China Merchant English Low

8/4/2019 China Merchant English Low

1/87

GROWTH

ANNUAL REPO RT 2010

COMMITMENTT O G R O W T H

China Merchants Holdings (Pacific) Limited


2/87

CONTENTS

2 Corporate Profile

3 Corporate Information

6 Chairmans Statement

8 CEOs Message

14 Board of Directors

16 Key Executive Officers

18 Financial Highlights

20 Corporate Governance

26 Financial Report

80 Statistics of Shareholders

82 Notice of Annual General Meeting

Proxy Form


3/872 ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

The Company was incorporated in Singapore as a private

limited company under the name Hotel Tai-Pan Pte Ltd on 27

March 1981 and was converted to a public limited company

on 11 May 1981. The Company was officially listed on the

main board of the Singapore Exchange Securities Trading

Limited (SGX-ST) on 17 August 1981. Upon the sale in

1989 of its flagship hotel, then known as Tai-Pan Ramada

Hotel, the Company changed its name to HTP Holdings

Limited.

China Everbright Holdings Co. Ltd took over the control of

the Company in August 1993 and the Companys name was

changed to China Everbright Pacific Limited.

In May 2001, China Merchants Holdings (International)

Company Limited (CMHI) acquired a 23.9% stake in the

Company from China Everbright Holdings Co. Ltd and

became the single largest shareholder of the Company. The

Company further changed its name to China Merchants

Holdings (Pacific) Limited so as to directly identify the

Companys strong ties with the China Merchants Group.

On 30 December 2004, the Company was transformed into

a significant toll road player following the acquisition of equityinterests in five toll roads in China from CMHI. The Company

CORPORATE PROFILE

is now one of the leading toll road operators in China and is

the largest tol l road company listed on the SGX-ST. Currently,

the Company invests in and operates three toll roads in

China. The three toll roads totalled approximately 274

kilometres and are located in Guangxi Zhuang Autonomous

Region, Guizhou province and Zhejiang province in the PRC.

These roads are sited on routes connecting destinations

that provide traffic growth opportunities. Besides the core

business in toll road operations, the Company is also involved

in property development in New Zealand.

Currently, Huajian Transportation Economic Development

Center (HTEDC) is the holding company with an equity

stake of 82.5% of the issued shares in the capital of the

Company. HTEDC, a wholly-owned subsidiary of China

Merchants Group Limited, is one of the largest enterprises

in China engaging in toll road investment and management.

HTEDC manages a portfolio comprising investment in more

than 20 expressways and bridges with an aggregate length

of 5,000 km.

The issued and paid up share capital of the Company

comprises 718 million ordinary shares and 136 million

redeemable convertible preference shares (RCPS).

40%

60%

60%

100%

100%

17.5%Other Shareholders

82.5%Huajian Transportation

Economic Development

Centre

Other Businesses

Toll Road Business

Guiliu Expressway(Guangxi Zhuang Autonomous Region,PRC)

Yuyao Highway

(Zhejiang Province, PRC)

Universal Homes Limited(Auckland, New Zealand)

Guihuang Highway(Guizhou Province, PRC)

Other Companies(New Zealand & PRC)

CHINA MERCHANTS

HOLDINGS

(PACIFIC) LIMITED

The corporate structure of the Group is as follows:


4/87

Directors

Mr Dong Xue Bo (Non-executive Chairman)

Mr Zheng Hai Jun (Non-executive Vice Chairman)

Mr Jiang Yan Fei (Vice Chairman & Chief Executive Officer)

Mr Wu Xin Hua (Executive Director & Chief Operating Officer)

Dr Lim Heng Kow (Independent Director)

Dr Hong Hai (Independent Director)

Audit Committee

Dr Lim Heng Kow (Chairman)

Mr Dong Xue Bo

Dr Hong Hai

Nominating CommitteeDr Lim Heng Kow (Chairman)

Mr Dong Xue Bo

Dr Hong Hai

Remuneration Committee

Dr Hong Hai (Chairman)

Mr Jiang Yan Fei

Dr Lim Heng Kow

Company SecretariesMs Lim Lay Hoon

Ms Lai Foon Kuen

Registered Office

50 Raffles Place #32-01

Singapore Land Tower

Singapore 048623

Tel: 6536 5355 Fax: 6536 1360

CORPORATE INFORMATION

Corporate Office

8 Temasek Boulevard #38-01

Suntec Tower Three

Singapore 038988

Tel: 6836 0200 Fax: 6836 4776

Share Registrar

Boardroom Corporate & Advisory Services Pte. Ltd.

50 Raffles Place #32-01

Singapore Land Tower

Singapore 048623

Tel: 6536 5355 Fax: 6536 1360

AuditorsDeloitte & Touche LLP

Public Accountants and Certified Public Accountants

6 Shenton Way #32-00

DBS Building Tower Two

Singapore 068809

Partner-in-charge:

Ms Ng Peck Hoon (from 2010)

3CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITEDANNUAL REPORT 2010


5/87

Our Vision is to be...a leading player in the toll roadindustry in China

COMMITMENTT O G R O W T H


6/87



CHAIRMANS STATEMENT

into the Wenzhou region of the prosperous coastal Zhejiang

province. Having obtained our shareholders approval in

October 2010, we are still in the process of obtaining the

PRC regulatory approvals. The acquisition of Yongtaiwen

Expressway, when completed, is immediately accretive to

the Groups earnings.

Review of Results

For the financial year ended 31 December 2010, the Group

posted a revenue to HK$130.6 million, a decrease of 38%

over the corresponding period. The property development

and others business segment which accounted for 92%of the total Group revenue, registered a decline in revenue

due mainly to a drop in settlement numbers of development

properties as a result of slower sales compared to last year.

The Groups pre-tax profit rose 38% to HK$281 million

from HK$203.2 million a year ago. Net profit after tax

was HK$267.4 million, a 37% growth over the previous

financial year. The 38% increase in pre-tax profit included

an exceptional gain of HK$41.3 million from the disposal

of the Groups entire interest in Luomei Highway in January

2010. Excluding an impairment charge of HK$168 million(the impairment charge was an investment write down in the

Groups 60%-owned Yuyao Highway) incurred in FY2009,

the Groups pre-tax profit would have declined by 35%,

impacted by the reduction in profit/cash sharing ratio from

90% to 40% with effect from 1 January 2010 of our major toll

road asset, the Guiliu Expressway.

The Groups property development business

continued to be adversely affected by challenging

market conditions in New Zealand. The property

development and others business segment as a

whole posted a higher pre-tax loss of HK$19.0 million

for the year under review compared to a loss of

HK$10.1 million a year ago largely due to lower gross

profit from sales of development properties, higher

administrative expenses, partially offset by

higher foreign exchange gain and bank

interest income.

Dear Shareholders,

As the global economy improved in 2010, we forged ahead

with a renewed focus on acquisitions to further strengthen

and expand our toll road business in China.

We have consistently adopted a growth strategy of

expanding our business and earnings base through both

organic expansion and selective acquisitions, in particular,

expressways located in the PRC. To support such growth

strategy, the Group has built up a strong financial position

with a cash balance of approximately HK$1.3 billion as at

31 December 2010 and significant debt capacity. We

therefore believe that we have the financial capacity and

flexibility to pursue investment opportunities with a view to

bringing long-term, strategic benefits to the CMHP Group.

In August 2010, as part of our long-term growth strategy,

our wholly-owned subsidiary, China Merchants Pacific

(Shenzhen) Investment Co., Ltd entered into a conditional

sale and purchase agreement with our ultimate holding

company, China Merchants Group Limited (CMG), to

acquire CMGs 51% equity interest in Zhejiang Wenzhou

Yongtaiwen Expressway Co., Ltd (Yongtaiwen Expressway

Co) for a total consideration of RMB2.23 billion

(approximately HK$2.56 billion).

Yongtaiwen Expressway Co owns and operates the Wenzhou

Yongtaiwen Expressway (Wenzhou Section) (the Yongtaiwen

Expressway) located in Zhejiang province in

the Peoples Republic of China. It is a

dual-2, four-lane carriageway with a total

length of approximately 138 km.

The acquisition of Yongtaiwen

Expressway will further diversify and

enlarge CMHPs toll road portfolio, as

well as expand its geographical coverage

6 ANA EP 0 0 CHINI A ME NA S H ) II T

impacted by the reduction in profit/cash sharing ratio from

90% to 40% with effect from 1 January 2010 of our major toll

road asset, the Guiliu Expressway.

