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Annual Report 2016 Assets by Business Assets of Non-Financial Profit Attributable to Ordinary Businesses Shareholders

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Annual Report 2016 Assets by Business Assets of Non-Financial Profit Attributable to Ordinary Businesses Shareholders ANNUAL REPORT Our Company CITIC Limited (SEHK: 00267) is China’s largest conglomerate and a constituent of the Hang Seng Index. Among our diverse global businesses, we focus primarily on financial services, resources and energy, manufacturing, engineering contracting and real estate. As China’s economy matures and is increasingly weighted toward consumption and services, CITIC is building upon its existing consumer platform, expanding into complementary businesses that reflect these trends and opportunities. Tracing our roots to the beginning of China’s opening and reform, we are driven today by the same values upon which we were founded: a pioneering spirit, a commitment to innovation and a focus on the long term. We embrace world-class technologies and aim for international best practice. We are guided by a strategy that is customer-centric, commercially-driven, and far-sighted in the allocation of capital and resources. Our platform is unique in its diversity and scale, allowing CITIC to capture emerging opportunities in China and around the world. Guiding us as we grow is our fundamental commitment to create long-term value for all of our shareholders. Our Businesses Financial Services CITIC Bank (65.97%) CITIC Trust (100%) CITIC-Prudential (50%) CITIC Securities (16.66%) Resources & Energy CITIC Resources (59.50%) CITIC Mining International (100%) CITIC Metal Group (100%) Manufacturing Sunburst Energy (100%) CITIC Pacific Special Steel (100%) CITIC Heavy Industries (67.27%) CITIC Dicastal (100%) Engineering Contracting CITIC Construction (100%) Real Estate CITIC Engineering Design (100%) CITIC Pacific Properties (100%) CITIC Urban Development & Operation (100%) Others CITIC Telecom International (60.24%) Dah Chong Hong (56.07%) CITIC Industrial Investment (100%) CITIC Environment (100%) As at 28 February 2017 Contents 2 Highlights 4 Chairman’s Letter to Shareholders Our Businesses 10 Financial Services 20 Resources and Energy 26 Manufacturing 34 Engineering Contracting 40 Real Estate 46 Others 50 Special Feature: CITIC Trust 64 Financial Review 75 Risk Management 80 Corporate Governance 109 Board of Directors 113 Senior Management 114 Report of the Directors 135 Environmental, Social and Governance Report 156 Past Performance and Forward Looking Statements FINANCIAL STATEMENTS 157 Contents of Financial Statements and Notes 158 Consolidated Income Statement 160 Consolidated Statement of Comprehensive Income 161 Consolidated Balance Sheet 162 Consolidated Statement of Changes in Equity 164 Consolidated Cash Flow Statement 166 Notes to the Consolidated Financial Statements 303 Independent Auditor’s Report 311 Corporate Information Highlights Year ended 31 December 2016 2015 Increase/ HK$ million (Restated) (Decrease) Continuing operations Revenue 380,822 395,310 (14,488) Profit before taxation 70,723 78,645 (7,922) Profit/(loss) attributable to ordinary shareholders 43,119 41,812 1,307 – Continuing operations 32,782 40,501 (7,719) – Discontinued operations 10,337 1,311 9,026 Basic earnings per share from (HK$): 1.48 1.58 (0.1) – Continuing operations 1.13 1.53 (0.4) – Discontinued operations 0.35 0.05 0.3 Diluted earnings per share from (HK$): 1.48 1.57 (0.09) – Continuing operations 1.13 1.52 (0.39) – Discontinued operations 0.35 0.05 0.3 Dividend per share (HK$) 0.33 0.30 0.03 Net cash generated from operating activities 280,465 309 280,156 – Continuing operations 274,809 (451) 275,260 – Discontinued operations 5,656 760 4,896 Capital expenditure 48,264 45,704 2,560 As at As at 31 December 31 December Increase/ HK$ million 2016 2015 (Decrease) Total assets 7,237,995 6,803,309 434,686 Total liabilities 6,542,144 6,140,140 402,004 Total ordinary shareholders’ funds and perpetual capital securities 490,633 492,902 (2,269) Return on total assets (%) 1% 1% – Return on net assets (%) 9% 9% – Staff employed 127,610 133,526 (5,916) Profit attributable to ordinary Revenue from shareholders from Business assets continuing operations continuing operations As at Year Year 31 ended 31 ended 31 Businesses December Increase/ December Increase/ December Increase/ HK$ million 2016 (Decrease) 2016 (Decrease) 2016 (Decrease) Financial services 6,729,902 518,726 187,537 (17,841) 38,406 (14,347) Resources and energy 135,784 (5,909) 50,254 4,590 (6,899) 10,352 Manufacturing 96,112 (1,096) 62,350 2,273 1,740 (756) Engineering contracting 36,796 (5,449) 11,023 (3,653) 1,675 (926) Real Estate 143,596 (89,213) 4,900 (1,125) 1,774 (1,052) Others 113,090 (648) 64,723 1,375 1,987 (514) 2 CITIC Limited / Annual Report 2016 Assets by business Assets of non-financial Profit attributable to ordinary businesses shareholders HK$ billion HK$ billion HK$ million Financial