CITIC Limited — Capital/Financing Update 2017

Sep 29, 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Incorporated in Hong Kong with limited liability ( Stock Code: 00267 )

CONNECTED TRANSACTION SUBSCRIPTION FOR NEW SHARES OF STAR THRIVE BY CITIC METAL, A WHOLLY-OWNED SUBSIDIARY OF CITIC LIMITED

On 29 September 2017, CITIC Metal, an indirect wholly-owned subsidiary of CITIC Limited, and Star Thrive, an indirect wholly-owned subsidiary of CITIC Group (which is a special purpose vehicle holding 76.37% equity interest in Jinzhou Titanium) entered into the New Share Subscription Agreement, pursuant to which CITIC Metal agreed to subscribe for 60% of the enlarged share capital of Star Thrive at a consideration of HK$1,325,770,960.

CITIC Group holds 58.13% equity interest in the Company as at the date of this announcement, and is thus a connected person of the Company under Chapter 14A of the Listing Rules. Star Thrive constitutes a connected person of the Company by virtue of being an indirect wholly-owned subsidiary of CITIC Group and the transaction under the New Share Subscription Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio applied in accordance with Rule 14A.76 of the Listing Rules in respect of the transaction under the New Share Subscription Agreement is more than 0.1% but less than 5%, such transaction is subject to the reporting and announcement requirements and exempt from the circular and independent shareholders’ approval requirements.

The Board is pleased to announce that, on 29 September 2017, CITIC Metal, an indirect whollyowned subsidiary of CITIC Limited, and Star Thrive, an indirect wholly-owned subsidiary of CITIC Group (which is a special purpose vehicle holding 76.37% equity interest in Jinzhou Titanium Industry Co., Ltd. (“ Jinzhou Titanium ”)) entered into the New Share Subscription Agreement, pursuant to which CITIC Metal agreed to subscribe for 60% of the enlarged share capital of Star Thrive at a consideration of HK$1,325,770,960. Upon the completion of the capital increase, the number of issued shares of Star Thrive will increase from 742,672,356 to 1,856,680,890.

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NEW SHARE SUBSCRIPTION AGREEMENT

Date:

29 September 2017

Parties:

• (1) Star Thrive (as the Target Company)

• (2) CITIC Metal (as the subscriber)

Subject 1,114,008,534 new shares issued by the Target Company to CITIC Metal, matter: representing 60% of the enlarged share capital of the Target Company.

• Consideration:[The total subscription price is HK$1,325,770,960. ]

• Completion: The completion will take place on the third business day after the satisfaction of all conditions precedent below, or a later date that may be agreed by the parties in writing.

Conditions The completion is subject to all of the following conditions precedent having been precedent: fulfilled:

• (1) the board of CITIC Limited, the controlling shareholder of CITIC Metal, having approved the transaction contemplated under the New Share Subscription Agreement;

• (2) the shareholders’ general meeting of CITIC Metal having approved the transaction contemplated under the New Share Subscription Agreement; and

• (3) the Target Company and Jinzhou Titanium having obtained all necessary third party consents required for the transaction contemplated under the New Share Subscription Agreement.

The parties shall make all reasonable efforts to procure that all conditions precedent are to be satisfied as soon as possible prior to the Long-stop Date. If the completion does not occur prior to the Long-stop Date, the parties shall further negotiate in order to propose a later date that may be agreed by the parties in writing for the satisfaction of conditions precedent and completion. In case the parties fail to agree on such later date, either party may have the right to terminate the New Share Subscription Agreement upon written notice to the other party, and the New Share Subscription Agreement as well as all rights and obligations thereunder shall cease to be effective (other than those already accrued under the New Share Subscription Agreement).

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• Transitional Subject to and upon completion, CITIC Metal shall be entitled to any profit or bear Period: any loss of Star Thrive from the Valuation Reference Date to the Completion on a pro-rata basis according to the percentage of its shareholding in Star Thrive upon the Completion.

BASIS OF CONSIDERATION

The consideration for the subscription of the new shares under the New Share Subscription Agreement, being HK$1,325,770,960, was determined after independent negotiations on an arm’s length basis between the Target Company and CITIC Metal with reference to the net asset value of the Target Company based on asset replacement approach, being RMB790,601,416 (approximately HK$883,847,307), as at the Valuation Reference Date as determined by the appraiser. As the Target Company is a special purpose vehicle, the valuation of the Target Company was solely based on the valuation of Jinzhou Titanium, and was conducted by way of the income approach.