The Groups property development business

continued to be adversely affected by challenging

market conditions in New Zealand. The property

evelopment and others business segment as a

whole posted a higher pre-tax loss of HK$19.0 million

for the year under review compared to a loss of

HK$10.1 million a year ago largely due to lower gross

profit from sales of development properties, higher

administrative expenses, partially offset by

higher foreign exchange gain and bank

interest income.

Yongtaiwen Expressway Co owns and operates the Wenzhou

Yongtaiwen Expressway (Wenzhou Section) (the Yongtaiwen

Expressway) located in Zhejiang province in

the Peoples Republic of China. It is a

ual-2, four-lane carriageway with a total

length of approximately 138 km.

The acquisition of Yongtaiwen

Expressway will further diversify and

nlarge CMHPs toll road portfolio, as

well as expand its geographical overage

6 ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED


8/87

We are optimistic about the toll road industry in China. Thetraffic volume and toll revenue registered by our toll roads grew

in 2010 as Chinas economy remained strong with a 10.3% GDP

growth rate. The overall toll road industry outlook remains positive

and the strong GDP forecast for Chinas economy in 2011 shouldcontinue to underpin our roads traffic and toll revenue growth.

The Groups balance sheet has strengthened. As at 31

December 2010, its cash and cash equivalents stood at

about HK$1.3 billion, up 27% compared to last year. Net

asset value per share rose from HK$4.59 as at 31 December

2009 to HK$4.62 as at 31 December 2010. The toll road

operations continued to generate robust cash flows. Free

cash flow for the year was HK$345 million. The Company

intends to use our existing cash resources to partly finance

the acquisition of Yongtaiwen Expressway.

Dividends

The acquisition of the 51% stake in Yongtaiwen Expressway

Co from CMG represents a major strategic investment of the

Company to strengthen its future earnings base. Taking into

consideration the cash requirement for the acquisition, the

Board is recommending a final tax exempt (one-tier) dividend

of 2.0 Singapore cents per share, unchanged from last year.Including the interim dividend of 2.0 Singapore cents per

share, the total dividend for the year would amount to 4.0

Singapore cents or a dividend payout ratio of 67% for the

financial year ended 31 December 2010.

The Road Ahead

We are optimistic about the toll road industry in China. The

traffic volume and toll revenue registered by our toll roads

grew in 2010 as Chinas economy remained strong with a

10.3% GDP growth rate. The overall toll road industry outlookremains positive and the strong GDP forecast for Chinas

economy in 2011 should continue to underpin our roads

traffic and toll revenue growth. The operating environment

in New Zealand is expected to remain weak and downward

pressure on house prices may remain for the next 12 months.

The acquisition of Yongtaiwen Expressway is in line with the

Groups growth strategy of further expanding its toll road

network in China to capture a greater share of the growing

expressway traffic and to derive an additional synergy from

an expanded network. The acquisition, when concluded, will

mark a great step forward in our development and will allow

us to accelerate growth and further strengthen our position

in the toll road industry.

The acquisition of Yongtaiwen Expressway from CMG has

also demonstrated the strong support given by the China

Merchants Group to help the Group grow its toll road

business. Going forward, the China Merchants Group would

continue to play a vital role in the Groups development. With

the China Merchants Groups extensive connections and

vast investments in the toll road industry in China, we believe

that the Group is advantageously positioned to seek further

expansionary growth in China.

Appreciation

In closing, let me record my appreciation to the management

team and staff of our Group for their hard work and

contributions, and our business partners, associates and

shareholders for their continuing support. I would also like

to express my thanks to fellow directors for the wise counsel

and guidance provided to the Group.

We are pleased to welcome on Board Mr Zheng Hai Jun and

Mr Wu Xin Hua and look forward to their contributions to

the Company. Mr Yan Cheng Da and Ms Tsui Suet Lai Linda

stepped down from the Board in February 2011. On behalfof the Board, I would like to convey our heartfelt appreciation

to them for their invaluable contributions during their period

of office.

I look forward to your continued support as we invest to build

the future for all our stakeholders.

Dong Xue Bo

Chairman



9/87

A s the Group enters its next phase of growth, we will

accelerate our growth strategies and enhanceshareholder value for the long term.

CEOS MESSAGE

Dear Shareholders,

The year 2010 was significant in that the Company took a

further step towards realising our vision of being a leading

player in the toll road industry in China. In an effort to expand

our footprint in China, the Company, in August 2010,

announced the proposed investment of RMB2.23 billion to

acquire a 51% stake in Yongtaiwen Expressway.

It is an exciting time for the Group as we are embarking on

a new phase of growth and expansion built upon our solid

foundation. The Group currently manages and operates

three toll roads in China with a total length of approximately

274 km. The acquisition of Yongtaiwen Expressway will

complement our existing toll road business and elevate the

scale of our operations. With this acquisition, our toll road

portfolio will be expanded to about 412 km from the current

274 km.

As part of our strategy to

streamline our toll road

portfolio, the Group

completed the disposal

of our 33.4% interest

in Luomei Highway in

January 2010, realising a

gain of approximately

HK$41.3 million.

Financial Review

I am pleased to report that the Group turned in a good set

of results in 2010. Our revenue declined 38% to HK$130.6

million on the back of lower sales volume of development

properties. Net profit before tax and non-recurring items,

at HK$239.7 million, was 35% lower. Including the sale of

Luomei Highway in January 2010 which resulted in an

exceptional gain of HK$41.3 million and the impairment

charge of HK$168 million incurred last year, our profit

before tax increased 38% to HK$281 million.


*Non-recurring items refer to the impairment loss on the Groups

investment in Yuyao joint ventures incurred in FY2009 and the gain on

disposable of an available-for-sale financial asset in FY2010

Segmental Performance

Revenue

2010HK$000

2009HK$000

%Change

Toll RoadOperations

9,023 13,128 (31)

PropertyDevelopment &Others

121,575 197,490 (38)

130,598 210,618 (38)

Profit Before Tax

2010HK$000

2009HK$000

%Change

Toll RoadOperations

258,781 381,340 (32)

PropertyDevelopment &Others

(19,047) (10,129) 88

239,734 371,211 (35)

Non-recurringitems*

41,314 (168,006) n.m.

281,048 203,205 38


10/879CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITEDANNUAL REPORT 2010

an impairment charge of HK$168 million taken against the

Groups investment in Yuyao Highway. In 2010, the Group

recognized an exceptional gain of HK$41.3 million from the

disposal of the Groups entire interest in Luomei Highway.

Excluding these non-recurring items, the Groups pre-tax

profit would have declined by 35%.

Basic EPS and diluted EPS were 38.81 HK cents and 31.30HK cents respectively as compared to 31.61 HK cents and

22.88 HK cents in the previous year, representing an increase

of 23% and 37% respectively.

Toll revenue registered by the Groups toll road joint ventures

reached RMB778.3 million, up 21% from the previous year

due mainly to the rise in traffic volumes on our roads which

grew 17.5% compared to last year. Pre-tax profit contribution

(excluding non-recurring items) from the toll road business

decreased 32% due principally to the reduction in profitcontribution from Guiliu Expressway arising from the reduction

in profit/cash sharing ratio and cessation of subsidy income

pursuant to the Guiliu Expressway joint venture agreement.

Our New Zealand home building operations encountered

an extremely difficult business environment in 2010. Sales

activities and transactions suffered on the lack of buying

interest and uncertainty over further mortgage rate increases.

The property development and others business segment as

a whole posted a pre-tax loss of HK$19 million compared to

a loss of HK$10.1 million last year.

The contribution to the Groups profit before tax by the

respective toll roads in 2010 and 2009 were as follows:

2010HK$000

2009HK$000 %

ChangeShare ofResults

SubsidyIncome Total

Share ofResults

SubsidyIncome Total

Jointly Controlled Entities

Guiliu Expressway 88,349 _ 88,349 153,655 53,417 207,072 (57.3)

Guihuang Highway 125,468 16,172 141,640 120,864 14,484 135,348 4.6

Yuyao Highway 21,782 21,782 15,610 15,610 39.5

235,599 16,172 251,771 290,129 67,901 358,030 (29.7)

Infrastructure Joint Venture

Luomei Highway 1,801 9,177 n.m.

