CITIC Limited — Proxy Solicitation & Information Statement 2008

Sep 12, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this Circular or as to the action to be taken, you should consult your licensed securities dealer 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 the transferee or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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)

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF A 49% INTEREST IN FAW TOYOTA 4S COMPANY AND A 50% INTEREST IN LEXUS 4S COMPANY AND THE RELATED SHAREHOLDERS’ LOANS

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

Commerzbank AG Hong Kong Branch

A letter from the Board is set out on pages 5 to 22 of this Circular. A letter of advice from the Independent Financial Adviser (as defined herein) to the Independent Board Committee (as defined herein) and the Independent Shareholders (as defined herein) is set out on pages 25 to 37 of this Circular. A letter of the Independent Board Committee is set out on pages 23 to 24 of this Circular.

16 September 2008

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38

– i –

DEFINITIONS

In this Circular, the following expressions have the following meanings unless the context otherwise requires:

• ‘‘Acquisition’’ the acquisition of the Sale Shares and the related shareholders’ loans by DSE from DIL pursuant to the terms of the Sale and Purchase Agreement (including the Contractual Arrangements);

• ‘‘associate(s)’’ has the meaning given to it by the Listing Rules; ‘‘Board’’ the board of Directors; ‘‘BVI’’ the British Virgin Islands; ‘‘Circular’’ the circular of the Company dated 16 September 2008; ‘‘CITIC HK’’ CITIC Hong Kong (Holdings) Limited, a substantial shareholder holding approximately 29% interest in the Company;

• ‘‘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;

• ‘‘Completion’’ completion of the Acquisition; ‘‘connected person(s)’’ has the meaning given to it by the Listing Rules; ‘‘Consideration’’ the consideration for the Acquisition; ‘‘Contractual contractual arrangements with the registered owners of Arrangements’’ Guangzhou Guangbao, Guangzhou Junjia and Foshan Junan (if applicable) that are implemented by the DCH Group, the details of which are set out in the section headed ‘‘Contractual Arrangements’’ of this Circular;

• ‘‘Contractual the agreements for the Contractual Arrangements, the details of Arrangements which are set out in the section headed ‘‘Contractual Agreements’’ Arrangements’’ of this Circular;

• ‘‘DCH Group’’ DCH Holdings and its subsidiaries, or, where the context so requires, any of them (as defined under the Listing Rules);

• ‘‘DCH Holdings’’ Dah Chong Hong Holdings Limited 大昌行集團有限公司, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange, and a nonwholly owned subsidiary of the Company;

• ‘‘Directors’’

the directors of the Company;

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DEFINITIONS

• ‘‘DSE’’ Delight Star Enterprises Limited 愉星企業有限公司, a company incorporated in Hong Kong with limited liability, and a whollyowned subsidiary of DCH Holdings and a non-wholly owned subsidiary of the Company;

• ‘‘DIL’’ Denker Investment Limited 駿佳投資有限公司, a company incorporated in Hong Kong with limited liability;

• ‘‘Established Group’’ Guangzhou Guangbao and Guangzhou Junjia (excluding any of their respective subsidiaries and investments);

• ‘‘FAW Toyota 4S Strong Step Holdings Limited 碩晉控股有限公司, a company Company’’ incorporated in Hong Kong with limited liability;

• ‘‘FAW Toyota 4S FAW Toyota 4S Company and its subsidiaries; Group’’

• ‘‘FAW Toyota 4S issued ordinary shares of HK$1.00 each in the share capital of Shares’’ FAW Toyota 4S Company;

• ‘‘Financial Assistance’’ (i) the granting of replacement guarantees after Completion in a sum of not more than HK$80 million and (ii) the provision of additional funding by DSE in a sum not to exceed HK$100 million, the details of which are set out in the section headed ‘‘The Sale and Purchase Agreement — Other Terms’’ of this Circular;

• ‘‘Foshan Junan’’ 佛山駿安豐田汽車銷售服務有限公司 (Foshan Junan Toyota Motors Sale and Service Limited), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of FAW Toyota 4S Company;

• ‘‘Group’’ the Company and its subsidiaries (as defined under the Listing Rules), or, where the context so requires, any of them (including DCH Holdings);

• ‘‘Guangzhou Guangbao’’ 廣州廣保豐田汽車銷售服務有限公司 (Guangzhou Guangbao Toyota Motors Sale and Service Limited), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of FAW Toyota 4S Company;

• ‘‘Guangzhou Junjia’’ 廣州駿佳凌志汽車銷售服務有限公司 (Guangzhou Junjia Lexus Motors Sale and Service Limited), a company established in the PRC with limited liability and an indirect 55%-owned subsidiary of Lexus 4S Company (the remaining 45% interests are directly held by an independent third party);

• ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong;

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DEFINITIONS

• ‘‘Hong Kong’’

the Hong Kong Special Administrative Region of the PRC;

• ‘‘Independent Board an independent committee of the Board, consisting of Hamilton Committee’’ Ho Hau Hay, Alexander Reid Hamilton, Hansen Loh Chung Hon and Norman Ho Hau Chong, all being independent nonexecutive Directors;

• ‘‘Independent Financial Commerzbank AG, acting through its Hong Kong branch, a Adviser’’ or licensed bank under the Banking Ordinance (Chapter 155 of the ‘‘Commerzbank’’ Laws of Hong Kong) and an authorized financial institution under the SFO to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities as set out in Schedule 5 to the SFO, and is appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition and the Financial Assistance;

• ‘‘Independent the independent shareholders of the Company, i.e. the Shareholder(s)’’ Shareholders as no Shareholder is required to abstain from voting in respect of the Acquisition and the Financial Assistance;

• ‘‘Latest Practicable 9 September 2008, being the latest practicable date prior to the Date’’ printing of this Circular for the purpose of ascertaining certain information contained in this Circular;

• ‘‘Lexus 4S Company’’ Star Partner Holdings Limited 易博控股有限公司, a company incorporated in Hong Kong with limited liability;

• ‘‘Lexus 4S Group’’ Lexus 4S Company and its subsidiaries;

• ‘‘Lexus 4S Shares’’ issued ordinary shares of HK$1.00 each in the share capital of Lexus 4S Company;

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange;

• ‘‘Mr. Mak’’

• Mr. Mak Hing Lung;

• ‘‘PRC’’ the People’s Republic of China;

• ‘‘Profit Paradise’’ Profit Paradise Investments Limited 程生投資有限公司, a company incorporated in Hong Kong with limited liability;

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC;

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DEFINITIONS

• ‘‘Sale and Purchase the sale and purchase agreement dated 26 August 2008 entered Agreement’’ into between DSE, DIL, DCH Holdings and Mr. Mak in relation to the Acquisition;

• ‘‘Sale Shares’’ 49 FAW Toyota 4S Shares and 50 Lexus 4S Shares; ‘‘SFO’’ Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong);

• ‘‘Share(s)’’ share(s) of HK$0.40 each in the share capital of the Company; ‘‘Shareholder(s)’’ holders of the ordinary shares of the Company; ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited; ‘‘substantial has the meaning given to it under the Listing Rules; shareholder(s)’’

• ‘‘Sunny Linker’’ Sunny Linker Development Limited 佳駿發展有限公司, a company incorporated in Hong Kong with limited liability;

• ‘‘Target Companies’’ collectively FAW Toyota 4S Company and Lexus 4S Company; and

• ‘‘Target Group’’ collectively the FAW Toyota 4S Group and Lexus 4S Group and ‘‘Target Group Company’’ and ‘‘Target Group Companies ’’shall be construed accordingly.

Unless the context otherwise requires and for the purpose of illustration only, the conversion rate of RMB1.00 = HK$1.14 is adopted.

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LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

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) Leslie Chang Li Hsien (Deputy Managing Director) Vernon Francis Moore (Executive Director) Li Shilin (Executive Director) Liu Jifu (Executive Director) Chau Chi Yin (Executive Director) Milton Law Ming To (Executive Director) Wang Ande (Executive Director) Kwok Man Leung (Executive Director) Willie Chang Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong Andre´ Desmarais Chang Zhenming* Peter Kruyt[#]

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

• Non-executive Director ** Independent non-executive Director # Alternate Director to Andre´ Desmarais

16 September 2008

To the Shareholders,

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF A 49% INTEREST IN FAW TOYOTA 4S COMPANY AND A 50% INTEREST IN LEXUS 4S COMPANY AND THE RELATED SHAREHOLDERS’ LOANS

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LETTER FROM THE BOARD

I. INTRODUCTION

Reference is made to the announcement of the Company dated 26 August 2008 in respect of the Acquisition and the Financial Assistance.

On 26 August 2008, DSE (a wholly-owned subsidiary of DCH Holdings and a nonwholly owned subsidiary of the Company) and DCH Holdings entered into the Sale and Purchase Agreement with DIL and Mr. Mak, pursuant to which DSE (or its nominee) agreed to purchase and DIL agreed to sell 49% and 50% equity interests in FAW Toyota 4S Company and Lexus 4S Company, respectively, and the related shareholders’ loans for a total consideration of HK$143,716,000. Upon Completion, DSE will have a 50% economic interest in each of the Target Companies (i.e. FAW Toyota 4S Company and Lexus 4S Company).

As at the Latest Practicable Date, nine wholly-owned subsidiaries of the Company, a closely allied group of the shareholders of DCH Holdings, were together beneficially interested in 1,018,800,000 shares representing approximately 56.67% of the issued share capital of DCH Holdings.

The purpose of this Circular is to provide you with details of the Acquisition and the Financial Assistance, the recommendations of the Independent Board Committee and the advice of the Independent Financial Adviser in respect of the Acquisition and the Financial Assistance.

