CITIC Limited

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Half-year Report 2016

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.

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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%)
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As at 30 June 2016

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

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Highlights

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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
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Note: As compared with balances as at 31 December 2015.

HALF-YEAR REPORT 2016

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Assets by business

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Financial services HK$ billion
Non-financial businesses
6,641
6,211
628 635
As at 31 December 2015 As at 30 June 2016
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Assets of non-financial businesses

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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
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Profit attributable to ordinary shareholders (Note)

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Profit attributable to ordinary shareholders HK$ million
48,430
39,834 41,812
37,685
20,182
6,954
2012 2013 2014 2015 First half of First half of
2015 2016
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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

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Chairman’s Letter to Shareholders

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Dear Shareholders,

The global economic uncertainty and volatility I discussed in my last letter has persisted. Fluctuations in the price of oil are a case in point. In January, oil fell to under US$30 a barrel, but by June the price had climbed to over US$50, and since then prices have dipped and recovered. The economies of the United States, Europe and Japan grew in the first half, but slowly. The unexpected outcome of the Brexit referendum created further economic uncertainty but so far Brexit’s effects on countries outside the United Kingdom, including China and other Asian nations, have been minimal. We are also keenly watching the outcome of the US presidential election.

By comparison, the Chinese economy has been relatively stable as China continued its transition to a more consumption-led economy. In the first half of 2016, we seized the opportunity to strengthen our existing consumer business — our majority-owned subsidiary Dah Chong Hong — by buying Li & Fung’s consumer and healthcare business covering both China and Southeast Asia.

We also proceeded with the sale of our mainland China residential property development business to China Overseas Land & Investment. In March, I said this transaction would allow us to focus on what we do best, which is the development of large integrated projects. Tax and expenses associated with this sale

were charged to the profits of the first half of 2016, whereas a profit on the sale will be recorded upon completion in the second half of this year.

Our company’s profit attributable to ordinary shareholders for the first six months of 2016 was HK$20.2 billion, compared with HK$37.7 billion in the same period last year. Apart from the expenses related to the property transaction just mentioned, the year-on-year comparison should be considered in the context of a gain recognised in 2015 from the sale of a 3% interest in CITIC Securities, as well as a reduced shareholding in CITIC Bank. A lower profit contribution from CITIC Securities also affected our profitability. In addition, as the vast majority of our assets are in mainland China the depreciation of the Renminbi had a carry-over effect on our reporting currency, which is the Hong Kong dollar.

In June, we raised US$1.25 billion in long-term US dollar debt in the capital market, thus further improving our balance sheet. This also lowered our overall funding cost and optimised our debt maturity profile. At the end of June, CITIC Limited had more than HK$21.8 billion in cash and committed facilities, leaving us with sufficient financial resources and flexibility to capture business opportunities as they arise.

The board recommends an interim dividend of HK$0.10 per share to shareholders.

HALF-YEAR REPORT 2016

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Business Performance

The financial services segment contributed HK$21.9 billion to our profit during the review period, with CITIC Bank accounting for 83% of the total. This compares with the HK$33.3 billion achieved in the same period last year. The profit of our 16.7% owned associate company, CITIC Securities, declined significantly due to a lacklustre A share market. At CITIC-Prudential, premium income grew but investment income declined, affecting its profitability. CITIC Trust, on the other hand, performed well.

CITIC Bank recorded revenue growth of 12% while profit grew more slowly, reflecting increased provisions made for non-performing loans. In recent years, CITIC Bank has done well focusing on growing non-interest income, which increased by more than 20% in the first half of 2016 compared with the same period last year. With the new normal of slower economic growth in China, the asset quality of Chinese banks is under pressure as they face growing non-performing loans. We are likely to see continued erosion of banks’ profitability and capital in the near term. Improving asset quality is a painful process, but in the longer term this process will result in a healthier banking system. In this environment, CITIC Bank continues to work on ensuring that its asset quality and overall risk management systems are best-in-class.

As for our non-financial businesses, the resources and energy sector remained challenged by low commodity prices. Sino Iron, our magnetite iron ore project in Western Australia, made great strides with the commissioning of the last two of its six concentrator lines in late May. Of course, these remain testing times for Sino Iron and the sector in general, as commodity prices are still low. It will be some time before we reach full capacity, but we are encouraged by recent progress. To place the project on a sustainable footing, our focus will be on increasing production rates, reducing operating costs, driving greater efficiencies and resolving outstanding legal issues to protect the interest of all stakeholders.

In manufacturing, overall demand for steel remained weak; however, our special steel business continued to outperform the market. Profit for the half year rose 14% compared with the same period in 2015. CITIC

Pacific Special Steel’s achievement can be attributed simply to good management. Its procurement strategy, for example, ensured that the overall cost of raw materials was much lower than the market, enhancing our margin. Export volume also rose by 17% as a result of increased marketing efforts.

In the first six months of 2016, increased demand for Dicastal’s products together with stronger marketing efforts contributed to higher sales growth, with a 17% rise in the number of wheels sold over the same period in 2015. Profit margin improved as a result of greater production efficiencies made possible by its highly automated facilities, better product mix as well as a decline in production costs such as gas. CITIC Dicastal registered an impressive 48% increase in profit as compared with the same period last year. To meet the rising demand in China for its casting products, Dicastal is working to have its KSM Chengdu plant up and running in early 2017.

Profit at CITIC Heavy Industries declined significantly in this reporting period as the company continued to experience a slowdown in its traditional customer segments of construction materials, mining and coal. In this challenging environment, CITIC Heavy Industries has been redoubling efforts to transform itself from a pure equipment manufacturer to a total solutions provider. This is paying off as close to 50% of the new contracts signed in the first half of the year were Engineering, Procurement and Construction contracts. In addition, demand has increased for the special purpose robots built by newly-acquired Tangshan Kaicheng, which are being used in firefighting, rescue operations and other emergencies.

Our engineering contracting business recorded profit of HK$1.1 billion, which included the reversal of a provision taken previously on a project in Algeria. Although most of CITIC Construction’s contracts are signed in US dollar, the project in Venezuela was contracted to receive a small portion of the payment in the country’s local currency. Therefore, the depreciation of the Venezuelan bolivar in the first half of the year affected CITIC Construction’s profit. During the period, four major contracts were signed including a US$936 million contract for a Kazakhstan highway reconstruction project.

CITIC LIMITED

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Capturing Consumer-related Opportunities

The continued rise of China’s middle class is leading to increased sales of a wide range of consumer goods and services, from cars and box office tickets to healthcare products. CITIC has long been in the consumer-facing businesses. Our bank offers financial services to retail customers, and our insurance company tailors products to consumers as well. On the non-financial front, we have a publishing business and also cater to the increasing desire of consumers to travel. As we observe the continuing growth of China’s consumer economy, Dah Chong Hong represents a valuable platform for capitalising on consumer trends.

Dah Chong Hong, a company listed in Hong Kong with a history of nearly 70 years, distributes motor vehicles and a host of consumer products, ranging from frozen chicken to coffee beans and imported packaged foods. The company operates across Asia with a focus on Greater China. At the moment, the profit contribution from mainland China is quite small but has good potential for growth. Dah Chong Hong’s purchase of Li & Fung’s consumer and healthcare distribution business this year is a good example of how we are deliberately deepening our exposure to promising consumer growth areas. Dah Chong Hong’s enlarged consumer products portfolio will boast a range of leading food, personal care and healthcare brands, giving it an immediate position in Asia’s rapidly-growing healthcare market.

The Power of Data

As you know, I have faith in our conglomerate business model as it provides diversification for our long-term stability. To investors, one of the greatest attractions of the CITIC platform is that our businesses mirror the Chinese economy. How can we continue to leverage this unique platform, particularly in today’s era of big data?

Some may know that I am the president of the International Go Federation. Go is a complex game of strategy played in Asia for thousands of years. The year 2016 was particularly interesting for Go fans because a computer program called AlphaGo beat one of the world’s best Go players. Although it is common knowledge that machines can calculate faster than even the smartest humans, it was still a big surprise that AlphaGo was able to formulate such strong playing strategies, spot patterns and make winning moves.

There are two key reasons why AlphaGo was able to accomplish what we thought would not be possible for years to come. First, AlphaGo collected and tested a huge number of Go moves and, second, it was backed by a farsighted company — Google. Both the data and the supporting platform were responsible for AlphaGo’s subsequent success.

I can see parallels with CITIC. Through our diversified businesses, we already have an impressive data bank with a huge amount of information about customers and economic trends. The CITIC platform is essentially an incubator for our franchises, not unlike Google’s backing of AlphaGo. Some investors are not yet convinced of the intrinsic value of our platform and view us simply as a collection of subsidiaries. Yet, if all of our data points can be better and more effectively connected, I believe we will have much greater insights and opportunities as well as the ability to make our businesses more efficient. These can transform CITIC into an enterprise whose value is not merely its access to capital, nor one based on a wellestablished brand, but an ecosystem that will touch almost every aspect of China’s market economy and beyond.

These ideas have potential, and I have gathered a group of experts to further explore the practical applications of the data we have collected.

HALF-YEAR REPORT 2016

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Conclusion

Success does not happen overnight — a winning company is the result of persistence, determination and constant effort. It also demands a long-term view. There is no end to competition from others with energy and ideas. It is up to CITIC’s management to identify the next move and win in highly competitive markets.

On behalf of the directors, I would like to express my sincere appreciation and gratitude for the dedication and commitment of our employees. I also thank you, our shareholders, for taking a long-term view of our company and prospects, and for having faith in your board and management team to win over time. We will continue to evolve, reform, and create value for you.

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Chang Zhenming Chairman Hong Kong, 26 August 2016

CITIC LIMITED

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Financial Review

Overview

Profit attributable to ordinary shareholders

For the first half of 2016, the Group achieved net profit attributable to ordinary shareholders of HK$20,182 million, a decrease of HK$17,503 million, or 46% from the first half of 2015. Excluding the gains recognised for the same period last year as a result of the disposal of 3.16% equity interests in CITIC Securities and the dilution of CITIC Limited’s equity interests following the placing of new shares by CITIC Securities, as well as the impact of translation into Hong Kong Dollars, the Company’s reporting currency, resulting from the depreciation of Renminbi in the first half of 2016 given CITIC Limited’s main operations and assets are in mainland China, a decrease would have been HK$6,632 million, or 24% from the half of 2015.

The financial services segment recorded net profit attributable to ordinary shareholders of HK$21,941 million. Excluding the gains recognised for the same period last year as a result of the disposal of equity interests in CITIC Securities and the dilution of CITIC Limited’s equity interests following the placing of new shares by CITIC Securities, as well as the impact of translation due to RMB depreciation for the current period, the decrease from the first half of 2015 would have been HK$395 million or 2%.

The banking business reported growth in net profit and remained the principal source of profit for the financial services segment. Following RMB depreciation and the introduction of China National Tobacco Corporation as a strategic investor of CITIC Bank during the first half of 2016, the percentage of the Group’s shareholdings in CITIC Bank decreased as compared to the same period last year, resulting in a corresponding 5% decrease in net profit of CITIC Bank attributable to the Group. The trust business reported sound performance for the first half of 2016, while the securities business experienced a significant decline in results in line with the overall conditions of China’s securities market from the first half of 2015.

For the non-financial segments, the manufacturing business achieved net profit attributable to ordinary shareholders of HK$1,641 million, an increase of HK$334 million, or 26% from the first half of 2015. Growth was reported in the special steel, aluminium wheel and aluminium casting businesses.

The engineering contracting business maintained stable performance, contributing net profit attributable to ordinary shareholders of HK$1,060 million, representing a year-on-year increase of HK$65 million or 7%.

The resources and energy business recorded net profit attributable to ordinary shareholders of HK$911 million. There was an increase of HK$223 million, or 32% compared to the same period last year, excluding gains realised through the release of reserve recognised in previous years upon the acquisition of controlling rights for Jiangsu Ligang Electric Power Limited (江蘇利港電力有限公司) and Jiangyin Ligang Electric Power Generation Company Limited (江陰利港發電股份有限公司) during the same period last year. The growth in profit for the resources and energy business was mainly attributable to the improvements in the crude oil business and bulk commodity trade business from the first half of 2015.

The Group recorded tax liabilities and other expenses relating to reorganisation for the first half of 2016 following its proposed disposal of its residential property projects in Mainland China to China Overseas Land & Investment Limited (COLI). Moreover, profit for the property business also decreased in line with the fewer number of property projects completed and delivered and decrease in valuation gain on investment properties recognised.

HALF-YEAR REPORT 2016

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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
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Earnings per share and dividends

Earnings per share of profit attributable to ordinary shareholders was HK$0.69 in the first half of 2016, an decrease of 54% from HK$1.51 in the first half of 2015. As at 30 June 2016, the number of ordinary shares outstanding was 29,090,262,630.

HK$2,909 million cash will be distributed as an interim dividend. The interim dividend per share of 2016 is HK$0.10 (interim dividend per share of 2015: HK$0.10).

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Earnings per share Dividend per share
HK$
1.91 1.94
1.60 1.58
1.51
0.69
0.45 0.3
0.35 0.215
0.1
0.1
2012 2013 2014 2015 First half of First half of
2015 2016
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CITIC LIMITED

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Profit/(loss) and assets by business

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Profit/(loss)
Half-year ended
30 June Assets
As at As at
2015 30 June 31 December
In HK$ million 2016 (Restated) 2016 2015
Financial services 31,756 43,187 6,640,820 6,211,176
Resources and energy 1,251 1,583 145,321 141,693
Manufacturing 1,740 1,437 96,827 97,208
Engineering contracting 1,059 995 38,284 42,245
Real estate 5 1,144 235,268 232,809
Others 2,802 2,713 120,243 113,738
Total 38,613 51,059 7,276,763 6,838,869
Operation management (2,495) (1,985)
Discontinued operations (4,782) (611)
Elimination 34 496
Profit attributable to non-controlling
interests and holders of perpetual
capital securities 11,188 11,274
Profit attributable to
ordinary shareholders 20,182 37,685
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Profit attributable to ordinary shareholders from continuing operations by business

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1H 2016 1H 2015 HK$ million
21,941
2,267
1,641
911 1,060
33,317 19
2,187
1,307
995
1,199
1,220
Financial Resources and Manufacturing Engineering Real estate Others
services energy contracting
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HALF-YEAR REPORT 2016

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Financial services

For the first half of 2016, the financial services segment recorded net profit attributable to ordinary shareholders of HK$21,941 million. Excluding the gains recognised for the same period last year as a result of the disposal of equity interests in CITIC Securities and the dilution of CITIC Limited’s equity interests following the placing of new shares by CITIC Securities, as well as the impact of translation due to RMB depreciation, the decrease from the first half of 2015 would have been HK$395 million or 2%.

The banking business reported growth in net profit and remained the principal source of profit for the financial services segment. CITIC Bank continued to optimise its revenue mix, as the increase in the percentage share of non-interest income contributed to the growth in profit before provision from the first half of 2015. Following the impact of translation due to RMB depreciation, the introduction of China National Tobacco Corporation as a strategic investor of CITIC Bank during the first half of the year, the percentage of the Group’s shareholdings in CITIC Bank decreased as compared to the same period last year, resulting in a corresponding 5% decrease in net profit of CITIC Bank attributable to the Group. The trust business reported sound performance for the first half of 2016, sustaining growth in revenue from handling charges and commission compared with the same period of last year. CITIC Securities reported a 58% decrease in net profit, as its securities brokerage, securities investment and credit trading businesses experienced year-on-year decline in results in line with the overall conditions of China’s securities market.

Resources and energy

Volatility in the global market for resources and energy brought challenges to the operation of this business segment of the Group. Although the prices of crude oil and certain other commodities picked up during the first half of 2016, weakness remained when compared with the same period of last year. The Group adopted a number of cost-saving and efficiency enhancement measures to alleviate the impact of low prices. The resources and energy business recorded net profit attributable to ordinary shareholders of HK$911 million for the first half of 2016. There was an increase of HK$223 million, or 32% compared to the same period last year, excluding gains realised through the release of reserve recognised in previous years upon the acquisition of controlling rights for Jiangsu Ligang Electric Power Limited (江蘇利港電力有限公司) and Jiangyin Ligang Electric Power Generation Company Limited (江陰利港發電股份有限公司) during the same period last year.

The crude oil business reported to reduce loss with the benefit of multiple, such as the reduction in tax and the implementation of cost control measures. Growth in net profit was driven by the substantial increase in the trade volume of non-ferrous metals, such as iron ore and copper. The 6 production lines of Sino Iron were fully commissioned in May, producing 4.51 million wet metric tonnes of concentrate during the first half of 2016.

Manufacturing

This business reported satisfactory results, recording net profit attributable to ordinary shareholders of HK$1,641 million during the first half of 2016, an increase of HK$334 million or 26% from the first half of 2015.

Special steel maintained its leading position in operating results against the backdrop of a steel industry suffering from decreasing production capacities and prices, as it improved its gross profit margin by cutting its raw material purchase costs and adjusting its product mix.

Aluminium wheels and castings sustained growth in sales while driving steady improvements in gross profit margin through cost control.

CITIC LIMITED

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Meanwhile, heavy machinery experienced a year-on-year decline in profit amidst sluggish market sentiments and aggravating competition in the market for heavy machinery equipment for the mining, construction materials and metallurgical sector. CITIC Heavy Industries was expediting its process of strategic transformation by actively grooming new growth drivers, as it achieved progress in developing the market for turnkey projects, while the special robotics business of Kaicheng Intelligence provided a new growth niche which partially offset the impact of the decline.

Engineering contracting

During the first half of 2016, this segment recorded net profit attributable to ordinary shareholders of HK$1,060 million, an increase of HK$65 million from the same period last year, mainly due to successive collection of amounts due from the Algerian expressway project and the write-back of certain impairment provisions charged in previous years. However, profit from the project under construction in Venezuela decreased owing to the devaluation of the local currency, while CITIC Engineering Design reported year-on-year profit growth driven by expedited progress in the construction of waste water treatment plant conversion and expansion projects.

Real estate

The Group recorded tax and other expenses relating to reorganisation for the first half of 2016 following the proposed disposal of its residential property projects in Mainland China to COLI. Moreover, there was also yearon-year decrease in the number of property projects completed and delivered and gains from the revaluation of investment properties. The aforesaid factors resulted in decline in profit for the property business of the Group from the first half of 2015.

The average occupancy rate for investment properties was approximately 95% as at 30 June 2016, which was comparable with preceding years.

The assets and liabilities related to the aforesaid residential property projects under proposed disposal have been classified as held-for-sale, and their operating results and cash flow have been presented under “Discontinued operations of the Group,” the details of which are set out in Note 14(a)and Note 35 to the financial statements.

Others

For the first half of the year, net profit attributable to ordinary shareholders of other businesses amounted to HK$2,267 million, increasing by HK$80 million. Net profit contributions were derived mainly from Dah Chong Hong, the international telecommunications service business and gains realised from the disposal of 43.42% equity interests in Shanghai CITIC Guojian Pharmaceutical Industry Company Limited.

Net profit of Dah Chong Hong decreased year-on-year, reflecting the overall slowdown of the automobile market in Hong Kong and weaker performance of the food distribution business in China. The international telecommunications service business reported year-on-year growth in net profit, as revenue from its enterprise solutions segment, which commanded a higher gross profit, increased as a percentage of total revenue. In the meantime, our infrastructure business, including tunnels and expressways, sustained stable results.

CITIC Envirotech, a company listed on the Mainboard of the Singapore Exchange Securities Trading Limited of which controlling stakes were acquired by the Group on 24 April 2015, reported substantial year-on-year growth in net profit for the first half of 2016 after expanding its EPC, water treatment and membrane product businesses.

HALF-YEAR REPORT 2016

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Group Financial Results

Revenue

For the first half of 2016, CITIC Limited recorded revenue of HK$183,974 million from continuous operations, a decrease of HK$12,588 million or 6%, as compared with the same period last year. Excluding gains of HK$12.2 billion recognised for the same period last year as a result of the disposal of 3.16% equity interests in CITIC Securities and the dilution of CITIC Limited’s equity interests following the placing of new shares by CITIC Securities, as well as the impact of translation due to RMB depreciation for the current period, the increase amounted to HK$11.2 billion or 6%.

Revenue from financial services was decreased by HK$6,214 million or 6% to HK$97,040 million. Excluding gains of HK$12.2 billion recognised for the same period last year as a result of the disposal of 3.16% equity interests in CITIC Securities and the dilution of CITIC Limited’s equity interests following the placing of new shares by CITIC Securities, as well as the impact of translation due to RMB depreciation for the current period, the banking business and trust business in the financial services segment maintained year-on-year growth.

Revenue from iron ore and copper trade and gold re-export grew in line with improved market sentiments, while revenue contributions from the power generation and platinum operations decreased year-on-year, reflecting lower demand and prices compared to the same period last year and partially offsetting the aforesaid growth. Resources and energy reported revenue of HK$21,323 million, a decrease of HK$823 million or 4%.

The manufacturing segment recorded revenue of HK$28,673 million, a decrease of HK$3,663 million or 11%, reflecting year-on-year growth in sales of aluminium wheels and castings offset by lower average selling prices for the special steel business as compared to the same period last year and the decline in order prices for heavy machinery owing to escalating competition.

The engineering contracting business recorded revenue of HK$6,096 million, a year-on-year decrease of HK$144 million or 2%, as its new projects were in the stage of preparation. There was year-on-year growth in the revenue from domestic engineering projects, such as the waste water treatment plant conversion and expansion project, for the first half of the year.

Revenue from continuous operations of the real estate segment amounted to HK$1,641 million, a year-onyear increase of HK$337 million or 26%, reflecting in part the increase in revenue from the closing of projects including the Jiading complex project.

Revenue from other businesses amounted to HK$29,183 million, a decrease of HK$2,007 million or 6%, reflecting mainly the decline in Dah Chong Hong’s automobile sales in Hong Kong, the food distribution business in China and CITIC Telecom’s mobile phone sales. CITIC Envirotech report notable year-on-year increase in revenue on the back of business scale expansion.

CITIC LIMITED

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Half-year ended 30 June Increase/(decrease)
Continuing operations 2015
In HK$ million 2016 (Restated) Amount %
Financial services 97,040 103,254 (6,214) (6)
Resources and energy 21,323 22,146 (823) (4)
Manufacturing 28,673 32,336 (3,663) (11)
Engineering contracting 6,096 6,240 (144) (2)
Real estate 1,641 1,304 337 26
Others 29,183 31,190 (2,007) (6)
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Financial services Resources and energy Manufacturing Engineering contracting Real estate Others

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16%
1%
3%
16%
12%
First half of
2016
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52%
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16%
1%
3%
53%
16%
11%
First half of
2015
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HALF-YEAR REPORT 2016

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Revenue by nature

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Half-year ended 30 June Increase/(decrease)
Continuing operations 2015
In HK$ million 2016 (Restated) Amount %
Net interest income 64,318 63,719 599 1
Net fee and commission income 28,409 23,471 4,938 21
Sales of goods and services 86,934 93,216 (6,282) (7)
– Sales of goods 69,431 75,301 (5,870) (8)
– Services rendered to customers 11,827 12,252 (425) (3)
– Revenue from construction contracts 5,676 5,663 13 0.2
Other revenue 4,313 16,156 (11,843) (73)
Net interest income Net fee and commission income Sales of goods and services Other revenue
2% 8%
35%
32%
47% 48%
12%
16%
First half of First half of
2016 2015
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CITIC LIMITED

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Impairments

In the first half of 2016, the Group recorded an asset impairment of HK$28,470 million, an increase of HK$6,808 million, or 31% from the first half of 2015. Of the total impairment, CITIC Bank accounted for HK$28,424 million, an increase of HK$7,310 million, or 35% from the same period last year, which mainly includes an HK$23,559 million impairment on its loans and advances to customers.

Net finance charges

Finance costs decreased HK$1,323 million, or 27% from HK$4,947 million in the first half of 2015 to HK$3,624 million in the first half of 2016, as a result of a decrease in borrowings of operation management segment and subsidiaries under non-financial segment.

In the first half of 2016, finance income from operation management segment and subsidiaries under nonfinancial segments amounted to HK$534 million, mainly came from interest income on bank deposits, a decrease of HK$746 million, or 58% from the first half of 2015.

Interest expense capitalised

Interest expense capitalised decreased HK$639 million, or 66% from HK$963 million in the first half of 2015 to HK$324 million in the first half of 2016. This was mainly because that the 6 production lines of Sino Iron were fully commissioned in May, interest expense capitalized decreased correspondingly.

Income tax

Income tax of the Group in the first half of 2016 was HK$12,343 million, an decrease of HK$854 million compared with the same period last year. This was in line with the changes in profit before taxation.

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Group Cash Flows

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CITIC Limited Half-year ended 30 June CITIC Bank Half-year ended 30 June
2015 Increase/ Increase/
In HK$ million 2016 (restated) (Decrease) % 2016 2015 (Decrease) %
Net cash generated from operating
activities 55,624 64,997 (9,373) (14) 59,066 48,298 10,768 22
– Continuing operations 48,178 69,757 (21,579) (31) 59,066 48,298 10,768 22
– Discontinued operations 7,446 (4,760) 12,206 256 – – – –
Net cash used in investing activities (101,723) (142,118) (40,395) (28) (85,397) (117,133) (31,736) (27)
– Continuing operations (102,451) (135,519) (33,068) (24) (85,397) (117,133) (31,736) (27)
Including: Proceeds from disposal and
redemption of financial
investments 334,376 448,014 (113,638) (25) 308,247 425,890 (117,643) (28)
Payments for purchase of
financial investments (421,804) (585,979) (164,175) (28) (389,443) (540,204) (150,761) (28)
– Discontinued operations 728 (6,599) 7,327 111 – – – –
Net cash generated from
financing activities 134,039 47,022 87,017 185 134,134 45,340 88,794 196
– Continuing operations 144,180 36,024 108,156 300 134,134 45,340 88,794 196
Including: Proceeds from new bank
and other loans and new
debt instruments issued 465,868 190,988 274,880 144 401,026 117,171 283,855 242
Repayment of bank and
other loans and debt
instruments issued (292,528) (138,951) 153,577 111 (259,854) (67,709) 192,145 284
Interest paid on bank and
other loans and debt
instruments issued (10,379) (9,470) 909 10 (6,941) (4,121) 2,820 68
Dividends paid to ordinary
shareholders of the
Company (5,818) (4,981) 837 17 – – – –
Dividends/distribution
paid to non-controlling
interests/holders of
perpetual capital
securities (1,586) (2,007) (421) (21) (98) – (98) N/A
– – – –
– Discontinued operations (10,141) 10,998 (21,139) (192)
Net increase/(decrease) in cash and
cash equivalents 87,940 (30,099) 118,039 392 107,803 (23,495) 131,298 559
Cash and cash equivalents at
1 January 354,111 347,891 6,220 2 270,195 289,496 (19,301) (7)
Effect of exchange rate changes (6,224) 1,875 (8,099) (432) (4,566) 1,907 (6,473) (339)
Cash and cash equivalents at
30 June 435,827 319,667 116,160 36 373,432 267,908 105,524 39
– Less: Cash and cash equivalents
included in assets of disposal
group classified as held for sale at
30 June (7,792) – (7,792) N/A – – – –
Cash and cash equivalents of
continuing operations at 30 June 428,035 319,667 108,368 34 373,432 267,908 105,524 39
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CITIC LIMITED

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Capital expenditure

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Financial services Resources and energy Manufacturing Engineering contracting Real estate Others

HK$ billion

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16
14
15
6 5 12
0
1 6
8 5
12
1 7 3
3 3
2 0
1 0 4
14 5
1 1
3 11 8 6
2013 2014 2015 First half of 2015 First half of 2016
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Half-year ended 30 June Increase/(Decrease)
In HK$ million 2016 2015 Amount %
(Restated)
Financial services 5,941 1,324 4,617 349
Resources and energy 2,901 6,621 (3,720) (56)
Manufacturing 2,600 2,425 175 7
Engineering contracting 154 49 105 214
Real estate 4,403 996 3,407 342
Others 5,979 8,225 (2,246) (27)
Subtotal 21,978 19,640 2,338 12
Real estate development 5,649 15,229 (9,580) (63)
Total 27,627 34,869 (7,242) (21)
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Capital commitments

As at 30 June 2016 the contracted capital commitments of the Group amounted to approximately HK$21,363 million. Details are disclosed in Note 31(f) to the consolidated financial statements.