Other Income/ (Expenses) 5,209 14,133 n.m.

235,599 16,172 258,781 290,129 67,901 381,340 (32.1)

Non-recurring Items 41,314 (168,006) n.m.

Total 235,599 16,172 300,095 290,129 67,901 213,334 40.7

Our net profit attributable to shareholders improved by

37% to HK$267.4 million, delivering a 23% growth in basic

earnings per share to 38.81 HK cents. Our balance sheet

remains strong and healthy. Net assets as at 31 December

2010 stood at HK$3.9 billion. We have a healthy cash reserve

of about HK$1.3 billion. Net asset value per share increased

from HK$4.59 to HK$4.62.

Revenue

Group revenue registered a decrease of 38% to HK$130.6

million compared to HK$210.6 million a year ago. The

property development and others business segment, which

made up 92% of the total Group revenue, registered a drop

in settlement numbers of development properties due to the

challenging operating environment which resulted in slower

sales compared to last year.

Revenue from toll road operations comprises income froman infrastructure joint venture (the Groups investment in the

Luomei Highway joint venture) and interest income from fixed

deposits placed with banks. Revenue from this business

segment accounted for the remaining 8% of the Groups

total revenue. It reported lower revenue this year due to the

absence of investment income after the disposal of Luomei

Highway was completed in January 2010.

Profitability

For the year under review, net profit after tax was HK$267.4

million, an increase of 37% over the HK$195.4 million

attained last year. The Groups pre-tax profit increased

38% to HK$281 million from HK$203.2 million attained last

year. Pre-tax profit for 2009 of HK$203.2 million included



Guiliu Expressway

Guiliu Expressway has registered strong growth in tollrevenue since the implementation of a weight-based toll

collection system for good vehicles since 1 July 2009. For

the year under review, toll revenue from Guiliu Expressway

increased by 29.4% over the previous year. Fuelled by the

stable economic environment in China, extension of the

road network in Guangxi Zhuang Autonomous Region and

the continued increase in car ownership, Guiliu Expressway

registered healthy traffic growth during the year.

In accordance with the Guiliu Expressway joint venture

agreement, the Groups profit/cash sharing entitlement in

Y06

Y07

Y08

Y09

Y10

3,338

3,392

3,457

3,883

4,251

Guiliu ExpresswayTraffic Volume (000 Vehicles)

Guiliu ExpresswayToll Revenue (RMB 000)

Y06

Y07

Y08

Y09

Y10

222,975

241,521

245,559

343,511

444,455

Operations Review

Toll Roads

The Chinese economy posted upbeat economic data in

2010, with GDP expanding by 10.3% to reach RMB39.8

trillion. Fuelled by the robust economy, traffic volume and toll

revenue achieved by the Groups toll road projects in China

increased by 17.5% and 21% respectively. Profit contribution

(excluding non-recurring items) registered by our toll roads

however declined by 32%, impacted by the reduction in

profit/cash sharing ratio of our major toll road asset, the

Guiliu Expressway.

Traffic flows and toll revenue recorded by each of the toll

roads are as follows:

Traffic Volume 2010 2009 Change

Vehicles(000)

Vehicles(000)

(%)

Guiliu Expressway 4,251 3,883 9.5

Guihuang Highway 20,995 19,690 6.6

Yuyao Highway 16,743 12,172 37.6

Total 41,989 35,745 17.5

Toll Revenue 2010 2009 Change

RMB(000)

RMB(000)

(%)

Guiliu Expressway 444,455 343,511 29.4

Guihuang Highway 211,330 216,299 (2.3)

Yuyao Highway 122,564 83,596 46.6

Total 778,349 643,406 21.0



CEOS MESSAGE (CONTD)

the 40%-owned Guiliu Expressway was reduced from 90%

to 40% with effect from 1 January 2010 and the receipt ofsubsidy had ceased from the same date. As a result, profit

contribution from Guiliu Expressway declined by 57.3% or

HK$118.7 million.

One of the main benefits of toll-by-weight tariff system is that

it reduces overloaded vehicles on the roads which in turn will

lower road surface maintenance costs in the long run.

Guihuang Highway

The performance of Guihuang Highway in the current period

was affected by mild traffic diversion from competing roads.

Toll revenue posted by Guihuang Highway amounted to

RMB211.3 million, a decrease of 2.3% compared to theamount recorded last year. However Guihuang Highway

achieved a profit growth of 4.6% due to lower direct expenses

incurred, partially offset by the absence of tax subsidy from

the local tax authority.

Yuyao Highway

The performance of Yuyao Highway improved after the

relocation of a toll station and the change of toll rate structure

at this station. Toll revenue from Yuyao Highway surged by

46.6% while profit contribution increased 39.5% on the back

of the higher toll revenue achieved.

Guihuang HighwayTraffic Volume (000 Vehicles)

Y06

Y07

Y08

Y09

Y10

15,795

16,253

15,301

19,690

20,995

Guihuang HighwayToll Revenue (RMB 000)

106,627

153,352

179,469

216,299

211,330

Y06

Y07

Y08

Y09

Y10

Yuyao HighwayTraffic Volume (000 Vehicles)

Y06

Y07

Y08

Y09

Y10

8,320

13,924

13,555

12,172

16,743

uyao g wayToll Revenue (RMB000)

Y06

Y07

Y08

Y09

Y10

108,370

123,358

106,955

83,596

122,564



China such as the recently announced proposed acquisition

of Yongtaiwen Expressway. We have already obtained our

shareholders approval for the acquisition and are still in

the process of obtaining the relevant PRC governmental

approvals. We believe the successful completion of the

acquisition of Yongtaiwen Expressway will further solidify our

position as a major player in the PRCs toll road industry.

The acquisition of Yongtaiwen Expressway, upon completion,

is immediately earnings accretive. Yongtaiwen Expressway has

recorded compounded annual growth of about 9.1%, 4.9%

and 5.0% in its traffic flow, toll revenue and net profit after tax

respectively between the financial year ended 31 December

1997 and 31 December 1999. The robust economic growth

of the prosperous coastal Zhejiang province will continue to

be the main driver for Yongtaiwen Expressways traffic flow

and toll revenue growth. The consolidation of the financial

results of Yongtaiwen Expressway upon completion will

therefore boost our toll road profits.

The Company intends to finance the acquisition of

Yongtaiwen Expressway using a combination of internal cash

Property Development and OtherBusinesses

In the past 12 months, the low level of sales in the general

property market in New Zealand had a significant impact

on our home-buiding subsidiary in New Zealand, Universal

Homes Limited (Universal Homes) as a large percentage of

its sales are to existing home buyers who have to sell their

own homes to upgrade to a Universal Homes product. Sales

volume is likely to remain at recent low levels for the majority

of 2011 based on the outlook for the primary drivers such

as housing affordability and the state of the New Zealands

economy which is expected to remain sluggish in 2011.

Universal Homes has an established track record and strong

brand name in New Zealand, coupled with an experienced

management team and prudent cost management, we

believe it will be able to ride out these difficult times.

Outlook

Moving forward, we plan to further strengthen and expand

our toll road business, focusing on expressway projects in



CEOS MESSAGE (CONTD)

resources and external financing. Our financial discipline and

strong operating cash flow will put us in good stead to secure

external bank borrowings.

The overall toll road industry outlook in China remains

positive. China posted 10.3% growth rate in 2010. Although

the recent policy measures, such as raising interest rate and

banks reserve ratio, is expected to affect Chinas economic

growth, the general consensus is that its economy will

continue to grow at a rate of between 7% to 8%. While most

of the advanced countries are yet to fully recover from the

financial crisis of 2008, emerging markets especially China

and India are showing a high rate of economic expansion

and growing demand. Rising car ownership and increasing

urbanization in China should continue to underpin our toll

roads traffic volume and toll revenue growth which bodes

well for our business.

The business environment for our property development

business in New Zealand will continue to remain challenging

and we expect sales of our residential properties to continueto be weak for the next 12 months.

As the Group enters its next phase of growth, we will

accelerate our growth strategies and enhance shareholder

value for the long term. I am confident that with the continued

strong support of our customers, stakeholders, partners

and staff, together as a team, we will be able to take our

Company to greater heights.

