CITIC Limited — Proxy Solicitation & Information Statement 2013

Mar 27, 2013

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

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

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

CITIC Pacific Limited 中信泰富有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

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

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

A letter from the Board is set out on pages 5 to 10 of this circular. A letter of advice from the Independent Financial Adviser (as defined herein) containing its advice and recommendation to the Independent Board Committee (as defined herein) and the Independent Shareholders (as defined herein) is set out on pages 13 to 25 of this circular. A letter from the Independent Board Committee is set out on pages 11 to 12 of this circular.

28 March 2013

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
**LETTER FROM **	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	11
**LETTER FROM **	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . .	13
APPENDIX	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .	26

– i –

DEFINITIONS

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

• “Acquisition”

the acquisition of the Sale Shares by Stenway from NSSMC pursuant to the terms of the Share Purchase Agreement;

• “associate”

has the meaning ascribed to it in the Listing Rules;

• “Board”

• the board of Directors;

• “Business Day”

means any day other than a Saturday, Sunday or other day on which commercial banks in the PRC, Hong Kong, Japan or New York are required or authorized by law or executive order to be closed or on which a tropical cyclone warning no. 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. Hong Kong time;

• “CITIC Pacific”

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

• “Closely Allied Group”

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

• “Completion”

completion of the Acquisition pursuant to the Share Purchase Agreement;

• “connected person”

has the meaning ascribed to it in the Listing Rules;

– 1 –

DEFINITIONS

• “Directors”

the directors of CITIC Pacific;

• “Group”

• CITIC Pacific and its subsidiaries or, where the context so requires, any of them;

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong;

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC;

• “Independent Board Committee”

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

• “Independent Financial Adviser”

• Somerley Limited, a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO, appointed as the independent financial adviser by the Board and approved by the Independent Board Committee to make recommendations to the Independent Board Committee and Independent Shareholders in relation to the Acquisition;

• “Independent Shareholders”

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

• “Latest Practicable Date”

• 24 March 2013, being the latest practicable date prior to the printing of this circular, for ascertaining certain information for inclusion in this circular;

• “Listing Rules”

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

• “NSSMC”

• Nippon Steel & Sumitomo Metal Corporation, a limited liability company incorporated in Japan and listed on the Tokyo, Osaka, Nagoya, Fukuoka and Sapporo stock exchanges, which legally and beneficially owns the Sale Shares as at the Latest Practicable Date;

– 2 –

DEFINITIONS

“PRC”

• the People’s Republic of China;

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

• “Sale Shares”

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

• “SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong;

• “Share Purchase Agreement”

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

• “Share(s)”

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

• “Shareholder(s)” holder(s) of Shares;

• “Silver Wings”

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

• “SteelCo”

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

• “Stenway”

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

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited;

• “subsidiary(ies)”

• has the meaning ascribed to it in the Listing Rules;

• “substantial shareholder”

has the meaning ascribed to it in the Listing Rules;

• “US$”

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

– 3 –

DEFINITIONS

“Xingcheng Phase II” production line at the site of SteelCo with steel melting, casting and rolling facilities to produce high-end special steel; and “%” per cent.

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

– 4 –

LETTER FROM THE BOARD

CITIC Pacific Limited 中信泰富有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

Directors:

Chang Zhenming (Chairman) Zhang Jijing (President) Vernon Francis Moore (Chief Financial Officer) Liu Jifu André Desmarais Ju Weimin Yin Ke Carl Yung Ming Jie Alexander Reid Hamilton[#] Gregory Lynn Curl[#] Francis Siu Wai Keung[#] Dr. Xu Jinwu[#] Peter Kruyt[^]

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

• Executive Director

• ** Non-executive Director

• Independent Non-executive Director

• ^ Alternate Director to André Desmarais

28 March 2013

To the Shareholders

Dear Sir or Madam,

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

INTRODUCTION

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

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is to provide Shareholders with, among other things, (i) further details of the Acquisition; (ii) a letter from the Independent Board Committee to the Independent Shareholders; and (iii) the letter of advice from the Independent Financial Adviser.

SUMMARY OF THE SHARE PURCHASE AGREEMENT

Date: 7 March 2013

Parties:

• (1) NSSMC, as the seller;

• (2) Stenway, as the buyer; and

• (3) CITIC Pacific

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

Assets to be Acquired

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

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

Conditions to completion

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

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

– 6 –

LETTER FROM THE BOARD

Consideration

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

The consideration for the Acquisition was arrived at after arm’s length negotiations between Stenway and CITIC Pacific on the one hand, and NSSMC on the other hand, with reference, as a whole, to the historical financial results of Silver Wings, which included the historical profit performance, the net asset value, as well as considering the business prospects of Silver Wings going forward.

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

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

INFORMATION ON SILVER WINGS

Silver Wings is an investment holding company, and is currently accounted for as a jointly controlled entity of CITIC Pacific. Silver Wings was incorporated in 2006 as a joint venture between CITIC Pacific (through Stenway) and Sumitomo Metals (Kokura) Ltd to build and develop Xingcheng Phase II. Xingcheng Phase II has been jointly managed by the representatives of CITIC Pacific and Sumitomo Metals (Kokura) Ltd, and has a steel production capacity of approximately 1.8 million tons per annum. Its products comprise big casting round billet and bar steel products, including bearing steel, gear steel and spring steel. Upon establishment of the joint venture, Sumitomo Metals (Kokura) Ltd subscribed for 25% of the issued shares in Silver Wings, for a subscription amount of the then US$ equivalent of RMB260 million. CITIC Pacific has been informed that there was no separate purchase cost paid by NSSMC for acquisition of the Sale Shares from Sumitomo Metals (Kokura) Ltd. The ownership of the Sale Shares passed to NSSMC as a result of a series of internal corporate reorganizations, share exchanges and mergers, firstly of Sumitomo Metals (Kokura) Ltd into Sumitomo Metals Industries Ltd, which in turn merged with Nippon Steel Corporation to form NSSMC.

