BUSINESS OVERVIEW A1A-28(1)a We are the largest integrated construction group in the PRC and in Asia, the third largest construction 3rd Sch.-1 contractor in the world in 2006 (up from fourth largest in 2005), based on total contracting revenue, and a R11.07 Fortune Global 500 company. We offer a full range of construction-related services, including infrastructure construction, survey, design and consulting services and engineering equipment and component manufacturing, which enables us to provide integrated one-stop solutions to our customers and compete effectively in large-scale and complex projects. We have enjoyed a leading market position in the railway construction industry in the PRC since the 1950s. We also hold leading positions in the design and construction of bridges, tunnels and electrified railways, and the research, development and manufacturing of turnouts and bridge steel structures in the PRC. Our products and services in these businesses have attained advanced international standards. In addition, we are leveraging on our established platform in the infrastructure construction industry to expand into other industries such as property development and mining. We operate in every province, autonomous region and municipality across the PRC and have A1A-29(2) established a growing international presence, having undertaken more than 230 construction projects across more than 55 countries and regions globally. Since the 1980s, we have received more than 200 of the most prestigious awards in the fields of engineering, construction, research and design. Our total revenue was RMB153.6 billion for the year ended 31 December 2006 and RMB72.5 billion for the six months ended 30 June 2007, and our profit attributable to equity holders for the same periods were RMB2,046 million and RMB643 million, respectively. The table below summarizes our business segments and the major services and products we provide in each business segment: Business Segment Key Services and Products Infrastructure Construction ********** Construction of railways, highways, bridges, tunnels, metropolitan railways (including subways and light railways), buildings, irrigation works, hydroelectricity projects, ports, docks, airports and other municipal works Survey, Design and Consulting Services ************************ Survey, design, consulting, research and development, feasibility study and compliance certification services with respect to infrastructure construction projects Engineering Equipment and Component Manufacturing******** Design, research and development, manufacture and sale of turnouts and other railway-related equipment and materials, steel structures and engineering machinery Property Development ************** Development, sale and management of residential and commercial properties Other Businesses******************* Railway and road investment and operation projects, mining, raw material trading and other ancillary businesses 87 BUSINESS The following table sets out the amount and percentage of our total revenue provided by each of our five business segments for the three years ended 31 December 2004, 2005 and 2006 and the six months ended 30 June 2006 and 2007: For the year ended 31 December For the six months ended 30 June 2004 2005 2006 2006 2007 % of % of % of % of % of Revenue Total Revenue Total Revenue Total Revenue Total Revenue Total (unaudited) (RMB in millions, except for percentages) Infrastructure Construction *********** 77,249 87.8 99,204 87.9 140,399 89.6 54,423 88.6 67,637 88.0 Survey, Design and Consulting Services 2,780 3.2 3,480 3.1 4,124 2.6 1,565 2.6 1,507 2.0 Engineering Equipment and Component Manufacturing ******** 3,024 3.4 3,814 3.4 4,095 2.6 1,955 3.2 2,222 2.9 Property Development *************** 863 1.0 1,622 1.4 1,879 1.2 932 1.5 1,408 1.8 Other Businesses******************** 4,018 4.6 4,747 4.2 6,278 4.0 2,544 4.1 4,043 5.3 Subtotal *************************** 87,934 100.0 112,867 100.0 156,775 100.0 61,419 100.0 76,817 100.0 Inter-Segment eliminations *********** (1,105) (1,444) (3,207) (1,045) (4,328) Total ****************************** 86,829 111,423 153,568 60,374 72,489 The following table sets out the amount and percentage of our segment results provided by each of our five business segments for the three years ended 31 December 2004, 2005 and 2006 and the six months ended 30 June 2006 and 2007: For the year ended 31 December For the six months ended 30 June 2004 2005 2006 2006 2007 Operating % of Operating % of Operating % of Operating % of Operating % of Profit Total Profit Total Profit Total Profit Total Profit Total (unaudited) (RMB in millions, except for percentages) Infrastructure Construction *** 157 19.6 566 36.3 2,227 61.3 607 45.7 715 57.2 Survey, Design and Consulting Services****************** 169 21.1 132 8.5 351 9.7 115 8.7 67 5.4 Engineering Equipment and Component Manufacturing 379 47.4 432 27.7 445 12.3 168 12.6 67 5.4 Property Development ******* 90 11.3 344 22.0 426 11.7 257 19.3 285 22.8 Other Businesses************ 5 0.6 87 5.5 181 5.0 182 13.7 