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Group Financial Position

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Note to
the
Consolidated
As at As at Financial
In HK$ million 30 June 31 December Increase/(Decrease) Statements
2016 2015 Amount %
Total assets 7,264,817 6,803,309 461,508 7
Loans and advances to
customers and other parties 3,153,019 2,947,798 205,221 7 19
Investments classified
as receivables 1,380,912 1,331,281 49,631 4 22
Cash and deposits 873,526 801,615 71,911 9 15
Available-for-sale financial assets 565,071 494,786 70,285 14 20
Held-to-maturity investments 225,507 216,267 9,240 4 21
Fixed assets 182,151 183,740 (1,589) (1)
Inventories 41,589 130,447 (88,858) (68)
Assets of disposal group classified
as held for sale 135,142 – 135,142 N/A 35
Total liabilities 6,609,200 6,140,140 469,060 8
Deposits from customers 4,010,328 3,766,848 243,480 6 27
Deposits from banks and
non-bank financial institutions 1,339,053 1,275,421 63,632 5 25
Debt instruments issued 609,098 449,772 159,326 35 29
Bank and other loans 110,779 147,221 (36,442) (25) 28
Liabilities of disposal group classified
as held for sale 88,695 – 88,695 N/A 35
Total ordinary shareholders’
funds and perpetual
capital securities 490,319 492,902 (2,583) (1)
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CITIC LIMITED

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Total assets

Total assets increased from HK$6,803,309 million as at 31 December 2015 to HK$7,264,817 million as at 30 June 2016, mainly attributable to an increase in loans and advances to customers and other parties, cash and deposits, and available-for-sale financial assets.

By geography

Mainland China Hong Kong and Macau Overseas

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2% 2%
5% 5%
93% 93%
As at 30 June As at 31 December
2016 2015
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Loans and advances to customers and other parties

As at 30 June 2016, the net loans and advances to customers and other parties of the Group was HK$3,153,019 million, an increase of HK$205,221 million, or 7% compared with 31 December 2015. The proportion of loans and advances to customers and other parties to total assets was 43%, an increase of 0.1% compared with 31 December 2015.

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As at As at
30 June 31 December Increase/(Decrease)
In HK$ million 2016 2015 Amount %
Corporate loans 2,194,273 2,115,285 78,988 4
Discounted bills 92,853 110,721 (17,868) (16)
Personal loans 940,787 798,078 142,709 18
Total loans and advances to
customers and other parties 3,227,913 3,024,084 203,829 7
Impairment allowances (74,894) (76,286) (1,392) (2)
Net loans and advances to
customers and other parties 3,153,019 2,947,798 205,221 7
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Deposits from customers

As at 30 June 2016, deposits from customers of the financial institutions under the Group was HK$4,010,328 million, an increase of HK$243,480 million, or 6% compared with 31 December 2015. The proportion of deposits from customers to total liabilities was 61%, a decrease of 0.7% compared with 31 December 2015.

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As at As at
30 June 31 December Increase/(Decrease)
In HK$ million 2016 2015 Amount %
Corporate deposits
Time deposits 1,732,262 1,727,112 5,150 0.3
Demand deposits 1,599,146 1,385,738 213,408 15
Subtotal 3,331,408 3,112,850 218,558 7
Personal deposits
Time deposits 417,527 432,611 (15,084) (3)
Demand deposits 250,660 213,561 37,099 17
Subtotal 668,187 646,172 22,015 3
Outward remittance and
remittance payables 10,733 7,826 2,907 37
Total 4,010,328 3,766,848 243,480 6
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Bank and other loans

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As at As at
30 June 31 December Increase/(Decrease)
In HK$ million 2016 2015 Amount %
Financial services 1,704 1,339 365 27
Resources and energy 41,740 42,562 (822) (2)
Manufacturing 15,477 16,521 (1,044) (6)
Engineering contracting 1,212 1,282 (70) (5)
Real estate [(note)] 9,095 85,618 (76,523) (89)
Others 36,620 37,672 (1,052) (3)
Operation management 16,262 12,586 3,676 29
Elimination (11,331) (50,359) 39,028 (77)
Total 110,779 147,221 (36,442) (25)
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CITIC LIMITED

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Debt instruments issued

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As at As at
30 June 31 December Increase/(Decrease)
In HK$ million 2016 2015 Amount %
Financial services 480,213 345,120 135,093 39
Resources and energy 702 446 256 57
Manufacturing 4,439 5,033 (594) (12)
Engineering contracting – – – –
Real estate [(note)] – 4,750 (4,750) (100)
Others 5,385 5,283 102 2
Operation management 119,053 89,804 29,249 33
Elimination (694) (664) (30) 5
Total 609,098 449,772 159,326 35
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Note: The Group intends to sell the Group’s interest in certain residential real estate projects in the PRC to COLI. As a result, the assets and liabilities related to such residential real estate projects have been presented as disposal group classified as held for sale in the financial statements.

Total ordinary shareholders’ funds and perpetual capital securities

As at 30 June 2016, total ordinary shareholders’ funds and perpetual capital securities was HK$490,319 million, a decreased of HK$2,583 million. In addition to the redemption of the perpetual capital securities of US$750 million (HK$5,850 million) on 15 April 2016 by the company, the decrease mainly was attributable to other comprehensive loss, such as exchange differences on translation of financial statements resulted from RMB depreciation in the currency period.

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Risk Management

In accordance with the Group’s development strategy, CITIC Limited has established a risk management system covering all business segments to identify, assess and manage various risks in the Group’s business activities.

The risk management system of CITIC Limited is established along the core concepts of risk management and internal control released by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and the Basic Standard for Enterprise Internal Control jointly issued by five ministries and commissions (Ministry of Finance, CSRC, National Audit Office, CBRC and CIRC) in 2008, as well as relevant guidelines and governmental policies.

The risk management system of CITIC Limited comprises “Four Levels” and “Three Lines of Defence” based on the corporate governance structure. The “Four Levels” are the (i) board of directors, (ii) management and several committees, (iii) risk management functions of CITIC Limited, and (iv) member companies. The “Three Lines of Defence” are the (i) first line of defence comprised by business units of each level of CITIC Limited, (ii) second line of defence comprised by the risk management functions of each level of CITIC Limited, and (iii) third line of defence comprised by the internal audit departments or functions of each level of CITIC Limited.

Financial Risk

Governance structure

As a sub-committee of the Executive Committee, the Asset and Liability Management Committee (“ALCO”) has been established to monitor financial risks of the Group in accordance with the relevant treasury and financial risk management policies (“management policies”). Relevant departments of CITIC Limited are responsible for communicating and implementing the decisions of ALCO, monitoring the adherence of the management policies and preparing relevant reports. All member companies have the responsibility for identifying and effectively managing their financial risk positions and reporting to the corresponding departments of CITIC Limited on a timely basis, in accordance with the overall risk framework under the management policies and within the scope of authorisation.

Based on the annual budget, ALCO shall review CITIC Limited’s financing plan and instruments, oversee fund management and cash flow positions, and manage risks relating to counterparties, interest rates, currencies, commodities, commitments and contingent liabilities, and is responsible for formulating hedging policy and approving the use of new risk management tools.

Asset and liability management

One of the main functions of ALCO is asset and liability management. CITIC Limited’s sources of funds for different businesses include long-term and short-term debt and equity, of which ordinary shares, preferred shares and perpetual securities are the alternative forms of equity financing instruments. CITIC Limited manages its capital structure to finance its overall operations and growth by using different sources of funds. The type of funding is targeted to match the characteristics of our underlying business.

CITIC LIMITED

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1. Debt

ALCO centrally manages and regularly monitors the existing and projected debt levels of CITIC Limited and its major non-financial subsidiaries to ensure that the Group’s debt size, structure and cost are at reasonable levels.

As at 30 June 2016, consolidated debt of CITIC Limited[(1)] was HK$719,877 million, including loans of HK$110,779 million and debt instruments issued[(2)] of HK$609,098 million. Debt of the head office of CITIC Limited[(3)] accounted for HK$66,047 million and debt of CITIC Bank[(4)] HK$480,212 million. In addition, the head office of CITIC Limited had cash and deposits of HK$4,829 million and available committed facilities from banks and subsidiaries of HK$17,000 million.

The details of debt are as follows:

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As at 30 June 2016 HK$ million
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Consolidated debt of CITIC Limited	719,877
Amongwhich: Debt of the head office of CITIC Limited	66,047
Debt of CITIC Bank	480,212

Note:

(1) Consolidated debt of CITIC Limited is the sum of “bank and other loans” and “debt instruments issued” in the Consolidated Balance Sheet of CITIC Limited;
(2) Debt instruments issued include corporate bonds, notes, subordinated bonds, certificates of deposit and certificates of interbank deposit issued;
(3) Debt of the head office of CITIC Limited is the sum of “bank and other loans”, “long-term borrowings” and “debt instruments issued” in the Balance Sheet of CITIC Limited;
(4) Debt of CITIC Bank refers to CITIC Bank’s consolidated debt securities issued, including long-term debt securities, subordinated bonds, certificates of deposit and certificates of interbank deposit issued.

Consolidated debt by maturity as at 30 June 2016

Within one year or on demand Between one and two years Between two and five years Over five years

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26%
56%
13%
5%
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Consolidated debt by type as at 30 June 2016

Loan within one year or on demand Loan over one year Corporate bonds issued Notes issued Subordinated debt issued Certificate of deposit issued Interbank CD

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4%
12%
47%
14%
9%
12%
2%
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The debt to equity ratio of CITIC Limited as at 30June 2016 is as follows:

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In HK$ million Consolidated Head office
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Debt	719,877	66,047
Total equity(5)	655,617	389,589
Debt to equity ratio	110%	17%

Note:

(5) Total consolidated equity is based on the “total equity” in the Consolidated Balance Sheet; Total equity of head office is based on the “total ordinary shareholders’ funds and perpetual capital securities” in the Balance Sheet.

2. Liquidity risk management

The objective of liquidity risk management is to ensure that CITIC Limited always has sufficient cash to repay its maturing debt, perform other payment obligations and meet other funding requirements for normal business development.

CITIC Limited’s liquidity management involves the regular cash flow forecast for the next three years and the consideration of its liquid assets level and new financings necessary to meet future cash flow requirements.

CITIC Limited centrally manages its own liquidity and that of its major non-financial subsidiaries and improves the efficiency of fund utilisation. With flexible access to domestic and overseas markets, CITIC Limited seeks to diversify sources of funding through different financing instruments, in order to raise lowcost funding of medium and long terms, maintain a mix of staggered maturities and minimise refinancing risk.

Details of liquidity risk management are set out in Note 32(b) to the consolidated financial statements.

CITIC LIMITED

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3. Contingent liabilities and commitments

Details of contingent liabilities and commitments of CITIC limited as at 30 June 2016 are set out in Note 31 to the consolidated financial statements.

4. Pledged loan

Details of cash and deposits, fixed assets and intangible assets pledged as security for CITIC Limited’s loan as at 30 June 2016 are set out in 28(d) to the consolidated financial statements.

5. Credit ratings

			Standard & Poor’s	Moody’s
30	June	2016	A–/Negative	A3/Negative

Treasury risk management

Treasury risk management essentially covers the following financial risks inherent in CITIC Limited’s businesses:

Interest rate risk
Currency risk
Counterparty risk for financial products
Commodity risk
Market price risk

CITIC Limited manages the above risks by using appropriate financial derivatives or other means, and priority will be given to simple, cost-efficient and effective hedge instruments which meet the HKAS 39 in performing treasury risk management responsibilities. To the extent possible, gains and losses of the derivatives offset the losses and gains of the assets, liabilities or transactions being hedged.

CITIC Limited is committed to establishing a comprehensive and uniform treasury risk management system. Within the group-wide treasury risk management framework, member companies are required to, according to their respective business characteristics and regulatory requirements, implement suitable treasury risk management strategies and procedures and submit reports on a regular and ad hoc basis.

1. Interest rate risk

CITIC Limited regularly monitors current and projected interest rate changes, with each of the operating entities of the Group implementing its own interest rate risk management system covering identification, measurement, monitoring and control of market risks. Interest rate risk is managed by taking into account market conditions and controlled at a reasonable level.

For our financial subsidiaries, repricing risk and benchmark risk are the main sources of interest rate risk. Observing the principle of prudent risk appetite, they closely track changes in the macroeconomic situation and internal business structure, continue to optimise the maturity structure of deposits, make timely adjustments to the loan repricing lifecycle, and take the initiative to manage sensitive gaps in interest rates for the overall objective of achieving steady growth both in net interest income and economic value within a tolerable level of interest rate risk.

HALF-YEAR REPORT 2016

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For our head office and non-financial subsidiaries, the interest rate risk arises primarily from debt. Borrowings at floating rates expose CITIC Limited to cash flow interest rate risk, while borrowings at fixed rates expose CITIC Limited to fair value interest rate risk. Based on its balance sheet and market conditions, CITIC Limited and its non-financial subsidiaries will conduct analysis and sensitivity testing on interest rate risk, adopt a flexible approach in choosing financing instruments at floating and fixed rates, or choose to employ, at the suitable time, the interest rate swaps and other derivative instruments approved for use by the ALCO to manage interest rate risk.

Details of interest rate risk management are set out in Note 32(c) to the consolidated financial statements.

2. Currency risk

CITIC Limited has major operations in mainland China, Hong Kong and Australia, with Renminbi (“RMB”), Hong Kong dollar (“HKD”) and United States dollar (“USD”) as functional currencies respectively. The Group’s member companies are exposed to currency risk from gaps between financial assets and liabilities, future commercial transactions and net investments in foreign operations that are denominated in a currency that is not the member company’s functional currency. The reporting currency of the consolidated financial statements of CITIC Limited is HKD. Translation exposures from the consolidation of subsidiaries, whose functional currency is not HKD, are not hedged by using derivative instruments as no cash exposures are involved.

CITIC Limited measures its currency risk mainly by currency gap analysis. Where it is appropriate, the Group seeks to lower its currency risk by matching its foreign currency denominated assets with corresponding liabilities in the same currency or using forward contracts and cross currency swaps, provided that hedging is only considered for firm commitments and highly probable forecast transactions.

Details of currency risk management are set out in Note 32 (d) to the consolidated financial statements.

3. Counterparty risk for financial products

CITIC Limited has business with various financial institutions, including deposits, interbank lending, financial investment products and derivative financial instruments. To mitigate the risk of non-recovery of deposited funds or financial instrument gains, member companies of CITIC Limited approve and adjust the list of counterparties and credit limits of approved financial institutions through internal credit extension processes. Regular report is required.

4. Commodity risk

Some businesses of CITIC Limited involve the production, procurement, and trading of commodities, and they face exposure to price risks of commodities such as iron ore, crude oil, gas and coal.

To manage some of its raw material exposures such as supply shortages and price volatility, CITIC Limited has entered into long-term supply contracts for certain inputs or used plain vanilla futures or forward contracts for hedging. While CITIC Limited views that natural offsetting is being achieved to a certain extent across its different business sectors, it performs continual risk management review to ensure commodity risks are well understood and controlled within its business strategies.

5. Market price risk

CITIC Limited holds investments in financial assets classified as available-for-sale financial assets or financial assets at fair value through profit or loss in the consolidated balance sheet. To control price risks arising from such investments, the Group actively monitors the price changes and diversifies the relevant investment risks through appropriate asset allocation.

CITIC LIMITED

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Economic Environment

CITIC Limited operates diversified businesses globally in various countries and regions. As a result, its financial condition, operational results and business prospects are, to a significant degree, subject to the development of both international and domestic economies, as well as the political and legislative environment.

As China’s economy is undergoing structural changes, the formation of new growth drivers involves further reforms in a variety of areas, including politics, economy, technology, culture and society. With the sluggish global economic recovery, growth remains soft in the developed economies and tends to be more divergent across regions due to significant differences in inherent structures. In emerging markets, economic growth continues to slow down. The economic rebound is still vulnerable due to the lowering of potential market growth as well as the decline in commodity prices and capital outflows. If negative economic factors appear in countries and regions in which CITIC Limited operates, there might be an adverse impact on its operational results, financial condition and profitability.

Operational Risk

The financial services segment of the Group covers various sectors, including banking, securities, trust, insurance and asset management. As information technology is widely applied in the modern financial services industry, the reliability of computer systems, computer networks and information management software is essential to both traditional financial and innovative businesses. Unreliable information technology systems or underdeveloped network technologies may result in inefficient trading systems, business interruption, or loss of important information, thus affecting the reputation and service quality of financial institutions and even incurring economic losses and legal disputes.

CITIC Limited carries out resources and energy, manufacturing, engineering contracting, real estate and other businesses in countries and regions across the world, and these businesses might continue to encounter a diversity of operational difficulties. Certain difficulties, if beyond the control of CITIC Limited, might result in production delays or increases in production costs. These operational risks include delay of government payments, deterioration of tax policies, labour disputes, unforeseen technical failures, various disasters and emergencies, unexpected changes in mineral, geological or mining conditions, pollution and other environmental damage, as well as potential disputes with foreign partners, customers, subcontractors, suppliers or local residents or communities. Such risks would cause damage or loss to the relevant businesses of CITIC Limited, which in turn could adversely affect its operations, financial condition and profitability.

HALF-YEAR REPORT 2016

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Credit Risk

With the proliferation of new market entities, innovative business models, new products, businesses and counterparties, credit risks could increase in both width and complexity. In this unpredictable economic climate, with extensive business operations and counterparties, the Group pays close attention to market developments and credit risks arising from business partners. If the Group fails to investigate and prevent such risks, they may have an adverse impact on its operations, financial condition and profitability.

Competitive Markets

CITIC Limited operates in highly competitive markets. Failure to compete in terms of product specifications, service quality, reliability or price may have an adverse impact on the Group.

The financial services business faces fierce competition from domestic and international commercial banks and other financial institutions.
The engineering contracting business is challenged by global peers as well as China’s large state-owned enterprises and private companies.
Resources and energy, manufacturing, real estate operations, and other businesses in different sectors also face severe competition over resources, technologies, prices and services.

Intensification of competition might result in lower product prices, narrower profit margins as well as loss of market share for CITIC Limited.

Other External Risks and Uncertainties

Impact of local, national and international laws and regulations

CITIC Limited faces local business risks in different countries and regions. Such risks might have a significant impact on the financial condition, operations and business prospects of CITIC Limited in the relevant markets. The investments of CITIC Limited in countries and regions across the world might at present or in future be affected by changes in local, national or international political, social, legal, tax, regulatory and environmental requirements from time to time. In addition, new government policies or measures, if introducing changes in fiscal, tax, regulatory, environmental or other aspects that may affect competitiveness, could result in an additional or unforeseen increase in operating expenses and capital expenditures, produce risks to the overall return on investment of CITIC Limited, and delay or impede its business operations and hence adversely affect revenue and profit.

Impact of new accounting standards

The Hong Kong Institute of Certified Public Accountants (“HKICPA”) issues new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) from time to time. As the accounting standards continue to evolve, HKICPA might further issue new and revised HKFRSs in the future. The new accounting policies, if required to be adopted by CITIC Limited, could have a significant impact on its financial condition and operations.

CITIC LIMITED

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Natural disasters or events, terrorism and diseases

The business of CITIC Limited could be affected by events such as earthquakes, typhoons, tropical cyclones, inclement weather, acts or threats of terrorism, or outbreaks of highly contagious diseases, which would directly or indirectly reduce the supply of essential goods or services or reduce economic activities on a local, regional or global scale. Any of these disasters might damage the businesses of CITIC Limited, which would have a material adverse impact on the financial condition and operations of CITIC Limited.

The entire Group is committed to constantly improving its risk monitoring and management mechanism in order to promote risk identification and assessment at all levels; strengthen risk assessment and monitoring of major projects and key businesses; and manage counterparty credit risks. CITIC Limited stays fully informed of the operations, financial condition and major business progress of its subsidiaries through off-site monitoring, on-site inspections and other means to assess the risks that may arise. Through risk reports on weaknesses and potential risks, CITIC Limited supervises and implements risk management and control measures to improve its comprehensive risk management practices and initiatives across the Group.

HALF-YEAR REPORT 2016

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Human Resources

Equality

In adherence to our people-oriented principles, we offer equal opportunities in employment, career advancement, remuneration and benefits, as well as training and development to provide a broad platform for the diversified development of our employees. As part of our active efforts to foster a harmonious employeremployee relationship, we operate against any discrimination in connection with ethnicity, nationality, religion, physical disability or gender, while child or forced labour is strictly forbidden.

Incentives

Our remuneration policy is results-based and market-oriented, formulated under the guidance of remuneration policies of local governments of regions where we operate and with reference to data on remuneration furnished by professional consulting agencies. It takes into account all factors and seeks balance between internal and external requirements, placing equal emphasis on the market-competitiveness of our remuneration and fairness among employees.

We have adopted a market-based incentive and appraisal system that links staff remuneration with business results. Decisions regarding human resources, such as those in relation to remuneration adjustment, bonus allocation, promotion, training and incentives, are made on the basis of a scientifically performance appraisal mechanism.

We are in stringent compliance with the requirements of local governments in relation to staff insurance, benefit plans, work hours and annual leave provisions, and provide social insurance with full-coverage. Most subsidiaries also offer additional benefits and insurance coverage for staff, such as corporate annuities (supplementary pension insurance) and supplementary medical insurance.

Training

Staff training is a top priority for CITIC, which endeavours to provide different channels for staff training to enhance the expertise of its employees and maximise the ability to add value in all employees. With the establishment of CITIC School of Management, we are actively building a staff training platform and regime bearing CITIC characteristics and complementary to its business development. We have organised a number of premium training projects in solid implementation of our talent strategy, and held our first training session for Hong Kong employees.

CITIC LIMITED

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Past Performance and Forward Looking Statements

Performance and results of the operations of CITIC Limited for previous years described within this Half-Year Report are historical in nature. Past performance is no guarantee of the future results of CITIC Limited. This HalfYear Report may contain forward-looking statements and opinions, and therefore risks and uncertainties are involved. Actual results may differ materially from expectations discussed in such forward-looking statements and opinions. None of CITIC Limited, the Directors, employees or agents assumes (a) any obligation to correct or update any forward-looking statements or opinions contained in this Half-Year Report; and (b) any liability arising from any forward-looking statements or opinions that do not materialise or prove to be incorrect.

HALF-YEAR REPORT 2016

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Consolidated Income Statement

For the six months ended 30 June 2016

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----- Start of picture text -----

Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
Continuing operations
Interest income 128,784 136,793
Interest expenses (64,466) (73,074)
Net interest income 5(a) 64,318 63,719
Fee and commission income 29,680 24,640
Fee and commission expenses (1,271) (1,169)
Net fee and commission income 5(b) 28,409 23,471
Sales of goods and services 5(c) 86,934 93,216
Other revenue 5(d) 4,313 16,156
91,247 109,372
Total revenue 183,974 196,562
Cost of sales and services 6 (72,158) (77,420)
Other net income 7 3,595 4,722
Impairment losses on
– Loans and advances to customers (23,632) (19,996)
– Others (4,838) (1,666)
Other operating expenses 9 (37,352) (39,914)
Net valuation gain on investment properties 171 382
Share of profits of associates, net of tax 957 3,215
Share of profits of joint ventures, net of tax 868 549
Profit before net finance charges and taxation 51,585 66,434
Finance income 534 1,280
Finance costs (3,624) (4,947)
Net finance charges 8 (3,090) (3,667)
Profit before taxation 9 48,495 62,767
Income tax 10 (12,343) (13,197)
Profit for the period from continuing operations 36,152 49,570
Discontinued operations
Loss for the period from discontinued operations 35 (4,782) (611)
Profit for the period 31,370 48,959
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CITIC LIMITED

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Consolidated Income Statement

For the six months ended 30 June 2016

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Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
Profit for the period 31,370 48,959
Attributable to:
–
Ordinary shareholders of the Company 20,182 37,685
– Holders of perpetual capital securities 460 565
– Non-controlling interests 10,728 10,709
Profit for the period 31,370 48,959
Profit/(loss) attributable to ordinary shareholders of
the Company arising from:
–
Continuing operations 24,918 38,171
– Discontinued operations (4,736) (486)
20,182 37,685
Basic and diluted earnings per share for profit/(loss)
attributable to ordinary shareholders of the
Company during the period (HK$): 12
– Continuing operations 0.85 1.53
– Discontinued operations (0.16) (0.02)
0.69 1.51
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The notes on pages 43 to 117 form part of these condensed unaudited consolidated interim accounts.

HALF-YEAR REPORT 2016

/ 35

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2016

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Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
Profit for the period 31,370 48,959
Other comprehensive (loss)/income for the period (after
tax and reclassification adjustments) 13
Items that have been reclassified or may be reclassified
subsequently to profit or loss:
Available-for-sale financial assets: net movement in the fair
value reserve (2,653) 183
Cash flow hedge: net movement in the hedging reserve (447) 320
Share of other comprehensive loss of associates and joint
ventures: exchange differences on translation of financial
statements and others (581) (509)
Exchange differences on translation of financial statements
and others (11,545) 2
Items that have not been reclassified or may not be
reclassified subsequently to profit or loss:
Reclassification of owner-occupied property as investment
property: revaluation gain 11 –
Other comprehensive loss for the period, net of tax (15,215) (4)
Total comprehensive income for the period 16,155 48,955
Attributable to:
Ordinary shareholders of the Company 9,331 37,406
Holders of perpetual capital securities 460 565
Non-controlling interests 6,364 10,984
Total comprehensive income for the period 16,155 48,955
Total comprehensive income/(loss) attributable to
ordinary shareholders of the Company arising from:
–
Continuing operations 14,275 37,888
– Discontinued operations (4,944) (482)
9,331 37,406
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The notes on pages 43 to 117 form part of these condensed unaudited consolidated interim accounts.

