China Merchants Shekou Holdings Co., Ltd.

CSR Report 2017

Telephone: 0755-26818600 Address: No. 3 Building of NH E-COOL, No. 6 Xinghua Rd., Shekou, Nanshan District, Shenzhen, Guangdong Province Website: www.cmsk1979.com

This report uses environmentally friendly paper printing. Conviction and Enabling Urban Growth

Supported by China Merchants Group (CMG), a central state- owned enterprise with total assets valued at over RMB one trillion, China Merchants Shekou Industrila Zone Holdings Ltd.(CMSK), has thrived over the years. Our branches have formed the unique "Port-Park-City"(PPC) development model. With our mission of promoting social progress through commercial success, we endeavor to enhance our social responsibility, lead urban upgrading, and create low- carbon, healthy, green and vibrant urban spaces. We will continue to deepen the development of cities to meet the expectations for a better life. CMSK CSR REPORT

Message from Chairman of the Board

China Merchants Shekou Industrial Zone Holdings Co., Ltd green ideas and promotes public participation through various (CMSK), a subsidiary of China Merchants Group (CMG), is a flagship means, such as forums and summits, in the pursuit of sustainable company specializing in comprehensive urban development. development that intergrate the economy, environment, and In line with CMG's mission to "promote social progress through society. commercial success", CMSK is committed to being China's leading Caring for employees and growing together. urban and industrial park developer and operator. Bearing in We advocate the mind a strong sense of historical mission and social responsibility, "simple, transparent, efficient, and caring" work environment, CMSK strives to take the lead in opening a new chapter in urban and ensure the rights and interests of employees through a non- development. discriminatory working environment, fair compensation system, Creating a better life for customers. and umimpeded communication channels. At the same time, The 19th National Congress we have developed sound talent strategies, reliable recruitment of the Communist Party of China (the 19th CPC National Congress) methods, smooth career paths, comprehensive training schemes, suggests that the principal contradiction facing Chinese society and innovative assessments and incentives to promote employee has evolved into the contradiction between unbalanced and development. Through diverse cultural activities, we care for the inadequate development and the people's ever-growing needs for lives and health of employees, and build up the sense of company a better life. Thus we adhere to a concept that is truly "customer- belonging, thus encouraging them to grow with the Company. centric", and have improved supporting industry chains covering Promoting harmony and shared development with the society. medical, health, and educational sectors. Our efforts center on three core business systems which include the development A harmonious society, the ideal of humans, is full of vitality and and operation of industrial parks, residential and commercial hope. Over the years, we have taken the social responsibilities that properties, as well as the development and operation of the cruise a central state-owned enterprise (SOE) should exercise, supporting industry, so as to provide customers with intelligent, quality, social welfare projects, and contributing to national development. and comprehensive services, and to contribute to the long-term We have created a better living environment by promoting an prosperity and sustainable development of cities while creating a urban cultural atmosphere. The debut of Shekou Museum of better life for customers. Reform and Opening carries forward the pioneering Shekou Creating value for shareholders and developing with them. spirit which highlights innovation and entrepreneurship; the Sea World Culture and Arts Center is splendid blossoming, offering Against the backdrop of mass entrepreneurship and innovation, visitors a pleasant cultural feast. In addition, we also organized we face challenges, seize opportunities, innovate in development charity activities such as iWalk and "Green Ribbon" to continue to models, and strengthen operational management. We have popularize positive energy. accelerated the construction in Qianhai-Shekou Free Trade Area, and actively responded to national strategies by creating the 2017 marks the 145th anniversary of the establishment Taihu New Town as our support for the integrated development of China Merchants Group. Keeping in mind its missions and of the Beijing-Tianjin-Hebei region. In addition, we closely follow responsibilities, CMSK adheres to the sustainable development the Belt and Road Initiative and strive to expand the international concept that lays equal emphasis on ecological, economic, market. Through continuous and steady operations, we have and social benefits, and continues to shoulder its due social been improving quality and efficiency, providing returns for responsibilities while pursuing its own development. Our excellent shareholders and society. business performance and good social reputation achieved in Pursuing sustainable development and keeping harmony with 2017 were the tribute to the 145th anniversary of CMG. the environment. Sun Chengming The 19th CPC National Congress makes clear Chairman of the Board, China Merchants Shekou Holdings Co., that the natural environment are invaluable national assets, and Ltd. we should realize the harmonious coexistence between human and nature. Correspondingly, we have integrated "green concepts" into corporate management, launched a "163 Actions" working plan for green development, and established a comprehensive green management system. At the same time, we put these concepts into practice by innovating in green technologies and reducing the environmental impacts from the industrialization of urban development. The Company also actively popularize

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CONTENTS Responsible 2017

Total assets Business revenue RMB 332.62 billion RMB 75.45 billion

Message from Chairman of 30.1% 18.7% Brilliance with Customers the Board ...... 1

Developing a Diverse Business Mix...... 17 Business coverage ...... Responsible 2017 4 Rendering High-Quality Services...... 23 46 cities Total tax paid Ensuring Quality and Safety...... 26 The power of quality: 27.78% RMB 14.60 billion ...... About Us 5 Building a "safe haven" for city dwellers 29.5% ...... 27 ...... Company Profile 5 Accumulated investment in the ...... Corporate Governance 6 Prosperity with Shareholders "Customer Care Fund" Number of employees CMSK and Our City ...... 8 RMB 79.8 million 23,242 Sound Business Operation...... 31 ...... RMB 15 million in 2017 CSR Management 9 Innovative Transformation and Upgrading ...... 34 5.93% ...... Mutually Beneficial Cooperation ...... 37 CSR Philosophy 9 The power of value: Activating long-term rental apartments Area of the green building Total employee training hours Stakeholder ...... 39 projects completed Communication...... 10 969,679.5 hours 1.9042 million square meters 44.29% Material Topics Harmony with the Environment 24.17% Management ...... 11

Green Management...... 43 Number of suppliers 9,655 Public welfare expenditure Feature: Shekou Green Practice...... 44 Model, Leads Urban Co-developing the Green Ecosystem ...... 48 RMB 47.508 million ...... The power of green: Seeking a suitable path to RMB 2.05 billion of strategic Upgrading 13 654.1% the industrialization of construction...... 49 localized procurement

Number of projects with LEED Funds raised through iWalk Growth with Employees Certification campaign 19 projects RMB 560,000 Protecting Employees' Interests and Rights...... 53 Outlook 73 ...... 18.75% Promoting Development of Employees ...... 55 CSR Honors Improving Employees' Sense of Happiness ...... 59 CSR Figures 74 The power of innovating spirit: ...... Mutual growth between CMSK and you ...... 61 Third-Party Evaluations 75 Honor Organization ... 2016-2017 China Real Estate Brand Building Chapter of Marketing Committee of China Real Estate Exemplary Enterprise Chamber of Commerce, The Summit of China Real Estate Development with Community GRI 4.0 Content Index 77 ..... Industrial Best Way Swan Award—City Restructuring Star of Organizing Committee of REAM Conference (Best Way recognition the Year Club, Eju Wharton, Wanshang Club) Promoting Urban Development...... 65 Assurance Statement 79 China Real Estate Business, China Real Estate Business ...... China Real Estate Honor Hall Brands in 25 Years Nurturing Urban Culture ...... 66 School Advocating the Whole Society's About This Report 81 The Most Respected Companies of China 2016-2017 The Economic Observer Engagement in Public Welfare ...... 69 ...... The power of compassion: China's Best Employer Award 2017-China's Most Social honors Zhaopin.com Aspiring Employers Let design creativity drive urban development...... 71 Feedback 82 ...... Comprehensive Prize of the 14th China's Best 21st Century Business Herald Corporate Citizenship Award

3 4 CMSK CSR REPORTCMSK 招商蛇口社会责任报告CSR REPORT

About Us

Company Profile Corporate Governance

Supported by CMG, a central state-owned enterprise with total assets valued at over According to current laws and regulations as well as our business practices, we have established a corporate RMB one trillion, CMSK has thrived over the years. Our branches have formed the governance structure divided by operations, business departments, professional companies, and relevant management rules and systems, so as to offer organizational and institutional assurance for the Company's unique "Port-Park-City"(PPC) development model. With our mission of promoting development. social progress through commercial success, we endeavor to enhance our social responsibility, lead urban upgrading, and create low-carbon, healthy, green and General Meeting vibrant urban spaces. We will continue to deepen the development of cities to meet of Shareholders Scan the QR code the expectations for a better life. to explore CMSK's efforts in leading the smart growth of cities Board of Board of Directors Supervisors Port Cruise Management CMSK is committed to creating the most impressive residential Management Department. Secretariat of Board Board of Secretariat (CPC Discipline Inspection Inspection Discipline (CPC Management Center Supervision Department. Department. Supervision Product Management Management Product area and centered in cruise homeport, through an interrelated Finance Departmen Human Resources Resources Human Cost Management Management Cost Audit Department Fund and Capital Capital and Fund (CPC Committee Committee (CPC Brand Marketing Marketing Brand Committee Office) Committee IT Department Production Safety Safety Production City Research Research City Development Supervision and and Supervision Admin Office Admin Department Department Department of Directors of Legal Affairs Affairs Legal Department Department Department

development of "Ship, Port, City, Tourism, Shopping and Operation Strategic Institute Center Entertainment", and to developing the unique "Port-Park-City" Office) model.

Park Industrial Parks CMSK has been devoted in industrial park development and operation, and concentrates on layout planning, industrial Business Shenzhen Qianhai Shekou Professional Investment and Development Industrial City clustering and eco-cycle services to promote industrial Region Development Departments Subsidiaries Overseas Development China Merchants Commercial Shenzhen Property Investment (Shenzhen) Central East China Maillen Hotel Management Co., South North Free Trade China Merchants Property China China innovation. The Company has formed a complete system and China Co., Ltd Cruise Business Management Co., Ltd Department service philosophy for comprehensive development of urban Department Co., Ltd.

and industrial parks. Ltd City Residential and Commercial Properties CMSK is not only prioritizes in boutique apartment development and community operation as well as experiential complex development and operation, but also focuses on developing health care and tourism related properties. Meanwhile, it explores overseas markets and seeks potential growth points for company scale and profits.

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We act in strict compliance with the Company Law, Securities Law, Code of Corporate Governance for Listed Companies in China, Stock Listing Rules of the Shenzhen Stock Exchange and other CMSK and Our City relevant laws and regulations, as well as requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange and other regulatory bodies. According to the situation of the Company, ·· CMSK believes that every city has life with natural and diversified lifestyles while growing constantly. As a leader we continuously improve our corporate governance structure and internal control system, actively of urban upgrading, we promote urban upgrading, diversified community life and help everyone to realize their carry out investor relations management, further regulate our business operations, strengthen information disclosure, and enhance corporate governance through institutionalized and dreams with an attitude as earnest and professional as we treat our life. standardized management, so as to promote healthy development of the Company. Respectfully integrate with Empower industries through Activate an excellent life with Shape the better local communities abundant and quality resources an innovative vision future Board of Directors

The Board of Directors, consisting of 11 directors (including 4 independent directors and 7 other directors), is responsible for implementing the decisions of the General Create abundance, happiness and vitality Meeting of Shareholders and determining the Company's operation and investment plans,etc. The Board of Directors, elected by the General Meeting of Shareholders, serves a three-year term and can be re-elected in consecutive term. Under the Board of Directors are Strategy Committee, Nomination Committee, Auditing Committee, Remuneration and Appraisal Committee and other specialized committees, which offer suggestions on decision making and improve the work efficiency of the Board of Directors.

General Meeting of Shareholders Our city accumulates the power for constant growth through CMSK.

We act in strict compliance with the Company Law, Securities Law, Code of CMSK preserves the natural beauty in everyday life. Corporate Governance for Listed Companies in China, Stock Listing Rules of the Shenzhen Stock Exchange and other relevant laws and regulations. By clarifying the organizing and decision making procedures of the General Meeting of Shareholders, we inform shareholders of their rights and privileges. In 2017, we convened two General Meetings of Shareholders.

Board of Supervisors

The Board of Supervisors is responsible for all shareholders and it supervises the legality and compliance of the Board of Directors, General Manager and other senior management in fulfilling their responsibilities.

Investor Relations Management

We continue to strengthen the management of investor relations and communicate with investors through various channels such as regular reports, announcements, and our official website. By utilizing brokerage strategy meetings, conference calls, strategy press conferences, performance briefings, and roadshows, we have properly managed investor relations, deepened the interaction between the Company and investors, and effectively safeguarded the interests of investors. In 2017, we received 1,025 investors visits, participated in 52 large-scale investor meetings organized by domestic and foreign organizations and organized one investor meeting, further promoting the long-term mutual trust between investors and the Company.

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Stakeholder Communication CSR Management We take the initiative to understand and respond to the expectations and needs of stakeholders, and continuously In line with the development strategy of the new period, corporate culture, and corporate expand diversified communication channels and hold activities of various forms. We react to the legitimate demands motto, we continue improving our CSR management system and CSR philosophy, and integrate of stakeholders through practical actions and measures, and take those demands as an important reference to make the philosophy into our management and business operations, so as to satisfy stakeholders' our sustainable development strategy and plans, material topics analysis, and information disclosure. expectations and promote mutual sustainable development with the society. Channel of Stakeholder Expectation for CMSK CMSK Response in 2017 CSR Philosophy Communication

·· Information We continue to promote the social responsibility philosophy centered on "Smart Growth", and ·· Financial information disclosure regard the powers of quality, value, green, innovating spirit, and compassion as the foundation ·· Convened 2 General Meetings of disclosure ·· General Meeting Shareholders for urban upgrading and development. Meanwhile, we actively respond to and implement Shareholders and ·· Integrity and clean conduct of Shareholders the Sustainable Development Goals (SDGs) to enhance responsible competitiveness. Working Investors ·· Participated in 52 meetings with investors ·· Economic value creation ·· Exchange and held by Chinese and foreign organizations together with stakeholders, we contribute the most solid strength to the sustainable development visits of cities and help achieve the global development goals. ·· Routine ·· report and ·· Anti-corruption talks with over 1,800 ·· Law-compliant operation Governments and ·· communication people Power of quality, Brilliance with ·· Local development support ·· Forum and Customers Regulatory Authorities ·· Inspected 16 companies INDUSTRY, SUSTAINABLE RESPONSIBLE ·· exchange activity INNOVATION AND CITIES AND CONSUMPTION Create a smart community INFRASTRUCTURE COMMUNITIES AND PRODUCTION (industrial park) ecosystem and a 9 11 12 high-end cruise business to provide ·· Information ·· Comprehensive quality control system customers with diversified and ·· Product quality disclosure innovation and business incubators smart services ·· Customer service ·· Relevant ··30 benefit more than start-ups Customers improvement activities 1,500 ·· Exclusive service of CM Club for ·· Reliable privacy protection ·· Satisfaction 60,280 people Power of value, Prosperity with Shareholders survey INDUSTRY, SUSTAINABLE PARTNERSHIPS Give full play to the "Port-Park-City" INNOVATION AND CITIES AND FOR THE GOALS INFRASTRUCTURE COMMUNITIES development model and "Industry- 9 11 17 Internet-Finance-City Integration" ·· Sourcing ··100% of strategic suppliers have passed model to promote smart growth of ·· Cooperation with integrity ·· Routine cities quality, environment and safety assessment. ·· Mutually beneficial communication Partners ·· Strategic local sourcing rate: 100%, totaling development ·· Cooperation and RMB 2.05 billion Power of green, Harmony with the exchange Environment Conduct ecological management and SUSTAINABLE RESPONSIBLE CLIMATE operation, build green ecosystems, CITIES AND CONSUMPTION ACTION ·· Protection of basic rights COMMUNITIES AND and improve the natural environment ·· Employee PRODUCTION and interests ·· Proportion of female employees: % 11 12 13 to construct environmental-friendly seminars 35 ·· Career development ·· Employee training coverage: % cities favorable for people, living and ·· Regular training 83.8 working Employees opportunities ·· Average hours of training received: ·· Employee 41.72 ·· Balance between work and hours activities life Power of innovating spirit, Growth with Employees ·· Reduced 144,340.91 tons of carbon GOOD HEALTH GENDER WORK AND Promote the Company's ·· Less impact on the dioxide emissions AND WELL-BEING EQUALITY ECONOMIC ·· Environmental GROWTH transformation and enhance our environment from business ·· Completed 1.9042 million square meters 3 5 8 ability for sustainable development information of green construction operation with the innovating spirit of our disclosure ·· Saved 148.827 million kWh on an annual Environment ·· Green development employees ·· Forums and basis through green projects capability throughout the ·· Participated in the U.S.–China Clean Energy exchanges whole industry Research Center building energy efficiency Power of compassion, Development with cooperation projects Community NO ZERO SUSTAINABL Respect local customs and people, ·· Public welfare POVERTY HUNGER CITIES AND ·· Promoting urban COMMUNITIES and promote regional development hours of volunteer service development activity ··3,079 1 2 11 and cultural prosperity while retaining ·· Volunteer service ·· RMB were raised by the iWalk Society ·· Contributing to public 560,000 the original characteristics of cities and ·· Information campaign to support public welfare spreading the power of compassion welfare disclosure

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Brilliance with Prosperity with Harmony with the Material Topics Management customers shareholders environment

