Shanghai Able Digital Science&Tech Co., Ltd. — Annual Report 2006

Apr 23, 2007

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(incorporated in Bermuda with limited liability) Website: www.citicresources.com

(Stock Code: 1205)

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006

FINANCIAL RESULTS

The board of directors (the “Directors”) of CITIC Resources Holdings Limited (the “Company”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively the “Group”) for the year ended 31 December 2006.

CONSOLIDATED INCOME STATEMENT

Year ended 31 December

Notes REVENUE Cost of sales Gross profit Other income and gains 4 Selling and distribution costs Administrative expenses Other operating expenses, net Finance costs 5 PROFIT BEFORE TAX 6 Tax 7 PROFIT FOR THE YEAR ATTRIBUTABLE TO: Shareholders of the Company Minority interests EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY 8 Basic Diluted DIVIDEND PER SHARE 9	2006 HK$’000 7,503,428 (6,974,598) 528,830 283,245 (68,302) (214,910) (62,319) (150,355) 316,189 (70,152) 246,037 200,815 45,222 246,037 HK 4.65 cents HK 4.61 cents NIL	2005 HK$’000 Restated 5,786,386 (5,376,077) 410,309 195,293 (33,805) (132,526) (3,384) (93,730) 342,157 (110,642) 231,515 221,703 9,812 231,515 HK 5.14 cents N/A NIL

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CONSOLIDATED BALANCE SHEET 31 December

Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease premiums Other intangible assets Other assets Goodwill Available-for-sale equity investments Prepayments, deposits and other receivables Loan receivable Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Accounts receivable 10 Prepayments, deposits and other receivables Loan receivable Equity investments at fair value through profit or loss Derivative financial instruments Other assets Cash and bank balances Due from related companies Due from the ultimate holding company Assets of a disposal group classified as held for sale Total current assets CURRENT LIABILITIES Accounts payable 11 Tax payable Accrued liabilities and other payables Derivative financial instruments Due to a minority shareholder Bank and other loans Provisions Liabilities of a disposal group classified as held for sale Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other loans Deferred tax liabilities Derivative financial instruments Provisions Other payables Total non-current liabilities Net assets	2006 HK$’000 2,391,501 58,353 135,701 555,983 341,512 845,936 16,346 21,615 6,754 4,373,701 1,112,150 939,938 1,867,396 17,327 1,974 16,380 62,945 850,744 51,486 34,320 4,954,660 – 4,954,660 533,788 47,108 306,789 286,920 38,174 1,588,022 53,738 2,854,539 – 2,854,539 2,100,121 6,473,822 2,214,540 519,933 41,063 117,549 75,648 2,968,733 3,505,089	2005 HK$’000 1,170,614 – – 573,878 341,512 657,035 326,486 – 11,188
		3,080,713
		656,138 395,749 29,185 – 1,830 12,356 58,365 1,519,595 – –
		2,673,218 266,096
		2,939,314
		186,288 71,709 51,153 203,541 – 858,393 33,229
		1,404,313 33,072
		1,437,385
		1,501,929
		4,582,642
		1,047,223 470,985 11,016 86,011 –
		1,615,235
		2,967,407

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EQUITY Equity attributable to shareholders of the Company Issued capital Reserves Minority interests Total equity	215,909 3,009,434 3,225,343 279,746 3,505,089	215,844 2,725,929
		2,941,773 25,634
		2,967,407

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for derivative financial instruments and equity investments, which have been measured at fair value. A disposal group held for sale is stated at the lower of carrying amount and fair value less costs to sell. These financial statements are presented in Hong Kong dollars (HK$) and all values are rounded to the nearest thousand (HK$’000) except where otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2006. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The acquisition of subsidiaries during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of business combinations to the fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Minority interests represent interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries.