Jiang Yan Fei

Chief Executive Officer


15/87

Mr Dong Xue Bo ChairmanMr Dong was appointed Chairman of the Board in February 2009. He is the Assistant to the President

of China Merchants Group Limited, Executive Vice Chairman and Chief Executive Officer of HuajianTransportation Economic Development Center, a wholly-owned subsidiary of China Merchants Group

Limited. Mr Dong has extensive experience in Chinas national expressway network planning and

management. He successively served as Deputy Section Director, Section Director, Deputy Director

and Director in the Strategic Planning Department of the Ministry of Transportation in the PRC before

taking up his current appointment in the China Merchants Group. He was also previously a vice-mayor

of Luoyang City in Henan Province. In the last few years, he was actively involved in Chinas development

of a long-term framework for its highways and waterways transportation system.

Mr Dong graduated from Liaoning University in the PRC with a Bachelors Degree in Economics and

holds an MBA from China Europe International Business School. He is currently the Vice Chairman of

China Highway Society, Chairman of the Operation and Management Sub-society of the China Highway Society, Deputy President of

the National Defence Transportation Society, standing member of China Young Entrepreneur Society as well as an adjunct professor

at Nankai University and Dalian Maritime University.


BOARD OF DIRECTORS

Mr Jiang Yan Fei Vice Chairman & Chief Executive Officer

Mr Jiang was appointed Director and Chief Executive officer of the Company in December 2004 and

further assumed the position of Vice Chairman in Febraury 2011. He also assumed the concurrent

position of Executive Deputy General Manager of Huajian Transportation Economic Development

Centre. Mr Jiang joined China Merchants Holdings (International) Company Limited (CMHI) in

2001 as a Deputy General Manager, whose main area of responsibility was the toll road business.

Prior to joining CMHI, he was the Deputy General Manager of China Merchants Shekou Holdings

Co. Ltd. He has extensive experience in the development of toll roads and transportation systems

including investment management, technology and communications in the PRC and was a senior

manager of the Shandong Provincial Transport Development and Investment Company. Mr Jiang is

a telecommunication engineer and a senior economist and a standing member of the Operation andManagement Sub-society of the China Highway Society. He holds an MBA from Murdoch University,

Australia, and graduated from Chongqing Communication College in the PRC.

Mr Zheng Hai Jun Vice Chairman

Mr Zheng was appointed Vice Chairman of the Board In February 2011. Mr Zheng joined the China

Merchants Group in 1998 and is currently the General Manager of Huajian Transportation Economic

Development Center, a wholly-owned subsidiary of China Merchants Group Limited. Mr Zheng has

been actively involved in transportation management in the PRC since the 1990s. He brings with

him an extensive knowledge and skills in infrastructure management having held senior project and

corporate management roles in several of Chinas infrastructure projects including expressways and

ports. Mr Zheng is the Chairman of Huabei Expressway Co., Ltd, a company listed on Shenzhen

Stock Exchange. He is also the Vice Chairmen of two other companies listed on Shanghai Stock

Exchange. Mr Zheng holds a Masters Degree in Investment Management from the Graduate

School of China Academy of Social Science and an MBA from the University of South Australia

International Graduate School of Management. He is a senior economist and a standing member

of China Highway Society.



Mr Wu Xin Hua Executive Director & Chief Operating Officer

Mr Wu joined the Company as an Executive Director and Chief Operating Officer in February

2011. He is concurrently a Deputy General Manager of Huajian Transportation Economic

Development Center where he is responsible for developing Huajians business through new

acquisitions and overseeing the integration of Huajians various businesses. Mr Wu has extensive

experience in corporate finance, specialising in asset restructuring and equity and debt financing.

He has held senior management positions at financial institutions including CITIC Securities Co.,

Ltd, Shandong Securities Co., Ltd and China Merchants Securities Co., Ltd with responsibilities

in the areas of general management and investment banking. Prior to joining Huajian, Mr Wu was

the General Manager of the Investment Banking Department of China Merchants Securities Co.,

Ltd. Mr Wu graduated from Renmin University of China with a Bachelors Degree in Economics.

He is currently the Vice Chairman of the Operation and Management Sub-society of the China Highway Society.

Dr Lim Heng Kow Independent Director

Dr Lim was appointed to the Board in July 1996. Dr Lim has more than 30 years experience

in the hotel, property development and retail industries as well as consultancy businesses.

He has served as managing/executive directors and/or senior consultants to many listed

and non-listed companies in Singapore, Malaysia and China over the past 30 years. In the

early part of his career, he was an academic, having lectured in the universities of Malaysia

and Singapore, and then worked briefly as a journalist. Dr Lim holds a PhD from the

University of London, a Masters Degree in Arts from University of Ibadan (formerly London

University, Ibadan College), Nigeria and a Bachelors Degree in Arts from the Nanyang

University of Singapore.

Dr Hong Hai Independent Director

Dr Hong joined the Board in May 2005. He is a Professorial Fellow at the Nanyang

Technological University. Prior to joining the academia, he was President and CEO of

Haw Par Corporation Limited, a leading public listed group in Singapore, from 1990 to

2003. He was also previously a Member of Parliament. Dr Hong serves as an honorary

council member of the Singapore Chinese Chamber of Commerce & Industry and a council

member of the Nanyang Academy of Fine Arts. Dr Hong obtained a Bachelor of Electrical

Engineering Degree from the University of Canterbury, New Zealand. He also holds a

Masters Degree in Public Administration from Harvard University, a PhD in Economics from

Carnegie Melon University, USA and a Masters Degree in Chinese Language and Literature

from Beijing Normal University.



KEY EXECUTIVE OFFICERS

Mr Jiang Yan FeiChief Executive Officer

Mr Wu Xin Hua

Chief Operating Officer

Mr Chen Yuan JunDeputy General Manager & Chief Operating Officer

Mr Chen is responsible for overseeing the Groups toll road business in China. He was previously the General Manager

of the Infrastructure Department of China Merchants Holdings (International) Co. Ltd. (CMHI) where he was actively

involved in the management and operations of the toll road business of CMHI. Prior to joining CMHI in 1999, Mr Chen

worked successively with Qinhuangdao Port Administration and China Merchants Group Limited. He has more than

twenty years experience in transportation infrastructure, port investment and management, and enterprise integration

and governance. Mr Chen holds an MBA Degree and graduated from China South East University in the PRC.

Ms Lim Lay HoonCompany Secretary

Ms Lim is responsible for the corporate secretarial and human resource and administration matters of the Company. She

has been with the Company since 1995 when she joined as an Assistant Finance & Admin Manager. She later assumed

the positions of Finance & Admin Manager and Financial Controller in 1999 and 2000. Prior to joining the Company, she

had worked as an accountant in a local company and an auditor in a public accounting firm. A member of the Institute

of Certified Public Accountants of Singapore, Ms Lim holds an MBA from the Nanyang Technological University and

graduated with a Bachelors Degree in Accountancy from the National University of Singapore.

Ms Chin WennFinance Manager

Ms Chin joined the Company in September 2000 and is responsible for the accounting, financial, treasury and tax

functions of the Company. Prior to joining the Company, she had held various accounting and finance positions in-charge

of matters relating to accounting, tax and financial management in various companies in Singapore and China. She is a

Certified Public Accountant (Singapore), a Chartered Certified Accountant (UK) and a CFA Charter holder. She graduated

with a Bachelor of Economics Degree from Nankai University, the PRC.



Mr Graham Basil StreetCEO of Universal Homes Limited

Mr Street has been with the Group for 33 years and is responsible for overseeing the business, management and sales

activities of our home building subsidiary in New Zealand. He joined Universal Homes as an accountant in 1978 and was

appointed Company Secretary in 1980 and Financial Director in 1985. He was promoted to CEO in 1993. Prior to joining

Universal Homes, he worked as an accountant in an Auckland based Chartered Accountant Partnership. He holds a

Bachelors Degree in Commerce from Auckland University. He is an Associate Chartered Accountant of the Institute of

Chartered Accountants of New Zealand.

Mr Yang Xu DongGeneral Manager of Guiliu JV Enterprises

Mr Yang is responsible for overseeing the operations of the Guiliu Expressway. Mr Yang joined CMHI in 1999 as a Project

Manager in the Infrastructure Department as well as Deputy General Manager in the Guiliu JV Enterprises. He graduated

with a Masters Degree in Engineering from Chang An University, the PRC, and holds a Bachelors Degree from Xian

Highway University, the PRC.

