CITIC : Overseas Regulatory Announcement

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OVERSEAS REGULATORY ANNOUNCEMENT

(This overseas regulatory announcement is issued pursuant to Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited)

The following announcement is released by CITIC Envirotech Ltd. (a subsidiary of CITIC Limited) to Singapore Exchange Limited on 1 November 2019:-

Clarification on CITIC Envirotech Ltd.'s Third Quarter Financial Statements Ended 30 September 2019

Hong Kong, 1 November 2019

As at the date of this announcement, the executive directors of CITIC Limited are Mr Chang Zhenming (Chairman), Mr Wang Jiong and Ms Li Qingping; the non-executive directors of CITIC Limited are Mr Song Kangle, Ms Yan Shuqin, Mr Liu Zhuyu, Mr Peng Yanxiang, Mr Liu Zhongyuan and Mr Yang Xiaoping; and the independent non-executive directors of CITIC Limited are Mr Francis Siu Wai Keung, Dr Xu Jinwu, Mr Anthony Francis Neoh, Mr Shohei Harada and Mr Gregory Lynn Curl.

CITIC ENVIROTECH LTD

(Company Registration Number: 200306466G)

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CLARIFICATION ON THE COMPANY'S THIRD QUARTER FINANCIAL STATEMENTS ENDED 30 SEPTEMBER 2019

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The Board of Directors (the "Board") of CITIC Envirotech Ltd ("Group" or the "Company") wishes to announce the clarification set out below in respect of the Company's third quarter financial statements ended 30 September 2019 ("3QFY2019").

SGX QUERY 1

Please provide details of the nature of the right-of-use assets of $118.1 million in the 3QFY2019 unaudited results and reasons for the significant balance.

COMPANY'S RESPONSE

The details of the nature of the right-of-use assets of $118.1 million as at 30 September

2019 were as follow:

	S$'000	Remark
Land use rights	116,347	Classified as prepaid leases as at 31
		December 2018
Office premises and others	1,775
Total	118,122

The land use rights were classified as prepaid leases as at 31 December 2018. Due to the adoption of SFRS(I) 16 LEASES, which came into effect beginning 1 January 2019, the land use rights were re-classed as right-of-use assets as at 30 September 2019. There was no significant increase from 31 December 2018 to 30 September 2019.

SGX QUERY 2

Please disclose the factors leading to the material usage of proceeds of the net increase of $100 million, when comparing the new bank loans raised of $294.3 million and repayment of bank borrowings of $194.6 million.

COMPANY'S RESPONSE

The material usage of proceeds of the net increase of $100 million, when comparing the new bank loans raised of $294.3 million and repayment of bank borrowings of $194.6 million in 3Q2019, was mainly due to the financing of the following investment projects, as well as the working capital for the group, particularly membrane manufacturing.

1. Lanzhou project
2. Wuji project
3. Nantong Guoqi project
4. Hubei Xiaochang project

SGX QUERY 3

Please provide an explanation for the 61.2% decrease in engineering business from $122.9 million in 3Q2018 to $47.7 million in 3Q2019 and elaborate on the material factors that affected the business.

COMPANY'S RESPONSE

In contrast to treatment revenue, which is stable and recurring in nature, engineering revenue and membrane systems sales are directly related to the order book of the engineering contracts as well as the progress of the execution of the engineering projects in the pipeline. Engineering contracts are one-off and lumpy in nature. The decrease in the engineering revenue and membrane systems sales during 3QFY2019 relative to the corresponding period ended 30 September 2018 ("3QFY2018") was mainly due to the higher engineering projects being executed during 3QFY2018.

SGX QUERY 4

Please elaborate on the foreign currency exchange loss of $26 million and the material factors that affected the major underlying items which resulted in the material foreign exchange loss.

Please provide a breakdown of whether these losses have been realized or are unrealized.

COMPANY'S RESPONSE

Breakdown of realized and unrealized foreign currency exchange loss:

	$'million
Realized foreign currency exchange loss	3.0
Unrealized foreign currency exchange loss	23.0
Total	26.0

The unrealized foreign currency exchange loss of S$23.0 million was mainly due to the revaluation of the USD denominated bank loan of approximately USD463.8 million to RMB as at 30 September 2019.

SGX QUERY 5

It was disclosed in paragraph 8 that Employee benefits expense increased to $23.3 million from $13.5 million, an increase of $9.8 million or 73.0%. It was explained that this increase was mainly due to the share transfer to reward key employees in Memstar USA. Please elaborate on the key achievements of this entity that the performance milestones are set.

COMPANY'S RESPONSE

The performance milestones included the following:

1. Commencement of RO/NF membrane production;
2. Increase global sales of UF/MF membranes with the setting up of global sales network;
3. File new patent and to develop new intellectual property to drive sustainable technology competitiveness.

The key employees of Memstar USA have achieved certain portions of the performance targets and received the agreed incentive amount.

BY ORDER OF THE BOARD

Lotus Isabella Lim Mei Hua

Company Secretary

1 November 2019