CITIC LI M IT ED 2019 ANNUAL REPORT Annual Report 2019 Stock code: 00267 CITIC LIMITED CITIC Limited Registered Office 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong Tel +852 2820 2111 HTML Fax +852 2877 2771 www.citic.com Our Businesses Our Company Financial Services CITIC Limited (SEHK: 00267) is one of China’s CITIC Bank (65.97%) largest conglomerates and a constituent of CITIC Trust (100%) the Hang Seng Index. Tracing our roots to the CITIC-Prudential Life (50%) beginning of China’s opening and reform, CITIC CITIC Securities (16.50%) has grown in step with the country’s rise and modernisation. We have built a remarkable Resources & Energy portfolio of businesses with a focus on financial CITIC Resources (59.50%) services, resources and energy, manufacturing, CITIC Mining International (100%) engineering contracting and real estate. CITIC Metal Group (100%) We are driven today by the same values on CITIC Pacific Energy Investment (100%) which we were founded: a pioneering spirit, a commitment to innovation and a focus Manufacturing on the long term. We embrace world-class CITIC Pacific Special Steel (83.85%) technologies and aim for international best CITIC Dicastal (42.11%) practices. We are guided by a strategy that is CITIC Heavy Industries (67.27%) consumer-centric, commercially-driven, and far-sighted in the allocation of capital and resources. Engineering Contracting Our platform is unique in its diversity and CITIC Construction (100%) scale, allowing CITIC to capture emerging CITIC Engineering (100%) 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. Real Estate CITIC Pacific Properties (100%) CITIC Urban Development & (100%) Operation Others CITIC Telecom International (58.19%) Dah Chong Hong (100%) CITIC Industrial Investment (100%) CITIC Environment (100%) CITIC Press (73.50%) As at 29 February 2020 Contents 2 Highlights 115 Report of the Directors 4 Chairman’s Letter to Shareholders 136 Environmental, Social and Governance Report 176 Past Performance and Forward Looking OUR BUSINESSES Statements 8 Financial Services FINANCIAL STATEMENTS 24 Resources and Energy 177 Contents of Financial Statements and Notes 28 Manufacturing 178 Consolidated Income Statement 40 Engineering Contracting 179 Consolidated Statement of Comprehensive 46 Real Estate Income 52 Others 180 Consolidated Balance Sheet 58 Financial Review 182 Consolidated Statement of Changes in Equity 71 Risk Management 184 Consolidated Cash Flow Statement 77 Five Year Statistics 186 Notes to the Consolidated Financial Statements 79 Corporate Governance 357 Independent Auditor’s Report 110 Board of Directors 367 Corporate Information 114 Senior Management CITIC LIMITED Annual Report 2019 1 Highlights Year ended 31 December Increase/ HK$ million 2019 2018 (Decrease) Revenue 566,497 533,285 6.2% Profit before taxation 96,015 93,969 2.2% Net profit attributable to ordinary shareholders 53,903 50,239 7.3% Basic earnings per share (HK$) 1.85 1.73 7.3% Diluted earnings per share (HK$) 1.85 1.73 7.3% Dividend per share (HK$) 0.465 0.41 13% Net cash generated from operating activities 160,082 151,899 5.4% Capital expenditure 32,318 43,802 (26%) As at As at 31 December 31 December Increase/ 2019 2018 (Decrease) Total assets 8,289,924 7,660,713 8.2% Total liabilities 7,395,433 6,850,053 8.0% Total ordinary shareholders’ funds 591,526 558,545 5.9% Return on total assets (%) 1.4% 1.4% – Return on net assets (%) 9.4% 9.1% 0.3pp Staff employed 287,910 273,344 5.3% Revenue from Profit attributable to Business assets external customers ordinary shareholders Increase/ Increase/ Increase/ (decrease) (decrease) (decrease) excluding excluding excluding As at the effect Year ended the effect Year ended the effect Business 31 December Increase/ of currency 31 December Increase/ of currency 31 December Increase/ of currency HK$ million 2019 (Decrease) translation 2019 (Decrease) translation 2019 (Decrease) translation Financial services 7,703,980 9.0% 9.3% 222,316 9.5% 14% 42,845 2.7% 6.9% Resources and energy 134,304 1.9% 2.4% 94,951 21% 21% 3,015 43% 48% Manufacturing 117,240 (13%) (13%) 119,328 (2.1%) 1.9% 7,553 26% 31% Engineering contracting 59,030 6.5% 6.8% 23,373 19% 24% 1,867 (9.1%) (5.4%) Real Estate 166,404 7.6% 7.7% 5,943 (34%) (31%) 4,347 (19%) (15%) Others 162,893 7.8% 8.0% 100,546 (0.4%) 0.2% 2,556 25% 27% CITIC LIMITED 2 Annual Report 2019 Assets By Business Assets of Non-Financial Profit Attributable to Ordinary Businesses Shareholders Financial Services HK$ billion Resources and Energy Real Estate HK$ billion HK$ million Non-Financial Business Manufacturing Others Engineering Contracting 129 134 132 142 137 117 130 97 135 7,704 59 42 7,068 46 6,925 96 53,903 55 6,730 50,239 43,146 43,902 37 41,812 166 160 155 233 144 163 