang Luen Chong Property	Hong Kong	100	–	100	2	HK$ 1	Property
Management Company,							management
Limited
Hang Wah Chong Investment	Hong Kong	100	–	100	50,000	HK$ 100	Property investment
Company Limited
Lindenford Limited	Hong Kong	100	–	100	2	HK$ 10	Property investment
Linking Wisdom Ltd.	British Virgin Islands	100	–	100	1	US$1	Property
							development
Neostar Investment Limited	Hong Kong	100	–	100	2	HK$ 1	Property investment
Pacific Grace Limited	Hong Kong	100	–	100	2	HK$ 1	Property investment
Shanghai Super Property Co.,	People’s Republic of China	100	–	100	N/A	N/A	Property investment
Ltd.	Wholly foreign-owned						and management
	enterprise*
Tendo Limited	Hong Kong	100	–	100	2	HK$ 10	Property investment

– I-64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
上海中信泰富廣場有限公司	People’s Republic of China	100	–	100	N/A	N/A	Property investment
	Wholly foreign-owned						and management
	enterprise*
上海老西門新苑置業有限公司	People’s Republic of China	100	–	100	N/A	N/A	Property
	Sino-foreign co-operative						development
	joint venture*
上海珠街閣房地產開發有限公司	People’s Republic of China	100	71.59	28.41	N/A	N/A	Property
	Wholly foreign-owned						development
	enterprise*
上海利通置業有限公司	People’s Republic of China	90	85	5	N/A	N/A	Property
	Sino-foreign equity joint						development
	venture*
中信泰富（上海）物業管理有限公司	People’s Republic of China	100	–	100	N/A	N/A	Property
	Wholly foreign-owned						management
	enterprise*
中信泰富萬寧發展有限公司	People’s Republic of China	100	–	100	N/A	N/A	Property
	Wholly foreign-owned						development
	enterprise*
中信泰富萬寧（聯合）開發有限公司	People’s Republic of China	80	–	80	N/A	N/A	Property
	Limited liability company*						development
江陰興澄置業有限公司	People’s Republic of China	56	–	56	N/A	N/A	Property
	Sino-foreign equity joint						development
	venture*
無錫太湖景發展有限公司	People’s Republic of China	70	–	70	N/A	N/A	Sports related
	Sino-foreign equity joint						services
	venture*
無錫太湖苑置業有限公司	People’s Republic of China	70	–	70	N/A	N/A	Property investment
	Sino-foreign equity joint						and development
	venture*
無錫太湖美生態環保有限公司	People’s Republic of China	70	–	70	N/A	N/A	Environmental
	Sino-foreign equity joint						protection
	venture*
萬寧中意發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧中榮發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*

– I-65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
萬寧中宏發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧仁和發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧仁信發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧百納發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧金信發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧金誠發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
萬寧創遠發展有限公司	People’s Republic of China	99.9	–	99.9	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
寧波信富置業有限公司	People’s Republic of China	99.29	–	99.29	N/A	N/A	Property
	Sino-foreign co-operative joint						development
	venture*
Jointly controlled entities
上海瑞明置業有限公司	People’s Republic of China	50	50	–	–	–	Property
	Sino-foreign equity joint						development
	venture*
上海瑞博置業有限公司	People’s Republic of China	50	50	–	–	–	Property
	Sino-foreign equity joint						development
	venture*
中船置業有限公司	People’s Republic of China	50	50	–	–	–	Property
	Sino-foreign equity joint						development
	venture*
Associated companies
CITIC Tower Property	Hong Kong	40	–	40	–	–	Property
Management Company							management
Limited
Goldon Investment Limited	Hong Kong	40	–	40	–	–	Property investment

– I-66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
Hong Kong Resort Company	Hong Kong	50	–	50	–	–	Property
Limited‡							development
Kido Profits Limited	British Virgin Islands/	15	–	15	–	–	Property
	Hong Kong						development
Shinta Limited‡	Hong Kong	20	–	20	–	–	Property investment
Infrastructure
*Aviation*
Jointly controlled entities
Air China Cargo Co., Ltd.	People’s Republic of China	25	–	25	–	–	Operation of
	Sino-foreign equity joint						international and
	venture*						domestic air-cargo
							services and
							related ground
							services
Associated companies
Cathay Pacific Airways Limited	Hong Kong	17.46	1.82	15.64	–	–	Airlines and related
							services
Swire Aviation Limited	Hong Kong	33.3	–	33.3	–	–	Investment in Hong
							Kong Air Cargo
							Terminals Limited
							with 10% effective
							interest
*Power Generation*
Jointly controlled entities
Huaibei Guoan Power Company	People’s Republic of China	12.5	–	12.5	–	–	Building, possession
Ltd.	Sino-foreign equity joint						and operation of
	venture*						power plant and
							sale of electricity
Inner Mongolia Electric Power	People’s Republic of China	35	–	35	–	–	Coal-fired power
(Holdings) Company Limited	Sino-foreign equity joint						station operation
(Formerly known as Inner	venture*						and management
Mongolia Fengtai Electric
Power Generation Company
Limited)
Jiangsu Ligang Electric Power	People’s Republic of China	56.31	–	56.31	–	–	Electric power plant
Company Limited	Sino-foreign equity joint						construction and
	venture*						operation

– I-67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value		principal activities
		%	%	%
Jiangyin Ligang Electric Power	People’s Republic of China	54.31	–	54.31	1,170,000,000		RMB1	Electric power plant
Generation Company Limited	Foreign investment stock							construction and
	company*							operation
Kaifeng Xinli Power Generation	People’s Republic of China	50	–	50	–		–	Coal-fired power
Co., Ltd.‡	Sino-foreign equity joint							station operation
	venture*
Sunburst Energy Development	People’s Republic of China	65	–	65	–		–	Investment holding
Co., Ltd.	Sino-foreign equity joint
	venture*
Widewin Investments Limited‡	British Virgin Islands	37.5	–	37.5	–		–	Investment holding
Wuxi Taihu Lake Pumped	People’s Republic of China	70	–	70	–		–	Pumped storage
Storage Power Co., Ltd.	Sino-foreign equity joint							hydraulic power
	venture*							plant construction
Zhengzhou Xinli Electric Power	People’s Republic of China	50	–	50	–		–	Electric power plant
Co., Ltd.	Sino-foreign equity joint							construction and
	venture*							operation
江陰利電能源材料有限公司	People’s Republic of China	54.31	–	54.31	–		–	Coal related
	Sino-foreign equity joint							businesses and
	venture*							provision of
								maintenance and
								technical services
								for electrical
								appliances
Associated companies
North United Power	People’s Republic of China	20	20	–	–		–	Investment holding
Corporation	Sino-foreign equity joint							and generation of
	venture*							electricity and heat
								and related
								businesses
*Tunnels*
Subsidiary companies
New Hong Kong Tunnel	Hong Kong	70.8	–	70.8	75,000,000		HK$10	Tunnel operation
Company Limited
Jointly controlled entities
Eastern Harbour Crossing	Hong Kong	50	–	50	–		–	Tunnel operation
Company Limited‡

– I-68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
Hong Kong Transport, Logistics	Hong Kong	35	–	35	–	–	Management,
and Management Company							operation and
Limited							maintenance of the
							Cross-Harbour
							Tunnel
Western Harbour Tunnel	Hong Kong	35	–	35	–	–	Franchise to
Company Limited‡							construct and
							operate the
							Western Harbour
							Crossing
*Environmental*
Jointly controlled entities
Changzhou CGE Water Co., Ltd.	People’s Republic of China	24.01	–	24.01	–	–	Production and
	Sino-foreign equity joint						supply of tap
	venture*						water
Ecoserve Limited	Hong Kong	50	–	50	–	–	Design, construction
							and operation of
							refuse transfer
							station
Bloom Country Limited	Hong Kong	50	–	50	–	–	Investment holding
Veolia Water (Kunming)	Hong Kong	25	–	25	–	–	Investment holding
Investment Limited
Associated companies
Enviropace Limited	Hong Kong	20	–	20	–	–	Design, construction,
							operation and
							management of
							chemical waste
							treatment plant
Green Valley Landfill, Limited	Hong Kong	30	–	30	–	–	Landfill construction
							and operation
South China Transfer Limited	Hong Kong	30	–	30	–	–	Design, construction
							and operation of
							transfer station
上海老港生活垃圾處置有限公司	People’s Republic of China	30	–	30	–	–	Design, construction
	Sino-foreign equity joint						and operation of
	venture*						landfill

– I-69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity		particulars of	particulars of
	principal place of operation	attributable	shares held by			issued shares†
name	kind of legal entity*	to the group	company	subsidiary		no. of shares	par value	principal activities
		%	%		%
*Others*
Subsidiary companies
CITIC Pacific Communications	Bermuda	100	–		100	100,000	HK$1	Investment holding
Limited
廣州市泰富信通技術有限公司	People’s Republic of China	100	–		100	N/A	N/A	Provision of internet
	Wholly foreign-owned							value added
	enterprise*							services
Jointly controlled entities
CITIC Guoan Co., Ltd.	People’s Republic of China	50	–		50	–	–	Investment holding
	Sino-foreign equity joint
	venture*
Associated companies
Companhia de	Macau	20	20		–	–	–	Telecommunications
Telecomunicacoes de								services
Macau S.A.R.L.
Listed Subsidiary Companies
CITIC 1616 Holdings Limited	Hong Kong	52.56	–		52.56	1,978,066,283	HK$0.10	Investment holding
(Listed in Hong Kong)§
Dah Chong Hong Holdings	Hong Kong	56.6	–		56.6	1,800,000,000	HK$0.15	Investment holding
Limited (Listed in
Hong Kong)§
Others
Subsidiary companies
CITIC Pacific China Holdings	People’s Republic of China	100	–		100	N/A	N/A	Investment holding
Limited	Wholly foreign-owned
	enterprise*
CITIC Pacific Finance (2001)	British Virgin Islands	100	100		–	1,000	US$ 1	Financing
Limited
CITIC Pacific Finance (2005)	British Virgin Islands	100	100		–	1	US$ 1	Financing
Limited
Dah Chong Hong (Engineering)	Hong Kong	100	–		100	951,000	HK$ 100	Engineering services
Limited
Idealand Investment Inc.	Republic of Panama	100	–		100	100	US$ 1	Financing

– I-70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	place of incorporation/		interest in equity	interest in equity	particulars of	particulars of
	principal place of operation	attributable	shares held by		issued shares†
name	kind of legal entity*	to the group	company	subsidiary	no. of shares	par value	principal activities
		%	%	%
Jointly controlled entities
CITIC Capital Holdings Limited	Hong Kong	50	–	50	–	–	Investment holding
上海國睿生命科技有限公司	People’s Republic of China	24.94	24.94	–	–	–	Research and
	Sino-foreign equity joint						development of
	venture*						tissue engineering
							products
Associated companies
Cheer First Limited‡	Hong Kong	40	–	40	–	–	Financing
Jiangsu Wal-Mart Stores Co.,	People’s Republic of China	35	–	35	–	–	Hypermarket
Ltd.	Wholly foreign-owned						business
	enterprise*
Treasure Trove Limited	Hong Kong	50	–	50	–	–	Financing
Wal-Mart East China Stores Co.,	People’s Republic of China	35	–	35	–	–	Hypermarket
Ltd.	Wholly foreign-owned						business
	enterprise*

Note:

† Represented ordinary shares, unless otherwise stated.

‡ The above companies are the affiliated companies have been given to financial assistance and guarantees given for facilities granted by the Company and/ or its subsidiary company as at 31 December 2007.

§ Subsidiaries being separately listed on the main board of the Hong Kong Stock Exchange and including their respective group companies.

– I-71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

F. UNAUDITED INTERIM FINANCIAL REPORT

The information set out below is extracted from the interim report of CITIC Pacific for the six months ended 30 June 2008.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

for the six months ended 30 June – unaudited

Note Turnover 2 Cost of Sales Distribution and Selling Expenses Other Operating Expenses Net Gain from Sale of Other Financial Assets Change in Fair Value of Investment Properties Profit from Consolidated Activities 3 Share of Results of Jointly Controlled Entities Associated Companies Finance Charges Finance Income Net Finance Income/(Charges) 4 Profit before Taxation Taxation 5 Profit for the Period Attributable to: Shareholders of the Company Minority Interests Dividends Dividend Proposed 6 Earnings per Share for Profit attributable to Shareholders of the Company during the Period (HK$) 7 Basic Diluted Dividend per Share (HK$) Interim Special		2008 HK$ million 28,318 (22,942) (512) (1,441) 843 410	2007 HK$ million 19,618 (13,973) (438) (1,433) – 355 4,129 652 708 (126) 119 (7) 5,482 (174) 5,308 4,968 340 5,308 (1,325) 2.25 2.25 0.40 0.20
		4,676 641 43	4,129 652 708
		(189) 272	(126 119
		83 5,443 (496)	(7
			5,482 (174
		4,947
		4,377 570	4,968 340
		4,947 (658) 1.99 1.99 0.30 –

– I-72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

Note Non-Current Assets Fixed Assets Property, plant and equipment Investment properties Properties under development Leasehold land Jointly controlled entities Associated companies Other financial assets Intangible assets Deferred tax assets Derivative financial instruments Non-current deposits Current Assets Properties held for sale Assets held for sale Inventories Debtors, accounts receivable, deposits and prepayments 8 Cash and bank deposits Current Liabilities Bank loans, other loans and overdrafts Secured Unsecured Creditors, accounts payable, deposits and accruals 8 Liabilities held for sale Provision for taxation Net Current Assets Total Assets Less Current Liabilities
		37,438 21,338 17,515 4,045 5,871 91 225 7,641 94,164	28,978 17,446 17,941 7,502 5,109 100 150 5,723
			82,949
		430 192 6,843 11,895 10,695	440 1,127 5,982 8,292 8,045
		30,055	23,886
		395 4,467 12,376 – 674	328 3,326 10,727 2 590
		17,912 12,143 106,307	14,973
			8,913
			91,862

– I-73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Non-Current Liabilities Long term borrowings Deferred tax liabilities Derivative financial instruments Net Assets EQUITY Share capital Reserves Proposed dividend Equity attributable to Shareholders of the Company Minority Interests Total Equity		Unaudited 30 June 2008 As Restated 31 December 2007 HK$ million HK$ million 37,044 25,000 2,216 2,094 310 69 39,570 27,163 66,737 64,699 878 885 59,524 57,138 658 1,770 61,060 59,793 5,677 4,906 66,737 64,699
		37,044 2,216 310
		39,570 66,737 878 59,524 658 61,060 5,677 66,737

– I-74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June – unaudited

Cash Flows from Consolidated Activities Profit from Consolidated Activities after Net Finance Income/(Charges) Net finance charges Income from other financial assets Depreciation and amortisation Impairment losses Net gain from sale of other financial assets Provision for loan to associated companies Loss on disposal of property, plant and equipment Change in fair value of investment properties Fair value gains on derivative financial instruments Profit on disposal of interests in subsidiary companies (Profit)/loss on disposal of jointly controlled entities and associated companies Operating Profit before Working Capital Changes Increase in inventories Increase in debtors, accounts receivable, deposits and prepayments Increase/(decrease) in creditors, accounts payable, deposits and accruals Effect of foreign exchange rate changes Cash from/(used in) Consolidated Activities Interest received Interest paid Income taxes paid Net Cash from/(used in) Consolidated Activities	2008 HK$ million 4,759 49 (93) 508 35 (843) – 6 (410) (130) (170) (403)	2007 HK$ million 4,122 40 (29) 576 79 – 2 55 (355) (66) (1,928) 135 2,631 (510) (2,337) (61) (28) (305) 119 (445) (202) (833)
	3,308 (557) (2,567) 1,507 108 1,799 202 (698) (332)	2,631 (510 (2,337 (61 (28
		(305 119 (445 (202
	971

– I-75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2008 2007 HK$ million HK$ million

Cash Flows from Investing Activities Purchase of subsidiary companies Purchase of additional interests in a subsidiary company Purchase of property, plant and equipment Purchase of properties under development Purchase of leasehold land Purchase of intangible assets Investment in jointly controlled entities and associated companies Increase in other financial assets Increase in non-current deposits Proceeds on disposal of property, plant and equipment Proceeds on sale of other financial assets Proceeds on disposal of jointly controlled entities Proceeds on disposal of interests in subsidiary companies Issue of a subsidiary’s shares (Increase)/decrease in loans to jointly controlled entities Decrease in loans to associated companies Dividend income from jointly controlled entities and associated companies Income from other financial assets Net Cash (used in)/from Investing Activities Cash Flows from Financing Activities Repurchases of shares Issues of shares pursuant to the Plan New borrowings Repayment of loans Decrease in minority interests Dividends paid Net Cash from Financing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at 1 January Effect of Foreign Exchange Rate Changes Cash and Cash Equivalents at 30 June Analysis of the Balances of Cash and Cash Equivalents Cash and bank deposits Bank overdrafts
		(38) (2) (5,036) (1,743) (33) (597) (2,507) (393) (2,348) 89 1,786 916 526 – (583) 356 547 79
		(8,981)
		(631) 8 16,829 (3,983) (97) (1,757)
		10,369
		2,359 8,017 264	396 3,634 45
		10,640
		10,695 (55)	4,135 (60
		10,640

– I-76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June – unaudited

At 1 January Attributable to: Equity shareholders of the Company Minority interests Share of Reserves of Associated Companies Fair value gain on other financial assets Loss on cash flow hedge of financial instruments Retained profits Share of capital redemption reserve Share of capital reserve Share of exchange translation differences Share of Reserves of Jointly Controlled Entities Fair value gain on other financial assets (Loss)/gain on cash flow hedge of financial instruments Share of capital reserve Share of exchange translation differences Reserve Released on Disposal of Jointly Controlled Entities Gain on Cash Flow Hedge of Financial Instruments Fair Value (Loss)/Gain on Other Financial Assets Transfer to Profit and Loss Account on Disposal of Other Financial Assets Exchange Translation Differences Net (Loss)/Income Recognised in Equity Profit for the Period Attributable to: Equity shareholders of the Company Minority interests Total Recognised Income for the Period *Attributable to:* *Equity Shareholders of the Company* *Minority Interests* Dividend to Shareholders of the Company Minority Interests Repurchase of Shares Share Options Exercised Premium received Share capital issued At 30 June		2008 HK$ million 59,793 4,906	2008 HK$ million 59,793 4,906
		38 (17) (26) – 10 77 7 (7) 64 50 (72) 20 (1,444) (1,453) 2,211
		(542) 4,377 570
		4,405 3,647 758 4,405 (1,757) 13 (631) 8 –	7,186 6,802 384
			7,186
			(2,429 796 – 252 6
		66,737

– I-77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE ACCOUNTS

1 SIGNIFICANT ACCOUNTING POLICIES

These condensed unaudited consolidated interim accounts (‘the Accounts’) are prepared in accordance with Hong Kong Accounting Standard (‘HKAS’) 34 ’Interim Financial Reporting’ issued by the Hong Kong Institute of Certified Public Accountants and Appendix 16 to the Listing Rules of The Stock Exchange of Hong Kong Limited.

The accounting policies used in preparation of the Accounts are consistent with those adopted in the annual accounts for the year ended 31 December 2007 and with the adoption of certain new or revised Hong Kong Financial Reporting Standards, (‘HKFRS’) and HKAS in 2008 among which the following will have below impact to the Group:

HK(IFRIC)-Int 12 ‘Service Concession Arrangements’

In accordance with HK(IFRIC)-Int 12, the vehicular tunnel is regarded as a service concession arrangement. As such, the Group has recognised the vehicular tunnel as an intangible asset instead of property, plant and equipment under fixed assets with retrospective effect from 1 January 2007. The carrying amount as at 1 January 2007 of HK$1,102 million has also been restated.

The adoption of the above accounting standard has no effect on the Group’s results reported for the period ended 30 June 2008.

2 TURNOVER AND SEGMENT INFORMATION

An analysis of the Group’s turnover and profit from consolidated activities and share of results of jointly controlled entities and associated companies by business is as follows:

Six months ended 30 June 2008 By principal activities Special Steel Property Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong Others Change in Fair Value of Investment Properties _Less:_General and Administration Expenses Net Finance Income Taxation Profit for the Period	Turnover HK$ million 15,212 901 1,289 1,128 9,631 157 – – 28,318	Profit from consolidated activities HK$ million 1,846 477 680 178 449 919 410 (283) 4,676	Share of results of jointly controlled entities HK$ million 405 (9) 141 – 29 75 – – 641	Share of results of associated companies HK$ million – (5) (65) – (29) (18) 160 – 43	Group total HK$ million 2,251 463 756 178 449 976 570 (283) 5,360	Segment allocations HK$ million – 46 – – (46) – – – –	Segment allocations HK$ million – 46 – – (46) – – – –
							83 (496

– I-78 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Six months ended 30 June 2007 By principal activities Special Steel Property Infrastructure Listed Subsidiary Companies CITIC 1616 Dah Chong Hong Others Change in Fair Value of Investment Properties _Less:_General and Administration Expenses Net Finance Charges Taxation Profit for the Period	Turnover HK$ million 8,737 371 595 2,831 7,062 22 – – 19,618	Profit from consolidated activities HK$ million 1,274 293 113 2,039 272 21 355 (238) 4,129	Share of results of jointly controlled entities HK$ million 227 (11) 260 – 22 154 – – 652	Share of results of associated companies HK$ million – 46 569 – 2 (25) 116 – 708	Group total HK$ million 1,501 328 942 2,039 296 150 471 (238) 5,489	Segment allocations HK$ million – 42 – – (42) – – – –	Segment allocations HK$ million – 42 – – (42) – – – –
							(7 (174

An analysis of the Group’s turnover by geographical area is as follows:

By geographical area Hong Kong Mainland China Overseas	Six months ended 30 June 2008 2007 HK$ million HK$ million 6,052 6,326 21,177 12,410 1,089 882 28,318 19,618	Six months ended 30 June 2008 2007 HK$ million HK$ million 6,052 6,326 21,177 12,410 1,089 882 28,318 19,618
		19,618

– I-79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3 PROFIT FROM CONSOLIDATED ACTIVITIES

The profit from consolidated activities is arrived at after crediting and charging:

	Six months ended	Six months ended
	30	June
		As restated
	2008	2007
	HK$ million	HK$ million
Crediting
Dividend income from other financial assets	93	29
Profit on disposal of subsidiary company	170	1,928
Profit on disposal of jointly controlled entity	403	–
Charging
Cost of inventories sold	20,738	12,803
Depreciation of property, plant and equipment	432	500
Amortisation of intangible assets	51	49
Amortisation of leasehold land	25	24
Impairment losses on other financial assets	21	1
Impairment losses on fixed assets	14	72

NET FINANCE (INCOME)/CHARGES

Finance charges Interest expenses Amount capitalised Fair value gains on derivative financial instruments Exchange (gain)/loss Other finance charges Finance income Interest income	Six months ended 30 June 2008 2007 HK$ million HK$ million 709 421 (388) (262) (130) (66) (30) 10 28 23 189 126 (272) (119) (83) 7	Six months ended 30 June 2008 2007 HK$ million HK$ million 709 421 (388) (262) (130) (66) (30) 10 28 23 189 126 (272) (119) (83) 7
		126 (119)
		7

– I-80 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5 TAXATION

Hong Kong profits tax is calculated at 16.5% (2007: 17.5%) on the estimated assessable profit for the period. Overseas taxation is calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates. Tax provisions are reviewed regularly to take into account changes in legislation, practice and status of negotiations. Details as follows:

Current taxation Hong Kong profits tax Overseas taxation Deferred taxation Changes in fair value of investment properties Origination and reversal of other temporary differences Effect on tax rate change	Six months ended 30 June 2008 2007 HK$ million HK$ million 114 104 367 207 76 55 (29) (15) (32) (177) 496 174	Six months ended 30 June 2008 2007 HK$ million HK$ million 114 104 367 207 76 55 (29) (15) (32) (177) 496 174
		174

6 DIVIDENDS

2007 Final dividend paid: HK$0.80 (2006: HK$0.80) per share 2007 Special dividend paid: Nil (2006: HK$0.30) per share 2008 Interim dividend proposed: HK$0.30 (2007: HK$0.40) per share 2008 Special dividend proposed: Nil (2007: HK$0.20) per share	Six months ended 30 June 2008 2007 HK$ million HK$ million 1,757 1,767 – 662 1,757 2,429 658 883 – 442 658 1,325	Six months ended 30 June 2008 2007 HK$ million HK$ million 1,757 1,767 – 662 1,757 2,429 658 883 – 442 658 1,325
		2,429

		883 442
		1,325

7 EARNINGS PER SHARE

The calculation of earnings per share is based on profit attributable to shareholders of HK$4,377 million (2007: HK$4,968 million).