II. DETAILS OF THE TRANSACTION

The Sale and Purchase Agreement

Date: 26 August 2008 Parties: (1) Purchaser: DSE (a wholly-owned subsidiary of DCH Holdings and a non-wholly owned subsidiary of the Company)

(2) Seller: DIL (3) Purchaser’s Guarantor: DCH Holdings (4) Seller’s Guarantor: Mr. Mak

Assets to be acquired:

49 FAW Toyota 4S Shares, representing 49% of the entire issued share capital of FAW Toyota 4S Company and 50 Lexus 4S Shares, representing 50% of the entire issued share capital of Lexus 4S Company and the related shareholders’ loans. Upon Completion, DSE will have a 50% economic interest in each of the Target Companies based on the understanding that they will each be a joint venture company.

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LETTER FROM THE BOARD

The Target Companies are DIL’s holding vehicles for its interests in the businesses relating to the provision of vehicles sales, spare parts, maintenance services and customer survey services in respect of the ‘‘FAW Toyota’’ brand in Guangzhou and Foshan, the PRC and ‘‘Lexus’’ brand in Guangzhou, the PRC.

The major assets of FAW Toyota 4S Company are its 100% interests in each of Guangzhou Guangbao (which is held through the Contractual Arrangements (as described below)) and Foshan Junan (which may be held through the Contractual Arrangements), and are engaged in the provision of the above services in respect of the ‘‘FAW Toyota’’ brand. Foshan Junan was established on 7 August 2007 and only commenced its operations since December 2007. DIL and Mr. Mak have undertaken to procure the establishment or acquisition at reasonable cost of two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in the PRC by Guangzhou Guangbao (or such other entities as the parties may agree) by 31 December 2010. Guangzhou Guangbao is already in the process of acquiring interests in one of such additional dealership.

The major asset of Lexus 4S Company is its 55% interests in Guangzhou Junjia, which is held through the Contractual Arrangements and is engaged in the provision of the above services in respect of the ‘‘Lexus’’ brand.

Consideration:

The Consideration is in the amount of HK$143,716,000.

The Consideration was determined after arm’s length negotiation between the parties having regard to the (i) financial track record of the Established Group; (ii) net asset value of the Established Group as at Completion of not less than HK$63,786,420; (iii) set up costs and future prospects of a newly completed dealership, Foshan Junan; (iv) establishment or acquisition of two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in the PRC as undertaken by DIL and Mr. Mak; and (v) goodwill and future prospects of the Target Group, taking into account the possibility of the Target Group to expand and to acquire additional dealerships in the future, and HK$102,676,000 was attributed to (i) and (ii) above and HK$41,040,000 was attributed to (iii), (iv) and (v) above.

The Consideration will be funded by internal resources of DCH Holdings.

Payment Terms:

The Consideration will be payable by DSE in the following manner:

• (a) a deposit of HK$42,750,000 has been paid upon signing of the Sale and Purchase Agreement;

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LETTER FROM THE BOARD

• (b) an amount equal to the Consideration minus (i) any outstanding receivables due to the Target Group from DIL, Mr. Mak and/or their respective associates as at Completion (if any) and (ii) the deposit, will be payable in cash upon Completion; and

• (c) the amount equal to the outstanding receivables mentioned in (b) above (if any) will be payable to DIL to satisfy such receivables due to the Target Group.

The outstanding receivables amounted to approximately HK$30,000,000 as at 31 July 2008.

If Completion does not take place for any reason and the Sale and Purchase Agreement is terminated, the deposit (together with accrued interest on it) will be refunded by DIL to DSE within 30 days after the termination.

Conditions:

Completion is conditional on:

• (a) all necessary consents or approvals required of the holding company of DCH Holdings (i.e. the Company), if any, under the Listing Rules for the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained;

• (b) all necessary consents or approvals required of the holding company of DSE (i.e. DCH Holdings), if any, under the Listing Rules for the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained;

• (c) any regulatory approval and third party consents (including but not limited to the consent of relevant automobile manufacturers) required of DIL for the Acquisition having been obtained;

• (d) the completion of the reorganisation of the Target Group (including, amongst others, the entering into of the Contractual Arrangements Agreements);

• (e) DSE undertaking a financial due diligence review of the Target Group and being reasonably satisfied with such review in all material aspects;

• (f) there being no material adverse change or development (including a prospective change or development), in the position or condition, financial or otherwise, of the Target Group Companies or any of them, or in their or its earnings, business, assets or prospects prior to Completion; and

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LETTER FROM THE BOARD

• (g) the warranties given as at the date of the Sale and Purchase Agreement and immediately prior to Completion remaining true, accurate and not misleading in all material respects.

In the event that any of the conditions has been not satisfied (or waived) on or before 30 September 2008 or such other later date as may be agreed by the parties, the Sale and Purchase Agreement will immediately terminate and the deposit (together with accrued interest on it) will be refunded to DSE.

Completion:

Completion shall take place on the fifth business day after all the conditions being satisfied or waived.

Upon Completion, DSE will hold 49% and 50% of the entire issued share capitals of FAW Toyota 4S Company and Lexus 4S Company, respectively, and a 50% economic interest in each of the Target Companies. As DSE will have an overriding casting vote which could be exercised by DSE at the meetings of the board of directors of the Target Companies, the Target Group is expected to be accounted for as subsidiaries of the Company and DCH Holdings upon Completion.

A confirmation from the reporting accountants of DCH Holdings has been obtained confirming that, upon Completion, Guangzhou Guangbao and Guangzhou Junjia will become subsidiaries of Sunny Linker and Profit Paradise, respectively.

Other Terms:

Upon Completion, the parties shall enter into a shareholders’ agreement for each of the Target Companies. The board of directors of each of the Target Companies shall consist of equal nominated members, of which DSE shall have a casting vote.

DIL and Mr. Mak have guaranteed that the net profits for the Established Group shall be no less than RMB12.9 million (approximately HK$14.7 million) for the period from 1 August 2008 to 31 December 2008 and no less than RMB31.0 million (approximately HK$35.3 million) for each of the two financial years ending 31 December 2010. 50% of any such shortfall shall be indemnified by DIL and Mr. Mak to DSE on a dollar-to-dollar basis in cash. During these periods, it was agreed that Mr. Mak will remain as the responsible person for the management and operation of the Target Group.

The Company will publish an announcement in accordance with Rule 2.07C of the Listing Rules if the net profits for the Established Group are less than the amount guaranteed and will include details in the Company’s next annual report. The independent non-executive Directors will also provide an opinion in the Company’s next annual report as to whether Mr. Mak has fulfilled his obligations under the guarantee if this is the case.

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LETTER FROM THE BOARD

The Target Companies, amongst others, shall have a right of first refusal to invest at cost in respect of any new investment opportunity offered to Mr. Mak and his affiliates to invest in any business engaged in the provision of vehicles sales, spare parts, maintenance services and customer survey services to manufacturers or suppliers in respect of the ‘‘Lexus’’ and ‘‘FAW Toyota’’ brands in the PRC, and for any other brands in the PRC, DIL and Mr. Mak will notify DSE prior to such investments being made, as long as DSE remains a shareholder of either Target Company. DSE shall have a right of first refusal to acquire any disposal of other existing businesses already owned and operated by Mr. Mak or DIL in the PRC, at a reasonable price to be offered by DIL or Mr. Mak. Such price shall be equal to or lower than the price to be offered by DIL or Mr. Mak to a prospective purchaser if DSE refuses to acquire such existing businesses.

DIL and Mr. Mak have undertaken to DSE, and DSE and DCH Holdings have undertaken to DIL, that they shall not, amongst others, carry on or have an interest in businesses engaged in the provision of vehicles sales, spare parts, maintenance services and customer survey services in respect of the ‘‘FAW Toyota’’ brand in Guangzhou and Foshan, the PRC and ‘‘Lexus’’ brand in Guangzhou, the PRC or any other business as may be carried on by the Target Group from time to time, during a term of three years from the date of which DIL and DSE (as the case may be) ceases to be a shareholder of the relevant Target Company.

The existing guarantees in favour of the Target Companies shall be replaced by replacement guarantees to be provided by DSE and DIL after Completion. It is expected that such replacement guarantees will not exceed HK$80 million. Each of DIL and DSE shall contribute to additional funding needs of the Target Companies by way of equity or loan in proportion to their existing interests in the Target Companies for working capital purpose (including the establishment or acquisition of two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in the PRC). It is expected that these additional funding to be contributed by DSE will not exceed HK$100 million.

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LETTER FROM THE BOARD

Structure charts of the Target Groups upon Completion:

FAW Toyota 4S Group

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Note: Up to a 6.66% interest in Foshan Junan will be held by Guangzhou Guangbao either through its wholly-owned subsidiary or through the Contractual Arrangements. Please refer to the section headed ‘‘Contractual Arrangements — Foshan Junan’’ for details.

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LETTER FROM THE BOARD

Lexus 4S Group

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Contractual Arrangements

Guangzhou Guangbao

Upon Completion, Guangzhou Guangbao, one of the major assets of FAW Toyota 4S Company, is to be held as to 51% by Mr. Mak and 49% by a wholly-owned subsidiary of DCH Holdings in the PRC (the ‘‘DCH Subsidiary’’) for the benefits of FAW Toyota 4S Group through a series of Contractual Arrangements implemented by FAW Toyota 4S Group prior to the conversion of Guangzhou Guangbao into a wholly-owned foreign enterprise, the conversion of which is expected to take a certain period of time. Such Contractual Arrangements are fundamental to the legal structure and business operations of the FAW Toyota 4S Group and are specifically designed for the purpose of allowing FAW Toyota 4S Group (a) to enjoy all the economic benefits of Guangzhou Guangbao, to exercise management control over the operations of Guangzhou Guangbao and to prevent leakages of assets and values to the registered owners of Guangzhou Guangbao; and (b) to acquire, if and when permitted by PRC law, the equity interests in Guangzhou Guangbao at the minimum transfer price

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LETTER FROM THE BOARD

permitted under the relevant PRC laws and regulations. Guangzhou Guangbao is in the process of converting into a company which can be wholly owned by foreign enterprises and upon completion of such conversion, the Contractual Arrangements for Guangzhou Guangbao will be converted into direct equity interests to be directly owned by Sunny Linker, the immediate holding company of Guangzhou Guangbao.