1. To know more about the stakeholders' expectations and demands so as to give targeted responses in the report, Development of basic products and 8. Law-abiding governance and in line 19.Green development model we follow the process of material topics analysis. We surveyed stakeholders, identified key material topics to make 2. supplementary services with CPC anti-corruption 20.Low-carbon industrial structure Development of new demanded sure that key material topics are in line with the Company's development strategies, also focus and concentrate on 9. Business transparency in cities products 10.Risk management and internal 21.Enhanced energy conservation expectation of stakeholders. 3. Quality control and work safety 4. management system and emission reduction in business 5. Smart ecosystem 11.Integration and effectiveness, operation Value-added services organizational construction, quality 22.Green cooperation platform Selection process of material topics 6. Standardized service improvement and performance improvement 23.Green initiative practice 7. Customer privacy protection 12. Free trade zone development and 24.Public participation advocacy Growth with management Step 1 Step 2 Step 3 Step 4 13. Business model innovation and employees upgrading Development with Identification Survey and selection Review and confirm Response 14. Innovative work management community 15.Overseas business expansion 25. Balance between work and life 16. Responsible supply chain Identifying important Carrying out surveys Reviewing the selection and Formulating and 26.Employee training and career 17.Cross-industry cooperation for 29. Contribution to people's livelihood issues for the Company's among internal and analysis of results by the implementing action plans development mutually beneficial development 30.Contribution to cultural sustainable development, external stakeholders; Company' s management for the material topics, 27.Protection of basic rights and 18. Deeper cooperation for the industry's prosperity and studying stakeholders' 1,123 questionnaires were and external experts and disclosing related interests development 31.Engagement in public welfare focuses. 32 topics in 9 major collected, among which 866 information in the report 28. Employee diversity and opportunity 32.Support for volunteer services equality dimensions were identified. internal questionnaires, and Note: Material topics are in blue 257 were external. Notes of material topics

Scope of influence Select Identify Disclose Material topics Corresponding G4 Indicators Page No. Create a material material material Internal External topic tank topics topics topics Develop basic products and √ Host regions Customer health and safety P17-18 supplementary services Develop new products that √ Host regions Customer health and safety P28 Prioritization meet society's demands √ Products and services, customer health and Build smart ecosystem Host regions P23 safety √ Products and services, customer health and Provide value-added services Host regions P23 Based on "Importance to CMSK Business" and "Importance to Stakeholders", we identify the key material topics for safety disclosure and prioritize them based on surveys on internal and external stakeholders. Improve business √ Shareholders Governance P31 transparency 1.0 Business model innovation √ Products and services, customer health and

Importance to CMSK Business Host regions P13-14,P34 0.9 and upgrading safety Innovation of work √ 17 Host regions Products and services, training and education P34,P58 0.8 management 23 20 √ Upstream of 0.7 Build responsible supply chain Supplier assessments, procurement practices P37 9 30 14 2 supply chain 22 1 0.6 4 13 Cross-boundary cooperation 25 16 √ Energy, products and services, local 19 for mutually beneficial Partners P38 27 5 communities, marketing 0.5 26 development 29 21 6 3 √ 0.4 Green development model Host regions Energy, products and services P44,P49-50 11 31 24 8 10 18 0.3 Promote low-carbon urban √ Host regions Energy, products and services, emissions P46 32 12 industrial structure 0.2 7 28 Establish green cooperation √ 15 Host regions Products and services, local communities P48 0.1 platform √ 0.0 Green initiative practice Host regions Energy, products and services P48 0.1 0.2 0.3 0.4 0.5 0.6 0.8 0.9 1.0 Employee training and career √ —— Training and education P55-57 Importance to Stakeholders development Contribute to cultural √ Activity areas Local communities, public policy P66-68 Note: Topics are numbered according to the order. The numbers in the graph represent the topics. prosperity

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Livable and suitable for business and daily life, achieving Feature sustainable development

The Shekou Model boasts complete functions which cover industry, commerce, urban functions, and Shekou Model, Leads Urban Upgrading everyday living. It promotes the harmony of production, life, and ecology, and the transformation and Key topic upgrading of cities. Business model innovation and upgrading

Upgrading lifestyle Upgrading urban functions Scan the QR code to enjoy the glamour of Shekou We established the Shekou Industrial Zone in 1979 right after China's Reform and Opening-up, initiating bold exploration and experimentation. After 38 years of evolution and five industrial upgrading and innovative ■■ Green life ■■ Free trade zone

development stages, the Shekou model has entered its fourth iteration, the "Port-Park-City" (PPC) era. The new ■■ Smart business district ■■ Renovation of old industrial areas in the city center model features the deep integration of "port, industry, and city", leading the sustainable growth of cities. ■■ Smart community ■■ Urban village renovation ■■ Healthy life PORT PARK CITY ■■ Old port and logistics park ■■ Colorful life in retiremen Livable and suitable for renovation ■■ New urban area development The hub connecting the world The ideal business development The ideal living environment business and daily life, environment Upgrading production achieving sustainable Upgrading industrial service function As a hub connecting the outside world, The "Park" connects the "Port" and the The "City" provides customers with development

the "Port" is dedicated to including "City", and has gathered advanced park ideal support services, as well as ■■ Improved residence ■■ Smart urban area industrial trade, financial services, development and operation capabilities. comprehensive service capabilities ■■ Experiential compound ■■ Smart industrial park tourism and leisure industry, and traffic Through diversified and innovative covering urban residential areas, retail ■■ Theme industrial park flow. It aims to boost industries and drive investment and financing models, it areas, and entertainment areas. It provides ■■ Introduction of high-end ■■ Health properties and industries the development of urban and regional collaborates with local companies to seek comprehensive infrastructure, education communities for all ages economies. common growth. and medical care to meet daily needs of ■■ Incubation for start-ups ■■ Comprehensive life, consumption and entertainment. development and ■■ Financial service for growing operation with first and enterprises second level coordination

The Shekou Model was created to allow for the flow of local people and logistics, so that people can live and work in a single location. Only such a city can be sustainable.

——Liu Wei, Deputy Secretary of the Party Committee and Executive Deputy General Manager of CMSK

Development history of the Shekou Model

City 4.0 1.0 Port 2.0 Park 3.0 City Duplication in Park other places

Port The construction of Shekou started In 1980, the first Sino-foreign joint After three upgrades of industries and The Shekou Model was duplicated from the port. In order to attract venture, Zhonghong Industrial Gas urban forms, the manufacturing industry successfully in Djibouti. By adapting to Driven by foreign investment, we had to first (shenzhen) Co., Ltd., was established in Shekou Industrial Zone gradually local conditions, and developing the "Port" and went into operation in Shekou, the deal with transportation of raw Since then, foreign-invested slowed. After 30 years, Shekou has "Port, Park and City" simultaneously, "Park" materials and products. Because of companies such as Sanyo Electric, developed from a remote, small fishing "Shekou Model 4.0" was upgraded the further this, the port has become the key Kaida Toys, and Guangdong Float village into a modern, international, and successfully and has entered the global promotes the development to development. To this end, our Glass invested and built factories in livable city that is suitable for business duplication stage, giving vitality to the Shekou. The Shekou Industrial Zone and prosperity of the first investment in Shekou was the development. The transformation of development of cities. "City". behind the port was gradually formed. construction of the port, which is The "Shekou Model 2.0" started to "Shekou Mode 3.0" was thus completed. known as "Shekou Mode 1.0". take shape.

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The background of sustainable development

Facing the rapid economic development and increasing urbanization, the 19th CPC National BRILLIANCE WITH Congress proposes to realize people's yearning for a better life. This has brought new opportunities and challenges for the sustainable development of cities and upgrading consumption habits. As CUSTOMERS a city and industrial park operator and service provider, we need to persist with our customer- • Start new business in long-term rental centric strategies, constantly enrich and innovate apartment market, the health and our products, as well as optimize and upgrade culture sector our services, so as to meet customers' needs • with products and services of higher quality and Create a smart service ecosystem by standards, and to lead the transformation and launching the China Merchants Smart development of cities. Service Ecosystem INDUSTRY, INNOVATION AND INFRASTRUCTURE • 9 Upgrade business models and relevant Our actions products of three major SUSTAINABLE CITIES AND business segments COMMUNITIES • 11 Launch the "Exquisite Project" to provide

finely decorated RESPONSIBLE CONSUMPTION residences 12 AND PRODUCTION

Our achievements

1,500 More than start-ups incubated 200,000 households served 4.381 million cruise passengers received in 2017

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Developing a Diverse Business Mix Key topics In-depth core business Develop basic products and support facilities; Develop new products that meet society's demands development

We are committed to becoming China's leading city developer, With the unique "Port-Park-City" model, we have park operator, and service provider. Guided by the needs of developed three major business segments of our customers, we actively explore the development of diverse the park, community, and cruise, and improved businesses, and constantly innovate to inject vitality into the growth related products and services to achieve urban of the city. prosperity and sustainable development. employment/start-up/commerce/ supporting facilities

·· Developed and operated 10 industrial parks The Park across the country ·· Developed incubators for start-ups port/logistics/cruise 30 life/business/supporting facilities ·· Incubated more than 1,500 companies ·· The cruise industry covers cities ·· Community development and operation 5 ·· million cruise passengers received 4.381 covered cities across China in 2017 46 The Port The City ·· Property management business totaled ·· Accounting for 88.4% of national cruise passengers in 2017 37.75 million square meters ·· Served 200,000 households

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The Port Developing the whole industry chain, creating a fourth The City iteration of cruise home port (version 4.0) Excellent living conditions, creating a better life

Taking the home port of cruise ships as the core, we have explored the development of the whole cruise Over the past 40 years, CMSK is committed to developing quality housing projects for customers. PORT industry chain through the coordinated development of "Cruise, Port, City, Tourism, Shopping and CITY We have covered more than 40 cities, meeting customers' needs by providing them with a variety of Entertainment', and promoted the establishment of home port "version 4.0" of cruise ships, providing quality housing products to meet their yearning for better living and business experience. customers with better experience. Entertainment

sightseeing cruise line management cruise ship mooring and Shopping port reception service Cruise maintenance Hotel Commerce

duty-free shopping cruise ship manufacturing and design including including large business urban complex, international travel agency hotel, resort community-level public transport service and reception hotel, etc commercial real- Scan the QR code to estate, etc. explore the Shekou international shipping customs entry and exit Prince Bay Cruise Port Tourism industry Home port of City Residential Zhangzhou·Maillen Health Resort Shenzhen·Sea World cruise ships and commercial Important support platforms International access real-estate Office building Residential Core strategic platform for the cruise economy real-estate including first- class office including luxury building, housing projects, commercial office long-term rental buildings, etc. apartments, etc.

Shenzhen·CMG Plaza Beijing·The Pearl on the Crown

Theme industrial parks Special industrial zones Ecological zones

Centralized commercial activities The Park Leading industrial Shekou Net Valley Service apartments NH ECOOL

upgrading, promoting CMG Port Building mass entrepreneurship I-Factory Culture and Art Center

and innovation Dacheng Art Center Prince Bay Plaza

Hong Kong City Sea World PARK Boasting industrial parks, special Shenzhen Shekou Prince Bay Cruise Home Port industrial zones, and ecological zones, Shekou-Binhai Shenzhen-Hong Kong Entrepreneurship we spare no effort in industrial park Shekou Net Valley and Innovation Industrial Belt Qianhai-Shekou Free Trade Area development and operation, and have established the industry-city Developing and operating ten major industrial parks including Establishing the Shekou-Binhai Shenzhen-Hong Kong Making strategic plans on the comprehensive development of Qianhai- integration ecosystem to promote net valley, ECOOL and E park, and focusing on industrial Entrepreneurship and Innovation Industrial Belt based Shekou Free Trade Area to give play to the combined advantages of industrial innovation and urban upgrading and ecosystem services to promote industrial on culture, capital, and information technology, as a the free trade pilot zone, the Belt and Road hub, the Shenzhen-Hong development. innovation benchmark for industrial transformation and urban Kong Cooperation Demonstration Zone and the bonded port area. upgrading. This will result in the most open free trade area in China.

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Innovating in products based on social needs Cultural and creative industry: Promoting the cultural, creative, art and educational industries With the progress of the society and the development of the city, we keep up with trends by having a strong presence in industries such as health care, elderly care, culture, and education, and have In order to meet people's growing cultural needs, we take advantage of our cultural and creative resources, and innovated in products to meet people's ever-growing needs for a better life. actively build a complete cultural and creative ecological chain that covers office work on culture and creativity, Health care: Safeguarding the basis of people 's well-being exhibitions, cultural business, education, film, television, media, and cultural facilities, in an effort to offer customers an enriching experience. Based on the social trends and people's increasing needs for health services, we actively develop operations in the health sector, and have formed the "two-base, three-model, and four-field" industrial development framework to promote the coordinated development of various businesses Cultural and creative ecological chain and provide innovative products and quality experience for our customers.

Two-base CMSK's main Qichun poverty Cultural business operations alleviation Cultural Cultural and and design resources Top K12 international and creative exhibition and creative parks education represented gathering places gathering platforms Real-estate Powerful Industry-finance represented by by G30 Qianhai Whittle Three- represented by represented by "Sea operation model combination model integration model "ECOOL" model "I-Factory" World Culture and School Art Center" Four- Elderly care Health care Chinese medicine Health field

·· Actively exploring the ·· Creating the joint venture ·· Relying on CMG Qichun ·· Starting from China elderly care industry and of China Merchants Lippo Health Industry New City Merchants Maillen Health have developed several Hospital Management and building a full industrial Center and building product lines including (Shenzhen) Co., Ltd., with chain covering health care, an integrated health institutional elderly care, Indonesia's Lippo Group pharmaceuticals, culture management center that retirement condos, and for the establishment of and tourism by centering provides services such home-based elderly care a professional medical around the development as advanced medical in a number of cities, such service platform based on strategies of Health China examinations, Chinese as Shenzhen, Guangzhou, the Telemedicine Imaging and traditional Chinese physiotherapy, family Hangzhou, etc. Center as its main model. medicine. doctors, dietary care, etc. This is a people-oriented evaluation system for elderly care services, suitable for elderly people living in CA Shenzhen NH ECOOL Shekou I-Factory Mainland China. It integrates SE Elderly care with Chinese characteristics: Sharing and building a new era for senior citizens resources, needs and services As a classic case of urban upgrading and industrial Shekou I-Factory: Built on the former site of Guangdong Float Glass restructuring, NH ECOOL has become a renowned park for factory, it is a park for creative and advanced manufacturing industry to improve the quality of life At present, there are more than 200 million senior citizens in China. In order to create a better life for the elderly, cultural and creative industry as well as an exemplar of green featuring "art + technology". for the elderly. we have launched the Guangzhou Golden Valley Senior Care Community, the first permanent retirement real- and low-carbon buildings over its 10 years of development. ——Hao Yao, General Secretary estate project that boasts quality retirement apartments and professional nursing homes for the seniors. At of Zhengyang Social Work and the same time, we carried out the study on "exploring the approaches to matching between regional elderly Service Center, Panyu District, care service resources and actual needs". We assessed the needs of the community for elderly care services by Guangzhou researching the living conditions of local senior citizens, and explored the ways to match resources and needs of the community in the future, so as to establish the most suitable elderly care model unique to China. At the 4th China International Silver Industry Exhibition, we organized a variety of activities, including paper-cutting, free Because of you, the life of diagnosis, etc. Our enthusiasm and professional services were highly praised and widely received. senior citizens will be greatly improved. ——A women in her late 70s

Sea World Culture and Art Center G30 Qianhai Whittle School

With the theme of design and creativity, the Center boasts The G30 Qianhai Whittle School that is currently under V&A Museum of Childhood, the main exhibition hall for Design construction is a global educational institution, which Society, and the Shekou Museum of Reform and Opening, provides "K-12" education (covering kindergarten to high etc., aiming to build the core engine for the cluster of cultural school) for Chinese and international students. China International Silver Industry Exhibition Guangzhou Panyu International Senior Care and Recovery Center and creative initiatives.

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Featured "customer -centric" services Rendering High-Quality Services If the service industry is a Key topics Focusing on "People-oriented and customer-centric", and according to the different characteristics of our park, community battlefield, then customer service Build smart ecosystem; provide value-added services and cruise customers, we have further subdivided the customer groups to provide them with more thoughtful and considerate is like an invisible front, many services in a more professional and sophisticated manner. operations of which are obscure. We continue to improve our customer service capabilities, as well as integrate and innovate in resources The value of customer service lies to build a smart service ecosystem. At the same time, we actively optimize the service system and give in the creation of a real sense of attention to the voice of customers, so as to provide them with considerate services that offer them a sense presence and real value. of fulfillment, well-being, and security. Integrated One-stop service Ÿ Comprehensive ——Zhu Wenkai, Executive Deputy "Internet·Home" smart service cruise services for industrial parks community services General Manager of CMSK Integrating service at Integrating various service Offering customers better Considering the advantages of the popularity of the internet, the advances in the Internet of Things ports and cruise ships resources to promote the community services When I go back home after grocery technology, and the widespread application of cloud technology, we are advancing with the times by to make cruise tourism development of companies shopping, I always carry many bags. upgrading our customer service and user experience based on individual needs. From "Internet Plus" to more attractive But when I am 7 or 8 meters close "Internet·Home", we coordinate online and offline resources to create a smart service ecosystem that to my home, I take something out aims to make customers lives better. of my pocket. Guess what? It's not the key card or keys, but my cell China Merchants Smart Service Platform phone. Now, I only need a touch on Integrated cruise services the app CM Club on my cellphone to open the door, which is very safe fee collection equipment and facility and convenient. retail system CRM system system system We always care about the well-being of tourists. While providing services that integrate port, cruise and tourism, we pay ——A home-owner close attention to every detail and fully consider the needs and experiences of our customers. Management Client-side side: Staff-side

Daojiahui Zhaoshangtong Huidaojia Port Services Cruise Services Tourism Services

·· Complete the international transfer ·· Carry out the 5S on-site visual ·· Further enrich the product portfolio internet of things intelligent card system big data system sales system of baggage, and successfully promote management to optimize the of cruise tourism, and realize the system the supply operation for cruise environment at cruise center and integrated operation of "Cruise, Mobile house check service now 31,000 tourism. routes for passengers. Port, City, Tourism, Shopping and covers more than ·· Expand the operation and service ·· Improve service facilities at cites Entertainment". households platform, and establish the real-name and stations, and add self-service ·· Actively innovate in cruise service, in 23 cities ticket purchase system. ticket machines, wheelchairs, water and launch the "Tour Shenzhen on coolers, etc. ·· Improve supporting services at the the Sea" project. home port, and hold a variety of ·· Promote the standardized ·· Continuously optimize our WeChat activities such as group weddings, management of passenger service, platform to make ticket purchase Hotline of the customer information art exhibitions, education fair about and introduce standardized service and payment more convenient. center now covers dinosaur, etc. descriptions. 145 projects in 33 cities Mobile house check Application of CRM system One-touch door-opening through WeChat Launching a series of online customer Establishing a customer information center and service platforms for house inspections and a health record supervision and management Developing the one-touch door-opening system contractors to provide one-stop services that mechanism through the analysis of data collected so that users will no longer need key cards; cover delivery, dispatching, maintenance, through multiple channels; conducting monitoring instead, they can just "Shake" their phones to etc. and follow-up through a variety of methods enter their community, building, and garage.