The basic earnings per share is based on the weighted average number of 2,198,430,092 shares in issue during the period (2007: 2,203,437,210 shares in issue). The diluted earnings per share is based on 2,203,728,977 shares (2007: 2,208,527,391 shares) which is the weighted average number of shares in issue during the period plus the weighted average number of 5,298,885 shares (2007: 5,090,181 shares) deemed to be issued at no consideration if all outstanding options had been exercised.

– I-81 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8.1 DEBTORS, ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

Trade debtors and bills receivable Within 1 year Over 1 year Accounts receivable, deposits and prepayments	30 June 2008 31 December 2007 HK$ million HK$ million 5,811 4,248 54 42 5,865 4,290 6,030 4,002 11,895 8,292	30 June 2008 31 December 2007 HK$ million HK$ million 5,811 4,248 54 42 5,865 4,290 6,030 4,002 11,895 8,292
		4,290 4,002
		8,292

Note:

i) Trade debtors are net of provision and the ageing is classified based on invoice date.
ii) Each business unit has a defined credit policy appropriate to its circumstances.
iii) The carrying amounts of debtors, accounts receivable, deposits and prepayments approximate their fair value.
iv) Accounts receivable, deposits and prepayments include derivative financial assets of HK$580 million (2007: HK$251 million), amounts due from jointly controlled entities of HK$143 million (2007: HK$138 million), which are unsecured, interest free and recoverable on demand, except for an amount of HK$5 million (2007: HK$1 million) which is interest bearing, and amounts due from associated companies of HK$200 million (2007: HK$90 million) which are unsecured, interest free and recoverable on demand.

8.2 CREDITORS, ACCOUNTS PAYABLE, DEPOSITS AND ACCRUALS

Trade creditors and bills payable Within 1 year Over 1 year Accounts payable, deposits and accruals	30 June 2008 31 December 2007 HK$ million HK$ million 4,803 4,532 587 329 5,390 4,861 6,986 5,866 12,376 10,727	30 June 2008 31 December 2007 HK$ million HK$ million 4,803 4,532 587 329 5,390 4,861 6,986 5,866 12,376 10,727
		4,861 5,866
		10,727

Note:

i) Accounts payable, deposits and accruals included derivative financial liabilities of HK$29 million (2007: HK$66 million).
ii) The carrying amounts of creditors, accounts payable, deposits and accruals approximate their fair value.

– I-82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

G. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Liquidity and Financial Resources

Group Debt and Liquidity

The financial position of the Group as at 30 June 2008, as compared to 31 December 2007 and 30 June 2007, is summarised as follows:

		31
	30 June	December	30 June
	2008	2007	2007
	HK$ million	HK$ million	HK$ million
Total debt	41,906	28,654	21,975
Cash and bank deposits	10,695	8,045	4,135
Net debt	31,211	20,609	17,840

Total debt increased mainly due to capital expenditure and new investments relating to the Group’s core businesses in the first half of 2008.

The denomination of the Group’s borrowings as well as cash and deposit balances by currency as at 30 June 2008 is summarised as follows:

			denomination	denomination
HK$ million equivalent	HK$	US$	RMB	Yen	other	total
Total debt in original
currency	9,411	23,955	7,198	1,231	111	41,906
Total debt after hedging	16,806	16,982	7,198	809	111	41,906
Cash and bank deposits	1,357	3,042	5,539	135	622	10,695
Net debt/(cash) after
hedging	15,449	13,940	1,659	674	(511)	31,211

– I-83 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Leverage

Net debt divided by total capital was 34% as at 30 June 2008 compared with 26% at the end of 2007.

==> picture [231 x 194] intentionally omitted <==

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

HK$
billion
100
80
60
40 34%
32%
25% 24% 26%
20 12%
03 04 05 06 07 6/08
Total Capital Net Debt/Total Capital %
Net Debt
----- End of picture text -----

Maturity Profile of Outstanding Debt

The Group actively manages its debt portfolio and aims to extend the debt maturity profile such that the maturing debt each year will not exceed the anticipated cash flow and the Group’s ability to refinance the debt in that year. As at 30 June 2008, outstanding loans that will mature as at the end of 2008 amounted to HK$2.0 billion, against a cash and deposits balance totalling HK$10.7 billion. Weighted average life of the Group’s debt was 5.8 years (31 December 2007: 6.0 years).

						2013
						and		Per-
	2008	2009	2010	2011	2012	beyond	Total	centage
	HK$	HK$	HK$	HK$	HK$	HK$	HK$
	million	million	million	million	million	million	million
Parent Company	3	2,9661	2,917	5,1742	7,550	11,5963	30,206	72%
Subsidiaries	2,044	1,314	2,393	3,592	543	1,814	11,700	28%
Total Maturing Debt	2,047	4,280	5,310	8,766	8,093	13,410	41,906	100%

Includes a US$270 million short term bridging loan in connection with the Iron Ore Mining project which will be replaced by long term project loan.
Includes a US$450 million global bond due in 2011 which was issued by a wholly owned special purposes vehicle.
Includes a JPY8.1 billion floating rate note due in 2035 which was issued by a wholly owned special purposes vehicle.

– I-84 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Available Sources of Financing

In addition to the cash and deposits balance of HK$10.7 billion as at 30 June 2008, the Group had available loan and trade facilities totalling HK$21.8 billion and HK$2.9 billion respectively. Borrowings by source of financing as at 30 June 2008 are summarised as follows:

Committed Facilities Short Term Loan Term Loans Global Bonds Private Placement Total Committed Uncommitted Facilities* Money Market Lines and Short Term Facilities Trade Facilities	Total facilities Outstandings HK$ million HK$ million 4,290 2,106 51,015 33,713 3,510 3,510 422 422 59,237 39,751 4,457 2,136 4,414 1,523	Available facilities HK$ million 2,184 17,302 0 0
		19,486

		2,321 2,891

* This is a USD short term bridging loan to support the funding requirement of the Iron Ore Mining project Phase II.

==> picture [369 x 162] intentionally omitted <==

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

Available Committed Facilities by Maturity Available Facilities by Type
(Total HK$19.5 billion) (Total HK$24.7 billion)
12%
HK$
billion
12.3 9%
9%
70%
3.5
2.7
1.0
As at 30 June 2008
08 09 10 to 12 13 and
beyond Long Term Loan Short Term Loan
As at 30 June 2008 Money Market Trade
----- End of picture text -----

In addition to the above facilities, the Company has established Cooperative Agreements with major banks in mainland China. Under these Cooperative Agreements, CITIC Pacific’s projects in mainland China can apply for credit facilities subject to the banks’ approval on project-by-project basis in accordance with banking regulations in the Mainland.

– I-85 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Set out on page I-1 is the information in relation to the indebtedness of the Group as at 31 October 2008.

Treasury Policy and Risk Management

General Policies

Maintain a high degree of financial control and transparency
Diversify funding sources
Centralise financing and cash management activities
Enhance risk management and ensure best utilisation of financial resources
Employ limited or non-recourse financing when appropriate

Risk Management

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 activity is prohibited. Counterparties’ credit risks are carefully reviewed, and the Group only deals with financial institutions with investment grade credit ratings. The amount of counterparties’ lending exposure to the Group is also an important consideration as a means to control credit risk.

Foreign Currency Exposure

CITIC Pacific conducts business mainly in Hong Kong, mainland China and Australia, therefore it is subject to the market risk of foreign exchange rates in HK Dollar, US Dollar, Renminbi and Australian Dollar. To minimise currency exposure, non HK 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. Due to limitations in financial markets and regulatory constraints in mainland China, CITIC Pacific has an increasing exposure to the Renminbi. As at 30 June 2008, the Group had net RMB exposure of approximately HK$59 billion (31 December 2007: HK$46 billion) as investments in mainland China expand.

The functional currency for the Australian Iron Ore Mining project is deemed to be USD as future revenue and cash flow will be denominated in USD. As such, CITIC Pacific funded the Iron Ore Mining project development costs and the acquisition of vessels related to the mining operations by USD loans to match the future USD cash flows derived from these assets. A portion of the Iron Ore Mining project development costs as well as certain pre-completion expenditures required paying in non-USD currencies. Foreign exchange forward contracts and structured forward instruments are employed to hedge or minimise these currency exposures.

– I-86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 30 June 2008, outstanding foreign exchange forward contracts and structured forward instruments amounted to HK$3.9 billion (31 December 2007: HK$3.5 billion).

In addition, foreign exchange forward contracts are employed to minimise currency exposure for the outstanding USD debts and a Yen bond. As at 30 June 2008, such contracts outstanding amounted to HK$7,913 million (31 December 2007: HK$5,853 million).

Foreign exchange forward contracts and structured forward instruments were also employed by the Group’s trading subsidiaries to hedge currency fluctuations. As at 30 June 2008, such contracts outstanding amounted to HK$804 million (31 December 2007: HK$968 million).

There have been significant changes in CITIC Pacific’s foreign exchange exposure since 30 June 2008. Subsequently, and with the intention of minimizing the currency exposure of the Australian iron ore mining project, the Group entered into a number of additional leveraged foreign exchange contracts. Under these leveraged foreign exchange contracts the maximum delivery amount of foreign currency, particularly AUDs, receivable by the Group is significantly greater than the Group’s foreign currency requirement. To mitigate the loss this excess creates at current exchange rates, CITIC Pacific and CITIC Group have entered into a conditional Agreement including the issue of a Convertible Bond and Novation of some of the leveraged foreign exchange contracts. The remaining AUD leverage foreign exchange contracts match the AUD requirement of the Australian iron ore project, so CITIC Pacific intends to restructure them with a view to the contracts becoming eligible for hedge accounting.

In addition to the leverage foreign exchange contracts, the Group entered into dual currency target redemption forward contracts under which the maximum deliverable amount to the Group as at the Reference Date is AUD270.2 million or EUR149.2 million, deliverable in monthly instalments up to July 2010. The Group intends to terminate these dual currency target redemption forward contracts.

As for the RMB target redemption forward contracts, the maximum notional amount under such contracts as at the Reference Date is RMB5.7 billion. The amount payable in USD by CITIC Pacific under the remaining RMB target redemption forward contracts (which is the maximum actual exposure of the Group bearing in mind no physical delivery of RMB takes place) is calculated to be not more than USD42.3 million based on an exchange rate of USD : RMB6.83 as at the Reference Date and has a weighted average strike price of USD : RMB6.50. The RMB target redemption forward contracts will not be taken over by CITIC Group and the Group currently intends to retain the RMB target redemption forward contracts.

Further details of all foreign exchange contracts are set out in (i) CITIC Pacific’s announcement dated 20 October 2008; (ii) the Announcement and (iii) pages 10–14, 20–21, 25–26 of the Circular.

– I-87 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Interest Rate Exposure

The Group aims to maintain a suitable mixture of fixed and floating rate borrowing in order to stabilise interest costs against rate fluctuations. The interest rate hedging ratio is determined after taking consideration of factors including general market trends, the Group’s cash flow pattern and interest coverage ratio.

The Group uses interest rate swaps, forward rate agreements, interest rate option contracts and other instruments to hedge exposures or to modify the interest rate characteristics of its borrowings. As at 30 June 2008, CITIC Pacific had interest rate swap or swaption contracts with a notional amount of HK$29.1 billion, of which forward starting IRS contracts amounted to HK$16.7 billion.

The weighted average all-in cost of borrowing for the Group (including fees and hedging costs) for the six months ended 30 June 2008 was about 4.8%, compared with 5.4% for the same period last year.

Financing Activities

During the six months ended 30 June 2008, bilateral facilities totalling HK$4.0 billion were established or renewed at CITIC Pacific and subsidiary level. A 20-year US$1,343 million project finance loan was signed. In addition, a US$550 million bridge loan facility was established, which will be replaced by a long term project finance loan currently being arranged.

Segmental Information

The contributions made by major business segments in the first six months of 2008, compared with the same period of 2007, were:

	actual	actual
	6 months	ended		Increase/
	30 June 2008	30 June 2007		(decrease)
	HK$ million	_HK$ _	million	HK$ million
Special Steel	1,839		1,123	716
Property	453		446	7
Infrastructure	689		844	(155)
Listed Subsidiaries
CITIC 1616	83		2,020	(1,937)
Dah Chong Hong	151		187	(36)
Fair Value change of
Investment Properties	490		416	74
Net Gain from Sale of
Listed Shares	843		–	843

– I-88 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Comparing the contribution for the six months ended 30 June 2007:

Special Steel: Contribution increased by more than 60% due to the continuing good performance of the steel plants resulting from strong demand.
Property: Property leasing recorded good growth during the period but this was partly offset by the operating expenses of the development projects.
Infrastructure: Both Cathay Pacific and Power Generation suffered from the continuing high energy prices and incurred losses for the period. The decreased contribution from the aviation business was partially compensated by the profit on disposal of an interest in Air China Cargo. Contribution from tunnels in Hong Kong recorded a 15% growth.
CITIC 1616: Excluding the HK$1.9 billion profit in connection with the spin off of CITIC 1616 in 2007, contribution decreased by 10% due to the decreased shareholding following its separate listing. The profit of CITIC 1616 increased by 11% compared to the same period in 2007.
Dah Chong Hong: The profit of Dah Chong Hong increased by 37% compared to the same period in 2007. Contribution decreased by 19% due to the 43% reduction in shareholding upon the spin off of Dah Chong Hong in the second half of 2007.
Fair Value change of Investment Properties: The increase in fair value of investment properties as a result of a revaluation reflecting the current market conditions in both Hong Kong and mainland China.
Net Gain from Sale of Listed Shares: The amount represents the net gain from the disposal of listed shares in 2008.

– I-89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Contribution

==> picture [230 x 223] intentionally omitted <==

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

HK$
million
5,000
4,000
3,000
2,000
1,000
1-6/07 1-6/08
Special Steel Property
Infrastructure CITIC 1616
Dah Chong Hong Fair Value change of
Net Gain from Sale Investment Properties
of Listed Shares
----- End of picture text -----

Pages 25 and 26 of the Interim Report contain business segment information relating to turnover and profit before net finance charges and taxation for consolidated activities, jointly controlled entities and associated companies.

Geographical Distribution

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

==> picture [223 x 176] intentionally omitted <==

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

Contribution % Assets at Book Value %
07 08 07 08
For the six months ended 30 June as at as at
31 December 30 June
Hong Kong Mainland China Overseas
2
12
16
33
56
50
55
67 42 38 29
----- End of picture text -----

– I-90 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Employees

As at the end of June 2008, the total number of employees at CITIC Pacific reached another new high of 25,177 (2007: 23,989) as the Group continued its development and investment in mainland China and Australia. Employees working in Hong Kong increased to 4,135 (2007: 3,932). Mainland China has the largest number of employees and it has increased steadily to 20,491 (2007: 19,720). The other 551 (2007: 337) are employed in subsidiaries in Japan, Singapore, Canada and Australia.

Employee Compensation

CITIC Pacific aims to attract, retain and motivate employees who have the relevant skills, knowledge and competencies to develop, support and sustain the continued success of the Group. Employee’s cash remuneration typically comprises a base salary and variable compensation, mainly the form of a performance-linked discretionary bonus which is based on the Company’s results and, the individual’s performance as well as the unit’s performance. Senior management of the Group receives a substantially higher portion of their cash remuneration in discretionary performance bonus, reflecting their contribution to the business and the Group’s financial performance. The compensation strategy is to cultivate a pay-for-performance culture to incentivize and reward employee performance that will lead to a long-term enhancement of the overall caliber of the Group. The replacement of the Group’s many forms of guaranteed and fixed bonuses with performance-based variable compensation has been implemented effectively by having the top-performers adequately rewarded and under-performers properly addressed.

On an annual basis, the Group reviews the cash compensation and benefit programs provided for its employees to ensure that the total compensation is internally equitable, externally competitive, as well as in support of the Group’s business strategy. Towards this end, Group companies are largely in conformity with this policy.

The Remuneration Committee which comprises Independent Non-Executive Directors has been established to exercise the powers of the Board to determine and review the remuneration packages of individual executive directors and key executives, including salaries, bonuses, benefits in kind and the terms on which they participate in any share option or other plans considering factors such as salaries paid by comparable companies, time commitment and responsibilities of the directors and key executives, employment conditions elsewhere in the group and desirability of performance-based remuneration so as to align management incentives with shareholder interests.

Training & Development

CITIC Pacific is committed to providing a healthy organizational environment that is conducive to each individual’s development. Employees are encouraged to

– I-91 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

commit to continuous improvement by initiating their own learning and self-development plan with financial sponsorship by the Group. Seminars, courses by professional institutions and in-house training are also organized regularly to help employees improve job performance and prepare for future development. Where applicable, the Group arranges public institutions to conduct customized talks on specific subjects such as new legislative issues, work place safety and updates on new technology. With the ever growing cross-border business activities between Hong Kong and the mainland, the Group encourages and is actively promoting business integration, knowledge sharing and skills transfer between staff in the two territories.

CITIC Pacific fully supports investing in the training and development of our younger generation. The Group has implemented various management trainee and apprentice training programs. It also provides training opportunities to young school leavers and college students by participating in the Youth Pre-employment Training Programme held by the Labour Department and internship programmes of universities.

Share Option Plan Adopted by the Company

CITIC Pacific adopted the CITIC Pacific Share Incentive Plan 2000 (“the Plan”) on 31 May 2000. The major terms of the Plan are as follows:

The purpose of the Plan is to promote the interests of CITIC Pacific and its shareholders by (i) providing the participants with additional incentives to continue and increase their efforts in achieving success in the business of CITIC Pacific, and (ii) attracting and retaining the best available personnel to participate in the on-going business operation of CITIC Pacific.
The participants of the Plan are any director, executive or employee of CITIC Pacific or its subsidiaries as invited by the Board.
The maximum number of Shares over which options may be granted under the Plan shall not exceed 10% of (i) the issued share capital of CITIC Pacific from time to time or (ii) the issued share capital of CITIC Pacific as at the date of adopting the Plan, whichever is the lower.
The total number of shares issued and to be issued upon exercise of the options granted to each participant (including both exercised and outstanding options) in any 12-month period must not exceed 1% of the shares of CITIC Pacific in issue.
The exercise period of any option granted under the Plan must not be more than ten years commencing on the date of grant.

– I-92 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The acceptance of an offer of the grant of the option must be made within 28 days from the date of grant with a nonrefundable payment of HK$1.00 from the grantee.
The exercise price determined by the Board will be at least the higher of (i) the closing price of CITIC Pacific’s shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant; (ii) the average closing price of CITIC Pacific’s shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant and (iii) the nominal value of CITIC Pacific’s shares.
The Plan shall be valid and effective till 30 May 2010.

All options granted and accepted can be exercised in whole or in part within 5 years from the date of grant.

Charges on the assets of the Group

As at 30 June 2008, assets of HK$525 million (31 December 2007: HK$423 million) were pledged to secure banking facilities, mainly related to Dah Chong Hong’s overseas business and to a property subsidiary in mainland China. In addition, assets of the Iron Ore Mining project were pledged under the project finance arrangement.

Future Plans for material investments or capital assets and their expected sources of funding in the coming year

Capital Expenditure

In the first half of 2008, a total deposit of HK$1.5 billion was paid for the purchase of five vessels. The construction of the infrastructure for the Iron Ore Mining project in Australia is continuing and the acquisition of the second phase of the project has been completed in October 2008. The latest estimated capital expenditure for the first two phases is US$3.5 billion, of which approximately 75% has been committed. An additional amount of capital expenditure of approximately US$0.35 billion will be incurred in anticipation of the third phase of our project (for another one billion tonnes of magnetite resources). The Company is optimistic about the preliminary drilling results for the third phase. Exercise of options for the third to sixth phases of the project (each for one billion tonnes of magnetite resources totalling another four billion tonnes of iron ore on the same mine site) is dependent upon the reserves being proven.

The capital expenditure of special steel in the first half of 2008 mainly represented enhancement and construction of the production facilities at the Jiangyin Steel Plant.

The property development projects in mainland China, including the Shanghai Lu Jia Zui New Financial District Project, the Sichuanbeilu Station Project, Qingpu, Ningbo, Yangzhou, and Hainan Island are continuing.

– I-93 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Included in Infrastructure is the acquisition of a 30% interest in the Shangdong coal mine investment for HK$1.7 billion in the first half of 2008.

‘Others’ in 2008 includes investment in the listed shares of China Railway Construction. The Group also invested in the listed shares of Country Garden and China Molybdenum in 2007.

As at 30 June 2008, the Group’s contracted capital commitments were approximately HK$27 billion, related mainly to Iron Ore Mining, PRC Property and Special Steel.

The order by the Group of a total of 17 ships will guarantee a secure transportation of raw materials for the ordinary course of the Group’s special steel business and to secure transportation of coal for its power plants.

				Year ended
	6 months	ended		31 December
	30 June 2008	30 June 2007		2007
	HK$ million	_HK$ _	million	HK$ million
Iron Ore Mining	3,858		329	6,844
Property	2,779		2,660	4,525
Special Steel	3,800		184	1,442
Infrastructure	2,346		31	71
Listed Subsidiaries
CITIC 1616	57		29	62
Dah Chong Hong	189		96	323
Others	465		665	1,042

Gearing Ratio

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital (shareholders’ funds plus net debt).

As disclosed in CITIC Pacific’s 2008 interim report, the gearing ratio as at 30 June 2008 was 34%. The gearing ratio since 30 June 2008 is adversely affected as a result of losses incurred by the Group since then pursuant to the leveraged foreign exchange contracts.

Contingent Liabilities

Material Acquisitions and Disposals of Subsidiaries and Associated Companies

Save for the announcements and circulars published by CITIC Pacific, there were no material acquisitions and disposals of subsidiaries and associated companies of CITIC Pacific during the period from 1 January 2008 to 30 June 2008.

– I-94 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES AND PROFIT AND LOSS ACCOUNT OF THE GROUP

The following is an illustrative and unaudited pro forma statement of assets and liabilities and profit and loss account of the Group, which has been prepared on the basis set out in the notes below for the purpose of illustrating the effect of the issue of the Convertible Bond, the Novation (collectively, the “Transactions”) and the conversion of the Convertible Bond into 1,453,125,000 new Shares (the “Conversion”) as if they had taken place on 30 June 2008 for the pro forma statement of assets and liabilities and on 1 January 2008 for the pro forma profit and loss account.

This unaudited pro forma financial information has been prepared based on the following scenarios:

(a) there is no legal transfer of the Novation Contracts from the Group to CITIC Group upon Completion; and
(b) the Novation Contracts are legally transferred from the Group to CITIC Group upon Completion.

This unaudited pro forma financial information has been prepared for illustrative purpose only and because of its hypothetical nature, it may not give a true picture of the financial results and financial positions of the Group had the Transactions and the Conversion been completed as at 1 January 2008, 30 June 2008 or any future dates.

