Aker Clean Hydrogen
Annual Report 2008

Plain-text annual report

T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Contents 2 Corporate Profile 5 Corporate Information 8 Financial Summary 14 Directors, Supervisors, Senior Management and Staffs 25 Particulars of Share Capital Structure, Changes and Substantial Shareholders 35 Chairman’s Statement 45 Management’s Discussion and Analysis of Financial Conditions and Results of Operations 53 Report of the Directors 64 Report of the Supervisory Committee 70 Report on Corporate Governance and Internal Control 85 Significant Events 91 Connected Transactions 102 Independent Auditor’s Report 104 Consolidated Balance Sheet 107 Balance Sheet 110 Consolidated Income Statement 112 Consolidated Statement of Changes in Shareholders’ Equity 114 Consolidated Cash Flow Statement 117 Notes to the Consolidated Financial Statements 252 Supplementary Information T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 01 Corporate Profile Aluminum Corporation of China Limited (“Chalco” or The Group is principally comprised of the following the “Company”) is a joint stock limited company branches, subsidiaries and associated company: established in the People’s Republic of China (the”PRC”); its stocks are listed on the New York Branches: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Stock Exchange, the Stock Exchange of Hong Kong Limited and the Shanghai Stock Exchange respectively. The Company and its subsidiaries (collectively referred to as the “Group”) are engaged principally in the exploration and mining of bauxite; the production and sales of alumina, primary aluminum and aluminum-fabricated products and related research activities. The principal products of the Group include alumina, primary aluminum, aluminum fabricated products, gallium and carbon-related products, etc. The Group is the largest producer of alumina, primary aluminum and aluminum fabrication products in the PRC, and also the third largest producer of alumina as well as the fourth largest producer of primary aluminum around the globe. The competitiveness of the Group is mainly reflected in: Its leading strategic position in the alumina, primary aluminum and aluminum fabrication market in China; sufficient and stable supply of bauxite resources and • • • • • • • • Shandong branch (mainly engaged in producing alumina/primary aluminum products); Henan branch (mainly engaged in producing alumina/primary aluminum products); Guizhou branch (mainly engaged in producing alumina/primary aluminum products); Shanxi branch (mainly engaged in producing alumina products); Guangxi branch (mainly engaged in producing alumina/primary aluminum products); Zhongzhou branch (mainly engaged in producing alumina products); Qinghai branch (mainly engaged in producing primary aluminum products); Lanzhou branch (mainly engaged in producing refining technology as well as its possession of a primary aluminum products); comprehensive industry chain to enable it to better withstand market risks. 02 Corporate Profile (Continued) • • Liancheng branch (mainly engaged in producing • Zunyi Aluminum Company Limited (“Zunyi primary aluminum products); Aluminum”) (mainly engaged in producing primary aluminum products); Chongqing branch (mainly engaged in p r o d u c i n g a l u m i n a p r o d u c t s ; u n d e r • Shandong Huayu Aluminum and Power construction); Company Limited (“Shandong Huayu”) (mainly engaged in producing primary aluminum • Northwest Aluminum Fabrication Plant (mainly products); engaged in producing aluminum fabricated products); • Gansu Hualu Aluminum Company Limited (“Gansu Hualu”) (mainly engaged in producing • Zhengzhou Research Institute (mainly providing primary aluminum products); research and development services). Subsidiaries: • B a o t o u A l u m i n u m C o . , L t d . ( “ B a o t o u Aluminum”) (mainly engaged in producing primary aluminum products); • Shanxi-Huaze Aluminum & Power Co., Limited (“Shanxi-Huaze”) (mainly engaged in producing • Jiaozuo Wanfang Aluminum Company Limited primary aluminum products); (“Jiaozuo Wanfang”) (mainly engaged in producing primary aluminum products); • Shanxi Huasheng Aluminum Company Limited (“Shanxi Huasheng”) (mainly engaged in • Chalco Qingdao Light Metal Company Limited producing primary aluminum products); (mainly engaged in producing recycled • Fushun Aluminum Company Limited (“Fushun Aluminum”) (mainly engaged in producing • Chalco Southwest Aluminum Cold Rolling primary aluminum products); Company Limited (“Chalco Southwest aluminum products); T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Aluminum Cold Rolling”) (mainly engaged in producing aluminum fabricated products; under construction); 03 Corporate Profile (Continued) T T R R O O P P E E R R L L A A U U N N N N A A 8 8 0 0 0 0 2 2 D D E E T T I I M M I I L L A A N N H H C C I I F F O O N N O O I I T T A A R R O O P P R R O O C C M M U U N N M M U U L L A A I I • Chalco Ruimin Company Limited (“Chalco • Chalco Zunyi Alumina Co., Ltd. (“Zunyi Ruimin”) (mainly engaged in producing Alumina”) (mainly engaged in producing aluminum fabricated products); alumina products; under construction); • Chalco Henan Aluminum Company Limited • Chalco Nanhai Alloy Company (“Nanhai Alloy’’) (“Henan Aluminum”) (mainly engaged in (mainly engaged in producing aluminum producing aluminum fabricated products); fabricated products; under construction); • Huaxi Aluminum Company Limited (“Huaxi Aluminum”) (mainly engaged in producing aluminum fabricated products); • • Shanxi Huatai Coal Co., Ltd. (“Shanxi Coal”) (mainly engaged in producing carbon products); Fushun Fluoride Salt Company Limited (“Fushun • Chalco Southwest Aluminum Company Limited Fluoride Salt”) (mainly engaged in producing (“Chalco Southwest Aluminum”) (mainly fluoride salt products; under construction); engaged in producing aluminum fabricated products); • S h a n x i L o n g m e n A l u m i n u m C o . , L t d . (“Longmen Aluminum”) (mainly engaged in • • Chalco Mining Co., Ltd. (“Chalco Mining”) producing primary aluminum products); (mainly engaged in mining bauxite); China Aluminum Inter national Trading (“Taiyue Mining”) (mainly engaged in mining Corporation Limited (“Chalco Trading”) (mainly bauxite; under construction). • China Aluminum Taiyue Mining Co., Ltd. selling alumina and primary aluminum products); Jointly controlled entity: • Chalco Hong Kong Limited (“Chalco Hong • Guangxi Huayin Aluminum Company Limited Kong”) (mainly engaged in developing overseas (“Guangxi Huayin”) (mainly engaged in projects); producing alumina products) in which the Company has a 33% equity interest. 04 Corporate Information 1. Registered name 中國鋁業股份有限公司 Abbreviated name in Chinese 中國鋁業 Name in English ALUMINUM CORPORATION OF CHINA LIMITED Abbreviated name in English CHALCO 2. First registration date September 10, 2001 Registered address No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (100082) Place of business No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (100082) Principal place of business Unit 3103, 31/F, Office Tower, Convention Plaza, in Hong Kong Corporate Website Corporate E-mail 1 Harbour Road, Wanchai, Hong Kong http://www.chalco.com.cn IR_FAQ@chalco.com.cn 3. Authorized representative Company Secretary Telephone Fax E-mail Xiao Yaqing Liu Qiang 8610 8229 8103 8610 8229 8158 IR_FAQ@chalco.com.cn Contact address No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (100082) Representative for the Company’s Zhang Qing securities related affairs Telephone Fax E-mail Address 8610 8229 8150 8610 8229 8158 IR_FAQ@chalco.com.cn No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (100082) Department for corporate Secretarial Office to the Board information and inquiry Telephone for corporate 8610 8229 8150/8156/8157 information and inquiry T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 05 Corporate Information (Continued) 4. Share Registrar and Transfer Office H Shares: Hong Kong Registrars Limited Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong A Shares: China Securities Depository