CA SE Link Share — Providing customers with better service

In 2017, we further promoted the integration of the three networks (At Home, Smart Net Valley Park, and CM Club), and innovated in the Link Share platform to support the daily management and operation of WeChat official accounts that cover multiple services. At the same time, we combined the platform with the back-end CRM+ system to form an effective integration Shenzhen Cruise Tourism Carnival "Tour Shenzhen on the Sea" Scan the QR code to enjoy the quality service by of internet channels and customer data, and to give full play to the function of Link (linking customers, products, and scenario- China Merchants Property Management based services) and Share (sharing materials, customers, products, services and resources). By the end of 2017, we launched The 2017 Shenzhen Cruise Tourism Carnival was launched The cruise was themed with "Tour Shenzhen on the Sea by cooperating with Shenzhen Administration of Art, Sport — the view you have never seen before" to offer local the Link Share platform on 140 WeChat official accounts, covering various fields such as community, park, and commerce. In and Tourism and 31 large travelling shows were held in the citizens and visitors a brand-new travel experience and the future, we will build the Link Share platform into a customer service channel that integrates online and offline operations, city, offering local citizens and visitors the opportunity to improve people's life. and an open and interconnected customer value platform to create a better customer experience for customers. experience sea travel.

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One-stop service for industrial parks

Innovation and business Ensuring Quality and Safety To better meet the development needs of enterprises, we refined our services and business incubators, aiming to incubators developed Quality and safety are the foundation for production and project development. We attach great importance to quality provide more convenient and diversified services to help local enterprises achieve better and faster development. 30 control and safety. By improving the quality control system and strengthening safety management, we guarantee that our customers enjoy quality and safe products. Enterprises supported more than Comprehensive quality control 1,500 Corporate Incubation service services We have established the quality control system that covers the whole process of production and the four parties intermediary involved, including the headquarters, municipal companies, project departments, and contractors, aiming to provide intellectual system R&D testing services customers with high quality products that are safe and durable. property rights certification policy personnel support services technical CA industrial training and corporate support training SE Promoting fine craftsmanship — Remain true to our original aspiration Average grade of field investment policy exchanges services and and offer high quality products testing and measurement and financing exchanges In today's society, people are paying more attention to the quality of housing, rather than the number of residences 88.4 marketing financial human entrepreneurial they own. In order to better meet the needs of the market and customers, and to guarantee superb product quality, we services resources support services continue to implement the campaign to promote "fine craftsmanship". Starting from customer's needs, we have taken a series of measures to ensure outstanding design, strict selection of materials, construction quality and comprehensive customer service. Also, we coordinate all parties involved in the whole process to strictly control every detail and ensure Comprehensive community services the quality. In 2017, 94% of our finely decorated projects were up to standard. Followers of CM Club official account Home is the safe haven for everyone, and we are committed to creating warm, harmonious, and happy homes for every customer. That is why we actively offer harmonious and caring home services, and have successively launched a series of More than Considerate Strict Outstanding Considerate 160,000 community activities such as the CM Club, the "Home Culture" festival, and the Rainbow Plan. design selection construction service Exclusive service offered Scan the QR code to see our craftsmanship by CM Club Examine the product Guarantee product Establish the Be consistent and design from the quality from the standard system for considerate in people 60,280 CM Club perspective of source quality management offering customer customers service

Brand activities of CM Club 541 Improving safety management Passing grade at the safety test and evaluation Covered Through a series of safety measures, we have further standardized our construction operations and improved the % more than safety management of home port. At the same time, to fulfill our commitment to society, we have strengthened risk 85.34 400,000 people management, eliminated potential hazards, and improved safety awareness of all employees. a year-on-year increase 0.65percentage points percentage Work safety Cruise home port safety 0.65 points

"Scouts" woodland "Scouts" OP sailing · Hierarchical and classified management: · Safety management team: adventure summer camp · Implemented · Set up a safety management the management model featuring "one team, one system, team with the Work Safety Committee as the decision- making organ, as well as an independent safety supervision and multiple brands" to manage the construction process of department to take full responsibility for the safety supervision Awarded "Company with projects and standardize safety management and management of the home port Outstanding Safety and · Standard management system: · Safety responsibility system. · Established a professional Integrity Performance" Scan the QR code to enjoy our · Complied and released the customer service standard management system that covers standard Work Safety Responsibility System through the revision of rules by China MSA for 6 management guidelines, standard plans, rules for breach of and regulations, strengthening the accountability system, and consecutive years. the classification of safety responsibilities contract, site management records, etc. · Dual safety and prevention system. · Safety inspection: · Established the dual Awarded the "Advanced · Organized seven company-level (headed safety and prevention system that covers the control of Company for the Work by company leaders) safety inspections and one safety classified safety risk and safety hazard management . Safety Month by the Work inspection by a third-party agency to ensure safe construction University for the Safety Committee of the "Family Day" in 2017 Elderly State Council

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CSR Story Assuming responsibility at all hours

The power of quality: Building a "safe haven" for city dwellers The 19th CPC National Congress emphasizes that "houses are for living, not for speculation". This sets The city lights up as night falls. At this moment, those who have just finished a long day of work want the most is to return the general orientation for the real estate market. In home. For this reason, CMSK launched the long-term rental apartment projects, providing a temporary "safe haven" for those order to meet the needs of different urban groups, we who work in the city but live far outside the city. have launched diversified long-term rental apartment products and services including Habitat One, Apartment One and Mansion one. Based on many years of Based on the differentiated needs of urban tenant groups, we launched three series of long-rental apartment projects in 2010, management and service experience, we have gradually namely Habitat One, Apartment One and Mansion One. At present, we have developed more than 10 projects in 4 key cities, developed the "integrated development" model for Shenzhen, Beijing, Tianjin, and Chongqing, which provide accommodation for an increasing number of city dwellers. the continuous improvement of customer experience. That's why we are recognized by the market and won Habitat One: You can call Shenzhen home if you praise of customers. In the future, we will expand the "One" series apartments to more first and second-tier are here cities and overseas cities, and deliver the power of "a better life" to every corner of the world. Like most young people, Mr. He, the 25-year-old young man, chose to come to Key topic Shenzhen to pursue his career and dreams. Despite his limited income, Mr. He felt that the rented room was not just a place to sleep. He is longing for the way people live in popular TV series like Ode to Joy or iPartment . In the shows, Develop new products that characters share cozy apartments, living happily together. After seeing a number meet society's demands of apartments, he eventually chose our Habitat One. "I really like the layout here. The furniture is so exquisite, not cumbersome. After work, I enjoy sitting down on the sofa with a couple of friends and watching the variety shows while enjoying all kinds of snacks. Nothing can beat that." Mansion One — a luxury-service apartment complex Nearly long-term rental apartments 15,000 with a total For Mr. He, the warmest part is that it reminds him of his childhood, when he and Habitat One — designed for young office workers Mansion One: A "safe heaven" created for you area of 600,000 square his family often watched TV together. This is how Habitat One should be. meters

Mr. Liu is responsible for renting offices for Fortune 500 companies. With many years of working experience, he has a high demand for residential services. But Apartment One: We are here with you Mr. Liu was impressed by the facilities and the high-quality services that rival "One" series apartments3,833 in Shekou, those of any five-star hotels. "They always can satisfy my special requirements. Shenzhen, accommodating Their exceptional service quality is on a par with that of high-end hotels," said Sherly comes from Hong Kong. She is an office worker who Mr. Liu in praise of Mansion One. about 7,000 tenants, really cares about quality of life. Sherly is usually busy at among them more than 500 work and always returns home late. "Living in Apartment One weekend, he and his children passed the counter, and asked about the people are foreign nationals One means that whenever I come home, I feel so relieved, climbing route of Dananshan. A well-dressed customer service representative because I don't have to worry about security at all", Sherly recommended three routes in details, as well as their different features, and said in a happy mood, "Even if it's a rainy or blustery day, I possible situations. They also reminded Mr. Liu to bring water and snacks in don't have to bother with my apartment, because I can just case that his children might feel hungry while climbing the mountain. Besides, 95% of all "One" series make a phone call and the customer service staff will help the customer service representative, encouraged them not to give up until they apartments are rented out; me deal with all kinds of chores." reach the top of the mountain and suggested that they should take a picture 60% of tenants have lived of Mansion One from the mountain top. "I am very impressed by the customer in those apartments for 2 Mr. Li is a handsome young man from Xi'an, Shaanxi province. service representative. They give me the feeling and warmth of home. My family years or more. He is really into the atmosphere of Apartment One where and I all enjoy living here". Mr. Liu expressed his satisfaction and how he felt most tenants are young people. At Apartment One, he can about living in Mansion One. He also wrote a letter of thanks to the customer often hold parties and gatherings with friends. However, Mr. Apartment One — designed for urban middle class service representative. Li is always careless with his keys or key cards, and often leaves them at home. So the customer service staff at the Mansion One receives gratitude from its inhabitants every day. People thank the service staff for helping them integrate into the local culture... marketing center always help Mr. Li open his door. If it is cleaners and security guards for their considerate service, express gratitude to too late at night, when the marketing center is closed, the those they live together with, and write letters of thanks to neighbors that they Apartment One is like a small "United Nations", where people security staff will promptly help Mr. Lee. He is very touched. make friends in community activities... from China and all over the world live harmoniously together, regardless of their nationality and race. In addition, Lee Gengjun from South Korea thought that The road to home is the most beautiful journey. Nothing is better than home. the service of the apartment is almost perfect and the living CMSK's "One" series apartments provide high-quality accommodation for those environment is particularly good. Burton Mulliins and Lisa, who work hard in the city. a couple from the United States, were very grateful to the Scan the QR code to experience Apartment One

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The background of sustainable development

As China's economy has gained new momentum, its structure will be further optimized. The cross- PROSPERITY WITH boundary integration, ecosystem development, and global competition have become new trends. At the same time, synergistic resources and shared platforms have become the common direction for all businesses. • As one of the first group of companies listed as SHAREHOLDERS Upgrade the unique "Port - Park - City" the demonstration bases of entrepreneurship and model of regional development to innovation in the country, we need to systematically support industrial transformation and optimize the ecological environment for innovation urban upgrading • and entrepreneurship, and further promote Develop the continuously entrepreneurship and innovation in a wider range and evolving smart ecosystem to to a higher level. This development will undoubtedly gather resources, and support bring us more challenges and opportunities. regional economic development

INDUSTRY, • Our actions INNOVATION AND Establish the cooperation platform that INFRASTRUCTURE facilitates productive interaction and 9 exchanges, aiming to grow together with upstream and downstream enterprises • Accelerate the optimal allocation of the industrial chain of innovative elements to • enhance the capability of SUSTAINABLE Expand the "Shekou Model 4.0" to CITIES AND countries along the "Belt and Road" so serving innovation and COMMUNITIES as to support local social and economic entrepreneurship, and activate 11 development the momentum of development

PARTNERSHIPS FOR THE GOALS 17

Our achievements

Business revenue 75.45 RMB billion 14.6 Total tax paid RMB billion 800 companies incubated or invested by CMSK

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Risk control and management

Economic value added Sound Business Operation As an enterprise that lays equal stress on operations in diversified industries and capital management, we have continued 18 (EVA) RMB billion Companies completed 7.57 Key topic to improve the risk management system by actively integrating internal control and risk management, and have established Promote business transparency internal audit the comprehensive internal control and risk management system to cover daily operations. In 2017, we merged the "Leading Group for Risk Management and Internal Control" and the "Leading Group for Compliance Management" into % the "Risk Control and Compliance Management Committee", which was in charge of corporate risk management, internal 96.7 We respond to the changing domestic economy. Our business philosophy and high degree of risk prevention Defects rectification rate awareness have enabled us to achieve quality large-scale development, and to provide outstanding returns to control and compliance management, and aims to create efficient internal operations. shareholders and society. Risk control and management

Business revenue Net profit 18.7% 23.5% Organizational System RMB 100 million Year-on-year growth RMB 100 million Year-on-year growth 200 800 754.5 Leadership 635.7 150 150.1 Vertical risk Risk Control and Compliance Management Committee 600 433.9 492.2 121.5 control 400 100 80.5 Risk management and coordination organ 325 55 55.1 of the headquarters 200 50 Functional departments Management of the headquarters Risk management department 0 0 of the headquarters Audit Department 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Functional departments Risk management department and Executiion personnel of subsidiaries of subsidiaries Total tax paid Total assets 29.5% 30.1% The first line of The second line of The third line of RMB 100 million Year-on-year growth RMB 100 million Year-on-year growth defense defense defense 200 4000 3,326.2 Horizontal risk control 150 146.0 3000 2,557.3 116.5 112.7 2,109 100 77.9 80.6 2000 1,517 1,340 Supporting measures 50 1000 0 0 Strengthening the construction Improving risk control system Conducting internal control evaluation 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 of risk control team

Organize leaders in charge of risk control and Formulate the risk control system, and improve Improve the internal control matrix through Note: The data of 2013 and 2014 is derived from the former China Merchants Property; due to adjustment of operations of CMSK in related personnel to participate in internal and working mechanism, specific duties, etc., to approaches such as internal control interviews 2017, the data of 2016 were restated. external risk control training to continuously effectively guide the Company's risk control and walk-through tests to identify defects and improve the team's professional capabilities and work. conduct internal control evaluation. Strengthening operation management skills.

% 222 employees participated 282 systems of the 94.07% coverage of internal Legal100 review of major We strictly abide by national laws and regulations as well as business ethics, continuously improve internal management, and in annual risk control training headquarters control operations (counted by were revised and improved assets) operation decisions comprehensively promote risk control and anti-corruption. Therefore, in order to safeguard the Company's health and long- term development, we have consolidated the foundation for our development with operations that are honest, prudent and complaint with laws and regulations. Compliance management % Legal100 review of Anti-corruption Publicity coverage of commercial contracts As a subsidiary of China Merchants Group to develop the pilot compliance management, we have further improved the legal and compliance project incompliance We have made continuous efforts to improve our conduct, supervision and accountability. Taking the opportunity of the working system and incorporated the legal and compliance concept % projects 100% inspection by the Party Committee of the CMG, we made corresponding rectification, further promoted the administration into CMSK's Articles of Association. At the same time, we carried out 100 Legal review of rules and of enterprises according to laws and regulations, and enhanced daily supervision and the enforcement of disciplines, which training and put up posters to promote the culture that encourages "legal systems enable us to better fight corruption. compliance and operation, pioneering and innovation, and sustainable · Actively cooperating with the inspection teams of CMG to complete all rectification tasks. development", in pursuit of better compliance management, and · We have achieved good developing CMSK into a Fortune 500 company. results in implementing the Party's requirements, upgrading the selection of talents, strengthening the enforcement of disciplines, enhancing internal supervision, and establishing long-term mechanism. Companies16 supervised · Consolidating comprehensive supervision pattern to strengthen coordination between business units. · Through the improvement of coordination accountability of positions and the joint conference on anti-corruption, we over 1,800 successfully created synergy among functions, including supervision, law, auditing, finance, personnel, and cost, which People interviewed on further strengthened comprehensive supervision. integrity · Carrying out continuous publicity and education to enhance integrity and self-discipline. · We have regularized and institutionalized the requirement for all Party members to have a solid understanding of the Party Constitution, Party regulations, and related major policy addresses and to meet Party standards, conducted activities to promote honesty and integrity, interviews to promote proper conduct at all levels, and publicity to warn employees the consequence of wrongdoings, which further enhanced employees' awareness of integrity and self-discipline, and successfully created a Legal compliance training in 2017 Posters on legal compliance positive atmosphere for proper and upright entrepreneurship.