CITIC LIMITED

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Consolidated Balance Sheet

As at 30 June 2016

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30 June 31 December
2016 2015
Note HK$ million HK$ million
(Unaudited) (Audited)
Assets
Cash and deposits 15 873,526 801,615
Placements with banks and non-bank financial institutions 128,762 141,775
Financial assets at fair value through profit or loss 16 74,285 40,391
Derivative financial instruments 17 26,976 16,509
Trade and other receivables 18 134,665 141,347
Amounts due from customers for contract work 1,451 2,234
Inventories 41,589 130,447
Financial assets held under resale agreements 113,199 165,391
Loans and advances to customers and other parties 19 3,153,019 2,947,798
Available-for-sale financial assets 20 565,071 494,786
Held-to-maturity investments 21 225,507 216,267
Investments classified as receivables 22 1,380,912 1,331,281
Interests in associates 23 53,597 50,663
Interests in joint ventures 24 19,058 22,701
Fixed assets 182,151 183,740
Investment properties 26,820 28,508
Intangible assets 20,420 20,572
Goodwill 22,052 19,481
Deferred tax assets 27,597 27,761
Other assets 59,018 20,042
Assets of disposal group classified as held for sale 35 135,142 –
Total assets 7,264,817 6,803,309
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HALF-YEAR REPORT 2016

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Consolidated Balance Sheet

As at 30 June 2016

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----- Start of picture text -----

30 June 31 December
2016 2015
Note HK$ million HK$ million
(Unaudited) (Audited)
Liabilities
Borrowing from central banks 91,380 44,761
Deposits from banks and non-bank financial institutions 25 1,339,053 1,275,421
Placements from banks and non-bank financial institutions 56,813 58,141
Financial liabilities at fair value through profit or loss 119 –
Derivative financial instruments 17 32,847 17,475
Trade and other payables 26 196,246 230,636
Amounts due to customers for contract work 4,125 7,224
Financial assets sold under repurchase agreements 22,536 84,949
Deposits from customers 27 4,010,328 3,766,848
Employee benefits payables 15,261 18,156
Income tax payable 7,123 9,414
Bank and other loans 28 110,779 147,221
Debt instruments issued 29 609,098 449,772
Provisions 3,911 3,567
Deferred tax liabilities 6,395 6,998
Other liabilities 14,491 19,557
Liabilities of disposal group classified as held for sale 35 88,695 –
Total liabilities 6,609,200 6,140,140
Equity 30
Share capital 381,710 381,710
Perpetual capital securities 7,879 13,836
Reserves 100,730 97,356
Total ordinary shareholders’ funds and perpetual capital
securities 490,319 492,902
Non-controlling interests 165,298 170,267
Total equity 655,617 663,169
Total liabilities and equity 7,264,817 6,803,309
----- End of picture text -----

Approved and authorised for issue by the board of directors on 26 August 2016.

Director: Chang Zhenming Director: Wang Jiong

The notes on pages 43 to 117 form part of these condensed unaudited consolidated interim accounts.

CITIC LIMITED

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Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016

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Perpetual Investment Non-
Share capital Capital Hedging related General Retained Exchange controlling Total
capital securities reserve reserve reserves reserve earnings reserve Total interests equity
Note HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Six months ended
30 June 2016
(unaudited)
Balance at 1 January
2016 381,710 13,836 (65,387) 294 4,306 37,013 131,132 (10,002) 492,902 170,267 663,169
Profit for the period 9 – 460 – – – – 20,182 – 20,642 10,728 31,370
Other comprehensive
loss for the period 13 – – – (458) (2,116) – – (8,277) (10,851) (4,364) (15,215)
Total comprehensive
income/(loss) for
the period – 460 – (458) (2,116) – 20,182 (8,277) 9,791 6,364 16,155
Capital injection by
non-controlling
interests – – – – – – – – – 129 129
Redemption of perpetual
capital securities 30(b) – (5,850) – – – – – – (5,850) – (5,850)
Dividends paid to
ordinary shareholders
of the Company 11 – – – – – – (5,818) – (5,818) – (5,818)
Dividends paid to
non-controlling
interests – – – – – – – – – (6,237) (6,237)
Distribution to holders
of perpetual
capital securities – (567) – – – – – – (567) – (567)
New subsidiaries – – – – – – – – – 147 147
Transactions with
non-controlling
interests 36 – – (232) – – – – – (232) (5,399) (5,631)
Others – – 93 – – – – – 93 27 120
– – – – –
Other changes in equity (6,417) (139) (5,818) (12,374) (11,333) (23,707)
Balance at 30 June 2016 381,710 7,879 (65,526) (164) 2,190 37,013 145,496 (18,279) 490,319 165,298 655,617
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HALF-YEAR REPORT 2016

/ 39

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016

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Six months ended
30 June 2015
(unaudited)

Balance at 1 January
2015		324,198	13,834	(60,869)	92	4,885	24,836	109,387	15,597	431,960	143,547	575,507
Profitforthe period	9	–	565	–	–	–	–	37,685	–	38,250	10,709	48,959
Other comprehensive
income/(loss) for
the period	13	–	–	–	285	(398)	–	–	(166)	(279)	275	(4)
Total comprehensive
income/(loss) for
the period		–	565	–	285	(398)	–	37,685	(166)	37,971	10,984	48,955
Capital injection by
non-controlling
interests		–	–	–	–	–	–	–	–	–	4,152	4,152
Dividends paid to ordinary
shareholders of the
Company	11	–	–	–	–	–	–	(4,981)	–	(4,981)	–	(4,981)
Dividends paid to
non-controlling
interests		–	–	–	–	–	–	–	–	–	(1,888)	(1,888)
Distribution to holders
of perpetual capital
securities		–	(567)	–	–	–	–	–	–	(567)	–	(567)
Newsubsidiaries		–	–	–	–	–	–	–	–	–	2,966	2,966
Put options issued
in business
combinations		–	–	(3,034)	–	–	–	–	–	(3,034)	–	(3,034)
Others		–	–	2	–	–	–	–	–	2	34	36
Other changes in equity		–	(567)	(3,032)	–	–	–	(4,981)	–	(8,580)	5,264	(3,316)
Balance at 30 June 2015		324,198	13,832	(63,901)	377	4,487	24,836	142,091	15,431	461,351	159,795	621,146

The notes on pages 43 to 117 form part of these condensed unaudited consolidated interim accounts.

CITIC LIMITED

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Consolidated Cash Flow Statement

For the six months ended 30 June 2016

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Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
Cash flows from operating activities
Profit before taxation from continuing operations 48,495 62,767
Adjustments for:
–
Depreciation and amortisation 9(b) 5,570 5,726
–
Impairment losses 28,470 21,662
–
Net valuation gain on investment properties (171) (382)
–
Net valuation gain on investments (210) (241)
–
Share of profits of associates and joint ventures, net of tax (1,825) (3,764)
–
Interest expenses on debt instruments issued 5(a) 7,819 4,816
– Finance income 8 (534) (1,280)
– Finance costs 8 3,624 4,947
– Net gain on available-for-sale financial assets (2,019) (3,525)
– Net gain on disposal of subsidiaries,
associates and joint ventures (2,029) (13,160)
87,190 77,566
Changes in working capital
(Increase)/decrease in deposits with central banks
and non-bank financial institutions (12,918) 30,273
Increase in placements with banks and
non-bank financial institutions (2,652) (31,016)
Increase in financial assets at fair value through
profit or loss and derivative financial assets (32,322) (8,528)
Increase in trade and other receivables (8,893) (13,526)
Decrease/(increase) in amounts due from
customers for contract work 783 (219)
Increase in inventories (5,012) (3,975)
Decrease in financial assets held under resale agreements 51,404 72,454
Increase in loans and advances to
customers and other parties (286,866) (170,120)
Increase in investments classified as receivables (78,840) (314,781)
Increase in other assets (42,130) (14,387)
Increase in deposits from banks and
non-bank financial institutions 89,970 273,120
(Decrease)/increase in placements from
banks and non-bank financial institutions (210) 1,026
Increase/(decrease) in financial liabilities at fair value
through profit or loss and derivative financial liabilities 15,493 (725)
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HALF-YEAR REPORT 2016

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Consolidated Cash Flow Statement

For the six months ended 30 June 2016

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Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
(Decrease)/increase in trade and other payables (5,039) 4,560
Decrease in amounts due to customers for contract work (3,099) (1,978)
Decrease in financial assets sold under
repurchase agreements (61,774) (43,928)
Increase in deposits from customers 313,666 286,528
Increase/(decrease) in borrowing from central bank 48,317 (50,600)
Decrease in other liabilities (1,705) (3,136)
Decrease in employee benefits payables (2,895) (2,345)
Increase/(decrease) in provisions 344 (338)
Cash generated from operating activities of
continuing operations 62,812 85,925
Income tax paid (14,634) (16,168)
Net cash generated from operating activities of
continuing operations 48,178 69,757
Net cash generated from/(used in) operating
activities of discontinued operations 7,446 (4,760)
Net cash generated from operating activities 55,624 64,997
Cash flows from investing activities
Proceeds from disposal and redemption of
financial investments 334,376 448,014
Proceeds from disposal of fixed assets,
intangible assets and other assets 364 136
Proceeds from disposal of associates and joint ventures 3,246 14,360
–
Net cash received from disposal of subsidiaries 1,236
Dividends received from equity investments,
associates and joint ventures 914 2,813
Payments for purchase of financial investments (421,804) (585,979)
Payments for additions of fixed assets,
intangible assets and other assets (11,940) (12,237)
Net cash payment for acquisition of subsidiaries,
associates and joint ventures (7,607) (3,862)
Net cash used in investing activities of
continuing operations (102,451) (135,519)
Net cash generated from/(used in) investing
activities of discontinued operations 728 (6,599)
Net cash used in investing activities (101,723) (142,118)
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CITIC LIMITED

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Consolidated Cash Flow Statement

For the six months ended 30 June 2016

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----- Start of picture text -----

Unaudited
Six months ended 30 June
2016 2015
Note HK$ million HK$ million
(Restated)
Cash flows from financing activities
Capital injection received from non-controlling interests 104 445
Transactions with non-controlling interests 36 (5,631) –
Proceeds from new bank and other loans 29,195 69,388
Repayment of bank and other loans and
debt instruments issued (292,528) (138,951)
Proceeds from new debt instruments issued 436,673 121,600
Interest paid on bank and other loans and
debt instruments issued (10,379) (9,470)
-
Dividends paid to non controlling interests (1,019) (1,440)
Dividends paid to ordinary shareholders of the Company (5,818) (4,981)
–
Redemption of perpetual capital securities (5,850)
Distribution paid to holders of perpetual capital securities (567) (567)
Net cash generated from financing activities of
continuing operations 144,180 36,024
Net cash (used in)/generated from
financing activities of discontinued operations (10,141) 10,998
Net cash generated from financing activities 134,039 47,022
Net increase/(decrease) in cash and cash equivalents 87,940 (30,099)
Cash and cash equivalents at 1 January 354,111 347,891
Effect of exchange rate changes (6,224) 1,875
Cash and cash equivalents at 30 June 435,827 319,667
Less: c ash and cash equivalents included in assets of
–
disposal group classified as held for sale at 30 June (7,792)
Cash and cash equivalents of continuing
operations at 30 June 428,035 319,667
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The notes on pages 43 to 117 form part of these condensed unaudited consolidated interim accounts.

HALF-YEAR REPORT 2016

/ 43

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

1 General Information

CITIC Limited (the “Company”) was incorporated in Hong Kong, the shares of which are listed on the Main Board of the Stock Exchange of Hong Kong Limited. The Company and its subsidiaries (collectively referred to as the “Group”) are principally engaged in financial services, resources and energy, manufacturing, engineering contracting, real estate and other businesses.

The parent and the ultimate holding company of the Company is CITIC Group Corporation (“CITIC Group”).

These condensed unaudited consolidated interim accounts (the “Accounts”) are presented in millions of Hong Kong dollars (“HK$”), unless otherwise stated.

The financial information relating to the year ended 31 December 2015 that is included in the Accounts as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows:

The Company has delivered the financial statements for the year ended 31 December 2015 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622).

The Company’s auditor has reported on those financial statements. The auditor’s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance (Cap. 622).

2 Basis of preparation

The Accounts have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” and Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The Accounts should be read in conjunction with the Company’s annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”).

In addition to those described below, the accounting policies adopted in the preparation of the Accounts are consistent with those adopted in the Company’s annual financial statements for the year ended 31 December 2015.

CITIC LIMITED

/ 44

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

2 Basis of preparation (continued)

Disposal groups held for sale and discontinued operations

Disposal groups are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. Disposal groups (except for certain assets as explained below) are stated at the lower of carrying amount and fair value less costs to sell. Deferred tax assets, financial assets (other than investments in subsidiaries and associates) and investment properties, which are classified as held for sale, would continue to be measured in accordance with the policies set out in the Company’s annual financial statements for the year ended 31 December 2015.

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographic area of operations. Intra-group balances, transactions and cash flows between discontinued and continuing operations are eliminated in preparing the Accounts.

When an operation is classified as discontinued, a single amount is presented in the income statement, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

The following amendments became effective for the first time for the financial year beginning on or after 1 January 2016:

HKAS 1 (Amendment)	The disclosure initiative
HKAS 16 and HKAS 38 (Amendment)	Clarification of acceptable methods of depreciation and
	amortisation
HKAS 27 (Amendment)	Separate financial statements regarding the equity method
HKFRS 10, HKFRS 12 and	Investment entities: applying the consolidation exception
HKAS 28(Amendment)
HKFRS 11 (Amendment)	Accounting for acquisitions of interests in joint operations
Annual Improvement Project	Annual Improvements 2012-2014 Cycle

Adoption of the above amendments does not have a significant impact on the Accounts.

The Group has not applied the following amendments to standards and new standards which are not yet effective for the financial year beginning on or after 1 January 2016 and which have not been early adopted in the Accounts.

HKFRS 15	Revenue from contracts with customers(1)
HKFRS 9	Financial instruments(1)
HKFRS 16	Leases(2)
HKAS 28 and HKFRS 10 (Amendments)	Sale or contribution of assets between an investor and
	its associate or joint venture(3)

(1) Effective for the annual periods beginning on or after 1 January 2018.

(2) Effective for the annual periods beginning on or after 1 January 2019.

(3) Originally effective for annual periods beginning on or after 1 January 2016. The effective date has now been deferred/removed.

The Group is in the process of making an assessment of the impact of the above new standards and amendments to standards.

HALF-YEAR REPORT 2016

/ 45

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

3 Critical accounting estimates and judgment

In addition to those described below, the accounting estimates and judgements required to be made in preparation of the Accounts are consistent with those set out in the Company’s annual financial statements for the year ended 31 December 2015.

(a) Metallurgical Corporation of China (“MCC”) Claim

MCC were appointed as the EPC (engineering, procurement and construction) contractor for the processing area and related facilities at the Group’s Sino Iron project in Western Australia (“Sino Iron Project”). The fixed price contract amount was US$3.4 billion.

On 30 January 2013, MCC announced that it had incurred costs over the value of the contract and had provided additional funding of US$858 million to MCC Mining (Western Australia) Pty Ltd (“MCC WA”), its wholly owned subsidiary company responsible for delivering MCC’s obligations under the contract.

As at the date of approval of the Accounts, MCC has not claimed any additional costs from Sino Iron Pty Ltd (“Sino Iron”) or its subsidiary companies, other than minor contract variations in the normal course of operations, and the Group believes it has satisfied all of its obligations under the contract.

Under the contract, the Group has a right to claim liquidated damages from MCC WA for certain delays in the completion of their project scope at a daily amount of 0.15% of the value of the main contract (approximately US$5 million per day, with a cap of approximately US$530 million in total). As at balance sheet date the cumulative days delay that has been incurred has resulted in the contractual cap to the liquidated damages being reached.

As set out in the Company’s announcement dated 24 December 2013, Sino Iron and MCC WA entered into a supplemental contract pursuant to which Sino Iron will take over the management of the construction and commissioning of the remaining four production lines of the Sino Iron Project. An independent audit will opine on various matters including the contract price for the hand over pursuant to the supplemental contract and related fees and expenses, the value of the supporting services provided by Sino Iron to MCC WA in carrying out its responsibilities under the contract, the extent of the works completed by MCC WA in respect of the first two production lines, and the liability of MCC WA in respect of the extensive delays on completion of the works under the contract. By reference to such findings of the independent audit, Sino Iron and MCC WA expect to enter into further negotiations to determine the amount of liabilities to be borne between the parties. Outcomes are not yet known as at 30 June 2016.

CITIC LIMITED

/ 46

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

3 Critical accounting estimates and judgment (continued)

(b) Mineralogy Pty Ltd (“Mineralogy”) Disputes

Each of Sino Iron and Korean Steel Pty Ltd (“Korean Steel”), subsidiary companies of the Company, is a party to a Mining Right and Site Lease Agreement (“MRSLA”) with Mineralogy. Among other things, those agreements, together with other project agreements, provide Sino Iron and Korean Steel the right to construct the Sino Iron Project and take two billion tonnes of magnetite ore.

A number of disputes have arisen in relation to the MRSLAs and associated agreements, a number of which are described below. The Group intends to contest all claims vigorously.

Option Agreement Dispute

The Company is a party to an Option Agreement with Mineralogy and Mr. Clive Palmer, pursuant to which it has options to acquire up to four further companies, each holding the right to mine one billion tonnes of magnetite ore in the vicinity of the Sino Iron Project. The Company exercised the first option under the Option Agreement on 13 April 2012. Following the exercise of the first option, Mineralogy alleged that the Option Agreement had been repudiated by the Company, purported to accept that repudiation and stated that the Option Agreement was at an end.

The Company (and its affected subsidiaries, Sino Iron and Korean Steel) commenced legal proceedings in relation to the dispute in the Supreme Court of Western Australia. On 30 September 2015, the Court made the declarations sought by the Company, including that the Company had not repudiated the Option Agreement as initially asserted by Mineralogy and Mr. Palmer.

Notwithstanding the making of these declarations, Mineralogy has not taken the action necessary to permit completion of the transaction resulting from the Company’s exercise of the first option under the Option Agreement. On 31 March 2016, the Company, Sino Iron and Korean Steel commenced a proceeding in the Supreme Court of Western Australia to seek orders compelling Mineralogy to take the steps necessary to complete the transfer of a further company having the right to mine one billion tonnes of magnetite ore. No trial date has been set for this proceeding.

Royalties Disputes

The MRSLAs provide that Sino Iron and Korean Steel must pay a royalty to Mineralogy, a component of which (“Royalty Component B”) is payable on products produced and calculated by reference to prevailing annual published FOB prices for certain iron ore products (“annual benchmark prices’”). Annual benchmark prices no longer exist, and Sino Iron and Korean Steel’s position is that this means that Royalty Component B is no longer able to be calculated using the formula in the MRSLAs. Mineralogy denied that this was the case, and pursued proceedings in the Supreme Court of Western Australia seeking declarations (among other things) that Royalty Component B can be calculated.

HALF-YEAR REPORT 2016

/ 47

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

3 Critical accounting estimates and judgment (continued)

(b) Mineralogy Pty Ltd (“Mineralogy”) Disputes (continued)

Royalties Disputes (continued)

Earlier this year, Mineralogy sought and was granted leave to amend its statement of claim in the Royalty B proceeding. Among other things, those amendments raise certain claims made in other proceedings Mineralogy commenced in the Supreme Court of Western Australia that were permanently stayed in late 2015, withdraw certain claims contained in its previous statement of claim and raise new claims. Mineralogy then sought leave to bring an application for summary judgment in respect of its claim in this proceeding that Sino Iron and Korean Steel (via their agent or contractor, MCC) breached the ‘standard of work’ clause (clause 16.1) of the MRSLAs. Mineralogy asserts that the breach amounts to repudiation of the MRSLAs and that Mineralogy is therefore entitled to, and has, terminated the MRSLAs. The application for leave to bring the summary judgment application and the summary judgment application itself were heard together on 26 May 2016. Judgment was delivered on 4 August 2016 by Justice Chaney. Leave to bring the summary judgment application was refused and the application itself was dismissed. In early May 2016, Mineralogy filed an application to strike out certain paragraphs of the defence, however Mineralogy withdrew that application and it was dismissed at a directions hearing on 8 August 2016. Counsel for Mineralogy at the 8 August 2016 directions hearing also stated that Mineralogy would not be filing a fresh strike out application and indicated that Mineralogy considered the pleadings to be closed. A strategic conference has been convened by Justice Chaney, who is case managing the proceeding, to consider the future progress of the matter.

On 20 November 2015, Mineralogy filed an application for an urgent interlocutory mandatory injunction requiring Sino Iron, Korean Steel and the Company (together, for the purpose of this application, the “CITIC Parties”) to pay to Mineralogy royalties under the MRSLAs. The application was heard in December 2015 by Justice Tottle, who dismissed the application. Mineralogy appealed Justice Tottle’s decision. The appeal was heard on 24 March 2016 by the Court of Appeal of the Supreme Court of Western Australia. Judgment was delivered on 27 June 2016. The appeal was unanimously allowed and orders were made for the interlocutory injunction application to be remitted for hearing before Justice Chaney.

In August 2015, Queensland Nickel Pty Ltd (“Queensland Nickel”) commenced a proceeding in the Supreme Court of Queensland alleging that the non-payment of the Minimum Production Royalty to Mineralogy amounted to unconscionable conduct by the Company, Sino Iron and Korean Steel, and that the Company, Sino Iron Holdings Pty Ltd and individual officers of the Company and its subsidiaries (together, for the purpose of this proceeding, the “CITIC Parties”) were knowingly concerned in the alleged contraventions. Queensland Nickel sought damages for losses suffered as a consequence of Mineralogy being unable to advance funds to it due to such non-payment. In September 2015, the CITIC Parties filed a strike out application in the proceeding. At a hearing on 16 March 2016, the Court ordered that Queensland Nickel be removed as plaintiff and QNI Resources Pty Ltd and QNI Metals Pty Ltd be substituted as plaintiffs in the proceeding. On 23 March 2016, the Court upheld the strike out application brought by the CITIC Parties and dismissed the proceeding. QNI Resources Pty Ltd and QNI Metals Pty Ltd appealed the decision and the appeal was listed to be heard on 30 September 2016. However, on 22 August 2016, consent orders were made for the appeal to be dismissed and for the appellants to pay the CITIC Parties’ costs of the appeal.

CITIC LIMITED

/ 48

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

3 Critical accounting estimates and judgment (continued)

(b) Mineralogy Pty Ltd (“Mineralogy”) Disputes (continued)

Port Dispute

Sino Iron and Korean Steel have developed port infrastructure at the Port of Cape Preston to be used to export product from the Sino Iron Project. Mineralogy commenced legal proceedings in the Federal Court of Australia seeking declarations that the port infrastructure has vested in it, that it is entitled to possession, control and ownership of that infrastructure and that the Facilities Deeds between the parties which regulate usage of the port infrastructure have been terminated by it.

The matter was heard by the Federal Court of Australia in June 2015. The Court’s reasons for decision were handed down in August 2015. The Court refused to grant any of the relief sought by Mineralogy. The effect of the decision was to preserve the status quo in relation to the operation of the port facilities which continue to be operated by or on behalf of Sino Iron and Korean Steel. Mineralogy has appealed the decision. The appeal was heard from 9 to 12 May 2016. Judgment was reserved.

4 Taxation

The statutory income tax rate of the Company and its subsidiaries located in Hong Kong for the six months ended 30 June 2016 is 16.5% (six months ended 30 June 2015: 16.5%).

Except for the preferential tax treatments, the income tax rate applicable to the Group’s other subsidiaries in Mainland China for the six months ended 30 June 2016 is 25% (six months ended 30 June 2015: 25%).

Taxation for other overseas subsidiaries is charged at the rates of taxation prevailing in the countries/ jurisdiction in which the overseas subsidiaries operate.

5 Revenue

As a multi-industry conglomerate, the Group is principally engaged in financial services, resources and energy, manufacturing, engineering contracting, real estate and other businesses.

For financial services segment, revenue mainly comprises net interest income, net fee and commission income and net trading gain (see Notes 5(a), 5(b) and 5(d)). For non-financial services segment, revenue mainly comprises total invoiced value of sales of goods, services rendered to customers and revenue from construction contracts (see Note 5(c)).

The Group’s customer base is diversified and there is no single customer with which transactions have exceeded 10% of the Group’s revenue.

HALF-YEAR REPORT 2016

/ 49

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

5 Revenue (continued)

(a) Net interest income

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Interest income arising from:
Deposits with central banks, banks and
non-bank financial institutions 5,501 5,735
Placements with banks and non-banks financial institutions 1,973 1,779
Financial assets held under resale agreements 544 3,041
Investments classified as receivables 29,245 29,356
Loans and advances to customers and other parties 79,192 86,666
Investments in debt securities 12,327 10,198
Others 2 18
128,784 136,793
Interest expenses arising from:
Borrowing from central banks (1,434) (790)
Deposits from banks and non-bank financial institutions (20,146) (25,612)
Placements from banks and non-bank financial institutions (739) (331)
Financial assets sold under repurchase agreements (401) (429)
Deposits from customers (33,895) (41,075)
Debt instruments issued (7,819) (4,816)
Others (32) (21)
(64,466) (73,074)
Net interest income 64,318 63,719
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CITIC LIMITED

/ 50

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

5 Revenue (continued)

(b) Net fee and commission income

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Consultancy and advisory fees 3,776 4,795
Bank card fees 9,899 7,402
Settlement and clearing fees 884 1,320
Commission for wealth management services 3,881 3,249
Agency fees and commission 4,620 2,607
Guarantee fees 1,500 2,042
Trustee commission and fees 4,700 2,797
Others 420 428
29,680 24,640
Fee and commission expenses (1,271) (1,169)
Net fee and commission income 28,409 23,471
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(c) Sales of goods and services

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Sales of goods 69,431 75,301
Services rendered to customers 11,827 12,252
Revenue from construction contracts 5,676 5,663
86,934 93,216
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HALF-YEAR REPORT 2016

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Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

5 Revenue (continued)

(d) Other revenue

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Net trading gain (note (i)) 2,654 1,802
Net gain on investment assets under
financial services segment 1,304 13,892
Others 355 462
4,313 16,156
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(i) Net trading gain

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Trading profit/(loss):
– debt securities and certificates of deposits 752 1,294
–
foreign currencies 1,035 1,462
– derivatives 867 (954)
2,654 1,802
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6 Cost of sales and services

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Costs of goods sold 60,190 64,584
Costs of services rendered 7,345 7,955
Costs of construction contracts 4,623 4,881
72,158 77,420
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CITIC LIMITED

/ 52

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

7 Other net income

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Net gain on disposal of subsidiaries, associates and joint ventures 2,030 951
Net gain on financial assets under non-financial services segment 808 2,923
Commissions income, net foreign exchange gain and others 757 848
3,595 4,722
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8 Net finance charges

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Finance costs
– Interest on bank and other loans 1,198 2,835
– Interest on debt instruments issued and other interest expenses 2,699 2,822
3,897 5,657
Less: interest expense capitalised (324) (963)
3,573 4,694
Other finance charges 51 253
3,624 4,947
Finance income (534) (1,280)
3,090 3,667
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HALF-YEAR REPORT 2016

/ 53

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

9 Profit before taxation

Profit before taxation is arrived at after charging below costs and expenses in cost of sales and services and other operating expenses:

(a) Staff costs

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Salaries and bonuses 16,264 16,128
Contributions to defined contribution retirement schemes 2,210 1,488
Others 3,561 3,716
22,035 21,332
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(b) Other items

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Amortisation 1,246 1,267
Depreciation 4,324 4,459
Operating lease charges: minimum lease payments 2,798 2,808
Business tax and surcharges 4,765 7,529
Property management fees 389 502
Non-operating expenses 439 123
Professional fees 455 552
14,416 17,240
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CITIC LIMITED

/ 54

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

10 Income tax expense

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Six months ended 30 June
2016 2015
HK$ million HK$ million
(Restated)
Current tax – Mainland China
Provision for enterprise income tax 10,796 13,287
Land appreciation tax 48 24
10,844 13,311
Current tax – Hong Kong
Provision for Hong Kong profits tax 953 470
Current tax – Overseas
Provision 273 393
12,070 14,174
Deferred tax
Origination and reversal of temporary differences 273 (977)
12,343 13,197
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The particulars of the applicable income tax rates are disclosed in Note 4.