– 7 –

LETTER FROM THE BOARD

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

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

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

REASONS FOR AND BENEFITS OF THE ACQUISITION

CITIC Pacific’s strategy is to focus on the development of its three major businesses, being special steel, iron ore mining and property development in the PRC. Despite the unsatisfactory performance of the PRC steel market as a whole in 2012 and the market consensus of a slowdown of economic growth in both the global and local PRC markets in 2013, the Directors consider that in the medium to long term, there will still be a strong demand for steel in the PRC, in particular for special steel. The Group is the largest dedicated manufacturer of special steel in PRC. The Directors therefore view the Acquisition as part of their long term plans for one of the core businesses of the Group. The Acquisition is in line with the Group’s strategy. CITIC Pacific already holds 75% interest in Silver Wings. As upon completion of the Acquisition, CITIC Pacific will have acquired 100% control of all production facilities of Xingcheng Phase II through Silver Wings, and therefore full control of the steel manufacturing business of SteelCo and its future development for a reasonable and commercially negotiated price, the Directors are not aware of any material disadvantage in the Acquisition. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of, and will be accounted for as a subsidiary of CITIC Pacific. CITIC Pacific can therefore benefit fully from the financial results of Silver Wings.

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

INFORMATION ON STENWAY AND CITIC PACIFIC

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

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

– 8 –

LETTER FROM THE BOARD

INFORMATION ON NSSMC

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

LISTING RULES IMPLICATIONS

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

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

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

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

This waiver has been granted by the Stock Exchange.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

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

– 9 –

LETTER FROM THE BOARD

RECOMMENDATION

Having noted and considered the reasons stated under the section headed “Reasons for and Benefits of the Acquisition”, 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 terms of the Acquisition are fair and reasonable and in the interests of CITIC Pacific and the Shareholders as a whole. Accordingly, the Board (including the independent non-executive Directors) recommend the Independent Shareholders to support and, if a physical Shareholders’ meeting were to be held, to vote in favour of the relevant resolutions to approve the Acquisition.

As the Stock Exchange has granted a waiver under Rule 14A.43 of the Listing Rules no general meeting will be convened for the purpose of approving the Acquisition.

ADDITIONAL INFORMATION

Your attention is also drawn to the letter from the Independent Board Committee, the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders and the information set out in the appendix to this circular.

Yours faithfully, By order of the Board CITIC Pacific Limited Chang Zhenming Chairman

– 10 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee, setting out its recommendation to the Independent Shareholders in relation to the Acquisition prepared for the purpose of inclusion in this circular.

CITIC Pacific Limited 中信泰富有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00267)

28 March 2013

To the Independent Shareholders,

Dear Sir or Madam,

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

We refer to the circular issued by CITIC Pacific to the Shareholders of even date (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider and to advise you as to the fairness and reasonableness of the terms of the Acquisition and the transactions contemplated thereunder and to recommend whether or not the Independent Shareholders should approve them. Somerley Limited has been appointed as the Independent Financial Adviser to advise you and us in this regard. Details of the independent advice of the Independent Financial Adviser, together with the principal factors and reasons the Independent Financial Adviser has taken into consideration, are set out on pages 13 to 25 of the Circular.

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.

– 11 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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 to be fair and reasonable so far as the interests of the Independent Shareholders are concerned and to be in the interests of CITIC Pacific and the Shareholders as a whole. We therefore recommend the Independent Shareholders to support, and if a physical shareholders’ meeting were to be held, to vote in favour of the relevant resolution(s) to approve the Acquisition.

Yours faithfully, For and on behalf of Independent Board Committee of CITIC Pacific Limited Alexander Reid Hamilton Gregory Lynn Curl Francis Siu Wai Keung Xu Jinwu

Independent Non-executive Directors

– 12 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter from Somerley Limited, containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, prepared for the purpose of inclusion in this circular.

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SOMERLEY LIMITED

20th Floor Aon China Building 29 Queen’s Road Central Hong Kong

28 March 2013

• To: The Independent Board Committee and the Independent Shareholders of CITIC Pacific Limited

Dear Sirs,

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

INTRODUCTION

We refer to our appointment by CITIC Pacific to advise the Independent Board Committee and the Independent Shareholders in connection with the Acquisition. Details of the Acquisition are set out in the letter from the Board contained in the circular of CITIC Pacific to the Shareholders dated 28 March 2013 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 7 March 2013, the Share Purchase Agreement was entered into between Stenway, a wholly-owned subsidiary of CITIC Pacific, as purchaser and NSSMC as seller pursuant to which NSSMC has agreed to sell and transfer the Sale Shares to Stenway.