– II-1 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(I) Assuming no legal transfer of the Novation Contracts upon Completion

(a) Unaudited pro forma statement of assets and liabilities of the Group

Unaudited assets and liabilities of the Group as at 30 June 2008 Pro forma adjustments HK$ million HK$ million Note 2(a) HK$ million Note 2(b) HK$ million Note 2(c) 17,125 11,670 6,925 1,718	Unaudited pro forma adjusted assets and liabilities of the Group before Conversion Pro forma adjustment** HK$ million HK$ million Note 2(e) 17,125 11,670 6,925 1,718	Unaudited pro forma adjusted assets and liabilities of the Group after Conversion HK$ million 17,125 11,670 6,925 1,718
37,438 21,338 17,515 4,045 5,871 91 225 7,641 94,164 430 192 6,843 11,895 – 11,340 10,695 2,495 30,055	37,438 21,338 17,515 4,045 5,871 91 225 7,641 94,164 430 192 6,843 11,895 11,340 13,190 43,890	37,438 21,338 17,515 4,045 5,871 91 225 7,641
		94,164
		430 192 6,843 11,895 11,340 13,190
		43,890

see note 2(f) below

– II-2 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Current liabilities Bank loans, other loans and overdrafts Secured Unsecured	Unaudited assets and liabilities of the Group as at 30 June 2008 Pro forma adjustments HK$ million HK$ million Note 2(a) HK$ million Note 2(b) HK$ million Note 2(c) 395 4,467	Unaudited pro forma adjusted assets and liabilities of the Group before Conversion Pro forma adjustment** HK$ million HK$ million Note 2(e) 395 4,467	Unaudited pro forma adjusted assets and liabilities of the Group after Conversion HK$ million 395 4,467 – 12,376 – 11,340 674 29,252 14,638 108,802 37,044 2,216 310 39,570 69,232
Convertible bond	– 11,625*	11,625 (11,625)
Creditors, accounts payable, deposits and accruals Amount due to a shareholder Derivative financial instruments Provision for taxation Net current assets Total assets less current liabilities Non-current liabilities Long term borrowings Deferred tax liabilities Derivative financial instruments Net assets	12,376 – (9,130) 9,130 – 11,340 674	12,376 – 11,340 674
	17,912 12,143 106,307 37,044 2,216 310 39,570	40,877 3,013 97,177 37,044 2,216 310 39,570	29,252
			14,638
			108,802
			37,044 2,216 310
			39,570
	66,737	57,607

see note 2(f) below

– II-3 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(b) Unaudited pro forma profit and loss account of the Group

Turnover Cost of sales Distribution and selling expenses Other operating expenses Net gain from sale of other financial assets Fair value loss of derivative financial instruments Change in fair value of investment properties Profit/(loss) from consolidated activities Share of results of Jointly controlled entities Associated companies Finance charges Finance income Net finance income Profit/(loss) before taxation Taxation Profit/(loss) for the period Attributable to: Shareholders of the Company Minority interests Profit/(loss) for the period		Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410	Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410	Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410
		4,676 641 43 (189) 272 83 5,443 (496)		(6,664) 641 43
				(189) 272
				83 (5,897) (496)
		4,947
		4,377 (11,340) 570		(6,963 570
		4,947

– II-4 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(II) Assuming the Novation Contracts are legally transferred upon Completion

(a) Unaudited pro forma statement of assets and liabilities of the Group

Unaudited assets and liabilities of the Group as at 30 June 2008 Pro forma adjustments HK$ million HK$ million Note 2(a) HK$ million Note 2(b) HK$ million Note 2(d) 17,125 11,670 6,925 1,718	Unaudited pro forma adjusted assets and liabilities of the Group before Conversion Pro forma adjustment** HK$ million HK$ million Note 2(e) 17,125 11,670 6,925 1,718	Unaudited pro forma adjusted assets and liabilities of the Group after Conversion HK$ million 17,125 11,670 6,925 1,718
37,438 21,338 17,515 4,045 5,871 91 225 7,641 94,164 430 192 6,843 11,895 10,695 2,495 30,055	37,438 21,338 17,515 4,045 5,871 91 225 7,641 94,164 430 192 6,843 11,895 13,190 32,550	37,438 21,338 17,515 4,045 5,871 91 225 7,641
		94,164
		430 192 6,843 11,895 13,190
		32,550

see note 2(f) below

– II-5 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Current liabilities Bank loans, other loans and overdrafts Secured Unsecured	Unaudited assets and liabilities of the Group as at 30 June 2008 Pro forma adjustments HK$ million HK$ million Note 2(a) HK$ million Note 2(b) HK$ million Note 2(d) 395 4,467	Unaudited pro forma adjusted assets and liabilities of the Group before Conversion Pro forma adjustment** HK$ million HK$ million Note 2(e) 395 4,467	Unaudited pro forma adjusted assets and liabilities of the Group after Conversion HK$ million 395 4,467 – 12,376 – – 674 17,912 14,638 108,802 37,044 2,216 310 39,570 69,232
Convertible bond	– 11,625*	11,625 (11,625)
Creditors, accounts payable, deposits and accruals Amount due to a shareholder Derivative financial instruments Provision for taxation Net current assets Total assets less current liabilities Non-current liabilities Long term borrowings Deferred tax liabilities Derivative financial instruments Net assets	12,376 – (9,130) 9,130 – 11,340 (11,340) 674	12,376 – – 674
	17,912 12,143 106,307 37,044 2,216 310 39,570	29,537 3,013 97,177 37,044 2,216 310 39,570	17,912
			14,638
			108,802
			37,044 2,216 310
			39,570
	66,737	57,607

see note 2(f) below

– II-6 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(b) Unaudited pro forma profit and loss account of the Group

Turnover Cost of sales Distribution and selling expenses Other operating expenses Net gain from sale of other financial assets Fair value loss of derivative financial instruments Change in fair value of investment properties Profit/(loss) from consolidated activities Share of results of Jointly controlled entities Associated companies Finance charges Finance income Net finance income Profit/(loss) before taxation Taxation Profit/(loss) for the period Attributable to: Shareholders of the Company Minority interests Profit/(loss) for the period		Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410	Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410	Unaudited profit and loss account of the Group for the six months ended 30 June 2008 Pro forma adjustment HK$ million HK$ million Note 3(a) 28,318 (22,942) (512) (1,441) 843 – (11,340) 410
		4,676 641 43 (189) 272 83 5,443 (496)		(6,664) 641 43
				(189) 272
				83 (5,897) (496)
		4,947
		4,377 (11,340) 570		(6,963 570
		4,947

– II-7 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(c) Notes to unaudited pro forma financial information of the Group
1 The statement of assets and liabilities of the Group as at 30 June 2008 and the profit and loss account of the Group for the six months ended 30 June 2008 are extracted from the published interim report of the Company for the six months ended 30 June 2008.
2 For the purpose of the unaudited pro forma statement of assets and liabilities of the Group, the following pro forma adjustments have been made:
- (a) Recognition of the Novation Contracts as derivative liabilities amounting to HK$11.34 billion, being the mark-to-market loss under the Novation Contracts as at the Reference Date. In addition to the mark-to-market loss of the Novation Contracts, as at the Reference Date, the Group has recorded a realised loss amounting to HK$760 million arising from settlement and termination of a certain portion of the Novation Contracts with the counterparts since the inception of these Novation Contracts. As this is not the subject of the Circular, such realised loss is not reflected in this pro forma financial information.
- (b) Issue of the Convertible Bond to CITIC Group with an aggregate principal amount of HK$11.625 billion which is recognised as a current liability upon issue assuming the Whitewash Waiver is not granted by the Executive or is not approved by the Independent Shareholders and the Conversion would not have taken place on 30 June 2008 (see note 2(f) below for the case where such waiver and approval are obtained), and a corresponding decrease in amount due to CITIC Group by HK$9.13 billion arising from the transaction as mentioned in note 2(c) or (d) below, and an increase in cash and bank balances by HK$2,495 million, being the net balance to be received from CITIC Group.
- (c) Recognition of derivative assets amounting to HK$11.34 billion, being the mark-to-market loss under the Novation Contracts which CITIC Group has agreed to assume, and the consideration payable by the Group amounting to HK$9.13 billion. The difference between the assets and the liabilities recognised would be credited against the Group’s equity as part of the subscription price paid for the Shares to be issued as a result of the Convertible Bond.
- (d) De-recognition of derivative liabilities amounting to HK$11.34 billion, being the mark-to-market loss under the Novation Contracts which are legally transferred to CITIC Group, and the consideration payable by the Group amounting to HK$9.13 billion. The difference between derecognised liabilities and the consideration payable would be credited against the Group’s equity as part of the subscription price paid for the Shares to be issued as a result of the Convertible Bond.
- (e) Issue of 1,453,125,000 Shares upon the Conversion in the situation that the Whitewash Waiver is not granted by the Executive or is not approved by the Independent Shareholders and the Convertible Bond is only converted into Shares subsequently. This results in an increase in equity by HK$11.625 billion and de-recognition of the Convertible Bond previously recognised as current liabilities in note 2(b) above.

– II-8 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(f) In the situation that the Whitewash Waiver is granted by the Executive and approved by the Independent Shareholders then the Convertible Bond of HK$11.625 billion is converted automatically into Shares upon issue and credited directly to equity without having to be initially recognised as a liability. Therefore the pro forma adjustment as set out in note 2(e) above is not required and the pro forma adjustment as set out in note 2(b) above is amended so that the issue of the Convertible Bond does not create a liability of HK$11.625 billion. Other adjustments remain unchanged.
3 For the purpose of preparing the unaudited pro forma profit and loss account of the Group, the following pro forma adjustment has been made:
(a) Recognition of the mark-to-market loss under the Novation Contracts as at the Reference Date.

Interest expense to be accrued on the Convertible Bond issued to CITIC Group has not been presented as a pro forma adjustment as the Directors consider that such amount would not be significant for the purpose of this pro forma profit and loss account.

4 The final amounts of the mark-to-market loss under the Novation Contracts, consideration payable by the Group for the Novation Contracts and net balance payable by the CITIC Group for the subscription of the Convertible Bond upon completion may be different from those amounts presented above.
5 Other than the Novation Contracts, as at the Reference Date, the Group has also entered into other leveraged foreign exchange contracts as mentioned elsewhere in the Circular. The above pro forma adjustments have not taken into account the impact on the financial position and results of the Group arising from those other leveraged foreign exchange contracts.

In addition, except as mentioned above, no adjustments has been made to reflect the impact of the other transactions of the Group entered into subsequent to 30 June 2008.

– II-9 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. REPORT FROM THE REPORTING ACCOUNTANT

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ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF CITIC PACIFIC LIMITED

We report on the unaudited pro forma financial information set out on pages II-1 to II-9 under the heading of “Unaudited Pro Forma Statement of Assets and Liabilities and Profit and Loss Account of the Group” (the “Unaudited Pro Forma Financial Information”) in Appendix II of the circular dated 3 December 2008 (the “Circular”) of CITIC Pacific Limited (the “Company”), in connection with the proposed convertible bond issue and disposal involving certain leveraged foreign exchange contracts of the Company to be assumed by CITIC Group (the “Transactions”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Transactions might have affected the relevant financial information of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages II-1 to II-9 of the Circular.

Respective Responsibilities of Directors of the Company and the Reporting Accountant

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information,

– II-10 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

consisted primarily of comparing the unaudited assets and liabilities of the Group as at 30 June 2008 and unaudited profit and loss account of the Group for the six months ended 30 June 2008 with the unaudited interim financial report of the Company for the six months ended 30 June 2008, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Group as at 30 June 2008 or any future date, or
the results of the Group for the six months ended 30 June 2008 or any future periods.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 3 December 2008

– II-11 –

APPENDIX III

VALUATION REPORT

The following is the text of a letter, summary of values and valuation report, prepared for the purpose of incorporation in the Circular, received from Knight Frank Petty Limited, an independent qualified property valuer, in connection with its valuation as at 31 October 2008:

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Tel: 2840 1177 Fax: 2840 0600

3 December 2008

The Directors CITIC Pacific Limited 32nd Floor, CITIC Tower 1 Tim Mei Avenue Central Hong Kong

Dear Sirs

In accordance with your instructions for us to value various property interests held by CITIC Pacific Limited (“CITIC Pacific”) or its subsidiaries (hereinafter together referred to as the “CITIC Pacific Group”) and held by Dah Chong Hong Holdings Limited (“DCH”) or its subsidiaries (hereinafter together referred to as the “DCH Group”) in Hong Kong, Canada and Singapore, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of these property interests as at 31 October 2008 (“the date of valuation”) for the purpose of inclusion in a public circular.

BASIS OF VALUATION

Our valuation is our opinion of the “Market Value” which we would define as intended to mean the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special

– III-1 –

APPENDIX III

VALUATION REPORT

considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property was also estimated without regard to costs of sale or purchase, and without offset for any associated taxes.

VALUATION METHODOLOGIES

We have valued Property Nos 1 to 23 of Group 1 to Group 3 by reference to sales evidence as available on the market and where appropriate on the basis of capitalization of the net incomes shown on the documents handed to us by CITIC Pacific Group and DCH Group.

We have valued Property Nos 24 to 47 of Group 4 to Group 6 by using direct comparison approach whenever market comparable transactions are available and assumed sale of the properties with the benefit of vacant possession.

VALUATION ASSUMPTIONS

In addition to the basis of valuation as set out above, our valuation is subject to the following assumptions and limiting conditions.

Unexpired Government lease term

We have valued the property interests based on the unexpired term of their respective Government leases under which the property interests are held from the Government.

Inspection and Measurement

We have inspected the exterior and where possible, the interior of the properties valued. However, we have not carried out on-site measurement to verify the correctness of site areas and/or floor areas of the properties valued and assumed that the site areas and floor areas shown on the documents handed to us are correct.

Title Documents and Encumbrances

We have caused ownership search to be made at the Land Registry for the Hong Kong properties valued and have been provided with extracts of documents in respect of the title to the property interests in the overseas. We have not scrutinized the original documents to verify the ownership and encumbrances or to ascertain any amendment which may or may not appear on the copies handed to us. We have relied to a very considerable extent on the information given by the CITIC Pacific Group and DCH Group and assumed the information is correct.

No allowance has been made in our valuation for any compensation, charges, mortgages or amounts owing on the property interests valued nor for any expenses or taxation which might be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests valued were free from encumbrances, restrictions and outgoings of any onerous nature which could affect their market values.

– III-2 –

APPENDIX III

VALUATION REPORT

Whilst we have taken every care to investigate the title to the property interests valued, including examination of the copies of land grants provided by CITIC Pacific Group and DCH Group and land registers obtained from the Land Registry for Hong Kong properties, we do not accept a liability for any interpretation which we have placed on such information, that is more properly the sphere of the legal advisors.

Structural and Site Condition

We have not been instructed to undertake any structural surveys or to test the services of the properties valued. Our valuation has therefore been undertaken on the basis that the properties valued were all in satisfactory repair and condition with services functioning satisfactorily and is free of rot, infestation or any other structural defects. For the development site, we have not carried out site investigation to determine the suitability of the ground conditions and the services etc. for any future development. Our valuation is based on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

Contamination

We have not been instructed to arrange for any investigation to be carried out to determine whether any deleterious or hazardous material has been used in the construction of the properties valued and therefore assumed in our valuation that none of the said material was contained in the properties. However, should it be established subsequently that contamination exists at the properties or on any neighbouring land, or that the properties have been or are being put to any contaminative use, we reserve the right to adjust the values reported herein.

Source of Information

We have relied to a very considerable extent on the information provided by CITIC Pacific and have accepted advice given to us by CITIC Pacific Group and DCH Group on such matters as statutory notices, easements, tenure, particulars of occupancies, incomes, proposed developments, planning permissions, site and floor areas and all other relevant matters. We have caused searches to be made at the Land Registry in Hong Kong for those Hong Kong properties. However, we have not scrutinised the original documents to verify ownership or to verify any amendments to the documents. All documents and leases have been used as reference only and all dimensions, measurements and areas are only approximations.

We have not verified the information provided to us by CITIC Pacific Group or DCH Group and have assumed that they are correct. We have no reason to doubt the truth and accuracy of the information provided to us and/or their legal advisor which is material to the valuation. We were also advised by CITIC Pacific Group or DCH Group that no material facts have been omitted from the information provided.

Currency and Conversion Factor

Unless otherwise stated, all monetary terms quoted in this report are in Hong Kong Dollars (HK$). Where appropriate, the exchange rates we have adopted are HK$1 to S$0.1916 and HK$1 to CAD$0.1582 which were the prevailing exchange rates as at the date of valuation.

– III-3 –

APPENDIX III

VALUATION REPORT

Remarks

In preparing our valuation report, we have complied with “The HKIS Valuation Standards on Properties (First Edition 2005)” published by the Hong Kong Institute of Surveyors and all the requirements contained in the provision of Chapter 5 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.

As advised by the CITIC Pacific Group and the DCH Group, the potential tax liability which would arise on the disposal of the property interests held by the Group mainly includes Hong Kong profit tax (16.5%), Singapore income tax (18%) and Canadian corporate tax (30.5%). We were further being advised that except for the properties held for disposal by the CITIC Pacific Group, it is unlikely that such tax liability will be crystallized in the recent future as both the CITIC Pacific Group and the DCH Group have no intention to dispose of or transfer the relevant property interests. According to our standard practice, in the course of our valuation, we have neither verified nor taken into account such tax liability.

For property interests in Canada and Singapore, our valuations are with regard to the valuation works performed by our overseas company or alliance.

We enclose herewith our summary of values and valuation report.

Yours faithfully For and on behalf of Knight Frank Petty Limited Alex S L Ng MRICS MHKIS RPS(GP) Executive Director

Note: Alex S L Ng, MRICS, MHKIS, RPS(GP), has been a qualified valuer with Knight Frank Petty Limited since November 1995 and has 22 years’ experience in the valuation of properties in Hong Kong and has been involved in the valuation of properties in the People’s Republic of China and Asia Pacific regions since 1988.

– III-4 –

APPENDIX III

VALUATION REPORT

SUMMARY OF VALUES

Group 1 – Properties held for investments in Hong Kong Group 1A – Properties held for investments in Hong Kong by CITIC Pacific Group

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
1.	DCH Commercial Centre,	HK$1,980,000,000	100%	HK$1,980,000,000
	25 Westlands Road,
	Quarry Bay, Hong Kong
2.	Honest Motors Building,	HK$218,000,000	100%	HK$218,000,000
	9-11 Leighton Road,
	Causeway Bay, Hong Kong
3.	Shop B on Ground Floor,	HK$65,000,000	100%	HK$65,000,000
	China Insurance Group Building,
	141 Des Voeux Road Central,
	73 Connaught Road Central
	and 61-65 Gilman Street,
	Central, Hong Kong
4.	Apartments B on 10th, 15th,	HK$158,000,000	100%	HK$158,000,000
	16th and 17th Floors,
	Apartments C on 4th and 9th
	Floors, Car Parking Spaces
	Nos. 107, 137, 148 and 168 on
	1st Floor and 253 and 265 on 2nd
	Floor, South Bay Towers,
	59 South Bay Road,
	Island South, Hong Kong
5.	Skyway House formerly	HK$738,000,000	100%	HK$738,000,000
	known as Taikoktsui Centre
	(excluding a petrol filling
	station on the Ground Floor
	with an ancillary storage tank
	in part of the Basement and a
	storeroom on the 1st Floor),
	3 Sham Mong Road,
	Taikoktsui, Kowloon,
	Hong Kong

– III-5 –

APPENDIX III

VALUATION REPORT

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
6.	Unit B on 13th Floor of	HK$1,710,000	100%	HK$1,710,000
	311 Nathan Road,
	Hong Kiu Mansion,
	311-313 Nathan Road,
	Yaumatei, Kowloon,
	Hong Kong
7.	Workshops B and C on	HK$25,900,000	100%	HK$25,900,000
	1st Floor and Workshops
	A, B and C on 2nd Floor,
	Tai Chi Factory Building,
	25-29 Kok Cheung Street,
	Taikoktsui, Kowloon,
	Hong Kong
8.	Broadway Centre,	HK$376,000,000	100%	HK$376,000,000
	93 Kwai Fuk Road,
	Kwai Chung, New Territories,
	Hong Kong
9.	Block C of Yee Lim Industrial	HK$317,000,000	100%	HK$317,000,000
	Centre, 2-28 Kwai Lok Street
	and 2-6 Kwai Hei Street,
	Kwai Chung, New Territories,
	Hong Kong
10.	Wyler Centre 1,	HK$441,000,000	100%	HK$441,000,000
	Basements 1 and 2 in
	Basement and Parking Spaces
	Nos. P50 and P51 on 2nd
	Floor of Wyler Centre 2,
	192-210 Tai Lin Pai Road,
	Kwai Chung, New Territories,
	Hong Kong

– III-6 –

APPENDIX III

VALUATION REPORT

Property
Market value
in existing state
as at
31 October 2008
Interest
attributable to
the Group
11.
Factory Units Nos. 1 and 2
on Ground Floor including
the loading and unloading
platform, stores, Lorry
Parking Space No. 114 and
Container Parking Spaces
Nos. 112 and 113 on Ground Floor,
Tsuen Wan Industrial Centre,
220-248 Texaco Road,
Tsuen Wan, New Territories,
Hong Kong
HK$80,000,000
100%
12.
Commercial units and
272 car parking spaces
in the Car Parks,
Hang King Garden,
9 Wing Fong Road,
Kwai Chung, New Territories,
Hong Kong
HK$274,000,000
100%
Sub-total:

Market value
in existing state
attributable to
the Group as at
31 October 2008
HK$80,000,000
HK$274,000,000

HK$4,674,610,000

– III-7 –

APPENDIX III

VALUATION REPORT

Group 1B – Properties held for investments in Hong Kong by DCH Group

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
13.	Ground Floor of	HK$20,300,000	100%	HK$20,300,000
	115 Hennessy Road,
	Hip Sang Building,
	107-115 Hennessy Road, Wanchai,
	Hong Kong
14.	Ground Floor,	HK$80,000,000	100%	HK$80,000,000
	56 Percival Street,
	Causeway Bay, Hong Kong
15.	Shop No. G7 on Ground Floor and Car	HK$39,000,000	100%	HK$39,000,000
	Parking Spaces
	Nos LG123 and LG124 on
	Lower Ground Floor,
	Westlands Gardens, 1025-1037 King’s
	Road and 2-10, 12A-12H Westlands
	Road,
	Quarry Bay, Hong Kong
16.	Car Parking Space No 18 on Upper	HK$250,000	100%	HK$250,000
	Ground Floor,
	Kar Man Court,
	1-7 Kin Wah Street,
	North Point, Hong Kong
17.	Ground and Mezzanine Floors,	HK$85,000,000	100%	HK$85,000,000
	67 Sai Yeung Choi Street South,
	Mongkok, Kowloon, Hong Kong
18.	Ground Floor including its yard and	HK$158,000,000	100%	HK$158,000,000
	Cockloft of
	58 Sai Yeung Choi Street South
	and Shop 1 on Ground Floor,
	Cockloft and Flats A and B
	on 1st Floor of
	60 Sai Yeung Choi Street South,
	Mongkok, Kowloon, Hong Kong

– III-8 –

APPENDIX III

VALUATION REPORT

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
19.	Ground, 2nd, 3rd, 4th and	HK$6,900,000	100%	HK$6,900,000
	5th Floors, Front Portion,
	11 Mok Cheong Street,
	Tokwawan, Kowloon,
	Hong Kong
20.	Shops Nos. 1 and 2 on	HK$9,800,000	100%	HK$9,800,000
	Ground Floor, Siu Man Court,
	7, 7A and 9 Fort Street,
	North Point, Hong Kong
			Sub-total:	HK$399,250,000
Group 2 – Property held for development		in Hong Kong	by CITIC Pacific	Group
				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
21.	Lot Nos 392 and 393 in	HK$41,000,000	100%	HK$41,000,000
	Demarcation District
	No 127, Kiu Tau Wai,
	Yuen Long, New Territories,
	Hong Kong
			Sub-total:	HK$41,000,000

– III-9 –

APPENDIX III

VALUATION REPORT

Group 3 – Properties held for disposal in Hong Kong by CITIC Pacific Group

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
22.	Grand Court, Nos 109 -135	HK$950,000,000	100%	HK$950,000,000
	Kadoorie Avenue, Homantin,
	Kowloon, Hong Kong
23.	33 car parks within The Paragon,	HK$6,600,000	100%	HK$6,600,000
	No 9 Shan Yin Road, Tai Po,
	New Territories, Hong Kong
			Sub-total:	HK$956,600,000
Group 4 – Properties held as land bank in Hong Kong by CITIC Pacific				Group
				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
24.	The Remaining Portion of	HK$3,300,000	56.5%	HK$1,864,500
	Section B of Lot No 661 in
	Demarcation District No 181,
	Pak Tin, Shatin,
	New Territories, Hong Kong
25.	Lot No 1308RP, Lot No 1510RP,	HK$56,000,000	100%	HK$56,000,000
	Lot Nos 1511, 1513, 1514, 1515,
	1521, 1524, 3937 and 3938;
	all in Demarcation District
	No 124, San Sang San Tsuen,
	Yuen Long, New Territories,
	Hong Kong
26.	Lot Nos 472B, 469 and 496 in	HK$9,000,000	100%	HK$9,000,000
	Demarcation District No 131,
	Tsing Shan Tsuen, Tuen Mun,
	New Territories, Hong Kong

– III-10 –

APPENDIX III

VALUATION REPORT

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
27.	Lot Nos 129, 131, 132, 168, 180, 194,	HK$5,230,000	100%	HK$5,230,000
	211, 313, 370, 417, 433, 499, 507, 509,
	565, 570, 580, 582, 635, 654, 668, 710,
	711, 733, 742, 753, 757, 865, 902 and 908
	in Demarcation District No 275 and
	Lot Nos 134, 141, 143, 145, 146, 149,
	155, 159, 161, 479, 487, 499, 502, 516,
	662, 696, 712, 722, 728, 739, 740, 744,
	755, 763, 771, 775, 781, 784, 867, 890,
	933, 984, 991, 1046, 1074, 1079, 1277,
	1282, 1284, 1286, 1288, 1293, 1295, 1296
	and 1298 in Demarcation District
	No 276, Sai Kung, New Territories,
	Hong Kong
28.	Lot Nos 61, 63, 65, 67, 68, 70, 71, 74, 75,	HK$1,270,000	100%	HK$1,270,000
	77, 79, 80, 81, 82, 85, 87, 89, 91, 93, 94,
	95, 96, 98, 99 and 100 in Demarcation
	District No 339, Chi Ma Wan,
	Lantau Island, New Territories,
	Hong Kong
29.	Lot Nos 512 and 519 in Demarcation	HK$1,050,000	100%	HK$1,050,000
	District No 36, Cheung Shue Tan,
	Tai Po, New Territories,
	Hong Kong
30.	Lot Nos 2842A, 2846, 2851RP, 2852RP,	HK$16,800,000	60%	HK$10,080,000
	2943 in Demarcation District No 124,
	Yick Yuen Tsuen, Yuen Long,
	New Territories, Hong Kong
31.	Lot Nos 1, 3RP, 7, 9, 13, 15, 16, 17, 19,	HK$3,100,000	100%	HK$3,100,000
	21, 30, 33, 41, 48, 53, 55, 59, 64, 66, 73,
	75, 77RP, 79RP in Demarcation District
	No 338, Ngau Ku Wan, Lantau Island,
	New Territories, Hong Kong

