CITIC LIMITED Stock code : 00267 ANNUAL REPORT 2018 Our Businesses Financial Services Resources & Energy CITIC Bank (65.97%) CITIC Resources (59.50%) CITIC Trust (100%) CITIC Mining International (100%) CITIC-Prudential (50%) CITIC Metal Group (100%) CITIC Securities (16.50%) Sunburst Energy (100%) Manufacturing Engineering Contracting CITIC Pacifc Special Steel (90%) CITIC Construction (100%) CITIC Dicastal (100%) CITIC Engineering (100%) CITIC Heavy Industries (67.27%) Real Estate Others CITIC Pacifc Properties (100%) CITIC Telecom International (59.33%) CITIC Urban Development & (100%) Dah Chong Hong (56.97%) Operation CITIC Industrial Investment (100%) CITIC Environment (100%) As at 28 February 2019 Contents Our Company Highlights 2 CITIC Limited (SEHK: 00267) is one of China’s Chairman’s Letter to Shareholders 4 largest conglomerates and a constituent of the Our Businesses Hang Seng Index. Among our diverse global businesses, we focus primarily on fnancial Financial Services 8 services, resources and energy, manufacturing, Resources and Energy 24 engineering contracting and real estate. As Manufacturing 30 China’s economy matures and is increasingly 42 Engineering Contracting weighted towards consumption and services, Real Estate 50 CITIC is building upon its existing consumer Others 56 platform, expanding into complementary Financial Review 62 businesses that refect these trends and Risk Management 75 opportunities. Five Year Statistics 81 Tracing our roots to the beginning of China’s Corporate Governance 83 opening and reform, we are driven today Board of Directors 115 by the same values on which we were Senior Management 119 founded: a pioneering spirit, a commitment Report of the Directors 120 to innovation and a focus on the long term. Environmental, Social and Governance Report 140 We embrace world-class technologies and Past Performance and Forward Looking Statements 168 aim for international best practice. We are Financial Statements guided by a strategy that is consumer-centric, commercially-driven, and far-sighted in the Contents of Financial Statements and Notes 169 allocation of capital and resources. Consolidated Income Statement 170 Consolidated Statement of Comprehensive Income 171 Our platform is unique in its diversity and Consolidated Balance Sheet 172 scale, allowing CITIC to capture emerging Consolidated Statement of Changes in Equity 174 opportunities in China and around the world. Guiding us as we grow is our fundamental Consolidated Cash Flow Statement 176 commitment to create long-term value for all Notes to the Consolidated Financial Statements 178 of our shareholders. Independent Auditor’s Report 365 Corporate Information 375 Annual Report 2018 2 CITIC Limited Highlights Year ended 31 December Increase/ HK$ million 2018 2017 (Decrease) Revenue 533,285 450,536 82,749 Profit before taxation 93,969 82,783 11,186 Profit attributable to ordinary shareholders 50,239 43,902 6,337 Basic earnings per share (HK$) 1.73 1.51 0.22 Diluted earnings per share (HK$) 1.73 1.51 0.22 Dividend per share (HK$) 0.41 0.36 0.05 Net cash generated from operating activities 151,899 107,133 44,766 Capital expenditure 43,802 45,323 (1,521) As at As at 31 December 31 December Increase/ 2018 2017 (Decrease) Total assets 7,660,713 7,520,739 139,974 Total liabilities 6,850,053 6,727,098 122,955 Total ordinary shareholders’ funds and perpetual capital securities 558,545 550,951 7,594 Return on total assets (%) 1.4% 1.3% 0.1% Return on net assets (%) 9.1% 8.6% 0.5% Staff employed 273,344 243,036 30,308 Revenue from Profit attributable to Business assets external customers ordinary shareholders Year Year As at 31 ended 31 ended 31 Business December Increase/ December Increase/ December Increase/ HK$ million 2018 (Decrease) 2018 (Decrease) 2018 (Decrease) Financial services 7,067,565 142,489 202,949 12,921 41,704 2,198 Resources and energy 131,842 2,404 78,722 15,266 2,102 12,002 Manufacturing 134,882 4,501 121,939 24,507 6,008 2,690 Engineering contracting 55,432 9,305 19,700 5,047 2,053 322 Real Estate 154,631 (5,033) 8,968 5,741 5,353 (2,307) Others 151,071 (12,764) 100,920 19,247 2,049 (7,406) Profit Attributable to Ordinary Shareholders Non-financial businesses Financial services 20 Final dividend per share Interim dividend per share 20 20 20 Ordinary Shareholders’ Funds OrdinaryPer Share Shareholders’ 14 1 1 1 4 4 4 16.79 0.20 0.015 39,834 614 5,323 20 20 20 20 1 1 1 1 Dividend Per Share Assets By Business 5 5 5 5 16.47 0.20 0.10 41,812 628 6,211 ( ( (Restated Restated Restated 20 20 20 20 1 1 1 