Ltd., and Clearing Co., Shanghai Branch 3/F, China Insurance Building, No. 166, Lujiazui Road (East), Shanghai, the PRC American Depositary Receipt The Bank of New York Corporate Trust Office, 101 Barclay Street New York, New York 10286, USA 5. Places of listing The Stock Exchange of Hong Kong Limited Stock Name Stock code Shanghai Stock Exchange New York Stock Exchange CHALCO 2600(HK) 601600(China) ACH (US) 6. Principal bankers China Construction Bank Industrial and Commercial Bank of China 7. Registration Number of License of 100000000035734 Enterprise Legal Person Tax Registration Number 110108710928831 Institutional Organization Number 71092883-1 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 06 Corporate Information (Continued) 8. Independent Auditors PricewaterhouseCoopers 9. Legal advisers Certified Public Accountants 22/F, Prince’s Building, Central, Hong Kong PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11/F, PricewaterhouseCoopers Center 202 Hu Bin Road, Shanghai 200021, the PRC as to Hong Kong law: Baker & McKenzie 14/F, Hutchison House, 10 Harcourt Road, Central, Hong Kong as to United States law: Baker & McKenzie 14/F, Hutchison House, 10 Harcourt Road, Central, Hong Kong as to PRC law: Haiwen & Partners 21/F, Beijing Silver Tower, No. 2 Dong San Huan North Road, Chao Yang District, Beijing, the PRC 10. Corporate information database Secretarial Office to the Board T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 07 Financial Summary 1. Financial summary prepared in accordance with Hong Kong Financial Reporting Standards (Note (a)) Year ended December 31 2008 2007 2006 2005 2004 Consolidated Income Statement RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue (Note (b)) Cost of sales 76,725,941 85,198,835 64,826,615 37,826,486 32,959,343 (70,073,660) (64,936,133) (43,930,699) (25,542,555) (22,095,880) Gross profit 6,652,281 20,262,702 20,895,916 12,283,931 10,863,463 Selling and distribution expenses (1,562,409) (1,355,534) (1,027,875) (720,497) (647,532) General and administrative expenses (3,462,472) (3,042,363) (2,466,192) (1,489,537) (1,220,902) Research and development expenses (177,507) (229,803) (116,389) (113,381) (132,635) Other gains, net 372,771 158,913 382,261 120,720 47,656 Operating profit Finance costs, net 1,822,664 15,793,915 17,667,721 10,081,236 8,910,050 (1,709,566) (1,040,171) (637,236) (366,908) (109,948) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 08 Financial Summary (Continued) 1. Financial summary prepared in accordance with Hong Kong Financial Reporting Standards (Note (a)) (Continued) Year ended December 31 2008 2007 2006 2005 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Operating profit after finance costs 113,098 14,753,744 17,030,485 9,714,328 8,800,102 Share of profits/(losses) of jointly controlled entities 1,672 (3,381) (11,419) 372 (3,953) Share of profits of associates 10,045 241,945 105,177 26,947 — Profit before income tax benefits/(expense) 124,815 14,992,308 17,124,243 9,741,647 8,796,149 Income tax benefits/(expense) 33,557 (2,869,210) (4,410,674) (2,495,213) (2,161,086) Profit for the year 158,372 12,123,098 12,713,569 7,246,434 6,635,063 Attributable to: Equity holders of the Company 9,228 10,753,042 11,841,681 7,022,422 6,391,523 Minority interest 149,144 1,370,056 871,888 224,012 243,540 Total attributable profit 158,372 12,123,098 12,713,569 7,246,434 6,635,063 Dividends 703,273 4,131,749 2,190,177 2,364,673 1,944,778 T T R R O O P P E E R R L L A A U U N N N N A A 8 8 0 0 0 0 2 2 D D E E T T I I M M I I L L A A N N H H C C I I F F O O N N O O I I T T A A R R O O P P R R O O C C M M U U N N M M U U L L A A I I 09 Financial Summary (Continued) 1. Financial summary prepared in accordance with Hong Kong Financial Reporting Standards (Note (a)) (Continued) Summary of the Group’s consolidated total assets and total liabilities for the five years is set out below: As of December 31 2008 2007 2006 2005 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Total assets Total liabilities 135,527,519 105,848,068 81,941,754 59,009,879 49,558,069 75,330,697 41,354,861 32,675,192 24,804,985 20,752,191 Net assets 60,196,822 64,493,207 49,266,562 34,204,894 28,805,878 Notes: (a) Financial Summary as of December 31, 2006 and for the year ended have not been restated under merger accounting for the common control entities acquired by the Company in 2008. Financial summary as of December 31, 2004 and 2005 and for the years ended have not been restated under merger accounting for the common control entities acquired by the Group. (b) Total other revenues and related cost of sales were previously classified as “net other revenues and gains” for 2004 and 2005, they were separately presented in 2006, 2007 and 2008 as part of the total revenue and cost of sales, respectively, in the income statement. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 10 Financial Summary (Continued) 2. Financial summary prepared in accordance with the PRC Accounting Standards for Business Enterprises (2006) Principal financial figures in the reporting period Items Operating profit Total profit Net profit attributable to the shareholders of the Company Net profit attributable to the shareholders of the Company after excluding non-recurring items Net cash flow from operating activities Non-recurring items Non-recurring items Losses of non-current asset disposal Subsidy income Losses on fair value change of financial assets/liabilities held for trading Investment income from disposal of financial assets/liabilities held for trading Income from entrusted loans Net non-operating expenses other than the above items Reversal of impairment of accounts receivable based on separate impairment tests Income tax impact on the non-recurring items above Net profit attributable to the businesses acquired from business combinations under common control from the beginning of the period to the dates of combinations Total T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Year ended December 31, 2008 RMB’000 257,124 124,815 9,228 (126,120) 5,003,681 Year ended December 31, 2008 RMB’000 (59,142) 97,431 (21,450) 288,778 2,470 (174,409) 43,270 (52,932) 18,541 142,557 11 Financial Summary (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 2. Financial summary prepared in accordance with the PRC Accounting Standards for Business Enterprises (2006) (Continued) Principal accounting information and financial indicators at the end of two reporting periods of the Company Increase/(Decrease) as compared with the corresponding period Principal accounting information 2008 2007 in the previous year Revenue Total profit Net profit attributable to the shareholders RMB’000 RMB’000 76,725,941 124,815 85,198,835 14,992,308 of the Company 9,228 10,753,042 Net (loss)/profit attributable to the shareholders of the Company after excluding non-recurring items (126,120) 10,072,094 Basic earnings per share (RMB) Diluted earnings per share (RMB) Basic (loss)/earnings per share after excluding 0.00068 0.00068 0.8406 0.8406 (%) (9.94) (99.17) (99.91) (101.25) (99.92) (99.92) non-recurring items (RMB) (0.00933) 0.7874 (101.81) Fully diluted rate of return on net assets (%) Weighted average rate of return on net assets (%) Fully diluted rate of return on net assets after excluding non-recurring items (%) Weighted average rate of return on net assets after excluding non-recurring items (%) 0.02 0.02 (0.23) (0.22) 17.72 Decreased by 17.7 percentage points 19.72 Decreased by 19.7 percentage points 16.60 Decreased by 16.83 percentage points 18.47 Decreased by 18.69 percentage points Net cash flow from operating activities 5,003,681 12,122,672 Net cash flow from operating activities per share (RMB) 0.37 0.90 Total assets 135,527,519 105,848,068 Owners’ equity (or shareholders’ equity) attributable to the shareholders of the Company 54,998,482 60,688,063 Net assets attributable to shareholders of the Company per share (RMB) 4.07 4.49 (58.72) (58.89) 28.04 (9.38) (9.35) 12 Financial Summary (Continued) 3. Analysis between the financial