Brief summary of the Contractual Arrangements Agreements for Guangzhou Guangbao are as follows:

(i) Shareholding

Each of Mr. Mak and DCH Subsidiary will be registered as the legal shareholders of Guangzhou Guangbao.

(ii) Management

Each of Mr. Mak and DCH Subsidiary shall consult and follow the instructions of Sunny Linker, when he/it is involved in the management and exercise of its right as the shareholder of Guangzhou Guangbao, such rights shall include and without limitation to voting at the shareholders or board meetings (through their respective nominated director), appointing directors and making decisions in respect of the operation and financial issues of Guangzhou Guangbao.

(iii) Dividends

All the dividends, capital bonus or any other assets distributed to Mr. Mak or DCH Subsidiary by Guangzhou Guangbao shall be transferred to Sunny Linker or any other party nominated by Sunny Linker at nil consideration within three working days after such distribution.

(iv) Option to purchase

Sunny Linker shall have an option to purchase (or nominate a third party to purchase) all the interests of Mr. Mak and DCH Subsidiary in Guangzhou Guangbao at the minimum transfer price permitted under the relevant PRC laws and regulations. Where the PRC laws or regulations require the consideration for such transfer to be at the market value, the said consideration shall be transferred to Sunny Linker (or any third party nominated by Sunny Linker) at nil consideration within three business days after Mr. Mak or DCH Subsidiary (as the case may be) received such payment. Upon exercising such option, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

(v) Option to pledge

Sunny Linker shall have an option to request Mr. Mak and DCH Subsidiary to pledge all their respective shareholding in Guangzhou Guangbao to Sunny Linker or any other party nominated by Sunny Linker, so as to guarantee the

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LETTER FROM THE BOARD

performance of obligations of Mr. Mak or DCH Subsidiary (as the case may be) and Guangzhou Guangbao and the performance of obligations under any other agreements which may be entered into between Mr. Mak or DCH Subsidiary (as the case may be), Guangzhou Guangbao and Sunny Linker or any other party nominated by Sunny Linker. In the event that Sunny Linker exercises such rights, Mr. Mak or DCH Subsidiary (as the case may be) and/or Guangzhou Guangbao shall assist unconditionally and enter into a relevant share pledge agreement with Sunny Linker or any other party nominated by Sunny Linker.

(vi) Option to enter into management, consultancy agreements

Sunny Linker shall have an option to request Mr. Mak and DCH Subsidiary to instruct Guangzhou Guangbao to enter into any exclusive service or consultancy agreement with Sunny Linker or any other party nominated by Sunny Linker in respect of management, technical or other types of services, and Sunny Linker or any other party nominated by Sunny Linker shall provide the relevant service to Guangzhou Guangbao. The relevant service fees shall be paid by Guangzhou Guangbao, the amount of which shall be solely determined by Sunny Linker or any other party nominated by Sunny Linker and may be adjusted from time to time.

Upon entering into of such management or consultancy agreement, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

Foshan Junan

As at the date of the announcement dated 26 August 2008, a 93.34% interest in Foshan Junan is directly held by Guangzhou Guangbao and the remaining 6.66% interest is held by an individual (the ‘‘Individual’’) who is an independent third party. Such 6.66% interest will be transferred to Guangzhou Guangbao and/or its whollyowned subsidiary before Completion. If the said transfer cannot be completed before Completion due to the restrictions of the local PRC laws and regulations, Guangzhou Guangbao will acquire the maximum equity interests in Foshan Junan permitted under the local PRC laws and regulations and the remaining interests in Foshan Junan will either continue to be held by the Individual or to be transferred to a wholly-owned subsidiary of DCH Holdings in the PRC (the ‘‘PRC Subsidiary’’). In any event, the remaining interests will be held by the Individual or the PRC Subsidiary for the benefits of FAW Toyota 4S Group through a series of Contractual Arrangements implemented by FAW Toyota 4S Group.

Such Contractual Arrangements are fundamental to the legal structure and business operations of the FAW Toyota 4S Group and are specifically designed for the purpose of allowing FAW Toyota 4S Group (a) to enjoy all the economic benefits of Foshan Junan, to exercise management control over the operations of Foshan Junan and to prevent leakages of assets and values to the registered owner of Foshan Junan; and (b) to acquire, if and when permitted by PRC law, the equity interests in Foshan Junan at the minimum transfer price permitted under the relevant PRC laws and regulations.

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LETTER FROM THE BOARD

Brief summary of the Contractual Arrangements Agreements for Foshan Junan are as follows:

(i) Shareholding

The Individual or the PRC Subsidiary will be registered as the legal shareholder of Foshan Junan.

(ii) Management

The Individual or the PRC Subsidiary (as the case may be) shall consult and follow the instructions of Guangzhou Guangbao, when she/it is involved in the management and exercise of her/its right as the shareholder of Foshan Junan, such rights shall include and without limitation to voting at the shareholders or board meetings (through their respective nominated director), appointing directors and making decisions in respect of the operation and financial issues of Foshan Junan.

(iii) Dividends

All the dividends, capital bonus or any other assets distributed to the Individual or the PRC Subsidiary (as the case may be) by Foshan Junan shall be transferred to Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao at nil consideration within three working days after such distribution.

(iv) Option to purchase

Guangzhou Guangbao shall have an option to purchase (or nominate a third party to purchase) all the interests of the Individual or the PRC Subsidiary (as the case may be) in Foshan Junan at the minimum transfer price permitted under the relevant PRC laws and regulations. Where the PRC laws or regulations require the consideration for such transfer to be at the market value, the said consideration shall be transferred to Guangzhou Guangbao (or any third party nominated by Guangzhou Guangbao) at nil consideration within three business days after the Individual or the PRC Subsidiary (as the case may be) received such payment. Upon exercising such option, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

(v) Option to pledge

Guangzhou Guangbao shall have an option to request the Individual or the PRC Subsidiary (as the case may be) to pledge all her/its shareholding in Foshan Junan to Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao, so as to guarantee the performance of obligations of the Individual or the PRC Subsidiary (as the case may be) and Foshan Junan and the performance of obligations under any other agreements which may be entered into between the Individual or the PRC Subsidiary (as the case may be), Foshan Junan and

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LETTER FROM THE BOARD

Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao. In the event that Guangzhou Guangbao exercises such rights, the Individual or the PRC Subsidiary (as the case may be) and/or Foshan Junan shall assist unconditionally and enter into a relevant share pledge agreement with Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao.

(vi) Option to enter into management, consultancy agreements

Guangzhou Guangbao shall have an option to request the Individual or the PRC Subsidiary (as the case may be) to instruct Foshan Junan to enter into any exclusive service or consultancy agreement with Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao in respect of management, technical or other types of services, and Guangzhou Guangbao or any other party nominated by Guangzhou Guangbao shall provide the relevant service to Foshan Junan. The relevant service fees shall be paid by Foshan Junan, the amount of which shall be solely determined by Guangzhou Guangbao, or any other party nominated by Guangzhou Guangbao and may be adjusted from time to time.

Upon entering into of such management or consultancy agreement, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

Guangzhou Junjia

Guangzhou Junjia, the major asset of Lexus 4S Company, is also held by Mr. Mak for the benefits of Lexus 4S Group through the Contractual Arrangements. Such Contractual Arrangements are fundamental to the legal structure and business operations of the Lexus 4S Group and are specifically designed for the purpose of allowing Lexus 4S Group (a) to enjoy all the economic benefits of Guangzhou Junjia held by Mr. Mak, to exercise management control over the operations of Guangzhou Junjia and to prevent leakages of assets and values to the registered owner of Guangzhou Junjia (i.e. Mr. Mak); and (b) to acquire, if and when permitted by PRC law, the equity interests in Guangzhou Junjia at the minimum transfer price permitted under the relevant PRC laws and regulations. It is intended that Guangzhou Junjia will be converted into a sino-foreign equity joint venture company which is expected to take a certain period of time and upon completion of such conversion, the Contractual Arrangements for Guangzhou Junjia will be converted into direct equity interests to be directly owned by Profit Paradise, the immediate holding company of Guangzhou Junjia.

Brief summary of the Contractual Arrangements Agreements for Mr. Mak’s 55% interest in Guangzhou Junjia are as follows:

(i) Shareholding

Mr. Mak will be registered as the legal shareholder of Guangzhou Junjia.

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LETTER FROM THE BOARD

(ii) Management

Mr. Mak shall consult and follow the instructions of Profit Paradise, when he is involved in the management and exercise of his right as the shareholder of Guangzhou Junjia, such rights shall include and without limitation to voting at the shareholders or board meetings (through his nominated director), appointing directors and making decisions in respect of the operation and financial issues of Guangzhou Junjia.

(iii) Dividends

All the dividends, capital bonus or any other assets distributed to Mr. Mak by Guangzhou Junjia shall be transferred to Profit Paradise or any other party nominated by Profit Paradise at nil consideration within three working days after such distribution.

(iv) Option to purchase

Profit Paradise shall have an option to purchase (or nominate a third party to purchase) all the interests of Mr. Mak in Guangzhou Junjia at the minimum transfer price permitted under the relevant PRC laws and regulations. Where the PRC laws or regulations require the consideration for such transfer to be at the market value, the said consideration shall be transferred to Profit Paradise (or any third party nominated by Profit Paradise) at nil consideration within three business days after Mr. Mak received such payment. Upon exercising such option, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

(v) Option to pledge

Profit Paradise shall have an option to request Mr. Mak to pledge all his shareholding in Guangzhou Junjia to Profit Paradise or any other party nominated by Profit Paradise, so as to guarantee the performance of obligations of Mr. Mak and Guangzhou Junjia and the performance of obligations under any other agreements which may be entered into between Mr. Mak, Guangzhou Junjia and Profit Paradise or any other party nominated by Profit Paradise. In the event that Profit Paradise exercises such rights, Mr. Mak and/or Guangzhou Junjia shall assist unconditionally and enter into a relevant share pledge agreement with Profit Paradise or any other party nominated by Profit Paradise.