– III-11 –

APPENDIX III

VALUATION REPORT

					Market value
		Market value			in existing state
		in existing state	Interest		attributable to
		as at	attributable to		the Group as at
	Property	31 October 2008	the	Group	31 October 2008
32.	Lot Nos 1478, 1522, 1530, 1538RP, 1548,	HK$4,600,000		100%	HK$4,600,000
	2273, 2351RP, 2379, 2380, 2396, 2444,
	2449 and 2451 in Demarcation District
	No 316, Pui O, Lantau Island,
	New Territories, Hong Kong
33.	The Remaining Portion of	HK$1,910,000		100%	HK$1,910,000
	Lot No 552 in Demarcation District
	No 3, Mui Wo, Lantau Island,
	New Territories, Hong Kong
34.	Lot Nos 213, 218, 221, 223, 229, 232,	HK$1,900,000		100%	HK$1,900,000
	237 and 240 in Demarcation District
	No 5, New Tung Chung Hang,
	Tung Chung, Lantau Island,
	New Territories, Hong Kong
			Sub-total:		HK$96,004,500
Group 5 – Properties held for owner-occupation in Hong			Kong
Group 5A – Properties held for owner-occupation in Hong			Kong	by CITIC	Pacific Group

Property Market value in existing state as at 31 October 2008 Interest attributable to the Group 35. DCH Building, 20 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong HK$1,330,000,000 100% 36. No 111 Lee Nam Road, Ap Lei Chau, Hong Kong HK$528,000,000 100% Sub-total:	Market value in existing state attributable to the Group as at 31 October 2008 HK$1,330,000,000 HK$528,000,000
	HK$1,858,000,000

– III-12 –

APPENDIX III

VALUATION REPORT

Group 5B – Properties held for owner-occupation in Hong Kong by DCH Group

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
37.	1st Floor, Front portion,	HK$660,000	100%	HK$660,000
	11 Mok Cheong Street, Tokwawan,
	Kowloon, Hong Kong
38.	Shops Nos 1 and 2 on	HK$62,000,000	100%	HK$62,000,000
	Ground Floor and External Wall of
	Ground Floor Premises,
	Landwide commercial Building,
	118-120 Austin Road, Tsimshatsui,
	Kowloon, Hong Kong
39.	Car Parking Spaces Nos 1 and 2 on	HK$900,000	100%	HK$900,000
	basement, Hong Yuen Court,
	1-5 Tak Shing Street, Jordan,
	Kowloon, Hong Kong
40.	377 carparking Spaces	HK$48,000,000	100%	HK$48,000,000
	(Car Parking Spaces Nos 8001 to 8125
	on 8th Floor, Car Parking Spaces
	Nos 9001 to 9125 on 9th Floor and
	Car Parking Spaces Nos R001 to
	R127 on Roof), Commercial and
	Garage Block, Richland Gardens,
	80 Wang Kwong Road,
	Kowloon Bay, Kowloon,
	Hong Kong
41.	Flats B, C, D, E and F on Ground Floor	HK$51,000,000	100%	HK$51,000,000
	including the Forecourt, 152A-152D
	Prince Edward Road West and
	222G-222H Fa Yuen Street,
	Mongkok, Kowloon,
	Hong Kong

– III-13 –

APPENDIX III

VALUATION REPORT

					Market value
		Market value		in existing state
		in existing state	Interest		attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
42.	Shop A-9 on Ground Floor,	HK$6,600,000	100%		HK$6,600,000
	Kwai Chung Centre,
	102 Kwai Hing Road,
	Kwai Chung, New Territories,
	Hong Kong
43.	12th Floor, Union Park Centre,	HK$15,000,000	100%		HK$15,000,000
	771-775 Nathan Road,
	Mong Kok, Kowloon,
	Hong Kong
			Sub-total:	HK$184,160,000
Group 5C – Property held for owner-occupation in Canada by DCH Group
					Market value
		Market value		in existing state
		in existing state	Interest		attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
44.	Richmond Acura Auto-Dealership	HK$88,500,000	100%		HK$88,500,000
	Premises,
	4211 No 3 Road, Richmond,
	British Columbia, Canada
			Sub-total:		HK$88,500,000
Group 5D – Property held for owner-occupation in Singapore by DCH				Group
					Market value
		Market value		in existing state
		in existing state	Interest		attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
45.	20 Tuas Avenue 2,	HK$22,960,000	100%		HK$22,960,000
	Singapore 639451

– III-14 –

APPENDIX III

VALUATION REPORT

				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
46.	259 Pandan Loop	HK$8,610,000	100%	HK$8,610,000
	Singapore 128435
			Sub-total:	HK$31,570,000
Group 6 – Property held as Sub-lessee		for Occupation in Hong Kong by DCH Group
				Market value
		Market value		in existing state
		in existing state	Interest	attributable to
		as at	attributable to	the Group as at
	Property	31 October 2008	the Group	31 October 2008
47.	Nos 67–73 Fuk Hi Street,	HK$91,000,000	100%	HK$91,000,000
	Yuen Long Industrial Estate,
	Yuen Long, New Territories,
	Hong Kong
			Sub-total:	HK$91,000,000
			Grand total:	HK$8,420,694,500

– III-15 –

APPENDIX III

VALUATION REPORT

VALUATION REPORT

Group 1 – Properties held for investments in Hong Kong Group 1A – Properties held for investments in Hong Kong by CITIC Pacific Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
1.	DCH Commercial	The property comprises a	With the exception of	HK$1,980,000,000
	Centre, 25 Westlands	32-storey (including a 3-level	about 20,567 sq ft
	Road, Quarry Bay,	basement) commercial building	lettable area of office
	Hong Kong	erected on a site with a registered	spaces which were
		site area of approximately	vacant, the property
	Inland Lot No 8854	32,280 sq ft. The building was	was let under various
		completed in 1998.	tenancies with the latest
			one expiring in July
		The total gross area of	2013 at a total rent of
		the property (excluding	approximately
		carparking spaces) is	HK$7,655,000 per
		approximately 388,838 sq ft.	month exclusive of rates
			and management
		In addition, there are 76 parking	charges.
		spaces for private car and
		loading/unloading area provided	The income arising from
		within the building.	the carparks for the
			period January to
		The property is held under	October 2008 was
		Conditions of Exchange No 12463	approximately
		for a term commencing on 5 June	HK$1,861,000.
		1997 and expiring on
		30 June 2047.
		The Government rent payable for
		the property is an amount equal
		to 3 percent of the rateable value
		for the time being of the property
		per annum.

Notes:

(1) The registered owner of the property was Pacific Grace Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Quarry Bay Outline Zoning Plan No S/H21/25 dated 25 July 2008, the property lay within an area zoned for “Commercial” use.
(3) The property was subject to a No-objection Letter vide memorial no UB8179676 dated 24 August 2000. Pursuant to the said No-objection Letter, the car parking restrictions stipulated in the special condition Nos. (24)(a) and (25) of Conditions of Exchange No. 12463 were released so that only 9 spaces for the loading and unloading of vehicles should be provided within the lot for the life-time of the existing building.

– III-16 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 2. Honest Motors The property comprises a With exception of about HK$218,000,000 Building, 9-11 24-storey (including a mezzanine 2,953 sq ft floor area of Leighton Road, floor) commercial building office spaces which Causeway Bay, erected on a site with were vacant, the Hong Kong a registered site area of property was subject to approximately 3,393 sq ft. various tenancies with Inland Lots Nos 5432 The building was completed in the latest one expiring and 5431. about 1978 and was renovated in in August 2011 at a total 1998. rent of approximately HK$1,080,000 per The total gross area of the month exclusive of rates property is approximately and management 48,101 sq ft excluding the flat roof charges. and top roof. The property is held under two Government leases each for a term of 999 years from 20 June 1881. The Government rent payable for the property is HK$46 per annum.

Notes:

(1) The registered owner of the property was Wise Guide Development Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Wan Chai Outline Zoning Plan No S/H5/25 dated 6 November 2007, the property lay within an area zoned for “Commercial/Residential” use.

– III-17 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 3. Shop B on Ground The property comprises a shop The property was HK$65,000,000 Floor, China unit on the Ground Floor of a subject to a tenancy Insurance Group 32-storey (including basement) expiring on 9 May 2010 Building, 141 Des commercial building completed at a rent of HK$330,000 Voeux Road Central, in about 1967. per month exclusive 73 Connaught Road of rates and Central and The saleable area of the property management fee. 61-65 Gilman Street, is approximately Central, Hong Kong 2,164 sq ft. 2,090/44,680th shares The property is held under of and in the a Government lease and an Remaining Portion of Extension Letter each for a term Marine Lot No 395 of 999 years from 14 July 1903. and the Extension thereto. The total Government rent payable for the lot and the Extension is HK$258 per annum.

Notes:

(1) The registered owner of the property was Large Earnings Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Sai Yin Pun & Sheung Wan Outline Zoning Plan No S/H3/22 dated 15 July 2008, the property lay within an area zoned for “Commercial/Residential” use.

– III-18 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 4. Apartments B on The property comprises six The property was let to HK$158,000,000 10th, 15th, 16th and apartments and six car parking various tenancies with 17th Floors, spaces in a 31-storey (including the latest one expiring Apartments C on 4th ground floor) apartment building in October 2010 at a and 9th Floors, Car completed in about 1984. total rent of HK$501,000 Parking Spaces Nos per month inclusive of 107, 137, 148 and 168 The total gross area of the rates and management on 1st Floor and 253 property (excluding car parking charges. and 265 on 2nd Floor, spaces) is approximately South Bay Towers, 16,428 sq ft. 59 South Bay Road, Island South, The property is held under a Hong Kong Conditions of Sale for a term of 75 years from 4 September 1980 1,230/16,026th shares renewable for a further term of of and in Rural 75 years. Building Lot No 1049. The Government rent payable for the lot is HK$1,000 per annum.

Notes:

(1) The registered owner of Apartment C on 4th Floor and Car Parking Space No 265 on 2nd Floor was Master Step Investment Limited; that of Apartment C on 9th Floor and Car Parking Space No 107 on 1st Floor was Fortune Day Investment Limited; that of Apartment B on 10th Floor and Car Parking Space No 137 on 1st Floor was Silver Rise Investment Limited; that of Apartment B on 15th Floor and Car Parking Space No 168 on 1st Floor was Super Guide Investment Limited; that of Apartment B on 16th Floor and Car Parking Space No 253 on 2nd Floor was Top Guide Investment Limited and that of Apartment B on 17th Floor and Car Parking Space No 148 on 1st Floor was Treasure Full Investment Limited. All the aforesaid companies were wholly-owned subsidiaries of CITIC Pacific.
(2) According to Shouson Hill & Repulse Bay Outline Zoning Plan No S/H17/10 dated 26 September 2008, the property lay within an area zoned for “Residential (Group B)” use.

– III-19 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
5.	Skyway House	The property comprises the	With the exception of	HK$738,000,000
	formerly known as	majority portion of a 15-storey	about 46,483 sq ft floor
	Taikoktsui Centre	(including basement) commercial	areas which were
	(excluding a petrol	building erected on a site with an	vacant, the property
	filling station on	area of approximately	was subject to various
	the Ground Floor	28,739 sq ft. The property	tenancies with the latest
	with an ancillary	excludes the petrol filling station	tenancy expiring in
	storage tank in part of	on the Ground Floor with	August 2012 at a total
	the Basement and	ancillary storage tank in part of	rent of approximately
	a storeroom on	the Basement and a storeroom on	HK$3,045,000 per
	the 1st Floor),	the 1st Floor.	month exclusive of rates
	3 Sham Mong Road,		and management fees.
	Taikoktsui, Kowloon,	The original building (being an
	Hong Kong	industrial building), was	The income arising from
		completed in 1983 but was	the carparks for the
	2,604/2,700th shares	converted into a commercial	period January to
	of and in Kowloon	building in 1999.	October 2008 was
	Inland Lot No 9706		approximately
	and the Extension	The total gross area of the	HK$616,000.
	thereto.	property (excluding the
		carparking spaces) is
		approximately 308,648 sq ft.
		In addition, there are 24 parking
		spaces for private cars,
		11 parking spaces for lorry
		together with loading and
		unloading area provided on the
		Ground Floor and Basement of
		the building.
		The property is held under a
		Conditions of Regrant and a
		Conditions of Extension each for
		a term of 150 years from 13 April
		1891.
		The Government rent payable for
		the lot and the Extension is
		HK$1,216 per annum.

Notes:

(1) The registered owner of the property was Lindenford Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property lay within an area zoned for “Other Specified Use (Business)” use.
(3) The property was subject to a Modification Letter vide memorial no UB7606318 dated 5 November 1998. The said Modification Letter allowed the change of use of the property from industrial use to non-industrial (excluding godown, hotel, serviced apartments, private residential and petrol filling station) purposes.

– III-20 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Unit B on 13th Floor of 311 Nathan Road, Hong Kiu Mansion, 311-313 Nathan Road, Yaumatei, Kowloon, Hong Kong

The property comprises a residential unit on 13th floor of a 16-storey composite building completed in the 1960’s.

The gross area of the property is approximately 713 sq ft..

The property was HK$1,710,000 vacant.

1/80th shares of and in the Remaining The property is held under Portion of Kowloon a Government lease for a term of Inland Lot No 1471. 75 years from 9 October 1917 renewed for a further term of 75 years.

The total Government rent payable for the property is HK$1,800 per annum.

Notes:

(1) The registered owner of the property was Might & Right Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Yau Ma Tei Outline Zoning Plan No S/K2/20 dated 6 May 2008, the property lay within an area zoned for “Commercial” use.

– III-21 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 October 2008

Workshops B and C The property comprises two With exception of about HK$25,900,000 on 1st Floor and adjoining workshops on the 2,360 sq ft floor areas Workshops A, B and 1st Floor together with the whole which were vacant, the C on 2nd Floor, of the 2nd Floor of a 14-storey property was let under Tai Chi Factory industrial building completed in various tenancies with Building, 25-29 Kok 1971. the latest one expiring Cheung Street, in September 2010 at a Taikoktsui, The total gross area of the total rent of Kowloon, property is approximately approximately Hong Kong 34,287 sq ft. HK$186,000 per month exclusive of rates and 22/155th shares of The property is held under management charges.

22/155th shares of The property is held under and in the Remaining a Government lease for a term of Portion of Section K 999 years from 5 August 1871. and the Remaining Portion of Subsection The total Government rent 2 of Section M of payable for Section K of Kowloon Kowloon Marine Marine Lot No 28 and Lot No 28. Sub-section 2 of Section M of Kowloon Marine Lot No 28 is HK$78 per annum.

Notes:

(1) The registered owner of the property was Ray Bright Enterprises Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property lay within an area zoned for “Residential (Group E)” use.
(3) The property was subject to an Order under S.6(1) of Sewage Tunnel Ord. (for portions & lots) for the proposed construction of sewage tunnel from Kwun Tong and Kwai Chung to Stonecutters Island vide memorial no UB6088663 dated 28 July 1994.

– III-22 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 8. Broadway Centre, The property comprises a The property was partly HK$376,000,000 93 Kwai Fuk Road, 24-storey (there being no 4th, let to members of DCH Kwai Chung, 14th and 24th Floors) godown Group with an area of New Territories, building completed in 1997. approximately 168,700 Hong Kong sq ft and partly let to The Ground to 3rd Floors of the third parties under Kwai Chung Town building are designed for carpark various tenancies with Lot No 435 and loading/unloading area, the the latest one expiring 5th to 18th Floors are for in October 2010 at a warehouses and 19th to 26th total rent of Floors are for ancillary offices. approximately HK$1,700,000 per The total gross area of month exclusive of rates the property (excluding the and management carparking spaces) is charges. approximately 334,817 sq ft. The income arising from In addition, there are 18 parking the carparks for the spaces for private car and 18 period January to parking spaces for lorry provided October 2008 was within the development. approximately HK$767,000.

The property is held under a New Grant for a term commencing on 23 August 1994 and expiring on 30 June 2047.

The Government rent payable for the property is an amount equal to 3 percent of the rateable value for the time being of the property per annum.

Notes:

(1) The registered owner of the property was Neostar Investment Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Kwai Chung Outline Zoning Plan No S/KC/21 dated 29 June 2004, the property lay within an area zoned for “Industrial” use.
(3) The property was subject to a Notice under Section 19 of the Railways Ordinance vide memorial no TW1246396 dated 15 October 1998. Pursuant to the said Notice, the underground strata of the lot was resumed by the Government.

– III-23 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 October 2008

Block C of Yee Lim Industrial Centre, 2-28 Kwai Lok Street and 2-6 Kwai Hei Street, Kwai Chung, New Territories, Hong Kong

4,000/9,000th shares of and in Kwai Chung Town Lot No 333.

The property comprises a 17-storey godown building completed in 1981.

The 1st to 7th Floors of the building are occupied for cold storage and the 8th to 16th Floors are used for dry storage.

The gross areas of the property (excluding the car parking spaces) are approximately as follows:

The property was let to a member of DCH Group as a godown at a monthly rent of HK$865,000.

HK$317,000,000

Ground Floor : 1st to 7th Floors : 8th to 16th Floors : Total :	3,582 sq ft 151,382 sq ft 165,231 sq ft
	320,195 sq ft

In addition, there are 18 private carparks, plus 15 lorry carparks and two container carparks with loading and unloading area provided on the Ground Floor.

The property is held under a New Grant for a term of 99 years less the last three days from 1 July 1898 and is statutorily extended to 30 June 2047.

The annual Government rent payable for the property is an amount equal to 3 percent of the rateable value for the time being of the property.

Notes:

(1) The registered owner of the property was Glenridge Company Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Kwai Chung Outline Zoning Plan No S/KC/21 dated 29 June 2004, the property lay within an area zoned for “Industrial” use.
(3) The property was subject to two Notices under Sections 19 and 21 of the Railways Ordinance vide memorial nos TW1246396 and TW1246397 respectively both dated 15 October 1998. Pursuant to the two said Notices, the underground strata of the lot was resumed by the Government.

– III-24 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 October 2008

Wyler Centre 1, Basements 1 and 2 in Basement and Parking Spaces Nos P50 and P51 on 2nd Floor of Wyler Centre 2, 192-210 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong

5,779/11,152nd shares of and in the Remaining Portion of Kwai Chung Town Lot No 130 and the Extension thereto.

The property comprises a 12-storey industrial/warehouse building completed in 1976 and known as Wyler Centre 1. There are two parking spaces for container, 10 parking spaces for lorry and 16 parking spaces for private car/van provided on the Ground Floor of the building.

The property also comprises two godown units in the basement and two parking spaces for private car/van in a 32-storey (including a basement) industrial/warehouse building known as Wyler Centre 2, which was completed in 1989.

The gross areas of the property (excluding the parking spaces) in Wyler Centre 1 and Wyler Centre 2 are approximately as follows :

With the exception of about 36,298 sq ft floor spaces which were vacant, the property was let under various tenancies with the latest one expiring in December 2011 at a total rent of approximately HK$2,540,000 per month exclusive of rates and management charges.

The income arising from the carparks for the period January to October 2008 was approximately HK$492,000.

HK$441,000,000

Wyler Centre 1 : Wyler Centre 2 : Total :	373,596 sq ft 19,892 sq ft
	393,488 sq ft

In addition, there are 18 parking spaces for private car, 10 parking spaces for lorry and 1 parking space for container provided within the development.

The property is held under a New Grant for a term of 99 years less the last three days from 1 July 1898 and is statutorily extended to 30 June 2047.

The Government rent payable for the property is an amount equal to 3 percent of the rateable value for the time being of the property per annum.

Notes:

(1) The registered owner of the property was Famous Land Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Kwai Chung Outline Zoning Plan No S/KC/21 dated 29 June 2004, the property lay within an area zoned for “Other Specified Use (Business)” use.

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APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 11. Factory Units Nos 1 The property comprises the With exception of about HK$80,000,000 and 2 on Ground whole of the Ground Floor 25,500 sq ft floor spaces Floor including the including the loading and which were vacant, loading and unloading platform, three stores, the property was let to unloading platform, two container parking spaces and a member of the DCH stores, Lorry Parking a lorry parking space in a Group with an area of Space No 114 and 26-storey industrial building approximately Container Parking completed in about 1981. 25,500 sq ft at a monthly Spaces Nos 112 and rent of approximately 113 on Ground Floor, The total gross area of the HK$204,000 exclusive of Tsuen Wan Industrial property is approximately rates and management Centre, 220-248 50,996 sq ft (including toilets and charges. Texaco Road, Tsuen private loading and unloading Wan, New Territories, areas). Hong Kong The property is held under a New 18/414th shares of Grant for a term of and in Tsuen Wan 99 years less the last three days Town Lot No 24. from 1 July 1898 and is statutorily extended to 30 June 2047.

The annual Government rent payable for the property is an amount equal to 3 percent of the rateable value for the time being of the property.

Notes:

(1) The registered owner of the property was Hamborex Company Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Tsuen Wan Outline Zoning Plan No S/TW/25 dated 11 April 2008, the property lay within an area zoned for “Industrial” use.
(3) The property was subject to a No-objection Letter in favour of D.O.T.W and Cream Land Company Limited vide memorial no TW211617 dated 22 January 1981. Pursuant to the said No-objection Letter, portion of the ground floor of the property was permitted for banking purposes.

– III-26 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Commercial units and The property comprises a With exception of about HK$274,000,000 272 car parking 3-storey shopping arcade on 10,407 sq ft floor area spaces in the Car Ground to 2nd Floors and which were vacant, the Parks, Hang King 272 carparking spaces on the commercial units of the Garden, 9 Wing Fong carpark floors from 3rd to property were subject to Road, Kwai Chung, 8th Floors of a composite various tenancies with New Territories, development known as the latest one expiring Hong Kong Hang King Garden and was in October 2011 at a total completed in 1996. rent of approximately Situated within HK$944,000 per month Kwai Chung Town The total gross area of the exclusive of rates and Lot No 460. property (excluding car parking management charges. spaces) is approximately 73,229 sq ft. The income arising from the carparks for the period In addition, there are total of 272 January to October 2008 car parking spaces provided was approximately within the development. HK$3,410,000.

In addition, there are total of 272 car parking spaces provided within the development.

The property is held under a New Grant for a term commencing on 28 March 1994 and expiring on 30 June 2047.

The Government rent payable for the property is an amount equal to 3 percent of the rateable value for the time being of the property per annum.

Notes:

(1) The registered owner of the property was Hang Luen Chong Investment Company Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Kwai Chung Outline Zoning Plan No S/KC/21 dated 29 June 2004, the property lay within an area zoned for “Residential (Group A)” use.

– III-27 –

APPENDIX III

VALUATION REPORT

Group 1B – Properties held for investments in Hong Kong by DCH Group

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 13. Ground Floor of The property comprises a shop The property was HK$20,300,000 115 Hennessy Road, unit on the Ground Floor of a subject to a tenancy for Hip Sang Building, 17-storey composite building a term of three years 107-115 Hennessy completed in about 1969. expiring in August 2011 Road, Wanchai, at a rent of HK$76,000 Hong Kong The saleable area of the property per month exclusive of is approximately rates and management 6/45th shares of and 735 sq ft. fees. in the Remaining Portion of Inland The property is held under a Lot No 3831. Government lease for a term of 99 years from 25 May 1929 renewable for 99 years. The Government rent payable for the whole lot is HK$12 per annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Wan Chai Outline Zoning Plan No S/H5/25 dated 6 November 2007, the property lay within an area zoned for “Commercial/Residential” use.

– III-28 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 14. Ground Floor, The property comprises a shop The property was HK$80,000,000 56 Percival Street, unit on the Ground Floor of a subject to a tenancy for Causeway Bay, 9-storey tenement building a term of three years Hong Kong completed in about 1963. expiring in May 2008 at a rental of HK$200,000 2/96th shares of and The saleable area of the property per month exclusive of in the Remaining is approximately rates and management Portions of Sections A 866 sq ft plus a yard of 24 sq ft. charges with an option and C of Marine Lot to renew for a further No 365 and the The property is held under two term of 2 years at the Remaining Portion of Government leases each for a then market rent. As Sub-section 1 of term of 982 years from 25 June advised, the tenant has Section W of Inland 1860. duly executed the said Lot No 29. option to renew but the The total Government rent renewal rent was yet to payable for the subject lot be agreed. sections is HK$62 per annum.