information prepared in accordance with Hong Kong Financial Reporting Standards and PRC Accounting Standards for Business Enterprises (2006) Item Profit attributable Equity attributable to equity holders to equity holders of of the Company the Company Year ended December 31 As of December 31 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Prepared in accordance with PRC Accounting Standards for Business Enterprises (2006) 9,228 10,753,042 54,998,482 60,688,063 Prepared in accordance with Hong Kong Financial Reporting Standards 9,228 10,753,042 54,998,482 60,688,063 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 13 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Directors, Supervisors, Senior Management and Staffs 1. Directors, Supervisors and Senior Management Receipt of Total emolument emolument received from the or allowance from Company in the shareholder reporting period of the Company Date of RMB’0000 or other Name Position Sex Age appointment (Before tax) related entity Xiao Yaqing# Chairman and CEO Luo Jianchuan Executive Director and President Chen Jihua Executive Director, M M 50 46 2007.5.18 108.1 2007.5.18 Vice President and CFO M 41 2007.5.18 Liu Xiangmin Executive Director and Vice President Shi Chungui Non-executive Director Kang Yi Independent M M 47 68 2007.5.18 2007.5.18 Non-executive Director M 68 2007.5.18 Zhang Zhuoyuan Independent Non-executive Director M 75 2007.5.18 Wang Mengkui Independent Non-executive Director M 71 2008.5.9 Zhu Demiao Independent Non-executive Director M 45 2008.5.9 Poon Yiu Kin, Independent Samuel* Non-executive Director M 50 2007.5.18 Ao Hong Chairman of Supervisory Committee Yuan Li Supervisor Zhang Zhankui Supervisor Ding Haiyan Vice President Jiang Yinggang Vice President Liu Qiang Secretary to the Board M M M M M F 48 51 51 51 46 45 2007.5.18 2007.5.18 2007.5.18 2007.5.18 2007.5.18 2007.5.18 90.7 66.0 66.0 15.0 21.4 21.4 14.2 14.3 8.4 — 53.38 — 66.0 65.35 48.85 No No No No No No No No No No Yes No Yes No No No * # Resigned on May 9, 2008 Resigned from the position of Chairman of the Company on March 27, 2009 with immediate effect and resigned from the positions of CEO, executive Director and Chairman of the Nomination Committee which will take effect upon the conclusion of the 2008 annual general meeting of the Company to be held on May 26, 2009. 14 14 Directors, Supervisors, Senior Management and Staffs (Continued) Profiles of Directors, Supervisors and Senior Management: Directors Executive Directors Mr. Xiao Yaqing, 50, is the Chairman of the board of directors (the ‘’Board’’), Chief Executive Officer of the Company, the Chairman of the Nomination Committee of the Board and the President of Aluminum Corporation of China (hereafter as ‘’Chinalco’’) during the reporting period. He had been employed by the Company since 2004. Mr. Xiao resigned as the Chairman of the Company, with immediate effect on March 27, 2009. He also resigned as the Chief Executive Officer, Executive Director and Chairman of the Nomination Committee on March 27, 2009 which will take effect after the 2008 annual general meeting of shareholders to be held on May 26, 2009. Graduated from Central South University of Industry in 1982 majoring in pressure processing, Mr. Xiao holds a doctorate degree from Central South University of Industry. He is a professor-grade senior engineer. Having engaged in such fields as metallic material research, production and corporate management, and capital operation for a long time, Mr. Xiao has outstanding achievement as well as extensive practical e x p e r i e n c e a n d e m i n e n t m a n a g e m e n t competence. He had formerly served as engineer, department head, deputy chief engineer and chief engineer of Northeast Light Alloy Fabrication Plant. He had also served as the General Manager of Northeast Light Alloy T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Corporation Limited, the plant manager of Southwest Aluminum Fabrication Plant, the Chairman and General Manager of Southwest Aluminum (Group) Co., Ltd. and the Deputy President of Chinalco. Mr. Luo Jianchuan, 46, is an Executive Director and President of the Company as well as Chairman of the Development Planning Committee of the Board. He has been employed by the Company since 2001. Mr. Luo graduated from Kunming University of Science and Technology in 1985 majoring in mining, holds a doctorate degree from Central South University of Industry and is a senior engineer. He has participated in nonferrous metal trading and corporate management for a long period of time, and thus has extensive professional experience and strong management skill in those fields. Mr. Luo had formerly served as an engineer of the Lead and Zinc Bureau of China Non-ferrous Metals Industry Corporation, Manager of Haikou Nanxin Industry & Commerce Corporation, Assistant to the G e n e r a l M a n a g e r o f J i n p e n g M i n i n g Development Corporation, Deputy General Manager and General Manager of Beijing Xinquan Tech-trading Corporation, Assistant to the General Manager of China Non- Ferrous Metals Industry Trading Group Corporation, Deputy Chief of the Trading Division of China Copper, Lead & Zinc Group Corporation, G e n e r a l M a n a g e r o f C h i n a A l u m i n u m International Trading Corporation Limited, General Manager of the Operations and Sales Division, Vice President and Senior Vice President of the Company. 15 15 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Directors, Supervisors, Senior Management and Staffs (Continued) Mr. Chen Jihua, 41, is an Executive Director, Non-Executive Director Vice President and the Chief Financial Officer of the Company. Mr. Chen has been employed Mr. Shi Chungui, 68, is a Non-executive by the Company since 2001. He holds a Master Director of the Company. He has been employed degree from Central University of Finance and by the Company since 2005. He graduated Economics. He has engaged in corporate and from Northeast University of Finance and financial management for a long time and Economics and majoring in accounting in 1964. accumulated extensive and professional Mr. Shi is a senior economist with extensive experience. He had formerly served as Executive experience in finance, gover nment and M a n a g e r o f t h e I n t e r n a t i o n a l F i n a n c e corporate management. Mr. Shi was previously Department of China Chengxin Securities Head of Commerce Bureau of Qinhuangdao Appraisal Company Limited, Financial Controller City, Hebei Province, the Standing Deputy Mayor of Red Bull Vitamin Beverages Company of Qinhuangdao City, Hebei Province, President Limited, Regional (China) Financial Controller of Hebei Branch of China Construction Bank, of Saudi Arabia ALJ (China) Limited, Financial P re s i d e n t o f B e i j i n g B r a n c h o f C h i n a Controller of Jitong Network Communications Construction Bank, Deputy President of the Company Limited, Assistant to the President of Head Office of China Construction Bank and Chinalco and General Manager of the Deputy President of China Cinda Asset Company’s Finance Department. Management Corporation. Mr. Shi is currently an independent director of Cinda Securities Mr. Liu Xiangmin, 47, is an Executive Director Co., Ltd. and Vice President of the Company and has been employed by the Company since 2001. Mr. Liu graduated from Central South University of Industry in 1982, majoring in non-ferrous metal science and holds a doctorate degree in Central South University of Industry. He is a professor-grade senior engineer and has participated in non-ferrous metal metallurgy and corporate management for a long term and accumulated extensive and professional experience. Mr. Liu had previously served as Deputy Head and Head of the Alumina branch of Zhongzhou Aluminum Plant, Deputy Head of Zhongzhou Aluminum Plant, and General Manager of Zhongzhou Branch of the Company. 