Mr Yang Guo LinGeneral Manager of Guihuang JV Enterprises

Mr Yang is responsible for overseeing the operations of the Guihuang Highway. His previous appointments in the China

Merchants Group included that of Deputy General Manager of the Guihuang JV Enterprises and Assistant to the General

Manager of the Ningzhenluo JV Enterprises. He obtained his Masters Degree in Mechanical Engineering from Chang An

University, the PRC. He also holds a Bachelors Degree from Xian Highway University, the PRC.

Mr Yuan YiGeneral Manager of Yuyao JV Enterprises

Mr Yuan is responsible for overseeing the operations of the Yuyao Highway. Mr Yuan was previously a Project Manager of

the Infrastructure Department of CMHI as well as Deputy General Manager in the Yuyao JV Enterprises. He obtained his

Bachelors Degree and Masters Degree in Engineering both from Chang An University, the PRC.



FINANCIAL HIGHLIGHTS

Financial Years

2010 009 2008 2007 2006

HK$000 HK$000 HK$000 HK$000 HK$000

Operating Results

Revenue 130,598 210,618 211,649 514,413 35,366

Profit before tax 281,048 203,205 302,342 324,661 249,361

Income tax expense (13,612) (7,797) (6,120) (21,670) (20,165)

Profit for the year 267,436 195,408 296,222 302,991 229,196

Financial Position

Total assets 4,093,492 4,005,760 ,892,343 ,740,336 3,395,583

ash and cash equivalents 1,282,374 1,012,111 774,172 861,433 344,863

Total equity ,946,155 3,816,916 3,733,494 ,573,589 3,262,881

Financial Ratio (%)

Return on assets 6.53 4.88 7.61 8.10 6.75

Return on equity .78 5.12 7.93 8.48 7.02

Per Share Data

Basic earnings (HK cents) 38.81 1.61 48.96 64.18 47.88

Diluted earnings (HK cents) 31.30 22.88 4.67 35.44 26.84

Net asset value (based on issued share capital) HK$4.62 HK$4.59 HK$4.50 HK$4.21 HK$3.79

Net asset value (assuming all RCPS had been

converted)HK$4.62 HK$4.47 HK$4.37 HK$4.18 HK$3.82

Dividend Per Share (Singapore cents)

Interim dividend 2.00 2.50 2.75 2.75 2.75

Final dividend 2.00 2.00 2.25 2.75 2.75

Total dividend 4.00 4.50 5.00 .50 .50



20062008 200720092010

435514

212211

131

REVENUE(HK$ million)

20062008 200720092010

3.79

4.214.504.59

4.62

NAV PER SHARE(HK$)

20062008 200720092010

229

303296

195

267

NET PROFIT AFTER TAX(HK$ million)

20062008 200720092010

29

3534

3742

VEHICLE TRAFFIC VOLUME(million)

2007 2006200820092010

47.88

64.81

48.96

31.6138.81

20062008 200720092010

460

541550657

778

BASIC EARNINGS PER SHARE(HK cents)

TOLL REVENUE(RMB million)


21/87

CORPORATE GOVERNANCE

The Company is committed in its continuing efforts to achieving high standards of corporate governance and business

conduct in order to ensure greater transparency and to safeguard the interests of shareholders. We are pleased to confirm

that the Company has adhered to the principles and guidelines of the Code of Corporate Governance 2005 (the 2005

Code), save for the Guideline on the composition of the Remuneration Committee, the reason for which deviation is

explained below.

This report describes the Companys corporate governance practices with specific reference to the principles and

guidelines of the 2005 Code.

BOARD OF DIRECTORSPrinciple 1: Boards Conduct of its Affairs

Principle 2: Board Composition and Guidance

The Board comprises six directors, of which two are executive directors, two are non-executive directors and two are

independent directors.

The Board sets the overall strategy of the Group and sets policies on matters such as financial control, financial performance

and risk management procedures and supervises the management of the Companys business and affairs. Through

Board meetings and Board committees appointed by the Board, the Board monitors the performance of the Company,

safeguards the Companys assets, oversees the internal controls and sets the business direction for the Company.

The Board is of the view that the current size of the Board is appropriate considering the scope and nature of the

operations of the Company and of the Group.

The Board, of which one third are independent non-executive directors, is able to ensure that it is able to exercise its

powers objectively and independently from Management. This is further enhanced by the separate roles of the Chairman

and CEO.

The standing of members of the Board in the business community and their experience in strategic planning and direction,

accounting and finance, fund management, corporate finance and industry knowledge provide for effective decision

making and direction to the Group. Key information on the directors is set out on pages 14 and 15.

The Board holds meetings on a quarterly basis. When circumstances require, ad-hoc meetings are arranged. The

Companys Articles of Association allow a Board meeting to be conducted by way of a teleconference.

The Company has an established policy for new Board members to be briefed by management on the business activities

of the Group and its strategic directions.

Directors attendance at Board and Board Committee Meetings in FY2010 is as follows:

Board Audit CommitteeNominatingCommittee

RemunerationCommittee

No. of Meetings No. of Meetings No. of Meetings No. of Meetings

Name of Director Held Attended Held Attended Held Attended Held Attended

Mr Dong Xue Bo 5 4 5 4 1 1 - -

Mr Jiang Yan Fei 5 5 - - - - 1 1

Mr Yan Cheng Da* 5 5 - - - - - -

Ms Tsui Suet Lai Linda* 5 2 - - - - - -

Dr Lim Heng Kow 5 5 5 5 1 1 1 1

Dr Hong Hai 5 5 5 5 1 1 1 1

*Mr Yan Cheng Da and Ms Tsui Suet Lai Linda resigned as Directors with effect from 18 February 2011.

In place of physical meetings, the Board also circulates written resolutions for approval by the relevant members of the Board.



22/87

Principle 3: Role of Chairman and Chief Executive Officer

The Company has a separate Chairman and CEO. They each perform separate functions to ensure that there is an appropriate

balance of power and authority, and that accountability and independent decision-making are not compromised.

The Chairman who is non-executive bears responsibility for the workings of the Board whilst the CEO is responsible for the

day-to-day running of the Groups business.

The CEO ensures that Board meetings are held when necessary and sets the Board meeting agenda in consultation with the

Chairman and ensures that Board members are presented with complete, adequate and timely information. He works closely

with management to ensure compliance with the Companys guidelines on corporate governance. Management staff who

can provide additional insight into the matters to be discussed are invited to attend and present the necessary papers at the

relevant juncture during the Board meeting.

Principle 6: Access to Information

Board members are provided with adequate and timely information prior to Board meetings and on an on-going basis.Detailed Board papers are prepared for each meeting of the Board and are normally circulated at least four working days

in advance of each meeting. The Board papers contain sufficient information from management on financial, business and

corporate issues to enable the Directors to be briefed on issues to be considered at Board meetings.

The Board has separate and independent access to the senior management and the Company Secretary at all times. The

Board also has access to independent professional advice where appropriate.

The Company Secretary attends all Board meetings and is responsible to ensure that Board procedures are followed. It is

also the Company Secretarys responsibility to ensure that the Company complies with the requirements of the Companies

Act and all other rules and regulations of the SGX-ST.

BOARD COMMITTEESNominating Committee (NC)

Principle 4: Board Membership

The NC comprises two non-executive independent Directors and a non-executive Director. Dr Lim Heng Kow who is a

non-executive independent Director chairs the NC. The other members of the NC are Dr Hong Hai (non-executive and

independent) and Mr Dong Xue Bo (non-executive Director).

The NC is guided by its term of reference that sets out its responsibilities. Some of these responsibilities include:

to recommend to the Board on the appointment and re-appointment of Directors;

to review annually the independence of each Director, and ensure that the Board comprises at least one-third independent

Directors;

to decide, where a Director has multiple board representation, whether the Director is able to and has been adequately

carrying out his duties as Director of the Company;

to decide how the Boards performance may be evaluated and propose objective performance criteria to assess

effectiveness of the Board; and

to assess the performance of the Board as a whole, as well as the contribution of each Director to the effectiveness of

the Board.



23/87

New Directors are appointed by way of a Board resolution, after the NC makes necessary recommendations to the Board.

Such new Directors must submit themselves for re-election at the next AGM of the Company. Our Articles of Association

require one-third of our Directors to retire and subject themselves to re-election by shareholders at every AGM.

The NC has reviewed, and is satisfied that Dr Lim Heng Kow and Dr Hong Hai can be considered as independent

Directors.