11 Dividends

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Six months ended 30 June
2016 2015
HK$ million HK$ million
2015 Final dividend paid: HK$0.20
(2014: HK$0.20) per share 5,818 4,981
2016 Interim dividend proposed: HK$0.10
(2015: HK$0.10) per share 2,909 2,909
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HALF-YEAR REPORT 2016

/ 55

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

12 Earnings per share

The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders of the Company of HK$20,182 million for the six months ended 30 June 2016 (six months ended 30 June 2015: HK$37,685 million), calculated as follows:

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Profit/(loss) attributable to ordinary shareholders of
the Company arising from:
–
Continuing operations 24,918 38,171
– Discontinued operations (4,736) (486)
20,182 37,685
Weighted average number of ordinary shares (in million) 29,090 24,903
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The diluted earnings per share for the six months ended 30 June 2016 and 2015 are the same as the basic earnings per share. As at 30 June 2016, there are no share options or other equity securities of the Company in issue which if exercised would have a dilutive effect on the issued ordinary share capital as at 30 June 2016 (30 June 2015: Nil).

The basic and diluted earnings per share for the six months ended 30 June 2016 are HK$0.69 (six months ended 30 June 2015: HK$1.51).

13 Other comprehensive (loss)/income

(a) Tax effects relating to each component of other comprehensive (loss)/income

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Six months ended 30 June
2016 2015
Before tax Net-of-tax Before tax Net-of-tax
amount Tax expense amount amount Tax expense amount
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Available-for-sale financial assets:
net movement in fair value reserve (3,340) 687 (2,653) 245 (62) 183
Cash flow hedge: net movement in
hedging reserve (517) 70 (447) 378 (58) 320
Share of other comprehensive loss
of associates and joint ventures:
exchange differences on translation
of financial statements and others (581) – (581) (509) – (509)
Exchange differences on translation of
financial statements and others (11,545) – (11,545) 2 – 2
Reclassification of owner-occupied
property as investment property:
revaluation gain 11 – 11 – – –
(15,972) 757 (15,215) 116 (120) (4)
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CITIC LIMITED

/ 56

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

13 Other comprehensive (loss)/income (continued)

(b) Components of other comprehensive (loss)/income, including reclassification adjustments

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Six months ended 30 June
2016 2015
HK$ million HK$ million
Fair value (loss)/gains of available-for-sale financial assets (2,071) 1,056
Less: N et amounts previously recognised in other
comprehensive income transferred to profit or
loss in the current period (1,269) (811)
Tax effect 687 (62)
(2,653) 183
(Loss)/gains arising from cash flow hedge (573) 317
Less: N et amounts previously recognised in other
comprehensive loss transferred to profit or
loss in the current period 56 61
Tax effect 70 (58)
(447) 320
Share of other comprehensive loss of associates
and joint ventures (581) (509)
Exchange differences on translation of financial statements
and others (11,545) 2
Reclassification of owner-occupied property as
investment property: revaluation gain 11 –
(15,215) (4)
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HALF-YEAR REPORT 2016

/ 57

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

14 Segment reporting

The Group has presented six reportable operating segments which are financial services, resources and energy, manufacturing, engineering contracting, real estate and others. Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal organisation, management requirements and internal reporting system. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose financial performance is regularly reviewed by the board of directors to make decisions about resource to be allocated to the segment and assess its performance, and for which financial information regarding financial position, financial performance and cash flows is available. The details of these six reportable segments are as follows:

Financial services: this segment includes banking, trust, asset management, securities and insurance services.
Resources and energy: the major businesses in this segment include exploration, processing and trading of resources and energy products, including crude oil, coal and iron ore.
Manufacturing: this segment includes manufacturing of special steels, heavy machineries, aluminum wheels and other products.
Engineering contracting: this segment provides contracting and design services for infrastructure, real estate and industrial projects, etc.
Real estate: this segment includes development, sale and holding of properties.
Others: others include various businesses including investment and operation of infrastructures, telecommunication services, motor and food and consumer products business, commercial aviation services, publication services and others.

(a) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources among segments, the board of directors monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets are those assets that are attributable to a segment, and segment liabilities are those liabilities that are attributable to a segment.

Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation of assets attributable to those segments.

The measure used for reporting segment profit is “profit for the period”. To arrive at segment results, the Group’s profit is further adjusted for items not specially attributed to individual segments, such as share of results of associates and joint ventures.

Inter-segment pricing is based on similar terms as those available to other external parties.

CITIC LIMITED

/ 58

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

14 Segment reporting (continued)

(a) Segment results, assets and liabilities (continued)

Information regarding the Group’s reportable segments as provided to the board of directors for the purposes of resources allocation and assessment of segment performance for the six months ended 30 June 2016 and 2015 is set out below:

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Six months ended 30 June 2016
Financial Resources Engineering Real Operation
services and energy Manufacturing contracting estate Others management Elimination Total
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Continuing operations
Revenue from external customers 97,040 21,323 28,673 6,096 1,641 29,183 18 – 183,974
Inter-segment revenue 41 1,135 280 – 47 260 5 (1,768) –
Reportable segment revenue 97,081 22,458 28,953 6,096 1,688 29,443 23 (1,768) 183,974
Share of profits/(losses) of associates,
net of tax 1,096 (34) 63 (2) 18 (187) 3 – 957
Share of profits of joint ventures,
net of tax 206 386 – – 13 263 – – 868
Finance income (Note 8) – 153 129 120 114 44 1,298 (1,324) 534
Finance costs (Note 8) – (795) (363) (37) (163) (821) (3,024) 1,579 (3,624)
Depreciation and amortisation (Note 9(b)) (1,575) (827) (1,656) (67) (90) (1,323) (32) – (5,570)
Impairment losses (28,825) (16) (36) 650 (186) (57) – – (28,470)
Profit/(loss) before taxation 41,333 1,586 2,207 1,231 670 3,885 (2,413) (4) 48,495
Income tax (9,577) (335) (467) (172) (665) (1,083) (82) 38 (12,343)
Profit/(loss) for the period from
continuing operations 31,756 1,251 1,740 1,059 5 2,802 (2,495) 34 36,152
Loss for the period from discontinued
– – – – – – –
operations (4,782) (4,782)
Profit/(loss) for the period 31,756 1,251 1,740 1,059 (4,777) 2,802 (2,495) 34 31,370
Attributable to:
– Ordinary shareholders of the Company 21,941 911 1,641 1,060 (4,717) 2,267 (2,955) 34 20,182
Continuing operations 21,941 911 1,641 1,060 19 2,267 (2,955) 34 24,918
Discontinued operations – – – – (4,736) – – – (4,736)
– N on-controlling interests and holders
of perpetual capital securities 9,815 340 99 (1) (60) 535 460 – 11,188
Continuing operations 9,815 340 99 (1) (14) 535 460 – 11,234
Discontinued operations – – – – (46) – – – (46)
As at 30 June 2016
Financial Resources Engineering Real Operation
services and energy Manufacturing contracting estate Others management Elimination Total
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Reportable segment assets 6,640,820 145,321 96,827 38,284 235,268 120,243 141,077 (153,023) 7,264,817
Including:
Interests in associates 29,737 11,065 984 319 3,608 7,809 75 – 53,597
Interests in joint ventures 3,871 2,850 – – 6,992 5,345 – – 19,058
Assets of disposal group classified
as held for sale – – – – 144,485 – – (9,343) 135,142
Reportable segment liabilities 6,195,559 152,611 48,436 26,879 162,533 74,607 189,903 (241,328) 6,609,200
Including:
Bank and other loans 1,704 41,740 15,477 1,212 9,095 36,620 16,262 (11,331) 110,779
Debt instruments issued 480,213 702 4,439 – – 5,385 119,053 (694) 609,098
Liabilities of disposal group classified
as held for sale – – – – 123,331 – – (34,636) 88,695
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HALF-YEAR REPORT 2016

/ 59

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

14 Segment reporting (continued)

(a) Segment results, assets and liabilities (continued)

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Six months ended 30 June 2015 (Restated)
Financial Resources Engineering Real Operation
services and energy Manufacturing contracting estate Others management Elimination Total
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Continuing operations
Revenue from external customers 103,254 22,146 32,336 6,240 1,304 31,190 92 – 196,562
Inter-segment revenue 647 987 153 68 57 215 – (2,127) –
Reportable segment revenue 103,901 23,133 32,489 6,308 1,361 31,405 92 (2,127) 196,562
Share of profits/(losses) of associates,
net of tax 2,892 3 (69) (4) 139 263 (9) – 3,215
Share of profits/(losses) of joint
ventures, net of tax 301 (16) (66) – (4) 334 – – 549
Finance income (Note 8) – 171 152 237 201 103 1,850 (1,434) 1,280
Finance costs (Note 8) – (799) (562) (74) (321) (730) (3,829) 1,368 (4,947)
Depreciation and amortisation
(Note 9(b)) (1,499) (829) (2,084) (60) (267) (977) (10) – (5,726)
Impairment losses (21,556) (2) (20) – (1) (45) (162) 124 (21,662)
Profit/(loss) before taxation 54,499 1,875 1,747 1,408 1,304 3,606 (1,957) 285 62,767
Income tax (11,312) (292) (310) (413) (160) (893) (28) 211 (13,197)
Profit/(loss) for the period from
continuing operations 43,187 1,583 1,437 995 1,144 2,713 (1,985) 496 49,570
Loss for the period from discontinued
– – – – – – –
operations (611) (611)
Profit/(loss) for the period 43,187 1,583 1,437 995 533 2,713 (1,985) 496 48,959
Attributable to:
–
O rdinary shareholders
of the Company 33,317 1,199 1,307 995 734 2,187 (2,550) 496 37,685
Continuing operations 33,317 1,199 1,307 995 1,220 2,187 (2,550) 496 38,171
Discontinued operations – – – – (486) – – – (486)
–
N on-controlling interests and holders
of perpetual capital securities 9,870 384 130 – (201) 526 565 – 11,274
Continuing operations 9,870 384 130 – (76) 526 565 – 11,399
Discontinued operations – – – – (125) – – – (125)
As at 31 December 2015
Financial Resources Engineering Real Operation
services and energy Manufacturing contracting estate Others management Elimination Total
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Reportable segment assets 6,211,176 141,693 97,208 42,245 232,809 113,738 132,562 (168,122) 6,803,309
Including:
Interests in associates 28,821 11,128 3,143 217 4,036 3,245 73 – 50,663
Interests in joint ventures 3,794 2,628 – – 9,582 6,697 – – 22,701
Reportable segment liabilities 5,777,576 147,960 47,529 30,467 160,689 73,651 155,973 (253,705) 6,140,140
Including:
Bank and other loans 1,339 42,562 16,521 1,282 85,618 37,672 12,586 (50,359) 147,221
Debt instruments issued 345,120 446 5,033 – 4,750 5,283 89,804 (664) 449,772
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CITIC LIMITED

/ 60

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

14 Segment reporting (continued)

(b) Geographical information

An analysis of the Group’s revenue and total assets by geographical area are as follows:

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Revenue from external customers Reportable segment assets
Six months ended 30 June 30 June 31 December
2016 2015 (Restated) 2016 2015
HK$ million HK$ million HK$ million HK$ million
Mainland China 155,249 162,847 6,758,928 6,312,332
Hong Kong and Macau 16,797 20,391 383,789 380,549
Overseas 11,928 13,324 122,100 110,428
183,974 196,562 7,264,817 6,803,309
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15 Cash and deposits

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30 June 31 December
2016 2015
HK$ million HK$ million
Cash 7,937 8,827
Bank deposits 62,521 63,166
Balances with central banks (note (i)):
–
Statutory deposit reserve funds (note (ii)) 512,644 519,487
–
Surplus deposit reserve funds (note (iii)) 173,102 75,983
–
Foreign exchange reserves (note (iv)) 16,909 4,078
–
Fiscal deposits (note (v)) 8,746 4,532
Deposits with banks and non-bank financial institutions 91,667 125,542
873,526 801,615
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Notes:

(i) The balances with central banks represent deposits placed with central banks by China CITIC Bank Corporation Limited (“CITIC Bank”) and CITIC Finance Company Limited (“CITIC Finance”).

(ii) CITIC Bank and CITIC Finance place statutory deposit reserves with the People’s Bank of China and overseas central banks where they have operations. The statutory deposit reserves are not available for use in their daily business.

As at 30 June 2016, the statutory deposit reserve placed by CITIC Bank with the People’s Bank of China was calculated at 15% (31 December 2015: 15%) of eligible RMB deposits for domestic branches of CITIC Bank, and at 15% (31 December 2015: 0%) of eligible RMB deposits from overseas financial institutions respectively. In addition, CITIC Bank is required to deposit an amount equivalent to 5% (31 December 2015: 5%) of its foreign currency deposits from domestic branch customers as statutory deposit reserve as at 30 June 2016.

As at 30 June 2016, the statutory RMB deposit reserve rate applicable to Zhejiang Lin’an CITIC Rural Bank Corporation Limited, a subsidiary of CITIC Bank, was at 9% (31 December 2015: 9.5%).

The amounts of statutory deposit reserves placed with the central banks of overseas countries are determined by local jurisdictions. The foreign currency reserve deposits placed with the People’s Bank of China are non-interest bearing.

As at 30 June 2016, the statutory deposit reserve placed by CITIC Finance with the People’s Bank of China was calculated at 7% (31 December 2015: 7.5%) of eligible RMB deposits from the customers of CITIC Finance. As at 30 June 2016, CITIC Finance is also required to deposit an amount equivalent to 5% (31 December 2015: 5%) of its foreign currency deposits from the customers as statutory deposit reserve.

HALF-YEAR REPORT 2016

/ 61

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

15 Cash and deposits (continued)

Notes: (continued)

(iii) The surplus deposit reserve funds are maintained with the People’s Bank of China for the purposes of clearing.
(iv) The foreign exchange reserve is maintained with the People’s Bank of China in accordance with the related notice issued by the People’s Bank of China on 31 August 2015. The reserve is payable on a monthly basis at 20% of the total contract amount of customers driven forward transactions in the previous month. Such foreign exchange reserve is non-interest bearing and will be repayable in 12 months according to the notice.
(v) Fiscal deposits placed with the People’s Bank of China are not available for use in the Group’s daily operations, and are non-interest bearing.
(vi) In addition to the statutory deposit reserve funds, fiscal deposits and foreign exchange reserves, HK$6,645 million (31 December 2015: HK$7,416 million) included in cash and deposits as at 30 June 2016 were restricted in use. They mainly include guaranteed deposits.

16 Financial assets at fair value through profit or loss

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30 June 31 December
2016 2015
HK$ million HK$ million
Held for trading purpose:
–
Debt trading financial asset (note (a)) 14,920 10,189
–
Certificates of interbank deposit (note (b)) 49,006 18,175
–
Investment funds (note (c)) 2,456 6,371
– Trading equity investments (note (d)) 291 338
Financial assets designated at fair value through
profit or loss (note (e)):
– Debt securities 6,730 2,108
– Others 882 3,210
74,285 40,391
Issued by:
– Government 568 507
–
Policy banks 6,899 4,509
– Banks and non-bank financial institutions 61,788 30,961
– Corporates 5,030 4,414
74,285 40,391
Analysed by remaining maturity:
– Within 3 months 28,772 15,378
–
Between 3 months and 1 year 34,713 15,236
–
Over 1 year 10,783 9,757
– No fixed terms 17 20
74,285 40,391
----- End of picture text -----

The remaining term to maturity of financial assets at fair value through profit or loss does not represent the Group’s intended holding period.

CITIC LIMITED

/ 62

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

16 Financial assets at fair value through profit or loss (continued)

(a) Debt trading financial assets

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30 June 31 December
2016 2015
HK$ million HK$ million
Listed in Hong Kong 474 832
Listed outside Hong Kong 12,710 9,235
Unlisted 1,736 122
14,920 10,189
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(b) Certificates of interbank deposit

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Listed outside Hong Kong 49,006 18,175
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(c) Investment funds

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Unlisted 2,456 6,371
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(d) Trading equity investments

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Listed in Hong Kong 109 202
Listed outside Hong Kong 180 133
Unlisted 2 3
291 338
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(e) Financial assets designated at fair value through profit or loss

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
–
Listed in Hong Kong 1,733
–
Listed outside Hong Kong 5,715
Unlisted 1,897 3,585
7,612 5,318
----- End of picture text -----

Note:

Debt securities traded on the China Domestic Inter-bank Bond Market are included in “Listed outside Hong Kong”.

HALF-YEAR REPORT 2016

/ 63

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

17 Derivative financial instruments

The Group’s subsidiaries under the financial services segment act as an intermediary to offer derivative products including forwards and swap of interest rate and currency to its customers. These derivative positions are managed through entering back-to-back deals with external parties to ensure the remaining exposures are within acceptable risk levels. Meanwhile, derivatives are also used for proprietary trading purposes.

Subsidiaries under non-financial services segment of the Group enter into forward and swap contracts to hedge their exposure to fluctuations in foreign exchange rates, commodity prices and interest rates.

The following tables and notes provide an analysis of the nominal amounts of derivatives and the corresponding fair values as at the balance sheet date. The nominal amounts of the derivatives indicate the volume of transactions outstanding as at the balance sheet date; they do not represent amounts at risk. Hedging instruments are derivatives qualified for hedge accounting, and non-hedging instruments are derivatives not qualified for hedge accounting.

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30 June 2016 31 December 2015
Nominal Nominal
amount Assets Liabilities amount Assets Liabilities
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Hedging instruments
Fair value hedge (note (c)(i)):
– Interest rate derivatives 13,224 398 177 13,302 283 46
– Currency derivatives 1,469 5 – 3,939 48 –
Cash flow hedge (note (c)(ii)):
– Interest rate derivatives 17,416 – 3,380 14,246 – 2,608
– Currency derivatives 1,242 3 4 113 – 2
– Other derivatives 1,380 23 835 24 – 908
Non-hedging instruments
– Interest rate derivatives 816,932 1,296 786 716,684 1,258 1,467
–
Currency derivatives 2,344,669 23,293 20,509 1,911,069 13,717 12,082
– Precious metals derivatives 92,108 1,958 7,113 22,396 1,203 362
– Other derivatives 1,528 – 43 6,234 – –
3,289,968 26,976 32,847 2,688,007 16,509 17,475
----- End of picture text -----

(a) Nominal amount analysed by remaining maturity

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30 June 31 December
2016 2015
HK$ million HK$ million
Within 3 months 1,369,112 974,188
Between 3 months and 1 year 1,677,818 1,560,625
Between 1 year and 5 years 229,407 144,900
Over 5 years 13,631 8,294
3,289,968 2,688,007
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The remaining term to maturity of derivatives does not represent the Group’s intended holding period.

CITIC LIMITED

/ 64

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

17 Derivative financial instruments (continued)

(b) Credit risk weighted amounts

The credit risk weighted amounts are solely in connection with the derivatives held by CITIC Bank, and have been computed in accordance with “Regulation Governing Capital of Commercial Banks (provisional)” promulgated by the China Banking Regulatory Commission in the year of 2012, and depends on the status of the counterparties and the maturity characteristics of the instruments, including those customer-driven back-to-back transactions. As at 30 June 2016, the credit risk weighted amount was HK$38,155 million (31 December 2015: HK$22,332 million), of which HK$17,345 million (31 December 2015: HK$17,066 million) was attributes to default risk of counter party and HK$20,810 million (31 December 2015: HK$5,266 million) was credit valuation adjustment.

(c) Derivatives designated as hedging instruments

(i) Fair value hedge

Fair value hedge is adopted to hedge the risk that a financial instrument’s fair value will fluctuate because of changes in market interest rates or foreign exchange rates by using interest rate swaps or foreign currency forward contracts.

(ii) Cash flow hedge

Cash flow hedge is adopted to hedge the risk that a financial instrument’s cash flows will fluctuate because of changes in market interest rates, foreign exchange rates or commodity price by using foreign currency forward contracts, commodity forward contracts or interest rate swaps.

18 Trade and other receivables

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30 June 31 December
2016 2015
HK$ million HK$ million
Trade and bills receivables (note (a)) 28,963 27,333
Interest receivables (note (b)) 36,583 36,750
Prepayments, deposits and other receivables (note (c)) 69,119 77,264
134,665 141,347
----- End of picture text -----

As at 30 June 2016, the amount of the Group’s prepayments, deposits and other receivables expected to be recovered or recognised as expense after more than one year was HK$16,862 million (31 December 2015: HK$16,502 million). The remaining trade and other receivables are expected to be recovered or recognised as expense within one year.

HALF-YEAR REPORT 2016

/ 65

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

18 Trade and other receivables (continued)

(a) Trade and bills receivables

(i) Ageing analysis

As at the balance sheet date, the ageing analysis of trade and bills receivables of the Group based on invoice date and net of allowance for impairment losses is as follows:

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30 June 31 December
2016 2015
HK$ million HK$ million
Within 1 year 25,196 23,522
Over 1 year 4,957 4,947
30,153 28,469
Less: allowance for impairment losses (1,190) (1,136)
28,963 27,333
----- End of picture text -----

Each business unit has its own defined credit policy that is specific to the respective business environment and market practice.

(ii) Impairment of trade and bills receivables

As at 30 June 2016, the Group’s trade and bills receivables of HK$549 million (31 December 2015: HK$411 million) were individually determined to be impaired. These receivables mainly relate to customers which were in financial difficulties. It is assessed that a portion of such receivables is expected to be recovered. Consequently, specific allowance for impairment losses is recognised.

(iii) Trade and bills receivables that are not impaired

The ageing analysis of past due trade and bills receivables that are neither individually nor collectively considered to be impaired is as follows:

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30 June 31 December
2016 2015
HK$ million HK$ million
Less than 1 year past due 1,097 1,365
Over 1 year past due 259 407
1,356 1,772
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Receivables that are past due but not impaired are related to a number of third-party customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered to be fully recoverable.

CITIC LIMITED

/ 66

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

18 Trade and other receivables (continued)

(b) Interest receivables

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30 June 31 December
2016 2015
HK$ million HK$ million
Interest receivables 39,718 39,297
Less: allowance for impairment losses (3,135) (2,547)
36,583 36,750
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(c) Prepayments, deposits and other receivables

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30 June 31 December
2016 2015
HK$ million HK$ million
Prepayments, deposits and other receivables 70,357 78,661
Less: allowance for impairment losses (1,238) (1,397)
69,119 77,264
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19 Loans and advances to customers and other parties

(a) Loans and advances

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30 June 31 December
2016 2015
HK$ million HK$ million
Corporate loans
– Loans 2,165,284 2,093,945
– Discounted bills 92,853 110,721
– Finance lease receivables 28,989 21,340
2,287,126 2,226,006
Personal loans
–
Residential mortgages 407,313 320,999
– Business loans 130,702 126,251
– Credit cards 232,116 209,841
– Others 170,656 140,987
940,787 798,078
3,227,913 3,024,084
Less: impairment allowance
–
Individually assessed (23,070) (21,973)
– Collectively assessed (51,824) (54,313)
(74,894) (76,286)
3,153,019 2,947,798
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HALF-YEAR REPORT 2016

/ 67

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

19 Loans and advances to customers and other parties (continued)

(b) Types of collateral

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30 June 31 December
2016 2015
HK$ million HK$ million
Unsecured loans 616,834 588,325
Guaranteed loans 590,207 588,124
Secured loans
–
Loans secured by collateral 1,558,823 1,397,259
– Pledged loans 369,196 339,655
3,135,060 2,913,363
Discounted bills 92,853 110,721
Gross loans and advances 3,227,913 3,024,084
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(c) Assessment method of allowance for impairment losses

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As at 30 June 2016
Gross impaired
Loans and Impaired loans and advances loans and
advances for (note (i)) advances as
which the for which the for which the a percentage
allowance is allowance is allowance is of gross total
collectively collectively individually loans and
assessed assessed assessed Total advances
HK$ million HK$ million HK$ million HK$ million
Gross loans and advances 3,178,875 11,588 37,450 3,227,913 1.52%
Less: allowance for impairment losses (43,546) (8,278) (23,070) (74,894)
3,135,329 3,310 14,380 3,153,019
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----- Start of picture text -----

As at 31 December 2015
Gross impaired
Loans and Impaired loans and advances loans and
advances for (note (i)) advances as
which the for which the for which the a percentage
allowance is allowance is allowance is of gross total
collectively collectively individually loans and
assessed assessed assessed Total advances
HK$ million HK$ million HK$ million HK$ million
Gross loans and advances 2,977,437 9,553 37,094 3,024,084 1.54%
Less: allowance for impairment losses (47,335) (6,978) (21,973) (76,286)
2,930,102 2,575 15,121 2,947,798
----- End of picture text -----

CITIC LIMITED

/ 68

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

19 Loans and advances to customers and other parties (continued)

(c) Assessment method of allowance for impairment losses (continued)

Notes:

(i) Impaired loans and advances include loans and advances for which objective evidence of impairment exists and which have been assessed as bearing significant impairment losses which are assessed individually or collectively (portfolios of homogeneous loans and advances).
(ii) As at 30 June 2016, the loans and advances of the Group for which the impairment allowance were individually assessed amounted to HK$37,450 million (31 December 2015: HK$37,094 million). The secured and unsecured portion of these loans and advances were as follows:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Secured portion 13,113 12,396
Unsecured portion 24,337 24,698
37,450 37,094
----- End of picture text -----

As at 30 June 2016, the fair value of collateral held against these loans and advances amounted to HK$18,211 million (31 December 2015: HK$19,935 million).

The fair value of collateral was estimated by management based on the latest available external valuations adjusted by taking into account the current realisation experience as well as market situation.

(d) Movements of allowance for impairment losses

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Six months ended 30 June 2016
Loans and
advances for Impaired loans and advances
which the for which the for which the
allowance is allowance is allowance is
collectively collectively individually
assessed assessed assessed Total
HK$ million HK$ million HK$ million HK$ million
At 1 January 47,335 6,978 21,973 76,286
Charge for the period
– Impairment allowance on loans charged 228 3,926 25,605 29,759
–
Reversal of impairment for the period (3,138) (204) (2,785) (6,127)
– –
Unwinding of discount on allowance (341) (341)
Write-offs – (2,464) (21,185) (23,649)
Recovery of loans and advances written
off in previous year – 204 97 301
Changes of exchange rate (879) (162) (294) (1,335)
At 30 June 43,546 8,278 23,070 74,894
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HALF-YEAR REPORT 2016

/ 69

For the six months ended 30 June 2016

Notes to the Consolidated Financial Statements

19 Loans and advances to customers and other parties (continued)

(d) Movements of allowance for impairment losses (continued)

		Loans and advances for which the allowance is collectively assessed HK$ million	Six months ended 30 June 2015 Impaired loans and advances for which the allowance is collectively assessed for which the allowance is individually assessed HK$ million HK$ million	Six months ended 30 June 2015 Impaired loans and advances for which the allowance is collectively assessed for which the allowance is individually assessed HK$ million HK$ million	Total HK$ million
At 1 January		46,554	4,920	17,627	69,101
Charge for the period
–Impairment allowance on loans charged		304	4,069	17,960	22,333
–Reversal of impairment for the period		(197)	(203)	(1,937)	(2,337)
Unwinding of discount on allowance		–	–	(310)	(310)
Write-offs		–	(2,222)	(13,704)	(15,926)
Recovery of loans and advances written
	off in previous year	–	201	110	311
Changes of exchange rate		24	11	44	79
	At 30 June	46,685	6,776	19,790	73,251

(e) Overdue loans by overdue period

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----- Start of picture text -----

As at 30 June 2016
Overdue Overdue
Overdue between between
within 3 months 1 year and Overdue
3 months and 1 year 3 years over 3 years Total
HK$ million HK$ million HK$ million HK$ million HK$ million
Unsecured loans 7,338 4,011 2,842 440 14,631
Guaranteed loans 12,409 12,300 6,637 167 31,513
Secured loans
– Loans secured by collateral 31,450 24,174 7,434 750 63,808
– Pledged loans 3,759 1,672 871 56 6,358
54,956 42,157 17,784 1,413 116,310
----- End of picture text -----

CITIC LIMITED

/ 70

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

19 Loans and advances to customers and other parties (continued)

(e) Overdue loans by overdue period (continued)

	Overdue within 3 months HK$ million	Overdue between 3 months and 1 year HK$ million	As at 31 December 2015 Overdue between 1 year and 3 years Overdue over 3 years HK$ million HK$ million	As at 31 December 2015 Overdue between 1 year and 3 years Overdue over 3 years HK$ million HK$ million	Total HK$ million
Unsecured loans	4,088	3,657	2,993	355	11,093
Guaranteed loans	10,632	6,308	6,093	275	23,308
Secured loans
–Loans secured by collateral	25,754	14,732	7,569	458	48,513
– Pledged loans	3,685	1,903	1,194	74	6,856
	44,159	26,600	17,849	1,162	89,770

Overdue loans represent loans of which the principal or interest are overdue one day or more.