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

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

– 13 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

to abstain from voting on, the resolution. Written shareholders’ approval of the Acquisition has been obtained from CITIC Group Corporation, the ultimate beneficial owner of the Closely Allied Group. The Acquisition will therefore be approved by way of written shareholders’ approval given in accordance with Rule 14A.43 of the Listing Rules, in lieu of holding a general meeting of CITIC Pacific. An application has been made to the Stock Exchange for a waiver from compliance with the requirement to convene a Shareholders’ meeting to approve the Acquisition on the basis that written shareholders’ approval has been given in accordance with Rule 14A.43 of the Listing Rules. The waiver has been granted by the Stock Exchange.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Messrs Alexander Reid Hamilton, Gregory Lynn Curl, Francis Siu Wai Keung and Dr. Xu Jinwu, has been established to advise the Independent Shareholders as to whether the terms of the Acquisition are fair and reasonable and whether the Acquisition is in the interests of CITIC Pacific and the Shareholders as a whole. We, Somerley Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard.

We are not associated with CITIC Pacific, NSSMC, or their respective substantial shareholders or associates and accordingly we are considered eligible to give independent advice on the Acquisition. Apart from normal professional fees payable to us in connection with this and similar appointments, no arrangement exists whereby we will receive any fees or benefits from CITIC Pacific, NSSMC, or their respective substantial shareholders or associates.

In formulating our opinion and recommendation, we have reviewed, among other things, the Share Purchase Agreement, the annual report of CITIC Pacific for year ended 31 December 2012 and certain audited consolidated financial information of Silver Wings. We have also discussed with the management of the Group the businesses and future prospects of the Group as they may be affected by the Acquisition.

We have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Group and have assumed that they are true, accurate and complete. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to believe that any material information has been withheld from us, or to doubt the truth or accuracy of the information provided. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view. We have not, however, conducted any independent investigation into the business and affairs of the Group, Silver Wings or SteelCo.

– 14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion, we have taken into consideration the following principal factors and reasons:

1. Business of the Group

CITIC Pacific is a diversified company with a focus on three main businesses: special steel, iron ore mining and property development in the PRC. Other businesses include energy and civil infrastructure. CITIC Pacific also holds controlling interests in Dah Chong Hong Holdings Limited (“ Dah Chong Hong ”) and approximately 41% interest in CITIC Telecom International Holdings (“ CITIC Telecom ”).

Special steel

With an annual production capacity of 9 million tonnes, CITIC Pacific special steel is the largest dedicated manufacturer of special steel in the PRC. Major products include special steel wires and bars, medium-to-thick wall seamless steel tubes, special plates and special forging steel. Currently, over 80% of the special steel products are sold domestically to customers in the auto components, machinery manufacturing, shipbuilding, power generation, oil and petrochemical industries.

Iron ore mining

The Sino Iron project is 100% owned by CITIC Pacific, which has rights to extract 2 billion tonnes of magnetite iron ore resource from its mine in Cape Preston in Western Australia’s Pilbara region. Sino Iron is the largest magnetite iron ore development project in Australia and, when completed, will have six production lines with an expected capacity to produce a total of 24 million tonnes of magnetite concentrate a year.

Property

CITIC Pacific focuses on developing medium and large-scale projects in mainland China. Properties are located in prime areas of Shanghai and major cities in the Yangtze River delta area and Hainan Province.

– 15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Recent financial results of the Group

The following are summaries of the annual results of the Group for each of the two years ended 31 December 2012:

	**For the year **	ended
	31 December
	2012		2011
	HK$ million	_HK$ _	million
		(as restated)
Turnover	93,272		96,890
Profit for the year attributable to the ordinary
shareholders of CITIC Pacific	6,954		9,233

Turnover of the Group has declined by approximately 4% from HK$96,890 million in 2011 to HK$93,272 million in 2012 and the net profit attributable to the Shareholders decreased by approximately 25% to HK$6,954 million in 2012. The decreases were mainly attributable to the sharp decline in the contribution made by the special steel business in the second half of 2012, as a result of weak demand and lower pricing of steel products in the PRC market.

Profits from the mainland property sales were also lower as compared with 2011 due to the measures put in place by the Chinese government to regulate the property market. While the aforesaid two businesses did less well, other businesses such as energy, Hong Kong property and cross-harbour tunnels as well as Dah Chong Hong and CITIC Telecom performed satisfactorily and continued to contribute steadily to the Group’s profit and cash flow.

3. Reasons for and benefits of the Acquisition

As set out in the letter from the Board in this Circular, CITIC Pacific’s strategy is to focus on the development of its three major businesses, being special steel, iron ore mining and property development in the PRC. Despite the unsatisfactory performance of the PRC steel market as a whole in 2012 and the market consensus of a slowdown of economic growth in both the global and local PRC markets in 2013, the Directors consider that in the medium to long term, there will still be a strong demand for steel in the PRC, in particular for special steel. The Group is the largest dedicated manufacturer of special steel in the PRC. The Directors therefore view the Acquisition as part of their long term plans for one of the core businesses of the Group. The Acquisition is in line with the Group’s strategy. CITIC Pacific already holds 75% interest in Silver Wings. Upon completion of the Acquisition, CITIC Pacific will have 100% control of all production facilities of Xingcheng Phase II through Silver Wings, and therefore full control of the steel manufacturing business of SteelCo and its future development for a reasonable and commercially negotiated price. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of, and will be accounted for as a subsidiary of, CITIC Pacific. CITIC Pacific can therefore benefit fully from the financial results of Silver Wings.

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Directors (including the independent non-executive Directors whose views are set out in the letter from the Independent Board Committee in this circular) consider the terms of the Acquisition are fair and reasonable and in the interests of CITIC Pacific and the Shareholders as a whole.