16 Directors, Supervisors, Senior Management and Staffs (Continued) Independent Non-Executive Directors Mr. Zhang Zhuoyuan, 75, is an Independent Non-executive Director of the Company who Mr. Kang Yi, 68, is an Independent Non- has been with the Company since 2007. Mr. Executive Director and the Chairman of the Zhang graduated from the Faculty of Economics Remuneration Committee of the Board. Mr. of Zhongnan University of Economics and has Kang has served as an Independent Non- a c h i e v e d e x t e n s i v e a n d p r o f e s s i o n a l Executive Director of the Company since 2004. accomplishment in such aspects as political He is also the chairman of the China Nonferrous economy, price theory and marketing. Mr. Metals Industry Association. Mr. Kang Zhang had consecutively served as the director graduated in 1965 from Central-South Institute and researcher of the Institute of Finance, Trade of Mining and Metallurgy majoring in the and Economics of Chinese Academy of Social metallurgy of non-ferrous metals. He is a Sciences, the chief editor of “Finance & Trade professor-grade senior engineer and has Economics” and a tutor of doctorate students, engaged in corporate management and civil director, researcher and tutor of doctorate service for a long term. Mr. Kang has extensive students of the Institute of Industrial Economics experience and had once served as the factory of Chinese Academy of Social Sciences, director, manager of Qingtongxia Aluminum Plant, the researcher and tutor of doctorate students of Head of the Economic Committee of Ningxia the Institute of Economics of Chinese Academy Hui Autonomous Region, Deputy General of Social Sciences. He is the chief editor of Manager of China Non-ferrous Metals Industry Economics Research Journal. Mr. Zhang is also Corporation, Deputy Head of the State Non- a member of the Ninth and Tenth Sessions of ferrous Metals Industry Bureau and an CPPCC, deputy director of China Association Independent Non-Executive Director of Jiangxi of Pricing, China Society of Urban Economy Copper Company Limited. Currently, Mr. Kang and Chinese Society for Urban Studies, director is also a member of National Committee of the of Chinese Society for Cost Studies and Chinese People’s Political Consultative Secretary-General of Foundation of Sun Ye Fang Conference (“CPPCC”) and the China Economics and Science. Mr. Zhang is a member Association for Science and Technology, the of the Chinese Academy of Social Sciences and Chairman of Non-ferrous Metals Society of a researcher of Institute of Economics as well China and an Independent Non-Executive as an Independent Director of Jiangnan Director of Jinduicheng Molybdenum Co., Ltd. Securities Co. Ltd. and Baoji Titanium Industry Co., Ltd.. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 17 Directors, Supervisors, Senior Management and Staffs (Continued) Mr. Wang Mengkui, aged 71, an independent Mr. Zhu Demiao, aged 45, is an independent non-executive Director of the Company who non-executive Director of the Company and has been with the Company since 2008. Mr. the Chairman of the Audit committee of the Wang graduated from the School of Economics, Board. He has been with the Company since Beijing University. He is an economist and is 2008. Mr. Zhu is currently the Managing currently a professor and advisor of doctor Director of Oaktree Capital (Hong Kong) Ltd. candidates of Peking University. Mr. Wang is Mr. Zhu graduated from the University of engaged on a long-term basis in the analysis Chicago GSB with a MBA degree, and obtained of economic theory and policy. He has published a Master’s degree in Economics from the many articles with respect to economics and Research Institute for Fiscal Science, Ministry of other aspects and is experienced in economic Finance, PRC and obtained a Bachelor’s degree theory and practice. Mr. Wang had served as in Economics from Hebei Geological Institute. a vice head and researcher of the economic Mr. Zhu is one of the PRC Certified Public team of the research office of the Secretariat Accountants in the early period. He has of the CPC Central Committee, the governing extensive experience in professional fields member of the State Development and Planning i n c l u d i n g f i n a n c e , a u d i t a n d c a p i t a l Commission, the executive vice director of the management. Mr. Zhu had worked in the economic research centre of the State Ministry of Finance of the PRC and the Development and Planning Commission, the investment analysis department of FMC. He vice director and director of the Research Office had also served as the head of China business of the State Council, the President of the in the equity capital market department and Development Research Center of the State investment bank department of Credit Suisse Council. Mr. Wang had also served as a member First Boston, the managing director, member of the Tenth Standing Committee of National of the executive committee of Asia-pacific People’s Congress, the vice director of Financial region and chairman of operation committee and Economic Affairs Committee of National of the greater China region of JP Morgan Chase People’s Congress. He is currently the chairman & Co. Mr. Zhu is currently an independent of the China Development Research Foundation director of WSP Holdings Limited. and a committee member of the National Council for Social Security Fund of the PRC. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 18 Directors, Supervisors, Senior Management and Staffs (Continued) Supervisors Mr. Zhang Zhankui, 51, is the Deputy Head of the Finance Department of Chinalco. Mr. Mr. Ao Hong, 48, is currently a Vice President Zhang is a postgraduate researcher in economic of Chinalco. Mr. Ao graduated from Kunming management and a senior accountant. He has University of Science and Technology majoring extensive experience in corporate financial in Metallurgy. He holds a Master degree from accounting, fund management and auditing. Central South University and is a professor- Mr. Zhang had formerly served as the Head of grade senior engineer with extensive experience the Finance Division and then the Head of the in nonferrous metals research, corporate Audit Division of China General Design Institute management, corporate governance and for Non-ferrous Metals, a Deputy General internal control. Mr. Ao had formerly served as Manager of Beijing Enfei Tech-industry Group, an engineer, senior engineer, Head of General the Head of the Accounting Division of the Office and Vice Chairman of Beijing General Finance Department and the Deputy Head of Research Institute for Non-ferrous Metals, the the Finance Department of China Copper Lead Chairman of GRINM Semiconductor Materials & Zinc Group Corporation, the manager of the Co., Ltd., Guorui Electronic Materials Co., Ltd., Asset and Finance of the Listing Office of Chalco Beijing Guojing Infrared Optical Technology Co., and the Head of the Fund Division of the Finance Ltd., Guowei Silver Anticorrosive Materials Department of Company and the manager of Company and Guo Jing Micro-electronic the General Division of the Finance Department Holdings Ltd. in Hong Kong, respectively. of the Company. Mr. Yuan Li, 51, is a Supervisor elected as the employee representative supervisor of the Company and a General Manager of the Corporate Culture Department of the Company. Mr. Yuan has been employed by the Company since 2001. He is an engineer with extensive administrative and managerial experience. He had formerly served as a Manager of the General Management Office and the Deputy Head of the Department of Research and Investigation of China Non-ferrous Metals Industry Corporation, the Head of the Department of Research and Investigation as well as the Head of the Secretariat and an assistant inspector of the State Bureau of Nonferrous Metals Industry and the Deputy Head of the Department of Political Affairs and the Head of the Community Union Working Department of Chinalco. 