2. ACCOUNTING POLICIES

The accounting policies and basis of preparation adopted in the preparation of the annual financial statements are the same as those used in the annual financial statements for the year ended 31 December 2005, except in relation to the following new and revised HKFRSs (which also include HKASs and Interpretations) that affect the Group and are adopted for the first time for the current year’s financial statements:

HKAS 21 Amendment Net Investment in a Foreign Operation HKAS 39 & HKFRS 4 Amendments Financial Guarantee Contracts HKAS 39 Amendment Cash Flow Hedge Accounting of Forecast Intragroup Transactions HKAS 39 Amendment The Fair Value Option HKFRS 6 Exploration for and Evaluation of Mineral Resources HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease

3.

SEGMENT INFORMATION

The Group’s operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of the other business segments.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

Business segments

The following tables present revenue and results information for the Group’s business segments for the year ended 31 December 2006 and 2005.

Year ended 31 December 2006 HK$’000 Segment revenue: Sales to external customers Other income Segment results Interest income and unallocated gains Unallocated expenses Profit from operating activities Unallocated finance costs Profit before tax Tax Profit for the year	Aluminium smelting 1,602,930 37,039 1,639,969 108,340	Coal 274,752 120 274,872 76,756	Import and export of commodities 5,074,136 9,756 5,083,892 111,025	Manganese 538,006 15,193 553,199 65,759	Crude oil 13,604 5,637 19,241 15,847	Others – – – (11,980)	Consolidated 7,503,428 67,745
							7,571,173
							365,747 215,500 (114,703)
							466,544 (150,355)
							316,189 (70,152)
							246,037

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Year ended 31 December 2005 HK$’000 Restated

Segment revenue: Sales to external customers 1,148,078 259,705 4,300,699 – Other income/(expenses) (3,138) 78,463 21,602 – 1,144,940 338,168 4,322,301 – Segment results 173,383 177,792 82,631 – Interest income and unallocated gains Unallocated expenses Profit from operating activities Unallocated finance costs Profit before tax Tax Profit for the year 4. OTHER INCOME AND GAINS Interest income Handling service fees Dividend income from listed investments Gain on sales of coal exploration interests Gain on disposal of marketable securities Insurance claim income Gain on conversion of available-for-sale equity investments Sale of scraps Others Total other income and gains 5 FINANCE COSTS Interest expense on bank and other loans repayable: Within one year In the second to fifth years, inclusive Beyond five years Total interest Less: Interest capitalized Other finance charges: Increase in discounted amounts of provision arising from the passage of time Others Included amortization of up-front fee of HK$2,004,600 (2005: HK$501,150). 6. PROFIT BEFORE TAX Profit before tax is arrived at after charging/(crediting): Depreciation Amortisation of the electrity supply agreement Amortisation of other intangible assets Amortisation of a prepaid land lease premiums Provision for impairment of items of property, plant and equipment Exchange (gains)/losses, net 7. TAX Current – Hong Kong Current – Elsewhere Charge for the year Overprovision in prior years Deferred Total tax charge for the year	77,429 475 – 10 77,429 485 (6,620) (15,507) 2006 HK$’000 144,810 7,121 55,115 – 5,235 25,996 17,502 11,891 15,575 283,245 2006 HK$’000 85,452 64,773 9,697 159,922 (22,897) 137,025 7,673 5,657 150,355 2006 HK$’000 92,560 62,930 4,235 948 4,893 53,883 2006 HK$’000 – 103,072 (4,533) (28,387) 70,152		5,786,386 96,937 5,883,323 411,679 98,356 (74,148) 435,887 (93,730) 342,157 (110,642) 231,515 2005 HK$’000 Restated 75,002 13,326 19,768 78,463 – – – 5,148 3,586 195,293 2005 HK$’000 43,264 10,219 34,054 87,537 – 87,537 2,445 3,748 93,730 2005 HK$’000 Restated 114,330 58,348 – – 12,733 (30 ,754) 2005 HK$’000 – 102,371 – 8,271 110,642

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The statutory tax rate for Hong Kong profits tax is 17.5% (2005: 17.5%) on the estimated assessable profits arising in Hong Kong during the year. No provision for Hong Kong profits tax has been made as the Group had no assessable profits arising in Hong Kong for the year (2005: Nil).

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Provision for Australian income tax has been made at the statutory rate of 30% (2005: 30%) on the estimated assessable profits arising in Australia during the year.