(vi) Option to enter into management, consultancy agreements

Profit Paradise shall have an option to request Mr. Mak to instruct Guangzhou Junjia to enter into any exclusive service or consultancy agreement with Profit Paradise or any other party nominated by Profit Paradise in respect of management, technical or other types of services, and Profit Paradise or any other party nominated by Profit Paradise shall provide the relevant service to

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LETTER FROM THE BOARD

Guangzhou Junjia. The relevant service fees shall be paid by Guangzhou Junjia, the amount of which shall be solely determined by Profit Paradise or any other party nominated by Profit Paradise and may be adjusted from time to time.

Upon entering into of such management or consultancy agreement, the Company and DCH Holdings shall comply with the Listing Rules as appropriate.

(vii)Compensation

In the event of any breach of the Contractual Arrangements Agreement for Guangzhou Junjia by Mr. Mak, Mr. Mak shall pay a compensation to Profit Paradise. The amount of the compensation shall be the higher of (i) 55% of the net asset value of Guangzhou Junjia at the time of the breach or the fair market value of 55% of the registered capital in Guangzhou Junjia (whichever is higher), which shall be determined by an independent third party valuer appointed by Profit Paradise; and (ii) any actual loss incurred by Profit Paradise.

The PRC legal advisers of DCH Holdings have issued a legal opinion confirming that the Contractual Arrangements Agreements do not contravene any existing PRC laws, rules and regulations. However, there can be no assurance that the relevant governmental authority will not challenge the validity of the Contractual Arrangements or the governmental authorities in the PRC will not promulgate laws or regulations to invalidate such Contractual Arrangements in the future.

Information about the Target Group

As at 31 July 2008, the unaudited net asset value attributable to Guangzhou Guangbao, Foshan Junan and Guangzhou Junjia was approximately HK$36.5 million, HK$7.4 million and HK$89.4 million, respectively. Foshan Junan commenced its operations since December 2007.

For the financial years ended 31 December 2006 and 2007, the audited net profits (both before and after taxation and extraordinary items) attributable to Guangzhou Guangbao, Foshan Junan and Guangzhou Junjia were approximately as follows:

	Audited net profits/(loss)	Audited net profits/(loss)	Audited net profits/(loss)	Audited net profits/(loss)
	before taxation and		after taxation and
	extraordinary items		extraordinary items
	2006	2007	2006	2007
	(HK$ million)		(HK$ million)
Guangzhou Guangbao	3.3	9.5	0.6	4.2
Foshan Junan
(operations
commenced since
December 2007)	—	(0.3)	—	(0.3)
Guangzhou Junjia	30.7	75.9	19.0	51.7

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LETTER FROM THE BOARD

The investment amount of Guangzhou Guangbao, Foshan Junan and Guangzhou Junjia as at 31 July 2008 by DIL and Mr. Mak was approximately HK$87 million, comprising (i) the total amount of the registered capitals of Guangzhou Guangbao, Foshan Junan and Guangzhou Junjia; and (ii) the shareholders loans to these companies as at 31 July 2008.

Reasons for and Benefits of the Acquisition and the Financial Assistance

The directors of DCH Holdings consider that the Target Group, as managed and operated by Mr. Mak, has a competitive edge over its competitors in the relevant brands due to its long established history of over 10 years, its financial track record and Mr. Mak’s standing in this industry in the PRC and Hong Kong. Of the Target Group, to the best knowledge of the directors of DCH Holdings, Guangzhou Guangbao was a top 10 dealership in ‘‘FAW Toyota’’ brand in terms of sales in the PRC for the year 2007 and Guangzhou Junjia was named the top 3 outstanding dealerships in the ‘‘Lexus’’ brand in the PRC for the year 2007. In April 2008, DCH Holdings and Mr. Mak formed two joint venture companies to provide services relating to vehicles sales, spare parts, maintenance services and customer survey services in respect of the ‘‘Lexus’’ brand in Shanghai and Ningbo, the PRC.

The transactions contemplated under the Sale and Purchase Agreement do not only allow DCH Group to acquire the Target Group (including Guangzhou Guangbao, Guangzhou Junjia and a newly completed dealership, Foshan Junan). They also provide an opportunity for DCH Group to share in the interests of two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in the PRC to be established or acquired. They also further enhance the strategic partnership with Mr. Mak, provide a good opportunity to strengthen DCH Group’s multi-brand portfolio and allow DCH Group to further develop motor vehicle dealing business in the PRC. Furthermore, the directors of DCH Holdings believe that there is an increasing demand for high-end and luxurious products in the PRC and leveraging on the famous and established brand-names, ‘‘FAW Toyota’’ and ‘‘Lexus’’, the transactions contemplated under the Sale and Purchase Agreement also enable the DCH Group to benefit from this increasing demand in the PRC automobile industry. The directors of DCH Holdings (including the independent non-executive directors of DCH Holdings) consider that the Acquisition and the Financial Assistance are on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interests of the shareholders of DCH Holdings as a whole.

Noting and considering the reasons above, the Directors take the view that the Acquisition and the Financial Assistance, which are beneficial to a subsidiary of the Company (i.e. DCH Holdings), will also be beneficial to the Company and increase the Group’s development and competitiveness in general. The Directors (including the independent non-executive Directors whose views have been set out in this Circular after taken into consideration the advice of the Independent Financial Adviser)

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LETTER FROM THE BOARD

consider that the Acquisition and the Financial Assistance are on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interests of the Shareholders as a whole.

Effect on the Earnings and Assets and Liabilities of the Company in relation to the Acquisition and the Financial Assistance

The acquisitions shall not have significant financial impact on the Company.

General

The Group is engaged in a diversified range of business, including 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.

DCH Group is a diversified business conglomerate in motor vehicles sales, motor vehicle related business and services, sales of food and consumer products, as well as logistics services, supported by integrated distribution platforms and a well-established base and network in the PRC, Hong Kong and Macao.

DIL, founded by Mr. Mak in 1992, is one of the companies operated by Mr. Mak and which is engaged in motor business, including businesses relating to the provision of vehicles sales, spare parts, maintenance services and customer survey services in the PRC.

Listing Rules Implications

As at the Latest Practicable Date, nine wholly-owned subsidiaries of the Company, a closely allied group of the shareholders of DCH Holdings, were together beneficially interested in 1,018,800,000 shares representing approximately 56.67% of the issued share capital of DCH Holdings.

DIL is a substantial shareholder and Mr. Mak is a director of various subsidiaries of DCH Holdings and accordingly, DIL and Mr. Mak are connected persons of the Company. As a result, the Acquisition and the Financial Assistance also constitute connected transactions for the Company under the Listing Rules. As a relevant percentage ratio under the Listing Rules in respect of the Acquisition and the Financial Assistance are more than 5% but less than 25% for the Company, the Acquisition and the Financial Assistance also constitute discloseable transactions for the Company. The Acquisition and the Financial Assistance are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Independent Shareholders’ Approval

According to Rule 14A.43 of the Listing Rules, where independent shareholders’ approval of a connected transaction is required, under certain conditions the Stock Exchange may accept that approval of the independent shareholders be given by a resolution in writing, instead of one passed at a shareholders’ meeting. Those conditions are that: (a) no shareholder of the listed issuer is required to abstain from voting if the Company were to convene a general meeting for the approval of the connected transaction; and (b) the written independent shareholders’ approval has been obtained from a shareholder or closely allied group of shareholders who (together) hold more than 50% in nominal value of the securities giving the right to attend and vote at the general meeting to approve the connected transaction.

As at 3 September 2008, the following persons are closely allied group of the Shareholders and together beneficially interested in 1,110,746,285 Shares, representing approximately 50.62% of the issued share capital of the Company:

Name of beneficial shareholder CITIC Hong Kong (Holdings) Limited (through its wholly-owned subsidiaries) The Chairman and the Managing Director of the Company having an interest in the Shares TOTAL	No. of Shares beneficially interested 643,611,285 467,135,000 1,110,746,285	Percentage of total issued share capital of the Company as of 3 September 2008 29.33% 21.29%
		50.62%

Each of DIL and Mr. Mak has confirmed that it/he has no interest in any share of the Company giving the right to attend and vote at general meetings of the Company.

Since, to the best knowledge of the Directors, none of the Shareholders is required to abstain from voting on the Acquisition and the Financial Assistance, written approvals of the above Shareholders have been obtained for the purpose of approving the Acquisition and the Financial Assistance in lieu of an approval from the Independent Shareholders of the Company at a shareholders’ meeting pursuant to Rule 14A.43 of the Listing Rules.

An application has been made by the Company to the Stock Exchange for, and the Stock Exchange has granted to the Company, a waiver from strict compliance with the requirement to hold a shareholders’ meeting to approve the Acquisition and the Financial Assistance on the basis of a written independent shareholders’ approval given in accordance with Rule 14A.43 of the Listing Rules.

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LETTER FROM THE BOARD

III. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 23 to 24 in this Circular which contains its recommendation to the Independent Shareholders in relation to the Acquisition and the Financial Assistance.

Your attention is also drawn to the letter from the Independent Financial Adviser, for incorporation into this Circular, which contains its advice to the Independent Board Committee and the Independent Shareholders as regards the Acquisition and the Financial Assistance and the principal factors and reasons considered by it.

Having noted and considered the reasons stated under the section headed ‘‘Reasons for and Benefits of the Acquisition and the Financial Assistance’’, the Directors (including the independent non-executive Directors whose views have been set out in this Circular after taken into consideration the advice of the Independent Financial Adviser) consider that the Acquisition and the Financial Assistance are on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interests of the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to support, and if a physical shareholders’ meeting was to be held, to vote in favour of, the Acquisition and the Financial Assistance.