4. Industry outlook

As evidenced by the fact that over 80% of the special steel products of the Group, being one of the leading dedicated manufacturers of special steel in China, are sold domestically to customers in the auto components, machinery manufacturing, shipbuilding, power generation, oil and petrochemical industries, the special steel industry is heavily dependent on the underlying economic fundamentals of the Chinese economy.

According to 《鋼鐵行業2012年運行分析及走勢預測》 (The 2012 Steel Industry Operations Analysis and Trends Forecast) issued by 國家發展和改革委員會 (The National Development and Reform Commission (the “ NDRC ”)) in February 2013, the Chinese steel sector (including both general and special steel) faced strong challenges in 2012 as it grappled with, among other factors, overcapacity, lower demand, reduced growth in fixed asset investment, lower steel prices and accelerated iron ore price increases. Amid encouraging economic statistics recently issued by 國家統計局 (The National Bureau of Statistics) according to which China’s gross domestic product (“ GDP ”) registered a year-on-year increase of 7.8% over the course of 2012 and grew 7.9% in the final quarter of 2012 offsetting the slow growth recorded in the earlier part of the year, the NDRC is nevertheless cautious of the prospects of the steel industry. Given the sheer size of overcapacity, any notable improvements may not be forthcoming. The NDRC has also raised concerns about that increasing production costs reflected in the recent increase in commodities prices may add further burdens to the steel industry during its attempt to improve efficiency and cut costs. Furthermore, the NDRC expects the Chinese steel industry will suffer from tighter capital markets as well as intensified trade disputes.

Despite the concerns and negative outlook of the general steel industry, the special steel sector should be looked at from a slightly different angle given China is still undergoing rapid urbanisation and industrialisation and the government has confirmed its support for the special steel industry during its《十二五規劃》(The 12th Five Year Plan). It is also worthwhile noting that China still lags behind other industrial nations in terms of the output of special steel relative to the total steel output. As set out in 高品質特殊鋼科技 發展《十二五》專項規劃 (The Development of High Quality Special Steel Technology “12th Five Year Plan” Special Plan) as promulgated by 國家科學技術部 (The Ministry of Science and Technology of the PRC) (the “ MST ”) on 6 August 2012, the output of special steel for industrial countries typically accounts for around 10% to 22% of total steel output while the current level is only about 5% in China. MST targets to promote the Chinese special steel industry and to lift its output of special steel relative to the total steel output from about 5% to about 10%. The above driving factors may continue to support the special steel industry in terms of domestic demand in China.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Principal terms of the Share Purchase Agreement

• (a) The Share Purchase Agreement

Date: 7 March 2013 Parties: (1) NSSMC, as the seller; (2) Stenway, as the buyer; and (3) CITIC Pacific, as guarantor.

• (b) Assets to be acquired

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

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

Silver Wings’ sole asset is its interest in Xingcheng Phase II, which is principally engaged in the production of high-end special steel.

(c) Consideration for the Acquisition

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

The consideration for the Acquisition was arrived at after arm’s length negotiations between Stenway and CITIC Pacific on the one hand, and NSSMC on the other hand, with reference, as a whole, to the historical financial results of Silver Wings, which included the historical profit performance, the net asset value, as well as considering the business prospects of Silver Wings going forward.

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

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) Condition precedent

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

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

(e) Guarantee

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

6. Information on Silver Wings and Xingcheng Phase II

• (a) Background and business of Silver Wings and Xingcheng Phase II

Silver Wings was incorporated in 2006 as a joint venture between CITIC Pacific (through Stenway) and Sumitomo Metals (Kokura) Ltd (“ SMK ”) to build and develop Xingcheng Phase II. Upon establishment of the joint venture, SMK subscribed for 25% of the issued shares in Silver Wings, for a subscription amount of the then US$ equivalent of RMB260 million. The ownership of the Sale Shares passed to NSSMC (the “ JV Partner ”) as a result of a series of internal corporate reorganisations, share exchanges and mergers.

Xingcheng Phase II is located in Jiangsu Province in the eastern part of China. It is situated next to the Yangtze River and has wharves for the transport of raw materials and finished products. Xingcheng Phase II has been jointly managed by the representatives of CITIC Pacific and SMK. With steel melting, casting and rolling facilities to produce up to approximately 1.8 million tonnes of high-end special steel annually, Xingcheng Phase II is one of the leaders in the manufacturing of high-end special steel in China. Its products comprise casting round billet and bar steel products, including bearing steel, gear steel and spring steel. These products are used in industries such as auto components, machinery manufacturing, energy and shipbuilding.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

At the time of incorporation of the Silver Wings, SMK transferred some advanced technologies in relation to manufacturing of special steel (the “ Technology ”) to Xingcheng Phase II. As the Technology has been transferred and the Group is now fully familiar with the operations, the Group does not consider that buying out the JV Partner will have any material adverse impact on the operations of Xingcheng Phase II.

(b) Financial information of Silver Wings

(i) Financial results of Silver Wings

Set out below is certain key information extracted from the audited consolidated financial results of Silver Wings for the two years ended 31 December 2011 and 31 December 2012 (prepared in accordance with Hong Kong accounting standards).

	**For the year **	ended
	31 December
	2012		2011
	HK$ million	_HK$ _	million
Revenue	9,345		11,645
Net profit before taxation	465		430
Net profit after taxation	359		328

The consolidated revenue of Silver Wings decreased by approximately 20%, from HK$11,645 million for 2011 to HK$9,345 million for 2012. Based on our discussion with the management of the Group, the decrease was mainly due to the drop in both sales volume of approximately 10% and average selling price of the goods sold of approximately 13% by Xingcheng Phase II during 2012 as a result of the slump in overall demand for special steel and selling price.