20 Available-for-sale financial assets

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30 June 31 December
2016 2015
HK$ million HK$ million
Debt securities (note (a)) 403,672 360,040
Certificates of deposit and certificates of interbank deposit (note (b)) 114,285 89,897
Wealth management products issued by financial
institutions (note (c)) 32,139 33,138
Equity investments (note (d)) 10,923 10,660
Investment funds (note (e)) 4,717 1,904
565,736 495,639
Less: allowance for impairment losses (665) (853)
565,071 494,786
Issued by:
– Government 164,419 136,925
–
Policy banks 88,226 87,008
– Banks and non-bank financial institutions 193,148 162,884
–
Corporates 116,951 107,969
– Public entities 2,327 –
565,071 494,786
Analysed by remaining maturity:
– Within 3 months 79,491 77,175
–
Between 3 months and 1 year 133,991 122,040
–
Over 1 year 341,039 287,217
– No fixed terms 10,550 8,354
565,071 494,786
----- End of picture text -----

The remaining term to maturity of available-for-sale financial assets does not represent the Group’s intended holding period.

HALF-YEAR REPORT 2016

/ 71

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

20 Available-for-sale financial assets (continued)

(a) Debt securities

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Debt securities 403,672 360,040
Less: allowance for impairment losses (114) (168)
403,558 359,872
Representing:
–
Listed in Hong Kong 15,751 14,874
–
Listed outside Hong Kong 355,822 309,119
– Unlisted 31,985 35,879
403,558 359,872
----- End of picture text -----

(b) Certificates of deposit and certificates of interbank deposit

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Certificates of deposit and certificates of interbank deposit 114,285 89,897
Representing:
– Listed outside Hong Kong 114,285 89,897
----- End of picture text -----

(c) Wealth management products issued by financial institutions

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Wealth management products issued by financial institutions 32,139 33,138
Less: allowance for impairment losses (74) (256)
32,065 32,882
Representing:
– Listed outside Hong Kong 17 17
– Unlisted 32,048 32,865
32,065 32,882
----- End of picture text -----

CITIC LIMITED

/ 72

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

20 Available-for-sale financial assets (continued)

(d) Equity investments

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30 June 31 December
2016 2015
HK$ million HK$ million
Equity investments 10,923 10,660
Less: allowance for impairment losses (449) (401)
10,474 10,259
Representing:
–
Listed in Hong Kong 1,555 1,370
–
Listed outside Hong Kong 1,493 1,394
– Unlisted 7,426 7,495
10,474 10,259
----- End of picture text -----

(e) Investment Funds

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Investment funds 4,717 1,904
Less: allowance for impairment losses (28) (28)
4,689 1,876
Representing:
– Listed in Hong Kong 1,062 12
– Unlisted 3,627 1,864
4,689 1,876
----- End of picture text -----

Note:

Debt securities traded on the China Domestic Inter-bank Bond Market are included in “Listed outside Hong Kong”.

HALF-YEAR REPORT 2016

/ 73

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

21 Held-to-maturity investments

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Debt securities 225,419 216,244
Others 88 72
225,507 216,316
–
Less: allowance for impairment losses (49)
225,507 216,267
Representing:
– Listed in Hong Kong 764 462
–
Listed outside Hong Kong 217,473 208,704
– Unlisted 7,270 7,101
225,507 216,267
Issued by:
– Government 60,254 59,759
–
Policy banks 83,709 76,419
– Banks and non-bank financial institutions 50,276 48,658
– Public entities 4 5
– Corporates 31,264 31,426
225,507 216,267
Analysed by remaining maturity:
– Within 3 months 7,165 5,655
–
Between 3 months and 1 year 34,619 22,222
– Over 1 year 183,723 188,390
225,507 216,267
Fair value 230,981 222,501
Of which: listed debt securities 224,315 215,396
----- End of picture text -----

Note:

Debt securities traded on the China Domestic Inter-bank Bond Market are included in “Listed outside Hong Kong “.

CITIC LIMITED

/ 74

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

22 Investments classified as receivables

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Trust investment plans 133,430 168,036
Investment management products managed by securities
companies 1,014,081 986,781
Wealth management products issued by financial institutions 236,344 176,186
Others – 1,468
1,383,855 1,332,471
Less: allowance for impairment losses (2,943) (1,190)
1,380,912 1,331,281
----- End of picture text -----

As at 30 June 2016, certain of the Group’s investments with an aggregate amount of HK$232,119 million (31 December 2015: HK$90,285 million) were managed by certain subsidiaries and related parties of the Group.

The underlying assets of investment classified as receivables primarily include investment in rediscounted bills, corporate loans, certificates of interbank deposit and wealth management products issued by other financial institutions.

23 Interests in associates

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Carrying value 56,026 53,094
Less: allowance for impairment losses (2,429) (2,431)
53,597 50,663
----- End of picture text -----

24 Interests in joint ventures

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Carrying value 20,554 24,198
Less: allowance for impairment losses (1,496) (1,497)
19,058 22,701
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HALF-YEAR REPORT 2016

/ 75

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

25 Deposits from banks and non-bank financial institutions

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Banks 523,348 493,190
Non-bank financial institutions 815,705 782,231
1,339,053 1,275,421
Analysed by remaining maturity:
– On demand 218,066 269,043
– Within 3 months 883,545 373,031
–
Between 3 months and 1 year 236,238 630,237
– Over 1 year 1,204 3,110
1,339,053 1,275,421
----- End of picture text -----

26 Trade and other payables

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Trade and bills payables 46,510 52,920
Advances from customers 5,791 24,332
Interest payables 45,717 47,933
Other taxes payables 3,423 4,297
Settlement accounts 22,193 28,311
Other payables 72,612 72,843
196,246 230,636
----- End of picture text -----

As at the balance sheet date, the ageing analysis of the Group’s trade and bills payable based on the invoice date is as follows:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Within 1 year 39,177 36,216
Between 1 and 2 years 5,547 11,556
Between 2 and 3 years 1,003 3,356
Over 3 years 783 1,792
46,510 52,920
----- End of picture text -----

CITIC LIMITED

/ 76

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

27 Deposits from customers

(a) Types of deposits from customers

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Demand deposits
–
Corporate customers 1,599,146 1,385,738
– Personal customers 250,660 213,561
1,849,806 1,599,299
Time and call deposits
–
Corporate customers 1,732,262 1,727,112
– Personal customers 417,527 432,611
2,149,789 2,159,723
Outward remittance and remittance payables 10,733 7,826
4,010,328 3,766,848
----- End of picture text -----

(b) Deposits from customers include pledged deposits for the following items:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Bank acceptances 285,446 349,205
Letters of credit 8,226 11,031
Guarantees 50,331 25,992
Others 143,399 144,801
487,402 531,029
----- End of picture text -----

HALF-YEAR REPORT 2016

/ 77

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

28 Bank and other loans

(a) Types of loans

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Bank loans
Unsecured loans 79,792 92,931
Loan pledged with assets (note (d)) 23,801 33,996
Guaranteed loans 703 708
104,296 127,635
Other loans
Unsecured loans 5,191 17,962
Loan pledged with assets (note (d)) 1,164 1,624
Guaranteed loans 128 –
6,483 19,586
110,779 147,221
----- End of picture text -----

(b) Maturity of loans

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30 June 31 December
2016 2015
HK$ million HK$ million
Bank and other loans are repayable:
–
Within 1 year or on demand 27,540 37,645
–
Between 1 and 2 years 15,693 22,778
–
Between 2 and 5 years 27,065 40,806
– Over 5 years 40,481 45,992
110,779 147,221
----- End of picture text -----

(c) Bank or other loans are denominated in the following currency

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
RMB 30,057 70,886
US$ 53,734 58,633
HK$ 16,182 8,754
Other currencies 10,806 8,948
110,779 147,221
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CITIC LIMITED

/ 78

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

28 Bank and other loans (continued)

(d) As at 30 June 2016, the Group’s bank and other loans of HK$24,965 million (31 December 2015: HK$35,620 million) are pledged with cash and deposits, fixed assets and intangible assets with an aggregate carrying amount of HK$87,824 million (31 December 2015: HK$83,858 million).
(e) All of the Group’s banking facilities are subject to the fulfilment of covenants relating to balance sheet ratios or ownership of a minimum shareholding in certain entities of the Group, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in Note 32(b). As at 30 June 2016, none of the covenants relating to drawn down facilities had been breached (31 December 2015: Nil).

29 Debt instruments issued

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30 June 31 December
2016 2015
HK$ million HK$ million
Corporate bonds issued (note (a)) 97,589 72,762
Notes issued (note (b)) 67,918 69,244
Subordinated bonds issued (note (c)) 89,014 92,840
Certificates of deposit issued (note (d)) 12,957 10,390
Certificates of interbank deposit issued (note (e)) 341,620 204,536
609,098 449,772
Analysed by remaining maturity:
–
Within 1 year or on demand 376,575 219,157
–
Between 1 and 2 years 17,336 11,158
–
Between 2 and 5 years 69,988 79,894
– Over 5 years 145,199 139,563
609,098 449,772
----- End of picture text -----

The Group did not have any defaults of principal, interest or other breaches with respect to its debt instruments issued during the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

Certain debt instruments issued were purchased by certain subsidiaries of the Group. These debt instruments issued were eliminated in full on consolidation.

HALF-YEAR REPORT 2016

/ 79

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes:

(a) Corporate bonds issued

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30 June 31 December
2016 2015
HK$ million HK$ million
The Company (note (i)) 52,536 36,713
CITIC Corporation Limited (“CITIC Corporation”) (note (ii)) 34,527 20,896
CITIC Real Estate Co., Ltd. (“CITIC Real Estate”) (note (iii)) – 4,391
CITIC Telecom International Holdings Limited (“CITIC Telecom International”) (note (iv)) 3,482 3,480
CITIC Heavy Industries Co., Limited (“CITIC Heavy Industries”) (note (v)) 3,620 3,330
CITIC Pacific Limited’s (“CITIC Pacific”) subsidiaries (note (vi)) 1,521 2,149
CITIC Environment Investment Group Co., Limited’s (“CITIC Environment”)
subsidiaries (note (vii)) 1,903 1,803
97,589 72,762
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(i) Details of corporate bonds issued by the Company

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As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
RMB Notes 1 RMB 1,000 2011-08-03 2016-08-03 2.70%
US$ Notes 3.1 US$ 750 2012-03-21 2018-01-21 6.88%
US$ Notes 3.2 US$ 350 2012-04-26 2018-01-21 6.88%
HK$ Notes 1 HK$ 500 2013-07-31 2018-07-31 5.90%
US$ Notes 5 US$ 500 2013-04-10 2020-04-10 6.38%
US$ Notes 2.1 US$ 500 2011-04-15 2021-04-15 6.63%
US$ Notes 2.2 US$ 250 2014-06-23 2021-04-15 6.63%
US$ Notes 1 US$ 150 2010-08-16 2022-08-16 6.90%
US$ Notes 4.1 US$ 750 2012-10-17 2023-01-17 6.80%
US$ Notes 4.2 US$ 250 2012-12-11 2023-01-17 6.80%
US$ Notes 4.3 US$ 400 2014-07-18 2023-01-17 6.80%
US$ Notes 6.1 US$ 110 2014-07-18 2024-01-18 4.70%
US$ Notes 6.2 US$ 90 2014-10-29 2024-01-18 4.70%
HK$ Notes 2 HK$ 420 2014-07-25 2024-07-25 4.35%
US$ Notes 7 US$ 280 2015-04-14 2035-04-14 4.60%
US$ Notes 8 US$ 150 2016-02-04 2041-02-04 4.88%
US$ Notes 9 US$ 350 2016-02-04 2036-02-04 4.75%
US$ Notes 10 US$ 90 2016-04-25 2036-04-25 4.65%
US$ Notes 11 US$ 210 2016-04-25 2046-04-25 4.85%
US$ Notes 12 US$ 500 2016-06-14 2021-12-14 2.80%
US$ Notes 13 US$ 750 2016-06-14 2026-06-14 3.70%
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CITIC LIMITED

/ 80

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(a) Corporate bonds issued (continued)
(i) Details of corporate bonds issued by the Company (continued)

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----- Start of picture text -----

As at 31 December 2015
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
----- End of picture text -----

RMB Notes 1	RMB	1,000	2011-08-03	2016-08-03	2.70%
US$ Notes 3.1	US$	750	2012-03-21	2018-01-21	6.88%
US$ Notes 3.2	US$	350	2012-04-26	2018-01-21	6.88%
HK$ Notes 1	HK$	500	2013-07-31	2018-07-31	5.90%
US$ Notes 5	US$	500	2013-04-10	2020-04-10	6.38%
US$ Notes 2.1	US$	500	2011-04-15	2021-04-15	6.63%
US$ Notes 2.2	US$	250	2014-06-23	2021-04-15	6.63%
US$ Notes 1	US$	150	2010-08-16	2022-08-16	6.90%
US$ Notes 4.1	US$	750	2012-10-17	2023-01-17	6.80%
US$ Notes 4.2	US$	250	2012-12-11	2023-01-17	6.80%
US$ Notes 4.3	US$	400	2014-07-18	2023-01-17	6.80%
US$ Notes 6.1	US$	110	2014-07-18	2024-01-18	4.70%
US$ Notes 6.2	US$	90	2014-10-29	2024-01-18	4.70%
HK$ Notes 2	HK$	420	2014-07-25	2024-07-25	4.35%
US$ Notes 7	US$	280	2015-04-14	2035-04-14	4.60%

(ii) Details of corporate bonds issued by CITIC Corporation

		Denominated currency	Face value in denominated currency million	As at 30 June 2016 Issue date Maturity date	As at 30 June 2016 Issue date Maturity date	Interest rate per annum
	02 CITIC bond	RMB	4,500	2002-09-26	2017-09-26	4.08%
	03 CITIC bond-2	RMB	6,000	2003-12-10	2023-12-09	5.10%
	05 CITIC bond-2	RMB	4,000	2005-12-07	2025-12-06	4.60%
	16 CITIC stock SCP001	RMB	10,000	2016-04-12	2016-12-07	2.55%
	16 CITIC stock SCP002	RMB	5,000	2016-04-26	2016-10-22	2.75%
	Samurai bond	JPY	10,000	1996-09-19	2016-09-18	4.95%
		Denominated currency	Face value in denominated currency million	As at 31 December 2015 Issue date Maturity date		Interest rate per annum
02 CITIC bond		RMB	4,500	2002-09-26	2017-09-26	4.08%
03 CITIC bond-2		RMB	6,000	2003-12-10	2023-12-09	5.10%
05 CITIC bond-2		RMB	4,000	2005-12-07	2025-12-06	4.60%
15 CITIC bond-SCP001		RMB	3,000	2015-04-20	2016-01-17	4.18%
Samurai bond		JPY	10,000	1996-09-19	2016-09-18	4.95%

HALF-YEAR REPORT 2016

/ 81

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(a) Corporate bonds issued (continued)

(iii)	Details of corporate bonds issued by CITIC Real Estate
	As at 31 December 2015
	Denominated currency Face value in denominated currency million Issue date Maturity date Interest rate per annum
	Corporate bonds RMB 4,000 2015-12-09 2020-12-09 4.80%

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(iv) Details of corporate bonds issued by CITIC Telecom International
As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
Guaranteed Bonds US$ 450 2013-03-05 2025-03-05 6.10%
As at 31 December 2015
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
Guaranteed Bonds US$ 450 2013-03-05 2025-03-05 6.10%
(v) Details of corporate bonds issued by CITIC Heavy Industries
As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
Corporate Bonds RMB 600 2013-01-25 2020-01-25 5.20%
Corporate Bonds RMB 1,000 2014-11-26 2019-11-26 4.98%
Short Term Corporate
Bonds RMB 1,500 2016-02-26 2017-02–26 3.20%
As at 31 December 2015
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
Corporate Bonds RMB 1,200 2013-01-25 2016-01-25 4.85%
Corporate Bonds RMB 600 2013-01-25 2020-01-25 5.20%
Corporate Bonds RMB 1,000 2014-11-26 2019-11-26 4.98%
----- End of picture text -----

CITIC LIMITED

/ 82

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(a) Corporate bonds issued (continued)

(vi) Details of corporate bonds issued by CITIC Pacific’s subsidiaries

		Denominated currency	Face value in denominated currency million	As at 30 June 2016 Issue date Maturity date	As at 30 June 2016 Issue date Maturity date	Interest rate per annum
	Medium Term Notes	RMB	200	2015-05-19	2018-05-19	4.50%
	Medium Term Notes	RMB	300	2015-06-08	2018-06-08	4.70%
	Hubei Xin Yegang
	Steel Co., Ltd.
	–RMB Notes 2	RMB	500	2012-06-25	2017-06-25	5.23%
	Jiangyin Xingcheng Special
	Steel Works Co., Ltd.
	–RMB Notes 3	RMB	200	2012-11-27	2017-11-26	6.06%
	Jiangyin Ligang Electric
	Power Generation
	Co., Ltd.
	–Medium Term Notes	RMB	100	2013-10-28	2016-10-28	6.30%
		Denominated currency	Face value in denominated currency million	As at 31 December 2015 Issue date Maturity date		Interest rate per annum
Medium Term Notes		RMB	200	2015-05-19	2018-05-19	4.50%
Medium Term Notes		RMB	300	2015-06-08	2018-06-08	4.70%
Hubei Xin Yegang
	Steel Co., Ltd.
	–RMB Notes 2	RMB	500	2012-06-25	2017-06-25	5.23%
Jiangyin Xingcheng Special
	Steel Works Co., Ltd.
	–RMB Notes 3	RMB	200	2012-11-27	2017-11-26	6.06%
	–RMB Notes 4	RMB	500	2013-06-05	2016-06-04	4.93%
Jiangyin Ligang Electric
	Power Generation
	Co., Ltd.
	–Medium Term Notes	RMB	100	2013-10-28	2016-10-28	6.30%

HALF-YEAR REPORT 2016

/ 83

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(a) Corporate bonds issued (continued)

(vii) Details of corporate bonds issued by CITIC Environment’s subsidiaries

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----- Start of picture text -----

As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
CITIC Envirotech
– Medium Term Notes SG$ 325 2013-09-02 2017-07-02 4.7%-7.25%
As at 31 December 2015
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
CITIC Envirotech
– Medium Term Notes SG$ 325 2013-09-02 2017-07-02 4.7%-7.25%
----- End of picture text -----

(b) Notes issued

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
CITIC Corporation (note (i)) 31,296 31,889
CITIC Bank (note (ii)) 36,622 37,355
67,918 69,244
----- End of picture text -----

(i) Details of notes issued by CITIC Corporation

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----- Start of picture text -----

As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
2010 First tranche medium
term note RMB 3,000 2010-06-08 2020-06-10 4.60%
2010 Second tranche
medium term note RMB 4,000 2010-08-20 2020-08-24 4.40%
2011 First tranche medium
term note RMB 3,000 2011-07-28 2018-08-02 5.85%
2011 Second tranche
medium term note-1 RMB 2,000 2011-11-15 2018-11-16 5.10%
2011 Second tranche
medium term note-2 RMB 6,000 2011-11-15 2021-11-16 5.30%
2012 Medium term note-1 RMB 4,000 2012-03-28 2019-03-29 5.00%
2012 Medium term note-2 RMB 5,000 2012-03-28 2022-03-29 5.18%
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CITIC LIMITED

/ 84

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(b) Notes issued (continued)

(i) Details of notes issued by CITIC Corporation (continued)

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2010 First tranche medium
term note	RMB	3,000	2010-06-08	2020-06-10	4.60%
2010 Second tranche
medium term note	RMB	4,000	2010-08-20	2020-08-24	4.40%
2011 First tranche medium
term note	RMB	3,000	2011-07-28	2018-08-02	5.85%
2011 Second tranche
medium term note-1	RMB	2,000	2011-11-15	2018-11-16	5.10%
2011 Second tranche
medium term note-2	RMB	6,000	2011-11-15	2021-11-16	5.30%
2012 Medium term note-1	RMB	4,000	2012-03-28	2019-03-29	5.00%
2012 Medium term note-2	RMB	5,000	2012-03-28	2022-03-29	5.18%

(ii) Details of notes issued by CITIC Bank

		Denominated currency	Face value in denominated currency million	As at 30 June 2016 Issue date Maturity date	As at 30 June 2016 Issue date Maturity date	Interest rate per annum
	Financial debts	RMB	15,000	2013-11-08	2018-11-12	5.20%
	Dim Sum bonds	RMB	1,500	2014-02-27	2017-02-27	4.13%
	Financial bonds	RMB	7,000	2015-05-21	2020-05-25	3.98%
	Financial bonds	RMB	8,000	2015-11-13	2020-11-17	3.61%
		Denominated currency	Face value in denominated currency million	As at 31 December 2015 Issue date Maturity date		Interest rate per annum
Financial debts		RMB	15,000	2013-11-08	2018-11-12	5.20%
Dim Sum bonds		RMB	1,500	2014-02-27	2017-02-27	4.13%
Financial bonds		RMB	7,000	2015-05-21	2020-05-25	3.98%
Financial bonds		RMB	8,000	2015-11-13	2020-11-17	3.61%

HALF-YEAR REPORT 2016

/ 85

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(c) Subordinated bonds issued

The balance represents the subordinated debts issued by CITIC bank or CITIC Bank International Limited (“CBI”), a subsidiary of CITIC Bank. The carrying amount of subordinated debts is as follows:

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30 June 31 December
2016 2015
HK$ million HK$ million
Fixed rate notes maturing
– In June 2020 (note (i)) 4,232 4,133
– In September 2022 (note (ii)) 2,331 2,307
– In May 2024 (note (iii)) 2,377 2,328
Fixed rate bonds maturing
– In June 2021 (note (iv)) – 2,387
– In May 2025 (note (v)) 13,455 13,727
– In June 2027 (note (vi)) 23,375 23,845
– In August 2024 (note (vii)) 43,244 44,113
89,014 92,840
----- End of picture text -----

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----- Start of picture text -----

As at 30 June 2016
Face value in
denominated
Denominated currency Interest rate
currency million Issue date Maturity date per annum
(i) Subordinated Notes US$ 500 2010-06-24 2020-06-24 6.88%
(ii) Subordinated Notes US$ 300 2012-09-27 2022-09-28 3.88%
(iii) Subordinated Notes US$ 300 2013-11-07 2024-05-07 6.00%
(iv) Subordinated Fixed Rate
Bonds RMB 11,500 2010-05-27 2025-05-28 4.30%
(v) Subordinated Fixed Rate
Bonds RMB 20,000 2012-06-19 2027-06-21 5.15%
(vi) Subordinated Fixed Rate
Bonds RMB 37,000 2014-08-22 2024-08-26 6.13%
----- End of picture text -----

CITIC LIMITED

/ 86

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

29 Debt instruments issued (continued)

Notes (continued):

(c) Subordinated bonds issued (continued)

		Denominated currency	Face value in denominated currency million	As at 31 December 2015 Issue date Maturity date	As at 31 December 2015 Issue date Maturity date	Interest rate per annum
(i)	Subordinated Notes	US$	500	2010-06-24	2020-06-24	6.88%
(ii)	Subordinated Notes	US$	300	2012-09-27	2022-09-28	3.88%
(iii)	Subordinated Notes	US$	300	2013-11-07	2024-05-07	6.00%
(iv)	Subordinated Fixed	Rate
	Bonds	RMB	2,000	2006-06-22	2021-06-22	4.12%
(v)	Subordinated Fixed	Rate
	Bonds	RMB	11,500	2010-05-27	2025-05-28	4.30%
(vi)	Subordinated Fixed	Rate
	Bonds	RMB	20,000	2012-06-19	2027-06-21	5.15%
(vii)	Subordinated Fixed	Rate
	Bonds	RMB	37,000	2014-08-22	2024-08-26	6.13%

(d) Certificates of deposit issued

These certificates of deposit were issued by CBI with interest rate ranging from 0.46% to 3.73% per annum (31 December 2015: 0.46% to 3.73% per annum).

(e) Certificates of interbank deposit issued

As at 30 June 2016, CITIC Bank issued certain certificates of interbank deposit with a total value of RMB291,972 million (approximately HK$341,620 million) (31 December 2015: RMB171,356 million (approximately HK$204,536 million)). The yield ranges from 2.70% to 3.45% per annum (31 December 2015: 2.75% to 4.77% per annum). The original expiry terms are between 1 month to 2 years (31 December 2015: between 1 month to 2 years).

HALF-YEAR REPORT 2016

/ 87

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

30 Share capital and perpetual capital securities

(a) Share capital

On 25 August 2014, the Company issued 21,253,879,470 ordinary shares. Immediately prior to this issuance, the number of ordinary shares in issue of the Company was 3,649,444,160.

On 12 August 2015, Xin Ma Apparel International Limited (a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Youngor Group Co., Ltd.) subscribed for 859,218,000 new shares of the Company at a price of HK$13.95 per share for an aggregate amount of HK$11,986,091,100.

On 3 August 2015, the Company allotted and issued to Chia Tai Bright Investment Company Limited (“CT Bright”) 3,327,721,000 fully paid convertible preferred shares of the Company (“Preferred Shares”) for a total consideration of HK$45,922,549,800. On 14 August 2015, CT Bright converted all of the Preferred Shares at the conversion price of HK$13.80 per ordinary share and the Company allotted and issued 3,327,721,000 ordinary shares to CT Bright.

As at 30 June 2016, the number of ordinary shares in issue of the Company was 29,090,262,630 (31 December 2015: 29,090,262,630).

(b) Perpetual capital securities

In April 2011 and May 2013, the Company issued perpetual subordinated capital securities (the “perpetual capital securities”) with a nominal amount of US$750 million (approximately HK$5,850 million) and US$1,000 million (approximately HK$7,800 million), respectively. These securities are perpetual and the distribution payments can be deferred at the discretion of the Company. Therefore, the perpetual capital securities are classified as equity instruments and recorded in equity in the consolidated balance sheet. On 15 April 2016, the perpetual capital securities of US$750 million were redeemed by the Company. The amounts as at 30 June 2016 and 31 December 2015 included the accrued distribution payments.

(c) Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s stability and growth, so that it can continue to provide returns for shareholders.

The Group actively and regularly reviews and manages its capital structure, with reference to such financial ratios like debt (total of debt instruments issued and bank and other loans) to total equity ratio, to maintain a balance between the higher shareholders’ returns that might be possible with of borrowings obtained and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

Certain subsidiaries under the financial services segment are subject to capital adequacy requirements imposed by the external regulators. There was no non-compliance of capital requirements as at 30 June 2016 (31 December 2015: Nil).

CITIC LIMITED

/ 88

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments

(a) Credit commitments

Credit commitments in connection with the financial services segment of the Group take the form of loan commitments, credit card commitments, financial guarantees and letters of credit.