IV. ADDITIONAL INFORMATION

Your attention is also drawn to the general information set out in the appendix to this Circular.

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

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [189 x 62] intentionally omitted <==

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

16 September 2008

To the Independent Shareholders,

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF A 49% INTEREST IN FAW TOYOTA 4S COMPANY AND A 50% INTEREST IN LEXUS 4S COMPANY AND THE RELATED SHAREHOLDERS’ LOANS

We refer to the letter from the Board set out in the circular dated 16 September 2008 (the ‘‘Circular’’) of which this letter forms part. Capitalised terms defined in the Circular shall have the same meaning when used herein unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider the Acquisition and the Financial Assistance and to advise the Independent Shareholders as to the fairness and reasonableness of the Acquisition and the Financial Assistance and to recommend whether or not the Independent Shareholders should approve the Acquisition and the Financial Assistance. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the Acquisition and the Financial Assistance.

RECOMMENDATION

We wish to draw your attention to the letter from the Board and the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders which contains its advice to us in relation to the Acquisition and the Financial Assistance as set out in the Circular.

Having taken into account principal factors and reasons considered by and the opinion of the Independent Financial Adviser as stated in its letter of advice, we consider the terms of the Acquisition and the Financial Assistance to be fair and reasonable so far as the interests of the Independent Shareholders are concerned and to be in the interests of the

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to support, and if a physical shareholders’ meeting was to be held, to vote in favour of, the Acquisition and the Financial Assistance.

Yours faithfully, Independent Board Committee of CITIC PACIFIC LIMITED Hamilton Ho Hau Hay Alexander Reid Hamilton Hansen Loh Chung Hon Norman Ho Hau Chong Independent Non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [172 x 33] intentionally omitted <==

21st Floor, The Hong Kong Club Building 3A Chater Road, Central Hong Kong

16 September 2008

• To: the independent board committee and the independent shareholders of the Company

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF A 49% INTEREST IN FAW TOYOTA 4S COMPANY AND A 50% INTEREST IN LEXUS 4S COMPANY AND THE RELATED SHAREHOLDERS’ LOANS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Acquisition (including the Financial Assistance), details of which, among other things, are set out in the circular dated 16 September 2008 (the ‘‘Circular’’), of which this letter forms a part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context requires otherwise.

On 26 August 2008, DCH Holdings, a non wholly-owned subsidiary of the Company, through its wholly-owned subsidiaries, DSE (as the purchaser) entered into the Sale and Purchase Agreement with DIL (as the vendor) and Mr. Mak (as the guarantor). Pursuant to the Sale and Purchase Agreement, DSE (or its nominee) will (i) acquire 49% of the issued share capital of FAW Toyota 4S Company; (ii) acquire 50% of the issued share capital of Lexus 4S Company; and (iii) accept the assignment of the shareholders’ loans owed by FAW Toyota 4S Company and Lexus 4S Company to DIL and Mr. Mak (and/or their respective associates) upon Completion, at the aggregate consideration of HK$143,716,000 (the ‘‘Consideration’’). In addition, it is agreed that after Completion, DSE and DIL will jointly provide (i) replacement guarantees in a sum of not more than HK$80.0 million for purpose of replacing the existing guarantees in favour of FAW Toyota 4S Company and Lexus 4S Company and (ii) additional funding to both FAW Toyota 4S Company and Lexus 4S Company by way of equity or shareholders’ loans in an amount proportional to their then interest in each of FAW Toyota 4S Company and Lexus 4S Company. It is expected that such additional funding to be contributed by DCH Group will be not more than HK$100.0 million. Furthermore, through the Contractual Arrangements, DSE will be entitled to enjoy 50% economic interest in each of FAW Toyota 4S Company and Lexus 4S Company after Completion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

By virtue of Mr. Mak and DIL being the director and substantial shareholder of certain subsidiaries of DCH Holdings, respectively, and DCH Holdings is a non whollyowned subsidiary of the Company, Mr. Mak and DIL are both connected persons (as defined under the Listing Rules) of the Company. Accordingly, the Acquisition (including the Financial Assistance) constitutes a connected transaction for the Company. As the relevant percentage ratios (as defined under the Listing Rules) in respect of the Acquisition (including the Financial Assistance) are more than 5% but less than 25%, the Acquisition (including the Financial Assistance) is also a discloseable and non-exempted connected transaction for the Company which is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

As disclosed in the Circular, no Shareholder is required to abstain from voting in relation to the relevant resolutions approving the Acquisition (including the Financial Assistance). Given that a written approval from Shareholders (including the wholly-owned subsidiaries of CITIC Hong Kong (Holdings) Limited as well as the Chairman of the Board and the Managing Director) who in aggregate hold 1,110,746,285 Shares, representing approximately 50.62% of the issued share capital of the Company, has been obtained by the Company approving the Acquisition (including the Financial Assistance) as at the Latest Practicable Date, an application has been made by the Company to the Stock Exchange for and the Stock Exchange has granted a waiver from strict compliance with the requirement for the Company to hold a shareholders’ meeting in accordance with Rule 14A.43 of the Listing Rules.

The Independent Board Committee, comprising all of the independent non executive Directors, namely Mr. Hamilton Ho Hau Hay, Mr. Alexander Reid Hamilton, Mr. Hansen Loh Chung Hon and Mr. Norman Ho Hau Chong, has been established to advise the Independent Shareholders as to the fairness and reasonableness of the Acquisition (including the Financial Assistance). We, Commerzbank AG Hong Kong Branch, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the Acquisition (including the Financial Assistance) and the terms of the Sale and Purchase Agreement as to whether (i) the Acquisition (including the Financial Assistance) is conducted in the Company’s ordinary and usual course of business and on normal commercial terms; and (ii) the terms of the Sale and Purchase Agreement are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

In formulating our recommendation, we have relied on the information and facts supplied to us by the Company and DCH Holdings. We have reviewed, among other things, (i) the Circular; (ii) the Sale and Purchase Agreement; (iii) the relevant financial information of the Target Group provided by DCH Holdings; (iv) the annual report (the ‘‘DCH Annual Report’’) of DCH Holdings covering the two years ended 31 December 2007 (‘‘FY2006’’ and ‘‘FY2007’’) and its interim results announcement (the ‘‘DCH Interim Results’’) covering the six months ended 30 June 2007 and 2008 (‘‘1H2007’’ and ‘‘1H2008’’), respectively and (v) the annual report of the Company (the ‘‘Annual Report’’) covering FY2006 and FY2007 and its interim results announcement (the ‘‘Interim Results’’) covering 1H2007 and 1H2008. We have assumed that all information, opinions and representations contained or referred to in the Circular are true, complete and accurate in all material

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

respects and we have relied on the same. Also, we have relied on the representations made by the Directors and management of the Company that having made all reasonable enquiries and careful decisions, and to the best of their information, knowledge and belief, there is no other fact or representation or the omission of which would make any statement contained in this Circular, including this letter, misleading. We have also assumed that all information, statements and representations made or referred to in the Circular, which have been provided to us by the Company, and for which it is wholly responsible, are true, complete and accurate in all material respects at the time they were made and continue to be so up to the date of despatch of the Circular.

We consider that we have (i) taken reasonable steps as required under Rule 13.80 of the Listing Rules in obtaining all necessary information from the Company; and (ii) reviewed sufficient information to enable us to reach an informed view regarding the Acquisition (including the Financial Assistance) and to provide us with a reasonable basis for our recommendation. We have no reason to suspect that any material facts have been omitted or withheld, nor are we aware of any facts or circumstances, which would render the information and the representations made to us untrue, inaccurate or misleading. We have not, however, carried out any independent verification of the information provided by the Company; nor have we conducted any independent in-depth investigation into the business and affairs of the Company and DCH Holdings, and their respective associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition (including the Financial Assistance), we have taken into account the following principal factors:

1. Reasons for and benefit of the Acquisition

• (i) Background of the Group

The Group is a business conglomerate engaged in a diversified range of business, including manufacturing of special steel, iron ore mining, property development and investment, basic infrastructure (such as power generation, aviation and tunnels). The Company is the holding company of two listed companies in Hong Kong, namely CITIC 1616 Holdings Limited and DCH Holdings.

DCH Group is a diversified business conglomerate principally engaged in three major business segments, namely (i) the motor vehicle sales, motor vehicle related business and services; (ii) the sales of food and consumer products; and (iii) the provision of logistics services, which are all supported by its integrated distribution platforms and a well-established base and network in PRC, Hong Kong and Macao. DCH Group has a long operating history of over 40 years in the automobile industry and has established the ‘‘Dah Chong Hong’’ brand name with significant market recognition on DCH Group’s trading and distribution of automobiles and the quality of its services rendered. As at the Latest Practicable Date, DCH Group held distributorship for 10 brands of motor vehicles in Hong Kong and Macao (including Acura, Audi, Bentley, Honda, Isuzu, MAN, Nissan, Opel, Saab and UD Nissan

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Diesel). DCH Group is also the official distributor or dealer for 20 vehicle brands, including Bentley, Bugatti, BJ Hyundai, DF Honda, DF Nissan, DF Peugeot, DF Yuda Kia, FAW-Volkswagen Audi, FAW Mazda, FAW Toyota, GZ Honda, GZ Toyota, Haima, Isuzu, Kia, Mercedes Benz, Nissan, Qingling, Renault and SGM Buick and operates 35 4S outlets in 13 major cities in PRC, including Guangzhou, Kunming and Shanghai. DCH Group’s motor business has been the key contributor to its financial performance and the related revenue accounted for approximately 59.4%, 63.4% and 67.1% of DCH Group’s total revenue for each FY2006, FY2007 and 1H2008, respectively. In recent years, DCH Group’s motor business in PRC recorded substantial increase in revenue by approximately 43.0% from FY2006 to FY2007, accounting for approximately 33.5% of DCH Group’s total revenue for FY2007 as compared with 29.1% for FY2006.