164 151 114 113 628527 6,211 628 629 640 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 (Restated) (Restated) (Restated) Total Ordinary Shareholders’ Funds Dividend Per Share Earnings Per Share and Perpetual Capital Securities Perpetual Capital Securities HK$ million Interim dividend per share HK$ Earnings per share HK$ Ordinary Shareholders Funds Final dividend per share 7,873 0.18 7,873 0.15 0.11 0.10 0.10 1.85 1.73 591,526 1.58 1.51 1.48 543,078 558,545 483,129 0.285 0.26 479,066 13,836 0.25 0.23 0.20 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 (Restated) (Restated) Ordinary Shareholders’ Funds Per Share Ordinary shareholders' fund per share HK$ 20.33 19.20 18.67 16.61 16.47 2015 2016 2017 2018 2019 (Restated) CITIC LIMITED Annual Report 2019 3 Chairman’s Letter to Shareholders businesses, many of which are leaders in their fields. I look forward to carrying his mantle as we continue to generate value for you. CITIC has consistently focused on solidifying its businesses. In 2019, the company registered a profit attributable to ordinary shareholders of HK$53.9 billion, up 7%. Excluding the Renminbi to HK Dollar conversion effect, profit from operations grew 12% year-on-year. The financial services segment delivered strong performance, while the growth of our non-financial segment was largely the result of the contribution from Sino Iron, a considerable profit rise in the special steel business and profit from the sale of a 58% stake in CITIC Dicastal. At the end of December 2019, CITIC Limited had approximately HK$30 billion in cash and available facilities. The board recommends a final dividend payment of HK$0.285 per share, giving shareholders a total dividend of HK$0.465 per share for the year, 13% more than in 2018. Business Results Dear Shareholders, Benefitting mainly from a lift in liquidity by the central bank in China, especially over the first It is an honour to be appointed the Chairman of half of 2019, the financial services segment CITIC Limited. CITIC is a company that has been performed strongly, recording HK$42.8 billion at the forefront of China’s development. From in profit, a 3% rise. Excluding the effect of modest beginnings four decades ago, CITIC has currency translation, this is an increase of 7% grown into one of the largest conglomerates in compared with 2018. the country today. CITIC Bank remains the largest profit I feel privileged for the opportunity to join contributor to the company, registering a CITIC and to build upon the leadership of my bottom line of RMB48 billion, a rise of 8%, predecessor, Mr Chang Zhenming, and those supported by double-digit growth in both net who came before him. Under his stewardship, interest income and non-interest income. Net CITIC has solidified itself into a formidable, interest income rose 13% as assets grew and unique and increasingly international platform net interest margin widened, while non-interest operating both financial and non-financial income increased 15% as a result of the bank’s CITIC LIMITED 4 Annual Report 2019 capital-light strategy. Over the year, CITIC profit declined 20% to RMB968 million. To Bank continued to focus on integrating fintech better serve its customers internationally, CITIC solutions. Only two years after its launch, CITIC Dicastal continued to diversify its production AiBank registered a profit of RMB20 million. capacity beyond China. The first phase of its plant in Morocco is now operational, while CITIC Trust’s profit rose 7% to RMB3.6 billion, construction of the second phase is on track to driven by interest income and investment be completed by the end of 2020, taking total gains. During the period under review, CITIC- production capacity in Morocco to 6 million Prudential Life achieved a substantial profit wheels per annum. This will further strengthen increase of 63% to RMB1.8 billion, spurred Dicastal’s long-term competitiveness. by growth in both premium income and investment gains. Riding on revived activity in In 2019, CITIC Heavy Industries’ profit was the capital market, CITIC Securities’ profit in RMB117 million, a rise of 10% compared 2019 grew 30% to RMB12.2 billion, led by its with 2018. In part, this was attributable to trading and investment banking businesses. the company’s push to grow its business of providing total solutions to customers, which In the non-financial segment, the has yielded favourable results. Ongoing efforts manufacturing business realised a profit of to drive cost savings and enhance efficiency HK$7.6 billion for 2019, a 26% year-on-year together with the strong performance of the increase, with significant profit growth in the specialty robotics division also contributed to special steel business as well as the booking the bottom line.