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Improving quality and efficiency Innovative Transformation and Upgrading We are acutely aware that if CMSK aims to become a Fortune 500 company, we must achieve inclusive development. Capitalizing on the internet and big data technology, we continue to realize our potential, increase efficiency, and Key topics enhance informatization, the company's overall management capability and operating efficiency, which facilitate Business model innovation and upgrading; innovation of work management efficient and stable development. Strengthening cost management We uphold the pioneering spirit while further reforming and innovating in the business model. Moreover, we are building an open platform to support innovation and entrepreneurship, so that we are able to leap forward in urban We prioritize cost management strategy and take costs as leverage for introducing cost management throughout the development. entire life cycle of project development. At the same time, we have developed refined management that covers the whole Supporting entrepreneurship and innovation process of project development, and gradually developed control-based cost management into a value-added one, which Platforms dedicated to improves the core competitiveness of cost control. In 2017, the Company introduced the CMSK Administrative Measures entrepreneurship and As one of the first demonstration bases of entrepreneurship and innovation in China, we seize the opportunity to promote on Responsibility Cost (2017 Edition) to encourage all departments to formulate cost assessment plans and raise the innovation entrepreneurship and innovation focusing on space creation, platform support, and capital connection, so as to create awareness of cost management among all personnel of the value chain. a development pattern where "large enterprises set the stage and lead small enterprises to prosperity", and to promote 2 innovation, development, and regional transformation and upgrading. Profit margin Vertical incubators CMSK's development model for entrepreneurship and innovation 24 Enterprises in accelerating

40% 36.2% Innovation Enterprises undergoing 32.0% center technology Technological Innovative growing stage Enterprises in innovation investment Invested and incubated incubation 30% 26.2% Entreprene Investment Input stage Output urship and Achievements enterprises of three innovation capital made in four 20% resources fund aspects Industrial Net valley data Digital Space 800 10% and ECOOL arena Total estimated value 0% RMB 10 billion 2015 2016 2017 Cost management training Coordination Incubation Space + Interactive Space + Maker space + Digital Space among the four spaces CM Space + I Factory + Premier Maker Space + Nanyou Data Center Venture capital firms Facilitating informatization introduced

Support Public cloud platform for Public technology service platform in 26 from the two The world has entered the information era, where the rapid development and continuous upgrading of information entrepreneurship industrial parks Mobile66 information platforms technology has brought tremendous changes to our production activities and everyday life. Therefore, in order to projects launched in China better serve all stakeholders, CMSK actively promotes informatization by capitalizing on the mobile internet and information technology to enhance management capabilities and performance, and to expand smart marketing. CA SE Promoting mobile Partnering with Huawei to unleash extraordinary results information input across the country and collecting data on customer behavior Completing wireless On April 19, 2017, we cooperated with Huawei in establishing the "CMSK - Huawei Joint Innovation Center", in real time to provide network coverage in 10 aiming to give full play to the internal innovation resources of both companies. This innovation and support for intelligent major business districts in decision-making and Shekou to provide support incubation platform will promote the rapid transformation of technological achievements and the innovation business improvement for subsequent customer of business models, and cultivate new markets and areas of cooperation. data analysis and the Upgrading office identification of potential network, and improving customers Industrial park cooperation network speed and With the goal of building a "entrepreneurship and innovation + basic service stability to ensure smooth information platform", we apply the ERP basic data of the park to integrate clusters within sharing the park, build a 3D visualized operation platform, and optimize park services and management through a unified portal.

Entrepreneurship and innovation platform cooperation We seize the opportunity of incubating "the service platform for entrepreneur and innovation industry" to integrate resources of all parties of the park, so as to provide enterprises with cloud services and innovation platforms.

Innovative ecological park cooperation With the goal of creating an "CMSK innovation base for Internet of Things", we adopt new energy-saving technologies and Internet of Things technologies to Signed a cooperation agreement with Huawei Login interface for wireless build an open platform for IoT services and realize the cluster of industries inside network in business districts the IoT ecosystem.

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Developing Guangdong-HK- CA Macao Greater Bay Area into SE Sponsoring the "Shining Star Innovation Contest" to facilitate the The Shining Star Innovation connection between innovation programs and investments a tremendous growth pole The convention and exhibition Contest and the advisers not industry is able to create only expanded the horizon On June 21, 2017, the Shining Star Innovation Contest the 1:9 effect in economic of those who originally were opened in Shenzhen. A number of central SOEs, as In March, 2017, the concept of Guangdong-Hong returns, which means if the Kong-Macao Greater Bay Area was put forward direct revenue is 1, then its focused on patents and big well as makers and investors from all over the country gathered at the activity. The contest climaxed with by Premier Li Keqiang in Report on the Work contribution to industries such data, but also promoted the fascinating sessions such as detailed introduction, in- of the Government, which immediately drew as transportation, tourism, development of the projects. depth promotion, open Q&A, etc., which ignited the the attention of the whole country. It is a great restaurant industry, hotel, etc. ——Bai Bo, project leader of enthusiasm of attendees for "entrepreneurship and opportunity for Shenzhen. The Shenzhen World will be 9. innovation". A total of 90 institutional investors and 81 ——Mao Daben, Executive "Technological Progress Index Exhibition & Convention Centre located in the heart projects were connected at Shekou Net Valley, promoting Deputy General Manager of (TPI)" of the Guangdong-HK-Macao Greater Bay Area and the rapid incubation of innovation programs. Project team on roadshows Zhaohua Exhibition Co., Ltd the Guangzhou-HK-Shenzhen Economic Corridor is currently under construction. The first phase of the Promoting regional development project is expected to be completed and put into use in September, 2018. It will become the world's We actively respond to the regional economic development strategies of the nation such as development of the "Guangdong- largest convention and exhibition center. Therefore, Hong Kong-Macao Greater Bay Area" and the "Beijing-Tianjin-Hebei Integration". Taking advantage of our unique development we will make the best use of the center to promote the development of the entire region, realize the model of "Port-Park-City", we strive to inspire creativity and encourage innovation in various areas, and to achieve a mutually Architectural rendering of Shenzhen World potential of the Guangdong-Hong Kong-Macao Exhibition & Convention Centre beneficial situation for the development of enterprises, regions, and the country. Greater Bay Area as a world-class economic engine, Free Trade Zone construction and operation and support urban development.

In 2017, the construction of the Qianhai-Shekou Free Trade Zone entered a new stage that gives priority to quality improvement Advancing the coordinated development of the Beijing-Tianjin-Hebei region while achieving rapid development. Therefore, we seized opportunities blaze new trails with the pioneering spirit. In the past year, we deepened innovation and reform that centered around region-wide development, innovative working mechanism, We actively engage in national strategies, such as the coordinated development of the Beijing-Tianjin-Hebei region and new and in-depth cooperation among Guangdong, Hong Kong and Macao, and promoted the rapid development of the trade zone. urbanization. Taking advantage of our successful experience in developing the "Shekou Model", we set up a platform of cooperation with the government of Taihu Town, Tongzhou District, Beijing, in an effort to ease the non-capital functions of Beijing and promote new urbanization. The platform will develop the "industry alliance + resources and platform of performing arts + cultural industry fund" Industrial cluster ·· Continued to promote the construction of Free Trade New City by New city launching 82 new projects, and unveiled the Prince Bay Complex model to attract industrial resources, building Beijing's first exemplary performing arts town, serving the development of the capital construction subcenter, and promoting the integration of Beijing, Tianjin and Hebei. We have accumulated extensive ·· Promoted the implementation of "the plan for experience in the economic attracting ten major companies to establish Taihu new town ·· Actively facilitated innovation in six major areas including investment, development and industrial headquarters in Shekou"; attracted a number trade, systems and mechanisms, and so forth; with 319 achievements upgrading of the bay area. While of Fortune 500 companies, large central SOEs, developing the Shekou industrial renowned companies from Hong Kong, Institutional on institutional innovation, among which 131 were nationally zone, we have developed the "Port- and leading private enterprises to establish innovation recognized, and 8 achievements were replicated and across the country Park-City" development model. In the headquarters in Shekou. A total of 164,900 Exquisite city·rural town Expected contribution of Taihu future, we will capitalize on the model enterprises were registered. Performing Arts Town to GDP to promote the development of the ·· Developed the fund management methods for ·· Facilitated the construction of Qianhai Shenzhen-Hong Kong growth over Guangdong-HK-Macao Greater Bay comprehensive pilots of modern service industry, A town of high importance in the Beijing-Tianjin-Hebei city cluster and supported a total of 104 projects involving Cultural and Creative Town, and the headquarters of Hong Kong Area. Shenzhen-Hong RMB billion Kong cooperation Kingboard Chemical Holdings Ltd. in China ——Liu Ning, Deputy General RMB 19.219 billion of capital 10 Manager and Secretary to the Tax revenue more than Chairman of the Board of CMSK RMB 800 million CA New employment SE 15,000 the Guangdong-HK-Macao Greater Bay Area about jobs

On April 8, 2017, we held the Guangdong-Hong Kong-Macao Greater Bay Area Development Forum, where experts from government, businesses, and research institutes were invited to discuss the planning and construction of Qianhai and Mawan zones, and to imagine a bright future of the Qianhai-Shekou Free Trade Zone. Through analysis of the future strategic positioning and industrial development philosophy of the Mawan zone, we have developed a "roadmap" for the innovative development of Mawan which features "One District, Three Directions, Six Platforms". Meanwhile, we strive to create the Belt and Road Luxury city: Rural town: International Economic and Trade Cooperation Area, aiming to build high-end industries, thoughtful design, good environment, cultural inheritance Qianhai-Shekou Free Trade Zone into a core area and an important complete functions, efficient management Scan the QR code to access the engine for the Guangdong-Hong Kong-Macao Greater Bay Area. "Guangdong-Hong Kong-Macao blueprint of Qianhai-Mawan Greater Bay Area Development Forum

35 36 CMSK CSR REPORT

CA Mutually Beneficial Cooperation SE Internet Plus Procurement: Developing a transparent supply chain Key topics Build responsible supply chain; cross-industry cooperation for mutually beneficial development In order to standardize the management of all bidding processes, we have actively established the unified electronic platform for bidding, procurement, and transaction within the Group. The platform covers all related processes, and will not only help the Company We adhere to mutually beneficial cooperation while promoting the supply chain to better assume responsibility. achieve resource sharing, save procurement costs, reduce related risks, but also protect the rights and interests of suppliers in an open, Leveraging our complementary advantages, we have established a positive relationship with partners, which enables fair and just manner. As of the end of 2017, a total of 5,955 suppliers registered on the electronic platform, among which 3,937 were us to jointly meet challenges, achieve integrated development, and share economic returns. reviewed, with the passing rate of 66.1%. Creating a responsible supply chain Supporting the development of suppliers

We have continuously improved procurement and supply management as well as our bidding system. With systematic In order to achieve the mutually beneficial cooperation with suppliers, we provide suppliers with full support such as supply service training, management and professional support, we collaborated with suppliers, and created greater value in the broader professional and technical lectures, etc., and establish the incentive mechanism for a responsible supply chain. Meanwhile, we continue to development space with supply chain companies. improve communication with suppliers to help them improve the quality of their products and services as well as their own management. Optimizing supply chain management 100% Suppliers participated in While attaching equal importance to quality and efficiency, we revised a series of procurement systems and processes quality, environmental in 2017, such as the Supplier Management and Operation Guideline, and implemented the "Eagle Eye Program" and safety assessment to conduct material sampling inspection, aiming to raise suppliers' awareness of quality control, and to promote the management of selection, utilization, cultivation and reservation. At the same time, we revised the strategic procurement system and advanced regional strategic procurement towards higher efficiency and better quality. Local procurement amount: Supplier management system Strict RMB billion 2.05 storage Gold Award given to excellent suppliers at process CMSK Supplier Conference the 2017 CMSK Supplier Conference Local procurement rate: Performance Eagle Eye Program % assessment 100 (process Supplier (quality monitoring) monitoring) Promoting cross-boundary cooperation management % 100Strategic cooperation As the country further deepens transformation and reform, and releases the vitality of the market, we actively explore suppliers signed our Clean Supplier Supplier cooperation with external partners and give new impetus to innovation and productivity to achieve mutually beneficial Procurement Agreement rating conference development.

Establishing a "black list system" to punish poor supplies, and CMSK promoting suppliers' dynamic management In 2017, we reached to friends of all industries to diversify our friends circle with partners from all backgrounds and join hands to build a better society.

Achieving common development through government-enterprise cooperation Strengthening cooperation with counterparts

9,655 ·· Qichun government: Build a new health industry ·· HKPC: Build China's intelligent manufacturing demonstration base Total number of suppliers: ·· Government of Guangming New District, Shenzhen: to realize industrial upgrading

Promote urban upgrading and transformation ·· Ping An Real Estate: Comprehensively promote cooperation in the

North China 18.3% ·· Municipal government of Jieyang: Co-develop the Eastern financing, construction and operation of industrial new cities

Guangdong Bay Area ·· Lippo Group: Facilitate the development of the health care

East China 32.6% ·· …… industry

·· …… Central China 17.2%

South China 16.9% CMSK, Wuhan Iron and Steel Group, Government of Qingshan District of Wuhan, Municipal government of Jieyang, Government of Tongzhou District of Beijing, Ping An Real Estate, Huawei, KISC, Qichun government, Government of Baoan District of Shenzhen, Shenzen 15.0% Royal Caribbean International, Government of Guangming New District of Shenzhen, Lippo Group, HKPC

37 38 CMSK CSR REPORT

Assuming responsibility at all CSR Story hours

Our breakthrough made in CMBS and ABN marks The power of value: Activating long-term rental apartments a solid step forward in our drive to nurture a "Totaling RMB 6 billion! China's first commercial mortgage backed security (CMBS) for long-term rental apartment real estate project healthy and sustainable rental housing market, and to meet the housing needs of the people. It won approval!" On December 1, 2017, when the CMBS, with CMSK as the issuer, was granted the "No Objection Certificate on Listing also represents a major innovation as we respond Requirements" by Shenzhen Stock Exchange, CMSK soon attracted attention of the industry. The RMB 6 billion set a new record for asset- to China's supply –side structural reform and backed securitization of long-term rental apartment real-estate. employ innovation market-based approaches and multiple channels to solve the financing The report of the 19th CPC National Congress proposes that "housing is for living in, not for speculation. With this in mind, we will difficulties of long-term rental apartment projects, move faster to put in place a housing system that ensures supply through multiple sources, provides housing support through multiple thus laying a solid foundation for the asset-backed channels, and encourages both housing purchase and renting. This will make us better placed to meet the housing needs of all of our securitization of other underlying asset of CMSK. people." Therefore, China's real estate industry is faced with historic "changes" and "opportunities". Meanwhile, as the government In the future, we will form the long-term rental encourages both housing purchase and renting, and financing models are continuously upgrading, effective channels have been created apartment development strategy that combines for the transformation and upgrading of the traditional leasing industry. "The funds raised through asset-backed securitization will be different strategies, and separates assets from prioritized for the development and operation of future long-term rental apartment projects. We will build these projects into the new management. We will also develop a professional standard for the company and industry," said Xu Yongjun, Secretary of the Party Committee and General Manager of CMSK, "Long-term operator in charge of the comprehensive operation of rental apartments, making it an important rental apartment projects are one of the company's development strategies, and asset-backed securitization is an integral part of it. In leverage for the Company's transformation and the future, we will actively explore innovations for industrial integration". development. Innovating in industry-financing integration to explore asset-back securitization for rental housing 20-31% Rent premium reached Due to the large initial investment and long return period in the rental housing market, including Relatively small but well-performance — long-term rental apartment market, institutional renters always face enormous capital and cost pressures. Therefore, merely relying on credit funds can not meet market demand. Asset- achieving a balance between scale and efficiency 90% backed securitization can, however, revitalize stock assets. This is why it's expected to be GOP rate of dorm-style apartments: welcome in the future. As a leading company in the rental apartment market, we boast a long 85% GOP rate of boutique apartments: history and a complete product line. In addition, we have been advancing the innovation of "Due to the market mechanism of the securitization of rental housing assets, 65% GOP rate of service apartments: industry-financing integration to explore the asset-backed securitization of rental housing, investors are having a hard time making returns. But the financing cost of operators so as to reserve energy for transformation and innovation in the era of "housing purchase will depend on the judgment of investors", said professionals. They pointed out and renting". Soon after we were approved China's first RMB 6 billion self-storage CMBS, we that although asset-backed securitization faces new opportunities, there are also signed a strategic cooperation agreement with China Construction Bank (CCB), and issued still problems. For example, investors are hesitating, and companies may have to We expect to establish the brand in key long-term rental apartment asset-backed notes (ABN) that totals RMB 20 billion. In the future, deal with an unhealthy balance sheet. "We can complete the RMB 26 billion asset- cities nationwide within three years. we will cooperate with CCB comprehensively in fields like rental housing resources, integrated backed securitization for our long-term rental apartment operations within half a 100,000 By then, we will manage financial services, utilization of resources and platforms, and other financial services. month. We make it thanks to our innovative operation and management model, contracted apartments, and boast RMB and reduced operating costs, which have improved operational performance", said 3 "In the future, we will carry out operations in first-tier cities and key second-tier cities. Through Xu Yongjun. billion of regular rental revenue. mergers and acquisitions, CMSK's long-term rental apartment projects will expand to one million apartments", said Xu Yongjun while taking about the future goals. He also said that the In the long-term rental housing market, Gross Operating Profit rate, is a core Company will continue to deepen the innovation of industry-financing integration, which will indicator that reflects the operating capability of a project. According to statistics provide a strong financial support for operations in the future rental housing market. of CRIC, the average GOP rate of long-term rental apartment projects in China stays at around 80%, but the GOP rate of our projects that have entered stable operation can reach about 90%; at the same time, in the service apartment market with higher operating cost, the GOP rate is usually 50-55%, while that of our representative projects exceeds 68%, far higher than the average data of the industry.

"In recent years, the competition in the rental housing market has become increasingly fierce. Unlike many other companies that only pursue large scale expansion, we pay more attention to the balance between scale and efficiency," said Xu Yongjun. said Xu Yongjun. CMSK has established a comprehensively refined and standardized management system for products, services, operation management, brand management, etc. With a rent premium that reaches 20-31%, CMSK has emerged as a "relatively small but well-performing, large-scale, and leading enterprise" in the industry. Since entering the rental apartment market in the early 1980s, we have been progressing steadily. Now, we boast significant advantages such as stable lease duration, low vacancy rate, and high premium rate. But this is not enough. In the future, we will continue to conduct innovation and reform to further improve assets management and service quality, and create a better life for people.