Loan commitments represent the undrawn amount of approved loans with signed contracts. Credit card commitments represent the credit card overdraft limits authorised by the Group. Financial guarantees and letters of credit represent guarantee provided by the Group to guarantee the performance of customers to third parties. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled simultaneously with the reimbursement from the customers.

The contractual amounts of credit commitments by category as at the balance sheet date are set out below. The amounts disclosed in respect of loan commitments and credit card commitments assume that amounts are fully drawn down. The amounts of guarantees, letters of credit and acceptances represent the maximum potential loss that would be recognised as at the balance sheet date if counterparties failed to perform as contracted.

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Contractual amount
Loan commitments
With an original maturity of within 1 year 194,302 154,627
With an original maturity of 1 year or above 62,321 83,210
256,623 237,837
Guarantees 178,263 168,190
Letters of credit 105,421 109,784
Acceptances 671,085 753,607
Credit card commitments 220,144 178,015
Others 16 5,040
1,431,552 1,452,473
----- End of picture text -----

(b) Credit commitments analysed by credit risk weighted amount

==> picture [425 x 70] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Credit risk weighted amount on credit commitments 397,448 467,758
----- End of picture text -----

Notes:

(i) The above credit risk weighted amount is solely in connection with the credit commitments held by CITIC Bank under the financial services segment of the Group.

(ii) As at 30 June 2016 and 31 December 2015, the credit risk weighted amount refers to the amount as computed in accordance with the rules set out by the China Banking Regulatory Commission and depends on the status of counterparties and the maturity characteristics. The risk weighting used is ranging from 0% to 150%.

HALF-YEAR REPORT 2016

/ 89

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments (continued)

(c) Bond redemption obligations

As an underwriting agent of PRC government bonds, CITIC Bank has the responsibility to buy back those bonds sold by it should the holders decide to early redeem the bonds held. The redemption price for the bonds at any time before their maturity dates is based on the coupon value plus any interest unpaid and accrued up to the redemption date. Accrued interest payables to the bond holders are calculated in accordance with relevant rules of the Ministry of Finance and the People’s Bank of China. The redemption price may be different from the fair value of similar instruments traded at the redemption date.

The redemption obligations below represent the nominal value of government bonds underwritten and sold by CITIC Bank, but not yet matured as at the balance sheet date:

==> picture [425 x 75] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Bonds redemption obligations 15,027 15,960
----- End of picture text -----

As at 30 June 2016, the original maturities of these bonds vary from one to five years (31 December 2015: one to five years). Management of the Group expects the amount of redemption before maturity dates of these bonds will not be material. The Ministry of Finance will not provide funding for the early redemption of these bonds on a back-to-back basis, but will settle the principal and interest upon maturity.

(d) Guarantees provided

Except for guarantees that have been recognised as liabilities, the guarantees issued by the Group as at the balance sheet date are as follows:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Related parties 14,731 15,469
Third parties 7,370 7,208
22,101 22,677
----- End of picture text -----

As at 30 June 2016, the guarantees provided by discontinued operations to related parties of HK$3,056 million and to third parties of HK$7,251 million were included in the above table respectively.

The relationship of related parties is disclosed in Note 33.

CITIC LIMITED

/ 90

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments (continued)

(d) Guarantees provided (continued)

Included in the above table, the Group’s counter guarantees issued to related parties and third parties as at the balance sheet date are as follows:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Related parties 213 146
Third parties 9 99
222 245
----- End of picture text -----

(e) Outstanding litigation and disputes

The Group is involved in a number of current and pending legal proceedings. The Group provided for liabilities arising from those legal proceedings in which the outflow of economic benefit is probable and can be reliably estimated in the consolidated balance sheet. The Group believes that these accruals are reasonable and adequate.

(i) The Hong Kong Securities and Futures Commission (the “SFC”) Investigation

Following the Company’s announcement of a foreign exchange related loss, on 22 October 2008, the SFC announced that it had commenced a formal investigation into the affairs of the Company. On 3 April 2009, the Commercial Crime Bureau of the Hong Kong Police Force began an investigation of suspected offences relating to the same matter.

The SFC announced on 11 September 2014 that it has commenced proceedings in the Court of First Instance of the High Court of Hong Kong (the “High Court”) and the Market Misconduct Tribunal (the “MMT”), respectively, against the Company and five of its former executive directors.

The SFC alleges that the Company and the former directors had engaged in market misconduct involving the disclosure of false or misleading information about the Company’s financial position in connection with losses that the Company had suffered through its investment in the leveraged foreign exchange contracts.

In the action instigated by the SFC at the MMT, the SFC is asking the MMT to (i) determine whether any market misconduct has taken place, and (ii) identify persons who had engaged in such misconduct. In the event that the MMT makes determinations of market misconduct against either the Company or the former directors, it is understood that the SFC will seek from the High Court orders against those who have been found to have engaged in market misconduct to restore affected investors to their pre-transaction positions or to compensate affected investors for their losses. The SFC has not yet quantified the amount of such restoration or compensation sought in the proceedings in the High Court, which have been stayed pending the MMT results.

The MMT hearing was completed in July 2016 with the outcome pending.

HALF-YEAR REPORT 2016

/ 91

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments (continued)

(e) Outstanding litigation and disputes (continued)

(i) The Hong Kong Securities and Futures Commission (the “SFC”) Investigation

(continued)

On 15 October 2014, the Secretary for the Financial Services and the Treasury said that the Police’s investigation into the CITIC matters on aspects outside the subject matters of the SFC’s actions are still ongoing.

In the absence of the findings of these proceedings and investigations being made available to the Company and due to the inherent difficulties involved in attempting to predict the outcome of such proceedings and investigations and in assessing the possible findings, the directors do not have sufficient information to reasonably estimate the fair value of contingent liabilities (if any) relating to such proceedings and investigations, the timing of the ultimate resolution of those matters or what the eventual outcome may be. However, based on information currently available, the directors are not aware of any matters arising from the above proceedings and investigations that might have a material adverse financial impact on the consolidated financial position or liquidity of the Group.

(ii) Mineralogy Disputes

The MRSLAs provide that royalties are payable to Mineralogy by each of Sino Iron and Korean Steel on ore mined (Royalty Component A) and concentrate produced (Royalty Component B). The MRSLAs also provide that, unless certain exceptions apply, a Minimum Production Royalty is payable to Mineralogy by each of Sino Iron and Korean Steel where a minimum production level was not achieved by a specified date.

Due to changes in the way in which seaborne-traded iron ore is priced, the Company considers that it is no longer possible to calculate Royalty Component B. Mineralogy and its related companies have commenced a number of proceedings against the Company, Sino Iron, Korean Steel, Sino Iron Holdings Pty Ltd and certain officers of those companies containing or derived from claims for Royalty Component B and/or the Minimum Production Royalty. A number of those proceedings are described above in Note 3(b). To the extent those proceedings have not been permanently stayed or dismissed, they are being vigorously contested by the Group. No trial date has been set in the ongoing royalties proceedings.

In the circumstances, the Group does not consider that a reliable estimate can be made of the amount of any potential liability arising from the royalties proceedings, and, therefore, no provision has been recognised in the Accounts.

There are a number of disputes with Mineralogy. Refer to Note 3(b) for details.

(iii) CITIC Resources Holdings Limited (“CITIC Resources”) Litigation

(1) In August 2014, 山煤煤炭進出口有限公司 (Shanxi Coal Import & Export Co., Ltd.) (“Shanxi Coal I/E”), a wholly-owned subsidiary of 山煤國際能源集團股份有限公司 (Shanxi Coal International Energy Group Co., Ltd.) (“Shanxi Coal Int’l”), commenced a claim in 山西省高級人民法院 (Shanxi High People’s Court) (the “Shanxi Court”) against, amongst others, CITIC Australia Commodity Trading Pty Limited (“CACT”) (the “Claim A”). Shanxi Coal I/E is claiming from CACT (i) the sum of US$89,755,000 (HK$700,089,000) plus interest for breach of contract resulting from the alleged non-delivery of certain aluminium ingots by CACT to Shanxi Coal I/E, and (ii) costs in respect of Claim A.

CITIC LIMITED

/ 92

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments (continued)

(e) Outstanding litigation and disputes (continued)

(iii) CITIC Resources Holdings Limited (“CITIC Resources”) Litigation (continued)

Service of Claim A was effected on CACT in September 2015 by way of a public notice issued by the Shanxi Court. Court hearings have been held subsequently. So far, no judgment has been issued by the Shanxi Court in respect of Claim A.

CITIC Resources has noted from an announcement issued by Shanxi Coal Int’l in August 2014 that, in connection with Claim A, Shanxi Coal I/E had obtained an asset protection order over a certain quantity of CACT’s alumina and copper stored in bonded warehouses at Qingdao port.

As at 30 June 2016 and the date of approval of the Accounts, CACT remains of the view that Claim A is without merit. Accordingly, no provision was made in respect of Claim A.

(2) In the second half of 2015, CACT received an arbitration request notice from the International Court of Arbitration of the International Chamber of Commerce (the “ICC”) in respect of an arbitration application by Shanxi Coal I/E pursuant to which, Shanxi Coal I/E is (i) alleging that CACT has entered into two contracts for the supply of, and has failed to deliver, copper cathodes to Shanxi Coal I/E (the “Contracts”); and (ii) claiming the amount of US$27,890,000 (HK$217,542,000) as the aggregate purchase price Shanxi Coal I/E alleges it has paid to CACT under the Contracts, plus interest (“Claim B”).

As at 30 June 2016 and the date of approval of the Accounts, CACT considers Claim B to be baseless and the purported submission to arbitration by the ICC wrongful. CACT has not entered into the Contracts as alleged by Shanxi Coal I/E. Accordingly, no provision was made in respect of Claim B.

(3) In August 2014, CITIC Resources has noted from an announcement issued by Qingdao Port International Co., Ltd. (the “Qingdao Port Announcement”) that a legal complaint dated 14 July 2014 (the “Legal Proceedings”) had been issued by ABN AMRO Bank N.V., Singapore Branch (“ABN AMRO”) against CACT. According to the Qingdao Port Announcement, among other things, ABN AMRO had issued the Legal Proceedings alleging that CACT had taken wrongful preservative measures in respect of cargo over which ABN AMRO claims it had been granted a pledge (the “Subject Cargo”) and is seeking an order that (i) CACT compensate ABN AMRO for loss of RMB1,000,000 (HK$1,167,000); (ii) CACT withdraw its asset protection order over the Subject Cargo; and (iii) CACT bear all fees and legal costs of the Legal Proceedings.

Up to the date of approval of the Accounts, CACT has not been served with the Legal Proceedings and is, therefore, unable to consider or comment on the substance of the Legal Proceedings. Accordingly, no provision was made in respect of the Legal Proceedings.

(iv) There are some issues in dispute with MCC, and their details are disclosed in Note 3(a).

HALF-YEAR REPORT 2016

/ 93

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

31 Contingent liabilities and commitments (continued)

(f) Capital commitments

As at the balance sheet date, the Group had the following contracted capital commitments not provided for in the Accounts:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Contracted for 21,363 30,888
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As at 30 June 2016, the capital commitments of discontinued operations of HK$7,877 million were included in the above table.

(g) Operating lease commitments

The Group leases certain properties and fixed assets under operating leases. As at the balance sheet date, the Group’s future minimum lease payments under non-cancellable operating leases are as follows:

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----- Start of picture text -----

30 June 31 December
2016 2015
HK$ million HK$ million
Within 1 year 4,536 4,469
Between 1 and 2 years 3,746 3,794
Between 2 and 3 years 2,921 3,141
Over 3 years 9,069 10,429
20,272 21,833
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As at 30 June 2016, the operating lease commitments of discontinued operations of HK$105 million were included in the above table.

32 Financial risk management and fair values

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the business of the Group. The Group has established policies and procedures to identify and analyse these risks, to set appropriate risk limits and controls, and to constantly monitor the risks and limits by means of reliable and up-to-date management information systems. The Group regularly updates and enhances its risk management policies and systems to reflect changes in markets, products and best practice risk management processes. Internal auditors also perform regular audits to ensure compliance with policies and procedures.

CITIC LIMITED

/ 94

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Credit risk

Credit risk represents the potential loss that may arise from a customer or counterparty’s failure to meet its obligation when due. For loan business, the Group identifies and manages the credit risk through its target markets definitions, credit approval process, post-disbursement monitoring and remedial management procedures. In respect of treasury businesses, credit risk mainly represents impairment losses of debt securities due to default by issuers, and inability of derivative counterparties in fulfilling their obligations. The Group sets credit limits for treasury activities and monitors them regularly with reference to the fair values of the relevant financial instruments.

The Group is also confronted with credit risk resulting from receivables that arising from sale of goods and rendering of services within the non-financial services segments. The relevant subsidiaries have established a credit policy under which individual credit evaluations are performed on all customers to determine the credit limit and terms applicable to the customers. These evaluations focus on the customers’ financial position, the external ratings of the customers and their bank credit records where available.

(i) Maximum credit risk exposure

The maximum exposure to credit risk as at the balance sheet date without taking into consideration of any collateral held or other credit enhancement is represented by the net balance of each type of financial assets in the balance sheet after deducting any impairment allowance. A summary of the maximum exposure is as follows:

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30 June 31 December
2016 2015
HK$ million HK$ million
Deposits with central banks, banks and
non-bank financial institutions 865,589 792,788
Placements with banks and non-bank
financial institutions 128,762 141,775
Financial assets at fair value through profit or loss 71,538 33,682
Derivative financial assets 26,976 16,509
Trade and other receivables 110,175 118,008
Financial assets held under resale agreements 113,199 165,391
Loans and advances to customers and other parties 3,153,019 2,947,798
Available-for-sale financial assets 517,843 449,769
Held-to-maturity investments 225,507 216,267
Investments classified as receivables 1,380,912 1,331,281
6,593,520 6,213,268
Credit commitments and guarantees provided 1,453,653 1,475,150
Maximum credit risk exposure 8,047,173 7,688,418
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HALF-YEAR REPORT 2016

/ 95

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(a) Credit risk (continued)

(ii) Distribution by credit exposure is as follows:

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As at 30 June 2016
Due from Debt
Loans and central banks, securities
advances to banks and Financial investments
customers non-bank asset held and Investments
and other financial under resale certificates of classified as
parties institutions agreements deposit receivables
HK$ million HK$ million HK$ million HK$ million HK$ million
Impaired
Individually assessed
Gross balance 37,450 36 – 4,632 480
–
Allowance for impairment losses (23,070) (10) (46) (150)
14,380 26 – 4,586 330
Collectively assessed
Gross balance 11,588 – – – –
– – – –
Allowance for impairment losses (8,278)
– – – –
3,310
Overdue but not impaired
(note (1))
Gross balance 72,829 – – – –
Within which:
– Within 3 months 53,131 – – – –
– – – – –
Between 3 months and 1 year 19,698
– – – –
Allowance for impairment losses (8,524)
– – – –
64,305
Neither overdue nor impaired
Gross balance 3,106,046 994,325 113,199 809,400 1,383,375
Allowance for impairment losses
– –
(note (2)) (35,022) (68) (2,793)
3,071,024 994,325 113,199 809,332 1,380,582
Net balance 3,153,019 994,351 113,199 813,918 1,380,912
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CITIC LIMITED

/ 96

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(a) Credit risk (continued)

(ii) Distribution by credit exposure is as follows (continued) :

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----- Start of picture text -----

As at 31 December 2015
Due from
central banks, Debt securities
Loans and banks and Financial investments
advances to non-bank asset held and Investments
customers and financial under resale certificates of classified as
other parties institutions agreements deposit receivables
HK$ million HK$ million HK$ million HK$ million HK$ million
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Impaired
Individually assessed

Gross balance	37,094	36	–	198	33
Allowance for impairment losses	(21,973)	(10)	–	(128)	(16)
	15,121	26	–	70	17
Collectively assessed

Gross balance	9,553	–	–	–	–
Allowance for impairment losses	(6,978)	–	–	–	–
	2,575	–	–	–	–
Overdue but not impaired (note (1))
Gross balance	49,896	–	–	–	148
Within which:
–Within 3 months	41,997	–	–	–	148
–Between 3 months and 1 year	7,899	–	–	–	–
Allowance for impairment losses	(6,685)	–	–	–	(44)
	43,211	–	–	–	104
Neither overdue nor impaired
Gross balance	2,927,541	934,537	165,391	696,455	1,332,290
Allowance for impairment losses (note (2))	(40,650)	–	–	(89)	(1,130)
	2,886,891	934,537	165,391	696,366	1,331,160
Net balance	2,947,798	934,563	165,391	696,436	1,331,281

HALF-YEAR REPORT 2016

/ 97

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(a) Credit risk (continued)

(ii) Distribution by credit exposure is as follows (continued) :

Notes:

(1) Collateral and other credit enhancements for overdue but not impaired loans and advances

As at 30 June 2016, the corporate loans and advances of the Group which were overdue but not impaired were HK$60,468 million (31 December 2015: HK$36,693 million). As at 30 June 2016, the secured portion of these loans and advances were HK$35,987 million (31 December 2015: HK$21,471 million), and the remaining loans and advances were unsecured.

The fair value of collateral held against these loans and advances amounted to HK$43,779 million as at 30 June 2016 (31 December 2015: HK$28,290 million).

The fair value of collateral was estimated by management based on the latest available external valuations, if any, adjusted by taking into account the current realisation experience as well as market situation.

(2) The balance represents collectively assessed allowance for impairment losses.

(iii) Loans and advances to customers and other parties analysed by industry sector:

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As at 30 June 2016 As at 31 December 2015
Loans and Loans and
advances advances
Gross secured by Gross secured by
balance collateral balance collateral
HK$ million % HK$ million HK$ million % HK$ million
Corporate loans
– Manufacturing 487,968 15% 247,544 494,368 17% 240,563
– Real estate 352,727 11% 303,596 307,585 10% 261,357
– Wholesale and retail 299,809 9% 185,796 311,149 10% 192,861
– Re ntal and business
services 189,569 6% 112,009 176,416 6% 103,917
– Tr ansportation,
storage and postal
services 184,784 6% 94,790 176,102 6% 86,347
– Wa ter, environment
and public utility
management 166,081 5% 83,900 152,110 5% 76,776
– Construction 120,610 4% 54,698 122,469 4% 57,306
– Pr oduction and
supply of electric
power, gas and
water 69,829 2% 25,120 65,296 2% 24,134
– Pu blic management
and social
organisations 25,885 1% 5,725 24,869 1% 5,825
– Others 297,011 9% 124,941 284,921 9% 116,578
2,194,273 68% 1,238,119 2,115,285 70% 1,165,664
Personal loans 940,787 29% 689,900 798,078 26% 571,250
Discounted bills 92,853 3% – 110,721 4% –
3,227,913 100% 1,928,019 3,024,084 100% 1,736,914
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CITIC LIMITED

/ 98

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(a) Credit risk (continued)

(iv) Loans and advances to customers and other parties analysed by geographical sector:

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----- Start of picture text -----

As at 30 June 2016 As at 31 December 2015
Loans and Loans and
advances advances
Gross secured by Gross secured by
balance collateral balance collateral
HK$ million % HK$ million HK$ million % HK$ million
Mainland China 3,051,511 94% 1,851,067 2,852,755 94% 1,665,593
Hong Kong and Macau 157,157 5% 63,338 146,504 5% 55,634
Overseas 19,245 1% 13,614 24,825 1% 15,687
3,227,913 100% 1,928,019 3,024,084 100% 1,736,914
----- End of picture text -----

(v) Rescheduled loans and advances to customers and other parties

Rescheduled loans and advances are those loans and advances which have been restructured or renegotiated because of deterioration in the financial position of the borrower, or of the inability of the borrower to meet the original repayment schedule and for which the revised repayment terms are a concession that the Group would not otherwise consider.

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As at 30 June 2016 As at 31 December 2015
Gross balance % of total loans Gross balance % of total loans
HK$ million and advances HK$ million and advances
Rescheduled loans and advances
overdue less than 3 months 3,845 0.12% 3,786 0.13%
Rescheduled loans and advances
overdue more than 3 months 6,960 0.22% 6,339 0.21%
10,805 0.34% 10,125 0.34%
----- End of picture text -----

(vi) Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

As at 30 June 2016, the Group did not enter into enforceable master netting arrangements with counterparties and therefore there were no offsettings of any assets and liabilities in the consolidated balance sheet (31 December 2015: Nil).

HALF-YEAR REPORT 2016

/ 99

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(b) Liquidity risk

Liquidity risk arises when there is mismatch between amounts and maturity dates of financial assets and financial liabilities.

Each of the Group’s operating entity formulates liquidity risk management policies and procedures within the Group’s overall liquidity risk management framework and takes into consideration of the business and regulatory requirements applicable to individual entity.

The Group manages liquidity risk by holding liquid assets (including deposits, other short term funds and securities) of appropriate quality and quantity to ensure that short term funding requirements are covered within prudent limits. Adequate standby facilities are maintained to provide strategic liquidity to meet unexpected and material demand for payments in the ordinary course of business.

The following tables indicate the analysis by remaining maturities of the Group’s financial assets and liabilities:

	Repayable on demand HK$ million	Within 1 year HK$ million	As at 30 Between 1 and 5 years HK$ million	June 2016 More than 5 years HK$ million	No maturity date HK$ million	Total HK$ million
Total financial assets	361,108	3,339,727	1,494,827	852,024	603,746	6,651,432
Total financial liabilities	(2,529,900)	(3,217,078)	(553,477)	(157,403)	(2,127)	(6,459,985)
Financial asset-liability gap	(2,168,792)	122,649	941,350	694,621	601,619	191,447

Total financial assets	Repayable on demand HK$ million 313,863	Within 1 year HK$ million 3,302,808	As at 31 December 2015 Between 1 and 5 years More than 5 years HK$ million HK$ million 1,384,146 702,505		No maturity date HK$ million 570,499	Total HK$ million 6,273,821
Total financial liabilities	(1,981,905)	(3,242,186)	(623,643)	(197,096)	(1,766)	(6,046,596)
Financial asset-liability gap	(1,668,042)	60,622	760,503	505,409	568,733	227,225

CITIC LIMITED

/ 100

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(b) Liquidity risk (continued)

Credit Commitments include loan commitments, acceptances, credit card commitments, guarantees, letters of credit and others. The tables below summarise the amounts of credit commitments by remaining contractual maturity.

	Within 1 year HK$ million	As at 30 June 2016 Between 1 and 5 years More than 5 years HK$ million HK$ million	As at 30 June 2016 Between 1 and 5 years More than 5 years HK$ million HK$ million	Total HK$ million
Acceptances	671,085	–	–	671,085
Credit card commitments	220,144	–	–	220,144
Guarantees	101,889	72,976	3,398	178,263
Loan commitments	122,285	81,166	53,172	256,623
Letters of credit	104,326	898	197	105,421
Others	–	16	–	16
Total	1,219,729	155,056	56,767	1,431,552

Acceptances	Within 1 year HK$ million 753,607	As at 31 December 2015 Between 1 and 5 years More than 5 years HK$ million HK$ million – –		Total HK$ million 753,607
Credit card commitments	178,015	–	–	178,015
Guarantees	102,315	63,774	2,101	168,190
Loan commitments	106,754	74,868	56,215	237,837
Letters of credit	108,840	944	–	109,784
Others	–	5,040	–	5,040
Total	1,249,531	144,626	58,316	1,452,473

HALF-YEAR REPORT 2016

/ 101

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(c) Interest rate risk

Each of the Group’s operating entity has formulated its own interest risk management policies and procedures covering identification, measurement, monitoring and control of risks. The Group manages interest rate risk to control potential loss from interest rate risk at an acceptable level.

(i) Asset-liabilities gap

Interest rate risk arises from mismatch between repricing dates of financial assets and liabilities affected by market interest rate volatility.

		Non-interest bearing HK$ million	Within 1 year HK$ million	As at 30 June 2016 Between 1 and 5 years More than 5 years HK$ million HK$ million	As at 30 June 2016 Between 1 and 5 years More than 5 years HK$ million HK$ million	Total HK$ million
Total financial assets		204,339	5,445,407	779,275	222,411	6,651,432
Total financial liabilities		(230,055)	(5,547,651)	(526,933)	(155,346)	(6,459,985)
	Financial asset-liability gap	(25,716)	(102,244)	252,342	67,065	191,447

		Non-interest bearing HK$ million	As at 31 December 2015 Within 1 year Between 1 and 5 years More than 5 years HK$ million HK$ million HK$ million			Total HK$ million
Total financial assets		202,696	4,872,776	1,006,508	191,841	6,273,821
Total financial liabilities		(217,139)	(5,086,478)	(566,746)	(176,233)	(6,046,596)
	Financial asset-liability gap	(14,443)	(213,702)	439,762	15,608	227,225

CITIC LIMITED

/ 102

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(c) Interest rate risk (continued)

(ii) Effective interest rate

==> picture [403 x 413] intentionally omitted <==

----- Start of picture text -----

As at As at
Effective 30 June Effective 31 December
interest rate 2016 interest rate 2015
HK$ million HK$ million
Assets
Cash and deposits 1.31%-1.54% 873,526 1.22%-1.47% 801,615
Placements with banks and non-bank
financial institutions 2.59% 128,762 2.59% 141,775
Financial assets held under resale agreements 2.33% 113,199 3.90% 165,391
Loans and advances to customers and
other parties 4.96% 3,153,019 5.85% 2,947,798
Investments classified as receivables 4.11% 1,380,912 5.20% 1,331,281
Investments (note (1)) 3.63% 937,518 3.86% 824,808
Others 677,881 590,641
7,264,817 6,803,309
Liabilities
Borrowing from central banks 3.08% 91,380 3.50% 44,761
Deposits from banks and non-bank
financial institutions 2.88% 1,339,053 3.80% 1,275,421
Placements from banks and non-bank
financial institutions 2.19% 56,813 1.81% 58,141
Financial assets sold under repurchase
agreements 2.49% 22,536 2.43% 84,949
Deposits from customers 1.77% 4,010,328 2.16% 3,766,848
Bank and other loans 0.31%-7.86% 110,779 0.63%-8.50% 147,221
Debt instruments issued 2.55%-7.25% 609,098 1.00%-7.25% 449,772
Others 369,213 313,027
6,609,200 6,140,140
----- End of picture text -----

Note:

(i) The Group’s investments include financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments, and interests in associates and joint ventures. The calculation of effective interest rate is based on the interest yielding part of the financial assets.

HALF-YEAR REPORT 2016

/ 103

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(c) Interest rate risk (continued)

(iii) Sensitivity analysis

The Group uses sensitivity analysis to measure the potential effect of changes in interest rates on the Group’s profit or loss. As at 30 June 2016, it is estimated that a general increase or decrease of 100 basis points in interest rates, with all other variables held constant, the Group’s annualised profit before taxation would decrease or increase by HK$3,651 million (31 December 2015: the Group’s annual profit before taxation would decrease or increase by HK$2,968 million).

This sensitivity analysis is based on a static interest rate risk profile of the Group’s non-derivative assets and liabilities and certain simplified assumptions. The analysis only measures the impact of changes in the interest rates within one year, showing how annualised interest income would have been affected by repricing of the Group’s non-derivative assets and liabilities within the one-year period. The analysis is based on the following assumptions: (1) all assets and liabilities that reprice or mature within three months and after three months but within one year reprice or mature at the beginning of the respective periods; (2) there is a parallel shift in the yield curve and in interest rates; and (3) there are no other changes to the portfolio, all positions will be retained and rolled over upon maturity. The analysis does not take into account the effect of risk management measures taken by management. Because of its hypothetical nature with the assumptions adopted, actual changes in the Group’s profit before taxation resulting from increases or decreases in interest rates may differ from the results of this sensitivity analysis.