For the year ended 31 December 2006, the tax rate applicable to the subsidiaries established and operating in the People’s Republic of China (the “PRC”) and Indonesia is 33% and 30% respectively. However, certain PRC subsidiaries of the Group are subject to a full corporate income tax exemption for the first two years and a 50% reduction in the succeeding three years, commencing from the first profitable year. No provision for Indonesian tax has been made for the year as the Indonesian operation of the Group did not generate any assessable profits.

8. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY

The calculation of the basic earnings per share is based on the profit for the year attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares in issue during the year.

The calculation of the diluted earnings per share is based on the profit for the year attributable to ordinary shareholders of the Company. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares in issue during the year, as used in the basic earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares.

A diluted earnings per share amount for the year ended 31 December 2005 has not been presented as exercise prices of the outstanding share options of the Company were greater than the market price of the Company’s shares prevailing during a substantial period of the year ended 31 December 2005.

The calculations of basic and diluted earnings per share are based on:

Earnings Profit attributable to ordinary shareholders of the Company, used in the basic earnings per share calculation Shares Weighted average number of ordinary shares in issue during the year used in the basic earnings per share calculation Effect of dilution – weighted average number of ordinary shares: Share options		2006 2005 HK$’000 HK$’000 200,815 221,703 Number of shares 2006 2005 4,317,072,600 4,316,884,381 43,138,686 – 4,360,211,286 4,316,884,381	2006 2005 HK$’000 HK$’000 200,815 221,703 Number of shares 2006 2005 4,317,072,600 4,316,884,381 43,138,686 – 4,360,211,286 4,316,884,381	2005 HK$’000 221,703
			4,316,884,381

9. DIVIDEND

No interim dividend was paid during the year and the prior year. The Directors do not recommend the payment of any dividend in respect of the year (2005: Nil).

10 ACCOUNTS RECEIVABLE

An aged analysis of the accounts receivable as at the balance sheet date, based on the invoice date, is as follows:

Within one month One to two months Two to three months Over three months	2006 HK$’000 643,465 255,889 17,794 22,790 939,938	2005 HK$’000 313,181 76,950 4,630 988
		395,749

Included in the Group’s total accounts receivable is an amount due from the Group’s fellow subsidiary of HK$235,785,000 (2005: HK$18,313,000), which is repayable on similar credit terms to those offered to other customers of the Group.

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11 ACCOUNTS PAYABLE

An aged analysis of the accounts payable as at the balance sheet date, based on the invoice date, is as follows:

Within one month One to two months Two to three months Over three months	2006 HK$’000 455,696 58,416 5,284 14,392 533,788	2005 HK$’000 170,572 14,762 172 782
		186,288

The accounts payable are non-interest-bearing and are normally settled on 60-day terms.

12. COMPARATIVE AMOUNTS

Certain comparative amounts have been reclassified and restated to conform with the current year’s presentation and accounting treatment.

BUSINESS REVIEW AND OUTLOOK

Strong demand and price volatility for natural resources, especially aluminium, coal, iron ore, manganese and oil, which are important to and impact the Group’s performance, continued during 2006. Against this background, the delivery of the Group’s business strategy as an integrated provider of key natural resources continued and there were a number of encouraging initiatives and developments during the year.

The Group’s businesses and interests in Australia, including aluminium smelting, coal, import and export of commodities, continue to be the principal contributors and formed the basis for the satisfactory results of the Group in 2006. The Group’s Australian listed subsidiary, CITIC Australia Trading Limited (“CATL”), recorded a modest increase in net profit. Alumina exports performed well as did iron ore trading. A positive development has been the commencement in 2006 of a new trading line exporting Chinese steel to Europe and the Middle East.

Since completing the acquisition of manganese investment in February 2006, the manganese business has been integrated into the Group. The Directors are pleased to report that the manganese business has made a welcome contribution to the profits of the Group for 2006 and the Group will be endeavouring to obtain greater efficiency and productivity in the future.

Investment in oil has been identified as a particular focus for the Group and the Group has been benefiting from the key industry appointments of 2006.

