About CTIHK Company

We are China Tobacco International's designated overseas platform for capital operation and international business development. China Tobacco International is a wholly-owned subsidiary of China Tobacco Corporation. It undertakes the management and operation of China Tobacco Corporation by organizing the trade of tobacco products and supervising the operation of overseas subsidiaries and the overseas investment of China Tobacco Corporation. CNTC Group is the only entity engaged in the production, sale, import and export of Chinese tobacco monopoly products in accordance with the national tobacco monopoly system. According to the authorization of the State Tobacco Administration and related laws, regulations and rules, we are mainly engaged in the following business: Tobacco leaf product import business: We exclusively operate the import business of tobacco leaf products in accordance with document No. 60. We mainly procure tobacco leaf products from countries or regions of origin around the world (such as Brazil, the United States, Argentina, Canada, Zambia and other regions), and sell imported tobacco leaf products to China Tobacco International to resell them to Chinese tobacco manufacturers to meet their needs for overseas tobacco products. Revenue from tobacco product import operations was HK$5190.1 million, HK$4063.6 million, HK$5487.5 million, HK$4574.4 million and HK$3798.2 million for the years ended 31 December 2017 and 30 September 2018, respectively, accounting for 68.1%, 64.4%, 70.3% and 71.3% of total revenue for the same period, and 74.8%; Tobacco leaf product export business: Our exclusive tobacco product export business mainly refers to purchasing tobacco products from various regions of origin in China and exporting them to Southeast Asia (including Indonesia, Thailand, Singapore, Vietnam, the Philippines, Laos, Cambodia, Myanmar, Malaysia, Brunei, and the Democratic Republic of East Timor), Taiwan, China, Hong Kong, and Macau. According to the Frost & Sullivan report, the export value of tobacco products to these regions was 226.9 million US dollars, 206.4 million US dollars and 242 million US dollars respectively for the year ended 31 December 2017, accounting for 42.3%, 38.1% and 38.2% of the total export value of tobacco leaf products in China, respectively; Cigarette export business: We exclusively export Chinese brand cigarettes to duty-free shops and cigarette wholesalers for sale in Thailand, Singapore, Hong Kong, Macau, China, and overseas regions within and outside China. In 2015, 2016, 2017 and the nine months ended September 30, 2018, we directly exported cigarettes to three, three, six and six duty-free shop operators and 14, 17, 18 and 17 wholesalers, respectively. According to the Frost & Sullivan report, the export value of duty-free Chinese brand cigarettes to overseas markets was 697.7 million US dollars, 724.4 million US dollars, and 687.2 million US dollars for the year ended December 31, 2017, respectively, and is expected to increase from 697.9 million US dollars in 2018 to 742.2 million US dollars in 2022. As of the last practical date, we have 24 Chinese cigarette brands in our product portfolio, including approximately 174 SKU items. Yuxi, Yunyan, Hongta Mountain, Chinese Hibiscus King and Liqun are the main brands in our product portfolio; Export business of new tobacco products: We exclusively operate the business of exporting new tobacco products to overseas markets around the world. We began exporting new tobacco products in May 2018, and since then we have exported new tobacco products to different countries and regions. Currently, our export countries and regions are mainly located in Asia, such as South Korea. Our new tobacco products mainly include tobacco products that do not burn when heated. According to the Frost & Sullivan report, the global market for heated non-combustible tobacco products will enter an important development period in the next five years, and its global sales will increase from 9.7 billion US dollars in 2018 to 19.6 billion US dollars in 2022, with a compound annual growth rate of 19.3%.