About CTIHK Company

We are China Tobacco International's designated overseas platform responsible 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 trade in tobacco products and supervising the operation of overseas subsidiaries and China Tobacco Corporation's overseas investments. 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 National Tobacco Administration and related laws, regulations and rules, we are mainly engaged in the following business: Tobacco product import business: We exclusively operate the tobacco leaf product import business in accordance with Document No. 60. We mainly purchase tobacco leaf products from countries or regions of origin around the world (such as Brazil, the United States, Argentina, Canada, Zambia and others), and sell imported tobacco leaf products to China Tobacco International for resale to Chinese tobacco manufacturers to meet their demand for overseas tobacco products. Revenue from the tobacco product import business for the years ended 31 December 2015, 2016 and 2017 and the nine months ended September 30, 2018 was HK$5,190.1 million, HK$4,063.6 million, HK$5,487.5 million, HK$4,574.4 million and HK$3,798.2 million, accounting for 68.1%, 64.4%, 70.3%, 71.3% and 74.8% of total revenue for the same period, respectively; 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, China. According to the Frost & Sullivan report, exports of tobacco products to these regions were 226.9 million US dollars, 206.4 million US dollars and 242.0 million US dollars for the years ending December 31, 2017, respectively, accounting for 42.3%, 38.1% and 38.2% of China's total exports of tobacco products, respectively; Cigarette export business: We exclusively export Chinese brand cigarettes to duty-free shops and cigarette wholesalers for sale in Thailand, Singapore, Hong Kong and Macau, China, as well as Guanwai regions in China. In 2015, 2016, 2017 and the nine months ending September 30, 2018, we directly exported cigarettes to 3, 3, 6 and 6 duty-free shop operators and 14, 17, 18 and 17 wholesalers, respectively. According to Frost & Sullivan's report, exports of duty-free Chinese brand cigarettes to overseas markets were 697.7 million US dollars, 724.4 million US dollars and 687.2 million US dollars for each year ending December 31, 2017, and are expected to increase from 697.9 million US dollars in 2018 to 742.2 million US dollars in 2022. As of the last available date, there are 24 Chinese cigarette brands in our product portfolio, including approximately 174 SKU items. Yuxi, Yunyan, Hongta Mountain, Chinese Hibiscus Wang and Liqun are the main brands in our product portfolio; New tobacco products export business: We exclusively operate the business of exporting new tobacco products to overseas markets around the world. We started the export business of 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 novel tobacco products mainly include heated, non-burnable tobacco products. According to the Frost & Sullivan report, the global market for heated non-burnable tobacco products will enter an important development period in the next five years. 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%.