CHANGES TO THE SHAREHOLDING STRUCTURE OF THE TARGET COMPANY

The shareholding structure of the Target Company as at the date of this announcement is set out below:

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CITIC Group
100%
Deep Sky Investments Limited
100%
CITIC United Asia Holdings Limited
100%
CITIC United Asia Holdings (HK)
Limited
100%
Star Thrive Panzhihua Iron & Steel Group Co., Ltd.
76.37% 23.63%
Jinzhou Titanium
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The shareholding structure of the Target Company upon the completion of the transaction is set out below:

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CITIC Group
100% 58.13%
Deep Sky Investments
CITIC Limited
Limited
100% 100%
CITIC United Asia Holdings
CITIC Corporation Limited
Limited
100% 100%
CITIC United Asia Holdings Metal And Mining Link
(HK) Limited Limited
100%
CITIC Metal
40% 60%
Panzhihua Iron & Steel Group
Star Thrive
Co., Ltd.
76.37% 23.63%
Jinzhou Titanium
FINANCIAL INFORMATION
Set out below is the unaudited financial information of the Target Company for the years ended 31
December 2015 and 2016:
HK$ Financial years ended 31 December
2015 2016
(Unaudited) (Unaudited)
Net profit/(loss) before taxation and extraordinary items 61,617,430 50,197,106
Net profit/(loss) after taxation and extraordinary items 45,291,579 36,832,426
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FINANCIAL INFORMATION

Set out below is the unaudited financial information of the Target Company for the years ended 31 December 2015 and 2016:

The unaudited net assets value of the Target Company as at 31 December 2016 and 30 June 2017 were approximately HK$822 million and HK$894 million, respectively.

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PRINCIPAL ASSUMPTIONS OF THE VALUATION

Given that the valuation of Jinzhou Titanium was conducted by income approach, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules.

The valuation of the Jinzhou Titanium was based on the following principal assumptions:

1. General Assumptions

• (1) There are no material changes in the current laws, regulations and policies of the State and the national macro-economy of the PRC as well as in the political, economic and social environments of the regions where the parties to the proposed transaction are located, and there are no other material adverse impacts caused by any unpredictable factor or force majeure；

• (2) There are no material changes in the applicable interest rate, exchange rate, taxation basis and rates and policy-imposed charges；

• (3) The appraiser assumes that the information and data provided by the principal and other parties on which all or part of the valuation results in their report have relied are reliable and has not verified them. The appraiser gives no warranty with regard to the accuracy of such information and data;

• (4) The estimates set out in the valuation report are made on the assumption that all important and potential factors that may affect value analysis have been fully disclosed between appraiser and the principal；

• (5) There is no other irresistible or unpredictable factor that may have material adverse impact on the enterprise;

• (6) Unless otherwise indicated, it is assumed that the Company fully complies with all the relevant laws and regulations; and

• (7) The estimation of value as set out in the valuation report is made on the basis of the financial structure existing as at 31 December 2016.

2. Specific Assumptions

• (1) The valued assets are still to be used in accordance with the current designed capacity, scale and purposes and the production expansion plan implemented as scheduled. Jinzhou Titanium will remain at its existing location. The original mode and style of business operation will remain unchanged. The enterprise will continue to operate as an on-going concern on the basis of its original main assets or after necessary adjustments；

• (2) It is assumed that the accounting policies to be adopted by Jinzhou Titanium in the future are basically consistent in material respects with the accounting policies adopted in preparing this report;

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• (3) The information and presentation provided by the principal and Jinzhou Titanium are true, legal and complete；

• (4) Jinzhou Titanium and the future operation and management team of the long-term investment entity will faithfully perform their duties and continue to operate the business as it is currently conducted；

• (5) The recapture of depreciation of fixed assets of Jinzhou Titanium will be applied to maintain simple reproduction, and the newly-added working capital each year will change concurrently with the operating costs of products；

• (6) The financing cost of Jinzhou Titanium in the future operation period will remain at the current interest rate level and will not change or fluctuate to a significant extent；and

• (7) The operational and managerial expenses of Jinzhou Titanium in the future operation period will remain as they have been in the recent years and will change along with changes in sales revenue and the various period expenses will not change or fluctuate to a significant extent.

Based on the requirements of asset valuation, the appraiser acknowledged that these assumptions have been established on the Valuation Reference Date. In the event when there are relatively significant changes to the future economic environment, the appraiser will not undertake the liabilities of different valuation results deduced from the change of assumptions.