Notes:

(1) The registered owner of the property was Sand Grain Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Causeway Bay Outline Zoning Plan No S/H6/14 dated 13 September 2005, the property lay within an area zoned for “Commercial/Residential” use.

– III-29 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
15.	Shop No G7 on	The property comprises a shop	The shop unit was	HK$39,000,000
	Ground Floor and	unit on the Ground Floor and two	subject to a tenancy for
	Car Parking Spaces	covered car parking spaces on the	a term of two years
	Nos LG 123 and	Lower Ground Floor in a 2-storey	expiring in February
	LG 124 on Lower	commercial and	2009 at a rent of
	Ground Floor,	car parking podium of a	HK$214,500 per month
	Westlands Gardens,	composite building completed in	exclusive of rates and
	1025-1037 King’s	about 1975.	management fees.
	Road and 2-10,
	12A-12H	The saleable area of the shop unit	Carparking Space No
	Westlands Road,	is approximately	LG123 was subject to
	Quarry Bay,	1,370 sq ft.	a tenancy expiring in
	Hong Kong		August 2009 at a rent of
		The property is held under a	HK$1,650 per month
	14/6,952nd shares of	Government lease for a term of	whilst Carparking
	and in the Remaining	999 years from 2 February 1882.	Space No LG124 was
	Portion of Quarry Bay		subject to a tenancy
	Inland Lot No 15.	The Government rent payable for	expiring in April 2009 at
		the whole lot is HK$480 per	a rent of HK$1,450.
		annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Quarry Bay Outline Zoning Plan No S/H21/25 dated 25 July 2008, the property lay within an area zoned for “Residential (Group A)” use.

– III-30 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 16. Car Parking Space No The property comprises an open The property was HK$250,000 18 on Upper Ground car parking space on the Ground subject to a licence Floor, Kar Man Court, level forecourt of a 23-storey expiring in January 1-7 Kin Wah Street, residential building (erected over 2009 at a monthly North Point, a 2-level car parking floors) licence fee of HK$1,300 Hong Kong completed in 1981. inclusive of rates and management fee. 1/713th share of and The property is held under a in the Remaining Conditions of Sale for a term of Portions of 75 years from 13 February 1922 Subsections 1, 2, 3 and the lease term has been and 4 of Section X of renewed for a further term of Inland Lot No 2366 75 years. and the Extension thereto. The Government rent payable for the property is HK$504 per annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to North Point Outline Zoning Plan No S/H8/21 dated 27 July 2007, the property lay within an area zoned for “Residential (Group A)” use.

– III-31 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Ground and Mezzanine Floors, 67 Sai Yeung Choi Street South, Mongkok, Kowloon, Hong Kong

3/11th shares of and in the Remaining Portion of Subsection 2 of Section C and the Remaining Portion of Section A of Subsection 3 of Section C of Kowloon Inland Lot No 1259.

The property comprises a shop unit on the Ground Floor together with the Mezzanine Floor of a 9-storey composite building completed in about 1967.

The saleable areas of the property are approximately as follows:

Ground Floor : 765 sq ft Mezzanine : 470 sq ft Floor Total : 1,235 sq ft

The property was subject to a tenancy for a term of three years expiring in March 2010 at a rent of HK$310,000 per month exclusive of rates and management charges.

HK$85,000,000

In addition, there is a yard with an area of approximately 73 sq ft

The property is held under a Government lease for a term of 75 years from 18 February 1910 and the lease term has been renewed for a further term of 75 years.

The Government rent payable for the property is HK$15,120 per annum.

Notes:

(1) The registered owner of the property was Sand Grain Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property lay within an area zoned for “Commercial” use.

– III-32 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 October 2008

Ground Floor including its yard and Cockloft of 58 Sai Yeung Choi Street South and Shop 1 on Ground Floor, Cockloft and Flats A and B on 1st Floor of 60 Sai Yeung Choi Street South, Mongkok, Kowloon, Hong Kong

2/8th shares of and in the Remaining Portion of Kowloon Inland Lot No 2191 and 12/50th shares of and in Kowloon Inland Lot No 2192.

The property comprises two shop units on the Ground Floor together with their appurtenant Cocklofts, a yard and a 1st Floor of two adjoining 6-storey composite buildings completed in about 1972.

The saleable areas of the property are approximately as follows:

Ground Floor : Yard : Cockloft : 1st Floor : Total :	782 sq ft 227 sq ft 976 sq ft 788 sq ft
	2,773 sq ft

The property was subject to a tenancy for a term of three years expiring in March 2011 at a rent of HK$620,000 per month exclusive of rates and management charges.

HK$158,000,000

The property is held under two Government leases each for a term of 75 years from 24 March 1923 and the lease term has been renewed for a further term of 75 years.

The Government rent payable for the property is HK$170,576 per annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) The property was subject to a Building Order No. INVO00009/K/05 under S.26A(1) of The Buildings Ordinance vide memorial no 05031701800113 dated 28 January 2005 regarding the structures on the canopy of the first floor whereby such order requiries reporting on the structural integrity and stability of the canopy of the 1st floor is required and remedial works are required in due course (Re: Canopy at First Floor of 60 Sai Yeung Choi Street South).
(3) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property lay within an area zoned for “Residential (Group A)” use.

– III-33 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 19. Ground, 2nd, 3rd, The property comprises the Except for 5th Floor HK$6,900,000 4th and 5th Floors, Ground, 2nd, 3rd, 4th and which was vacant, the Front Portion, 5th (Roof) Floors of a 5-storey property was let under 11 Mok Cheong Street, industrial building erected on a various tenancies with Tokwawan, Kowloon, site with a registered area of the latest one expiring in Hong Kong approximately 2,450 sq ft. March 2011 at a total The building was completed rent of HK$52,400 per Portion of and in in 1958. month mostly inclusive Kowloon Inland of rates and Lot No 7630. The total saleable area of the management charges. property is approximately 6,065 sq ft plus flat roof 1,495 sq ft on 3rd Floor and roof 758 sq ft.

The property is held under a Government lease for a term of 75 years from 17 March 1952 renewable for a further term of 75 years.

The Government rent payable for the lot is HK$90 per annum.

Notes:

(1) The registered owner of the property was Ixonia Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Ma Tau Kok Outline Zoning Plan No S/K10/19 dated 18 January 2008, the property lay within an area zoned for “Comprehensive Development Area (3)” use.
(3) The property was subject to a Notice No. WC/SC06650/06/K-R05 issued by the Building Authority under Section 24C(1) of the Buildings Ordinance vide memorial no 08093000650040 dated 27 May 2008 in respect of the unauthorized structures on roof and flat roof at the front of the 3rd floor which are required by the notice to be demolished and rectified.

– III-34 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 20. Shops Nos 1 and 2 The property comprises two The property was HK$9,800,000 on Ground Floor, adjoining shop units on the subject to a tenancy for Siu Man Court, Ground Floor of a 24-storey a term of three years 7, 7A and composite building completed expiring in November 9 Fort Street, in about 1983. 2008 at a rent of North Point, HK$32,000 per month Hong Kong The saleable area of the exclusive of rates and property was 1,814 sq ft plus a management charges 51/543rd shares of yard area of 476 sq ft. with an option to renew and in the Remaining for a further term of Portions of Sections P The property is held under three years at open and Q of Inland Lot Conditions of Sale for a term of market rent. No 2366 and the 75 years from 13 February 1922 Extension thereto. renewed for a further term of 75 years. The total Government rent for the subject lot sections and the Extension is HK$14,580 per annum.

Notes:

(1) The registered owner of the property was Tak Sing Chong Investment Company Limited, which was a wholly-owned subsidiary of DCH.
(2) According to North Point Outline Zoning Plan No S/H8/21 dated 27 July 2007, the property lay within an area zoned for “Commercial/Residential” use.

– III-35 –

APPENDIX III

VALUATION REPORT

Group 2 – Property held for development in Hong Kong by CITIC Pacific Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
21.	Lot Nos 392 and 393	The property comprises two	The property was	HK$41,000,000
	in Demarcation	adjoining vacant industrial lots	vacant and demolition
	District No 127,	with a total registered site area of	work was completed.
	Kiu Tau Wai,	approximately 46,500 sq ft.
	Yuen Long,
	New Territories,	The property is held under two
	Hong Kong	New Grants each for a term of 99
		years less the last three days
		commencing from 1 July 1898 and
		has been statutorily extended to
		30 June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was Linking Wisdom Ltd., a wholly-owned subsidiary of CITIC Pacific.
(2) According to Ping Shan Outline Zoning Plan No S/YL-PS/11 dated 1 February 2005, the property was situated within an area zoned for “Industrial” use.
(3) The salient conditions stipulated in the New Grants are, inter alia, as follows:–

(i)	User	:	Industrial
(ii)	Carpark Ratio	:	1 carparking space for each 10,000 sq ft of gross floor area or 1
			carparking space for each 5,000 sq ft of the site area whichever
			rate provides the greater amount of such spaces.
(iii)	No of Storey	:	Not more than two storeys
(iv)	Height	:	Not exceed a height of 30 feet above the mean formation level

(4) In accordance with the planning application of Application No A/YL-PS/280 approved by Town Planning Board on 28 March 2008 for a proposed vehicle repair workshop (including minor relaxation of building height restriction), Town Planning Board has approved the development of a vehicle repair workshop of 3-storey building with a total gross floor area of approximately 10,798 sq m (116,230 sq ft) with stipulated number of ancillary carparking spaces and loading/unloading spaces. The aforesaid planning approval shall subject to conditions and satisfactions of the Directors of Planning and Fire Services or the Town Planning Board in respect of the implementation of landscaping proposal, provision of water supply for fire fighting and fire service installations. The permission shall cease to have effect on 8 March 2012 unless prior to the said date, either the development as permitted was commenced or the permission was renewed.
(5) As advised by CITIC Pacific Group, land exchange application in respect of the property was in progress and land premium offer was yet to be received from the Government. In addition, as advised by CITIC Pacific Group, commencement of development of the property is not expected before 2nd half 2009.
(6) The estimated completion value of the property, assuming developed in accordance with the existing lease conditions, will be approximately HK$160 million as at 31 October 2008, with an estimated construction cost at approximately HK$84 million and an estimated development period of 9 months.

– III-36 –

APPENDIX III

VALUATION REPORT

Group 3 – Properties held for disposal in Hong Kong by CITIC Pacific Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
22.	Grand Court,	Grand Court is a 7-storey	With exception of about	HK$950,000,000
	Nos 109-135	residential building erected on a	24,010 sq ft which were	(see Note (5))
	Kadoorie Avenue,	site with a registered site area of	vacant, the property
	Homantin,	approximately 5,559.55 sq m	was let under various
	Kowloon,	(59,843 sq ft). The building was	tenancies with the latest
	Hong Kong	completed in about 1955.	one expiring in October
			2010 yielding a total
	Sub-Sections 1 and 2	The Ground Floor of the building	monthly rent of
	and the Remaining	comprises various parking spaces	approximately
	Portion of Section D	and the upper floors are planned	HK$1,920,000 exclusive
	of Kowloon Inland	for residential uses. The total	of rates, management
	Lot No 2657.	gross area of the residential units	fees and other
		(excluding car parking spaces) of	outgoings. The total
		the property is approximately	gross income generated
		14,555.93 sq m (156,680 sq ft).	from the car parking
			spaces from January
		The property is held under	2008 to October 2008
		Conditions of Sale No UB3121 for	was approximately
		a term of 75 years from	HK$1,800,000.
		16 November 1931 renewable for
		75 years.
		The annual Government rent for
		Kowloon Inland Lot No 2657 is
		HK$681,420.

Notes:

(1) The registered owner of the property was Hang Wah Chong Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) The property was situated within an area zoned for “Residential (Group C)” uses under Ho Man Tin Outline Zoning Plan No S/K7/19 dated 18 January 2008.
(3) Pursuant to the Explanatory Statement of Ho Man Tin Outline Zoning Plan No S/K7/19 for Residential (Group C), the property was subject to inter alia, the following planning issues:
(i) No new development, or addition, alteration and/or modification to or redevelopment of an existing building shall result in a total development and/or redevelopment in excess of a maximum plot ratio of 0.6 and a maximum building height of 2 storeys, or the plot ratio and height of the existing building, whichever is the greater.
(ii) In determining the relevant maximum plot ratio for the purposes of paragraph (i), any floor space that is constructed or intended for use solely as car park, loading/unloading bay, plant room, caretaker’s office and caretaker’s quarters, or recreational facilities for the use and benefit of all the owners or occupiers of the domestic building or domestic part of the building, provided such uses and facilities are ancillary and directly related to the development or redevelopment, may be disregarded.
(iii) Based on the individual merits of a development or redevelopment proposal, minor relaxation of the building height restriction stated in paragraph (1) above may be considered by the Town Planning Board on application under section 16 of the Town Planning Ordinance.

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APPENDIX III

VALUATION REPORT

(4) In accordance with the planning application of Application No A/K7/72 approved by the Town Planning Board on 15 July 2005 for a proposed minor relaxation of building height restriction (2 basement storeys), Town Planning Board has approved the development of a 7-storey (over 2-storey basement) residential building with a total gross floor area of approximately 14,230 sq m (153,172 sq ft) providing no more than 79 flats and with stipulated number of ancillary carparking spaces. The aforesaid planning approval shall subject to conditions and satisfactions of the Directors of Planning and Fire Services or the Town Planning Board in respect of landscape proposal, tree preservation and maintenance scheme, provision of emergency vehicular access, water supplies for firefighting and fire service installations and shall cease to have effect on 24 June 2009 unless prior to the said date, either the development as permitted was commenced or the permission was renewed.
(5) Our valuation is our opinion on the redevelopment value of the property as at 31 October 2008, which was greater than the existing use value. The basis of valuation for the redevelopment of the property was prepared with reference to the above planning restrictions (i.e. no new development/redevelopment should be in excess of a maximum plot ratio of 0.6 and a maximum building height of 2 storeys or the plot ratio and height of the existing building, whichever is the greater and the covenants stipulated in the Government lease) and the planning permission as stated in (4) above.

– III-38 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 23. 33 car parks within The property comprises Portion of the property HK$6,600,000 The Paragon, 33 covered car parking spaces on was subject to various No 9 Shan Yin Road, the C1 and C2 Floors of a private monthly licences and Tai Po, New residential development known the total gross income Territories, as The Paragon. The Paragon generated from January Hong Kong consists of a total of eleven low to to October 2008 was high-rise residential buildings approximately Portion of shares of with associated car parking HK$133,000. and in Tai Po Town facilities, clubhouse and Lot No 136. recreational facilities. The property was completed in 1997.

The property is held under New Grant No 12905 for a term from 23 August 1994 to 30 June 2047.

The Government rent payable for the property is an amount equal to 3% of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Admarch Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) The property comprises various car parks within The Paragon with details as follows:

Floor Car Park No

C1 P1, P41, P73, P90 C2 P26, P33, P36, P37, P39, P40, P43, P44, P45, P47, P48, P50, P51, P52, P55, P56, P57, P58, P59, P60, P61, P62, P64, P66, P83, P84, P85, P94, P95
(3) According to Tai Po Outline Zoning Plan No S/TP/20 dated 21 December 2007, the property was situated within an area zoned “Residential (Group B)” use.

– III-39 –

APPENDIX III

VALUATION REPORT

Group 4 – Properties held as land bank in Hong Kong by CITIC Pacific Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
24.	The Remaining	The property comprises a piece	The property was	HK$3,300,000
	Portion of Section B	of agricultural lot at on a slope	overgrown with	(56.5% attributable
	of Lot No 661 in	at Pak Tin, Shatin.	vegetation.	interest to CITIC
	Demarcation District			Pacific Group:
	No 181, Pak Tin,	The property has a site area of	We are instructed to	HK$1,864,500)
	Shatin,	approximately 55,036 sq ft.	assess the property on
	New Territories,		vacant possession basis.
	Hong Kong	The property is held under
		New Grant No 4238.

Notes:

(1) The registered owner of the property was Wah Luen Fung Co. Ltd. in which CITIC Pacific has 56.5% attributable interest.
(2) No lease term, date of commencement and rent can be traced from Shatin Land Registry. We have assumed that the property, similar to other New Territories Leases, have the lease term been statutorily extended to 30 June 2047 with an amount equal to 3 per cent. of the then rateable value of the property be payable as the annual Government rent.
(3) According to Sha Tin Outline Zoning Plan No S/ST/23 dated 5 June 2007, the property lay within an area zoned “Green Belt” use.
(4) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-40 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 25. Lot No 1308RP, The property comprises Except portion of the HK$56,000,000 Lot No 1510RP, Lot 10 house and agricultural lots at property has been Nos 1511, 1513, 1514, San Sang San Tsuen, Yuen Long. cleared and leveled, the 1515, 1521, 1524, property was 3937 and 3938; all in The property has a total overgrown with Demarcation District registered site area of vegetation. No 124, approximately San Sang San Tsuen, 342,677 sq ft including We are instructed to Yuen Long, 2,614 sq ft house lots and 340,063 assess the property on New Territories, sq ft agricultural lots. vacant possession basis. Hong Kong Except Lot Nos 3937 and 3938 which are subject to New Grant No 7193, the remaining portion of the property is held under a Block Government Lease and all the lots are held for a term of 75 years from 1 July 1898 renewed for a further term of 24 years less the last 3 days and had been statutorily extended until 30 June 2047.

The annual Government rent payable for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Hang Tat Sing Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to Ha Tsuen Outline Zoning Plan No S/YL-HT/9 dated 25 January 2008 and Ping Shan Outline Zoning Plan No S/YL-PS/11 dated 1 February 2005, the property lay within an area zoned “Green Belt”, “Conservation Area” and “Residential (Group D)” uses.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-41 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 26. Lot Nos 472B, 469 and The property comprises 1 house The property was HK$9,000,000 496 in Demarcation lot and 2 agricultural lots at Tsing overgrown with District No 131, Shan Tsuen, Tuen Mun. vegetation. Tsing Shan Tsuen, Tuen Mun, The property has a total site area We are instructed to New Territories, of approximately assess the property on Hong Kong 57,312 sq ft, including vacant possession basis. 1,556 sq ft house lot and 55,756 sq ft agricultural lots.

Notes:

(1) The registered owner of the property was Hang Tat Sing Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) No lease term, date of commencement and rent can be traced from Tuen Mun Land Registry. We have assumed that the property, similar to other New Territories Leases, have the lease term been statutorily extended to 30 June 2047 with an amount equal to 3 per cent. of the then rateable value of the property be payable as the annual Government rent.
(3) According to Tuen Mun Outline Zoning Plan No S/TM/24 dated 4 July 2008, the property lay within an area zoned “Green Belt” and “Government/Institution/Community” uses.
(4) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-42 –

APPENDIX III

VALUATION REPORT

Description and tenure

Property

Lot Nos 129, 131, 132, The property comprises 2 168, 180, 194, 211, 313, building lots and 73 agricultural 370, 417, 433, 499, lots scattered at Tai Long, Ham 507, 509, 565, 570, Tin, Tai Wan Cheung Uk Wai and 580, 582, 635, 654, Lam Uk Wai, Sai Kung. 668, 710, 711, 733, 742, 753, 757, 865, 902 and The property has a total site area 908 in Demarcation of approximately District No 275 and 85,377 sq ft, including Lot Nos 134, 141, 143, 1,307 sq ft building lots and 145, 146, 149, 155, 84,070 sq ft agricultural lots. 159, 161, 479, 487, 499, 502, 516, 662, The property is held under 696, 712, 722, 728, two Block Government Leases 739, 740, 744, 755, each for a term of 75 years from 763, 771, 775, 781, 1 July 1898 renewed for a further 784, 867, 890, 933, term of 24 years less the last 3 984, 991, 1046, 1074, days and was statutorily 1079, 1277, 1282, 1284, extended until 30 June 2047. 1286, 1288, 1293, 1295, 1296 and 1298 in The annual Government rent Demarcation District payable for the property is an No 276, Sai Kung, amount equal to 3 per cent. of the New Territories, then rateable value of the Hong Kong property.

Market value in Particulars of existing state as at occupancy 31 October 2008 Except lot nos. 180 and HK$5,230,000 194 which were with temporary structure erected on, the remaining portion of the property was overgrown with vegetation. We are instructed to assess the property on vacant possession basis.

Notes:

(1) The registered owner of the property was Hang Tat Sing Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to Tai Long Wan Outline Zoning Plan No S/SK-TLW/5 dated 7 February 2006, portion of the property lay within an area zoned “Village Type Development” and “Conservation Area” uses.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-43 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at occupancy 31 October 2008

Property Description and tenure occupancy 31 October 2008 28. Lot Nos 61, 63, 65, 67, The property comprises 25 Except portion of the HK$1,270,000 68, 70, 71, 74, 75, 77, agricultural lots at Chi Ma Wan, property has been 79, 80, 81, 82, 85, 87, Lantau Island. cleared and leveled up, 89, 91, 93, 94, 95, 96, the remaining portion 98, 99 and 100 in The property has a total site area of the property was Demarcation District of approximately overgrown with No 339, Chi Ma Wan, 37,462 sq ft. vegetation. Lantau Island, New Territories, The property is held under a We are instructed to Hong Kong Block Government Lease for a assess the property on term of 75 years from 1 July 1898 vacant possession basis. renewed for a further term of 24 years less the last three days and was statutorily extended until 30 June 2047. The annual Government rent payable for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Hang Tat Sing Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to South Lantau Coast Outline Zoning Plan No. S/SLC/14 dated 1 February 2005, the property lay within an area zoned “Green Belt” use.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-44 –

APPENDIX III

VALUATION REPORT

Property Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Lot Nos 512 and 519 The property comprises 2 house in Demarcation lots at Cheung Shue Tan, Tai Po. District No 36, Cheung Shue Tan, The property has a total site area Tai Po, of approximately 871 sq ft. New Territories, Hong Kong The property is held under a Block Government Lease for a term of 75 years from 1 July 1898 renewed for a further term of 24 years less the last three days and has been statutorily extended until 30 June 2047.

The property was an HK$1,050,000 open area between neighbouring buildings. We are instructed to assess the property on vacant possession basis.