116 9.2 Subtotal ******************* 800 100.0 1,561 100.0 3,630 100.0 1,329 100.0 1,250 100.0 Adjustment(1) *************** 45 58 52 (110) 189 Total ********************** 845 1,619 3,682 1,219 1,439 (1) Operating profit for individual business segments in this Prospectus is segment result, which includes the addition of net allocated finance income or the deduction of net allocated finance expenses. Total operating profit for the Group represents the total of operating profit for individual business segments after adjustment to include net unallocated income (expenses) and to eliminate inter-segment transactions and net allocated finance income (expenses). Infrastructure Construction We are the largest integrated construction group in the PRC and in Asia and the third largest construction contractor in the world in 2006 (up from fourth largest in 2005), in terms of total contracting revenue. Our track record of successfully completing numerous large-scale construction projects and developing and applying innovative technologies and engineering methods in such projects has enabled us 88 BUSINESS to become a leading company in the infrastructure construction industry in the PRC and various other countries in the world. Our principal focus is on railway construction and we have participated in the construction of all main railway lines built in the PRC since the 1950s. We also focus on the construction of large-scale, complex bridges and tunnels and are one of the market leaders in the construction of expressways, highways and metropolitan railways in the PRC. Our major infrastructure construction activities throughout the PRC also include construction of buildings, irrigation works, hydroelectricity projects, ports, docks, airports and other municipal works. We have also established a growing portfolio of international infrastructure construction projects, and have undertaken over 230 construction projects in more than 55 countries and regions. For the six months ended 30 June 2007, our Infrastructure Construction Business accounted for approximately RMB67.6 billion, or 88.0%, of our total revenue and RMB715 million, or 57.2%, of our operating profit before adjustment. Survey, Design and Consulting Services We are one of the leading players in the infrastructure survey, design and consulting services industry in the PRC and offer a full range of survey, design and consulting services (including integrated one-stop solutions and specialized services in the areas of railway electrification, bridge and tunnel design). In particular, we are a leader in the railway survey, design and consulting services market and play an important role in assisting the MOR to formulate railway industry standards on design, construction and implementation specifications and quality inspection. Having a market share of more than 31% of the PRC metropolitan railway survey and design services market, in which there are a large number of participants each with a small market share, we, along with our associates, dominate the PRC market for metropolitan railway survey and design services. We also hold a leading position in the bridge, tunnel and electrified railway survey and design markets, and the airborne and remote sensing survey and design market in the PRC. For the six months ended 30 June 2007, our Survey, Design and Consulting Services Business accounted for approximately RMB1.5 billion, or 2.0%, of our total revenue and RMB67 million, or 5.4%, of our operating profit before adjustment. Engineering Equipment and Component Manufacturing We are the largest manufacturer of several railway-related engineering equipment and components in the PRC. Our major product lines include turnouts and other railway equipment, steel structures, tracked machines and engineering machinery. We are one of the largest developers and manufacturers of turnouts in the world based on total number of units produced. We dominate the turnout market in the PRC and are the sole developer and manufacturer of high manganese steel welded frogs and the only manufacturer currently producing acceleration turnouts in the PRC, being the only entity granted the permit by the MOR to manufacture high manganese steel welded frogs and one of two entities granted permits by the MOR to manufacture acceleration turnouts. We are also one of the leading manufacturers of bridge steel structures and the sole manufacturer of railway-related large bridge steel structures in the PRC. We are one of the few manufacturers that have been licensed by the MOR to manufacture tracked machines such as rail trolleys and electrified railway work vehicles. We are committed to building our research and development and design capabilities and providing pre-sales and after-sales services, including the installation of our manufactured products. For the six months ended 30 June 2007, our Engineering Equipment and Component Manufacturing Business accounted for approximately RMB2.2 billion, or 2.9%, of our total revenue and RMB67 million, or 5.4%, of our operating profit before adjustment.