REASONS FOR AND BENEFITS OF ENTERING INTO THE NEW SHARE SUBSCRIPTION AGREEMENT

Jinzhou Titanium is a leading company that has first produced chloride titanium dioxide on a commercial basis in China, with designed production capacity of 60,000 tons per annum. Titanium dioxide is an inorganic chemical of white color and has a wide variety of application in coating, plastic, paper, ink, ceramic, electronic and cosmetic industries. There are two major processes employed in the manufacturing of titanium dioxide, namely sulfate process and chloride process. The advantages of chloride process over sulfate process include compact process, more automatic control, less discharge of wastes, reusability of chlorine, high quality of products, etc. Manufacturing of titanium dioxide by chloride process has been categorized as “Encouraged” in the Catalogue for the Guidance of Industrial Structure Adjustment by China’s National Development and Reform Commission since 2005. Jinzhou Titanium is also one of China’s National High and New Tech Enterprises.

Entering into the New Share Subscription Agreement will enable CITIC Metal to have a controlling interest in Jinzhou Titanium through controlling Star Thrive and to include Jinzhou Titanium as a quality asset in the Company’s portfolio, as well as support CITIC Metal’s continued development of its mineral mining and processing business through the Star Thrive platform.

The Directors (including the independent non-executive Directors) consider that the terms of the New Share Subscription Agreement are fair and reasonable and on normal commercial terms, and they are in the interests of the Company and the Shareholders as a whole.

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LISTING RULES IMPLICATIONS

CITIC Group holds 58.13% equity interest in the Company as at the date of this announcement, and is thus a connected person of the Company under Chapter 14A of the Listing Rules. Star Thrive constitutes a connected person of the Company by virtue of being an indirect wholly-owned subsidiary of CITIC Group and the transaction under the New Share Subscription Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio applied in accordance with Rule 14A.76 of the Listing Rules in respect of the transaction under the New Share Subscription Agreement is more than 0.1% but less than 5%, such transaction is subject to the reporting and announcement requirements and exempt from the circular and independent shareholders’ approval requirements.

Mr Chang Zhenming, Mr Wang Jiong, Ms Li Qingping, Mr Pu Jian, Mr Liu Yeqiao, Mr Song Kangle, Ms Yan Shuqin and Mr Liu Zhuyu hold positions in CITIC Group, in order to avoid the perception of a conflict of interest, each of them had either abstained from voting, or was not present at the relevant Board meeting to vote, on the Board resolution approving the New Share Subscription Agreement. Save as disclosed above, none of the Directors have any material interest under such agreement and the transaction contemplated thereunder or should abstain from voting in respect of the relevant proposal at the Board meeting.

INFORMATION ABOUT THE PARTIES INVOLVED

The Company

CITIC Limited is China’s largest conglomerate with total assets over US$900 billion. Among its diverse global businesses, CITIC Limited focuses primarily on financial services, resources and energy, manufacturing, engineering contracting and real estate. CITIC Limited enjoys leading market positions in sectors well matched to China’s economy. CITIC’s rich history, diverse platform and strong corporate culture across all businesses ensure that CITIC Limited is unrivalled in capturing opportunities arising in China. CITIC Limited is listed on the Stock Exchange, where it is a constituent of the Hang Seng Index.

CITIC Group

CITIC Group is a Chinese state-owned enterprise under the Ministry of Finance. Its main asset is a 58.13% interest in CITIC Limited. Since its establishment in 1979, CITIC Group has been a pioneer of China’s economic reform. It makes investments in areas of long-term potential as well as those aligned with national priorities.

CITIC Metal

CITIC Metal, an indirect wholly-owned subsidiary of the Company, is a limited liability company incorporated in Hong Kong, with its primary business activities including the import and export trade of metallurgical raw materials and metallurgical products as well as industrial investment, and its primary products including, among others, iron alloy, mineral products, steel, nonferrous metals and metal products.

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Target Company

Star Thrive, an indirect wholly-owned subsidiary of CITIC Group as at the date of this announcement, is a special purpose vehicle holding 76.37% equity interest in Jinzhou Titanium. Jinzhou Titanium is a national high-tech enterprise integrating the R&D, production and sale of chloride titanium dioxide. As the only enterprise achieving the commercial production of chloride titanium dioxide in China, Jinzhou Titanium has a designed capacity of chloride titanium dioxide of 60,000 tons per annum.

CONFIRMATIONS

Ernst & Young, acting as the Company’s reporting accountant for purposes of Rule 14.62(2) of the Listing Rules, has examined the calculations of the discounted future estimated cash flows on which the valuation of Jinzhou Titanium was based.