The annual Government rent payable for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Hang Tat Sing Investment Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to Tai Po Outline Zoning Plan No S/TP/20 dated 21 December 2007, the property lay within an area zoned “Village Type Development” use.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-45 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
30.	Lot Nos 2842A, 2846,	The property comprises	The property was a	HK$16,800,000
	2851RP, 2852RP, 2943	5 agricultural lots at	leveled site of concrete	(60% attributable
	in Demarcation	Yick Yuen Tsuen, Yuen Long.	screeding and	to CITIC Pacific
	District No 124,		surrounded by metal	Group:
	Yick Yuen Tsuen,	The property has a total site area	fencing.	HK$10,080,000
	Yuen Long,	of approximately
	New Territories,	50,794 sq ft.	We are instructed to
	Hong Kong		assess the property on
		The property is held under a	vacant possession basis.
		Block Government Lease for a
		term of 75 years from 1 July 1898
		renewed for a further term of 24
		years less the last three days and
		was statutorily extended until 30
		June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was Ko Lok Investment Company Limited in which CITIC Pacific has 60% attributable interest.
(2) According to Lam Tei & Yick Yuen Outline Zoning Plan No S/TM-LTYY/6 dated 14 March 2006, the property lay within an area zoned “Government/Institution/Community” and “Residential (Group B)2” uses.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-46 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
31.	Lot Nos 1, 3RP, 7, 9,	The property comprises	Except lot no. 3 RP	HK$3,100,000
	13, 15, 16, 17, 19, 21,	23 agricultural lots at	which was with
	30, 33, 41, 48, 53, 55,	Ngau Ku Wan, Lantau Island.	temporary structures
	59, 64, 66, 73, 75,		erected on, the
	77RP, 79RP in	The property has a total site area	remaining portion of
	Demarcation District	of approximately	the property was
	No 338, Ngau Ku Wan,	123,961 sq ft.	overgrown with
	Lantau Island,		vegetation.
	New Territories,	The property is held under a
	Hong Kong	Block Government Lease for a	We are instructed to
		term of 75 years from 1 July 1898	assess the property on
		renewed for a further term of 24	vacant possession basis.
		years less the last three days and
		was statutorily extended until 30
		June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was Lecede Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to South Lantau Coast Outline Zoning Plan No S/SLC/14 dated 1 February 2005, the property lay within an area zoned “Green Belt” and “Country Park” uses.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-47 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
32.	Lot Nos 1478, 1522,	The property comprises	The property was	HK$4,600,000
	1530, 1538RP, 1548,	13 agricultural lots at Pui O,	overgrown with
	2273, 2351RP, 2379,	Lantau Island.	vegetation.
	2380, 2396, 2444,
	2449 and 2451	The property has a total site area	We are instructed to
	in Demarcation	of approximately	assess the property on
	District No 316,	45,886 sq ft.	vacant possession basis.
	Pui O, Lantau Island,
	New Territories,	The property is held under a
	Hong Kong	Block Government Lease for a
		term of 75 years from 1 July 1898
		renewed for a further term of 24
		years less the last three days and
		was statutorily extended until 30
		June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was On Yip Property Development Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to South Lantau Coast Outline Zoning Plan No S/SLC/14 dated 1 February 2005, the property lay within an area zoned “Coastal Protection Area” use.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-48 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 33. The Remaining The property comprises an Except portion of the HK$1,910,000 Portion of Lot No 552 agricultural lot at the fringe of property which was in Demarcation Tai Tei Tong, Mui Wo, with temporary District No 3, Mui Wo, Lantau Island. structure erected on, the Lantau Island, remaining portion was New Territories, The property has a site area of overgrown with Hong Kong approximately 25,761 sq ft. vegetation. The property is held under We are instructed to New Grant No 2932 for a term of assess the property on 75 years from 1 July 1898 vacant possession basis. renewed for a further term of 24 years less the last three days and has been statutorily extended until 30 June 2047. The annual Government rent payable for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was On Yip Property Development Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) According to Mui Wo Fringe Outline Zoning Plan No S/I-MWF/8 dated 17 October 2006, the property lay within an area zoned “Residential (Group D)” and “Village Type Development” uses.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-49 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
34.	Lot Nos 213, 218, 221,	The property comprises	The property was	HK$1,900,000
	223, 229, 232, 237 and	8 agricultural lots at	overgrown with
	240 in Demarcation	Tung Chung, Lantau Island.	vegetation.
	District No 5,
	New Tung Chung	The property has a total site area	We are instructed to
	Hang, Tung Chung,	of approximately	assess the property on
	Lantau Island,	42,253 sq ft.	vacant possession basis.
	New Territories,
	Hong Kong	The property is held under a
		Block Government Lease for a
		term of 75 years from 1 July 1898
		renewed for a further term of 24
		years less the last three days and
		has been statutorily extended
		until 30 June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was On Yip Property Development Company Limited, a wholly-owned subsidiary of CITIC Pacific.
(2) The property was not covered by Outline Zoning Plan.
(3) As advised by CITIC Pacific Group, they have no plan to develop the property as at the date of valuation.

– III-50 –

APPENDIX III

VALUATION REPORT

Group 5 – Properties held for owner-occupation in Hong Kong Group 5A – Properties held for owner-occupation in Hong Kong by CITIC Pacific Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
35.	DCH Building,	The property comprises an	The property was	HK$1,330,000,000
	20 Kai Cheung Road,	11-storey motor services building	occupied by DCH
	Kowloon Bay,	completed in 1984. Vehicular	Group as motor
	Kowloon,	access to each floor is further	services centre with
	Hong Kong	provided by car ramps.	ancillary office and
			store.
	New Kowloon Inland	The total floor area of the
	Lot No 5849.	property is approximately
		1,032,000 sq ft.
		The property is held under
		Conditions of Sale No UB11513
		for a term of 99 years from
		1 July 1898 less the last 3 days
		and has been statutorily extended
		to 30 June 2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was Borgia Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Ngau Tau Kok & Kowloon Bay Outline Zoning Plan No S/K13/25 dated 12 September 2006, the property was zoned for “Other Specified Uses (Business)”.
(3) The property was subject to an Order No. C/TC/002695/08/K issued by the Building Authority under S.24(1) of The Buildings Ordinance vide memorial no 08070800400239 dated 27 May 2008 in respect of the change of carpark at 10th floor into office and erection of partition walls.
(4) The property was subject to a waiver letter vide memorial no 05111101720067 dated 19 October 2005. Pursuant to the said waiver letter, portion of the ground floor of the property was permitted to be used as a motor car showroom and ancillary sales of motor vehicles for an initial term of three years commencing on 1 January 2005 and expiring on 31 December 2007 and thereafter quarterly until such time as the waiver is terminated or revoked.

– III-51 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
36.	111 Lee Nam Road,	The property comprises a	The property was	HK$528,000,000
	Apleichau,	16-storey (including ground and	partly occupied
	Hong Kong	mezzanine floors) motor services	by DCH Group as a
		building completed in 1994.	motor services centre
	Ap Lei Chau Inland	Vehicular access to upper floors	with ancillary office
	Lot No 124.	are further provided by car	and store. Portion of the
		ramps.	property with an area of
			approximately of
		The total gross area of the	241,000 sq ft was let to
		property is approximately	independent third
		644,999 sq ft.	parties yielding a total
			monthly rent of about
		The property is held under	HK$1,182,000.
		Conditions of Sale No 12209 for a
		term commencing on 28 April
		1992 and expiring on 30 June
		2047.
		The annual Government rent
		payable for the property is an
		amount equal to 3 per cent. of the
		then rateable value of the
		property.

Notes:

(1) The registered owner of the property was Tendo Limited, which was a wholly-owned subsidiary of CITIC Pacific.
(2) According to Aberdeen & Ap Lei Chau Outline Zoning Plan No S/H15/24 dated 19 December 2006, the property was zoned for “Industrial” use.

– III-52 –

APPENDIX III

VALUATION REPORT

Group 5B – Properties held for owner-occupation in Hong Kong by DCH Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
37.	1st Floor,	The property comprises the	The property was	HK$660,000
	Front Portion,	1st Floor of a 5-storey industrial	occupied by DCH
	11 Mok Cheong Street,	building erected on a site with a	Group for storage
	Tokwawan,	registered area of approximately	purpose.
	Kowloon,	2,450 sq ft. The building was
	Hong Kong	completed in 1958.
	Portion of and in	The saleable area of the property
	Kowloon Inland	is approximately
	Lot No. 7630.	2,283 sq ft plus flat roof 85 sq ft.
		The property is held under a
		Government Lease for a term of
		75 years from 17 March 1952
		renewable for 75 years.
		The Government rent payable for
		the lot is HK$90 per annum.

Notes:

(1) The registered owner of the property was Ixonia Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Ma Tau Kok Outline Zoning Plan No S/K10/19 dated 18 January 2008, the property was zoned for “Comprehensive Development Area (3)” use.
(3) The property was subject to a Notice No. WC/SC06650/06/K-R05 issued by the Building Authority under Section 24C(1) of the Buildings Ordinance vide memorial no 08093000650040 dated 27 May 2008 in respect of the structures on roof and flat roof at the front at 3rd floor.

– III-53 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 October 2008 38. Shops Nos 1 and 2 on The property comprises two The property was HK$62,000,000 Ground Floor and adjoining shop units on the occupied by DCH External Wall of Ground Floor and their respective Group as a motor Ground Floor external walls of a 16-storey vehicle showroom with Premises, Landwide commercial building completed ancillary offices. Commercial Building, in 1974. 118-120 Austin Road, Tsim Sha Tsui, The saleable area of the property Kowloon, Hong Kong is approximately 3,875 sq ft. 92/1,000th shares of and in Kowloon The property is held under two Inland Lot No. 8375 Conditions of Regrant each for a and the Remaining term of 150 years from Portion of Kowloon 25 December 1893. Inland Lot No 8832. The total Government rent for the two lots is HK$572 per annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Tsim Sha Tsui Outline Zoning Plan No S/K1/23 dated 25 April 2008, the property was zoned for “Commercial” use.

– III-54 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Car Parking Spaces The property comprises two The property was HK$900,000 Nos 1 and 2 on adjoining car parking spaces in occupied by DCH Basement, the basement of a 17-storey Group for car parking Hong Yuen Court, (including basement) residential purpose. 1-5 Tak Shing Street, building completed in about Jordan, Kowloon, 1980. Hong Kong The property is held under a 4/2,100th shares of Government Lease for a term and in Kowloon from 25 June 1990 to 30 June 2047. Inland Lot No 11009.

The annual Government rent for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Tsim Sha Tsui Outline Zoning Plan No S/K1/23 dated 25 April 2008, the property was zoned for “Residential (Group A)” use.

– III-55 –

APPENDIX III

VALUATION REPORT

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
40.	377 carparking Spaces	The property comprises	With the exception of	HK$48,000,000
	(Car Parking Spaces	377 private car parking spaces on	28 car parking spaces
	Nos 8001 to 8125 on	the 8th and 9th floors and top	which were licensed to
	8th Floor, Car Parking	roof of a 10-storey commercial	independent third
	Spaces Nos 9001 to	and car parking complex in a	parties under various
	9125 on 9th Floor and	private sector participation	licences with the latest
	Car Parking Spaces	scheme residential estate	licence expiring in
	Nos R001 to R127 on	completed in about 1985.	September 2009 at a
	Roof), Commercial		total monthly licence
	and Garage Block,	Except for 127 car parking spaces	fee of approximately
	Richland Gardens,	on the roof which are open, the	HK$33,600, the property
	80 Wang Kwong	remaining	was occupied by DCH
	Road, Kowloon Bay,	car parking spaces	Group for car parking
	Kowloon, Hong Kong	are covered.	purpose.
	627/106,352nd shares	The property is held under a
	of an in	Conditions of Sale for a term of
	New Kowloon Inland	99 years less the last three days
	Lot No 5928.	from 1 July 1898 and is statutorily
		extended to
		30 June 2047.
		The annual Government rent for
		the property is an amount equal
		to 3 per cent. of the then rateable
		value of the property.

Notes:

(1) The registered owner of the property was Sing Wo Chong Investment Company Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Ngau Tau Kok & Kowloon Bay Outline Zoning Plan No S/K13/25 dated 12 September 2006, the property was zoned for “Residential (Group A)” use.

– III-56 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

Flats B, C, D, E and F The property comprises on Ground Floor five adjoining shop units on the including the Ground Floor together with an Forecourt, 152A-152D adjoining open forecourt in a Prince Edward Road 10-storey composite building West and 222G-222H completed in about 1960. Fa Yuen Street, Mong Kok, Kowloon, The saleable area of the property Hong Kong is approximately 2,271 sq ft and the area of the

6/64th shares of and forecourt is approximately in Kowloon Inland 3,870 sq ft. Lot No 7634.

The property was HK$51,000,000 occupied by DCH Group as a motor vehicle showroom with ancillary offices.

The property is held under a Conditions of Sale for a term of 75 years from 8 September 1958 renewable 75 years.

The Government rent for the property is HK$34 per annum.

Notes:

(1) The registered owner of the property was Dah Chong Hong Holdings Limited.
(2) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property was zoned for “Residential (Group A)” use.

– III-57 –

APPENDIX III

VALUATION REPORT

Property Description and tenure 42. Shop A-9 on The property comprises a shop Ground Floor, unit on the Ground Floor of a Kwai Chung Centre, 23-storey composite building 102 Kwai Hing Road, completed in 1978. Kwai Chung, New Territories, The saleable area of the property Hong Kong is approximately 573 sq ft. 13/1706th shares of and in Kwai Chung The property is held under a New Town Lot No 294. Grant for a term of 99 years less the last three days from 1 July 1898 and the lease term has been statutorily extended to 30 June 2047.

Market value in Particulars of existing state as at occupancy 31 October 2008 The property was HK$6,600,000 occupied by DCH Group as a food store.

The annual Government rent for the property is an amount equal to 3 per cent. of the then rateable value of the property.

Notes:

(1) The registered owner of the property was Dah Chong Hong, Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Kwai Chung Outline Zoning Plan No S/KC/21 dated 29 June 2004, the property was zoned for “Commercial” use.

– III-58 –

APPENDIX III

VALUATION REPORT

Market value in Particulars of existing state as at occupancy 31 October 2008

Description and tenure

Property Description and tenure occupancy 31 October 2008 43. 12th Floor, The property comprises the The property was HK$15,000,000 Union Park Centre, whole of office spaces on occupied by DCH 771-775 Nathan Road, 12th Floor of a 15-storey Group as office. Mong Kok, Kowloon, (including ground floor and Hong Kong basement) commercial building completed in about 1983. 493/10,000th shares of and in the The saleable area of the property Remaining Portions is 2,929 sq ft. of Kowloon Inland Lot Nos 2570, 2571 The property is held under three and 2572. Government Leases each for a term of 75 years from 26 May 1930 and the lease term has been renewed for a further term of 75 years. The Government rent for the property is HK$12,600 per annum.

Notes:

(1) The registered owner of the property was Triangle Motors Limited, which was a wholly-owned subsidiary of DCH.
(2) According to Mong Kok Outline Zoning Plan No S/K3/25 dated 25 July 2008, the property was zoned for “Commercial” use.

– III-59 –

APPENDIX III

VALUATION REPORT

Group 5C – Property held for owner-occupation in Canada by DCH Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
44.	Richmond Acura	The property comprise an	The property was	HK$88,500,000
	Auto-Dealership	irregular shaped site having a site	occupied by DCH
	Premises,	area of about 9,420.9 sq m	Group as showroom,
	4211 No 3 Road,	(101,407 sq ft) on which a	service bays and office.
	Richmond,	single-storey plus a mezzanine
	British Columbia,	automobile dealership building is
	Canada	erected. For the rest of the site,
		about 213 parking stalls are
	Lot 18 (Except Part	provided. The building was
	Subdivided by Plan	originally completed in 1980s
	70548 and Part on	with renovations carried out in
	Plan LMP48197)	2003.
	Section 32, Block 5,
	North Range 6 West,	It is located on the west side of
	New Westminister	No 3 Road between Browngate
	District Plan 37477.	Road and Leslie Road in the West
		Cambie neighbourhood of
		Richmond, British Columbia.
		The total floor area of the
		property is approximately 2,013.4
		sq m (21,672 sq ft) including
		mezzanine floor of approximately
		546 sq m
		(5,877 sq ft).
		The property is held by Dah
		Chong Hong (Canada) Ltd under
		fee simple.

Notes:

(1) The registered owner of the property was Dah Chong Hong (Canada) Ltd., which was a wholly-owned subsidiary of DCH.
(2) The property was subject to two Mortgages both in favour of Montreal Trust Company.
(3) According to the zoning plan of Automobile-Oriented Commercial District, the property was zoned as Automobile – Oriented Commercial District (“C-6”).

– III-60 –

APPENDIX III

VALUATION REPORT

Group 5D – Property held for owner-occupation in Singapore by DCH Group

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31 October 2008
45.	20 Tuas Avenue 2,	The property comprises a	The property was	HK$22,960,000
	Singapore 639451	single-storey detached factory	occupied by DCH
		with a mezzanine level office	Group as car
	Lot No 1349C Mukim 7	erected on a site with site area of	showroom, workshop,
		approximately 8,413.2 sq m	storage and office.
		(90,560 sq ft). The building was
		originally completed in the 1980s
		and additions/alterations were
		carried out in 1989. Further
		renovation was carried out in
		December 2005.
		It is located at the eastern
		junction of Tuas Avenue 2 and
		Tuas Avenue 3, off Jalan Ahmad
		Ibrahim, within Jurong Industrial
		Estate and some
		24 km from the City Centre.
		The floor area of the property is
		approximately 4,840.5 sq m
		(52,103 sq ft).
		Triangle Auto Pte Limited was
		granted a lease for a term of
		30 years from 16 October 1981
		renewable for 30 years at a fixed
		ground rent of SGD110,276.04 per
		annum with the tenant
		responsible for the property tax.

Notes:

(1) We are instructed to value the leasehold interest of the property held by Triangle Auto Pte Ltd under a ground lease for a term of 30 years from 16 October 1981 renewable for 30 years. Triangle Auto Pte Ltd was a wholly-owned subsidiary of DCH.
(2) According to Master Plan 2003, the property was zoned for “Business 2” use. Land zoned as Business 2 is intended for clean industry, light industry, general industry, warehouse, public utilities and telecommunication uses and other public installations. Special industries such as manufacture of industrial machinery, shipbuilding and repairing, may be allowed in selected areas subject to evaluation by the competent authority.

– III-61 –

APPENDIX III

VALUATION REPORT

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 31 October 2008

259 Pandan Loop The property comprises a Singapore 128435 single-storey terrace factory with a mezzanine level and a rear Lot No 4009A (JTC extension erected on a site with Pte Lot A14379) site area of approximately 1,495.6 Mukim 5 sq m (16,099 sq ft). Two cold rooms are provided within the property. The building was originally completed in the early 1980’s and the rear extension was erected in about 1991.

The property was HK$8,610,000 occupied by DCH Group as a cold store.

It is located on the north-western side of Pandan Loop, off West Coast Highway and some 14.5 km from the City Centre.

The floor area of the property is approximately 1,137.5 sq m (12,244 sq ft).

Dah Chong Hong Trading (Singapore) Pte Ltd was granted a lease for a term of 30 years from 1 December 1982 renewable for 30 years at a fixed ground rent of SGD26,164.80 per annum with the tenant responsible for the property tax.

Notes:

(1) We are instructed to value the leasehold interest of the property held by Dah Chong Hong Trading (Singapore) Pte Ltd under a ground lease for a term of 30 years from 16 October 1981 renewable for 30 years. Dah Chong Hong Trading (Singapore) Pte Ltd was a wholly-owned subsidiary of DCH.
(2) According to Master Plan 2003, the property was zoned for “Business 2” uses. Land zoned as Business 2 is intended for clean industry, light industry, general industry, warehouse, public utilities and telecommunication uses and other public installations. Special industries such as manufacture of industrial machinery, shipbuilding and repairing, may be allowed in selected areas subject to evaluation by the competent authority.

– III-62 –

APPENDIX III

VALUATION REPORT

Group 6 – Property held as Sub-lessee for Occupation in Hong Kong by DCH Group

Property Description and tenure 47. Nos 67–73 The property comprises Fuk Hi Street, industrial complex Yuen Long L-shape leveled site Industrial Estate, approximately 367,976 Yuen Long, was completed in two New Territories, Hong Kong Phase 1 of the property

The property comprises a low-rise industrial complex erected on a roughly L-shape leveled site with a site area of approximately 367,976 sq ft. The property was completed in two phases.

Phase 1 of the property comprises a 2 to 3-storey factory building completed in 1988. Phase 2 of the property comprises a 2-storey extension building (extension to the Phase 1 factory building) and a 2-storey workshop building completed in 1995.

Sub-lease of 1988. Phase 2 of the property comprises a Subsections 1 & 2 2-storey extension building (extension to of Section A and the Phase 1 factory building) and a Section O of Yuen 2-storey workshop building completed in Long Town Lot 1995. No 313 and Extensions The gross floor areas of the property, as thereto. per our measurement from building plans, are summarized as follows:

Market value in Particulars of existing state as at occupancy 31 October 2008

The property HK$91,000,000 was undergoing (see Notes (5) and renovation works (6)) and was planned to be occupied by DCH as an integrated food processing and repackaging centre.

Phase 1 Main Building Phase 2 Extension Phase 2 Additional Building Total	Gross Floor Area 22,720.646 sq m 244,565 sq ft 18,792.524 sq m 202,283 sq ft 804.166 sq m 8,656 sq ft 42,317.336 sq m 455,504 sq ft	Gross Floor Area 22,720.646 sq m 244,565 sq ft 18,792.524 sq m 202,283 sq ft 804.166 sq m 8,656 sq ft 42,317.336 sq m 455,504 sq ft
		455,504 sq ft

The property also comprises the following ancillary areas :

	Area
Guard House	5.2	56
on G/F	sq m	sq ft
Roof & Upper	2,285.747	24,604
Roof of Phase 1	sq m	sq ft
Main Building
Roof & Upper	2,866.152	30,851
Roof of Phase 2	sq m	sq ft
Buildings

The property is held under a sub-lease for a term expiring on 24 June 2047.

The annual Government rent payable for the property is an amount equal to 3 per cent of the then rateable value of the property.

– III-63 –

APPENDIX III

VALUATION REPORT

Notes:

(1) The property was held by Dah Chong Hong Holdings Limited as Sub-leasee.
(2) According to Yuen Long Outline Zoning Plan No S/YL/18 dated 21 October 2008, the property was zoned for “Other Specified Uses (Industrial Estate)”.
(3) The property was subject to the following encumbrances :
(i) Waiver Letters dated 15 October 1983 and 6 September 1984 vide memorial nos YL290217 and YL295589 respectively;
(ii) Particulars and Conditions of Extension of Lease Term dated 4 May 1990 vide memorial no YL425154;
(iii) Extension Letter dated 17 August 1992 vide memorial no YL519967;
(iv) Modification Letter dated 17 August 1992 vide memorial no YL519968;
(v) Supplemental Agreement for Lease and Grant of Extension Area dated 27 May 1993 vide memorial no YL557207; and
(vi) Deed of Variation of Lease dated 28 November 2007 vide memorial no 07122803740855.
(4) Pursuant to Clause B (11) (b) of the Lease, “ in the event that the Lessee is desirous of assigning the said premises at any time during the term hereby demised the Lessee shall first by notice in writing to the Corporation offer to surrender this Lease (Provided That if any such notice of surrender is served during the currency of the Corporation’s notice, if any, of its intention to re-enter the said premises under Clause B (15) hereof such notice of surrender shall be null and void) free from encumbrances at one of the following two considerations payable by the Corporation whichever shall be the lesser......”
(5) As per the specific terms of instructions, we have valued the property based on its market value. Our valuation is prepared on the hypothetical assumption that the property was free from any specific user and alienation restrictions. We also assumed that the property was immediately available for sale in the market with the benefit of vacant possession and assignable in the market with the permission from the Hong Kong Science & Technology Parks Corporation and with the consent fee and/or associated costs fully paid.
(6) According to the Surrender Value consideration as stated under Clause B (11) (b) (i) (A) (I) of the Lease, the Surrender Value of the property as at the date of valuation was in the region of HK$19,000,000.
(7) Pursuant to Clause A (6) of the Deed of Variation of Lease dated 28 November 2007, the Hong Kong Science and Technology Parks Corporation approved the change of user of the Property for an integrated food processing complex with a laboratory for quality assurance and food safety use.

– III-64 –

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

The Circular includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to CITIC Pacific. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

2. SHARE CAPITAL OF CITIC PACIFIC

As at the Latest Practicable Date, the authorised and issued share capital of CITIC Pacific were as follows:

Authorised share capital* 3,000,000,000 Shares	HKD 1,200,000,000

Issued and fully paid up share capital: 2,193,149,160 Shares as at the Latest Practicable Date 1,453,125,000 new Shares to be issued upon full conversion of the Convertible Bond at the initial conversion price of HKD8.00	877,259,664 581,250,000
3,646,274,160	1,458,509,664

* Subject to the Shareholders’ approval, the authorised share capital will be increased to 6,000,000,000 Shares.

All the Shares in issue rank pari passu in all respects, including the rights in particular as to dividend, voting rights and return on capital. The Shares in issue are listed on the Stock Exchange. Save for 343,000 Shares issued pursuant to the exercise of share options granted pursuant to the employee share option scheme of CITIC Pacific, no Share has been issued since 31 December 2007, the date to which the latest audited financial statements of the Group were made up.

3. DISCLOSURE OF INTERESTS

(a) Interests of Directors and chief executive in securities

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and the chief executive of CITIC Pacific had any interest or short position in the shares, underlying shares or debentures of CITIC Pacific or its associated corporations (within the meaning of the SFO) which were required, pursuant to

– IV-1 –

APPENDIX IV

GENERAL INFORMATION

section 352 of the SFO, to be entered into the register referred to therein, or were required to be notified to CITIC Pacific and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short position which he was taken or deemed to have under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Companies set out in the Listing Rules:

(i) Shares in CITIC Pacific:

Name of Director Larry Yung Chi Kin Henry Fan Hung Ling Peter Lee Chung Hing Carl Yung Ming Jie Vernon Francis Moore Li Shilin Liu Jifu Wang Ande Hansen Loh Chung Hon André Desmarais Peter Kruyt (alternate Director to André Desmarais)	Number of Shares Personal interests unless otherwise stated Percentage to the issued share capital (%) 418,418,000 (Note 1) 19.078 50,640,000 (Note 2) 2.309 1,000,000 0.046 300,000 0.014 4,200,000 (Note 3) 0.192 300,000 0.014 840,000 0.038 400,000 0.018 1,550,000 (Note 4) 0.071 10,145,000 (Note 5) 0.463 34,100 0.002

Note:

Corporate interest.
Corporate interest in respect of 5,640,000 Shares and trust interest in respect of 45,000,000 Shares.
Trust interest.
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.
Corporate interest in respect of 10,000,000 Shares and family interest in respect of 145,000 Shares.