In November 2006, CITIC Seram Energy Limited, a wholly-owned subsidiary of the Group, concluded the acquisition of a 51% majority interest in the Seram Island Non-Bula Block production sharing contract. One notable aspect of this acquisition is that CITIC Seram Energy Limited also became the operator responsible for managing and operating exploration and development at the Seram Island Non-Bula Block which marks a change in the Group’s strategy for oil investments from passive holdings to an involvement. In 2006, the average production of oil from the Seram Island NonBula Block was above 4,700 barrels per day.

The Group plans to increase its oil production capacity through development of existing interests and through acquisitions. The Directors are currently assessing a possible investment in the Karazhanbas oilfield located in Kazakhstan which has proven reserves of about 340 million barrels of oil as of 31 December 2005. The Company has been granted a right by its ultimate controlling shareholder, CITIC Group, to acquire about a 50% interest in this oilfield. If an investment in the Karazhanbas oilfield can be successfully concluded, the Group would become one of the largest PRC controlled listed oil producers.

The Group continues to be financially sound and with the support of shareholders of the Company, remain well placed to continue efforts to build the business and enhance shareholder value.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 31 December 2006, the Group had a cash balance of HK$850.7 million. In February and April 2007, the Company has allotted and issued totaling 700,000,000 new shares at a price of HK$2.46 per new share. The net proceeds of the subscription amounted to HK$1,683.0 million.

As at 31 December 2006, the Group had outstanding borrowings of HK$3,802.6 million, which comprised secured bank loans of HK$878.7 million, unsecured bank loans of HK$2,465.0 million and unsecured other loans of HK$458.9 million. The secured bank loans were secured by the Group’s 22.5% participating interest in the Portland Aluminium Smelter joint venture, the fixed assets and mining right of the manganese coal mines, and guarantees mostly provided by Guangxi Dameng Manganese Industry Co., Ltd. The bank trade finance facilities available to CATL are guaranteed by CITIC Resources Australia Pty Limited.

Most transactions of CATL are debt funded, which means CATL is highly geared. However, in contrast to term loans, CATL’s borrowings are transaction specific and of short duration, matching the term of the underlying trade. When sales proceeds are received at the completion of a transaction, the related borrowings are repaid accordingly.

As at 31 December 2006, there was an increase in the Group’s total outstanding borrowings caused by the growth of the business, the gearing ratio of the Group was 54.1%. Of the total outstanding borrowings, HK$1,588.0 million was repayable within one year. There was no adverse change to the financial position of the Group.

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The Group’s diversified business is exposed to a variety of financial risks, such as market risks (including foreign exchange risk, commodity price risk and interest rate risk), credit risk and liquidity risk. The management of such risks is dictated by a set of internal policies and procedures designed to minimize potential adverse effects to the Group. The policies and procedures have proven to be effective.

The Group enters into derivative transactions, including principally forward currency, commodity contracts and interest rate swaps. The purpose of these transactions is to manage the currency, commodity price and interest rate risks arising from the Group’s operations and its sources of finance.

The Board is of the opinion that after taking into account the existing available borrowing facilities and internal resources, the Group has sufficient resources to meet its foreseeable working capital requirements and there will be no adverse change to its financial position.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2006, the Group had around 3,100 full time employees, including management and administrative staff. Most of the employees are employed in the PRC and Australia while the others are employed in Indonesia and Hong Kong.

The employees’ remuneration, promotion and salary increment are assessed based on an individual’s performance, professional and working experience and by reference to prevailing market practice and standards. Rent-free quarters are provided to the Group’s PRC employees.

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Scheme. The employees of the Group’s subsidiaries which operate in the PRC are required to participate in a central pension scheme operated by the local municipal government. The Group also operates a defined contribution retirement benefits scheme (the “RB Scheme”) under the superannuation legislation of the Australian government for those employees in Australia who are eligible to participate.

Contributions are made based on a percentage of the employees’ basic salaries. The assets of the MPF Scheme and the RB Scheme are held separately from those of the Group in an independently administered fund. The Group’s contributions as an employer vest fully with the employees when contributed into the MPF Scheme and the RB Scheme.