(d) Currency risk

Currency risk arises from the changes in exchange rates on the Group’s foreign currency denominated assets and liabilities. The Group measures its currency risk with foreign currency exposures, and manages currency risk by entering into spot foreign exchange transactions, use of derivatives (mainly foreign forwards and swaps), and matching its foreign currency denominated assets with corresponding liabilities in the same currency.

The revenue from the Group’s Sino Iron Project will be denominated in US$, which is also the functional currency for this entity. A substantial portion of its development and operating expenditure are denominated in Australian Dollars. The Group entered into plain vanilla forward contracts to manage the foreign currency risks.

The Group funded the Sino Iron Project and the acquisition of bulk cargo vessels by borrowing US$ loans to match the future cash outflows of these assets. The Group’s investments in the Sino Iron Project and bulk cargo vessels (whose functional currency is in US$) have been designated as an accounting hedge against other US$ loans.

CITIC LIMITED

/ 104

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(d) Currency risk (continued)

The exposure to currency risk arising from the financial assets and financial liabilities at the balance sheet date is as follows (expressed in HK$ million):

	HK$	US$	As at 30 June 2016 RMB Others	As at 30 June 2016 RMB Others	Total
Total financial assets	161,882	353,893	6,089,739	45,918	6,651,432
Total financial liabilities	(163,390)	(452,303)	(5,783,410)	(60,882)	(6,459,985)
Financial asset-liability gap	(1,508)	(98,410)	306,329	(14,964)	191,447

	HK$	As at 31 December 2015 US$ RMB Others			Total
Total financial assets	142,259	358,265	5,729,973	43,324	6,273,821
Total financial liabilities	(137,807)	(437,680)	(5,403,623)	(67,486)	(6,046,596)
Financial asset-liability gap	4,452	(79,415)	326,350	(24,162)	227,225

The Group uses sensitivity analysis to measure the potential effect of changes in foreign currency exchange rates on the Group’s profit or loss.

Assuming all other risk variables remained constant, a 100 basis points strengthening or weakening of HK$ against the US$, RMB and other currencies as at 30 June 2016 would decrease or increase the Group’s annualised profit before taxation by HK$1,930 million (31 December 2015: decrease or increase the Group’s annual profit before taxation by HK$2,228 million).

This sensitivity analysis is based on a static foreign exchange exposure profile of financial assets and financial liabilities and certain simplified assumptions. The analysis is based on the following assumptions: (1) the foreign exchange sensitivity is the gain and loss recognised as a result of 100 basis points fluctuation in the foreign currency exchange rates against HK$; and (2) the exchange rates against HK$ for all foreign currencies changes in the same direction simultaneously and does not take into account the correlation effect of changes in different foreign currencies; and (3) the foreign exchange exposures calculated include both spot foreign exchange exposures, forward foreign exchange exposures and options, and all positions will be retained and rolled over upon maturity. The analysis does not take into account the effect of risk management measures taken by management. Because of its hypothetical nature with the assumptions adopted, actual changes in the Group’s profit before taxation resulting from increases or decreases in foreign exchange rates may differ from the results of this sensitivity analysis.

HALF-YEAR REPORT 2016

/ 105

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(e) Fair values

(i) Financial instruments carried at fair value

The following table presents the carrying amounts of financial instruments measured at fair value as at the balance sheet date across the three levels of the fair value hierarchy defined in HKFRS 13 Fair value measurement, with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

Level 1 (highest level): fair values measured using quoted market for similar active markets for identical financial instruments;
Level 2: fair values measured using quoted prices in active market for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data;
Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.

The fair value of the Group’s financial assets and financial liabilities are determined as follows:

If traded in active markets, fair values of financial assets and financial liabilities with standard terms and conditions are determined with reference to quoted market bid prices and ask prices, respectively;
If not traded in active markets, fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models or discounted cash flow analysis using prices from observable current market transactions for similar instruments. If there were no available observable current market transactions prices for similar instruments, quoted prices from counterparty is used for the valuation, and management performs analysis on these prices. Discounted cash flow analysis using the applicable yield curve for the duration of the instruments is used for derivatives other than options, and option pricing models are used for option derivatives.

CITIC LIMITED

/ 106

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(e) Fair values (continued)

(i) Financial instruments carried at fair value (continued)

		Level 1 HK$ million	As at 30 June 2016 Level 2 Level 3 HK$ million HK$ million	As at 30 June 2016 Level 2 Level 3 HK$ million HK$ million	Total HK$ million
Assets
Financial assets at fair value through profit or loss Derivative financial assets		4,157 34	70,093 26,936	35 6	74,285 26,976
Available-for-sale financial assets		54,447	492,381	18,152	564,980
		58,638	589,410	18,193	666,241
Liabilities
Derivative financial liabilities		(13)	(31,960)	(874)	(32,847)

		Level 1 HK$ million	As at 31 December 2015 Level 2 Level 3 HK$ million HK$ million		Total HK$ million
Assets
Financial assets at fair value
	through profit or loss	4,713	35,597	81	40,391
Derivative financial assets		20	16,485	4	16,509
Available-for-sale financial assets		57,070	417,381	18,911	493,362
		61,803	469,463	18,996	550,262
Liabilities
Derivative financial liabilities		(1)	(16,566)	(908)	(17,475)

During the six months ended 30 June 2016, there were no significant transfers between instruments in different levels (six months ended 30 June 2015: Nil) and no significant changes in valuation techniques for determining the fair values of the instruments (six months ended 30 June 2015: Nil).

HALF-YEAR REPORT 2016

/ 107

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(e) Fair values (continued)

(i) Financial instruments carried at fair value (continued)

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

		Financial assets at fair value through profit or loss HK$ million	Six months ended 30 June 2016 Assets Derivative financial assets Available-for- sale financial assets Total HK$ million HK$ million HK$ million	Six months ended 30 June 2016 Assets Derivative financial assets Available-for- sale financial assets Total HK$ million HK$ million HK$ million	Six months ended 30 June 2016 Assets Derivative financial assets Available-for- sale financial assets Total HK$ million HK$ million HK$ million	Liabilities Derivative financial liabilities HK$ million
As at 1 January 2016		81	4	18,911	18,996	(908)
Total (loss)/gains
–in profit or loss		(44)	4	35	(5)	(4)
–in other comprehensive loss		–	–	(127)	(127)	36
Net settlements		(2)	(2)	(667)	(671)	2
	As at 30 June 2016	35	6	18,152	18,193	(874)
	Total (loss)/gains for the period
	included in profit or loss for
	assets and liabilities held in Level
	3 as at the balance sheet date	(44)	4	35	(5)	(4)
		Financial assets at fair value through profit or loss HK$ million	Six months ended 30 June 2015 Assets Derivative financial assets Available-for- sale financial assets Total HK$ million HK$ million HK$ million			Liabilities Derivative financial liabilities HK$ million
As at 1 January 2015		21	9	34,255	34,285	(765)
Total gains/(loss):
–in profit or loss		40	(1)	547	586	161
–in other comprehensive income		–	–	326	326	–
Net settlements		(29)	(2)	(169)	(200)	–
	As at 30 June 2015	32	6	34,959	34,997	(604)
	Total gains/(loss) for the period
	included in profit or loss for
	assets and liabilities held in Level
	3 as at the balance sheet date	40	(1)	547	586	161

CITIC LIMITED

/ 108

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(e) Fair values (continued)

(ii) Fair value of other financial instruments (carried at other than fair value)

The carrying amounts and fair values of the Group’s financial assets and liabilities, other than those with carrying amounts that reasonably approximate to their fair values, are as follows:

		As at 30 June 2016	As at 30 June 2016
Carrying amount	Fair value	Level 1	Level 2	Level 3
HK$ million	HK$ million	HK$ million	HK$ million	HK$ million
Financial assets

Held-to-maturity investments 225,507	230,981	1,163	229,730	88
Investments classified as receivables 1,380,912	1,401,925	–	1,401,925	–

1,606,419	1,632,906	1,163	1,631,655	88

Financial liabilities
Debt instruments issued
–Corporate bonds issued 97,589	101,760	3,620	98,140	–
–Notes issued 67,918	70,104	–	70,104	–
–Subordinated bonds issued 89,014	94,215	9,261	84,954	–
– Ce rtificates of deposit (not for trading purpose) 12,957	12,974	–	12,974	–
– Ce rtificates of interbank deposit issued 341,620	341,649	–	341,649	–

609,098	620,702	12,881	607,821	–

	As at 31 December 2015
Carrying amount	Fair value Level 1 Level 2			Level 3
HK$ million	HK$ million HK$ million HK$ million			HK$ million
Financial assets
Held-to-maturity investments 216,267	222,501 1,131 221,298			72
Investments classified as receivables 1,331,281	1,345,573 – 1,345,573			–
1,547,548	1,568,074 1,131 1,566,871			72
Financial liabilities
Debt instruments issued
–Corporate bonds issued 72,762	74,593 3,353 71,240			–
–Notes issued 69,244	71,174 – 71,174			–
–Subordinated bonds issued 92,840	99,288 9,090 90,198			–
– Ce rtificates of deposit (not for trading purpose) 10,390	10,392 – 10,392			–
– Ce rtificates of interbank deposit issued 204,536	204,709 – 204,709			–
449,772	460,156 12,443 447,713			–

HALF-YEAR REPORT 2016

/ 109

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

32 Financial risk management and fair values (continued)

(e) Fair values (continued)

(iii) Estimation of fair values

As at the balance sheet date, the Group adopted the following major methods and assumptions in estimating the fair value of financial instruments.

Debt securities and equity investments

Fair value is based on quoted market prices as at the balance sheet date for trading financial assets and liabilities (excluding derivatives), available-for-sale financial assets, and held-tomaturity investments if there is an active market. If an active market does not exist for availablefor-sale financial assets, the fair value is determined using valuation techniques.

Loans and advances to customers and other parties, bank and other loans

Loans and advances to customers and other parties, and bank and other loans are repriced at market rates at least annually. Accordingly, their carrying amounts approximate their fair values.

Placements with banks and non-bank financial institutions, financial assets held/sold under resale/ repurchase agreements

Placements with banks and non-bank financial institutions, financial assets held/sold under resale/repurchase agreements are mainly priced at market interest rates and mature within one year. Accordingly, the carrying amounts approximate their fair values.

Derivatives

The fair values of foreign currency and interest rate contracts are either based on their listed market prices or by discounted cash flow model at the measurement date.

Financial guarantees

The fair values of financial guarantees are determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that the lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made.

33 Material related party

(a) Relationship of related parties

(i) In addition to subsidiaries, related parties include parent company, holding company’s fellow entities, associates and joint ventures of the Group.
(ii) CITIC Group, the parent and the ultimate controlling shareholder of the Group, is a state-owned company established in Beijing in 1979.

CITIC LIMITED

/ 110

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

33 Material related party (continued)

(b) Related party transactions

(i) Transaction amounts with related parties

==> picture [403 x 227] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June 2016
Holding
Parent company’s Associates and
company fellow entities joint ventures Total
HK$ million HK$ million HK$ million HK$ million
Sales of goods – 13 5 18
Purchase of goods – 9 37 46
Interest income (note (2)) 9 83 110 202
Interest expenses 3 19 208 230
Fee and commission income – 6 18 24
Fee and commission expenses – – 3 3
Income from other services – 43 40 83
Expenses for other services – 222 4 226
Interest income from deposits
and receivables – 32 63 95
Other operating expenses – 10 19 29
----- End of picture text -----

		Parent company HK$ million	Six months ended 30 June 2015 Holding company’s fellow entities Associates and joint ventures HK$ million HK$ million	Six months ended 30 June 2015 Holding company’s fellow entities Associates and joint ventures HK$ million HK$ million	Total HK$ million
Sales of goods		–	133	–	133
Purchase of goods		–	4	12	16
Interest income (note (2))		8	27	21	56
Interest expenses		165	9	195	369
Fee and commission income		–	2	50	52
Fee and commission expenses		–	–	47	47
Income from other services		–	18	8	26
Expenses for other services		–	265	26	291
Interest income from deposits
	and receivables	–	44	2	46
Other operating expenses		–	1	65	66

Notes:

(1) These above transactions with related parties were conducted under the normal commercial terms.
(2) Interest rates of loans and advances to the related parties were determined at rates negotiated between the Group and the corresponding related parties on a case by case basis.
(3) During the relevant periods, CITIC Bank, a subsidiary of the Group, entered into transactions with related parties in the ordinary course of its banking businesses including lending, assets transfer, wealth management, investment, deposit, clearing and off-balance sheet transactions. These banking transactions were conducted under normal commercial terms and conditions and priced at the relevant market rates prevailing at the time of each transaction.

HALF-YEAR REPORT 2016

/ 111

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

33 Material related party (continued)

(b) Related party transactions (continued)

(ii) Outstanding balances with related parties

		Parent company HK$ million	As at 30 June 2016 Holding company’s fellow entities Associates and joint ventures HK$ million HK$ million	Total HK$ million
Trade and other receivables		5	3,101 6,260	9,366
Loans and advances (note (2))		–	8,411 4,485	12,896
Placements with banks and non-bank financial institutions		–	36 167	203
Cash and deposits Derivative financial instruments and other assets		– –	– 245 – 275	245 275
Trade and other payables Deposits from customers Deposits from banks and non-bank financial institutions		3,007 446 –	24,368 14,761 5,597 16,659 2 18,419	42,136 22,702 18,421
Derivative financial instruments and other liabilities		–	38 1,052	1,090
Guarantees provided (note (3))		–	213 14,518	14,731

		Parent company HK$ million	As at 31 December 2015 Holding company’s fellow entities Associates and joint ventures HK$ million HK$ million	Total HK$ million
Trade and other receivables		78	3,627 8,868	12,573
Loans and advances (note (2))		–	8,814 3,187	12,001
Placements with banks and
	non-bank financial institutions	–	27 –	27
Cash and deposits		–	– 116	116
Derivative financial instruments and
	other assets	–	– 72	72
Trade and other payables		3,251	24,425 1,250	28,926
Deposits from customers		1,938	3,116 26,753	31,807
Deposits from banks and non-bank
	financial institutions	–	5 28,161	28,166
Derivative financial instruments and
	other liabilities	–	9 771	780
Guarantees provided (note (3))		–	146 15,323	15,469

Notes:

(1) The above transactions were negotiated and carried out in accordance with the normal commercial terms.

(2) Interest rates of loans and advances to the related parties were determined at rates negotiated between the Group and the corresponding related parties on a case by case basis.

(3) The guarantees provided by the Group to the related parties were based on the terms agreed between the Group and the related parties on a case by case basis.

CITIC LIMITED

/ 112

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

33 Material related party (continued)

(c) Transactions with other state-owned entities in the PRC

In addition to these related party transactions disclosed in Note 33(b), transactions with other stateowned entities include but are not limited to the following:

sales and purchases of goods and provision of services;
leases of assets;
lending and deposit taking;
taking and placing of inter-bank balances;
derivative transactions;
entrusted lending and other custody services;
insurance and securities agency, and other intermediary services; and
sale, purchase, underwriting and redemption of bonds issued by other state-owned entities.

HALF-YEAR REPORT 2016

/ 113

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

34 Structured entities

(a) Consolidated structured entities

The principal guaranteed wealth management products issued and managed by CITIC Bank, a subsidiary of the Group, represent products to which CITIC Bank has guaranteed the investor’s principal investment. The investments of the wealth management products and the corresponding source of funding are categorised as financial assets and financial liabilities in accordance with the accounting policies.

(b) Structured entities sponsored by third party institutions in which the Group holds an interest

The Group holds an interest in some structured entities sponsored by third party institutions through investments in debt securities issued by these structured entities. Such structured entities include wealth management products, investment management products managed by securities companies, trust investment plans, asset-backed financings and investment funds and the Group does not consolidate these structured entities.

The following table sets out an analysis of the carrying amounts of interests held by the Group as at the balance sheet date in the structured entities sponsored by third party institutions, as well as an analysis of the line items in the balance sheet in which the relevant assets are recognised:

==> picture [425 x 186] intentionally omitted <==

----- Start of picture text -----

As at 30 June 2016
Financial Available-
assets at fair Held-to- for-sale Investments
value through maturity financial classified as Maximum
Carrying amount profit or loss investments assets receivables Total Guarantees loss exposure
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
– – –
Wealth management products 17,737 236,344 254,081 254,081
Investment management products
managed by securities companies – – 178 1,013,841 1,014,019 – 1,014,019
– – –
Trust investment plans 3,759 129,891 133,650 133,650
Asset-backed securities – 3,418 8,893 – 12,311 – 12,311
Investment funds 351 – 4,592 – 4,943 – 4,943
Total 351 3,418 35,159 1,380,076 1,419,004 – 1,419,004
----- End of picture text -----

Carrying amount Wealth management products	Financial assets at fair value through profit or loss HK$ million –	Held-to- maturity investments HK$ million –	As at 31 December 2015 Available- for-sale financial assets Investments classified as receivables Total HK$ million HK$ million HK$ million 21,206 176,186 197,392	As at 31 December 2015 Available- for-sale financial assets Investments classified as receivables Total HK$ million HK$ million HK$ million 21,206 176,186 197,392	As at 31 December 2015 Available- for-sale financial assets Investments classified as receivables Total HK$ million HK$ million HK$ million 21,206 176,186 197,392	Guarantees HK$ million –	Maximum loss exposure HK$ million 197,392
Investment management products
managed by securities companies	–	–	420	986,698	987,118	–	987,118
Trust investment plans	–	–	4,836	167,074	171,910	5,040	176,950
Asset-backed financings	–	6,333	6,150	–	12,483	–	12,483
Investment funds	3,227	–	2,133	–	5,360	–	5,360
Total	3,227	6,333	34,745	1,329,958	1,374,263	5,040	1,379,303

CITIC LIMITED

/ 114

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

34 Structured entities (continued)

(c) Structured entities sponsored by the Group which the Group does not consolidate but holds an interest

The investments issued by unconsolidated structured entities sponsored by the Group are primarily wealth management products and trust plans without principal and/or return guarantee. The nature and purpose of these structured entities are for the Group to generate fees from managing assets on behalf of investors. These structured entities are financed through the issuance of products to investors. Interest held by the Group includes fees charged by providing management services and investment made by the Group.

Wealth management products and trust plans

As at 30 June 2016, the aggregate amount of assets held by the unconsolidated non-principalguaranteed wealth management products and trust plans which are sponsored by the Group was HK$2,185,222 million (31 December 2015: HK$1,977,449 million).

As at 30 June 2016, the carrying amounts of management fee receivables being recognised in the balance sheet were HK$679 million (31 December 2015: HK$650 million.)

As at 30 June 2016, the amount of placements from the Group with non-principal-guaranteed wealth management products sponsored by the Group was HK$32,878 million (31 December 2015: HK$30,158 million).

During the six months ended 30 June 2016, the maximum exposure of the placements from the Group with non-principal guaranteed wealth management products sponsored by the Group was HK$47,529 million (six months ended 30 June 2015: HK$38,246 million). In the opinion of management, these transactions were conducted in the ordinary course of business under normal terms and conditions and at market rates.

During the six months ended 30 June 2016, the amount of fee and commission income recognised from the above mentioned structured entities sponsored by the Group was HK$6,786 million (six months ended 30 June 2015: HK$5,056 million).

Securitisation vehicle

CITIC Bank enters into securitisation transactions in the normal course of business by which it transfers credit assets to structured entities which issue asset-backed securities to investors. CITIC Bank may retain interests in the form of subordinated tranches which would give rise to CITIC Bank’s retention of risk and rewards on the transferred assets. CITIC Bank will assess whether to derecognise the assets or not based on the extent of risks and rewards retained. For the six months ended 30 June 2016, CITIC Bank has derecognised loans and advances of HK$1,585 million in the asset-backed securitisation transactions (six months ended 30 June 2015: Nil). As at 30 June 2016, CITIC Bank neither transferred nor retained substantially all risks and rewards of ownership of certain transferred assets and retained the control of the transferred assets. CITIC Bank recognised HK$577 million in both assets and liabilities representing its continuing involvement in this connection (31 December 2015: HK$341 million). In addition, CITIC Bank also disposed of its loans and advances to customers in the ordinary course of business during the six months ended 30 June 2016.

HALF-YEAR REPORT 2016

/ 115

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

35 Discontinued operations

On 14 March 2016, the Company, CITIC Pacific and CITIC Corporation entered into an agreement with China Overseas Land & Investment Limited (“China Overseas”) to sell the Group’s interest in certain residential real estate projects in the PRC to one of the affiliates of China Overseas. As a result, the assets and liabilities related to such residential real estate projects have been classified as held for sale following this agreement.

In accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the results and cash flows of the above mentioned residential real estate projects have been included in the discontinued operations of the Group. Comparative figures for the six months ended 30 June 2015 have been reclassified accordingly.

(a) The aggregate results of the discontinued operations were as follows:

==> picture [425 x 199] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June
2016 2015
HK$ million HK$ million
Revenue 7,484 4,899
Expenses (10,415) (5,412)
Loss before taxation (2,931) (513)
Income tax (1,851) (98)
Loss arising from discontinued operations (4,782) (611)
Attributable to:
–
Ordinary shareholders of the Company (4,736) (486)
– Non-controlling interests (46) (125)
(4,782) (611)
----- End of picture text -----

(b) Cumulative income recognised in other comprehensive income relating to disposal group classified as held for sale

==> picture [425 x 74] intentionally omitted <==

----- Start of picture text -----

30 June 2016
HK$ million
Cumulative income recognised in other comprehensive income
relating to disposal group classified as held for sale 617
----- End of picture text -----

CITIC LIMITED

/ 116

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

35 Discontinued operations (continued)

(c) Assets and liabilities of disposal group classified as held for sale

==> picture [425 x 375] intentionally omitted <==

----- Start of picture text -----

30 June 2016
HK$ million
Assets
Cash and deposits 9,267
Trade and other receivables 10,630
Inventories 103,642
Available-for-sale financial assets 340
Interests in associates 436
Interests in joint ventures 2,420
Fixed assets 3,902
Investment properties 1,543
Intangible assets 873
Deferred tax assets 642
Other assets 1,447
135,142
Liabilities
Trade and other payables 41,967
Employee benefits payables 935
Income tax payable 156
Bank and other loans 37,214
Debt instruments issued 5,785
Provisions 131
Deferred tax liabilities 1,146
Other liabilities 1,361
88,695
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HALF-YEAR REPORT 2016

/ 117

Notes to the Consolidated Financial Statements

For the six months ended 30 June 2016

36 Major Transactions with non-controlling interests

Acquisition of additional interests in indirectly held subsidiaries

In January 2016, CITIC Corporation acquired an additional 11.63% interests in CITIC Real Estate for an aggregate purchase consideration of RMB3,028 million (approximately HK$3,601 million). The Group recognised a decrease in non-controlling interests of HK$1,589 million, and a decrease in equity attributable to shareholders of the Company of HK$2,012 million.

For the six months period ended 30 June 2016, the Company through its subsidiary(ies) increased its shareholding in CITIC Bank by acquiring approximately 1.00% equity interests, for an aggregate purchase consideration of HK$2,229 million. The Group recognised a decrease in non-controlling interests of HK$3,874 million, and an increase in equity attributable to shareholders of the Company of HK$1,645 million.

The effect of changes in the ownership interest of CITIC Real Estate and CITIC Bank on the equity attributable to shareholders of the Company during the period is summarised as follows:

==> picture [448 x 93] intentionally omitted <==

----- Start of picture text -----

30 June 2016
HK$ million
-
Carrying amount of non controlling interests acquired 5,463
Consideration paid to non-controlling interests (5,830)
Excess of consideration paid recognised within equity (367)
----- End of picture text -----

37 Post balance sheet events

There have been no events subsequent to the period end which require further adjustments or disclosures therein.

CITIC LIMITED

/ 118

Report on Review of Interim Financial Information

==> picture [80 x 58] intentionally omitted <==

TO THE BOARD OF DIRECTORS OF CITIC LIMITED

(incorporated in Hong Kong with limited liability)

Introduction

We have reviewed the interim condensed financial information set out on pages 33 to 117, which comprises the consolidated balance sheet of CITIC Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2016 and the related consolidated income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 26 August 2016

HALF-YEAR REPORT 2016

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Statutory Disclosure

Interim Dividend and Closure of Register of Members

The directors have declared an interim dividend of HK$0.10 per share (2015: HK$0.10 per share) for the year ending 31 December 2016, payable on Friday, 30 September 2016 to shareholders whose names appear on the Company’s register of members on Thursday, 22 September 2016. The register of members of the Company will be closed from Monday, 19 September 2016 to Thursday, 22 September 2016, both days inclusive, during which period no transfer of shares will be effected. To qualify for the interim dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Share Registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for registration not later than 4:30 p.m. on Thursday, 15 September 2016.

Share Option Plan Adopted by the Company

CITIC Pacific Share Incentive Plan 2011

The CITIC Pacific Share Incentive Plan 2000 adopted by the Company on 31 May 2000 for a term of ten years expired on 30 May 2010. The Company adopted a new plan, the CITIC Pacific Share Incentive Plan 2011 (the “Plan 2011”) on 12 May 2011, the purpose of which is to promote the interests of the Company and its shareholders by providing the eligible participants with additional incentives to continue and increase their efforts in achieving success in the business of the Group, and attracting and retaining the best available personnel to participate in the on-going business operation of the Group. Pursuant to the Plan 2011, the board may at its discretion offer to grant share options to any eligible participant including any employee, executive director, non-executive director, independent non-executive director or officer, consultant or representative of any member of the Company who shall make payment of HK$1.00 to the Company on acceptance. The subscription price determined by the board will not be less than the higher of (i) the nominal value of the Company’s shares; (ii) the closing price of the Company’s shares as stated in the daily quotations sheet of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) on the date of offer of the grant; and (iii) the average of the closing prices of the Company’s shares as stated in the Hong Kong Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of offer of the grant. The total number of the Company’s shares which may be issued upon exercise of all options to be granted under the Plan 2011 must not in aggregate exceed 10% of the Company’s shares in issue as at the date of adopting the Plan 2011. As at 30 June 2016, the total number of shares available for issue under the Plan 2011 is 364,944,416 shares.

No share options were granted under the Plan 2011 during the period ended 30 June 2016.

CITIC LIMITED

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Statutory Disclosure

Share Option Plan Adopted by Subsidiaries of the Company

CITIC Telecom International Holdings Limited (“CITIC Telecom”)

CITIC Telecom adopted a share option plan (“CITIC Telecom Share Option Plan”) on 17 May 2007. As approved at the annual general meeting of CITIC Telecom held on 25 April 2014, the mandate limit is refreshed so that taking into account the overriding limit of the CITIC Telecom Share Option Plan, the total number of shares of CITIC Telecom (“CITIC Telecom Shares”) which may be issued upon the exercise of all options to be granted under the CITIC Telecom Share Option Plan, together with all outstanding options granted and yet to be exercised as at 25 April 2014, shall not exceed 333,505,276 CITIC Telecom Shares, being 10% of the number of CITIC Telecom Shares in issue as at the date of approval of the refreshment of the mandate limit.