– IV-2 –

APPENDIX IV

GENERAL INFORMATION

(ii) Share options in CITIC Pacific:

Name of Director
Date of
Grant
Exercise
price per
Share
Exercisable Period
HKD
Larry Yung Chi Kin
16.10.2007
47.32
16.10.2007 – 15.10.2012
Peter Lee Chung Hing
01.11.2004
19.90
01.11.2004 – 31.10.2009
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Carl Yung Ming Jie
01.11.2004
19.90
01.11.2004 – 31.10.2009
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Vernon Francis Moore
01.11.2004
19.90
01.11.2004 – 31.10.2009
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Li Shilin
16.10.2007
47.32
16.10.2007 – 15.10.2012
Liu Jifu
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Milton Law Ming To
01.11.2004
19.90
01.11.2004 – 31.10.2009
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Wang Ande
20.06.2006
22.10
20.06.2006 – 19.06.2011
16.10.2007
47.32
16.10.2007 – 15.10.2012
Kwok Man Leung
16.10.2007
47.32
16.10.2007 – 15.10.2012
Chang Zhenming
16.10.2007
47.32
16.10.2007 – 15.10.2012

Number of
share options
outstanding as
at the Latest
Practicable
Date
Percentage to
issued share
capital
(%)
2,000,000
0.091
1,000,000
1,200,000
1,200,000
3,400,000
0.155
500,000
600,000
800,000
1,900,000
0.087
1,000,000
700,000
600,000
2,300,000
0.105
500,000
0.023
700,000
700,000
1,400,000
0.064
334,000
800,000
800,000
1,934,000
0.088
350,000
800,000
1,150,000
0.052
600,000
0.027
500,000
0.023

– IV-3 –

APPENDIX IV

GENERAL INFORMATION

(iii) Shares in the associated corporations:

Name of Director
Vernon Francis Moore
Note:
1.
Trust interest.
Name of Director
Li Shilin
Liu Jifu
Hansen Loh Chung Hon

Number of ordinary
shares in CITIC 1616
Holdings Limited
Personal interests unless
otherwise stated
Percentage to the
issued share capital
(%)
200,000
(Note 1)
0.010
Number of ordinary shares
in Dah Chong Hong
Holdings Limited
Personal interests unless
otherwise stated
Percentage to the
issued share capital
(%)
12,000
0.001
33,600
(Note 1)
0.002
62,000
(Note 2)
0.003

Note:

Family interest.
Corporate interest in respect of 20,000 shares and concert party interest in respect of 42,000 shares.

(iv) Share options in the associated corporations:

Share options in CITIC Capital Holdings Limited

	Share options in CITIC Capital Holdings Limited	Share options in CITIC Capital Holdings Limited

Name of Director Date of Grant Exercise price per share Exercisable Period (HKD) Peter Lee Chung Hing 02.03.2005 66.54 02.03.2007 – 01.03.2010 04.04.2006 70.97 04.04.2008 – 03.04.2011 11.12.2007 80.03 11.12.2009 – 10.12.2012	Date of Grant Exercise price per share Exercisable Period (HKD) 02.03.2005 66.54 02.03.2007 – 01.03.2010 04.04.2006 70.97 04.04.2008 – 03.04.2011 11.12.2007 80.03 11.12.2009 – 10.12.2012	Number of share options outstanding at the Latest Practicable Date Percentage to issued share capital (%) 15,000 10,000 10,000
		35,000 0.125

– IV-4 –

APPENDIX IV

GENERAL INFORMATION

Share options in CITIC Capital Holdings Limited

	Share options in CITIC Capital Holdings Limited	Share options in CITIC Capital Holdings Limited

Name of Director Date of Grant Exercise price per share Exercisable Period (HKD) Vernon Francis Moore 02.03.2005 66.54 02.03.2007 – 01.03.2010 04.04.2006 70.97 04.04.2008 – 03.04.2011 11.12.2007 80.03 11.12.2009 – 10.12.2012 Chang Zhenming 11.12.2007 80.03 11.12.2009 – 10.12.2012	Date of Grant Exercise price per share Exercisable Period (HKD) 02.03.2005 66.54 02.03.2007 – 01.03.2010 04.04.2006 70.97 04.04.2008 – 03.04.2011 11.12.2007 80.03 11.12.2009 – 10.12.2012	Number of share options outstanding at the Latest Practicable Date Percentage to issued share capital (%) 15,000 10,000 10,000
		35,000 0.125 125,000 0.446

(b) Substantial shareholders of CITIC Pacific

As at the Latest Practicable Date, save as disclosed herein, so far as was known to any Director or chief executive of CITIC Pacific, no person (other than a Director or chief executive of CITIC Pacific or their respective associates) had any interest or short position in the Shares or underlying Shares which would fall to be disclosed to CITIC Pacific under the provisions of Divisions 2 and 3 of Part XV of the SFO or were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of CITIC Pacific:

		Percentage to
	Number of	the issued
Name	Shares	share capital
		(%)
CITIC Group	2,098,736,285*	95.695*
CITIC HK	645,611,285	29.438
Heedon Corporation	496,386,285	22.633
Honpville Corporation	310,988,221	14.180
Power Corporation of Canada	156,220,000	7.123
Gelco Enterprises Ltee	156,220,000	7.123
Nordex Inc.	156,220,000	7.123
Paul G. Desmarais	156,220,000	7.123

Such shareholding interest takes into account CITIC Group’s long position in the Shares pursuant to the Convertible Bond pursuant to the requirements of the SFO

– IV-5 –

APPENDIX IV

GENERAL INFORMATION

CITIC HK is a substantial shareholder of CITIC Pacific (within the meaning of the Listing Rules) indirectly through the following wholly owned subsidiary companies:

		Percentage to
Name of subsidiary companies of	Number of	the issued
CITIC HK	Shares	share capital
		(%)
Affluence Limited	46,089,000	2.101
Winton Corp.	30,718,000	1.401
Westminster Investment Inc.	101,960,000	4.649
Jetway Corp.	20,462,000	0.933
Cordia Corporation	32,258,064	1.471
Honpville Corporation	310,988,221	14.180
Hainsworth Limited	93,136,000	4.247
Southpoint Enterprises Inc.	10,000,000	0.456
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 CITIC Pacific beneficially. Accordingly, Honpville Corporation is a substantial shareholder of CITIC Pacific (within the meaning of the Listing Rules).

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 CITIC Pacific duplicate the interests of CITIC HK in CITIC Pacific. The interests of CITIC HK in CITIC Pacific duplicate the interests in CITIC Pacific of all its direct and indirect subsidiary companies as described above. The interests of Heedon Corporation in CITIC Pacific duplicate the interests in CITIC Pacific of all its direct and indirect subsidiary companies as described above. The interests of Affluence Limited in CITIC Pacific duplicate the interests in CITIC Pacific of its direct subsidiary company as described above. The interests of Man Yick Corporation in CITIC Pacific duplicate the interests in CITIC Pacific of its direct subsidiary company as described above. The interests of Barnsley Investments Limited in CITIC Pacific duplicate the interests in CITIC Pacific of its direct subsidiary company as described above and the interests of Kotron Company Ltd. in CITIC Pacific duplicate the interests in CITIC Pacific of its direct subsidiary company as described above.

– IV-6 –

APPENDIX IV

GENERAL INFORMATION

Power Corporation of Canada is a company 53.83% controlled by Gelco Enterprises Ltee 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 Ltee, Nordex Inc. and Mr. Paul G. Desmarais in CITIC Pacific duplicate each other.

Save as disclosed below, none of the Directors was a director or employee of a company which had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to CITIC Pacific under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of Director

Name of company which had such discloseable interest or short position

Position within such company

Larry Yung Chi Kin CITIC Group CITIC HK Heedon Corporation Honpville Corporation Earnplex Corporation

Larry Yung Chi Kin CITIC Group Director CITIC HK Director Heedon Corporation Director Honpville Corporation Director Earnplex Corporation Director & Shareholder Bloomfield Enterprises Director & Corp. Shareholder Rockhampton Director & Investments Limited Shareholder Henry Fan Hung Ling CITIC HK Director Carl Yung Ming Jie Earnplex Corporation Director Vernon Francis Moore Heedon Corporation Director Honpville Corporation Director Li Shilin CITIC Group Director Liu Jifu CITIC HK Director André Desmarais Power Corporation of President & Canada Co-Chief Executive Officer Peter Kruyt (alternate Power Corporation of Vice President Director to André Canada Desmarais) Chang Zhenming CITIC Group Director

– IV-7 –

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date,

(i) none of CITIC Pacific nor any of the Directors held (or, during the Relevant Period, dealt in) any equity interest (including shares, options, derivatives, warrants and other securities convertible into the shares or any other derivatives of CITIC Group) in CITIC Group;
(ii) none of (i) CITIC Pacific’s subsidiaries or (ii) a pension fund of CITIC Pacific or any of its subsidiaries or (iii) an adviser to CITIC Pacific as specified in class (2) of the definition of “associate” in the Takeovers Code owns or controls any shareholdings in CITIC Pacific, nor has dealt in the Shares during the Relevant Period;
(iii) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with CITIC Pacific or with any person who is an associate of CITIC Pacific by virtue of classes (1), (2), (3) and (4) of the definition of “associate” in the Takeovers Code;
(iv) none of the members of the CITIC Group Concert Parties, CITIC Pacific, or the Directors had borrowed or lent any Shares save for any borrowed Shares which have been either on-lent or sold;
(v) none of the Independent Shareholders had irrevocably committed themselves to vote for or against the Agreement and/or the Whitewash Waiver;
(vi) there is no agreement, arrangement or understanding (including any compensation arrangement) between CITIC Group or any person acting in concert with it and any of the Directors, recent Directors, Shareholders and recent Shareholders having any connection with or dependence upon the outcome of the Agreement and/or the Whitewash Waiver. There is no benefits to be given to any Directors as compensation for loss of office or otherwise in connection with the Agreement and the Whitewash Waiver;
(vii) there is no agreement or arrangement between any Directors and any other person which is conditional on or dependent upon the outcome of the Agreement and the Whitewash Waiver or otherwise connected therewith;
(viii) there is no material contract entered into by CITIC Group in which any Director has a material personal interest;
(ix) none of the Directors has any interest, direct or indirect, in any assets which had been, since 31 December 2007, being the date of the latest published audited consolidated financial statements of CITIC Pacific were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group;

– IV-8 –

APPENDIX IV

GENERAL INFORMATION

(x) save for Larry Yung Chi Kin (418,418,000 Shares and 2,000,000 share options), Li Shilin (300,000 Shares and 500,000 share options) and Chang Zhenming (500,000 share options) as disclosed in the Circular, none of the directors of CITIC Group has any shareholding interest in CITIC Pacific; and
(xi) save as disclosed in the Circular, none of the Directors, the directors of CITIC Group or members of the CITIC Group Concert Parties had dealt for value in any Shares, convertible securities, warrants, options or derivatives of CITIC Pacific during the Relevant Period. The shareholdings of the CITIC Group Concert Parties in CITIC Pacific are disclosed in the section headed “Changes to the Shareholding in CITIC Pacific as a result of Conversion” in the letter from the Board in the Circular.

4. MATERIAL CONTRACTS

The following are contracts of CITIC Pacific which are material contracts (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of the Circular or require disclosure in the Circular in accordance with the Takeovers Code or the Listing Rules, as the case may be:

The Agreement;
The Standby Facility;
The sale and purchase agreement dated 26 August 2008 between Delight Star Enterprises Limited 愉星企業有限公司 (“DSE”) (a wholly-owned subsidiary of Dah Chong Hong Holdings Limited (“DCH Holdings”) and a non-wholly owned subsidiary of CITIC Pacific), DCH Holdings, Denker Investment Limited 駿佳投資有限公司 (“DIL”) and Mr. Mak Hing Lung, pursuant to which DSE (or its nominee) agreed to purchase and DIL agreed to sell 49% and 50% equity interests in Strong Step Holdings Limited 碩晉控股有限公司 and Star Partner Holdings Limited 易博控股有限公司, respectively, and the related shareholders’ loans for a total consideration of HKD143,716,000;
The public offer underwriting agreement between DCH Holdings and BNP Paribas Capital (Asia Pacific) Limited (for itself and on behalf of other underwriters) dated 3 October 2007 in respect of the Hong Kong public offer of DCH Holdings shares; and the international underwriting agreement dated 10 October 2007 between DCH Holdings and the underwriters in respect of the international placing, pursuant to which the underwriters had severally agreed to subscribe or procure subscribers for, on the terms and conditions of the prospectus issued by DCH Holdings on 4 October 2007;

– IV-9 –

APPENDIX IV

GENERAL INFORMATION

The underwriting agreement dated 21 March 2007 between CITIC 1616 Holdings Limited (“CITIC 1616”) and BNP Paribas Capital (Asia Pacific) Limited (for itself and on behalf of other underwriters) in respect of the Hong Kong public offer of shares of CITIC 1616 (“CITIC 1616 Shares”); and the international underwriting agreement on 28 March 2007 in respect of the international placing, pursuant to which the underwriters had severally agreed to subscribe or procure subscribers for, on the terms and conditions of the prospectus issued by CITIC 1616;
Novation Contracts:
(i) Confirmation letter dated 9 July 2008 evidencing the terms of a foreign exchange forward transaction entered into on 8 July 2008 between CITIC Pacific and Citibank N.A., Hong Kong Branch (“Citibank”) whereby CITIC Pacific has agreed to purchase from Citibank (A) a contract amount of AUD10,000,000, if the AUD/USD reference rate is equal to or higher than the forward rate (being an AUD/USD exchange rate between 0.8000 and 0.8600 depending on the rate fixing date) on the rate fixing date; or (B) a contract amount of AUD30,000,000, if the AUD/USD reference rate is below the forward rate on the rate fixing date, with USD (equal to such contract amount multiplied by the forward rate) between 4 November 2008 and 6 October 2010. Such transaction is also subject to a knock out feature whereby if such knock out event occurs, settlement payments are payable by the parties and the remaining transactions are terminated as more particularly described in the confirmation letter;
(ii) Confirmation letter dated 16 July 2008 evidencing the terms of 24 foreign exchange forward transactions entered into on 16 July 2008 between CITIC Pacific and Coöperatieve Centrale RaiffeisenBoerenleenbank B.A. (trading as Rabobank International) (“Rabobank”) acting out of its Hong Kong office whereby, in respect of each transaction, CITIC Pacific has agreed to purchase from Rabobank (A) an amount of AUD10,000,000, if the AUD/USD reference rate is equal to or higher than the forward rate (being an AUD/USD exchange rate between 0.7815 and 0.9600 depending on the expiry date) on the expiry date, with an amount in USD (equal to such AUD amount multiplied by the forward rate on the relevant expiry date); or (B) an amount of AUD25,000,000, if the AUD/USD reference rate is below the forward rate on the expiry date, with an amount in USD (equal to such AUD amount multiplied by the forward rate at the specified expiry date), with the expiry dates for such transactions occurring at specified times between 16 October 2008 and 16 September 2010. Each such transaction is also subject to a knock out feature whereby if such knock out event occurs, settlement payments are payable by the parties and the remaining transactions are terminated as more particularly described in the confirmation letter;

– IV-10 –

APPENDIX IV

GENERAL INFORMATION

(iii) Confirmation letter dated 26 August 2008 evidencing the terms of 24 foreign exchange forward transactions entered into on 16 July 2008 between CITIC Pacific and Standard Chartered Bank (“SCB”) whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from SCB (A) an amount of AUD15,000,000, if the AUD/USD exchange rate is greater than or equal to the strike rate (being an AUD/USD exchange rate between 0.7840 and 0.9600 depending on the expiry date) on the expiry date; or (B) an amount of AUD37,500,000, if the AUD/USD exchange rate is less than the strike rate on the expiry date, with USD (in an amount equal to such AUD amount multiplied by the strike rate), the 24 transactions in respect of expiry dates occurring between 16 October 2008 and 16 September 2010 for settlement on dates occurring between 18 December 2008 and 20 September 2010. Each such transaction is subject to a target knock-out feature whereby if such target knock-out event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(iv) Amended confirmation letter dated 30 October 2008 evidencing the terms of a foreign exchange forward transaction entered into on 18 July 2008 between CITIC Pacific and NATIXIS whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from NATIXIS (A) an amount of AUD10,000,000, if the AUD/USD exchange rate is equal to or higher than the strike rate (being an AUD/USD exchange rate between 0.7810 and 0.9400 depending on the fixing date) on the fixing date; or (B) an amount of AUD25,000,000, if the AUD/USD exchange rate is below the strike rate on the fixing date, with USD (in an amount equal to such AUD amount multiplied by the strike rate), in respect of 24 fixing dates occurring between 20 October 2008 and 20 September 2010 for settlement on dates occurring between 22 October 2008 and 22 September 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;
(v) Confirmation letter dated 13 August 2008 evidencing the terms of a foreign exchange forward transaction entered into on 22 July 2008 between CITIC Pacific and Credit Suisse International (“CSIN”) whereby CITIC Pacific has agreed to purchase from CSIN (A) an amount of AUD10,000,000, if the AUD/USD foreign exchange rate is equal to or greater than the strike (being an AUD/USD exchange rate between 0.7810 and 0.9430 depending on the valuation date) on the valuation date; or (B) an amount of AUD25,000,000, if the AUD/USD foreign exchange rate is less than the strike on the valuation date, with USD (equal to such AUD amount multiplied by the strike on the relevant valuation date), in respect of 24 valuation dates occurring between 29 October 2008 and 28 September 2010 for settlement on dates occurring

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between 31 October 2008 and 30 September 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;

(vi) Confirmation letter dated 24 July 2008 (as amended on 22 October 2008 with effect from 21 October 2008) evidencing the terms of a foreign exchange forward transaction entered into on 23 July 2008 between CITIC Pacific and Bank of America, N.A. (“BOA”) whereby CITIC Pacific has agreed to purchase from BOA (A) an amount of AUD6,533,333, if the AUD/USD reference rate is greater than or equal to the forward rate (being an AUD/USD exchange rate between 0.7765 and 0.9400 depending on the valuation date) on the valuation date; or (B) an amount of AUD16,333,333, if the AUD/USD reference rate is less than the forward rate on the valuation date, with USD (equal to such AUD amount multiplied by the forward rate) in respect of 24 valuation dates occurring between 23 October 2008 and 22 September 2010 for settlement on dates occurring between 27 October 2008 and 27 September 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;
(vii) Confirmation letter dated 5 September 2008 (as amended on 2 October 2008 with effect from 29 September 2008) evidencing the terms of 24 foreign exchange forward transactions entered into on 23 July 2008 between CITIC Pacific and Barclays Bank PLC (“Barclays”) whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from Barclays (A) an amount of AUD4,166,666.67, if the AUD/USD exchange rate is greater than or equal to the strike rate (being an AUD/USD exchange rate between 0.7735 and 0.9400 depending on the expiry date) on the expiry date; or (B) an amount of 2.5 times AUD4,166,666.67, if the AUD/USD reference rate is less than the strike rate on the expiry date, with USD (in an amount equal to in the case of (A) the AUD amount multiplied by the strike rate, or in the case of (B) 2.5 times the AUD amount multiplied by the strike rate), the 24 transactions in respect of expiry dates occurring between 23 October 2008 and 22 September 2010 for settlement on dates occurring between 27 October 2008 and 27 September 2010. Each such transaction is subject to a trigger feature whereby if such trigger event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(viii) Confirmation letter dated 29 August 2008 evidencing the terms of a foreign exchange forward transaction entered into on 25 July 2008 between CITIC Pacific and BNP Paribas Hong Kong Branch (“BNP”) whereby CITIC Pacific has agreed to purchase from BNP (A) an amount

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of AUD10,000,000, if the AUD/USD exchange rate is at or above the forward rate (being an AUD/USD exchange rate between 0.7880 and 0.9395 depending on the valuation date) on the valuation date; or (B) an amount of AUD20,000,000, if the AUD/USD exchange rate is below the forward rate on the valuation date, with USD (in an amount equal to such AUD amount multiplied by the forward rate) in respect of 24 valuation dates occurring between 25 September 2008 and 26 August 2010 for settlement on dates occurring between 29 September 2008 and 30 August 2010. Such transaction is subject to a knock-out feature whereby if such knock-out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;

(ix) Confirmation letter dated 13 August 2008 evidencing the terms of a foreign exchange forward transaction entered into on 28 July 2008 between CITIC Pacific and CSIN whereby CITIC Pacific has agreed to purchase from CSIN (A) an amount of AUD10,000,000, if the AUD/USD foreign exchange rate is equal to or greater than the strike (being an AUD/USD exchange rate between 0.7730 and 0.9430 depending on the valuation date) on the valuation date; or (B) an amount of AUD25,000,000, if the AUD/USD foreign exchange rate is less than the strike on the valuation date, with USD (equal to such AUD amount multiplied by the strike on the relevant valuation date), in respect of 24 valuation dates occurring between 28 October 2008 and 28 September 2010 for settlement on dates occurring between 30 October 2008 and 30 September 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;
(x) Confirmation letter dated 21 August 2008 evidencing the terms of a foreign exchange forward transaction entered into on 29 July 2008 between CITIC Pacific and Morgan Stanley Capital Services Inc. (“MS”) whereby CITIC Pacific has agreed to purchase from MS (A) an amount of AUD10,000,000, if the AUD/USD exchange rate is equal to or higher than the reference strike rate (being an AUD/USD exchange rate between 0.7770 and 0.9560 depending on the expiration date) on the expiration date; or (B) an amount of AUD25,000,000, if the AUD/USD exchange rate is below the reference strike rate on the expiration date, with USD (in an amount equal to such AUD amount multiplied by the reference strike rate), in respect of 24 expiry dates occurring between 26 September 2008 and 26 August 2010 for settlement dates occurring between 30 September 2008 and 30 August 2010. Such transaction is also subject to a target redemption feature whereby if such target event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;

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(xi) Confirmation letter dated 5 September 2008 evidencing the terms of 24 foreign exchange forward transactions entered into on 5 August 2008 between CITIC Pacific and Barclays whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from Barclays (A) an amount of AUD5,000,000, if the AUD/USD exchange rate is greater than or equal to the strike rate (being an AUD/USD exchange rate between 0.7725 and 0.9350 depending on the expiry date) on the expiry date; or (B) an amount of 2 times AUD5,000,000, if the AUD/USD reference rate is less than the strike rate on the expiry date, with USD (in an amount equal to in the case of (A) the AUD amount multiplied by the strike rate, or in the case of (B) 2 times the AUD amount multiplied by the strike rate), the 24 transactions in respect of expiry dates occurring between 2 October 2008 and 3 September 2010 for settlement on dates occurring between 8 October 2008 and 7 September 2010. Each such transaction is subject to a trigger feature whereby if such trigger event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
AUD target redemption forward contracts:
(i) Confirmation letter dated 17 July 2008 evidencing the terms of 24 foreign exchange forward transactions entered into on 12 June 2008 between CITIC Pacific and SCB whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from SCB (A) an amount of AUD8,000,000, if the AUD/USD exchange rate is greater than or equal to the forward rate (being an AUD/USD exchange rate of 0.7975) on the expiry date; or (B) an amount of AUD20,000,000, if the AUD/USD exchange rate is less than the forward rate on the expiry date, with USD (in an amount equal to such AUD amount multiplied by the forward rate), the 24 transactions in respect of expiry dates occurring between 12 September 2008 and 12 August 2010 for settlement on dates occurring between 17 November 2008 and 16 August 2010. Each such transaction is subject to a knock-out feature whereby if such knock-out event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(ii) Term sheet dated 30 July 2008 setting out the terms of a foreign exchange forward transaction entered into on 29 July 2008 between Sino Iron and China Development Bank (“CDB”) whereby, in respect of each specified period, Sino Iron has agreed to purchase from CDB (A) an amount of AUD20,000,000, if the AUD/USD fixing rate is equal to or higher than the monthly strike rate (being an AUD/USD exchange rate between 0.7750 and 0.9600 depending on the expiry date) on the expiry date; or (B) an amount of AUD50,000,000, if the AUD/USD fixing rate is below the monthly strike rate on the expiry date, with USD (in an

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amount equal to such AUD amount multiplied by the monthly strike rate), in respect of 24 expiry dates occurring between 15 October 2008 and 15 September 2010 for settlement on dates occurring between 17 October 2008 and 17 September 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the term sheet;