39 40 CMSK CSR REPORT The background of sustainable development

The natural environment is vital to the well-being of the people and the future of the nation. In the 13th Five-Year Plan, "green" is established as one of the five development concepts. The report delivered at HARMONY WITH the 19th CPC National Congress proposes that we must realize that lucid waters and lush mountains are invaluable assets and act on this understanding to achieve harmonious coexistence between human THE ENVIRONMENT beings and nature. The SDGs call for responsible consumption and production, as well as action to address climate change. As a pioneer, practitioner and leader in green development, CMSK undertakes the responsibility for promoting the green development of cities and building ecological cities.

SUSTAINABLE Our actions CITIES AND 11 COMMUNITIES • Formulate green development • plans and improve the green Integrate green actions into operation management system to corporate development to RESPONSIBLE CONSUMPTION comprehensively promote green constantly reduce energy AND development consumption during production PRODUCTION • • 12 Develop and promote green Support and participate in climate innovation technologies to create change-related activities and green and ecological cities initiatives that bring more attention CLIMATE to climate change ACTION 13

Our achievements

72.0761 RMB million Investment in green development and technological innovation

0.0044 tons of standard coal Per RMB 10,000 of business revenue (current price) saved

144,340.91 tons of carbon dioxide emission reduction

41 42 CMSK CSR REPORT

Green management system Green Management Following the guiding ideology of green and low-carbon development, we have established an environmental management system, and As a city and industrial park operator and service provider, we are committed to building a green and livable environment. Insisting on promoted the implementation of the environmental management regulations in production and operations at the leadership, organizational, "Upgrading cities to improve lives", we have developed relevant green technologies as well as management systems and guidelines, and executive levels. and integrated the concept of green development into the whole process of management and operations, building modern cities where human beings live in harmony with nature. Green development planning

·· Formulate green development strategies, and Based on the requirements of building green and livable environments, we compiled plans for green development, and carried out the promote the widespread application of green "163 Action" to achieve green development with more unified strategies and practices. technologies Leadership

"163 Action" ·· Supervise and evaluate the implementation of Organization various green measures and indicators

Leads green and innovation operations, One vision: To become the leader of green City Research Institute development and operations ·· Committed to the innovation and application of green technologies as well as the construction of the green platform. Widespread application of green technologie in all regions

·· Consolidate operations Enhance capabilities Clarify three goals Implement in three stages Develop three major Carry out three Executiion at three levels in three aspects technology systems supporting measures Strengthen green Build a good foundation Focus on the micro level, Grasp policies, certification, in the start-up phase, Green planning, Technological Regional subsidiaries and city companies Control the general level, Fulfill social Continue energy Enhance capabilities i n Green construction, innovation, Project Observe the macro level responsibilities, conservation and the development phase, Green operation implementation, Meet market demand emission reduction, Compete for leadership in Assessment and Create green features the consolidation phase capacity building Green Practice Key topics Green development model; promote low-carbon urban industrial structure

We promote comprehensive resource conservation and recycling through the development and application of green technologies, the creation of green platforms, and the management of green living, and lead green and low-carbon development with the most practical actions and performance. Comprehensive energy consumption per RMB 10,000 Total energy consumption of business revenue

(10,000 ton of standard coal) (tons of standard coal/RMB 10,000)

4 3.326 0.008

3 2.508 0.006 0.0050 1.864 0.0044 2 0.004 0.0038 1 0.002

0 0 2015 2016 2017 2015 2016 2017

Note: Compared with the data of the previous year, the total energy consumption of 2017 increased, mainly because the statistical data contain new properties developed and owned by the Company. Therefore, the budget shall increase correspondingly as the business expands and the proportion of properties owned increases. The total energy Jinshan Valley consumption will continue to rise for some time in the future. Guangzhou

43 44 CMSK CSR REPORT

Innovation of green technology Green building area completed Projects with green building certification New authorized patents of2 green echnology 10,000 square meters number We continuously improve the system for green technology innovation and increase investment in the area, aiming to provide more high-quality green products for people and meet their ever-growing needs for a beautiful ecological 300 253.3 30 28 environment. 155.4 190.42 19 200 153.36 20 16 93.86 12 Further promoting the development of green building 100 10 Investment in green 5 technology innovation 0 0 On the basis of maintaining ecological balance, we strive to develop green real estate projects by making full use of 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 RMB72.0761million natural resources and optimizing the overall design and making arrangements for the layout of the construction. In 2017, we continued to innovate in green technologies, and complied two industry standards, namely, the Construction Residues without Burning and the Fire-Free Glaze Decorative Panels for Construction; meanwhile, we participated Electricity saved by green projects per year Water saved by green projects per year in two key national research projects for the "13th Five-Year Plan", the Basic Theory and Key Technology Research 10,000 kWh 10,000 tons of the Quality Control of Indoor Air of Buildings and the Strategies for Ventilation and Indoor Air Quality Creation of 16000 14,882.7 Residential Buildings. 150 134.46 "Excellent 12000 11,193.8 115.82 Awarded 8,857 87.4 103.8 8000 100 Member" 5,104.3 65.2 by Shenzhen CA Paying attention to ecological balance and green architecture while creating green 50 Green Building Association SE 4000 3,123.3 living space overseas in 2017 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 We adhered to the green concepts of energy conservation and ecological balance while developing our project in New Zealand. In the early stages of project planning, we considered various factors and took full advantage Note: The data of 2013 and 2014 are derived from the former China Merchants Property. of the local landform to build a green living space covering an area of 3,000 square meters in the Westgate community, Auckland. At the same time, we improved local water conditions and ecological environment. Advancing the optimization of energy structure of the cruise industry Advanced green architectural technologies were also applied to achieve energy conservation in heating, dehumidifying, water saving, and home environments. The project, which meets local residents' needs for a beautiful ecological and green living environment, was awarded the Homestar certification by New Zealand We actively explore the green development of the cruise industry and accelerate the development and application of new Green Building Council. technologies and equipment, so that we are able to make further progress on energy saving and emission reduction.

CA SE Developing the land-based power supply system to build a greener cruise home port

On December 13, 2017, the 16-MVA high-voltage land-based power supply system installed at the Prince Bay Cruise home port completed the first power transmission to the SkySea "Golden Era" cruise ship. As the 6.6 kV high-voltage power was delivered to "Golden Era" through the shore supply, we achieved power supply with non-intrusive automatic grid connection, automatic load transfer, and automatic cut-off of electric generator. Since then, all equipment on cruise ships at the home port of Shekou Prince Bay has relied on electricity from the shore supply, which greatly reduces fuel consumption. The annual electricity consumption of the system is expected to be 36.6 GWh, which can replace 8,052 tons of fuel oil, reducing emissions of 26,061 tons of carbon dioxide, 508 tons of nitrogen oxides and 77 tons of sulfide, and saving RMB 17.71 million of energy costs for cruise ships. Diagram of the green living space in Westgate community, Auckland

CA SE Effective application of innovative energy-saving technologies to build the Beijing •The Pearl on the Crown

To reduce construction energy consumption, we employed the CFD digital simulation tool to optimize overall architectural design. By optimizing the structure's shape, orientation, and window- wall ratio, we achieved the best thermal insulation of the building, creating the best thermal environment. In terms of water saving, we set up a rainwater collection system, which recycles rainwater for irrigation of greenery and road cleaning. In addition, micro sprinkler irrigation system was applied to minimize water consumption. The comprehensive application of innovative energy-saving technologies has enabled Beijing •The Pearl on the Crown to excel in energy and water saving. The project is expected to save an average of 52.78 tons of standard coal and 22,600 tons of water each year. Beijing •The Pearl on the Crown Prince Bay Cruise home port land-based power supply system

45 46 CMSK CSR REPORT

Urban innovation research Co-developing the Green Ecosystem Focusing on the three principal features of "health, technology, and green", we broaden the scope and breadth of Key topics urban innovation research based on the three major platforms of "innovative operation, professional technology, and Green cooperation platform; green initiative practice technical exchange", and actively explore the construction and upgrade of green and smart cities.

Smart city We adhere to the idea of co-development and sharing, and actively build a platform for exchange and cooperation to spread the idea of environmental protection. We promote public participation with more innovative actions and broader engagement. Targeting at the differentiated product features of comprehensive development operations in the community and the city proper, we have initiated the research and development of smart homes, smart communities, and smart ·· Support and partake in exchange and cooperation: Actively participating in exchanges and cooperation related to environmental cities (applicable to individual residence, community/industrial park, and urban complex project) to achieve smart protection, resource conservation, and ecological construction, as well as consulting, collaborating, and interacting with internal and management and promote sustainable urban development. external partners to promote the sustainable development of all parties involved.

CA SE Developing the green smart operating platform to promote energy conservation

In 2017, we embarked on the development of the CMSK Green Smart Operating Platform (or "Smart Cloud Platform"), and conducted tests at five existing projects including office buildings, shopping malls and hotels. The Participated in The U.S.-China Clean Attended The 9th International Continued operations in line with Smart Cloud Platform improves the energy efficiency management, indoor environmental quality management, Energy Research Center, Building Youth Summit on Energy and The United Nations Environment Energy Efficiency (CERC-BEE) program Climate Change, and discussed with Programme - Sustainable Building equipment and facility management, and operation management of these projects. At the same time, it is to exchange ideas with international scholars, government and youth and Climate Initiative (UNEP- capable of monitoring in real time the management data of projects and operations, as well as comprehensively experts and seek opportunities for representatives the impact of climate SBCI) and The Global Initiative for analyzes and compares the data for improvement measures, project road maps, and assessment objectives. With cooperative research and development change on people's everyday life Resource Efficient Cities (GI-REC) to the platform, we make possible the refined management of existing projects by our headquarters, professional in clean energy utilization, Net Zero as well as innovative approaches to promote the development of green management companies, and regional management head offices. In addition, the platform systematically analyzes Energy Building (NZEB), etc. sustainable development construction and eco-cities. the potential for energy conservation and consumption reduction, and realize smart energy conservation.

Homepage of the platform The 9th International Youth Summit on Energy and Climate Change

Sponge city ·· Promote public participation in environmental protection: We have set up donation bins for clothing and recycling bins in communities to encourage residents to participate in environmental protection and lead a green and low-carbon lifestyle. Xiamen International We actively partake in the construction of "sponge Besides, we hold the Shekou Car-free Day Carnival Party on an annual basis, aiming to encourage citizens to choose a car-free, green Cruise City gets cities" (widespread use of semi-permeable concrete and green lifestyle, and usher in the brilliant green future together with the public. During the event, vehicle lanes are closed for light for sponge city landscaping that allows for the management of rain and activities such as parades, craft fairs, roadside picnicking, etc. construction waste water), which are specially flexible in adapting to the changes of environment and responding to natural disasters, and can enhance the urban ecosystem. In 2017, we completed the planning of sponge city projects in Shenzhen Prince Bay, Qianhai and Xiamen International Cruise City, and also carried out specific implementation plans for these projects in stages after taking into account the specific conditions of each area. As of the end of 2017, completed sponge city projects covered an area of 877,100 square meters, with the annual runoff control rate reaching 70%, and the pollutant reduction Architectural tendering of sponge city at the 1# land Shekou Car-free Day Shekou Car-free Day rate reaching 40%. lot of Xiamen International Cruise City

47 48 CMSK CSR REPORT

Assuming heavy responsibility

CSR Story at all hours

The power of green: Seeking a suitable path to the After the convening of the 19th National Congress of the People's Republic of China, "green industrialization of construction development and the Beautiful China initiative" With green buildings becoming a new part of people's ever-growing needs for better ecological environment, the term "industrialization have become hot topics for urban development. of construction" is getting increasingly familiar to people. Aiming to realize energy saving, environmental protection and resource Architectural industrialization is the path we recycling through standardized architectural design and industrialized production of components, the idea has quickly become a "High quality and efficiency" CMSK technological must take to promote the transformation and trending topic within the construction industry. system reform and approach upgrading of the construction industry and drive the green development of cities, and it is of great As a pioneer, practitioner and leader in green residence development, we devote ourselves to "Upgrading cities to improve lives". We significance to the formation of energy-saving Compared with Japan, Europe, and the United States where technologies and have integrated the idea of "green residence" into the research and practice of the architecture industrialization for the creation of and environmental construction modes. We have practices of architectural industrialization are more developed, architectural comfort, energy-saving buildings, and to find a suitable path to industrialization of construction for CMSK. passion for green construction, and constantly industrialization in China is still at the initial development stage and there are explored and progressed along the journey toward still many problems in urgent need of solutions. In order to make architectural architectural industrialization, so as to create more Proactive cross-industry cooperation Pilot architechtural industrilizaiton projects industrialization technologies more universal and applied in more cities, we replicable samples for the industry and promote summarized related results through pilot projects in accordance with the "pilot the sustainable development of the whole society. Since 2015, we have successively established the project team and After a series of investigations and studies, we gradually found innovation projects - technical standardization - promotion and application" the City Research Institute to conduct research and application an appropriate technological system that could integrate the approach and formed the CMCF (828) architecture rules featuring high quality Key topic of the industrialization of construction and building information industrialization resources of the Company with various regional and efficiency, which helped us achieve the goals of quality improvement, higher management (BIM). But how can we take the first step while and municipal companies, and applied it to pilot projects. efficiency, reduced labor, energy saving and emission reduction, and promoted the Green development model lacking experience? transformation of architectural industrialization. Shenzhen Central Times is the first prefabricated super high-rise Working blindly behind closed doors won't work, and all the apartment project of CMSK. It features a fixed concrete core with more so if we mechanical copy others' ideas or experiences. precast concrete cladding and is prefabricated with insulation Prefabricated 22 Therefore, we quickly adjusted our strategies by "bringing in" Architectural industrialization wallboard, inner wallboard, stairs, balconies and so on, greatly components prefabricated projects launched several dozen renowned experts engaging in the industrialization reducing materials used for the main body and the generation external of construction, asking for their advice and guidance on how BIM of construction waste while optimizing space. "This is our debut protective million square we should develop our entire chain of construction. Meanwhile, in architectural industrialization. The project team realized a structures 2.449 we "reached out" and cooperated with governments, research meters Prefabricated buildings prefabrication rate of 15.95% and an assembly rate of 53.15% constructed institutes, counterparts, construction companies, etc., consulting in the Shenzhen Central Times project through multi-party with them and learning from their experience.... We have tried out investigations and collaboration", said by Zhang Hongbin when CMCF(828) best to absorb outside nutrition with a beginner's mind, charging he recalled those years of both passion and hardships. prefabricated lightweight ourselves and accumulating energy. waterproof Architecture internal Expected percentage of total Subsequently, we successively launched pilot projects in seals partitions "We took the initiative to set up teams and develop projects during rules area of prefabricated buildings Shenzhen, Shanghai, Beijing, Zhuhai and other cities, and created of all new buildings before incentives and related national policiesin China. When a series of representative works of architectural industrialization, % we lacked relevant experience, this was really difficult for us. But including prefabricated buildings, prefabricated decorations and 20 green building is the goal we have always been pursuing, and we prefabricated landscapes, which paved the way for CMSK toward instrumental prefabricated will hold on to it no matter what difficulty we will face" said Zhang Expected percentage of total architectural industrialization. outriggers decorations Hongbin, Deputy Director of the Department of Research and area of buildings constructed instrumental CMCF (828) architecture rules Application of the Industrialization of Construction of CMSK City templates of all new buildings Research Institute. 50%

"For all the time, we have continued to accumulate and think, and we will surely follow the correct path of practice toward a bright future. We will never forget our original passion for architectural industrialization and construct new environmentally friendly buildings featuring high quality, great performance and longevity", Zhang Hongbin firmly said.

With the dream as carrier, we have gradually grown from a green hand to an Shenzhen Central Times Beijing Nanshao Project Zhuhai Evian Town industry pioneer and leader on the road toward architectural industrialization, striving to export more green power for the city's green development and to

The first prefabricated super high-rise The first public rental housing project with The first prefabricated landscape improve the livelihood of the people with more ecological products. apartment project of CMSK prefabricated decoration of CMSK project of CMSK

49 50 CMSK CSR REPORT

The background of sustainable GROWTH WITH development With the trends of economic globalization and Chinese enterprises' going global, enterprises are in great need of investment in excellent human resources and their substantial support EMPLOYEES for corporate development. Putting people first, respecting, caring for and cultivating employees, as well as building up a reputation as a leading employer is critical to an enterprise's development. If we aspire to build the Company into one of Fortune 500 companies, we need to continuously optimize the human resources management system, provide employees with a better work platform to fulfill their values, and create a work atmosphere with more humanistic care, further achieving mutual growth with our employees.

GOOD HEALTH • AND WELL-BEING Improve the compensation Our actions 3 system and create a fair and • inclusive work atmosphere Innovate incentive • mechanism, implement the profit sharing scheme, GENDER Organize a series of activities EQUALITY and support employees' to enhance employees' internal corporate 5 physical and mental health entrepreneurship • Implement special training

programs such as the New WORK AND ECONOMIC Voyage Project and the Star GROWTH Journey Project 8

Our achievement

23,242

On-site employees

Percentage of female middle and senior management personnel: 17%

Total employee training hours: 969,679.5 hours

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Improving compensation and benefits Protecting Employees' Interests and Rights We respect and protect employees' legal rights and interests, uphold equal and transparent recruitment, and provide employees with We respect employees' contributions to the Company, take employees' needs into full consideration and continuously improve the pay guaranteed pay and benefits. We value open communication, respect, and care for our employees. distribution system to provide employees with reasonable salary and adequate welfare benefits.