Nonetheless, Silver Wings managed to make net profits for 2012 despite the decrease in overall sales resulting from the downturn of the cyclical steel industry. The net profit before taxation has increased by approximately 8% from HK$430 million for 2011 to HK$465 million for 2012, while the net profit after taxation has increased by approximately 9% from HK$328 million for 2011 to HK$359 million for 2012. Based on our discussion with the management of the Group, the improvement in the financial results was mainly due to reduced financing costs.

(ii) Net asset value of Silver Wings

The audited consolidated net asset value of Silver Wings as at 31 December 2012, prepared in accordance with Hong Kong accounting standards, was approximately HK$2,836 million. The majority of the assets of Silver Wings comprised the property, plant and equipment of Xingcheng Phase II, with the remaining balance consisting of inventories, trade and other receivables. The operation of Xingcheng Phase II was largely funded by shareholders’ equity and the remaining balance generally financed by bank borrowings and notes.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

7. Analysis of the consideration for the Acquisition

We have reviewed and identified certain comparable transactions involving sale and purchase of steel manufacturers in Asia, which have taken place in the last three years. We have summarised the aforesaid comparable transactions with their respective price-to-earnings ratio (“ P/E ratio ”) and price-to-book ratio (“ P/B ratio ”) in the table below.

below.
						Percentage
				Principal		of	Location
Date of				activities	acquisition/		of the
announcement	Purchaser	Seller(s)	Target	of the target	subscription		target	P/E ratio	P/B ratio
								(times)	(times)
								(Note 1)	(Note 2)
20 July 2012	Beijing Shougang	Shougang Group	Shougang Qianan	Production of iron		100.0%	PRC	23.5	1.0
	Co., Ltd.	Corporation	Iron and Steel	and steel
	(Shenzhen Stock		Co. Ltd.
	Exchange stock
	code: 000959)
21 April 2011	Chuan Huat	(1) Ong Hiap	Sama Wira	Manufacturing		100.0%	Malaysia	13.0	1.2
	Resources	Holdings Sdn	Mulpha	welded wire
	Berhad (Bursa	Bhd	Industries Sdn	mesh and hard
	Malaysia stock	(2) Koperasi	Bhd	drawn steel
	code: 7016)	Angkatan		wires
		Tentera
		Malaysia
		Berhad
		(3) Mulpha
		Capital
		Partners
		Berhad
13 April 2011	Jinan Iron and	Various	Laiwu Steel Co	Manufacturing of		100.0%	PRC	22.5	1.3
	Steel Company	shareholders of	Ltd. (Shanghai	steel products
	Ltd. (Shanghai	Laiwu Steel Co	Stock Exchange
	Stock Exchange	Ltd.(Note 3),	stock code:
	stock code:	Jinan Steel	600102) and
	600022)	Group	certain assets
		Company Ltd.	held by Jinan
		and Laiwu Steel	Steel Group
		Co Ltd.	Company Ltd.
			and Laiwu Steel
			Co Ltd.
27 July 2010	JFE Holdings, Inc.	N/A_(Note 4)_	JSW Steel Limited	Production of		15.0%	India	15.4	2.2
	(Tokyo Stock		(Bombay Stock	steel					(Note 5)
	Exchange: 5411)		Exchange stock
			code: 500228,
			National Stock
			Exchange of
			India stock
			code:
			JSWSTEEL)
16 July 2010	Signaland Sdn	Tata Steel Ltd.	Southern Steel	Manufacturing of		27.0%	Malaysia	4.6	1.0
	Bhd	(National Stock	Berhad	steel products
		Exchange of	Resources
		India stock	Berhad (Bursa
		code:TATASTEEL,	Malaysia stock
		Bombay Stock	code: 5665)
		Exchange stock
		code: 500470)
21 March 2010	Hebei Iron & Steel	CITIC Pacific	Shijiazhuang Iron	Production and		65.0%	PRC	11.8	1.1
	Group Co. Ltd.		& Steel Co., Ltd.	sale of special
				steel and related
				products
							Average	15.1	1.3
							Median	14.2	1.2
							Maximum	23.5	2.2
							Minimum	4.6	1.0
						The Acquisition		7.3	0.9

Source: Mergermarket and respective companies’ public filings

– 21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

1. The P/E ratios are calculated based on the consideration for the relevant acquisition or subscription divided by the consolidated net profit of the target company or the target asset for the then latest twelve-month period.

2. The P/B ratios are calculated based on the consideration for the relevant acquisition or subscription divided by the latest consolidated net asset value of the target company or the book value of the target asset.

3. Laiwu Steel Co Ltd. (“ Laiwu Steel ”) was a PRC listed company and the transactions involved, among other things, an offer of merger of Laiwu Steel by Jinan Iron and Steel Company Ltd.

4. The transaction involved the subscription of new shares of JSW Steel Limited (“ JSW Steel ”) by JFE Steel Corporation (“ JFE Steel ”).

5. The P/B ratio of the subscription of new shares of JSW Steel by JFE Steel is calculated on a post-money basis, i.e. the book value of JSW Steel has been adjusted for the subscription money paid by JFE Steel.

We have also assessed the consideration for the Acquisition against comparable listed companies in the sector. We have identified the following listed companies in Hong Kong which are engaged in the production of steel and are profitable in their respective latest twelve-month period that are broadly comparable to Silver Wings. Their respective P/E ratios and P/B ratios are set out below.