The year of initial appointment and last re-election of the Directors of the Company are set out as follows:

Name of Director

Date of firstappointment/

last re-election

Board appointment(executive/non-executive/

independent)

Board Committeeas Chairman or member

Mr Dong Xue Bo6 February 2009/

23 April 2009Non-executive

Member: Audit CommitteeNominating Committee

Mr Jiang Yan Fei 30 December 2004/27 April 2010

Executive Member: Remuneration Committee

Mr Yan Cheng Da*4 November 2005/

23 April 2009Executive Nil

Ms Tsui Suet Lai Linda*6 February 2009/

23 April 2009Non-executive Nil

Dr Lim Heng Kow26 July 1996/27 April 2010

IndependentNon-executive

Chairman: Audit CommitteeNominating Committee

Member: Remuneration Committee

Dr Hong Hai 27 May 2005/27 April 2010 IndependentNon-executive

Chairman: Remuneration Committee

Member: Audit CommitteeNominating Committee

Mr Zheng Hai Jun**18 February 2011/

NilNon-executive Nil

Mr Wu Xin Hua**18 February 2011/

NilExecutive Nil

*Mr Yan Cheng Da and Ms Tsui Suet Lai Linda resigned as Directors with effect from 18 February 2011.

**Mr Zheng Hai Jun and Mr Wu Xin Hua were appointed Directors with effect from 18 February 2011.

Principle 5: Board PerformanceThe NC, in considering the re-appointment of any Director, evaluates the performance of the Director. The NC, of which

the Chairman of the Board is a member, uses performance criteria such as attendance record at meetings of the Board

and Board committees, intensity of participation at meetings, the quality of interventions and special contributions.

The NC has adopted a formal process for the evaluation of the performance of the Board. The objective of the evaluation

process is to identify areas for continuous improvement to the Boards effectiveness. It is conducted by way of a board

evaluation questionnaire to assess the Board as a whole using qualitative performance criteria such as an evaluation of

the size and composition of the Board, Boards access to information, Board processes, Boards understanding of the

Groups business operations and effectiveness of Board meetings. No evaluation of the individual Directors contribution

to the effectiveness of the Board was performed during the year.



24/87

Audit Committee (AC)

Principle 11: Audit Committee

Principle 12: Internal ControlsThe AC comprises two non-executive independent Directors and a non-executive Director. Dr Lim Heng Kow who is a

non-executive independent Director chairs the AC. The other members of the AC are Dr Hong Hai (non-executive and

independent) and Mr Dong Xue Bo (non-executive Director).

The AC, which has written terms of reference approved by the Board, performs the following delegated functions:

review with external auditors their audit plan, evaluation of the system of internal controls, annual report and any other

matters that the external auditors wish to discuss;

review of audit matters, their scope and results, and cost effectiveness;

review interim and annual financial statements before submission to the Board for its approval;

review the assistance given by management to the external auditors;

review the independence and objectivity of external auditors;

review the nature and extent of non-audit services performed by external auditors;

review interested person transactions;

conduct investigations into any matter within the ACs scope of responsibility and review of any significant findings

of investigations; and

review arrangements by which employees of the Group may, in confidence, raise concerns about possible

improprieties in matters of financial reporting or other matters, to ensure that arrangements are in place for the

independent investigation of such matters and for appropriate follow up action.

The company has in place a whistle-blowing policy whereby accessible channels are provided for employees to raise

concerns about possible improprieties in matters of financial reporting or other matters.

The AC has full access to and cooperation of Management and has full discretion to invite any Director and executive

officer to attend its meetings.

The AC has reviewed the volume of non-audit services to the Group by the external auditors, and is satisfied that the

nature and extent of such services will not prejudice the independence and objectivity of the external auditors.

In performing its functions, the AC met with the external auditors, without the presence of Management, and reviewed theoverall scope of the external audit and the assistance given by Management to the auditors.

Principle 13: Internal Audit

The Board has appointed a public accounting firm in China to carry out the internal audit function of the Group. The

internal audit team reports primarily to the AC. The internal audit review assignments are determined from time to time

by the AC as its members deem appropriate and in the interest of the Group. An internal audit will be performed for 1

to 2 main operating companies every year. In FY2010, the internal audit team conducted an internal audit review on the

Groups operations of the jointly controlled entities that operate the Yuyao Highway and was satisfied that there were

adequate internal controls.


CORPORATE GOVERNANCE (CONTD)


25/87

Remuneration Committee (RC)

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of RemunerationPrinciple 9: Disclosure on Remuneration

The RC comprises two non-executive independent Directors and an Executive Director. Dr Hong Hai who is a non-

executive independent Director chairs the RC. The other members of the RC are Dr Lim Heng Kow (non-executive and

independent) and Mr Jiang Yan Fei (Chief Executive Officer).

The Board is of the view that Mr Jiang Yan Fei, who is an executive Director, by remaining as a member of the RC will

not compromise accountability and independent decision-making as he does not participate in the deliberation of his

personal remuneration.

The RC, which has written terms of reference approved by the Board, performs the following functions:

recommend to the Board a framework of remuneration for the Board of Directors and key executives; determine specific remuneration packages for each Executive Director and the CEO or executive of similar rank if

the CEO is not an Executive Director;

review the remuneration of senior management; and

administer the CMHP Share Option Scheme 2002.

In setting remuneration packages, the RC takes into account the performance of the Group as well as individual Directors

and key executives, aligning their interests with those of shareholders and linking rewards to corporate and individual

performance.

The RC determines the remuneration packages for the CEO and Executive Directors based on the performance of the

Group and the individual Directors. Independent Directors are paid directors fees, determined by the Board based on the

effort, time spent and responsibilities of the independent Directors. All Directors are recommended by the RC to be paida basic fee. Additional fees are payable to a Director for appointment as a member of a particular committee.

A Director in the RC abstains from making any recommendation in connection with his personal remuneration.

The remuneration of Directors and key executives of the Company for the financial year ended 31 December 2010 is set out

below:

Fee(%)

Salary(%)

Bonus(%)

Benefits(%)

Total(%)

a. Directors of the Company

S$250,000 to below S$500,000

Mr Jiang Yan Fei 54 43 3 100

Mr Yan Cheng Da 76 23 1 100

Below S$250,000

Mr Dong Xue Bo* 100 100

Ms Tsui Suet Lai Linda** 100 100

Dr Lim Heng Kow 100 100

Dr Hong Hai 100 100

b. Key Executives of the Company

Below S$250,000

Mr Chen Yuan Jun 50 46 4 100

Ms Lim Lay Hoon 79 20 1 100

Ms Chin Wenn 79 20 1 100

*Fees are paid to Mr Dong Xue Bos employer company.

**Fees are paid to Ms Tsui Suet Lai Lindas employer company. She resigned as Director with effect from 18 February 2011.



26/87

There are no employees in the Group who are immediate family members of a Director or the CEO.

Information on the China Merchants Holdings (Pacific) Limited Share Option Scheme 2002 is set out in the Report of the

Directors on pages 28 to 29.

COMMUNICATION WITH SHAREHOLDERSPrinciple 10: Accountability and Audit

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder participation

The Board is mindful of the obligation to provide timely and fair disclosure of material information. Shareholders are kept

informed of developments and performances of the Group through announcements via SGXNET and the press (where

appropriate) as well as the annual report.

In presenting announcements of interim and full year results to shareholders, the Boards policy is to provide a balanced and

understandable assessment of the Companys and Groups performance, position and prospects. Other announcements

are also made on an ad-hoc basis where applicable and as soon as possible to ensure timely dissemination of the

information to shareholders.

DEALINGS IN SECURITIES

The Company has adopted a set of code in relation to dealings in the Companys securities for the guidance of directors

and officers pursuant to the SGX-ST Listing Manual. There should be no dealings in the Companys shares by its officers

during the period commencing two weeks before the announcement of the Companys first, second and third quarter

financial results and one month before the announcement of the Companys full year results, and ending on the date of

the announcement of such results respectively. Directors and officers are also expected to observe insider trading laws at

all times even when dealing in its own securities is allowed.

INTERESTED PERSON TRANSACTIONS POLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the

procedures for review and approval of the Companys interested person transactions. There were no interested person

transactions conducted during the year ended 31 December 2010 (excluding transactions below S$100,000).