Promoting fair employment Salary Benefits management guarantee For fair and just recruitmentwe use a unified recruitment management platform, disclose recruitment information, and treat employees equally regardless of their gender, age or nationality. We provide equal opportunity of career development for every employee and make ·· Provide standardized and performance-based ·· Legal benefits: Insurance and social security efforts to have a diversity among employees. (Pension, medical, work-related injury, salary adjustments with the total amount of fixed unemployment, maternity insurance, along with salary and bonus housing funds and enterprise annuity), public holidays, paid annual leave, marriage leave, ·· Offer guarantees and incentives to enhance maternity leave, etc. ·· Extra benefits: Air conditioned office, female employees' perception of compensation package 23,242 11,044 35% Percentage of female17% middle and health care, rewards,visits, etc. senior management personnel On-site employees Newly hired employees Percentage of female employees Advocating open communication

Employees' Age Breakdown Employees' Educational Background In order to encourage employees to fully express themselves and have their voices heard, we actively expand employee communication 51.8% channels and motivate them to participate in democratic management and supervision. We listen to employees' opinions through 42.5% 31.3% various channels such as employees' discussion meetings and democratic meetings and guarantee employees' right to be involved and 21.0% right to express.

7.2% 4.3% lunch meetings 19.0% 22.9% Questionnaire democratic survey meetings

30 years of age and below 31-40 years of age High school or lower Junior college

41-50 years of age 51years of age and above Bachelor's degree Master's degree/MBA or higher

Note: The data includes property management personnel. real-time WeChat employees' communication discussion meetings Open communication

tea meeting work conferences

online forums

The 145th Anniversary of CMG - 145-kilometer global relay race Training for the Communist Youth League Cadres Tea meeting

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Promoting Development of Employees CA SE Organizing internal recruitment by competition via internal promotions Key topics Employee training and career development; innovation of work management In order to provide employees with more development opportunities, the Company organized internal recruitment for five positions. More than 120 middle and top-level employees from our headquarters and subsidiaries applied for these positions. Through CV screening, holistic assessment, written examination We put people first, put priority on values, and include career development as an important component of corporate strategy. We open and interviews, the best candidate was selected for each position, helping employees achieve horizontal employees' career development channels, continuously enhance investment in cultivation, and offer innovative incentives to promote development within the Company. The internal recruitment mechanism allows employees to select their employees' growth and self-improvement. own career development path. Our employees choose their position according to their aspiration and Setting up talent strategy qualification, developing a new method of fulfilling employees' self-value. Enhancing labor assets Through setting up a data-informed HR strategy, we have become one of the best employers in China. , facilitating mutually beneficial relationship with employees and striving to realize mutual growth between talents and the Company. We value the employee cultivation and invest in employee development. We recruit the right employees, and respect, utilize, unite and cultivate them as a base to build a strong team. Through our standardized Become one of the leading employers and become a valuable Employee training and comprehensive training system, we help employees enhance their professionalism and overall strategic partner coverage rate: quality. We provide employees with strong support for career development and help achieve the mutual Build a leading national human resources system and a first-class growth between employees and the Company. 83.8 % employer brand and establish close strategic partnerships with business departments within the Company Mission Total employee training Mutually beneficial relationship with employees hours: 969,679.5 hours

Draw on talent supply to enhance the Company's achievements, and let Average training hours per the enterprise become employees' career development platform Vision employee: 41.72 hours

Use humanistic care andcareer development to motivate value creation Talent development strategy Ivestment in employee Values Put people first, improve employees' satisfaction, enhance long-term training: employment, and build a comprehensive incentive system to achieve a Leadership Training Series: RMB million mutually beneficial working environment. Cultivation of leading senior Incremental Training 23.507 managers improvement courses Professional training Shekou Lecture Hall Recruit the best employees, and respect, utilize, unite, cultivate them well Practice class headquarters

Basic Concepts Qualification

Leadership improvement of mid- at corporate level managers camp

Specialized training for Opening career development channels transformation and upgrade projects

Through the management and technical career paths, we open the horizontal communication channel for employees. We Management skill training for new encourage our employees to select the most appropriate development path and help them maximize their value to the managers Company.

Management Performance improvement Department General Manager Manager Sequence Open courses on general skills Head Assistant training, New Voyage Project

New recruits Experienced Training program for new Training program for Technical graduat experienced recruits Senior Directing Chief Sequence Technician Technician Technician

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Innovating in performance appraisal and incentives

We have a comprehensive performance appraisal mechanism, continuously improve our performance management system, and actively innovate in incentives. We encourage employees' enthusiasm and creativity and support employees to fulfill their advantages and self-value.

Improving the performance appraisal system

Through a combination of PDCA performance appraisal and comprehensive evaluation, we make comprehensive performance appraisal of employees, help them figure out development goals, enhance their capabilities and support their career development and growth.

Performance plan: Investigation of Fulfill responsibility for general situation key performance index Leadership training (KPI) and capability Result development application:

Enhance the PDCA Tutoring and Interview Comprehensive application of performance interviews: Assessment with Use non-monetary appraisal of profession evaluation relevant incentives management tools such as persons Q12 to conduct Performance appraisal: performance tutoring and Holistic Make detailed performance interviews appraisals based on key assessment Special training Professionalism training General skills training performance index

CA SE Launching Senior Management Training Program to cultivate outstanding innovators Innovating incentive measures

Our Senior Management Training Class is the highest level in the leadership enhancement training system, including four modules In order to motivate employees' work enthusiasm and initiative, we continuously innovate in the incentive mechanism Urban companies engaged of "cultivating strategic thinking, developing market insight, learning innovation, and leading the future". The program aims to and optimize the reward incentive. We implement the project investment system and support internal corporate in by the end of 2017 cultivate persons in charge of operational units who are suited for transformational, innovative, and smart development of the entrepreneurship to help employees to deliver their full potential. Company. On November 2, 2017, 42 trainees were selected and admitted to the first Senior Management Training Class to learn the 15 module of "developing strategic thinking". Through analyzing macro trends, discussing the Company's strategic transformation and Investment follower innovation, and discussing business development of industrial parks, these senior managers were trained to effectively enhance the Innovating in reward incentives Implementing the project projects transformation of their understanding of the Company's future development orientation. investment follower system Complete the optimization of 23 commercial real estate appraisal On June 1, 2017, the Company became the pioneer incentive system, and formulate a commercial real estate reward plan, of central SOEs to launch the project investment which includes guidance for incentive follower system. implementation in different types of commercial real estate ·· Municipal companies implement development operations and obtain land sales project via the real estate market; the Encouraging internal corporate investment followers are divided into two types according to entrepreneurship position duties, relation, and importance to the project, i.e. the compulsory investment follower (core members) and the Utilize personnel entrepreneurship, voluntary investment follower (other members). fully encourage entrepreneurship of ·· The investment followers implement projects with personnel who have the capability for innovation, aspiration, and business investment regulators via trust plans or assets management ideas and guarantee their positions and plans. compensation while working on projects ·· The total investment of a single investment follower project outside of their post's scope shall not exceed 5% of the peak value of the project fund. Senior Management Training Class

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Caring for disadvantaged employees Improving Employees' Sense Of Happiness Equal attention is paid to employees' family. We We value employees' sense of happiness and fulfillment during work and daily life. With popular activities, care, and team building, we make effort in caring for employees, advocate spare no effort to create a favorable and comfortable work atmosphere to enhance their sense of happiness in a comprehensive way. mutual assistance and care among employees, 45 and investigate the needs of difficult employees. Difficult employees Balancing work and life By organizing activities such as Spring Festival assisted in 2017 Charity Visit and Education Support, we provide We persist in creating a simple, positive, highly efficient and caring organizational atmosphere. Through establishing the three disadvantaged employees with attention and care. bases for corporate culture, i.e. Employees' Home, Fitness Club, and Green-belt Charity Team, we conduct various activities to improve employees' lives. Spring Festival Charity Visit · Employees' Home – Care for employees' life · Green-belt Charity Team – Enrich employees' spiritual · · world Enhancing corporate culture

Employees' Home is an important measure to provide Founded in 2013, Green-belt Charity Team aims to publicize Corporate culture is the source of power for employees' efficient work. We take the initiative to conduct special care and improve work environment for employees; it charity among the public and call for employees to be engaged research on corporate culture. We formulated the Guidance on CMSK Corporate Culture Implementation, launched is also a pivotal base for publicizing corporate culture. in public welfare and fulfill their social responsibilities. the Standardized Documentation Platform for Corporate Culture, and promoted work on corporate culture building, enhancing employees' senses of identification, belonging, value and happi ness. Apart from standardized corporate culture wall, culture bookshelf, column of employee image, recreation facilities · The 145th anniversary of CMG: and employees' mailbox, we actively conduct activities on · 2017 is the 145th anniversary of CMG. In 2017, we conducted a series of employees' birthdays or corporate activity days, improving celebration activities to let employees add to our corporate culture and be proud of what we have. For example, we organized the group wedding ceremony for 45 couples and a 145-kilometer global relay race. employees' sense of belonging.

Scan the QR code to feel the Green-belt Activity happiness at home

· Fitness Club – Care for employees' physical health · Fitness Club is an organization that we established to support employees to develop interests or hobbies, and enrich their Employees' Home spare time; it is a great platform for employees to get physical exercise. We actively organize various fitness activities, enhance communication and exchange between employees, and promote their physical fitness. Group Wedding · Inheritance and development – CMSK Family Visit: · Honor the 100th birthday of Yuan Geng – Carrying · · forward the spirit of innovation: We carried out the activity themed "Inheritance and In order to honor development – CMSK Family Visit". We brought the the centennial birthday of Yuan Geng, the founder Company and employees' family closer, publicized of Shekou Industrial Zone, memorialize the spirit the cultural concept of "happy work, happy life", and of Shekou and inherit the passion of reformers, we improved employees' senses of honor and belonging carried out activities such as the opening ceremony as well as cohesion. of Yuan Geng' s sculpture and a photo exhibition

Badminton Competition

Employees' Home Football Game CMSK Family Visit Honoring the 100th Birthday of Yuan Geng

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CSR Story Assuming responsibility at all hours

Employees are the foundation and power source The power of innovating spirit: Mutual growth of corporate development. We have attached much importance to talent cultivation and between CMSK and you development. We provide employees with a At CMSK, there is such a group of people who have worked for CMSK for 10 years, 20 years, 30 years or even longer. They have witnessed great career development platform and pleasant the development of the Company while the Company has also witnessed their growth. work atmosphere to motivate value creation 30 years: Sticking to my post because of 20 years: Touching the pulse of CMSK 10 years: Mutual growth with CMSK with humanistic care and career development, passion development and arouse their enthusiasm for work and innovation. With such efforts, we enable every If your company is located in Xinjiekou, leaving home half an hour earlier may CMSK employee to grow. Within 30 years, a person may experience the change from being a At Shekou, Lei Wei is a renowned figure. For 20 years, she has help you get to the company one hour earlier; leaving home half an hour late baby to becoming a parent; a family may become three members been a journalist who frequently reports on Shekou. may probably cause you to arrive an hour late. Apparently, Lv Bin belongs to Diamond Prize (for employees from only one. To Lai Yihai, for 33 years, he has still been a CMSK the former case, for he loves his job from the deep of his heart. who have worked for 30 years In 1987, the 19-year-old Lei Wei went to Shekou for the first time. employee. or more) 106 employees As an intern journalist, she interviewed Yuan Geng, which helped In 2004, Lv Bin was admitted to CMSK after he graduated from university. her obtain a job in Shenzhen after graduation. In 1994, Lei Wei Within 13 years, he has become the General Manager of CMSK Nanjing Branch Gold Prize (for employees was admitted to Shekou TV Station and became a journalist. She from a mechatronics engineer. Over the years he has also witnessed the who have worked for 20 years said with pride that "Although Shekou TV Station is not a large growth of the Company and the development of Nanjing. "When admitted to or more) employees operator, it has a big vision". At Shekou TV Station, she fulfilled her the branch, there were only 14 people working on a single-project operation", 384 profession. All her works are the results that she followsShekou's speaking of corporate development, Lv Bin explained, "the period from 2013 development. to 2014 was the prime time of our branch. With strong corporate support Silver Prize (for employees and good team atmosphere, we united to make efforts and overcame the who have worked for 10 years In 2017, to honor the 100th birthday of Yuan Geng, Lei Wei and her problem of talent scarcity". His efforts paid off. On June 20, 2017, CMSK or more) colleagues presented the documentary He is the Man, Yuan Geng Nanjing Branch launched four product lines, i.e. Merchants Garden City Center, 1,983 as a gift. Lei Wei believes that the documentary is an excellent Garden Li, Garden Fang, G98 Information, which became frontpage news employees miniature of Yuan Geng's life; and it is also the recording of her in the commercial real estate circle in Nanjing. The year was also the most growth as a journalist over the past 20 years in Shekou. unforgettable and fruitful year for Lv Bin during his career development. In 1984, Lai Yihai left his hometown – Shantou and joined Shenzhen Shekou Zhaogang Passenger Transportation Industrial For more than 20 years, Lei Wei has made a name for herself in "Our team does not have a long development history. However, we are full of Co.,Ltd. (SZGKY)under CMSK. Since then, he has become a sailor. Shekou. Strangers will come up to say hi to Lei Wei just as if they vitality and vigor. We unite to make progress. With years of efforts, our team For Mr. Lai, this is "a highly paid and stable job". From a port were friends who have not met for years. For Lei Wei, recording has become better and better and repaid the branch and the Company", he sailor, Mr. Lai has gradually been promoted to the Vice Manager of the changes and wonderful moments of Shekou is a blessing for said with gratitude. He was grateful for the inclusive platform. The platform Shekou Cruise Parent Port and Manager of the Operation Group. her. "During 23 years' at Shekou, I have been honored to witness, provides young people opportunities of trial-and-error learning and creativity, No matter which position Mr. Lai holds, he provides considerate engage myself in, and follow Shekou's growth. I'm very lucky!"Lei and equal opportunities of fair competition and promotion. port service for passengers. Wei was grateful for what she has experienced and achieved at Shekou. On October 30, 2016, Shekou passenger terminal announced its closure and the new Shekou Cruise Center was launched. Watching the new cruise center, Lai Yihai was overwhelmed, saying that "for these years, I have witnessed the development of Shekou Port. In the very beginning, only two passenger cruises commuted between Shekou and Hong Kong per day, and there were only five employees at Shekou Port. At present, the passenger traffic of the new Shekou Cruise Center exceeds five million per year. Meanwhile, Shekou Port has also witnessed my growth. From a migrant worker, I have become a reliable port authority officer."

When asked the reason for working here, Lai Yihai replied that "sticking to my post because of passion". Indeed, without passion, Time flies. Generation after generation, group after group, CMSK who can be devoted the job for 33 years? people have made their contributions to the development of CMSK.

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The background of sustainable DEVELOPMENT WITH development When China enters a new normal of economic development and has accelerated its transformation, alleviating social problems and COMMUNITY improving stability have become the common concern of the government and the public. The 19th CPC National Congress reiterates the solemn promise of seeing that poor people and poor areas will enter the moderately prosperous society together with the rest of the country. Meanwhile, new development, new technology, and new demands have provided new space for imagination • Conduct targeted poverty and new opportunities for public welfare in China. alleviation by development-

oriented poverty alleviation; help NO residents in targeted counties with Our actions POVERTY employment and entrepreneurship 1 to support their self-sufficient development instead of providing • external help. Promote the new path of urban ZERO upgrading and build a more HUNGER inclusive community with • 2 Build a public health industrial humanism feelings. • park in Qichun County to drive Support innovation and creativity the local people plant Chinese industry to promote urban cultural SUSTAINABL CITIES AND herbal medicine and promote local development COMMUNITIES industry development 11

Our achievements

Public welfare expenditure 47.51 RMB million

Employee volunteer service 3,079 hours Funds raised through iWalk campaign 560,000 RMB

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Targeted poverty alleviation Promoting Urban Development Based on local development, we draw on our own professional advantages and resources to actively explore Actively responding to the national call for targeted poverty alleviation and upholding the policy of development- and implement the innovative approaches of the old city reconstruction and targeted poverty alleviation, drive oriented poverty alleviation of CMG, we take the actual situation of poor areas and our own professional advantages improvement of urban image, industrial upgrade & transformation and local economy, and promote urban into account to explore and implement project-based poverty alleviation. Through motivating local people to develop sustainability and prosperity. competitive industries, we bring profits to local residents and sustainable development to the local economy. Urban upgrading CA SE Qichun Public Health Industrial Park: the New Model of Urban upgrading has become an important approach to urban renewal, regeneration and revitalization. We promote Development-oriented Poverty Alleviation While providing donations, urban renewal in a sustainable way and serve the need and vision of urban transformation & upgrade and urban image improvement. While respecting local histories and customs, we create modern urban communities that The ground-breaking ceremony of the CMSK - Qichun Industry Promotion Center project, co-built by CMSK we also hope to bring connects the past and the future and a new Shekou with more humanistic care, contributing to urban sustainability. and the local government of Qichun County, was launched on April 26, 2017, symbolizing a new beginning mature experience of for CMSK to conduct development-oriented poverty alleviation in Qichun. In order to implement such an CMSK in developing innovative model of poverty alleviation, we localize the development model for the local herbal medicine and operating industrial CA industry. We built the Public Health Industrial Park in Hexi Industrial Zone, which covers 14.7 square SE Creating a new look for Shekou Towns and building a model for urban parks, introduce industrial upgrading kilometers in Qichun County. We are committed to building a public health industrial park that integrates industry and residence, business, supplementary facilities and industrial tourism zones, making for a new models, and help them improve capabilities of During recent years, old buildings, bad environment, low-end livable, ecological and LOHAS (Lifestyles of Health and Sustainability) public health industrial town. Through industries, and urban safety hazards of Shekou Towns have these efforts, we will promote the sustainable development of the local economy and help the people in development-oriented been a great concern for residents. With the vision of sustainable Qichun out of poverty and enter the moderately prosperous society. poverty alleviation.

