Half-year Report CITIC Limited 2016 Registered Oce 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong Tel : +852 2820 2111 Fax : +852 2877 2771 www.citic.com Stock code: 00267 Our Company CITIC Limited (SEHK: 00267) is the largest conglomerate in China and a constituent of the Hang Seng Index. Among our diverse businesses, we focus primarily on financial services, resources and energy, manufacturing, engineering contracting and real estate. Tracing our roots to the beginning of China’s opening and reform, we are driven today by the same values that defined our start: a pioneering spirit, a commitment to innovation and a focus on the long term. We embrace world-class technologies and aim always for international best practice. While sectors evolve and economies change, we adapt and our businesses last. Our platform is unique, and we use its diversity and scale to capture opportunities wherever they emerge — throughout the Chinese economy and around the world. Guiding us as we grow is our fundamental commitment to create long-term value for all of our shareholders. Financial Services Resources & Energy CITIC Bank (65.18%) CITIC Resources (59.50% ) CITIC Trust (100%) CITIC Mining International (100%) CITIC-Prudential (50%) CITIC Metal (100%) CITIC Securities (16.66%) CITIC United Asia (100%) Sunburst Energy (100%) Manufacturing Engineering Contracting CITIC Pacific Special Steel (100%) CITIC Construction (100%) CITIC Heavy Industries (67.27%) CITIC Engineering Design (100%) CITIC Dicastal (100%) CITIC Limited (00267.HK) Real Estate Others CITIC Pacific Properties (100%) CITIC Telecom International CITIC Urban Development & (58.66%) Operation (100%) Dah Chong Hong (56.07%) CITIC Industrial Investment (100%) CITIC Environment (100%) As at 30 June 2016 Contents 2 Highlights 4 Chairman’s Letter to Shareholders 8 Financial Review 23 Risk Management 31 Human Resources 32 Past Performance and Forward Looking Statements Financial Statements 33 Consolidated Income Statement 35 Consolidated Statement of Comprehensive Income 36 Consolidated Balance Sheet 38 Consolidated Statement of Changes in Equity 40 Consolidated Cash Flow Statement 43 Notes to the Consolidated Financial Statements 118 Report on Review of Interim Financial Information Statutory Disclosure 119 Interim Dividend and Closure of Register of Members 119 Share Option Plan Adopted by the Company 120 Share Option Plan Adopted by Subsidiaries of the Company 126 Directors’ Interests in Securities 127 Interests of Substantial Shareholders 128 Purchase, Sale or Redemption of Listed Securities 128 Corporate Governance 130 Review of Half-Year Report 130 Compliance with the Model Code for Securities Transactions by Directors 131 Update on Directors’ Information Pursuant to Rule 13.51B(1) of the Listing Rules 132 Corporate Information CITIC LIMITED / 2 Highlights Half-year ended 30 June 2016 2015 Increase/ In HK$ million (Restated) (Decrease) Continuing operations Revenue 183,974 196,562 (12,588) Profit before taxation 48,495 62,767 (14,272) Profit/(loss) attributable to ordinary shareholders 20,182 37,685 (17,503) – Continuing operations 24,918 38,171 (13,253) – Discontinued operations (4,736) (486) (4,250) Earnings/(loss) per share (HK$) 0.69 1.51 (0.82) – Continuing operations 0.85 1.53 (0.68) – Discontinued operations (0.16) (0.02) (0.14) Dividend per share (HK$) 0.10 0.10 – Net cash generated from operating activities 55,624 64,997 (9,373) – Continuing operations 48,178 69,757 (21,579) – Discontinued operations 7,446 (4,760) 12,206 Capital expenditure 27,627 34,869 (7,242) As at As at 30 June 31 December Increase/ 2016 2015 (Decrease) Total assets 7,264,817 6,803,309 461,508 Total liabilities 6,609,200 6,140,140 469,060 Total ordinary shareholders’ funds and perpetual capital securities 490,319 492,902 (2,583) Profit attributable to ordinary shareholders Revenue from from continuing Business assets continuing operations operations Half-year Half-year As at Increase/ ended ended Businesses 30 June (Decrease) 30 June Increase/ 30 June Increase/ In HK$ million 2016 (Note) 2016 (Decrease) 2016 (Decrease) Financial services 6,640,820 429,644 97,040 (6,214) 21,941 (11,376) Resources and energy 145,321 3,628 21,323 (823) 911 (288) Manufacturing 96,827 (381) 28,673 (3,663) 1,641 334 Engineering contracting 38,284 (3,961) 6,096 (144) 1,060 65 Real Estate 235,268 2,459 1,641 337 19 (1,201) Others 120,243 6,505 29,183 (2,007) 2,267 80 Note: As compared with balances as at 31 December 2015. HALF-YEAR REPORT 2016 / 3 Assets by business Financial services HK$ billion Non-financial businesses 6,641 6,211 628 635 As at 31 December 2015 As at 30 June 2016 Assets of non-financial businesses Resources and energy HK$ billion Manufacturing Engineering contracting 145 Real estate 142 Others 97 97 42 38 233 235 114 120 As at 31 