services Resources and energy Non-fi nancial Manufacturing businesses Engineering contracting Real estate Others 48,430 CITIC Pacifi c 43,119 41,812 39,834 43100 165 233 6,954 230 233 86 98 215 44 109 148 114 233 42 97 142 113 144 37 96 136 624 4,691 614 5,323 628 6,211 526 6,730 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Total ordinary shareholders’ funds Dividend per share and perpetual capital securities HK$ million HK$ Perpetual capital Interim dividend per share securities Final dividend per share Ordinary shareholders’ funds 13,834 13,836 13,838 0.10 0.015 482,760 7,873 479,066 418,126 371,776 Note: Assets by business, profit attributable 5,953 to ordinary shareholders, total ordinary shareholders’ funds and 0.300.25 0.15 0.10 0.20 0.20 78,725 0.23 0.10 perpetual capital securities, dividend 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 per share, earnings per share and ordinary shareholders’ funds per share for the year 2012 are from the annual reports of the former CITIC Earnings per share Ordinary shareholders’ funds Pacific. Those for the years from per share 2013 to 2016 are from the audited information of CITIC Limited. HK$ HK$ Earnings per share Ordinary shareholders’ funds per share 1.91 1.94 21.57 1.60 1.58 1.48 16.79 16.60 16.47 14.93 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CITIC Limited / Annual Report 2016 3 Chairman’s letter to shareholders Dear Shareholders, As we reflect on 2016 and events such as the Brexit These days, CITIC and its subsidiaries employ vote, the US presidential election and continued people of different nationalities across many political and economic tensions across the world, countries. We’re involved in cross-border capital global companies are grappling with pronounced flows as well as the sharing of ideas and best uncertainty and volatility. At home, China’s practices. We have not only absorbed technology economy is in the midst of a structural transition, from abroad but exported technology to the world, as industrial output and double digit growth such as magnetite iron ore mining and processing moderate but consumption, services, and higher to Western Australia’s mineral-rich Pilbara region. value-added manufacturing increase. The world is When we operate in other countries, we seek changing, and companies need to stay nimble and to harness local expertise. Likewise, when our prepare to adapt, while striking a balance between business partners work with us in China, we offer reacting to outside factors and navigating steadily them our “Chinese DNA” and the knowledge through rough waters to achieve their business we’ve accumulated over many decades. Our new goals. partnership with McDonald’s is a case in point. We live in an increasingly interconnected world, I remember in 1992 when the world’s largest where one nation’s interests can easily converge McDonald’s at the time opened in the centre of with another’s. Countries, and indeed companies, Beijing, and I can vividly recall the novelty of eating have become interdependent. At CITIC, we know a Big Mac in China. Fast-forward to 2017, and I am from our own transformation over the last 38 years again struck by the changing times, as this year that we have become more dependent than ever CITIC announced plans to acquire a majority stake on our global customers and partners, and they on in McDonald’s business in mainland China and us. Economic globalisation has brought all of us Hong Kong, where it already serves over one billion closer. people annually in its more than 2,600 restaurants. 4 CITIC Limited / Annual Report 2016 McDonald’s is ubiquitous here now, but it was increase in its net profit. CITIC Trust profit for the not always so. Such is the deep-rooted impact year remained stable. In our 2016 annual report of globalisation that there’s now a generation of we will spotlight CITIC Trust, a market leader in the Chinese citizens who have never known a China growing Chinese trust sector. devoid of the golden arches on the main streets of their towns and cities. There are many more In the non-financial sector, CITIC Pacific Special examples of popular international brands that have Steel and CITIC Dicastal continued to impress. Net become a part of Chinese consumers’ everyday profit from our steel business rose significantly due lives. As the world and China evolve, so does CITIC. to an optimal product mix and lower raw material cost, the result of an effective procurement Our 2016 Results strategy. Strong demand for CITIC Dicastal’s products, particularly wheels, delivered double Profit attributable to ordinary shareholders for digit growth in revenue and net profit. However, 2016 was HK$43.1 billion. Although this was a CITIC Heavy Industries suffered a considerable modest 3% increase from last year, there is no loss due to factors that included continuing weak doubt that the challenging operating environment demand from downstream industries for heavy continued to affect our businesses.
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