The Group’s PRC subsidiaries are required to contribute a certain percentage of their payroll costs to the central pension scheme.

The Company and CATL operate share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations.

POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the Group entered into the following significant transactions:

• (a) On 9 February 2007, the Company entered into the placing and subscription agreement with United Star International Inc. (“USI”), Citigroup Global Markets Asia Limited and UBS AG, pursuant to which the Company agreed to allot and issue, and USI agreed to subscribe for 570,000,000 new ordinary shares of HK$0.05 each at a price of HK$2.46 per new share.

• The transaction, completed on 28 February 2007, constituted a discloseable transaction under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). Further details of the transaction are set out in the announcement of the Company dated 9 February 2007.

• (b) On 9 February 2007, the Company entered into the subscription agreement (the “Subscription Agreement”) with Keentech Group Limited (“Keentech”), pursuant to which the Company conditionally agreed to allot and issue, and Keentech agreed to subscribe for 130,000,000 new ordinary shares of HK$0.05 each (the “Subscription Shares”) at a price of HK$ 2.46 per Subscription Share.

• The transaction, completed on 19 April 2007, constituted a connected transaction under the Listing Rules. Further details of the transaction are set out in the circular of the Company dated 5 March 2007.

• (c) On 20 March 2007, an ordinary resolution was passed at the special general meeting of the Company whereby the authorised share capital of the Company of HK$300,000,000 divided into 6,000,000,000 ordinary shares of HK$0.05 each be and is hereby increased to HK$500,000,000 divided into 10,000,000,000 ordinary shares of HK$0.05 each by the creation of an additional 4,000,000,000 ordinary shares of HK$0.05 each, which such shares shall on their issue rank pari passu in all respects with existing issued shares.

• (d) During the 5th Session of the 10th National People’s Congress, which was concluded on 16 March 2007, the PRC Corporate Income Tax Law (the “New Corporate Income Tax Law”) was approved and will become effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. Since the detailed implementation and administrative rules and regulations have not yet been announced, the financial impact of the New Corporate Income Tax Law to the Group cannot be reasonably estimated at this stage.

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CODE ON CORPORATE GOVERNANCE PRACTICES

In the opinion of the Directors, the Company complied with the applicable provisions, and also complied with certain recommended best practices, of the Code on Corporate Governance Practices (the “CG Code”) and the Rules on Corporate Governance Report as set out respectively in Appendix 14 and 23 to the Listing Rules throughout the accounting period covered by the annual report, except that the non-executive directors of the Company are not appointed for specific terms as required by paragraph A.4.1 of the CG Code. However, under the Company’s bye-laws, one-third of all Directors (whether executive or non-executive) are subject to retirement by rotation and re-election at each general meeting. As such, the Company considers that sufficient measures have been taken to ensure that the Company’s corporate governance practices are no less exacting than those in the CG Code.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its code of conduct for dealings in securities of the Company by the Directors. Based on specific enquiry by the Company, the Directors have complied with the required standard set out in the Model Code throughout the year.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year.

AUDIT COMMITTEE

The Company has an audit committee which was established in compliance with Rule 3.21 of the Listing Rules for the purpose of reviewing and providing supervision over the Group’s financial reporting process and internal controls. The audit committee comprises the three independent non-executive directors of the Company.

The audit committee has reviewed the annual results for the year ended 31 December 2006 with the management of the Company.

On behalf of the board Kwok Peter Viem Chairman

Hong Kong, 20 April 2007

As of the date of this announcement, the executive directors of the Company are Mr. Kwok Peter Viem; Mr. Ma Ting Hung; Mr. Shou Xuancheng; Mr. Sun Xinguo; Ms. Li So Mui; Mr. Mi Zengxin; Mr. Qiu Yiyong; Mr. Zeng Chen and Mr. Zhang Jijing, and the independent non-executive directors are Mr. Fan Ren Da, Anthony; Mr. Ngai Man and Mr. Tsang Link Carl, Brian.

Please also refer to the published version of this announcement in The Standard.

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