Set out below is the summary of financial results of DCH Holdings for FY2006, FY2007, 1H2007 and 1H2008, respectively:

Turnover: — Motor and motor related — Food and consumer products — Logistics — Others Total Segment Profit — Motor and motor related — Food and consumer products — Logistics — Others Total	FY2006 HK$’ Million % 7,684 59.4 5,047 39.1 144 1.1 51 0.4 12,926 100.0 298 60.7 101 20.6 11 2.2 81 16.5 491 100.0	FY2007 HK$’ Million % 10,175 63.4 5,626 35.1 176 1.1 73 0.4 16,050 100.0 483 68.7 149 21.2 17 2.4 54 7.7 703 100.0	1H2007 HK$’ Million % 4,313 61.7 2,567 36.7 85 1.2 24 0.4 6,989 100.0 202 65.2 63 20.3 10 3.2 35 11.3 310 100.0	1H2008	1H2008
	HK$’ Million 7,684 5,047 144 51 12,926 298 101 11 81 491	HK$’ Million 10,175 5,626 176 73 16,050 483 149 17 54 703	HK$’ Million 4,313 2,567 85 24 6,989 202 63 10 35 310	HK$’ Million 6,387 3,001 92 39 9,519 359 88 8 33 488	% 67.1 31.5 1.0 0.4
					100.0
					73.6 18.0 1.6 6.8
					100.0

Source: The DCH Annual Report and the DCH Interim Results

(ii) Background of the Target Companies

FAW Toyota 4S Company and Lexus 4S Company are investment holding companies and, through the Contractual Arrangements, are interested in 100% and 55% of Guangzhou Guangbao and Guangzhou Junjia, respectively. Guangzhou Guangbao and Guangzhou Junjia, being the operating subsidiaries of FAW Toyota 4S Company and Lexus 4S Company, respectively, are engaged in the provision of vehicle sales, spare parts, maintenance services and customer survey services in respect of the ‘‘FAW Toyota’’ brand in Guangzhou and Foshan and the ‘‘Lexus’’ brand in

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Guangzhou, respectively. Guangzhou Guangbao also owns 100% equity interest in Foshan Junan (of which up to 6.66% interest will be held through it wholly-owned subsidiaries or accounted for through the Contractual Arrangements), a newly established PRC company engaged in the above-mentioned motor related business in respect of the ‘‘FAW Toyota’’ brand in Foshan and having commenced its operations since December 2007. Both FAW Toyota 4S Company and Lexus 4S Company are operated and managed by Mr. Mak.

As disclosed in the section headed ‘‘Letter from the Board’’ of the Circular, Guangzhou Guangbao was awarded as one of the top 10 dealership in ‘‘FAW Toyota’’ brand in terms of sales in PRC for 2007 and Guangzhou Junjia was named as one of the top 3 outstanding dealerships in PRC for 2007. Both companies recorded substantial improvement in their financial results for FY2007 which are summarised as follows:

	Guangzhou		Guangzhou
	Guangbao	Foshan Junan	Junjia
	(HK$’000)	(HK$’000)	(HK$’000)
Net profits/(loss) after taxation
for the year ended
— FY2006	600	—*	19,000
— FY2007	4,200	(300)*	51,700
% increment	600.0%	Not Applicable*	172.1%
Net assets value as at 31 July
2008	36,500	7,400	89,400

• Foshan Junan has commenced its operations only since December 2007

(iii) Automobile Industry in Guangzhou, PRC

Guangzhou City is one of the major economic cities in PRC. According to the People’s Government of Guangzhou City, the regional gross domestic products of Guangzhou City amounted to approximately RMB606.8 billion (equivalent to approximately HK$691.8 billion) in 2006, up by approximately 47.4% from 2004 (or a compound in annual growth rate (‘‘CAGR’’) of approximately 21.4%). The per capita annual consumption expenditure of Guangzhou’s urban household also increased from RMB13,121 (equivalent to approximately HK$14,958) in 2004 to RMB15,445 (equivalent to approximately HK$17,607) in 2006, representing an increase of approximately 17.7% (or a CAGR of 8.5%). In addition, according to the National Bureau of Statistics of PRC, the number of privately owned cars in Guangdong Province increased from approximately 2.0 million in 2004 to approximately 3.0 million in 2006, representing an increase of approximately 50.0% (or a CAGR of approximately 22.5%).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered (i) the satisfactory past track records and achievements of the Target Group; (ii) the growing weight of DCH Group’s motor business in PRC; (iii) DCH Group’s development plan to strengthen its presence in PRC by forging strategic partnership and exploring merger and acquisition opportunities; and (iv) the growing economic condition in Guangzhou City and the continuous growing demand for motor vehicles in Guangdong Province, we are of the view that the Acquisition will not only provide DCH Group with an opportunity to acquire the Target Group (including Guangzhou Guangbao, Guangzhou Junjia and Foshan Junan, a newly completed dealership) and to obtain two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in PRC by December 2010 (as detailed below), but will also strengthen DCH Group’s market position in motor vehicle sales business in Guangzhou and Foshan. Accordingly, we consider that the Acquisition is in the ordinary and usual course of business of DCH Group and the Group as a whole.

1. Major Terms of the Sale and Purchase Agreement

Completion is subject to certain conditions precedents including, amongst others:

• (i) obtaining the regulatory approval and third party consents (including but not limited to the consent of relevant automobile manufacturers) required of DIL for the Acquisition;

• (ii) completion of the reorganisation of the Target Group (including, amongst others, the entering into of the Contractual Arrangements Agreements for purpose of ensuring DCH Group to be entitled to 50% economic benefit in each of FAW Toyota 4S Company and Lexus 4S Company);

• (iii) the financial due diligence review performed by DSE on the Target Group to DCH Group’s satisfaction;

• (iv) no material adverse change or development (including a prospective change or development), in the position or condition, financial or otherwise, of the Target Group, or their respective earnings, business, assets or prospects prior to Completion; and

• (v) the warranties given as at the date of the Sale and Purchase Agreement and immediately prior to Completion remaining true, accurate and not misleading in all material respects.

As advised by the management of the Company, Completion will take place in or around September 2008.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With a view to further safeguarding DCH Group’s economic benefit derived from the future operations of Target Group, the Sale and Purchase Agreement has the following additional provisions relating to the corporate structure and profitability of each of FAW Toyota 4S Company and Lexus 4S Company:

• (i) Profit guarantee and the relevant compensation mechanism

Pursuant to the Sale and Purchase Agreement, DIL and Mr. Mak have guaranteed that the aggregate of (i) 100% of the audited net profit after taxation of Guangzhou Guangbao (excluding Foshan Junan and any of its subsidiaries and investments) and (ii) 55% of the audited net profit after taxation of Guangzhou Junjia (excluding any of its subsidiaries and investments), for the period from 1 August 2008 to 31 December 2008 and each of the two years ending 31 December 2010 shall be no less than RMB12.9 million (equivalent to approximately HK$14.7 million), RMB31.0 million (equivalent to approximately HK$35.3 million) and RMB31.0 million (equivalent to approximately HK$35.3 million), respectively, (together, the ‘‘Guaranteed Profits’’). The Guaranteed Profits will be audited by an independent certified public accountant in accordance with the generally accepted accounting principles in PRC and shall exclude any non-recurring or exceptional items and revaluation gains. In the event that the aggregate actual net profit after taxation from Guangzhou Guangbao and Guangzhou Junjia for the aforesaid period(s) is/are less than the Guaranteed Profits, 50% of such shortfall shall be indemnified by DIL and Mr. Mak to DSE on a dollarto-dollar basis in cash.

Mr. Mak will remain as the responsible person for the management and operations for each of FAW Toyota 4S Group and Lexus 4S Group during the period from 1 August 2008 to 31 December 2010.

(ii) Guaranteed net asset value and the relevant compensation mechanism

Each of DIL and Mr. Mak has undertaken to DCH Holdings that, upon Completion, the aggregate of 100% and 55% of the net asset value of Guangzhou Guangbao and Guangzhou Junjia (excluding any of their respective subsidiaries and investments), respectively, will be no less than approximately HK$63.8 million (the ‘‘Guaranteed Net Asset Value’’). In the event the actual net asset value of Guangzhou Guangbao and Guangzhou Junjia (excluding their respective subsidiaries and investments) attributable to DCH Group falls below the Guaranteed Net Asset Value, DIL and Mr. Mak have undertaken that 50% of such shortfall shall be indemnified.

(iii) First right of refusal

Pursuant to the Sale and Purchase Agreement, so long as DSE remains as a shareholder of either FAW Toyota 4S Company or Lexus 4S Company, either of FAW 4S Company and Lexus 4S Company will have a first right of refusal to invest at cost in respect of any new investment opportunities offered to Mr. Mak and his affiliates relating to the provision of vehicles sales, spare parts, maintenance services and customer survey services to manufacturers or suppliers under the ‘‘Lexus’’ and ‘‘FAW

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Toyota’’ brands in PRC. In the event that any other opportunity is made available to either FAW Toyota 4S Company or Lexus 4S Company in relation to other vehicle brands in PRC during the time when DSE remains as the shareholder of either FAW 4S Company or Lexus 4S Company, DIL and Mr. Mak will notify DCH Group prior to making such investment. Furthermore, DSE shall also have a right of first refusal to acquire any existing business in PRC already owned and operated by Mr. Mak or DIL for disposal at a price equal to or lower than the price to be offered by DIL or Mr. Mak to any prospective purchaser if DSE refuses to acquire such business.