Scan the QR code to watch the development and the social responsibility fulfillment, we ——Liu Wei, Deputy new look of Shekou Towns plan the future of Shekou towns by adopting comprehensive treatment for local communities, demolishing and reconstructing Secretary of the Party certain buildings to coordinate the balance between land use Committee and Deputy and historic buildings around Shekou, promote the renewal of General Manager of CMSK Shekou Towns and maintain urban memories. Shekou Towns will maintain their original appearance and integrate projects Urban upgrading is the key such as Sea World, Prince Bay Cruise Homeport and Shekou Net to revitalizing Shekou. It can Valley, becoming an international modernized coastal city with be quality and sustainable industry and city integration. The new look of Shekou towns will urban upgrading be more charming, characterized by residential, new industries, The effect drawing of Shekou Towns after renewal implemented by taking the and modern business functions. leading role in planning, establishing an interest- sharing mechanism, CA and a coordinated SE Building the most beautiful promenade in west Shenzhen Ground-breaking ceremony innovation mechanism, and maintaining historic characteristics. On July 3, 2017, the west section of Shenzhen Bay Coastal Recreational Belt, which was constructed by ——Geng Yanliang, CMSK, was officially launched. Through the combination of walking paths, bicycle lane, seaside promenade, President of Shenzhen recreational platform, shoreline experience, and theme parks, etc., we provide waterproof wooden benches, Nurturing Urban Culture Urban Renewal and drinking fountains, barrier-free lavatories, nursing stations, charging ports, free WiFi, etc. We strive to provide Development Enterprises offshore sites for recreational activities and individualized service for urban citizens. Key topic Association Creating a rich atmosphere of urban culture

Culture is the foundation and soul of a city. We continuously explore the new path of urban culture and promote the vertical development of liberal education in a diversified and multi-level way. We drive better development of creative culture in domestic and overseas communities, promote the improvement of urban culture competitiveness, and enable culture to lead urban development and prosperity. Enriching liberal education

Public education and humanistic care are irreplaceable soft powers for urban development. As an enterprise with strong senses of social responsibility and historical mission, we have attached much importance to culture shaping and historical inheritance. By facilitating the urban humanistic development in a subtle manner, we provide a spiritual Shenzhen Bay Coastal Recreational Belt feast for urban citizens and promote the better urban development with a powerful cultural base.

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Shekou Museum of Reform and Opening Prince Bay School

pieces 1,091 We integrate abundant community, Shekou Museum of Reform and Opening, constructed by CMSK, is the first museum of its kind in China. Through audio, Works in Shekou cultural and internationalized light, and digital technologies, the Museum displays valuable historical materials during the recent 40 years of reform, the Museum of Reform and resources and have established life story of Yuan Geng, and approximately 500 works collected from the public, facilitating people to immerse themselves Opening. to the story of Shekou. the Prince Bay School of Shenzhen Shekou Yucai Education Group, With the museum, we propose the public education concept of "the city is a museum" and continuously conduct diverse and cooperated with the Education public education activities for communities and the general public, especially for the youth. Through interactions with Bureau of Shenzhen Nanshan the city, communities and residents, we help more people know the story of Shekou development and promote the new District in regards to curriculum generation to inherit and carry forward the spirit of innovation of Shekou. integration, extracurricular practice, and professional tutoring, etc. We will build Prince Bay School into an The Opening Ceremony of Prince Bay School of Shekou Yucai Education Group (Middle School) internationalized and high quality

Scan the QR code to know the costal school. Drawing on advantageous resources of the Prince Bay, we will build a school characterized by museum, ocean, port and ship courses, original mission and development STEAM project course and informationalization, contributing to cultivating inter-disciplinary talents with quality and science, as well as creativity and process of the Museum cooperation awareness. Supporting creative culture

We regard supporting the creative culture as the driving force of innovative urban development. We will create a new The Exhibition Hall of Yuan Geng, the Founder of Shekou Industrial Zone The Exhibition Hall of "Story in Spring" cultural atmosphere of "Design Society" to attract more creativity talents and bring new vitality and competitiveness to the city. National Youth Go Competition Qianhai - Shenzhen - Hong Kong Design Creative Industrial Park

National Youth Go We cooperate with (Shenzhen) Qianhai Administration Bureau, the Hong Kong Competition covers Upholding the mission of CMG as a central SOE, we have held the National Youth Go Competition for seven Federation of Design Associations (FHKDA) and (Hong Kong) Kicers Group Limited to cities consecutive years to carry forward "the power of wisdom". We cooperate with Chinese Weiqi Association (CWA) and 22 China National Go Team to build an arena for youth to display their talents.This platform helps enrich the spiritual and build Qianhai - Shenzhen - Hong Kong Design Creative Industrial Park. The industrial park integrates the advantages of Shenzhen and HongKong in design industry, deepens with almost cultural life of the youth, facilitate the new generation to make progress with practical actions, and inject new vigor of exchanges between design talents, and enhances cooperation in innovation to jointly players the culture of Go and traditional Chinese wisdoms in the new era. 5,000 promote the development of creative industry and innovation brands & products, and further elevate the cooperation level between Guangdong, Hong Kong, and Macao. In particular, the project of Eryuan Bridge serves as the demonstrative zone for Shenzhen CA and Hong Kong culture and creativity industry, including the north zone and the south SE Apprenticeship ceremony zone. The north zone is mainly featured by design blocks while the south zone is more like a multi-functional hall and creative fair, providing a wider arena for more design The Launch Ceremony of Qianhai - Shenzhen - Hong Kong Design Creative Industrial Park innovators and brands. On August 17, 2017, the 2017 CMSK Cup National Youth Go Competition and Ke Jie Sea World "Listen to the Music" International Light Festival Challenge Competition officially opened. On the competition day, we set up an Scan the QR code to see how the apprenticeship ceremony. Nie Weiping (Go's On December 28, 2017, we held the fifth Sea World "Listen to the Music" International Light Festival. Seeing the spiritual core of smartest brain was developed highest level of nine dan), Yu Bin (Go's highest "innovation, art and humanity", we used light and music to create an internationalized platform for artists, manifest the beauty of urban level of nine dan), Gu Li (Go's highest level of art, and provide a diversified cultural experience. The event makes the art access to the general public and becomes an important power nine dan) and Chang Hao (Go's highest level of to enrich urban life. nine dan) respectively offered apprenticeship to 22 young players from across the world. The masters gave away presents and explained the essence of playing Go to their apprentices. The art of Go does not only lie in skills; it values the consideration of skills, quality, formality, regulation and courtesy. These young players Scan the QR code to see the support behind the Go player Ke Jie who participated in the apprenticeship ceremony deepened their understanding of Go Apprenticeship ceremony culture and their respect for masters. International Light Festival TECHML(Electronic music)Party

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Going further Advocating the Whole Society's Engagement Organizing 55 Children living in mountainous areas or remote counties also need support to achieve their dreams. We actively employee volunteers to in Public Welfare respond to China Merchants Charitable Foundation's (CMCF) call of "going further". We organize employee volunteers Love warms the world and kindness changes the world. We give play to our professional advantages, consider social to help children in distant areas with education and support their growth and well being. help children to needs, technological development and the internet thinking, and disseminate the public welfare innovation of 165 achieve dreams advocating the whole society's engagement in public welfare, making joint efforts to promote charity cause engaged by everyone at anywhere. iWalk Aspiration Bravery iWalk public walking Finally I come to Beijng, events 27 Every step contributes to public welfare. CMSK persists and the city is not the in public welfare innovation. Based on new social trends same as I dreamed. in cities 19 and new technology, the 2017 iWalk public walking When I experienced the event has adopted a new model of internet-based public trapeze activity, I felt I was welfare by cross-boundary cooperation, covering 19 dropping off the line, just cities across the nation. The i Walk facilitates us to make as if someone at the other contributions to building a public welfare platform in end of the steel line tried which everybody can be engaged to inject sustainable Dream Optimism to shake me off. I was very power to urban development. excited, really excited, because I finally overcame Action Determination my fear of heights. From the 80-year-old ——A student from man to the toddler, Weifeng Primary School in everyone is participating Yanhu District, Yuncheng in the activity. Because City, Shanxi Province iWalk is not only good for our physical and Maybe big cities disappoint psychological health, you a little bit, but I hope but contributes to public you can go further to see welfare with the power of the life there. The world walking. Hope Confidence is big and you are young. ——Xu Yongjun,Secretary Everything is possible. I of the Party Committee hope next time I meet you, and General Manager of you are more confident CMSK Singing the song of and braver. —Du Ziying, a volunteer of The iWalk does not only public welfare " Going Further" activity build up your body, but let us reach out to the We practice and publicize the style and spirit of CMG. city we have lived for so Fore example, we support customers and employees long. It enables public to set up the 1872 Chorus and participate in various welfare to be realized with cultural activities in provincial and municipal a simple step; it makes us ·· The registration fee was donated levels. We bring the public welfare performance "One Step one to the China Social Welfare develop more experiences ·· About 50,000 participants to communities and spread the beauty of culture Grain of Rice" Foundation's Children Meal Fund and ideas about urban to provide free lunch for children in and art, providing a grand spiritual feast for the Community Culture Art Chorus Competition plan ·· RMB 360,000 raised lifestyle. impoverished mountainous areas. community. 1872 Chorus participates In addition, CMSK also made ·· RMB 200,000 donated ——Mrs. Wu, a participant public welfare donations to charity organizations. of "iWalk" performances times iWalk 7 campaign ·· Participants walk at least 1 ""100Million km to contribute to charitable ·· About 450,000 Kilometers" campaigns. When the total journey participants green charity reaches 100 million kilometers, ·· 108 million kilometers China Merchants Charitable plan Foundation will donate money to achieved education charitis. ·· RMB 700,000 donated "Nanshan Art Arena" Series Public Welfare Performance

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Assuming responsibility at all hours CSR Story We want to encourage more engagement with social development and have been tried to find The power of compassion：Let design creativity drive the dirving factor and source to boost social urban development development. Through the integrated innovation On December 2, 2017, Miss Zhao, who lives in Shekou, together with her friends, design platform, Design Society, we recognize design's contributions to the world and promote spent the weekend on the seaside. During a walk, they found that the previous the development of the design industry chain; public square had changed. Miss Zhao saw a "mysterious" newly-built building. with the perspective of inspiring public creativity and design, we offer the methods of design and The building is the Design Society|Sea World Culture and Art Center, the first the experiences of creativity to the general public cultural exhibition hall and life experience center with the theme of design with different ages and different backgrounds, and and art in China. As the pioneer of urban upgrading, we develop our vision of make joint efforts to think about and participate building a cultural destination and landmark to explore design and art, and to in building a better society. better serve the public and communities, and to promote the creative design Facilitating a better society with design industry. We think about life experience and link industries with design, making The 2017-2018 volunteer contributions to the development of the creative industry. Therefore, we Shenzhen is the generally recognized as the design capital of modern China and is development plan recruited hope that more people can participate in, experience and implement design home to many talented designers and creative talents. We hope that with the Design volunteers. innovation, improve the understanding and appreciation of design, and update Society, we can provide a platform for innovation, opportunities. and industrial 143 lifestyles. Moreover, we promote design to become the driving force of social transformation, making joint efforts to make a better society. We invited the trans- development and innovative urban development. disciplinary English maker Ross Atkin to speaker with students on innovation design for children with special needs. Through interactive observation and communication, we had a deep understanding of the general situation and the needs of autistic We will fully exploit the great potential of children in daily study, hobby, and personal capability, etc. Ross and the students Shenzhen- Hong Kong cooperation on cultural renovated four types of electronic toys to meet autistic children's needs in daily life. creativity & design industry, provide new "Although they are designed for autistic children, I think students also benefited of development space for Hong Kong cultural the activity. I deeply felt the essence of design and the importance of people-oriented creativity & design industry, and build Qianhai design." Wu Ziwei, a student from Shenzhen Polytechnic School, expressed gratitude into a new center for regional cultural creativity and expressed that this was a fruitful trip. Finding the significance of design & design industry. ——Tian Fu, Member of Standing Committee By participating in the first Shekou School Makers Festival, Maria, a sophomore of the CPC Shenzhen Municipal Committee and from Shenzhen American International School (SAIS) became a maker. At Director of Qianhai Shekou Free Trade Zone the very beginning, Maria did not know how to start; however, with teachers' Administration Committee instructions and demonstration, she built a working escalator with Legos, embedded the little engine and sensor to the escalator, and connected For the past several years, Victoria and Albert a complete yet simple programme into the escalator system. Finally, the Museum (V&A), and CMSK have had fruitful escalator was activated. Maria demonstrated the operation of the escalator to dialogues and cooperation. This is an attempt the audience and explained with pride that "I love the learning in practice. I between Britain museums and Chinese have passion for science. And I hope I can become a computer programmer. " enterprises, and an important milestone for our innovation of the international strategy. We advocate the concept of transforming professional design practices ——Tim Reeve, Vice curator and chief and innovation culture into activities that everybody can understand and operating officer of the Museum participate in. Thus, we cooperate with domestic and foreign educational Creativity and art are an eternal social power and play a more important role in institutions to enable design to enter schools and communities to let more production and cultural development in contemporary society. "Since its inception, people know the fun of design and encourage more interactions and creation Design Society has manifested "the blood of CMG and the gene of Shekou", with the internet. encouraged to inspire life by design and link industries with design, and built an

In order to integrate more social resources and build diversified cultural integrated network with open cooperation. Zhang Lin, Deputy General Manager of projects, we recruit Design Society volunteers and invite more people who are CMSK, said with pride. In future, we will continue to display the value and role of the interested in design and art to join the Design Society and realize their original platform. Through designing, guiding and motivating new linkage mechanism, we ideas and diversified designs. With these efforts, designs can make life better trigger vitality, realize sustainable urban development, and thus wil promote social Scan the QR code to see Scan the QR code to watch for more people. progress and development. the world-class cultural the interview with design landmarks society team and know the story behind them

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Outlook CSR Figures

2018 will see the guiding principles from the 19th CPC National Congress into action, and the 40th anniversary of China's Reform and Opening-up. It is also a crucial year for implementing the 13th Five-Year Plan. Regarding quality, performance, efficiency, and scale as the principles of our operations, we will conscientiously implement the "133341" strategy to enhance our capabilities in 26 BRILLIANCE WITH CUSTOMERS areas, and actively explore development opportunities to lay a solid foundation for achieving the goal of becoming a Fortune 500 Performance Indicator 2015 2016 2017 company. We remain true to our original aspiration by carrying out operations from the origin of urban development. Starting from the cradle of the reform and opening-up, we carry forward the Shekou Spirit, developing in China and then going global, and striving Number of residential customers 16 17 20 to make new historical strides for China's economic development in the new era! (10,000 households) Customer care fund (RMB million) 10 14.8 15 ·· Continue to upgrade the products and services in three major business sectors to contribute to urban development; Field testing and measurement figures (%) 100 100 100 ·· Further promote the development of long-term rental apartment projects to better Brilliance with satisfy the housing needs of city dwellers; PROSPERITY WITH SHAREHOLDERS customers ·· Advance the "Exquisite Project" to provide customers with luxury housing products. Performance Indicator 2015 2016 2017 Total assets (RMB billion) 210.90 255.73 332.62 ·· Earnestly support "mass entrepreneurship and innovation" by investing more resources and efforts to facilitate innovation and upgrading; Business revenue (RMB billion) 48.22 63.57 75.45 ·· Expand the "Shekou Model" to contribute to national strategies and regional Prosperity with Net profit (RMB billion) 8.05 12.15 15.01 shareholders economic development; ·· Expand cooperation for integrated development and shared benefits. Total tax paid (RMB billion) 11.65 11.27 14.60

HARMONY WITH THE ENVIRONMENT ·· Invest more in green technology to provide more green products to customers; Performance Indicator ·· Thoroughly apply the CMCF (828) architecture rules to transform green building 2015 2016 2017 Harmony with the methods; Area of Green building projects 253.3 153.36 190.42 environment ·· Continue to hold activities such as "Car-free Day" for environmental protection, and completed (10,000 square meters) encourage more people to live a green life. Number of projects with LEED 28 16 19 Certification Electricity saved by the developed 8,857 11,193.8 14,882.7 ·· Invest more in employee training to improve their skills; green projects (10,000 kWh) Water saved annually by the ·· Create more incentives to encourage bold innovation among employees; developed green projects (10,000 Growth with ·· Strengthen the construction of corporate culture to improve employees' sense of 103.8 115.82 134.46 tons) employees belonging and happiness. GROWTH WITH EMPLOYEES Performance Indicator 2015 2016 2017 ·· Practice the new model for urban upgrading to promote the sustainable and prosperity of cities; Number of employees 19,813 21,941 23,242 ·· Explore new approaches to cultural development, and promote the sound Percentage of female employees (%) 32.0 34.7 35 development of cultural education and creative arts; Development with Training hours of national projects ·· Promote public welfare and develop charity projects that can realize the full Community (hour) 1,304.5 1,352 1,009 advantages of CMSK's brand and accomplishments. Percentage of employees with signed 100 100 100 labor contracts (%)

DEVELOPMENT WITH COMMUNITY Performance Indicator 2015 2016 2017 Public welfare expenditure 4.67 6.30 47.51 (RMB million) Number of charitable activities 12 16 55 Number of cities covered by "iWalk" 12 14 19 campaign

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Third-Party Evaluations Han Bin Yu Zhihong Executive Secretary of Global Compact Network China President and Editor-in-Chief of China WTO Tribune

I am very pleased to be invited to comment on the CMSK CSR report 2017. This is the third consecutive social responsibility report Since the restructuring and listing of CMSK, I have commented on its CSR report for two consecutive years, and witnessed CMSK's issued by CMSK after its integration. With the company's development, the report has also been fully upgraded. Carrying forward efforts in promoting innovation and development, and fulfilling social responsibilities, as well as its remarkable achievements. The the tradition of CMSK to assume responsibility, the report fully demonstrates the highlights and performance of the Company in core responsibility concept of "Smart Growth" can be found throughout the report. One feature, five chapters, five responsibility social responsibility management and practice. Not only does it inherit the merits of previous reports, it is also in accordance with stories, as well as comprehensive responsibility management and detailed performance data all demonstrate the responsibility the latest international standards, reflecting the achievements of CMSK in pursuing the goal of becoming a "city and park operator and commitment of CMSK. When reading the report, I was moved by CMSK's sincere and relentless determination to promote and service provider". Therefore, this is a report with informative content, clear highlights, and distinctive features of CMSK. sustainable development. I believe the following three points in this report are worthy of attention and praise.