China Securities (International) Corporate Finance Company Limited, acting as the Company’s financial advisers for purposes of Rule 14.62(3) of the Listing Rules, has confirmed that they are satisfied that the valuation of Jinzhou Titanium has been made by the Directors after due and careful enquiry.

A report from Ernst & Young dated 29 September 2017 in compliance with Rule 14.62(2) of the Listing Rules and a letter from the China Securities (International) Corporate Finance Company Limited dated 29 September 2017 in compliance with Rule 14.62(3) of the Listing Rules have been submitted to the Stock Exchange, the texts of which are included in Appendix I and Appendix II to this announcement, respectively.

INFORMATION ON THE EXPERTS

The following is the qualification of the experts who have given their opinion and advice included in this announcement:

Name Qualification Ernst & Young Certified Public Accountants China Securities (International) Corporate Licensed corporation under the Securities and Finance Company Limited Futures Ordinance for type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities

As at the date of this announcement, each of Ernst & Young and China Securities (International) Corporate Finance Company Limited does not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person to subscribe for securities in any member of the Group.

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Each of Ernst & Young and China Securities (International) Corporate Finance Company Limited has given and has not withdrawn its consent to the publication of this announcement with inclusion of its report and/or all references to its name in the form and context in which it appears.

DEFINITIONS

In this announcement, unless the context requires otherwise, the following expressions have the following meanings:

the board of directors of the Company “Board” “CITIC Group” CITIC Group Corporation (中國中信集團有限公司) “CITIC Metal” CITIC Metal Group Limited (中信金屬集團有限公司), a limited liability company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company “Company” or CITIC Limited (中國中信股份有限公司) “CITIC Limited” completion of transaction contemplated under the New Share “Completion” Subscription Agreement “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited “Long-stop Date” 31 December 2017 (or a later date as the parties may agree upon in writing) “New Share the new share subscription agreement dated 29 September 2017 Subscription entered into between CITIC Metal and Star Thrive, pursuant to Agreement” which CITIC Metal agreed to subscribe for 60% of the enlarged share capital of Star Thrive at a consideration of HK$1,325,770,960 “PRC” or “China” the People’s Republic of China and for the purpose of this announcement, excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan “RMB” Renminbi, the lawful currency of the PRC

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“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Shareholder(s)”

Shareholder(s) of the Company

“Star Thrive” or “Target Company”

Star Thrive Investments Limited, a company incorporated in Hong Kong and as at the date of this announcement, an indirect whollyowned subsidiary of CITIC Group

“Valuation Reference Date”

31 December 2016

By Order of the Board CITIC Limited Chang Zhenming Chairman

Hong Kong, 29 September 2017

As at the date of this announcement, the executive directors of the Company are Mr Chang Zhenming (Chairman), Mr Wang Jiong, Ms Li Qingping and Mr Pu Jian; the non-executive directors of the Company are Mr Liu Yeqiao, Mr Song Kangle, Ms Yan Shuqin, Mr Liu Zhuyu, Mr Liu Zhongyuan and Mr Yang Xiaoping; and the independent non-executive directors of the Company are Mr Francis Siu Wai Keung, Dr Xu Jinwu, Mr Anthony Francis Neoh, Ms Lee Boo Jin, Mr Noriharu Fujita and Mr Paul Chow Man Yiu.

In this announcement, amounts denominated in RMB have been converted into HK$ at the rate of RMB0.8945: HK$1 for purposes of illustration. No representation is made that any amounts in RMB or HK$ can be or could have been converted at the above rate or any other rate or at all.

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APPENDIX I REPORT FROM ERNST & YOUNG IN RELATION TO THE DISCOUNTED CASH FLOW FORECAST

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Ernst & Young 安永會計師事務所 Tel 電話 : +852 2846 9888 22/F, CITIC Tower 香港中環添美道 1 號 Fax 傳真 : +852 2868 4432 1 Tim Mei Avenue 中信大廈 22 樓 ey.com Central, Hong Kong

29 September 2017

The Directors

CITIC Limited

32nd Floor, CITIC Tower, 1 Tim Mei Avenue

Central, Hong Kong

We have been engaged to report on the arithmetical accuracy of the calculations of the discounted cash flow forecast of Jinzhou Titanium Industry Co., Ltd. (“Jinzhou Titanium”), a subsidiary of Star Thrive Investments Limited (“Star Thrive”) (the “Forecast”) which the valuation dated 2 June 2017 prepared by Beijing China Appraisal Associates Co., Ltd. in respect of 60% enlarged share capital of Star Thrive as at 31 December 2016 is based. The valuation is set out in the announcement of CITIC Limited (the “Company”) dated 29 September 2017 (the “Announcement”) in connection with the subscription for 60% of the enlarged share capital of Star Thrive by CITIC Metal Group Limited, an indirect wholly-owned subsidiary of the Company. The valuation based on the Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Directors’ responsibilities