	Stock		Market
Company name	code	Principal activities	capitalisation	P/E ratio	P/B ratio
			(HK$ million)	(times)	(times)
				(Note 1)	(Note 2)
China Oriental Group Co.	581	Manufacture and sales of	4,454	28.7	0.4
Ltd.		iron and steel products
Tiangong International Co.	826	Manufacture and sale of	4,348	8.3	1.4
Ltd.		high speed steel (or
		HSS), HSS cutting tools
		and die steel
Xiwang Special Steel Co.	1266	Manufacture of integrated	2,320	3.1	0.7
Ltd.		steel used primarily in
		construction and
		infrastructure projects,
		as well as special steel
		products used in a
		variety of applications
			Average	13.4	0.8
			Median	8.3	0.7
			Maximum	28.7	1.4
			Minimum	3.1	0.4
		The Acquisition		7.3	0.9

– 22 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

1. The P/E ratios are calculated based on the market capitalisation as at the Latest Practicable Date divided by the consolidated net profit of the respective companies for the latest twelve-month period.

2. The P/B ratios are calculated based on the market capitalisation as at the Latest Practicable Date divided by the latest consolidated net asset value excluding minority interests, if any, of the respective companies.

3. Angang Steel Co. Ltd. - H Shares (stock code: 347), Chongqing Iron & Steel Co. Ltd. - H Shares (stock code: 1053), Maanshan Iron & Steel Co. Ltd. - H Shares (stock code: 323), Shougang Concord Century Holdings Ltd. (stock code: 103) and Shougang Concord International Enterprises Co. Ltd. (stock code: 697) are not included in the above table as all the aforesaid companies were loss-making (without taking into account exceptional items) for the latest twelve-month period.

On the basis of the consolidated net profit of Silver Wings for the year ended 31 December 2012 of approximately HK$359 million, the consideration for the Acquisition of RMB530 million (equivalent to approximately HK$651.9 million) for the 25% stake in Silver Wings represented a historical P/E ratio of approximately 7.3 times. Such multiple is lower than the averages of the comparable transactions and the comparable listed companies of approximately 15.1 times and 13.4 times respectively.

Based on the audited consolidated net asset value of Silver Wings as at 31 December 2012 of approximately HK$2,836 million, the consideration for the Acquisition of RMB530 million (equivalent to approximately HK$651.9 million) for the 25% stake in Silver Wings represented a discount of approximately 8.1% to the attributable consolidated net asset value of Silver Wings of approximately HK$709.0 million. In terms of P/B ratio, the ratio represented by the consideration for the Acquisition is approximately 0.9 times. The average for the comparable transactions and the comparable listed companies are approximately 1.3 times and approximately 0.8 times respectively, while the range is between 1.0 times to 2.2 times for the comparable transactions and approximately 0.4 times to approximately 1.4 times for the comparable listed companies. The P/B ratio represented by the consideration for the Acquisition is therefore below the average for the comparable transactions and is slightly above the average for the comparable listed companies.

8. Financial effects of the Acquisition on the Group

• (a) Earnings

Silver Wings has been accounted for as a jointly controlled entity in the financial statements of CITIC Pacific. The consolidated profit and loss account of CITIC Pacific has included the Group’s share (i.e. 75%) of the results of Silver Wings. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of CITIC Pacific and, accordingly, the entire consolidated financial results of Silver Wings will be fully consolidated into the financial statements of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Equity attributable to the Shareholders

As mentioned in paragraph (a) above, Silver Wings has been accounted for as a jointly controlled entity in the financial statements of CITIC Pacific. The consolidated balance sheet of CITIC Pacific has included the Group’s share (i.e. 75%) of the net assets of Silver Wings. Upon completion of the Acquisition, Silver Wings will become a wholly-owned subsidiary of CITIC Pacific and, accordingly, the entire consolidated assets and liabilities of Silver Wings will be consolidated into the financial statements of the Group.

The assets and liabilities of Silver Wings will be recorded at fair value at completion of the Acquisition. In the event that the fair value of the consolidated net assets of Silver Wings at completion of the Acquisition exceeds the corresponding book value in the Group’s balance sheet, the excess amount attributable to the Group (i.e. 75% of Silver Wings), if any, will be recognised as a fair value gain in the profit and loss account of the Group. The final amount of fair value gain, if any, will be determined upon completion of the Acquisition based on the then fair values of the assets and liabilities of Silver Wings, subject to audit.

(c) Net debt and liquidity

As at 31 December 2012, the Group was in a net debt position of HK$83,808 million, representing a total debt (comprising bank loans, other loans, other draft and long term borrowings) of HK$116,629 million less cash and bank deposits of HK$32,821 million. The consideration for the Acquisition is RMB530 million (equivalent to approximately HK$651.9 million) in cash, which will be entirely satisfied from the internal resources of the Group. Given the consideration for the Acquisition is relatively insignificant compared to the total amount of cash and bank deposits, the Acquisition is not expected to have any material impact on the Group’s liquidity and net debt positions.

DISCUSSION AND ANALYSIS

The Group is heavily engaged in the manufacturing of special steel. It has been a long-term strategy and commitment of the Group to develop its investment in the special steel business as evidenced by the increasing production capacity and building of a number of technical and research centres in the past few years. The Acquisition is in furtherance of the ordinary and usual course of business of the Group and represents a logical expansion of business in line with the stated strategy and plan of the Group.