RISK MANAGEMENT

The Group has in place risk management practices which aim to identify and manage areas of significant risks and

appropriate measures to control and mitigate these risks. The identification and management of financial risks such as

credit, interest rate and currency risks are outlined in Note 4 (under the Notes to the Financial Statements) of the Annual

Report.

MATERIAL CONTRACTS

There are no material contracts entered into by the Company or any of its subsidiaries involving the interests of the CEO

or any Director.


CORPORATE GOVERNANCE (CONTD)


27/87

27 Report of the Directors

31 Statement of Directors

32 Independent Auditors Report

33 Statements of Financial Position

34 Consolidated Income Statement

35 Consolidated Statement of Comprehensive Income

36 Statements of Changes in Equity

38 Consolidated Statement of Cash Flows

39 Notes to Financial Statements

78 Supplementary Information

FINANCIAL REPORT

upp emen ary n orma on



REPORT OF THE DIRECTORS

The directors present their report together with the audited consolidated financial statements of China Merchants

Holdings (Pacific) Limited (the Company) and its subsidiaries (collectively, the Group) and the statement of

financial position and statement of changes in equity of the Company for the year ended December 31, 2010.

1 DIRECTORS

The directors of the Company in office at the date of this report are:

Mr Dong Xue Bo Chairman

Mr Zheng Hai Jun Vice Chairman (Appointed on February 18, 2011)

Mr Jiang Yan Fei Executive Director

Mr Wu Xin Hua Executive Director (Appointed on February 18, 2011)

Dr Lim Heng Kow

Dr Hong Hai

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION

OF SHARES AND DEBENTURES

Neither at the end of the financial year nor at any time during the financial year did there subsist any

arrangement whose object is to enable the directors of the Company to acquire benefits by means of the

acquisition of shares or debentures in the Company or any other body corporate, except as disclosed in

paragraphs 3 and 5 below.

3 DIRECTORS INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding office at the end of the year had no interest in the share capital and

debentures of the Company and related corporations as recorded in the Register of Directors Shareholdings

kept by the Company under Section 164 of the Singapore Companies Act (the Act) except as disclosed

below:

Name of directors and company in which interest is held

Shareholdings in

which the directors are

deemed to have an interest

As at As at

December 31, December 31,

2009 2010

The Company

Ordinary shares fully paid (with no par value)

Jiang Yan Fei 340,000

Yan Cheng Da (resigned on February 18, 2011) 190,000 273,000

Options to subscribe for ordinary shares (with no par value)

Jiang Yan Fei 1,200,000 1,200,000


Lim Heng Kow 150,000 150,000

Hong Hai 150,000 150,000



As at As at

December 31, December 31,

2009 2010

Related corporation

China Merchant Holdings (International) Company Limited

Ordinary shares of HK$0.10 each fully paid

Tsui Suet Lai Linda (resigned on February 18, 2011) 12,000 12,156

Options to subscribe for ordinary shares of HK$0.10 each

Jiang Yan Fei 350,000 350,000


Tsui Suet Lai Linda (resigned on February 18, 2011) 48,000 48,000

The directors interests in the shares and options of the company at January 21, 2011 were the same at

December 31, 2010.

4 DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the year, no director has received or become entitled to receive a benefit which is

required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract

made by the Company or a related corporation with the director or with a firm of which they are a member,

or with a Company in which they have a substantial financial interest except for salaries, bonuses and other

benefits as disclosed in the consolidated financial statements.

5 SHARE OPTIONSThe China Merchants Holdings (Pacific) Limited Share Option Scheme 2002 (the Scheme) was approved

and adopted by the members of the Company at an Extraordinary General Meeting held on May 30, 2002 and

modifications to the Scheme were approved by the members of the Company at the Extraordinary General

Meetings held on April 27, 2006 and April 25, 2008. The Scheme is administered by the Remuneration

Committee, which comprises the following directors:

Dr Hong Hai (Chairman)

Mr Jiang Yan Fei

Dr Lim Heng Kow

Other information regarding the Scheme is set out below:

Group employees (including executive directors), non-executive directors, parent company employees

and associate employees, subject to certain conditions, are eligible to participate in the Scheme.

Controlling shareholders and their associates are not eligible to participate in the Scheme.

The exercise price of the options can be set at a discount to the market price provided that the

maximum discount shall not exceed 20% of the market price on the date of grant of the options.

Options granted with the exercise price set at market price may be exercised 1 year after the grant

date. Options granted with exercise price set at a discount to market price may only be exercised 2

years after the grant date.

All options are settled by physical delivery of shares.



Report Of The Directors

Options granted to eligible employees (including executive directors) expire after 10 years from the

grant date. Options granted to non-executive directors expire after 5 years from the grant date.

At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary

shares of the Company are as follows:

Balance Balanceas at as at Exercise

December 31, Granted or Lapsed or December 31, price per ExercisableDate of grant 2009 exercised expired 2010 share (S$) period

February 10, 2003 400,000 400,000 0.500 February 11, 2004 to

February 10, 2013

October 6, 2006 9,778,000 9,778,000 0.789 October 7, 2007 to

October 6, 2016

October 6, 2006 300,000 300,000 0.789 October 7, 2007 to

October 6, 2011

10,478,000 10,478,000

The details of the options granted under the 2002 Scheme to persons who were directors of the Company

during the year are as follows:

Name of director

Aggregate

options granted

since commencement

of the Scheme

to the end of year

Aggregate

options exercised

since commencement

of the Scheme

to the end of year

Aggregate

options lapsed/

expired since

commencement

of the Scheme

to the end of year

Aggregate options

outstanding as

at the end of year

Jiang Yan Fei 1,200,000 1,200,000Yan Cheng Da

(resigned on February 18, 2011)

1,150,000 (540,000) 610,000

Lim Heng Kow 150,000 150,000

Hong Hai 150,000 150,000

Since the commencement of the Scheme, no options have been granted to the controlling shareholders of

the Company or their associates and no participant under the Scheme has been granted 5% or more of the

total number of options available under the Scheme.

The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to

any rights to participate in any share issue of any other company.

6 AUDIT COMMITTEE

The members of the Audit Committee during the year and at the date of this report are:

Dr Lim Heng Kow (Chairman) Independent and non-executive director

Dr Hong Hai Independent and non-executive director

Mr Dong Xue Bo Non-executive director

The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing Manual

and the Code of Corporate Governance.

The Audit Committee held five meetings since the last directors report. In performing its functions, the AuditCommittee met with the Companys external auditors to discuss the scope of their work, the results of their

examination and evaluation of the Companys internal accounting control system as part of their audit.



The Audit Committee also reviewed the following, where relevant, with the executive directors and external

auditors of the company:

the evaluation of the Groups systems of internal accounting controls;

the Groups financial and operating results and accounting policies;

the financial statements of the Company and the consolidated financial statements of the Group

before their submission to the directors of the company and external auditors report on those financial

statements;

the quarterly, half-yearly and annual announcements as well as the related press releases on the

results and financial position of the Company and the Group;

the co-operation and assistance given by the management to the Groups external auditors;

the re-appointment of the external auditors of the Group; and

interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).

The Audit Committee has full access to management and is given the resources required for it to discharge

its functions. It has full authority and the discretion to invite any director or executive officer to attend its

meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the

level of audit and non-audit fees.

The Audit Committee reviewed the independence of the external auditors as required under Section 206(1A)

of the Act and determined that the external auditors were independent in carrying out their audit of the

financial statements of the Group and the Company.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for

re-appointment as external auditors of the Company at the forthcoming Annual General Meeting of the

Company.

7 AUDITORS

The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE DIRECTORS

Mr Dong Xue Bo

Mr Jiang Yan Fei

March 30, 2011



STATEMENT OF DIRECTORS

In the opinion of the directors, the consolidated financial statements of the Group and statement of financial position

and statement of changes in equity of the Company as set out on pages 33 to 77 are drawn up so as to give a true

and fair view of the state of affairs of the Group and of the Company as at December 31, 2010, and of the results,

changes in equity and the cash flows of the Group, and changes in equity of the Company for the year then ended

and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay

its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Mr Dong Xue Bo

Mr Jiang Yan Fei

March 30, 2011



INDEPENDENT AUDITORS REPORT

TO THE MEMBERS OF CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of China Merchants Holdings (Pacific) Limited (the

Company) and its subsidiaries (the Group) which comprise the statements of financial position of the Group

and the Company as at December 31, 2010, and the income statement, statement of comprehensive income,

statement of changes in equity and statement of cash flows of the Group and the statement of changes in equity

of the Company for the year then ended, and a summary of significant accounting policies and other explanatory

notes, as set out on pages 33 to 77.