The directors of the Company (the “Directors”) are solely responsible for the Forecast. The Forecast has been prepared using a set of bases and assumptions (the “Assumptions”), the completeness, reasonableness and validity of which are the sole responsibility of the Directors. The Assumptions are set out on section “Principal Assumptions of the Valuation” of the Announcement.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

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Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements , and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ responsibilities

Our responsibility is to express an opinion on the arithmetical accuracy of the calculations of the Forecast based on our work. The Forecast does not involve the adoption of accounting policies.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the arithmetical accuracy of the calculations are concerned, the Directors have properly compiled the Forecast in accordance with the Assumptions adopted by the Directors. Our work consisted primarily of checking the arithmetical accuracy of the calculations of the Forecast prepared based on the Assumptions made by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

We are not reporting on the appropriateness and validity of the Assumptions on which the Forecast are based and thus express no opinion whatsoever thereon. Our work does not constitute any valuation of Jinzhou Titanium. The Assumptions used in the preparation of the Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Forecast and the variation may be material. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

Opinion

Based on the foregoing, in our opinion, so far as the arithmetical accuracy of the calculations of the Forecast is concerned, the Forecast has been properly compiled in all material respects in accordance with the Assumptions adopted by the Directors.

Ernst & Young Certified Public Accountants Hong Kong

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APPENDIX II LETTER FROM CHINA SECURITIES (INTERNATIONAL) CORPORATE FINANCE COMPANY LIMITED IN RELATION TO THE PROFIT FORECAST

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September 29, 2017

The Board of Directors CITIC Limited 32nd Floor, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

Dear Sirs,

We refer to the valuation prepared by Beijing China Appraisal Associates Co., Ltd (the “Valuer”) in relation to 100% equity interest in Jinzhou Titanium Industry Co., Ltd (the “Valuation” ), which is set out in the valuation report dated June 2, 2017 in the announcement of CITIC Limited (the “Company” ) dated September 29, 2017 in connection with the subscription for 60% of the enlarged share capital of Star Thrive by CITIC Metal, an indirectly wholly-owned subsidiary of the Company (the “Announcement” ). Capitalized terms used in this letter have the same meanings as those defined in the Announcement, unless the context otherwise requires.

The Valuation has been arrived at using the discounted cash flow method and is regarded as a profit forecast (the “Forecast” ) under Rule 14.61 of the Listing Rules. The Directors are responsible for preparation of the Forecast after due and careful enquiry in accordance with the bases and assumptions as set out in the Valuation Report. We, as financial advisers to the Company, have reviewed the Forecast upon which the Valuation has been made, for which you as the Directors are solely responsible, and have discussed with the management of the Company and the Valuer the bases and assumptions upon which the Forecast has been prepared. We have also considered the report from Ernst & Young dated September 29, 2017 addressed to yourselves as set out in Appendix I to the Announcement regarding the calculations of the Forecast. We noted that in the opinion of Ernst & Young that the Forecast, so far as the arithmetical accuracy of calculations of the Forecast is concerned, have been properly compiled in all material respects in accordance with the bases and assumptions adopted by the Directors. We have also noted that the Forecast does not involve the adoption of accounting policies.

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The Forecasts have been prepared using a set of assumptions that include hypothetical assumptions about future events and other assumptions that may or may not necessarily be expected to occur and, as such, the Forecasts may not be appropriate for purposes other than for deriving the Valuation Report. Even if the events anticipated under the hypothetical assumptions occur, actual results are still likely to differ from the Forecasts since such anticipated events frequently may or may not occur as expected and the variation may be material.

On the basis of the foregoing and without giving any opinion on the reasonableness of the valuation methods, bases and assumptions adopted by the Valuer and the Company for which the Valuer and the Company are solely responsible, we are of the opinion that the Forecast, for which you as the Directors are solely responsible, have been made by you after due and careful enquiry.

The work undertaken by us in giving the above opinion has been undertaken for the purpose of reporting solely to you under Rule 14.62(3) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

Yours faithfully For and on behalf of

China Securities (International) Corporate Finance Company Limited

Christine Au Managing Director

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