Since the adoption of the CITIC Telecom Share Option Plan, CITIC Telecom has granted the following share options:

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Number of Exercise price
Date of grant share options per share Exercise period
HK$
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23.05.2007	18,720,000	3.26	23.05.2007	–	22.05.2012
17.09.2009	17,912,500	2.10	17.09.2010	–	16.09.2015
17.09.2009	17,912,500	2.10	17.09.2011	–	16.09.2016
19.08.2011	24,227,500	1.54	19.08.2012	–	18.08.2017
19.08.2011	24,227,500	1.54	19.08.2013	–	18.08.2018
26.06.2013	81,347,000	2.25	26.06.2013	–	25.06.2018
24.03.2015	43,756,250	2.612	24.03.2016	–	23.03.2021
24.03.2015	43,756,250	2.612	24.03.2017	–	23.03.2022

Upon completion of the rights issue of CITIC Telecom on 7 June 2013, the exercise price and the number of CITIC Telecom Shares to be allotted and issued upon full exercise of the subscription rights attaching to the outstanding share options of CITIC Telecom as at 6 June 2013 have been adjusted (the “Adjustments”) in the following manner:

	Before Adjustments	After Adjustments

Date of grant	Number of outstanding share options Exercise price per share	Number of outstanding share options Exercise price per share
	HK$	HK$
17.09.2009	19,451,000 2.10	21,438,072 1.91
19.08.2011	32,332,500 1.54	35,635,462 1.40

The grantees were directors, officers or employees of CITIC Telecom. None of these options were granted to the directors, chief executives or substantial shareholders of the Company.

The share options granted on 23 May 2007 have expired at the close of business on 22 May 2012 and the first 50% of the share options granted on 17 September 2009 have expired at the close of business on 16 September 2015. The remaining options granted and accepted under the CITIC Telecom Share Option Plan can be exercised in whole or in part within 5 years from the date of commencement of the exercise period.

HALF-YEAR REPORT 2016

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Statutory Disclosure

As at 1 January 2016, options for 153,118,257 CITIC Telecom Shares were outstanding under the CITIC Telecom Share Option Plan. During the six months ended 30 June 2016, options for 6,374,398 CITIC Telecom Shares were exercised, options for 1,076,968 CITIC Telecom Shares have lapsed but no option has been cancelled. As at 30 June 2016, options for 103,549,641 CITIC Telecom Shares under the CITIC Telecom Share Option Plan were exercisable.

A summary of the movements of the share options during the six months ended 30 June 2016 is as follows:

A. Employees of the Company/CITIC Telecom under continuous contracts (as defined in the Employment Ordinance)

	Number of share options

Date of grant	Balance as at 01.01.2016 Exercised during the six months ended 30.06.2016(Note 1) Cancelled during the six months ended 30.06.2016 Lapsed during the six months ended 30.06.2016(Note 2) Balance as at 30.06.2016
17.09.2009	5,372,073 2,512,883 – 266 2,858,924
19.08.2011	16,673,867 962,832 – 1,702 15,709,333
26.06.2013	44,942,817 1,162,000 – 15,000 43,765,817
24.03.2015	84,529,500 1,336,683 – 1,060,000 82,132,817

B. Others[(Note 3)]

	Number of share options

Date of grant	Balance as at 01.01.2016 Exercised during the six months ended 30.06.2016(Note 4) Balance as at 30.06.2016
26.06.2013	400,000 – 400,000
24.03.2015	1,200,000 400,000 800,000

Notes:

The weighted average closing price of CITIC Telecom Shares immediately before the dates on which the options were exercised was HK$3.16.
These are in respect of options granted to some employees under continuous contracts who have subsequently resigned. Such options have lapsed during the six months ended 30 June 2016.
These are in respect of options granted to independent non-executive directors of CITIC Telecom who are not employees under continuous contracts. None of these options were cancelled or lapsed during the six months ended 30 June 2016.
The weighted average closing price of CITIC Telecom Shares immediately before the dates on which the options were exercised was HK$3.16.

CITIC LIMITED

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Statutory Disclosure

Dah Chong Hong Holdings Limited (“DCH Holdings”)

DCH Holdings adopted the Share Option Scheme (the “Scheme”) on 28 September 2007. Since the adoption of the Scheme, DCH Holdings has granted the following share options:

Date of grant	Number of share options	Exercise price per share HK$	Exercise period
07.07.2010	23,400,000	4.766	07.07.2010–06.07.2015
08.06.2012	24,450,000	7.400	08.06.2013–07.06.2017*
30.04.2014	28,200,000	4.930	30.04.2015 – 29.04.2019*

Subject to a vesting scale

The share options granted on 7 July 2010 has expired by the close of business on 6 July 2015.

Of the share options granted on 8 June 2012, 24,250,000 were accepted and 200,000 were not as at the latest date of acceptance pursuant to the scheme rules (i.e. 5 July 2012). The share options granted are subject to a vesting scale. 25% of the share options granted will vest on the first anniversary of the date of grant. Further 25% will vest on the second anniversary of the date of grant and the remaining 50% of the share options granted will vest on the third anniversary of the date of grant. The vested options are exercisable in whole or in part within 5 years from the date of grant. The closing price of DCH Holdings’ shares immediately before the grant on 8 June 2012 was HK$7.49 per share.

Of the share options granted on 30 April 2014, 27,850,000 were accepted and 350,000 were not as at the latest date of acceptance pursuant to the scheme rules (i.e. 28 May 2014). The share options granted are subject to a vesting scale. 25% of the options granted will vest on the first anniversary of the date of grant. Further 25% will vest on the second anniversary of the date of grant and the remaining 50% of the share options granted will vest on the third anniversary of the date of grant. The vested options are exercisable in whole or in part within five years from the date of grant. The closing price of DCH Holdings’ shares immediately before the grant on 30 April 2014 was HK$4.91 per share.

The grantees were certain directors or employees of DCH Holdings group working under continuous contracts (as defined in the Employment Ordinance). None were granted to the directors, chief executives or substantial shareholders of the Company. As at 1 January 2016, options for 48,100,000 DCH Holdings’ shares were outstanding under the Scheme. During the six months ended 30 June 2016, 900,000 share options were lapsed and none of the share options under the Scheme were exercised and cancelled. As at 30 June 2016, options for 36,400,000 DCH Holdings’ shares under the Scheme were exercisable.

HALF-YEAR REPORT 2016

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Statutory Disclosure

A. Employees of the DCH Holdings Group working under continuous contracts (as defined in the Employment Ordinance)

	Number of share options

Date of Grant	Balance as at 01.01.2016 Granted during the six months ended 30.06.2016 Cancelled during the six months ended 30.06.2016 Lapsed during the six months ended 30.06.2016 Exercised during the six months ended 30.06.2016 Balance as at 30.06.2016
08.06.2012	18,250,000 – – 400,000 – 16,650,000(Note 2)
30.04.2014	23,300,000 – – 500,000 – 21,600,000(Note 3)

B. Others[(Note 1)]

	Number of share options

Date of Grant	Balance as at 01.01.2016 Granted during the six months ended 30.06.2016 Cancelled during the six months ended 30.06.2016 Lapsed during the six months ended 30.06.2016 Exercised during the six months ended 30.06.2016 Balance as at 30.06.2016
08.06.2012	3,950,000 – – – – 5,150,000(Note 2)
30.04.2014	2,600,000 – – – – 3,800,000(Note 3)

Notes:

These are in respect of share options granted to former employees whose employment was terminated other than for cause or misconduct.
1,200,000 share options (granted on 8 June 2012) were reclassified and added to the balance as at 30 June 2016 in “Others” subsequent to certain employees retire during the six months ended 30 June 2016.
1,200,000 share options (granted on 30 April 2014) were reclassified and added to the balance as at 30 June 2016 in “Others” subsequent to certain employees retire during the six months ended 30 June 2016.

CITIC LIMITED

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Statutory Disclosure

CITIC Resources Holdings Limited (“CITIC Resources”)

CITIC Resources adopted a share option scheme on 30 June 2004 (the “Old Scheme”) for a term of ten years, which expired on 29 June 2014. The share options that have been granted under the Old Scheme and remained outstanding as at the date of expiry of the Old Scheme remain valid and exercisable subject to and in accordance with the terms of the Old Scheme.

To enable CITIC Resources to continue to grant share options as an incentive or reward to eligible persons, a new share option scheme was adopted by CITIC Resources on 27 June 2014 (the “New Scheme”).

The following share options, which were granted under the Old Scheme, remained outstanding as at 30 June 2016:

Date of grant	Number of share options	Exercise price per share HK$	Exercise period
06.11.2013	200,000,000(Note)	1.770	06.11.2014–05.11.2018
06.11.2013	200,000,000(Note)	1.770	06.11.2015 – 05.11.2018

Note:

The share options are subject to the following vesting conditions:

(i) 50% of the share options vest and are exercisable with effect from the first anniversary of the date of grant; and
(ii) the remaining 50% of the share options vest and are exercisable with effect from the second anniversary of the date of grant.

The grantee was a director of CITIC Resources. No share option was granted, exercised, lapsed or cancelled during the period. As at 30 June 2016, CITIC Resources had 400,000,000 share options outstanding under the Old Scheme.

No share options were granted under the New Scheme during the six months ended 30 June 2016.

HALF-YEAR REPORT 2016

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Statutory Disclosure

CITIC Envirotech Ltd. (“CITIC Envirotech”)

CITIC Envirotech is a company incorporated in Singapore and whose shares are listed on the main board of the Singapore Exchange. It adopted the Employee Share Option Scheme (the “Scheme”) on 2 February 2010.

Since the adoption of the Scheme, CITIC Envirotech has granted the following share options:

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Number of Exercise price
Date of grant share options per share Exercise period
S$
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01.03.2010	4,375,000	0.2780	01.03.2011	–	01.03.2020
01.03.2010	4,375,000	0.2224	01.03.2012	–	01.03.2020
20.07.2010	1,500,000	0.3830	20.07.2011	–	20.07.2020
20.07.2010	1,500,000	0.3064	20.07.2012	–	20.07.2020
15.02.2013	49,950,000	0.552	15.02.2015	–	15.02.2023
15.02.2013	49,950,000	0.552	15.02.2015	–	15.02.2023
28.03.2013	12,000,000	0.584	28.03.2015	–	28.03.2023
25.07.2014	6,000,000	1.135	25.07.2016	–	25.07.2024

Under the Scheme, the ordinary shares of CITIC Envirotech under option may be exercised in full or a multiple thereof, on the payment of the exercise price.

The grantees were certain directors and employees of CITIC Envirotech. None were granted to the directors, chief executives or substantial shareholders of the Company. As at 1 January 2016, 53,875,500 ordinary shares of CITIC Envirotech under option were outstanding. None of the ordinary shares of CITIC Envirotech under option were exercised, lapsed or cancelled during the six months ended 30 June 2016.

No options were granted during the period. As at 30 June 2016, 53,875,500 ordinary shares of CITIC Envirotech under option were exercisable.

A summary of the share options under the Scheme during the six months ended 30 June 2016 is as follows:

A. Directors of CITIC Envirotech

	Number of share options

Date of grant	Balance as at 01.01.2016 Granted during the six months ended 30.06.2016 Cancelled during the six months ended 30.06.2016 Lapsed during the six months ended 30.06.2016 Exercised during the six months ended 30.06.2016 Balance as at 30.06.2016
01.03.2010	1,500,000 – – – – 1,500,000
01.03.2010	1,500,000 – – – – 1,500,000
28.03.2013	12,000,000 – – – – 12,000,000

CITIC LIMITED

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Statutory Disclosure

B. Employees of CITIC Envirotech

	Number of share options

Date of grant	Balance as at 01.01.2016 Granted during the six months ended 30.06.2016 Cancelled during the six months ended 30.06.2016 Lapsed during the six months ended 30.06.2016 Exercised during the six months ended 30.06.2016 Balance as at 30.06.2016
15.02.2013	33,775,500 – – – – 33,775,500
25.07.2014	5,100,000 – – – – 5,100,000

Directors’ Interests in Securities

As at 30 June 2016, the interests or short positions of the directors of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which were notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 352 of the SFO were as follows:

Shares in the Company

Name of director	Nature of interest	Number of ordinary shares held	Approximate percentage to the total number of issued shares
Li Rucheng	Corporate interest	1,454,513,000	4.99%
		(Long position)

Save as disclosed above, as at 30 June 2016, none of the directors of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to section 352 of the SFO.

HALF-YEAR REPORT 2016

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Statutory Disclosure

Interests of Substantial Shareholders

As at 30 June 2016, substantial shareholders of the Company (other than directors of the Company) who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO, or which were notified to the Company, were as follows:

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Approximate
percentage
Number of to the total
ordinary number of
Name Nature of interest/capacity shares held issued shares
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CITIC Group Corporation	Interests in a controlled corporation	26,055,943,755	89.57%
(“CITIC Group”)(Note 1)	and interests in a section 317	(Long position)	(Long position)
	concert party agreement
CITIC Glory Limited	Beneficial owner	7,446,906,755	25.60%
(“CITIC Glory”)(Note 2)		(Long position)	(Long position)
CITIC Polaris Limited	Beneficial owner and interests	18,609,037,000	63.97%
(“CITIC Polaris”)(Note 3)	in a section 317 concert party	(Long position)	(Long position)
	agreement
Chia Tai Bright Investment	Beneficial owner and interests	22,728,222,755	78.13%
Company Limited	in a section 317 concert party	(Long position)	(Long position)
(“CT Bright”)(Note 4)	agreement	5,818,053,363	20.00%
		(Short position)	(Short position)
CT Brilliant Investment Holdings	Interests in a controlled corporation	22,728,222,755	78.13%
Limited (“CT Brilliant”)(Note 5)	and interests in a section 317	(Long position)	(Long position)
	concert party agreement	5,818,053,363	20.00%
		(Short position)	(Short position)
Charoen Pokphand Group	Interests in a controlled corporation	22,728,222,755	78.13%
Company Limited (“CPG”)	and interests in a section 317	(Long position)	(Long position)
(Note 6)	concert party agreement	5,818,053,363	20.00%
		(Short position)	(Short position)
ITOCHU Corporation	Interests in a controlled corporation	22,728,222,755	78.13%
(“ITOCHU”)(Note 7)	and interests in a section 317	(Long position)	(Long position)
	concert party agreement	5,818,053,363	20.00%
		(Short position)	(Short position)

CITIC LIMITED

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Statutory Disclosure

Notes:

CITIC Group is deemed to be interested in 26,055,943,755 shares: (i) by attribution of the interests of its two wholly-owned subsidiaries, CITIC Polaris (9,463,262,637 shares) and CITIC Glory (7,446,906,755 shares); and (ii) because CITIC Group is a party to the Share Purchase Agreement and the Preferred Shares Subscription Agreement which, reading together, constitute an agreement to which section 317(1) of the SFO applies, and accordingly CITIC Group has aggregated its interests in the shares with the interests of the other parties to the Share Purchase Agreement and the Preferred Shares Subscription Agreement.
CITIC Glory is beneficially interested in 7,446,906,755 shares of the Company.
CITIC Polaris is deemed to be interested in 18,609,037,000 shares: (i) by including 9,463,262,637 shares it holds as beneficial owner; and (ii) because CITIC Polaris is a party to the Share Purchase Agreement which, reading together with the Preferred Shares Subscription Agreement, constitute an agreement to which section 317(1) of the SFO applies, and accordingly CITIC Polaris has aggregated its interests in the shares with the interests of the other parties to the Share Purchase Agreement and the Preferred Shares Subscription Agreement.
CT Bright is deemed to be interested in 22,728,222,755 shares: (i) by including 5,818,053,363 shares it holds as beneficial owner; and (ii) because CT Bright is a party to the Share Purchase Agreement and the Preferred Shares Subscription Agreement which, reading together, constitute an agreement to which section 317(1) of the SFO applies, and accordingly CT Bright has aggregated its interests in the shares with the interests of the other parties to the Share Purchase Agreement and the Preferred Shares Subscription Agreement. CT Bright has a short position of 5,818,053,363 shares because it is under an obligation to deliver a maximum of 5,818,053,363 shares to CITIC Polaris if CITIC Polaris’ right of first refusal under the Share Purchase Agreement is exercised in full.
CT Brilliant is deemed to be interested in 22,728,222,755 shares and to have a short position of 5,818,053,363 shares as a shareholder of CT Bright directly holding 50% equity interest in CT Bright.
CPG is deemed to be interested in 22,728,222,755 shares and to have a short position of 5,818,053,363 shares as a shareholder of CT Bright indirectly holding 50% equity interest in CT Bright through CT Brilliant, its wholly-owned subsidiary.
ITOCHU is deemed to be interested in 22,728,222,755 shares and to have a short position of 5,818,053,363 shares as a shareholder of CT Bright directly holding 50% equity interest in CT Bright.

Purchase, Sale or Redemption of Listed Securities

On 15 April 2016, the Company redeemed all the U.S.$750,000,000 7.875% perpetual subordinated capital securities issued on 15 April 2011. The Securities were delisted from the Hong Kong Stock Exchange effective on 27 April 2016. Save as disclosed above, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the six months ended 30 June 2016.

Corporate Governance

The Company is committed to maintaining high standards of corporate governance. The board of directors believes that good corporate governance practices are important to promote investor confidence and protect the interests of our shareholders. Looking ahead, we will keep our governance practices under continual review to ensure their consistent application and will continue to improve our practices having regard to the latest developments. Details of our corporate governance practices can be found in the Company’s Annual Report 2015 and on the Company’s website at www.citic.com.

Board Changes

On 18 March 2016, Ms Cao Pu retired from the board as a non-executive director and a member of the audit and risk management committee of the Company. On the same date, Mr Song Kangle and Mr Li Rucheng were appointed as non-executive directors of the Company and Mr Paul Chow Man Yiu was appointed as an independent non-executive director of the Company.

On 12 April 2016, Mr Yu Zhensheng retired from the board as a non-executive director of the Company and Ms Yan Shuqin was appointed as a non-executive director of the Company.

HALF-YEAR REPORT 2016

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Statutory Disclosure

Board Committees

Currently the board has the following committees to discharge its functions:

An executive committee to assist the board in the business operations and management of the Company. Its principal role is to select suitable candidates for senior management; to review/provide advice to the board on material investment plans and feasibility studies and proposed disposals/divestments, mergers, acquisitions and other significant transactions of the Company, strategy and planning of the Group. The committee is chaired by Mr Chang Zhenming, the chairman of the board, and other members are Mr Wang Jiong (being executive director, vice chairman and president of the Company and also serves as vice chairman of the committee), Mr Zhu Xiaohuang (who serves as vice chairman of the committee), Mr Feng Guang, Ms Li Qingping (being executive director and vice president of the Company), Mr Pu Jian (being executive director and vice president of the Company), Mr Zhu Gaoming (being vice president of the Company) and Mr Cai Xiliang (appointed as executive committee member and vice president of the Company with effect from 12 August 2016).
An audit and risk management committee to oversee the relationship with the external auditor; and to review the Company’s financial reporting, annual audit and interim report. The committee acts on behalf of the board in providing oversight of the Company’s financial reporting system, risk management and internal control systems, reviews and monitors the effectiveness of the internal audit function, and reviews the Company’s policies and practices on corporate governance. The committee comprises three independent non-executive directors, Mr Francis Siu Wai Keung (who serves as the chairman of the committee), Dr Xu Jinwu and Mr Anthony Francis Neoh.
A nomination committee to determine the policy for the nomination of directors and set out the nomination procedures and the process and criteria adopted to select and recommend candidates for directorship, which shall take into consideration the principle of diversity. It also reviews the structure, size, composition and diversity of the board. The committee is chaired by Mr Chang Zhenming, the chairman of the board, and other members include an executive director, Mr Wang Jiong (being vice chairman and president of the Company) and three independent non-executive directors, Mr Francis Siu Wai Keung, Dr Xu Jinwu and Mr Anthony Francis Neoh.
A remuneration committee to determine and review the remuneration packages of individual executive directors and senior management, including salaries, bonuses, benefits in kind, share options and other plans. The committee comprises two independent non-executive directors, Mr Francis Siu Wai Keung (who serves as the chairman of the committee) and Dr Xu Jinwu, and a non-executive director, Mr Yang Jinming.
A special committee to deal with all matters relating to all investigations (including enquiries) of, and proceedings involving, the Company and its directors, arising from the 2008 forex incident, including but not limited to by the Market Misconduct Tribunal, the Securities and Futures Commission and the Commercial Crime Bureau of the Hong Kong Police Force. The committee comprises two members, Mr Zhang Jijing and Mr Francis Siu Wai Keung.

CITIC LIMITED

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Statutory Disclosure

Other Management Committee

The Company has established the asset and liability management committee (the “ALCO”) as a sub-committee under the executive committee to be in charge of monitoring and controlling the financial risks of the Company. The principal responsibilities of the ALCO are to:

monitor and control the asset and liability financial position of the Company on a regular basis
monitor and control the following issues of the Company:
asset and liability structure
counterparties
currencies
interest rates
commodities
commitments and contingent liabilities
review financing plans of the Company and manage the cash flow of the Company on the basis of the annual budget
establish hedging policies and approve the use of new financial instruments for hedging

The committee is chaired by Mr Zhu Gaoming (being vice president of the Company and a member of the executive committee), and other members include responsible persons of the Financial Control Department, Treasury Department, Strategic Development Department and the Office of the Board of Directors.

Compliance with Corporate Governance Code

Save as disclosed below, the Company has applied the principles and complied with all the code provisions of the corporate governance code (“CG Code”) as set out in Appendix 14 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”) during the six months ended 30 June 2016. In respect of code provision A.6.7 of the CG Code, Mr Liu Yeqiao (non-executive director) was not able to attend the annual general meeting of the Company held on 8 June 2016 due to other engagements.

Review of Half-Year Report

The audit and risk management committee of the board reviewed the Half-Year Report in conjunction with the management and the Company’s external auditor and recommended its adoption by the board.

The interim financial information is prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. It has been reviewed by the Company’s independent auditor, PricewaterhouseCoopers, in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”.

Compliance with the Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) contained in Appendix 10 to the Listing Rules. All directors complied with the required standard set out in the Model Code throughout the six months ended 30 June 2016.

HALF-YEAR REPORT 2016

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Statutory Disclosure

Update on Directors’ Information Pursuant to Rule 13.51B(1) of the Listing Rules

Change in other directorships

Executive Directors

Mr Chang Zhenming resigned from the position as the chairman of the board of China CITIC Bank Corporation Limited (“China CITIC Bank”, a subsidiary of the Company listed on the Main Board of the Hong Kong Stock Exchange and the Shanghai Stock Exchange) with effect from 20 July 2016.

Ms Li Qingping has been appointed as the executive chairperson of the board and no longer serves as the president of China CITIC Bank with effect from 20 July 2016.

Non-executive Director

Mr Liu Zhongyuan has been appointed as director-general of Equity & Fixed-Income Investment Department of the National Council for Social Security Fund in April 2016.

Independent Non-executive Directors

Ms Lee Boo Jin was formerly the president of corporate strategy for Cheil Industries and an advisor to Samsung C&T Corporation from December 2010 to December 2015, with the two companies merging to become Samsung C&T Corporation (listed on the Korea Exchange) in September 2015.

Mr Noriharu Fujita was appointed as an independent director of Sanken Electric Co., Ltd. (listed on the Tokyo Stock Exchange) on 24 June 2016.

Mr Paul Chow Man Yiu assumed the membership of both the remuneration committee and the chairman of the nomination committee of China Mobile Limited (listed on the Main Board of the Hong Kong Stock Exchange) in May 2016. He retired as the chairman of Hong Kong Cyberport Management Company Limited after completing 6 years of services on 4 June 2016. He also retired from the office as independent non-executive director, chairman of the personnel and remuneration committee, member of the audit committee, member of the risk policy committee and member of the connected transactions control committee of Bank of China Limited (the “Bank”) (listed on the Main Board of the Hong Kong Stock Exchange and the Shanghai Stock Exchange) with effect from 18 August 2016 after serving the Bank for 6 years.

Change in directors’ emoluments

As approved by the remuneration committee of CITIC Limited on 5 September 2016, the monthly total salary of each of Mr Chang Zhenming and Mr Wang Jiong is increased to HK$48,000 and the monthly total salary of each of Ms Li Qingping and Mr Pu Jian is increased to HK$43,200, all of which take effect from January 2016.

CITIC LIMITED

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Corporate Information

Registered Office

Beijing Office

32nd Floor, CITIC Tower Capital Mansion, 6 Xinyuannanlu 1 Tim Mei Avenue Chaoyang District Central, Hong Kong Beijing 100004, China Telephone: +852 2820 2111 Fax: +852 2877 2771

Website

www.citic.com contains a description of the Company’s business, a copy of the full report to shareholders, announcements, press releases and other information.

Stock Codes

The Stock Exchange of Hong Kong: 00267 Bloomberg: 267 HK Reuters: 0267.HK American Depositary Receipts: CTPCY CUSIP Reference No: 17304K102

Share Registrar

Shareholders should contact our Registrar, Tricor Tengis Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong at +852 2980 1333, or by fax at +852 2810 8185, on matters such as transfer of shares, change of name or address, or loss of share certificates.

Investor Relations

Investors, shareholders and research analysts may contact our Investor Relations Department by telephone at +852 2820 2205, or by fax at +852 2522 5259 or by email at [email protected].

Financial Calendar

Closure of Register: 19 September 2016 to 22 September 2016 (both days inclusive) Interim dividend payment: 30 September 2016

The Half-Year Report is printed in English and Chinese and is available on our website at www.citic.com under the ‘Investor Relations’ section.

Shareholders may choose to receive the Half-Year Report in printed form in either English or Chinese or both or by electronic means. Shareholders may at any time change their choice on these matters by writing to the Company’s Share Registrar.

Shareholders having difficulty in gaining access to the Half-Year Report will promptly be sent printed copies free of charge upon request to the Company’s Share Registrar.

Non-shareholders are requested to write to the Joint Company Secretaries, CITIC Limited, 32nd Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong, or by fax at +852 2877 2771 or by email at [email protected].

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32[nd ] Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong Tel : +852 2820 2111 Fax : +852 2877 2771 www.citic.com Stock code: 00267

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AI assistant

CITIC Limited — Interim / Quarterly Report 2016

49082_rns_2016-09-08_17953f6f-398f-4815-a0cb-99b3302ace93.pdf

Our Company

Contents

Financial Statements

Statutory Disclosure

Highlights

Assets by business

Assets of non-financial businesses

Profit attributable to ordinary shareholders (Note)

Chairman’s Letter to Shareholders

Dear Shareholders,

Business Performance

Capturing Consumer-related Opportunities

The Power of Data

Conclusion

Financial Review

Overview

Profit attributable to ordinary shareholders

Earnings per share and dividends

Profit/(loss) and assets by business

Profit attributable to ordinary shareholders from continuing operations by business

Financial services

Resources and energy

Manufacturing

Engineering contracting

Real estate

Others

Group Financial Results

Revenue

Revenue by nature

Impairments

Net finance charges

Interest expense capitalised

Income tax

Group Cash Flows

Capital expenditure

Capital commitments

Group Financial Position

Total assets

By geography

Loans and advances to customers and other parties

Deposits from customers

Bank and other loans

Debt instruments issued

Total ordinary shareholders’ funds and perpetual capital securities

Risk Management

Financial Risk

Governance structure

Asset and liability management

1. Debt

Note:

Consolidated debt by maturity as at 30 June 2016

Note:

2. Liquidity risk management

3. Contingent liabilities and commitments

4. Pledged loan

5. Credit ratings

Treasury risk management

1. Interest rate risk

2. Currency risk

3. Counterparty risk for financial products

4. Commodity risk

5. Market price risk

Economic Environment

Operational Risk

Credit Risk

Competitive Markets

Other External Risks and Uncertainties

Impact of local, national and international laws and regulations

Impact of new accounting standards

Natural disasters or events, terrorism and diseases

Human Resources

Equality

Incentives

Training

Past Performance and Forward Looking Statements

Consolidated Income Statement

Consolidated Income Statement

CITIC Limited Interim / Quarterly Report 2016