(iv) Non-competition undertaking by Mr. Mak and DIL

DIL and Mr. Mak have undertaken to DSE, and DSE and DCH Holdings have undertaken to DIL, that they shall not, amongst others, carry on or have an interest in businesses engaged in the provision of vehicles sales, spare parts maintenance services and customer survey services in respect of the ‘‘FAW Toyota’’ brand in Guangzhou and Foshan and the ‘‘Lexus’’ brand in Guangzhou or any other business as may be carried on by FAW Toyota 4S Group and Lexus 4S Group from time to time, for a term of three years from the date of which DIL and DSE (as the case may be) ceases to be a shareholder of the relevant Target Companies.

• (v) Obtaining two additional dealerships in respect of the ‘‘FAW Toyota’’ brand

DIL and Mr. Mak have undertaken to DSE that they will procure Guangzhou Guangbao to establish or acquire two additional dealerships for the provision of vehicles sales, spare parts, maintenance services and customer survey services to manufacturers or suppliers in respect of the ‘‘FAW Toyota’’ brand by December 2010.

• (vi) The Contractual Arrangements

Upon Completion, a series of Contractual Arrangements under the Contractual Arrangements Agreements (details of which are disclosed in the section headed ‘‘Letter from the Board’’ of the Circular) will be implemented on Guangzhou Guangbao and Foshan Junan (which may be held through the Contractual Arrangements) such that FAW Toyota 4S Group will be entitled to (i) enjoy all the economic benefits of both Guangzhou Guangbao and Foshan Junan; (ii) exercise management control over the operations of Guangzhou Guangbao and Foshan Junan and prevent leakages of assets and values to the registered owners of Guangzhou Guangbao and Foshan Junan; and (iii) acquire, if and when permitted by PRC law, the equity interest in Guangzhou Guangbao and Foshan Junan at the minimum transfer price permitted under the relevant PRC laws and regulations. Such Contractual Arrangements will also be applied to Lexus 4S Group to effect the aforesaid purposes on Guangzhou Junjia with Lexus 4S Group entitled to all the economic benefit of Guangzhou Junjia held by Mr. Mak (i.e. 55% interest in Guangzhou Junjia).

As disclosed in the section headed ‘‘Letter from the Board’’ of the Circular, according to the PRC legal advisers to DCH Holdings, the Contractual Arrangements Agreements do not contravene any existing PRC laws, rules and regulations although there can be no assurance that the relevant governmental authority will not challenge

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the validity of the Contractual Arrangements or the governmental authorities in PRC will not promulgate laws or regulations to invalidate the Contractual Arrangements in the future. The reporting accountants to DCH Holdings have also confirmed that upon Completion, each of Guangzhou Guangbao and Guangzhou Junjia will become an indirect subsidiary of DCH Holdings. In addition, DCH Holdings has implemented similar contractual arrangements for certain of PRC companies engaged in auto dealership business (details of which are disclosed in DCH Annual Report). Since 1979, the PRC government has been developing its legal system by undertaking to promulgate a comprehensive system of laws, many of which are unprecedented or experimental and are expected to be refined or improved. It is understandable that there is no certainty as to whether any changes in laws and regulations (or the interpretation thereof) in the refining and readjustment process would have favourable or adverse impact on the Contractual Arrangements. However, as the PRC legal advisers to DCH Holdings have already confirmed that the Contractual Arrangements do not contravene any existing PRC laws, rules and regulations, we are of the view that the Contractual Arrangements can be justified for the economic benefit to DCH Group as analysed above.

Having considered the above, we are of the view that the terms of the Sale and Purchase Agreement are fair and reasonable and are in the interest of both DCH Group and the Company and their respective shareholders as a whole.

3. The Consideration

The Consideration of approximately HK$143.7 million was determined after arm’s length negotiation between DCH Group and DIL, comprising an amount of approximately HK$102.7 million attributable as to (i) the financial track record of Guangzhou Guangbao and Guangzhou Junjia; and (ii) the Guaranteed Net Asset Value of approximately HK$63.8 million; and as to the remaining HK$41.0 million attributable as to (iii) the set up costs and future prospects of Foshan Junan, a newly established company engaged in dealership in respect of the ‘‘FAW Toyota’’ brand and (iv) the establishment or acquisition of two additional dealerships in respect of the ‘‘FAW Toyota’’ brand in PRC as undertaken by DIL and Mr. Mak; and (v) the goodwill and future prospects of FAW Toyota 4S Group and Lexus 4S Group (particularly, the possibility of the future expansion of and potential acquisition of other dealership by FAW Toyota 4S Group and Lexus 4S Group).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As there are no listed companies primarily engaged in auto dealerships, distribution of vehicles parts and accessories and the provision of other auto related services in PRC, we, in evaluating the Consideration, have identified three companies (the ‘‘Comparable Companies’’) which are broadly comparable to FAW Toyota 4S Company and Lexus 4S Company.

				Market	Net profit
				capitalisation	attributable
				as at the Latest	to the
				Practicable	shareholders for	Price-
Comparable				Date/	the financial	earning
Company	Ticker	Listing venue	Currency	Consideration	year 2007	Ratio
			(Note 2)	(Million)*	(Million)**
A.P. Eagers	APE AU	Common Wealth	AUD	305.9	28.6	10.7
Limited		of Australia
Hotai Motor Co.	2207 TT	Taiwan	NTD	42,875.1	3,404.7	12.6
Ltd.
AutoNation, Inc.	AN US	United States of	US$	2,312.5	278.7	8.3
		America
The Target Group			HK$	143.7	16.2	8.9
					(Note 1)

• from Bloomberg

• ** extracted from the respective annual reports for FY2007

• Note 1: the net profit attributable to DCH Holdings is calculated based on the aggregate of DSE’s effective interest attributable to the audited net profit (or loss) after tax for each of Guangzhou Guangbao, Foshan Junan and Guangzhou Junjia for FY2007, comprising (i) 50% of Guangzhou Guangbao’s net profit after tax of approximately HK$4.2 million; (ii) 27.5% of Guangzhou Junjia’s net profit after tax of approximately HK$51.7 million; and (iii) 50% of the loss incurred by Foshan Junan of approximately HK$0.3 million.

• Note 2: AUD, NTD and US$ refer to the Australian Dollar, New Taiwan Dollar and United States Dollar respectively.

As illustrated above, the price-earning multiple for the Acquisition based on the Consideration is comparable to the Comparable Companies.

Having taken into account that the price-earning multiple for the Acquisition as calculated based on the Consideration is comparable to the Comparable Companies and the Guaranteed Profit, we are of the view that the Consideration is fair and reasonable and is in the interest of DCH Holdings and the Company, and their respective shareholders as a whole.

4. The Financial Assistance

Upon Completion, the existing guarantees in favour of the Target Companies shall be replaced by the replacement guarantees to be jointly provided by DSE and DIL in an amount not exceeding HK$80.0 million. In addition, each of DIL and DSE shall contribute to additional funding needs of the Target Companies by way of equity or shareholders’

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

loans in proportion to their then interest in the Target Companies for working capital purposes (including the establishment or acquisition of two additional dealerships for the ‘‘FAW Toyota’’ brand in PRC). The additional funding to be contributed by DSE is not expected to exceed HK$100.0 million.

5. Financial impacts of the Acquisition

(i) Earnings

Following Completion and the implementation of the Contractual Arrangements, each of FAW Toyota 4S Company and Lexus 4S Company will become an indirect non wholly-owned subsidiary of DCH Holdings, hence the Company. Accordingly, the financial results of DCH Holdings, together with those of the FAW Toyota 4S Group and Lexus 4S Group after the Completion will be consolidated into the consolidated financial statements of the Company. It is expected that the net profit of the Company will be increased by the future profit of FAW Toyota 4S Company and Lexus 4S Company attributable to the Group.

(ii) Gearing and working capital

According to the Interim Results, the Group had net debt of approximately HK$31,211 million (being the aggregate of the Company’s bank borrowings of approximately HK$41,906 million, less the cash and bank balances of approximately HK$10,695 million), and total capital of approximately HK$91,613 million (being the aggregate of equity attributable to the Shareholders of approximately HK$60,402 million and the net debt of approximately HK$31,211 million). As such, the gearing ratio of the Group (expressed as a percentage of the Company’s net debt over its total capital) was approximately 34.1% as at 30 June 2008. Given that the entire Consideration will be payable in cash from the internal resources of DCH Holdings, the cash position of the Company will be decreased accordingly by the amount of Consideration of approximately HK$143.7 million, and the gearing ratio of the Group will be increased by merely approximately 0.1% to approximately 34.2% accordingly. If the Finance Assistance has been taken into account, the gearing ratio of the Group is expected to be further increased.

Based on the DCH Interim Results, DCH Group had cash and bank balance of approximately HK$1,674 million and the Consideration represents approximately 8.6% of DCH Group’s total cash and bank balance as at 30 June 2008. In addition, as at 30 June 2008, DCH Group had undrawn available loans facilities amounted to approximately HK$2,088 million (comprising committed term loans and revolving loans facilities of approximately HK$600 million and uncommitted money market lines of approximately HK$1,488 million). Having considered that (i) DCH Group has sufficient cash and bank balances with significant undrawn banking facilities; (ii) the Financial Assistance will be contributed by DCH Group to FAW Toyota 4S Company and Lexus 4S Company in various stages during the course of their development, and (iii) FAW Toyota 4S Company and Lexus 4S Company are expected to continue to generate profit (and cash inflow), we concur with the management of the Company’s view that DCH Group will have sufficient financial resources to meet the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Consideration and the Financial Assistance, and that the slight increase in the Group’s gearing ratio is acceptable and there will be no material impact on the liquidity of both DCH Group and the Group as a result of the Acquisition.

(iii) Net asset value

Based on the Interim Results, the unaudited consolidated net asset value attributable to the Shareholders as at 30 June 2008 amounted to approximately HK$60,402 million. Upon Completion, the cash and bank balance of DCH Holdings (hence the Company) will be decreased by the Consideration in the amount of approximately HK$143.7 million. The excess of the Consideration over the net asset value of the Target Group attributable to the Group will be recorded as goodwill and intangible asset. Accordingly, the Acquisition is not expected to have any material impact on the Group’s net asset value immediately after Completion.

