CHAIRMAN'S STATEMENT

In 2018, the international landscape was profoundly altered by setbacks in economic globalisation and attacks on multilateralism, causing turmoil that reverberated across international financial markets. China-US trade frictions in particular adversely impacted market expectations. China’s economy was stabilising amid discourse and concerns in the face of a slowdown in economic growth and continuous adjustments to the financial market, hindering the development of real economy. With upgrades in financial regulations and the implementation of New Asset Management Rules designed to mitigate financial risks and to standardise the development of the industry, China’s asset management industry experienced a significant transformation as internal and external pressure points converged last year.

During the period under review, China Everbright Limited (the “Group” or “CEL”), which celebrated its 20th anniversary the year before, continued to leverage on its dual drivers of fund management business and principal investment business in the face of market changes. By advancing in momentum and delivering the power to transform, CEL manages to grow its core businesses consistently. As it launched new fund products and increased its fundraising scale, the Group optimised its business composition with cautious asset allocation. The Group also fortified the construction of its ecosystem platforms with principal capital and would ultimately increase the allocation of cross-border investments to effectively expand its global footprint.

For fund management business, against the backdrop of tightening regulations, increased difficulty in fundraising and slow investment, CEL captured opportunities in disruption globally by leveraging on the advantages of being backed by its motherland, China and facing the global market. It strengthened its dual-currency fundraising channels and increased its allocation in new economy and big consumption sectors, further solidifying its position as the leader in China’s private equity industry. New primary market funds, including the Walden CEL Global Fund I, CEL-iQiyi Cultural Equity Investment Fund, CEL Smart Entertainment Industry Investment Fund and CEL New Economy USD Fund completed their initial rounds of fundraising. The Group also established a RMB 7.1 billion Fund of Funds with Hunan Caixin Financial Holding Group Ltd and Jiangsu Pingling Construction Investment Group Co Ltd respectively, pushing the AUM to a new record high. As a result, the Group managed total of 62 funds and its AUM surged to HK$143.5 billion for the end of 2018, an increase of 11% year-on-year. Currently, there are 158 post-investment projects under management that cover multiple high-growth industries, including Neteasy Cloud Music, Cloud Light Technology Limited, Eastwes, Chunmi, Xiaopeng, Dekang Group, and so on. Meanwhile, the Group also fully supported the growth of its portfolio companies, of which six successfully went public on US and Hong Kong stock exchanges during the year under review, becoming the Group’s reserve for future divestment.

In terms of principal investments, the Group supported industries such as aircraft leasing, artificial intelligence and elderly care, and built numerous ecosystem platforms to cultivate, strengthen and enhance the leading edge of each of these market sectors. The Group’s CALC continued to ramp up its leasing business and optimised its fleet size to a scale of 133 aircraft. It also set up an aircraft investment vehicle CAG, and commenced operation of Asia’s first large-size aircraft recycling and remanufacturing base to widening the scope of CALC’s full value chain services from solely aircraft leasing. With its powerful productization of frontier technology, quick application capability and the fastest commercialization, Terminus has become a unicorn enterprise in the AIoT industry, providing solutions for over 10.8 million population in more than 30 provinces and 84 cities. The Group also saw rapid development in its elderly care industry, and strengthened its investment presence in the Beijing-Tianjin-Hebei and Yangtze River Delta regions. Currently, there are 25 elderly centres and close to 10,000 beds under management.

During the period under review, CEL strengthened its crossborder M&A drive and actively expanded its international footprint with a view to further balancing its global asset allocation. The Group made principal investments in CEL Impetus Corporate Finance, an investment bank in Singapore, and acquired one of the biggest Norwegian public transport operators Boreal with the Everbright Overseas Infrastructure Investment Fund. The Group also introduced Investcorp, a world-leading alternative investment company, through the CEL New Economy USD Fund. EBA Investments completed the acquisition of a well-known US asset management company, Arrow RE Holdings, while the Burke Porter Group, investees of the CEL Global Investment Fund, grew into a world-leading manufacturer of automotive chassis testing equipment.

China Venture and China Bridge. The investment teams also received multiple awards. EBA Investments ranked first for the fourth time in “Top 10 China Real Estate Funds”, CEL’s Fund of Funds was named “2018 Top 10 Market Funds (Stateowned Category)” by China Venture Capital and “The Best FoF in China Top 10” by China Bridge, investment cases of Everbright-IDG Industrial Fund and Everbright Zhongying Capital also attained numerous awards by China Venture, and China Everbright Asset Management Ltd received numerous awards at Overseas Golden Bull Fund Awards, I&M Professional Investment Awards, as well as Everbright China Focus Fund ranked in fourth place by BarclayHedge under the category “Emerging Markets (all asset class) – Asia” for its performance over the last three years.

During the period under review, CEL’s total income amounted to HK$4,696 million, representing a decrease of 15% year-onyear, in a challenging and complex market environment. The net profit attributable to shareholders was HK$3,104 million, down 25% year-on-year. Excluding the impact of HKFRS 9, total income increased by 6% and the net profit attributable to shareholders decreased by 8%, in which net profit attributable to shareholders of CEL’s direct operating businesses achieved an increase of 17% compared to last year. The development of CEL was strongly supported by our shareholders. Based on our principle of sharing the fruits of development, and the consideration of the Company’s healthy financial status, the needs for sustainable development and others, the board recommends the payment of a 2018 final dividend of HK$0.4 per share. The total dividends for the year amount to HK$0.66 per share, with a dividend payout ratio of 35.8%.

History is marked with struggles, as the future is built on the back of hard work. Looking ahead, we are convinced that while the market is filled with risks, it is also nurturing new opportunities. Adversity is a blessing in disguise, investors and capital will continue to converge to the strongest players in the China’s asset management industry. CEL will continue to stand at the forefront of the market, focusing on real and long-term value creation, and waiting for the right timing to take flight in the path of victors. In 2019, I look forward to working with our shareholders and fund investors. Together, we will go further and build a bigger dream.

Cai Yunge
Chairman

28 March 2019