1 6 6 6 6 ) ) 16.61 0.23 0.10 43,146 ) 527 6,730 20 20 20 20 1 17 1 17 7 7 18.67 0.25 0.11 43,902 629 6,925 2018 2018 2018 2018 19.20 0.26 0.15 50,239 HK$ million 628 7,068 HK$ billion HK$ HK$ Ordinary shareholders’ funds Ordinary shareholders’ Perpetual capital securities Engineering c Manufacturing Total Ordinary Shareholders’ Funds and Resources Resources and energy 20 20 20 Assets of Non-Financial Businesses 14 14 1 4 1.60 418,126 13,834 Perpetual Capital Securities 98 215 44 109 148 ontracting 20 20 20 Earnings Per Share Earnings 1 1 1 5 5 5 1.58 479,066 13,836 114 233 42 97 142 ( ( ( Real estate Others Restated Restated Restated) 20 20 20 1 1 1 6 6 6 ) 1.48 483,129 7,873 ) 113 144 37 96 137 20 20 20 17 17 17 1.51 543,078 7,873 164 160 46 130 129 Annual Report 2018 2018 2018 2018 CITIC Limited HK$ million 1.73 558,545 151 155 55 135 132 HK$ billion 3 HK$ Annual Report 2018 4 CITIC Limited Chairman’s Letter to Shareholders Our North Star is as true today as when Deng Xiaoping first inscribed it on a plaque at the fifth anniversary of CITIC in 1984: “Dare to innovate and contribute more.” Dear Shareholders, The year 2018 marked the 40th anniversary the non-financial segment reached 30%, and of the beginning of Chinese economic we are working to raise that number further. liberalisation. Even closer to home, in 2019 At the end of last year, we had HK$31.6 billion we will be celebrating the 40th anniversary of in cash and available facilities, positioning us the establishment of CITIC Group, the majority well for our future development. You can find shareholder of CITIC Limited. To provide a more detailed account of our 2018 results context, most of our assets today trace their and a comprehensive review of our business heritage to CITIC Group: Its history is very much performance in the annual report. our history. So in the spirit of renewal, I would like in this letter to reflect on the path we’ve The board recommends a final dividend taken and provide a framework for placing our payment of HK$0.26 per share, giving performance not only in an annual, but also a shareholders a total dividend of HK$0.41 per historical and future, context. share for the year, 14% more than last year. First, let me share with you CITIC Limited’s performance in the past year. In 2018, CITIC The Foundations of Our Growth Limited recorded a profit attributable to The world is a very different place from what ordinary shareholders of HK$50.2 billion, it was four decades ago. China today is the our highest ever and 14% more than 2017. second largest economy in the world, global Financial services registered a 6% profit growth commerce is more interconnected, and digital to HK$41.7 billion while profit from our non- technologies permeate nearly every aspect of financial businesses rose 43% from 2017 to our lives. CITIC too has grown in transformative HK$17.6 billion, with the largest increase from ways. But how did our story begin? What were the resources and energy area as well as our the foundations for our evolution? manufacturing business. We had very entrepreneurial and modest Three years ago, we set ourselves a task beginnings, not all that different from any other to better balance the growth between our startup. In 1979, when Mr Rong Yiren founded financial and non-financial arms. I am pleased China International Trust and Investment to report that for 2018, the contribution from Corporation (now known as CITIC Group) at the Annual Report 2018 5 CITIC Limited direction of Deng Xiaoping, the goal was to tap This is not just history—it is the story of our international capital markets to catalyse China’s lives. I see this most clearly when I reflect on my modernisation. But save for the determination own journey. Thirty-six years ago, I started with to succeed and insights into China and its CITIC as a fresh-faced graduate, one of around opportunities, the fact is that CITIC had neither 200 employees. Every few years since, as the meaningful experience running a market-driven vignettes I just shared show, we have stepped enterprise nor substantial cash to bankroll its out a little further onto the world stage. Today, ambitions. Operating out of just a few guest CITIC Limited has businesses ranging from rooms at the Peace Guest House with limited financial services to manufacturing, resources funds, the company had to more or less just and energy, and consumer goods and services “run with it.” That is why, from an early age, with over 200,000 employees worldwide. innovation and a can-do spirit were part of our DNA.