The financial statements of the Group and Company for the year ended December 31, 2009 were audited by another

auditor whose report dated April 5, 2010 expressed an unqualified opinion on those financial statements.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that gives a true and fair view in accordance

with the provisions of the Singapore Companies Act (the Act) and Singapore Financial Reporting Standards and for

devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance thatassets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised

and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and

balance sheets and to maintain accountability of assets.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are

free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditors judgement, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entitys preparation of financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as evaluating the

overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position and

statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act

and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Groupand of the Company as at December 31, 2010 and of the results, changes in equity and cash flows of the Group

and the changes in equity of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those

subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with

the provisions of the Act.

Deloitte & Touche LLP

Public Accountants and

Certified Public Accountants

Singapore

March 30, 2011



STATEMENTS OF FINANCIAL POSITION

December 31, 2010

Group Company

Note 2010 2009 2010 2009

HK$000 HK$000 HK$000 HK$000

ASSETS

Current assets

Cash and cash equivalents 6 1,282,374 1,012,111 556,356 357,493

Trade and other receivables 7 22,235 73,203 323,526 304,188

Mortgage advances 8 62

Inventories 9 396,405 370,304

Loan to an infrastructure joint venture 10 6,522

Available-for-sale investment 11 77,105

Total current assets 1,701,014 1,539,307 879,882 661,681

Non-current assets

Property, plant and equipment 12 14,179 13,638 421 452

Interests in subsidiaries 13 3,218,772 3,063,606

Interests in jointly controlled entities 14 2,365,543 2,438,396

Club membership 15 376 376 376 376

Mortgage advances 8 11

Deferred tax assets 16 12,380 14,032

Total non-current assets 2,392,478 2,466,453 3,219,569 3,064,434

Total assets 4,093,492 4,005,760 4,099,451 3,726,115

LIABILITIES AND EQUITY

Current liabilities

Trade and other payables 17 52,486 117,286 1,206,737 802,866

Interest-bearing liabilities 18 66,267 28,233

Provision for warranties 19 10,121 10,220

Dividend payable 6,163 11,249 6,163 11,249

Current tax payable 146

Total current liabilities 135,037 167,134 1,212,900 814,115

Non-current liability

Deferred tax liabilities 16 12,300 21,710

Capital and reserves

Share capital 20 2,728,967 2,728,967 2,728,967 2,728,967

Share option reserve 21 6,025 6,025 6,025 6,025

Statutory reserve 21 62,193 52,502

Fair value reserve 21 41,307

Currency translation reserve 21 384,917 309,733

Reserve on consolidation 21 (78,930) (78,930)

Accumulated profits 842,983 757,312 151,559 177,008

Total equity 3,946,155 3,816,916 2,886,551 2,912,000

Total liabilities and equity 4,093,492 4,005,760 4,099,451 3,726,115

See accompanying notes to financial statements.



CONSOLIDATED INCOME STATEMENT

Year ended December 31, 2010

Group

Note 2010 2009

HK$000 HK$000

Revenue 23 130,598 210,618

Cost of sales (113,586) (173,997)

Gross profit 17,012 36,621

Other operating income 24 68,179 23,743

Distribution expenses (7,159) (8,444)

Administrative expenses (44,254) (34,262)

Other operating expenses (56) (168,157)

Finance costs 25 (4,445) (4,326)

Subsidy income 26 16,172 67,901

Share of results of jointly controlled entities (net of tax) 14 235,599 290,129

Profit before tax 281,048 203,205

Income tax expense 27 (13,612) (7,797)

Profit for the year 28 267,436 195,408

Earnings per share (HK cents): 29

Basic 38.81 31.61

Diluted 31.30 22.88




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Group

2010 2009

HK$000 HK$000

Profit for the year 267,436 195,408

Other comprehensive income

Translation gain arising on consolidation 75,184 50,920

Net change in fair value of available-for-sale

investment transferred to profit or loss (41,307)

Other comprehensive income for the year, net of tax 33,877 50,920

Total comprehensive income for the year 301,313 246,328




STATEMENTS OF CHANGES IN EQUITY


Share Currency

Share Statutory Fair value option translation Reserve on Accumulated

capi ta l reserve reserve reserve reserve consolidat ion profi ts Total

Group HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000Balance at

January 1, 2009 2,728,967 43,309 41,307 7,275 258,813 (78,930) 732,753 3,733,494

Total comprehensive

income for the year 50,920 195,408 246,328

Share options

forfeited (1,250) 1,250

Transfer from

accumulated profits 9,193 (9,193)

One-tier tax exempt dividends:

Final ordinary dividend paid

of Singapore 2.25 cents

per share in respect

of 2008 (70,331) (70,331)

Interim ordinary dividend

paid of Singapore

2.5 cents per share (81,326) (81,326)

Non-cumulative preference

dividend payable of

Singapore 0.75 cents

per share (11,249) (11,249)

Balance at

December 31, 2009 2,728,967 52,502 41,307 6,025 309,733 (78,930) 757,312 3,816,916

Total comprehensive income

for the year (41,307) 75,184 267,436 301,313

Transfer from

accumulated profits 9,691 (9,691)

One-tier tax exempt dividends:

Final ordinary dividend paid

of Singapore 2 cents per

share in respect of 2009 (79,888) (79,888)

Interim ordinary dividend

paid of Singapore 2 cents

per share (86,023) (86,023)


dividend payable of

Singapore 0.75 cents

per share (6,163) (6,163)

Balance at

December 31, 2010 2,728,967 62,193 6,025 384,917 (78,930) 842,983 3,946,155

See accompanying notes to the financial statements.


38/87

Statements Of Changes In Equity


Share

Share option Accumulated

capital reserve profits Total

Company HK$000 HK$000 HK$000 HK$000

Balance at January 1, 2009 2,728,967 7,275 208,939 2,945,181


for the year 129,725 129,725

Transfer from share option reserve

to accumulated profits upon

lapse of share option (1,250) 1,250

One-tier exempt dividends:

Final ordinary dividend paid ofSingapore 2.25 cents per share

in respect of 2008 (70,331) (70,331)

Interim ordinary dividend paid of

Singapore 2.50 cents per share (81,326) (81,326)


dividend payable of Singapore

0.75 cents per share (11,249) (11,249)

Balance at December 31, 2009 2,728,967 6,025 177,008 2,912,000


for the year 146,625 146,625

One-tier exempt dividends:

Final ordinary dividend paid of

Singapore 2 cents per share

in respect of 2009 (79,888) (79,888)

Interim ordinary dividend paid of

Singapore 2 cents per share (86,023) (86,023)


dividend payable of Singapore

0.75 cents per share (6,163) (6,163)

Balance at December 31, 2010 2,728,967 6,025 151,559 2,886,551

See accompanying notes to the financial statements.



CONSOLIDATED STATEMENT OF CASH FLOWS


Group

2010 2009

HK$000 HK$000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 281,048 203,205

Adjustments for:

Depreciation of property, plant and equipment 1,142 1,031

Loss on disposal of plant and equipment 56 151

Dividend income (1,801) (9,177)

Interest expense 4,445 4,326

Interest income (10,519) (6,245)

Impairment on investment in jointly controlled entities 168,006

Gain on disposal of available-for-sale investment (41,314)

Exchange differences (26,234) (13,580)Share of results of jointly controlled entities (235,599) (290,129)

Operating cash flows before movements in working capital (28,776) 57,588

Inventories (829) 12,638

Receivables and advances 57,171 (19)

Trade and other payables (33,525) 26,283

Cash (used in) generated from operations (5,959) 96,490

Income taxes paid (20,549) (14,138)

Net cash (used in) from operating activities (26,508) 82,352

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 9,152 6,415Repayment of loan granted to infrastructure joint venture 6,529 6,819

Purchase of plant and equipment (892) (122)

Proceeds from sale of plant and equipment 8 87

Proceeds from disposal of available-for-sale investment 38,624

Repayment of loans by jointly controlled entities 87,814 74,850

Deposit for potential investments refunded 24,336

Dividends received 285,474 221,488

Net cash from investing activ

Documents

China Merchant English Low