Completion of the Acquisition will enable CITIC Pacific to take full control of the production facilities of Xingcheng Phase II and obtain the entire benefit from the financial results of Silver Wings.

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Silver Wings has been consistently profit-making since its commencement of operations in 2007. In our view, Xingcheng Phase II, being one of the leaders in the manufacturing of high-end special steel in China, is comparatively less exposed to the downturn of the general PRC steel market. It has been able to make a profit in 2012, when a significant number of steel makers made losses amid a poor PRC steel market environment.

The P/E ratio of the Acquisition of approximately 7.3 times is lower than the averages for the comparable transactions and the comparable listed companies of approximately 15.1 times and 13.4 times respectively while the P/B ratio of the Acquisition of approximately 0.9 times is below the average for the comparable transactions of approximately 1.3 times and is slightly above the average for the comparable listed companies of 0.8 times.

The consideration for the Acquisition will be entirely financed by cash from internal resources of the Group. The amount and method of payment have no significant adverse impact on the Group’s net asset value or liquidity position.

OPINION AND RECOMMENDATION

Based on the above principal factors and reasons, we consider that the Acquisition is on normal commercial terms, which are fair and reasonable to the Independent Shareholders, and that the Acquisition is in the interests of CITIC Pacific and the Independent Shareholders as a whole.

As set out in the “Introduction” section above, the Company has applied for, and the Stock Exchange has granted, a waiver pursuant to Rule 14A.43 of the Listing Rules from compliance with the requirement to convene a Shareholders’ meeting to approve the Acquisition. Accordingly, the Company has obtained written shareholders’ approval in lieu of convening a Shareholders’ meeting and no Shareholders’ meeting will be convened to approve the Acquisition. Nevertheless, should a Shareholders’ meeting have been convened, we would have advised the Independent Board Committee to recommend, and we ourselves would have recommended, the Independent Shareholders to vote in favour of the resolution in relation to the Acquisition.

Yours faithfully, for and on behalf of SOMERLEY LIMITED M.N. Sabine Chairman

– 25 –

APPENDIX

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(I) Directors’ Interests

Interests and/or short positions of the Directors and chief executives

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and the chief executive of CITIC Pacific had any interest or short position in the Shares, underlying Shares or debentures of CITIC Pacific or its associated corporations (within the meaning of the SFO) which were required, pursuant to section 352 of the SFO, to be entered into the register referred to therein, or were required to be notified to CITIC Pacific and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short position which he was taken or deemed to have under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Companies set out in the Listing Rules:

(i) Shares in CITIC Pacific:

Name of director Vernon Francis Moore Liu Jifu André Desmarais Carl Yung Ming Jie Peter Kruyt (alternate director to André Desmarais)	Number of Shares Personal interests unless otherwise stated Approximate percentage of the issued share capital (%) 4,200,000 (Note 1) 0.115 840,000 0.023 8,145,000 (Note 2) 0.223 300,000 0.008 34,100 0.001

Notes:

1. Trust interest

2. Corporate interest in respect of 8,000,000 Shares and family interest in respect of 145,000 Shares

– 26 –

APPENDIX

GENERAL INFORMATION

(ii) Share options in CITIC Pacific (Note) :

				Number of	Approximate
				share options	percentage
		Exercise		outstanding	of the
	Date of	price per	Exercise	as at the Latest	issued share
Name of director	grant	Share	period	Practicable Date	capital
		(HK$)			(%)
Chang Zhenming	19 Nov 09	22.00	19 Nov 09 –	600,000	0.016
			18 Nov 14
Zhang Jijing	19 Nov 09	22.00	19 Nov 09 –	500,000	0.014
			18 Nov 14
Vernon Francis	19 Nov 09	22.00	19 Nov 09 –	500,000	0.014
Moore			18 Nov 14
Liu Jifu	19 Nov 09	22.00	19 Nov 09 –	500,000	0.014
			18 Nov 14
Carl Yung Ming	19 Nov 09	22.00	19 Nov 09 –	500,000	0.014
Jie			18 Nov 14

Note: The consideration paid by the grantee on each grant of share options was HK$1.

(iii) Shares in associated corporations of CITIC Pacific:

Number of shares in CITIC Telecom International Holdings Limited

Personal interests Approximate unless otherwise percentage of the Name of director stated issued share capital (%) Vernon Francis Moore 200,000 (Note) 0.008

Note: Trust interest

– 27 –

APPENDIX

GENERAL INFORMATION

• (iv) Share options in associated corporations of CITIC Pacific:

CITIC Resources Holdings Limited (Note)

				Number
				of share
				options	Approximate
				outstanding	percentage
		Exercise		as at	of the
		price		the Latest	issued
	Date of	per	Exercise	Practicable	share
Name of director	grant	Share	period	Date	capital
		(HK$)			(%)
Zhang Jijing	02 Jun 05	1.018	02 Jun 06 –	10,594,315	0.135
			01 Jun 13

Note: No consideration was payable or paid by the grantee on each grant of the share option.