December 2015 As at 30 June 2016 Profit attributable to ordinary shareholders (Note) Profit attributable to ordinary shareholders HK$ million 48,430 41,812 39,834 37,685 20,182 6,954 2012 2013 2014 2015 First half of First half of 2015 2016 Note: Profit attributable to ordinary shareholders for the year 2012 is from the annual reports of the former CITIC Pacific. Those for the years from 2013 to 2015 are from the audited information of CITIC Limited. CITIC LIMITED / 4 Chairman’s Letter to Shareholders Dear Shareholders, The global economic uncertainty and volatility I were charged to the profits of the first half of 2016, discussed in my last letter has persisted. Fluctuations whereas a profit on the sale will be recorded upon in the price of oil are a case in point. In January, oil completion in the second half of this year. fell to under US$30 a barrel, but by June the price had climbed to over US$50, and since then prices Our company’s profit attributable to ordinary shareholders for the first six months of 2016 was have dipped and recovered. The economies of the HK$20.2 billion, compared with HK$37.7 billion in United States, Europe and Japan grew in the first half, the same period last year. Apart from the expenses but slowly. The unexpected outcome of the Brexit related to the property transaction just mentioned, referendum created further economic uncertainty but the year-on-year comparison should be considered so far Brexit’s effects on countries outside the United in the context of a gain recognised in 2015 from the Kingdom, including China and other Asian nations, sale of a 3% interest in CITIC Securities, as well as a have been minimal. We are also keenly watching the reduced shareholding in CITIC Bank. A lower profit outcome of the US presidential election. contribution from CITIC Securities also affected our profitability. In addition, as the vast majority of our By comparison, the Chinese economy has been assets are in mainland China the depreciation of the relatively stable as China continued its transition to Renminbi had a carry-over effect on our reporting a more consumption-led economy. In the first half of currency, which is the Hong Kong dollar. 2016, we seized the opportunity to strengthen our existing consumer business — our majority-owned In June, we raised US$1.25 billion in long-term subsidiary Dah Chong Hong — by buying Li & Fung’s US dollar debt in the capital market, thus further consumer and healthcare business covering both improving our balance sheet. This also lowered our overall funding cost and optimised our debt maturity China and Southeast Asia. profile. At the end of June, CITIC Limited had more than HK$21.8 billion in cash and committed facilities, We also proceeded with the sale of our mainland leaving us with sufficient financial resources and China residential property development business to flexibility to capture business opportunities as they China Overseas Land & Investment. In March, I said arise. this transaction would allow us to focus on what we do best, which is the development of large integrated The board recommends an interim dividend of projects. Tax and expenses associated with this sale HK$0.10 per share to shareholders. HALF-YEAR REPORT 2016 / 5 Business Performance Pacific Special Steel’s achievement can be attributed simply to good management. Its procurement The financial services segment contributed strategy, for example, ensured that the overall cost HK$21.9 billion to our profit during the review period, of raw materials was much lower than the market, with CITIC Bank accounting for 83% of the total. enhancing our margin. Export volume also rose by This compares with the HK$33.3 billion achieved in 17% as a result of increased marketing efforts. the same period last year. The profit of our 16.7% owned associate company, CITIC Securities, declined In the first six months of 2016, increased demand for significantly due to a lacklustre A share market. Dicastal’s products together with stronger marketing At CITIC-Prudential, premium income grew but efforts contributed to higher sales growth, with a investment income declined, affecting its profitability. 17% rise in the number of wheels sold over the same CITIC Trust, on the other hand, performed well. period in 2015. Profit margin improved as a result of greater production efficiencies made possible CITIC Bank recorded revenue growth of 12% while by its highly automated facilities, better product profit grew more slowly, reflecting increased mix as well as a decline in production costs such provisions made for non-performing loans. In recent as gas. CITIC Dicastal registered an impressive 48% years, CITIC Bank has done well focusing on growing increase in profit as compared with the same period non-interest income, which increased by more last year.