First, thoroughly demonstrating that Company's achievements made through continuous innovation. Shoudering more responsibilities with Thorough and thoughtful design for CMSK is an outstanding company that According to the adjustment of the Company's strategic goals, a global view readability the report sets up the "Shekou Model" feature, showing in detail is committed to the concept of common the achievements of CMSK. After the transformation from 1.0 development of mankind and its social to 4.0, CMSK has formed the unique "Port-Park-City" model to create a new pattern of livable urban environment that is One of the highlights of this report is that it displays CMSK's Compared with previous reports, the report has made responsibilities. efforts to achieve the Sustainable Development Goals great innovations in terms of form, content, and picture suitable for business activities, and to promote the sustainable (SDGs) and to assume social responsibilities with a global presentation. The chapter of responsibility management, the development of cities. In terms of product innovation, CMSK launched its long-term rental apartment projects in several view. The practices in this report maps international leading five major chapters, and the hue of each section are blended With the release and implementation of the UN 2030 Agenda cities such as Beijing and Shenzhen, including the Habitat One, companies, as well as the requirements of GRI G 4.0 and with an aesthetic inspired by Nuwa (a goddess in Chinese for Sustainable Development, 17 SDGs have gradually Apartment One and Mansion One, to meet the housing needs SDGs, showing CMSK's forward-thinking strategies and mythology), which fully embodies the integration of CMSK become the common vision of all humanity and the common of differentiated city dwellers. At the same time, it has laid the global view. CMSK integrates the SDGs into its belief system and the Nuwa spirit. To effectively improve its readability, utterances of companies. As a company that boasts a global foundation for the continued development of these apartment of responsibility which highlights "Smart Growth", and the report fully integrates the concept of "Internet Plus", view, a strong sense of responsibility, and the concept of projects through asset-backed securitization. This demonstrates scientifically identifies the goals that are most relevant to adding mobile internet elements such as QR codes to extend common development of mankind, CMSK actively responds that the Company is actively pursuing innovation and keeping the Company, especially those closely related to five major the content of the report and attract readers to read the to SDGs by carrying out corresponding actions after taking its pace with social needs to develop new products. stakeholders. The report aligns the Company's operations stories behind it. In addition, the presentation of pictures is a scientific approach to prioritize the goals that are closely with these goals by displaying its actions and performance at more flexible and more international. The report adopts big related to its own operations, and conducting responsible Third, better reading experience to the beginning of each chapter. This reflects the outstanding pictures, which fit well into the layout and design, making practices in related fields. In the report, CMSK combines the stakeholders. contributions made by CMSK in leading urban development the report concise, vivid and natural, while highlighting the prioritized goals with the five major concepts of responsibility: and upgrading, responding to the Belt and Road Initiative, visual focus and effect. This offers an appealing combination "quality, innovation, green, innovating spirit, and compassion", formulates corresponding initiatives and action plans, and implementing targeted poverty alleviation policies, etc. of readability and resonance. With a clear and well-arranged structure, the report is concise, displays the background of sustainable development in each well designed with concrete data, charts, forms, etc. This proves chapter as well as actions, achievement, etc. In the report, In general, this is an innovative CSR report with a clear that it is a report up to international standards. The cover of the CMSK elaborates on its efforts in leading urban transformation focus and distinctive characteristics. I look forward to CMSK and upgrading, enhancing its capacity for inclusion, safety, and report displays CMSK's operations by using vector graphics that More detailed information with a clear continuing to adhere to the mission to "Upgrading cities resilience to disasters, as well as building sustainable cities and are characteristic of the industry. Also, the use of the unique to improve lives", and continuing to borrow the SDGs as focus on social responsibility human communities. In addition, the Company assumes the Nuwa elements on the inner pages greatly improves readability. a guideline while they are innovating in the sustainable responsibility of a central SOE by putting the guidance of the Moreover, five CSR stories presented in the report are rather development approaches, leading the development of 19th CPC National Congress into action and supporting public informative, with concise and simple layout. The application of The report adds the disclosure of management information society, creating a better life for people, and promoting welfare undertakings through targeted poverty alleviation high-definition pictures, big data, and QR code presents readers at the opening of each chapter, presenting the sustainable the development of more prosperous cities and more programs and charity events such as "iWalk", contributing to the Company's unique practices and "assuming responsibility development background faced by CMSK as well as its harmonious society. I hope that CMSK will contribute more the development of the harmonious society. Specific cases are at all hours" with detailed description, which arouses the corresponding actions and achievements. At the same wisdom and strength to the sustainable development of presented in the report. readers' resonance. "Responsible 2017" focuses on the major time, the report highlights key topics below the subtitles, China and the world. achievements of CMSK in 2017, and "CSR Figures" compares the improving the material topics in a broader context of Second, presenting the unremitting key performance of the past three years from multiple angels, sustainable development, and disclosing targeted social efforts made by CMSK in innovation and allowing readers to see the results of CMSK efforts at a glance. responsibility information in a more detailed manner. This development in great detail. allows stakeholders to have a deeper understanding of the Therefore, I believe that CMSK has delivered to stakeholders a background, present and future of key topics. Meanwhile, the satisfactory annual summary on its CSR performance in 2017. report sets up a "CSR Story" section in each chapter, which I am very pleased to see the innovations in the framework This also means that CMSK has taken a new starting point and elaborates on CMSK's actions in various fields by centering and content of the report, in which the main body, namely, embarked on a new journey. I look forward to CMSK remaining around specific cases and people involved. It conveys the "Brilliance with customers", "Prosperity with shareholders", true to its original aspiration, working hard to press ahead and responsibility performance of CMSK with specific details, "Harmony with the environment", "Growth with employees", continuing to capitalize on its own advantages to make new enabling readers to grasp the content as if they were part of "Development with community", has been further upgraded. progress in fulfilling social responsibility, and creating a better the story. This is because of CMSK's aspiration to become China's future with people and cities while pursuing the sustainable leading urban and park operator and service provider, and the development of its own!

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Specific Standard Disclosures GRI 4.0 Content Index General Standard Disclosures Report Chapters Material Topics Indicator No. Page DMA P26

Indicaotr No. Headlines Page Customer health G4-PR1 P26 Strategy and Analysis and safety No law nor regulation related to the health and safety influence of products G4-PR2 and services were violated during the reporting period G4-1 Message from the Chairman of the Board P1-P2 Brillance with G4-2 Message from the Chairman of the Board P1-P2 Product and Service DMA P21-P25 Organizational Profile Customers Labeling G4-PR5 P17-P18

G4-3 About US/Company Profile P5-P8 DMA P26 Compliance No laws and regulations related to the health and safety influence of products G4-4 About US/Company Profile P5-P8 G4-PR9 and services were violated during the reporting period. G4-5 About US/Company Profile P5-P8 G4-6 About US/Company Profile P5-P8,P45 Supplier Assessment for DMA P37-P38 Labor Practices G4-LA15 P37-P38 G4-7 About US/Company Profile P5-P8 Economic Performance G4-EC1 P31 G4-8 About US/Company Profile P5-P8 G4-EC7 P35-P36 Responsible 2017, About Us, Brillance with Customers, Prosperity with Shareholders, G4-9 P4-P6,P17-P18,P31,P53 G4-EC8 P35-P36 Growth with Employees Indirect Economic Impacts No major fine nor non-financial punishment was imposed on CMSK for legal G4-10 Growth with Employees/Protecting Employees' Rights and Interests P53 G4-SO8 violations during the reporting period. G4-11 Not Applicable Not Applicable Prosperity with Shareholders DMA P37-P38 G4-12 Prosperity with Shareholders/ Mutually Beneficial Cooperation P37-P38 Procurement Practices G4-EC9 P37 G4-13 About Us/ Responsible 2017 P4 DMA P31-P32 Brillance with Customers/ Ensuring Quality and Safety, Prosperity with Shareholders/ Risk G4-14 P26,P32 Control and Management Anti-Corruption G4-SO4 P31-P32 G4-15 Harmony with the Environment/Co-developing the Green Ecosystem P48 G4-SO5 P31-P32 Supplier Environmental G4-16 Harmony with the Environment/Co-developing the Green Ecosystem P48 G4-EN32 P37 Identified Material Topics and Boundaries Assessment

DMA P43-P44 G4-17 CSR Management/ Material Topics Management, About Us/Corporate Governance P11-P12,P7 Harmony with the G4-EN3 P44 G4-18 CSR Management/ Material Topics Management P11-P12 Environment G4-EN7 P46 G4-19 CSR Management/ Material Topics Management P11-P12 DMA P45-P47,P49-P50 Products and Services G4-20 CSR Management/ Material Topics Management P11-P12 Harmony with the G4-EN27 P45-P47,P49-P50 G4-21 CSR Management/ Material Topics Management P11-P12 Environment DMA P45-P47 G4-EN15 P42 G4-22 Prosperity with Shareholders/Sound Business Operation P31 Emissions G4-EN19 P42,P45-P46 G4-23 CSR Management/Material Topics Management, About This Report P11-P12,P81 Stakeholder Engagement DMA P45-P46 Compliance G4-EN29 No environmental law nor regulation was violated during the reporting period. G4-24 CSR Management/ Material Topics Management P10 DMA P53 G4-LA1 P53 G4-25 CSR Management/ Material Topics Management P10 Employment G4-26 CSR Management/ Material Topics Management P10 G4-LA2 P53-P54 G4-LA3 P53-P54 G4-27 CSR Management/ Material Topics Management P10 Report Profile Occupational Health and Safety G4-LA6 P26,P59 G4-28 About This Report P81 DMA P56-P58 G4-29 About This Report P81 Training and Education G4-LA9 P56 G4-30 About This Report P81 Growth with G4-LA10 P56-P57

G4-31 Feedback P82 Employees Diversity and Equal G4-LA12 P53 G4-32 Assurance Statement, Content Index P77-P78,P79-P80 Opportunity

G4-33 Assurance Statement P79-P80 Equal Remuneration for Governance G4-LA13 P53 Women and Men

G4-34 About Us/Corporate Governance P6-P7 Labor Practices Grievance G4-LA16 P54 G4-38 About Us/Corporate Governance P6-P7 Mechanisms Ethics and Integrity Freedom of Association G4-HR4 P54 G4-56 CSR Management/CSR Philosophy, Properity with Shareholders/ Sound Business Operation P9,P31-P32 and Collective Bargaining G4-57 Properity with Shareholders/ Sound Business Operation P31-P32 Development with Indirect Economic G4-EC7 P65-P66 G4-58 Properity with Shareholders/ Sound Business Operation P31-P32 Community Impacts G4-EC8 P65-P66

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The CMSK CSR report 2017 objectively reflects its CSR work and achievement in 2017. The data in the report is reliable and objective. TÜV NORD dose not discover systematical or material errors, and the report is in accordance with the GRI G4: Core option. ● Assurance Statement ●The overall structure of the report is complete, the information disclosed herein is clear, understandable and ● accessible. ●The report is themed with "Smart Growth" and discloses CMSK' s 2017 CSR practice and performance from five dimensions of "Brilliance with customer; Prosperity with shareholders; Harmony with the environment; Growth with Assurance Statement of Corporate Social Responsibility Report ● employees; Development with community". ●With the background of sustainable development, CMSK responds to related requirements of the report delivered at Entrusted by China Merchants Shekou Holdings Company Limited (hereinafter as "CMSK"), TÜV NORD Asia Pacific Ltd. ● the 19th CPC National Congress with practices and actions; (hereinafter as "TÜV NORD") has conducted an independent third-party assurance regarding the CMSK CSR report 2017 ●After assurance and evaluation, we proposed our suggestions to improve the CSR practice and management of CMSK: (hereinafter referred to as "the report"). ● ●●Pay more attention to industrial standards about construction and real estate industries stipulated in G4; ●In the environment field, disclose the use of green constructionmaterials; ● ●Increase the disclosure of performance of municipal companies and special companies to enhance the balance of the CMSK is responsible for collecting, analyzing, compiling and disclosing the information within the report. TÜV NORD report; shall perform the report assurance within its authority acknowledged in its agreement made with CMSK. CMSK is the designated user of this statement. Special Statement:

This statement is based on the CSR report 2017 compiled by CMSK and CMSK shall be responsible for the integrity and authenticity of the information and data contained in the report. The report is the third CSR report publicly released after This statement does not include: CMSK's restructuring and TÜV NORD was invited to conduct independent assurance again. ● ●Activities outside of the scope of this disclosure; ● ●Statement of CMSK's standing, point of view, belief, objectives, future direction and promise. Assurance Scope Indepdent Review and Veracity

● ●The report covers key performance and information disclosed in the report related to social responsibility; TÜV NORD Group is a world-leading certification institution, with worldwide branches in more than 70 countries to ● provide testing, verification and assurance services, including management system and product certification, auditing ●The assurance site is located at No. 3 Building of NH E-COOL, No. 6 Xinghua Rd., Shekou, Nanshan District, Shenzhen, and training in quality, environment, society and ethics, as well as the assurance of environmental, CSR and sustainability Guangdong Province, the headquarters of China Merchants Shekou Holdings Co., Ltd. Subsidiaries, branches and report. ● project sites of CMSK were not visited and interviewed. ●The assurance evaluates the management of the collection, analysis and examination of data and information in the ● report; ●Economic data of the report are audited by the third party and thus no repeated assurance was carried out against TÜV NORD Group Asia Pacific Ltd., a branch of TÜV NORD Group, is an independent entity, and has not any conflict of interests with CMSK or its branches and stakeholders during the assurance of this CSR report. All information in the report related data. is provided by CMSK and TÜV NORD has not participated in the compilation of the report. Date of assurance : February 28 to March 2, 2018

Assurance Methodology TÜV NORD Asia Pacific Ltd.

Assurance process include the below activities: ● ●●Review documentary information provided by CMSK; ●●Interview the information collector of the report; ●Refer to public information on relevant websites and releases by media, and verify the information and data in the ● report via sampling check; ●Evaluate the report according to the requirements in the Sustainability Reporting Guidelines (G4) in terms of balance, Authorized Person: Song Haining Head of the Assurance Team: Huang Li ● comparability, accuracy, timeliness, clarity and reliability; ●●Based on AA1000 Assurance Standard (2008); Date: March 9, 2018 Date: March 9, 2018 ●Assurance is conducted in accordance with the CSR report assurance management procedure of TÜV NORD. Note: For any conflict or inconsistency between the Chinese version and English version of the statement, the Chinese version shall prevail. Assurance Conclusion

79 80 CMSK CSR REPORT

About This Report Feedback

Dear readers, This report is the third CSR report released by China Merchants Shekou Holdings Company Limited. We offer both the Chinese and English versions. For any conflict or Thank you for reading this CSR report. This report has been compiled with utmost care and attention Who inconsistency between the Chinese version and English version, the Chinese version shall to details but may contain certain errors and/or omissions. We sincerely look forward to your valuable prevail. opinions and comments on this report so that we can continue to make improvements.

For readability, "CMSK", "The Company", and "We" in this report refer to "China Merchants Shekou Holdings Company Limited"; "CMG" in this report refers to "China Multiple-choice Questions: (please tick in corresponding box) Merchants Group Co., Ltd." 1. Your general impression of the report: □ Very Good □ Good □ Fair □ Bad □ Very Bad

2. Your evaluation of the quality of social responsibility information covered in this report: Reporting Period: This report covers the period from January 1, 2017 to December 31, 2017, with some contents dating back to previous years or referring to coming years. □ Very Good □ Good □ Fair □ Bad □ Very Bad When Reporting Cycle: This is an annual report, and the latest report was published in 3. Your evaluation of the report structure: □ Very Good □ Good □ Fair □ Bad □ Very Bad March, 2017. 4. Your evaluation of the report layout design: □ Very Good □ Good □ Fair □ Bad □ Very Bad

5. Your evaluation of the readability of this report: □ Very Good □ Good □ Fair □ Bad □ Very Bad

Reporting Boundary: The report discloses the information and key performance of CMSK Open Questions: Where and its business departments, municipal companies and special companies in terms of their economic, social and environmental responsibilities. 1.What are your suggestions regarding our social responsibility work?

Reporting Purpose: The Company openly and honestly discloses sustainability concepts, practices and key performance in the report to fully respond to major concerns 2.What are the deficiencies of this report? of stakeholders. Why Reliability Assurance: The Company assures that no fictitious record, misleading statement, or material omission are included in this report, and will be responsible for the report' s authenticity, accuracy, and completeness. The third-party assurance over this report is provided by TÜV NORD. For details, please refer to the Assurance Statement (page 79 to 80). 3. What is the further social responsibility information that you think this report should disclose?

Data Sources: All data in this report is from the Company's official documents, statistical Address: No. 3 Building of NH E-COOL, No. 6 Xinghua Rd., Shekou, Nanshan District, reports, financial reports, and the sustainability practices of all business entities collected How and reviewed by the Company's CSR management department. In this report, the unit of Shenzhen, Guangdong Province monetary measurement is RMB. Tel: 0755-26818600

Compilation Conformance: Fax: 0755-26691037 GRI Sustainability Reporting Guidelines (G4); GB/T 36001- Email: [email protected] 2015 Guidance on Social Responsibility Reporting; Shenzhen Stock Exchange Social Responsibility Instructions to Listed Companies. Website: http://www.cmsk1979.com/

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