(II) Shareholders’ Interests

Substantial shareholders of CITIC Pacific

As at the Latest Practicable Date, save as disclosed below, so far as was known to any Director or chief executive of CITIC Pacific, no person (other than a Director or chief executive of CITIC Pacific or their respective associates) had any interest or short position in the Shares or underlying Shares which would fall to be disclosed to CITIC Pacific under the provisions of Divisions 2 and 3 of Part XV of the SFO or were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of CITIC Pacific:

		Approximate
		percentage of
	Number of	the issued
Name	Shares	share capital
		(%)
CITIC Group Corporation	2,098,736,285	57.508
CITIC Limited	2,098,736,285	57.508
CITIC Investment (HK) Limited	1,351,250,082	37.026
CITIC Hong Kong (Holdings)
Limited (“CITIC HK”)	747,486,203	20.482
Heedon Corporation	598,261,203	16.393
Full Chance Investments Limited	450,416,694	12.342
Newease Investments Limited	450,416,694	12.342
Skyprofit Holdings Limited	450,416,694	12.342
Honpville Corporation	310,988,221	8.522

– 28 –

APPENDIX

GENERAL INFORMATION

CITIC Group Corporation is a substantial shareholder (within the meaning of the Listing Rules) of CITIC Pacific holding its indirect interest in the Shares through the following wholly-owned subsidiary companies:

		Approximate	Approximate
		percentage of
Name of subsidiary companies of	Number of	the issued
CITIC Group Corporation	Shares	share capital
			(%)
CITIC Limited	2,098,736,285		57.508
CITIC Investment (HK) Limited	1,351,250,082		37.026
CITIC HK	747,486,203		20.482
Full Chance Investments Limited	450,416,694		12.342
Newease Investments Limited	450,416,694		12.342
Skyprofit Holdings Limited	450,416,694		12.342

CITIC HK is a substantial shareholder (within the meaning of the Listing Rules) of CITIC Pacific, holding its indirect interest in the Shares through the following wholly-owned subsidiary companies:

		Approximate
		percentage of
Name of subsidiary companies of	Number of	the issued
CITIC HK	Shares	share capital
		(%)
Affluence Limited	46,089,000	1.263
	(Note)
Winton Corp.	30,718,000	0.842
Westminster Investment Inc.	101,960,000	2.794
Jetway Corp.	122,336,918	3.352
Cordia Corporation	32,258,064	0.884
Honpville Corporation	310,988,221	8.522
Hainsworth Limited	93,136,000	2.552
Southpoint Enterprise Inc.	10,000,000	0.274
Raymondford Company Limited	2,823,000	0.077

Note: These shares include those held by Raymondford Company Limited as Affluence Limited is an indirect holding company of Raymondford Company Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of CITIC Pacific were not aware of any other persons (not being a Director or chief executive of CITIC Pacific) who had an interest or short position in the Shares or underlying shares of CITIC Pacific which would fall to be disclosed to CITIC Pacific under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital.

– 29 –

APPENDIX

GENERAL INFORMATION

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, both Messrs. Zhang Jijing and Ju Weimin were non-executive directors of CITIC Resources Holdings Limited, a company listed on the main board of the Stock Exchange (Stock code: 1205). CITIC Resources Holdings Limited is a diversified energy and natural resources investment holding company and through its subsidiaries has interests in aluminium smelting, coal, import and export of commodities, manganese mining and processing and oil exploration, development and production. Further details of its nature, scope and size of its business as well as its management can be found in the latest annual report of CITIC Resources Holdings Limited. In the event that there are transactions between CITIC Resources Holdings Limited and CITIC Pacific, Messrs. Zhang Jijing and Ju Weimin will abstain from voting. Save as disclosed above, Mr. Zhang Jijing and Mr. Ju Weimin are not directly or indirectly interested in any business that constitutes or may constitute a competing business of CITIC Pacific.

Save as disclosed above, no other Directors have any direct or indirect interests in any business that constitutes or may constitute a competing business of CITIC Pacific.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which was not expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors or the expert described in paragraph 7 of this appendix had any direct or indirect interest in any assets which had been, since 31 December 2012, being the date to which the latest published audited accounts of CITIC Pacific were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which is significant in relation to the business of the Group.

6. MATERIAL ADVERSE CHANGES

The Directors are of the opinion that as at the Latest Practicable Date, with reference to all announcements and circulars issued by CITIC Pacific, there has not been any material adverse change in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited accounts of the Group were made up.

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APPENDIX

GENERAL INFORMATION

7. EXPERT AND CONSENT

The following are the qualifications of the expert which has given advice contained in this circular:

Qualification

Name Qualification Somerley Limited A corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

The above expert has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its letter as set out in this circular and references to its name in the form and context in which they appear respectively.

As at the Latest Practicable Date, the above expert was not beneficially interested in the share capital of any member of the Group, nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

8. DIRECTORSHIP AND EMPLOYMENT OF DIRECTORS AND CHIEF EXECUTIVE IN SUBSTANTIAL SHAREHOLDERS OF CITIC PACIFIC

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 CITIC Pacific under the provisions of Divisions 2 and 3 of Part XV of the SFO:

		Position
	Name of company which had such	within such
Name of Director	discloseable interest or short position	company
Chang Zhenming	CITIC Group Corporation	Chairman
	CITIC Limited	Chairman
	CITIC HK	Chairman
Zhang Jijing	CITIC HK	Director
	Heedon Corporation	Director
	Honpville Corporation	Director
Liu Jifu	CITIC HK	Director
Ju Weimin	CITIC HK	Director
	CITIC Investment (HK) Limited	Director

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APPENDIX

GENERAL INFORMATION

9. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the registered office of CITIC Pacific in Hong Kong from the date of this circular up to and including 12 April 2013:

• (a) the letter from Somerley Limited, the text of which is set out on pages 13 to 25 of this circular;

• (b) the letter from the Independent Board Committee, the text of which is set out on pages 11 to 12 of this circular;

• (c) the Share Purchase Agreement; and

• (d) a copy of this circular.

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