(iii) Confirmation letter dated 12 August 2008 evidencing the terms of 24 foreign exchange forward transactions entered into on 8 August 2008 between CITIC Pacific and The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) whereby, with respect to each transaction, CITIC Pacific has agreed to purchase from HSBC (A) an amount of AUD10,000,000, if the AUD/USD exchange rate is equal to or higher than the forward rate (being an AUD/USD exchange rate of 0.7900) on the determination date; or (B) an amount of AUD20,000,000, if the AUD/USD exchange rate is below the forward rate on the determination date, with USD (in an amount equal to such AUD amount multiplied by the forward rate), the 24 transactions with determination dates occurring between 10 September 2008 and 10 August 2010. Each such transaction is also subject to a target redemption feature whereby if such target event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(iv) Term sheet dated 11 August 2008 setting out the terms of a foreign exchange forward transaction entered into on 8 August 2008 between Sino Iron and CDB whereby Sino Iron has agreed to purchase from CDB (A) an amount of AUD10,000,000, if the AUD/USD fixing rate is equal to or higher than 0.7860 on the expiry date; or (B) an amount of AUD25,000,000, if the AUD/USD fixing rate is below 0.7860 on the expiry date, with USD (in an amount equal to such AUD amount multiplied by 0.7860), in respect of 24 expiry dates occurring between 10 September 2008 and 10 August 2010 for settlement on dates occurring between 12 September 2008 and 12 August 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the term sheet;
(v) Confirmation letter dated 20 August 2008 evidencing the terms of a foreign exchange forward transaction entered into on 11 August 2008 between CITIC Pacific and Calyon whereby CITIC Pacific has agreed to purchase from Calyon (A) an amount of AUD10,000,000, if the AUD/USD exchange rate is equal to or higher than the strike rate (being an AUD/USD fixing rate of 0.7900) on the valuation date; or (B) an amount of AUD20,000,000, if the AUD/USD fixing rate is below the strike rate on the valuation date, with USD (in an amount equal to such

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AUD amount multiplied by the strike rate), in respect of valuation dates occurring between 11 September 2008 and 11 August 2010 for settlement on dates occurring between 16 September 2008 and 13 August 2010. Such transaction is subject to a knock out feature whereby if such knock out event occurs, settlement amounts are payable by the parties and the remaining transaction shall be terminated as more particularly described in the confirmation letter;

Daily accrual contracts for AUD:
(i) Amended and restated confirmation letter dated 7 November 2007 evidencing the terms of a foreign exchange forward transaction entered into on 30 August 2007 between CITIC Pacific and Calyon whereby CITIC Pacific has agreed to purchase from Calyon (A) AUD 0, if the fixing rate is equal to or higher than 0.8500; or (B) AUD50,000, if the fixing rate is equal to or higher than 0.7680 and less than 0.8500; or (C) AUD100,000, if the fixing rate is lower than 0.7680), with USD (equal to such amount in AUD converted into USD at an exchange rate of 0.7680) such amounts to be calculated daily for specified periods from 30 August 2007 to 25 February 2009 and settled in dates between 29 February 2008 and 27 February 2009;
(ii) Confirmation letter dated 10 October 2007 evidencing the terms of 19 foreign exchange forward transactions entered into on 7 September 2007 between CITIC Pacific and HSBC whereby CITIC Pacific has agreed to purchase from HSBC an amount equal to AUD100,000 multiplied by the number of days in specified accrual periods where the fixing rate is less than 0.8500 in exchange for an amount equal to USD78,000 multiplied by the number of days in specified accrual periods where the fixing rate is less than 0.8500, the first accrual period starting on 10 September 2007 and the last accrual period ending on 9 September 2009 and such transactions to be settled on specified dates between 11 March 2008 and 11 September 2009;
(iii) Confirmation letter dated 10 October 2007 evidencing the terms of 19 foreign exchange forward transactions entered into on 7 September 2007 between CITIC Pacific and HSBC whereby CITIC Pacific has agreed to purchase from HSBC an amount equal to (i) AUD150,000 multiplied by the number of days in specified accrual periods where the fixing rate is equal to or higher than 0.7680 but less than 0.8500 plus (ii) an amount equal to AUD300,000 multiplied by the number of days in the same specified accrual periods where the fixing rate is less than 0.7680, in exchange for an amount equal to (iii) USD115,200 multiplied by the number of days in same specified accrual periods where the fixing rate is equal to or higher than 0.7680 but less than 0.8500 plus (iv) an amount equal to USD230,400 multiplied by the number of days in same specified accrual periods where the fixing rate is less than 0.7680, the first accrual period starting on 10 September 2007 and the last accrual period ending

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on 9 September 2009 and such transactions to be settled at specified dates between 11 March 2008 and 11 September 2009;

Dual currency target redemption forward contracts:
(i) Confirmation letter dated 22 July 2008 evidencing terms of 24 foreign exchange forward transactions entered into on 15 July 2008 between CITIC Pacific and HSBC whereby, in respect of each transaction, CITIC Pacific has agreed to purchase from HSBC (A)(i) AUD4,000,000, if the AUD/USD exchange rate is equal to or higher than 0.8450 on the relevant determination date, in exchange for an amount in USD equivalent to the product of AUD4,000,000 and 0.8450 (“Condition 1”); or (ii) AUD8,000,000, if the AUD/USD exchange rate is lower than 0.8450 on the relevant determination date, in exchange for an amount in USD equivalent to the product of AUD8,000,000 and 0.8450 (“Condition 2”); and (B)(i) EUR2,000,000, if the EUR/USD exchange rate is equal to or higher than 1.4400 on the relevant determination date, in exchange for an amount in USD equivalent to the product of EUR2,000,000 and 1.4400 (“Condition 3”); or (ii) EUR4,000,000, if the EUR/USD exchange rate is lower than 1.4400 on the relevant determination date, in exchange for an amount in USD equivalent to the product of EUR4,000,000 and 1.4400 (“Condition 4”); the determination dates for the 24 transactions being monthly dates from 14 August 2008 to 15 July 2010, provided that if both Conditions 1 and 3 are satisfied on a determination date, such transaction will be settled in accordance with the relevant Condition that produce lower currency monthly pair gains as calculated in accordance with the terms of the confirmation letter. Such transactions are also subject to a target redemption feature whereby if the relevant target event occurs, settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(ii) Confirmation letter dated 4 August 2008 evidencing terms of a foreign exchange forward transaction entered into on 18 July 2008 between CITIC Pacific and BNP whereby CITIC Pacific has agreed to purchase from BNP (A)(i) an amount in EUR (equal to USD2,000,000 multiplied by EUR forward rate (being an EUR/USD exchange rate between 1.3820 and 1.4600 depending on the valuation dates) if the EUR/USD reference price on the valuation date is equal to or higher than the EUR forward rate or (ii) an amount in EUR (equal to USD5,000,000 multiplied by EUR forward rate) if the EUR/USD reference price on the valuation date is less than the EUR forward rate; and (B)(i) an amount in AUD (equal to USD2,000,000 multiplied by AUD forward rate (being an AUD/USD exchange rate between 0.7900 and 0.9500 depending on the valuation date) if the AUD/USD reference price on the valuation date is equal to or higher than the AUD forward rate or (ii) an amount in AUD (equal to USD5,000,000 multiplied by AUD forward rate) if the AUD/USD reference price on the valuation date is less than the AUD forward rate,

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in respect of 24 valuation dates occurring between 20 August 2008 and 20 July 2010 for settlement on dates occurring between 22 August 2008 and 22 July 2010, provided that on each settlement date, only the currency pair with the lower monthly intrinsic value (as calculated on each corresponding valuation date as more particularly described in the confirmation letter) will be settled. Such transaction is also subject to a knock out feature whereby if such knock out event occurs settlement amounts are payable by the parties and the remaining transactions shall be terminated as more particularly described in the confirmation letter;

RMB target redemption forward contracts:
(i) Amended confirmation letter dated 28 October 2008 evidencing terms of 18 foreign exchange forward transactions entered into on 8 July 2008 between CITIC Pacific and Deutsche Bank AG, Hong Kong Branch (“DB”) whereby (A) DB has agreed to pay CITIC Pacific, if the USD/CNY exchange rate is less than or equal to the settlement rate (being an exchange rate between 6.8900 and 6.4500 depending on the valuation date) on a valuation date, an amount equal to USD10,000,000 multiplied by (i) the settlement rate minus the USD/CNY exchange rate divided by (ii) the USD/CNY exchange rate; (B) CITIC Pacific has agreed to pay DB, if the USD/CNY exchange rate is higher than the settlement rate on a valuation date by less than or equal to 1.5, an amount equal to USD20,000,000 multiplied by (i) the USD/CNY exchange rate minus the settlement rate divided by (ii) the USD/CNY exchange rate; and (C) CITIC Pacific has agreed to pay DB, if the USD/CNY exchange rate is higher than the settlement rate on a valuation date by more than 1.5, an amount equal to USD20,000,000 multiplied by (i) 1.5 divided by (ii) the USD/CNY exchange rate (the valuation dates for the 18 transactions being monthly dates from 7 August 2008 to 7 January 2010). Such transactions are subject to a target profit provision whereby if the target profit event occurs, a settlement amount is payable and the remaining transactions shall be terminated as more particularly described in the confirmation letter;
(ii) Confirmation letter dated 22 July 2008 evidencing terms of a foreign exchange forward transaction entered into on 16 July 2008 between CITIC Pacific and Calyon whereby (A) Calyon has agreed to pay CITIC Pacific if the USD/CNY exchange rate is less than or equal to the strike rate (being an exchange rate between 6.8520 and 6.3500 depending on the valuation date) on a valuation date, an amount equal to USD10,000,000 multiplied by (i) the strike rate minus the USD/CNY exchange rate divided by (ii) the USD/CNY exchange rate; and (B) CITIC Pacific has agreed to pay Calyon if the USD/CNY exchange rate is higher than the strike rate on a valuation date, an amount equal to USD20,000,000 multiplied by (i) the USD/CNY exchange rate minus the strike rate divided by (ii) the USD/CNY exchange rate, in respect of 18 valuation dates occurring between 14 August 2008 and 15 January 2010

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to be settled on settlement dates occurring between 18 August 2008 and 19 January 2010. Such transactions are subject to a knock out feature whereby if the knock out event occurs a settlement amount shall be payable and the remaining transactions shall be terminated as more particularly described in the confirmation letter; and

(iii) Confirmation letter dated 12 August 2008 (as amended on 24 September 2008 with effect from 23 September 2008) evidencing terms of a foreign exchange forward transaction entered into on 18 July 2008 between CITIC Pacific and Calyon whereby (A) Calyon has agreed to pay CITIC Pacific, if the USD/CNY exchange rate is less than or equal to the strike rate (being an exchange rate between 6.8520 and 6.1000 depending on the fixing date) on a fixing date, an amount equal to USD8,000,000 multiplied by (i) the strike rate minus the USD/CNY exchange rate divided by (ii) the USD/CNY exchange rate; and (B) CITIC Pacific has agreed to pay Calyon, if the USD/CNY exchange rate is higher than the strike rate on a fixing date, an amount equal to USD16,000,000 multiplied by (i) the USD/CNY exchange rate minus the strike price divided by (ii) the USD/CNY exchange rate, in respect of 24 fixing dates occurring between 20 August 2008 and 20 July 2010 to be settled on delivery dates occurring between 22 August 2008 and 22 July 2010. Such transactions are subject to a knock out feature whereby if the knock out event occurs a settlement amount shall be payable and the remaining transaction shall be terminated as more particularly described in the confirmation letter.

Save for the contracts disclosed above, as of the Latest Practicable Date, CITIC Pacific or its subsidiaries had not entered into any material contracts (not being contracts in the ordinary course of business) within the two years immediately preceding the date of the Circular.

5. LITIGATION AND CLAIMS

On 22 October 2008, the SFC announced publicly that it wishes to confirm that a formal investigation has been commenced into the affairs of CITIC Pacific and it has no further statement to make at that point in time.

As at the Latest Practicable Date, neither CITIC Pacific nor any of its subsidiaries was engaged in any litigation or claim of material importance and, so far as the Directors were aware, no litigation or claim of material importance was pending or threatened against CITIC Pacific or any of its subsidiaries.

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6. COMPETING INTERESTS

None of the Directors or their respective associates has any interest in a business which competes or is likely to compete with the business of the Group.

7. MARKET PRICES OF SHARES

The closing prices of the Shares quoted on the Stock Exchange (i) at the end of each of the calendar months during the period commencing the six months immediately preceding 12 November 2008, being the date of the Announcement and ending on the Latest Practicable Date, (ii) on the Last Full Trading Day, and (iii) on the Latest Practicable Date were as follows:

	Closing Price of
Date	the Share
	(HKD)
30 May 2008	33.50
30 June 2008	28.75
31 July 2008	30.00
29 August 2008	27.35
30 September 2008	22.30
Last Full Trading Day (30 October 2008)	5.00
31 October 2008	6.06
Latest Practicable Date	5.22

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HKD35.90 on 13 May 2008, and HKD3.66 on 27 October 2008, respectively.

8. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date:

(i) none of the Directors had any existing or proposed service contract between any of the Directors and any member of the Group which is not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation); and
(ii) none of the Directors had any existing or proposed service contracts with CITIC Pacific or any of its subsidiaries or associated companies in force which (a) (including both continuous and fixed terms contracts) were entered into or amended within six months before the date of the Announcement, (b) were continuous contracts with a notice period of 12 months or more, or (c) were fixed term contracts with more than 12 months to run irrespective of the notice period.

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9. QUALIFICATIONS OF EXPERTS AND CONSENTS

The following are the qualifications of the professional advisers who have given opinions or advice contained in the Circular.

Name

Qualification

Independent Financial Adviser

Anglo Chinese Corporate Finance, Limited, a licensed corporation under the SFO to conduct type 1 (dealing in securities), 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities, the independent financial adviser to the Independent Board Committee and the Independent Shareholders

PricewaterhouseCoopers Certified Public Accountants

Knight Frank Petty Professional property valuers Limited

Each of the above experts has given and has not withdrawn its written consent to the issue of the Circular with the inclusion herein of its opinion, letter or advice and/or all references thereto and to its name in the form and context in which they are respectively included.

As at the Latest Practicable Date, each of the above experts did not have (i) any shareholding, direct or indirect, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, or (ii) any interest, direct or indirect, in any assets which had been, since 31 December 2007, being the date of the latest published audited consolidated financial statements of CITIC Pacific were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

10. MISCELLANEOUS

(i) The secretary of CITIC Pacific is Ms. Stella Chan Chui Sheung, ACIS, MA and the qualified accountant of CITIC Pacific appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Vernon Francis Moore, FCA, FCPA.
(ii) The registered office of CITIC Pacific is at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong.
(iii) The registered office of CITIC HK is at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong. As at the Latest Practicable Date, the ultimate controlling shareholder of CITIC HK is CITIC Group (which holds 100% interest in CITIC HK), and the directors of CITIC HK are Messrs. Kong Dan, Larry Yung Chi Kin, Henry Fan Hung Ling, Wang Jiong, Cai Xinghai, Zhuang Shoucang and Liu Jifu. The registered office of CITIC Group is situate at Capital Mansion, 6 Xinyuan Nanlu, Chaoyang District, Beijing 100004, China

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and its correspondence address in Hong Kong is 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong. The directors of CITIC Group are Mr. Kong Dan, Mr. Chang Zhenming, Mr. Wang Chuan, Mr. Jing Shu-ping, Mr. Larry Yung Chi Kin, Mr. Mi Zengxin, Mr. Dou Jianzhong, Mr. Li Shilin, Mr. Wen Jinping, Mr. Wang Jiong, Mr. Zhao Jingwen, Mr. Chen Xiaoxian, Mr. Guo Ketong, Mr. Pu Jian, Mr. Wang Dongming, Mr. Guo Zhirong, Mr. Qiu Yiyong, Mr. Wang Jianzhi, Mr. Hong Bo, Mr. Ren Qinxin, Mr. Xuan Erniu, Mr. Ju Weimin, Mr. Sun Yalei, Mr. Xu Yudi, Mr. Li Kang, Mr. Sun Xiaowen, Mr. Zhang Jijing, Mr. Luo Ning and Mr. Sun Xinguo.

(iv) The registered office of CITIC Securities Corporate Finance (HK) Limited is 26/F., CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong.
(v) The registered office of Anglo Chinese Corporate Finance, Limited is 40th Floor, Two Exchange Square, 8 Connaught Place, Central, Hong Kong.
(vi) The Directors (including the Directors on the Independent Board Committees) have indicated their intention, in respect of their own beneficial shareholdings (if any) to vote for the Agreement.
(vii) Save for Directors who, by reason of being members of the CITIC Group Concert Parties, will abstain from voting in relation to the Whitewash Waiver, the Directors (including the Directors on the Independent Board Committees) have indicated their intention, in respect of their own beneficial shareholdings (if any) to vote for the Whitewash Waiver.
(viii) As at the Latest Practicable Date, there is no agreement, arrangement or understanding to transfer, charge or pledge any voting rights over the new Shares to be issued pursuant to the conversion of the Convertible Bond.
(ix) The English text of the Circular and form of proxy shall prevail over the Chinese text in the case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the principal place of business of CITIC Pacific in Hong Kong, (ii) on the website of CITIC Pacific at www.citicpacific.com, and (iii) on the website of the SFC at www.sfc.hk from the date of the Circular up to and including 19 December 2008, being the date of the EGM:

(i) the memorandum and new articles of association of CITIC Pacific;
(ii) the articles of association of CITIC Group;
(iii) the contracts referred to in the section headed “Material Contracts” in this appendix;
(iv) the letter, summary of values and valuation report relating to some of our property interests prepared by Knight Frank Petty Limited, the texts of which are set out in Appendix III to the Circular;

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(v) the annual reports of CITIC Pacific for the two years ended 31 December 2007;
(vi) the interim report of CITIC Pacific for the six-month period ended 30 June 2008;
(vii) the letters of consent referred to in the section headed “Qualifications of Experts and Consents” in this appendix;
(viii) the report from the reporting accountant on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II of the Circular;
(ix) the letter from the Listing Rules Independent Board Committee, the text of which is set out on page 31 of the Circular;
(x) the letter from the Whitewash Independent Board Committee, the text of which is set out on page 32 of the Circular;
(xi) the letter from the Independent Financial Adviser, the text of which is set out on pages 33 to 56 of the Circular;
(xii) a copy of the Circular; and
(xiii) copy of all circulars issued pursuant to the requirements set out in Chapter 14 and/or 14A of the Listing Rules since the date of the latest published audited accounts.

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NOTICE OF THE EGM

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(Incorporated in Hong Kong with limited liability) (Stock Code: 00267)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of CITIC Pacific Limited (“ CITIC Pacific ”) will be held at Island Ballroom, Level 5, Island Shangri-La Hotel, Two Pacific Place, Supreme Court Road, Hong Kong on Friday, 19 December 2008 at 10:30 a.m. for the purpose of considering and, if thought fit, passing (with or without amendments) the following resolutions of CITIC Pacific:

ORDINARY RESOLUTIONS

1. “ THAT :

a) the agreement (the “ Agreement ”) dated 12 November 2008 entered into between CITIC Pacific and CITIC Group, details of which are set out in the circular of CITIC Pacific dated 3 December 2008 (the “ Circular ”) (a copy of the Agreement and the circular have been produced to the EGM marked “A” and initialled by the chairman of the EGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
b) the increase in the authorised share capital of CITIC Pacific from HKD1,200,000,000 divided into 3,000,000,000 shares of HKD0.40 each (“the Shares ”) to HKD2,400,000,000 divided into 6,000,000,000 Shares by the creation of an additional 3,000,000,000 Shares ranking pari passu in all respects with existing issued and unissued Shares be and is hereby approved; and
c) the directors of CITIC Pacific or any committee thereof be and are hereby authorised to do all acts and execute all documents they consider necessary or desirable to give effect to the transactions contemplated in this ordinary resolution no. 1, including but not limited to (i) the issue of the convertible bond (the “ Convertible Bond ”) pursuant to the Agreement; (ii) the issue and allotment to the holder of the Convertible Bond such appropriate number of new Shares upon the due exercise of the conversion rights attaching to the Convertible Bond;

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NOTICE OF THE EGM

(iii) the Novation (as defined in the Circular) and (iv) the increase in the authorised share capital of CITIC Pacific.”

“ THAT subject to and conditional on the passing of ordinary resolution no. 1, the waiver granted or to be granted by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong and any delegate of such Executive Director pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of CITIC Group to make a mandatory general offer to the shareholders of CITIC Pacific for all issued Shares not already owned by it or parties acting in concert with it under Rule 26 of the Hong Kong Code on Takeovers and Mergers as a result of the allotment and issue of the new Shares upon the exercise of conversion rights attaching to the Convertible Bond be and is hereby approved.”

By Order of the Board CITIC Pacific Limited Stella Chan Chui Sheung Company Secretary

Hong Kong, 3 December 2008

Registered Office:

32nd Floor

CITIC Tower 1 Tim Mei Avenue Central Hong Kong

Notes:

(1) Any member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and, on a poll, vote instead of him. A proxy need not be a member of CITIC Pacific.
(2) To be valid, the instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority must be deposited at the registered office of CITIC Pacific not less than forty-eight hours before the time for holding the meeting or adjourned meeting or poll (as the case may be) at which the person named in such instrument proposes to vote.
(3) A form of proxy for use at the EGM is enclosed herewith.

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AI assistant

CITIC Limited — Proxy Solicitation & Information Statement 2008

49082_rns_2008-12-02_4ac6eea3-516c-44e4-9c85-c03b2d92b9aa.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

INTRODUCTION

LETTER FROM THE BOARD

THE STANDBY FACILITY

THE AGREEMENT

PRINCIPAL TERMS OF THE CONVERTIBLE BOND

Principal Amount

Issue Price

Interest

Conversion Price

Conversion and Voting Rights

LETTER FROM THE BOARD

Term of Convertible Bond

Transfer

Form of the Convertible Bond

Ranking of the Convertible Bond

No Listing

NOVATION AND INDEMNITY

Background of the Leveraged Foreign Exchange Contracts

The Novation Contracts

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Accounting Treatment

IMPACT ON CITIC PACIFIC’S FINANCIALS

CONDITIONS OF THE AGREEMENT

COMPLETION

COVENANTS

TAKEOVERS CODE IMPLICATIONS

USE OF PROCEEDS FROM THE ISSUE OF THE CONVERTIBLE BOND

REASONS FOR AND BENEFITS OF ENTERING INTO THE STANDBY FACILITY AND THE AGREEMENT

INFORMATION ON THE REMAINING LEVERAGED FOREIGN EXCHANGE CONTRACTS

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

CHANGES TO THE SHAREHOLDING IN CITIC PACIFIC AS A RESULT OF CONVERSION

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

INFORMATION ON CITIC GROUP

INTENTIONS FOR THE GROUP

Business

Establishment of committee

MAINTAINING THE LISTING OF CITIC PACIFIC

GENERAL

LETTER FROM THE BOARD

LETTER FROM THE BOARD

OPTIONS, DERIVATIVES, WARRANTS AND OTHER SECURITIES CONVERTIBLE INTO THE SHARES

LETTER FROM THE BOARD

PROCEDURE FOR DEMANDING A POLL

EGM

LETTER FROM THE BOARD

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

STANDBY FACILITY CONNECTED TRANSACTIONS INVOLVING SUBSCRIPTION FOR CONVERTIBLE BOND BY CITIC GROUP APPLICATION FOR WHITEWASH WAIVER VERY SUBSTANTIAL DISPOSAL INVOLVING CERTAIN LEVERAGED FOREIGN EXCHANGE CONTRACTS TO BE ASSUMED BY CITIC GROUP AND INCREASE OF AUTHORISED SHARE CAPITAL

STANDBY FACILITY CONNECTED TRANSACTIONS INVOLVING SUBSCRIPTION FOR CONVERTIBLE BOND BY CITIC GROUP APPLICATION FOR WHITEWASH WAIVER VERY SUBSTANTIAL DISPOSAL INVOLVING CERTAIN LEVERAGED FOREIGN EXCHANGE CONTRACTS TO BE ASSUMED BY CITIC GROUP AND INCREASE OF AUTHORISED SHARE CAPITAL

INTRODUCTION

PRINCIPAL FACTORS

Background

Recent developments in markets and current market circumstances

Table 1, below: USD performance versus other currencies

USD exchange rate or parity

Table 3, below: CITIC Pacific – Changes in Share prices and index levels

Background on the leveraged foreign exchange contracts

REASONS FOR ENTERING INTO THE AGREEMENT AND THE STANDBY FACILITY

Principal terms of the Agreement and the Standby Facility

The Standby Facility

The Agreement

The Convertible Bond

The Conversion Price

The Whitewash Waiver

The Novation

Proposed increase in authorised share capital and the effect on shareholdings

Other regulatory issues

FINANCIAL EFFECTS OF THE PROPOSALS ON CITIC PACIFIC

Net assets

Earnings

Liquidity

The remaining leveraged foreign exchange contracts

Gearing

CITIC Limited Proxy Solicitation & Information Statement 2008