ANALYSIS AND CONCLUSION

DCH Group, being a non wholly-owned subsidiary of the Company, is a motor dealership conglomerate with a strong multi-brand portfolio comprising world renowned American, European, Japanese and Korean automobiles brands and having accounted for approximately 28.0% of the new vehicle market in Hong Kong in 2007. During the past years, DCH Group has been able to capitalise on its successful track record in Hong Kong and is currently the official distributor or dealer for 20 vehicle brands and operates 35 4S outlets in 13 major cities in PRC. Having considered the facts that PRC had overtaken Germany and Japan to become the second largest motor vehicle markets with sales volume projected to reach over 10 million units in 2008 as disclosed in the DCH Annual Report, and the continuous growth in PRC’s economy, the management of the Company expects that DCH Group’s motor business in PRC will continue to be a major growth driver for DCH Group’s future business development. Given the Acquisition will benefit DCH Group’s motor business in PRC by providing DCH Group with a good opportunity to strengthen its market position in Guangzhou and Foshan and to add brands to its multibrand portfolio, we are of the view that the aforesaid positive impact on DCH Group’s motor business in PRC from the Acquisition will also benefit the Company’s business portfolio.

We noted that there would be insignificant impact on the cash position and gearing ratio of the Group, which mainly resulted from the cash consideration payable under the Sale and Purchase Agreement and the Financial Assistance. However, having considered the future profitability (hence cash inflow) from the vehicle sales and provision of motor related services from FAW Toyota 4S Company and Lexus 4S Company as evidenced by their successful track records, together with (i) the standing and substantial experience of Mr. Mak in the motor dealership business in PRC and his future contribution to DCH Group’s motor business in PRC; (ii) the various guarantees and undertakings provided by DIL and Mr. Mak, including, amongst others, the profit guarantee and the related compensation mechanism in favour of DCH Group; and (iii) the arrangement that any future capital contribution by DCH Group and DIL, which is primarily for the purpose of establishing or acquiring two additional dealerships for the ‘‘FAW Toyota’’ brand in PRC

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

by 31 December 2010, will be proportional to their respective shareholdings in each of the Target Companies, we consider that the Acquisition (including the Financial Assistance) will enhance the future business development of DCH Group’s motor business in PRC as a whole, which in turn will benefit the Group. Accordingly, we are of the view that the Acquisition (including the Financial Assistance) is conducted in the ordinary and usual course of business of DCH Group and the Group and the terms of the Sale and Purchase Agreement are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

RECOMMENDATION

Based on the above principal factors and reasons, we consider the Acquisition (including the Financial Assistance) is conducted in the ordinary and usual course of business of the Company and on normal commercial terms and the terms of the Sale and Purchase Agreement are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Yours faithfully, For and on behalf of

Commerzbank AG Hong Kong Branch Kenneth Chan Gaston Lam Head of Corporate Finance — Asia Pacific Corporate Finance — Asia Pacific

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APPENDIX

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This Circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts not contained in this Circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

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 the Company had any interest or short position in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of the SFO) which were required, pursuant to section 352 of the SFO, to be entered into the register referred to therein, or were required to be notified to the Company 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 the Company:

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 Wang Ande Hansen Loh Chung Hon Andre Desmarais Peter Kruyt (alternate Director to Andre´ Desmarais)	Number of Shares Percentage to the issued share capital Personal interests unless otherwise stated (%) 417,418,000 (Note 1) 19.033 50,640,000 (Note 2) 2.309 1,000,000 0.046 300,000 0.014 480,000 0.022 4,200,000 (Note 3) 0.192 300,000 0.014 840,000 0.038 536,000 0.024 400,000 0.018 1,550,000 (Note 4) 0.071 10,145,000 (Note 5) 0.463 34,100 0.002

Note:

1. Corporate interest

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APPENDIX

GENERAL INFORMATION

1. Corporate interest in respect of 5,640,000 Shares and trust interest in respect of 45,000,000 Shares

2. Trust interest

3. 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

4. Corporate interest in respect of 10,000,000 Shares and family interest in respect of 145,000 Shares

(ii) Share options in the Company:

Name of Director Date of Grant Exercise price per Share Exercisable Period HK$ 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 Leslie Chang Li Hsien 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

Underlying Shares pursuant to the share options Percentage of issued shares as at the Latest Practicable Date (%) 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 0.087 350,000 800,000 800,000 1,950,000 0.089 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

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APPENDIX

GENERAL INFORMATION

Name of Director Date of Grant Exercise price per Share Exercisable Period HK$ Chau Chi Yin 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 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

Underlying Shares pursuant to the share options Percentage of issued shares as at the Latest Practicable Date (%) 500,000 800,000 800,000 2,100,000 0.096 334,000 800,000 800,000 1,934,000 0.088 350,000 800,000 1,150,000 0.052 600,000 0.027 500,000 0.023

(iii) Shares in the associated corporations:

Name of Director Vernon Francis Moore Chau Chi Yin Note:	Number of ordinary shares in CITIC 1616 Holdings Limited Percentage to the issued share capital Personal interests unless otherwise stated (%) 200,000 (Note 1) 0.010 26,750 0.001

1. Trust interest

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APPENDIX

GENERAL INFORMATION

Name of Director Li Shilin Liu Jifu Chau Chi Yin Hansen Loh Chung Hon	Number of ordinary shares in Dah Chong Hong Holdings Limited Percentage to the issued share capital Personal interests unless otherwise stated (%) 12,000 0.001 33,600 (Note 1) 0.002 21,000 0.001 62,000 (Note 2) 0.003

Note:

1. Family interest

2. Corporate interest in respect of 20,000 shares and concert party interest in respect of 42,000 shares

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APPENDIX

GENERAL INFORMATION

(iv) Share options in the associated corporation:

Share options in CITIC Capital Holdings Limited

Name of Director Date of Grant Exercise price per share Exercisable Period (HK$) 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 Leslie Chang Li Hsien 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 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

Number of share options outstanding at the Latest Practicable Date Percentage of issued share capital (%) 15,000 10,000 10,000 35,000 0.125 15,000 10,000 10,000 35,000 0.125 15,000 10,000 10,000 35,000 0.125 125,000 0.446

Interests of Directors and chief executive in substantial shareholders of the Company

As at the Latest Practicable Date, 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 the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

	Name of company which	had	such
Name of Director	discloseable interest or short position			Position within such company
Larry Yung Chi Kin	CITIC Group			Director
	CITIC HK			Director
	Heedon Corporation			Director
	Honpville Corporation			Director
	Earnplex Corporation			Director & Shareholder
	Bloomfield Enterprises Corp.			Director & Shareholder
	Rockhampton Investments Limited			Director & Shareholder
Henry Fan Hung Ling	CITIC HK			Director
Carl Yung Ming Jie	Earnplex Corporation			Director

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APPENDIX

GENERAL INFORMATION

	Name	of company	which	had	such
Name of Director	discloseable interest or short			position		Position within such company
Leslie Chang Li Hsien	CITIC	HK				Director
	Honpville Corporation					Director
Vernon Francis Moore	Heedon Corporation					Director
	Honpville Corporation					Director
Li Shilin	CITIC	Group				Director
Liu Jifu	CITIC	HK				Director
Chau Chi Yin	CITIC	HK				Director
Andre Desmarais	Power	Corporation of Canada				President & Co-Chief
						Executive Officer
Chang Zhenming	CITIC	Group				Director

3. MATERIAL ADVERSE CHANGE

Save as disclosed in this Circular, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2007, the date to which the latest published audited accounts of the Company were made up.

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APPENDIX

GENERAL INFORMATION

4. EXPERT

• (a) The qualification of the expert who has provided its advice which is contained in this Circular is set out as follows:

Name

Qualification

Commerzbank

Commerzbank AG, acting through its Hong Kong branch, a licensed bank under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) and an authorized financial institution under the SFO to conduct type 1 (dealing in securities), type 4 (advising on securities), and type 6 (advising on corporate finance) regulated activities as set out in Schedule 5 to the SFO

• (b) Commerzbank has confirmed that it has no shareholding 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 as at the Latest Practicable Date.

• (c) Commerzbank has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter or report (as the case may be) and references to its name in the form and context in which it appears.

• (d) The letter from Commerzbank is given as of 16 September 2008 for incorporation herein.

5. SERVICE CONTRACTS

There is no existing or proposed service contracts between any of the Directors and the Company or any of its subsidiaries, other than contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

6. COMPETING INTEREST

In so far as the Directors are aware, none of the Directors or their respective associates have any interest in a business which competes or is likely to compete with the business of the Group.

7. INTERESTS IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Directors nor their respective associates had any direct or indirect interests in any assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries since 31 December 2007, being the date to which the latest published audited consolidated financial statements of the Company were made up.

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APPENDIX

GENERAL INFORMATION

There is no contract or arrangement subsisting at the Latest Practicable Date in which any of the Directors is materially interested and which is significant in relation to the business of the Group.

8. LITIGATION

As at the Latest Practicable Date, neither the Company 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 the Company or any of its subsidiaries.

9. GENERAL

• (a) The secretary of the Company is Ms. Stella Chan Chui Sheung, ACIS, MA and the qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Leslie Chang Li Hsien, HKICPA, AICPA, NYSSCPA.

• (b) The registered office of the Company is at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong.

• (c) The share registrars of the Company is Tricor Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The English text of this Circular shall prevail over the Chinese text.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection on any weekday (except Saturdays) during business hours at the registered office of the Company at 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong from the date of this Circular up to and including 30 September 2008:

• (a) the letter from the Independent Board Committee, the text of which is set out in this Circular;

• (b) the letter from the Independent Financial Adviser, the text of which is set out in this Circular; and

• (c) the Sale and Purchase Agreement.

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