19 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Directors, Supervisors, Senior Management and Staffs (Continued) Other Senior Management Personnel Corporate Management Department of Qinghai Aluminum Plant, the Head of Qinghai Mr. Ding Haiyan, 51, is a Vice President of the Aluminum Smelter, a Deputy General Manager Company and has been employed by the and General Manager of Qinghai Aluminum Company since 2001. Graduated from Beijing Company Limited, and the General Manager Economics University in 1982 majoring in Labor of Qinghai branch of the Company. Economics, Mr. Ding holds a Master degree in Economics and is a senior economist with Ms. Liu Qiang, 45, is the Secretary to the extensive experience in labor, wages, insurance, Board and has been employed by the Company merger and acquisition of enterprises and since 2001. In 1989, Ms. Liu graduated from capital operation. He once served as the Head Beijing International Studies University majoring of Labor Wage Division of the Human Resource in English literature, obtained a Master’s degree Department of China Nonferrous Metals in Literature and is a deputy senior translator. Industry Corporation, the Deputy Director of Ms. Liu studied finance, financial management the Bureau of Labor and Insurance, the Deputy and business administration at the University Director-General of the Enterprise Reform of International Business and Economics in Department of the State Bureau of Non-ferrous Beijing and received trainings on finance and Metals Industry as well as the Head Manager financial management in Hong Kong. She once of the Department of Asset Operation, the served in the finance department of Hong Kong Deputy Head of the Listing Office and an Oriental Xinyuan (Holdings) Company Limited Assistant to president of Chinalco, and was an and had served as the Manager of the finance Executive Director and the Secretary to Board department of the Australian branch of China of the Company. National Non-Ferrous Metals Import and Export Corporation. Ms. Liu has extensive experience Mr. Jiang Yinggang, 46, is a Vice President in the import and export of non-ferrous metals of the Company and the General Manager of and analysis of the aluminum market. She had Qinghai Branch of the Company during the formerly served as the Manager of the reporting period. Graduated in 1983 from aluminum department of China National Non- Central South University of Industry majoring Ferrous Metals Import and Export Corporation; in the metallurgy of non-ferrous metals, Mr. a senior market analyst for the Aluminum Jiang holds a Master degree in metallurgy Industry in China National Non-Ferrous Metals engineering of non-ferrous metals and is a Trading Group and China National Metals and professor-grade senior engineer. He has Minerals Import and Export Corporation as well participated in production operation and as the Deputy Manager of the Import and c o r p o r a t e m a n a g e m e n t o f p ro d u c t i o n Export Division of China Aluminum International enterprises for a long period of time and has Trading Corporation Limited. extensive professional experience. He has served as the Deputy Head and then the Head of T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 20 Directors, Supervisors, Senior Management and Staffs (Continued) 2. Positions held in Shareholders of the Company Name Name of Shareholder Position(s) Appointment or Allowance Xiao Yaqing Chinalco President April 2004 No Whether Receiving Date of Remuneration Ao Hong Chinalco Vice President October 2005 Yes Zhang Zhankui Chinalco Deputy Head March 2006 Yes of Finance Department Positions in Other Entities Name Name of other entities Position(s) Appointment Remuneration Date of Whether Receiving Shi Chungui Cinda Securities Independent August 2007 No Co., Ltd Director Kang Yi Jinduicheng Molybdenum Independent September 2007 Yes Co., Ltd. Director (A share listed company) Baoji Titanium Industry Independent September 2008 Yes Co., Ltd. Director (A share listed company) Zhang Zhuoyuan Jiangnan Securities Independent October 2002 Yes Co., Ltd. Director Zhu Demiao Oaktree Capital Managing Director January 2006 Yes (Hong Kong) Ltd. WSP Holdings Limited Independent January 2007 Yes Director T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 21 Directors, Supervisors, Senior Management and Staffs (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 3. Decision Making Process, Basis of Determination and Situations in relation to the Remuneration of Directors, Supervisors and Senior Management B a s e d o n m a r k e t c o n d i t i o n s a n d t h e remuneration strategy of the Company, proposals in relation to the remuneration of the Company’s Directors, Supervisors and Senior Management would be prepared by a specialized department of the Company and submitted to the Remuneration Committee of the Company for consideration. Remuneration of the Senior Management will be submitted to the Board for determination whereas those of the Directors and the Supervisors will be submitted to the Board for consideration and to the general meeting for determination. Remunerations for Directors, Supervisors and Senior Management are determined in accordance with the Company’s development strategy, corporate culture and remuneration strategy, with reference to the remuneration standard of corresponding positions in comparable enterprises (in terms of scale, industry and nature etc.) in the market. The opinion and advice of an exter nal and professional consultancy will also be taken into consideration and remuneration will be linked to the Company’s operating results and the assessed performance of individuals. In 2008, the total remuneration of directors, supervisors, senior management and secretary to the Board of the Company amounted to RMB6.5908 million (including the traveling expenses of independent directors). Other than the discretionary bonus of RMB1.5415 million which were not distributed in the reporting period, all remuneration had been paid during the period. 4. Changes in Directors, Supervisors and Senior Management During the Reporting Period Name Position(s) Reason for change Wang Mengkui Independent Non-executive Director Appointed at the annual general Zhu Demiao Independent Non-executive Director Appointed at the annual general Poon Yiu Kin, Samuel Independent Non-executive Director Resigned on May 9, 2008 meeting on May 9, 2008 meeting on May 9, 2008 22 Directors, Supervisors, Senior Management and Staffs (Continued) 5. Resignation of Chairman and Proposed Changes In Directors Mr. Xiao Yaqing, the Chairman of the Company, resigned as the Chairman of the Company on March 27, 2009 with immediate effect. He also resigned as the Chief Executive Officer, Executive Director and Chairman of Nomination Committee of the Board on March 27, 2009, which will take effect after the election of a new executive director at the 2008 annual general meeting of the company to be convened on May 26, 2009. The board of the company extend thanks to Mr Xiao for his contribution to the Company during his tenure. Mr. Xiong Weiping was nominated by Chinalco, the controlling shareholder of the Company, and approved by the third session of the Board of the Company, as an executive director candidate of the third session of the Board of the Company, and his nomination will be submitted to the 2008 annual general meeting of the Company to be convened on May 26, 2009 for election and approval. The biographical details of Mr. Xiong Weiping is as follows: Mr. Xiong Weiping, 52, a candidate for executive director of the third session of the Board and concurrently the President of Chinalco. Mr. Xiong graduated from Central South University of Industry majoring in mining engineering. He obtained a Ph.D. degree in engineering and completed post-doctoral research in economics in Guanghua School of Management of Peking University. He has academic achievements and an impressive record of experience in economics, corporate management and metaliferous mining. Mr. Xiong is also a Professor and a tutor of Ph.D. students of Guanghua School of Management, Peking University. He is an expert who is granted special subsidies by State Council and was recognized as the “Middle-aged and Youth Expert with Special Contribution to the Nation” by the original Ministry of Personnel of the PRC. He was formerly the General Secretary of Hunan Provincial Communist Youth League, a standing committee member of the All China Youth Federation and the president of Hunan Youth Union Committee, the Vice-Chancellor and Dean of the Faculty of Management, Professor, tutor of Ph.D. students of Central South University of Industry. Mr. Xiong had served as the Vice President of China Copper, Lead & Zinc Group Corporation, the Vice President of Chinalco, the Executive Director, Senior Vice President and President of Chalco and the Vice Chairman and President of China National Travel Service (HK) Group Corporation (China Travel Service (Holdings) Hong Kong Limited). The biographical details of Mr. Xiong Weiping required to be disclosed under Rule 13.51(2) of the Hong Kong Listing Rules will be set out in the Notice of the 2008 Annual General Meeting of the Company to be despatched to shareholders of the Company. A further announcement will be made by the Company when the above proposed changes in directors of the Company become effective. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 23 Directors, Supervisors, Senior Management and Staffs (Continued) 6. Employees of the Company As at the date of the end of the reporting period, the Company had 107,887 employees. The structure Number of Persons 11,286 731 95,153 717 107,887 Number of Persons 629 10,675 18,865 77,718 107,887 of employees is as follows: Professional Structure Category Management Sales staffs Production staffs Others Total Education Background Category Masters Undergraduates College students Secondary school or below Total T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 24 Particulars of Share Capital Structure, Changes and Substantial Shareholders 1. Share Capital Structure Chinalco is the largest shareholder of the Group which directly holds 38.56% equity interest in the Company and together with its subsidiaries holds an aggregate of 41.82% equity interest in the Company. Share Structure of Chalco Chinalco 38.56% Baotou Lanzhou Aluminum Aluminum Group 2.60% Factory 0.58% Guiyang Aluminum and Magnesium 0.03% Public Public holders of holders of A Shares 29.07% H Shares 29.16% Aluminum Corporation of China Limited T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 25 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) As of December 31, 2008, the share capital structure of the Company was as follows: Holders of A Shares subject to trading moratorium Chinaclo Baotou Aluminum (Group) Co., Ltd. (note1) Lanzhou Aluminum Factory (note 1) Guiyang Aluminum Magnesium Design & Research Institute (note 1) Holders of A Shares not subject to trading moratorium Holders of H Shares Total As of December 31, 2008 Number Percentage to total of shares issued share capital (in million) (%) 5,214.41 351.22 79.47 4.12 3,931.30 3,943.97 13,524.49 38.56 2.60 0.58 0.03 29.07 29.16 100 Note 1: Subsidiaries of Chinalco. The subsidiaries also include Shanxi Aluminum Plant which holds 7.14 million A shares not subject to trading moratorium, representing 0.05% of the share capital. According to the public information available to the Company and to the best knowledge of the Company’s Directors, as of March 27, 2009, being the latest practicable date prior to the issue of this report, there is sufficient public float in the Company’s share capital structure which is in compliance with the requirement of the Hong Kong Listing Rules. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 26 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) 2. Changes in Shareholding and Shareholders Changes in Shareholding Unit: Share Before the change After the change Issue of Number Percentage new shares Number Percentage (%) (%) I. Shares subject to trading moratorium 1. 2. State-owned shares 6,866,707,049 50.77 N/A 5,214,407,195 38.56 State-owned legal person shares 1,283,194,886 9.49 N/A 434,809,850 3.21 Total shares subject to trading moratorium 8,149,901,935 60.26 N/A 5,649,217,045 41.77 II. Shares not subject to trading moratorium 1. Renminbi ordinary shares 1,430,619,989 10.58 N/A 3,931,304,879 29.07 2. Overseas listed foreign invested shares Total shares not subject to trading moratorium 3,943,965,968 5,374,585,957 29.16 39.74 N/A N/A 3,943,965,968 7,875,270,847 29.16 58.23 III. Total shares 13,524,487,892 100 N/A 13,524,487,892 100 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Approval of Changes in Shareholding Nil Transfer of Changes in Shareholding Nil 27 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) 3. Share Issue and Listing (1) Status of share issue in the past three years Unit: Share Currency: RMB Number of shares approved Date of Type of share and derivative security Date of issue Offer Price Number of for listing and termination shares issued Date of listing trading of trading H Shares placing May 9, 2006 HK$7.25 644,100,000* May 19, 2006 644,100,000 Renminbi ordinary share April 24, 2007 RMB6.60 1,236,731,739 April 30, 2007 1,148,077,357 N/A N/A (IPO of A Shares) Renminbi ordinary share December 28, 2007 RMB20.49 637,880,000 January 4, 2008 282,542,632 N/A (additional issue for share exchange in acquiring Baotou Aluminum) * Shares in the Placement include stock shares (i.e. 44,100,000 state-owned shares converted to H shares) sold by Chinalco, the parent company of the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 28 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I (2) Changes in total number of 4. i s s u e d s h a r e s a n d t h e shareholding structure of the Company During the reporting period, the total number of issued shares of the Company was 13,524,487,892 shares and there was no addition or reduction during the reporting period. However, due to the release of 2,500,684,890 shares subject to trading moratorium on May 6, 2008, there was a change in shareholding structure. Substantial Shareholders who held 5% or more of shares Substantial Shareholders So far as the Directors are aware, as at December 31, 2008, the following persons (other than the directors, supervisors and chief executive of the Company) 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 pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange. Name of substantial shareholders Class of shares Number of Percentage in the relevant Percentage in class of total share shares held Capacity share capital capital Chinalco A Shares 5,656,357,299 (L) Beneficial owner and 59.04%(L) 41.82%(L) (Note 1) interests of controlled corporations China Cinda Asset A Shares 900,559,074 (L) Beneficial owner 9.40%(L) 6.65%(L) Management Corporation China Construction Bank Corporation China Development Bank Templeton Asset Management Ltd. Barclays PLC A Shares 709,773,136 (L) Beneficial owner 7.41%(L) 5.25%(L) A Shares H Shares 554,940,780 (L) Beneficial owner 479,874,475 (L) Investment manager H Shares 249,799,316 (L) Interests of controlled 27,614,000 (S) corporations (Note 2) 5.79%(L) 12.17%(L) 6.33%(L) 0.70%(S) 4.10%(L) 3.55%(L) 1.85%(L) 0.20%(S) 29 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) Name of substantial shareholders Class of shares Number of Percentage in the relevant Percentage in class of total share shares held Capacity share capital capital HSBC Holdings plc H Shares 247,833,475 (L) Interests of controlled 253,569,239 (S) corporations (Note 3) 6.28%(L) 6.42%(S) JPMorgan Chase & Co H Shares 240,191,029 (L) Beneficial owner, 6.09%(L) (including investment manager (including 79,464,900 (P)) and custodian 2.01%(P)) 59,220,381 (S) corporation/approved 1.50%(S) (Note 4) lending agent 1.83%(L) 1.87%(S) 1.78%(L) (including 0.59%(P)) 0.44%(S) (L) (S) (P) Notes: The letter “L” denotes a long position. Among the aggregate interests in the long The letter “S” denotes a short position. position in H Shares, 360,000 H Shares were The letter “P” denotes interests in a lending h e l d b y B a r c l a y s G l o b a l I n v e s t o r s pool. (Deutschland) AG, 23,363,316 H Shares were held by Barclays Global Investors Ltd., 194,406,000 H Shares were held by Barclays Global Fund Advisors and 31,670,000 H 1. These interests included a direct interest of Shares were held by Barclays Global Investors, 5,214,407,195 A Shares held by Chinalco, N.A.. and an aggregate interests in 441,950,104 A S h a r e s h e l d b y v a r i o u s c o n t r o l l e d The short position in H Shares was held corporations which are subsidiaries of directly by Barclays Global Investors, N.A.. Chinalco, comprising 351,217,795 A Shares held by Baotou Aluminum (Group) Co., Ltd., 3. These interests were held directly by various 79,472,482 A Shares held by Lanzhou corporations controlled by HSBC Holdings Aluminum Factory, 4,119,573 A Shares held plc. by Guiyang Aluminum Magnesium Design and Research Institute and 7,140,254 A Among the aggregate interests in the long Shares held by Shanxi Aluminum Plant. position in H Shares, 233,568,000 H Shares were held by The Hongkong and Shanghai 2. These interests were held directly by various Banking Corporation Limited, 13,521,725 H corporations controlled by Barclays PLC. Shares were held by HSBC Financial Products (France) and 743,750 H Shares were held by Hang Seng Bank Trustee International Limited. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 30 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) Among the aggregate interests in the short Among the aggregate long position in H position in H Shares, 253,568,739 H Shares Shares, 17,077,405 H Shares were held as were held by The Hongkong and Shanghai derivatives. Banking Corporation Limited and 500 H Shares were held by HSBC Bank plc. The short position in H Shares was held as beneficial owner. Among the aggregate 4. These interests were held directly by various interests in the short position in H Shares, corporations controlled by JPMorgan Chase 12,055,000 H Shares were held by Bear, & Co.. Stearns International Limited, 10,396,000 H Shares were held by J.P. Morgan Structured The long position in H Shares included Products B.V., 17,336,586 H Shares were 86,256,129 H Shares held as beneficial h e l d b y J . P. M o r g a n S e c u r i t i e s L t d . , owner, 74,470,000 H Shares held as 19,432,795 H Shares were held by J.P. investment manager and 79,464,900 H Morgan Whitefriars Inc.. shares held as custodian corporation/ approved lending agent. Among the Among the aggregate short position in H aggregate interests in the long position in H Shares, 28,128,795 H Shares were held as Shares, 24,300,000 H Shares were held by derivatives. JF Asset Management (Singapore) Limited, 12,055,000 H Shares were held by Bear, Stearns International Limited, 18,648,784 H Shares were held by J.P. Morgan Securities Ltd., 55,552,345 H Shares were held by J.P. Morgan Whitefriars Inc., 20,812,000 H Shares were held by China International Fund Save as disclosed above and so far as the Directors are aware, as at December 31, 2008, no other person had an interest or short position in the shares or underlying shares of the Company (as the case may be) which would Management Ltd, 28,876,000 H Shares were fall to be disclosed to the Company and the held by JF Asset Management Limited, 482,000 H Shares were held by J.P. Morgan Investment Management Inc., 79,464,900 H Shares were held by JP Morgan Chase Bank, N.A.. Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required to be kept under section 336 of the SFO, or was otherwise a substantial shareholder of the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 31 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) 5. Number of Shareholders and Their Shareholding Total number of shareholders at the end of the reporting period 697,960 Unit: Number of Shareholders 6. Particulars of Shares Held by Top Ten Holders of A Shares Subject to Trading Moratorium and the Terms of the Trading Moratorium Unit: Share Name of holders Reason for A Shares subject Expiry date of A Shares subject trading to trading of trading Terms of No. to trading moratorium moratorium moratorium held moratorium trading moratorium Number of 1 Chinalco Issue A shares 5,214,407,195 January 4, 2011 No transfer within three years to exchange shares from April 30, 2007. The trading moratorium is extended to January 4, 2011 following the acquisition of Baotou Aluminum at the end of 2007. 2 Baotou Aluminum (Group) Additional issue 351,217,795 January 4, 2011 No transfer within three years Co., Ltd. of A shares to acquire Baotou Aluminum by share exchange from January 4, 2008 3 Lanzhou Aluminum Factory Issue A shares 79,472,482 January 4, 2011 No transfer within three years from T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I April 30, 2007. The trading moratorium is extended to January 4, 2011 following the merger of Baotou Aluminum in the end of 2007. 4,119,573 January 4, 2011 No transfer within three years from January 4, 2008 to exchange shares Additional issue of A shares to acquire Baotou Aluminum by share exchange 4 Guiyang Aluminum Magnesium Design & Research Institute 32 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) 7. Particulars of the top ten shareholders of tradable shares not subject to trading moratorium 1 2 3 4 5 6 7 8 9 HKSCC China Cinda Asset Management Corporation China Construction Bank Corporation China Development Bank Guangxi Investment (Group) Co., Ltd. (“Guangxi Investment”) Guizhou Provincial Materials Development and Investment Corporation ICBC - Shanghai 50 ETF Securities Investment Fund UBS AG Bank of China — Harvest Shanghai and Shenzhen 300 Index Securities Investment Fund 10 CICC-Standard Chartered-Citigroup Global Markets Limited 3,930,409,761 900,559,074 709,773,136 554,940,780 111,878,102 79,200,000 26,840,031 19,461,485 12,969,536 10,414,891 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 33 Particulars of Share Capital Structure, Changes and Substantial Shareholders (Continued) 8. Summary of Controlling Shareholder (1) Particulars of the Legal Person Controlling Shareholder Name of the controlling shareholder: Chinalco Legal representative: Xiong Weiping Registered capital: RMB15.432 billion Date of incorporation: February 21, 2001 Principal operating or managing activities: mining and selection of bauxite; smelting, processing and trading of aluminum; mining and selection of rare & rare-earth metal mines; smelting, processing and trading of rare & rare-earth metals; mining, smelting, processing and trading of copper and other non-ferrous metals; related engineering and technical service. (2) Diagram of the Direct Equity Interests and Controlling Relationship between the Company and Controlling Shareholder Chinalco 38.56% Aluminum Corporation of China Limited T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 34 Chairman’s Statement Dear Shareholders, I am pleased to present the annual report of the Group for the year ended December 31, 2008 for shareholders’ review. On behalf of the Board of the Company and all employees, I would like to express my gratitude to all shareholders for their concern and support for the Company. Product Market Reviews The supply and demand as well as the price of aluminum are closely tied to changes in the global and PRC macro- economy. Changes in the global and PRC economic climate have a significant impact on the aluminum market. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 35 Chairman’s Statement (Continued) Primary Aluminum Market During the year 2008, the international and domestic prices of primary aluminum were volatile. Prior to September, affected by various factors such as the U.S. subprime crisis, economic slowdown in western countries as well as power restriction and production cuts of primary aluminum in countries such as the PRC and South Africa, the highest price of spot aluminum at the London Metal Exchange (hereafter as “LME”) reached US$3,260 per tonne as compared to the lowest price of US$2,370 per tonne. The highest and the lowest prices of spot aluminum on the Shanghai Futures Exchange (hereafter as “SHFE”) were RMB21,600 per tonne and RMB18,040 per tonne respectively. Since October, the aluminum price experienced a consecutive sharp fall with the deepening and intensification of the international financial crisis. Prices of spot aluminum on the LME and SHFE hit a record low of US$1,471 per tonne and RMB10,050 per tonne, respectively. The average price of spot aluminum as quoted by LME in 2008 was US$2,573 per tonne, representing a decrease of 2.5% over the corresponding period last year, while that of SHFE was RMB17,345 per tonne, representing a decrease of 11.4% over the corresponding period last year. US$/tonne Aluminum Prices* LME SHFE *Source: CRU, Antaike, LME, SHFE T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 36 Chairman’s Statement (Continued) In 2008, the global output of primary aluminum was approximately 39.96 million tonnes, representing an increase of 4.7% over the corresponding period last year. The global consumption of aluminum was approximately 38.13 million tonnes, representing an increase of 0.8% over the corresponding period last year. Since 2008, especially in the fourth quarter when international financial crisis posed a deepening impact on entities’ economy, major aluminum consumption industries such as the real estate and automobile sectors have seen negative growth, followed by dampened global aluminum consumption and surge in stocks. In light of the sharp decline in aluminum prices and weakened consumption, both national and international aluminum manufacturers reduced production in succession. By the end of December 2008, the production capacity so reduced by global aluminum enterprises accounted for approximately 13.5% of the total production capacity around the world, while the reduction by PRC enterprises accounted for approximately 24.1% of the total production capacity of the PRC. In 2008, the domestic output of primary aluminum was approximately 13.18 million tonnes, representing an increase of 4.9% over the corresponding period last year and the domestic consumption of primary aluminum was approximately 12.50 million tonnes, representing an increase of 0.5% over the corresponding period last year. Alumina Market In 2008, international and domestic prices of spot alumina retreated gradually. The CIF PRC price for spot alumina in the international market went up to a maximum of approximately US$450 per tonne, while the alumina price bottomed at approximately US$200 per tonne due to outpaced expansion in alumina production capacity, depleted production of aluminum manufacturers and drastic decrease in demand. The highest and lowest prices of domestic spot alumina were RMB4,500 per tonne and RMB1,850 tonne respectively. At present, the price is approximately RMB1,900 per tonne. US$/tonne Alumina Spot Prices* China Import T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I *Source: CRU, Antaike, China Customs, Chalco 37 Chairman’s Statement (Continued) The global output of alumina for 2008 was approximately 79.18 million tonnes, representing a year-on-year increase of 6.2%; the consumption reached approximately 78.07 million tonnes, representing a year-on-year increase of 4.5%. In light of production cuts of aluminum, global alumina manufacturers have started to downsize production since the fourth quarter. By the end of December 2008, the production capacity of alumina so reduced by global and the domestic aluminum enterprises accounted for approximately 9.8% of the total global production capacity, while the reduction in the PRC accounted for 24.4% of the total domestic production capacity. In 2008, the domestic output of alumina products reached approximately 22.78 million tonnes, representing a year-on-year increase of 17.1%. The demand for alumina was approximately 26.70 million tonnes, representing a year-on-year increase of 2.7%. In 2008, alumina imported into the PRC amounted to approximately 4.58 million tonnes, representing a year-on-year decrease of 12.4%. Business Review In 2008, the disasters including snow storm and earthquake in the PRC caused substantial losses to the Group, international financial crisis, raw material price hikes and sharply decreasing commodity prices further posed unprecedented difficulties and challenges to the Group’s production and operation. The Group adopted effective countermeasures that were scientific, strengthened its management, reduced energy consumption, tapped potentials, increased efficiency, controlled costs and expenses, stabilized supply, strengthened sales and constrained investment to enable a stable operation of the Group’s production and business. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 38 Chairman’s Statement (Continued) 1. Stability in production. The Group proactively addressed challenges arising from natural disasters at home and financial crisis across the globe. Faced with serious natural disasters, the Group promptly kicked start emergency plans and completed post-disaster rehabilitation ahead of schedule. In response to rapidly deteriorating market conditions, the Group decisively adjusted its operating strategies by shifting to more flexible and profit-oriented production plans. In 2008, the production volume of alumina reached 9.02 million tonnes, representing a decrease of 5.8% over the corresponding period last year. The production volume of alumina chemicals was 1.04 million tonnes, representing an increase of 1.5% over the corresponding period last year. The production volume of primary aluminum amounted to 3.25 million tonnes, representing an increase of 16.1% over the corresponding period last year. The production volume of aluminum fabrication products was 353,000 tonnes, representing an increase of 341.3% over the corresponding period last year. 2. Strengthening financial management and controlling costs and expenses to secure stable cash flow. Making use of low-cost financing method to optimize debt structures. On financial management, the Group timely built resilience against risk via more in-depth economic breakdown as well as improved budget and cash flow alert system. At the same time, the Group worked hard to cut materials and energy consumption, stringently controlled costs and expenses, constrained expenditure and reinforced stock management. On May 22, 2008, the Company obtained approval from the National Association of Financial Market Institutional Investors to issue medium-term notes with a total principal sum of up to RMB10 billion in the PRC, to be issued by tranches. It was valid until May 20, 2010. In June 2008, the Company issued the 2008 first tranche of medium-term notes in the principal amount of RMB5 billion at par with face value of RMB100 for nominal value of RMB100 per unit, bearing an annual interest rate of 5.30% with a maturity period of three years. In October 2008, the Company successfully issued the second tranche of medium-term notes for 2008 in the principal amount of RMB5 billion at par with face value of RMB100 for nominal value of RMB100 per unit, bearing an annual interest rate of 4.58% with a maturity period of five years. The net proceeds aforementioned are to be principally used to supplement working capital and to refinance bank borrowings of the Group. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 39 Chairman’s Statement (Continued) In February and July 2008, the Company successfully issued short-term bonds with total principal amounts of RMB2 billion and RMB3 billion at par, respectively, in the PRC with a face value of RMB100 each, bearing coupon interest rates of 4.99% and 4.83% respectively, with a maturity period of 1 year. 3. Optimising industry chain to enhance risk resistance. Acquisitions of five aluminum fabrication enterprises and one aluminum enterprise had been completed. On May 12, 2008, the Company submitted a bid for the acquisition of 100% of the equity interests in Longxing Aluminum, 100% of the equity interests in Chalco Southwest Aluminum Cold Rolling, 84.02% of the equity interests in Henan Aluminum, 75% of the equity interests in Chalco Ruimin, 60% of the equity interests in Chalco Southwest Aluminum and 56.86% of the equity interests in Huaxi Aluminum from Chinalco and China Nonferrous Metals Processing Technology Co., Ltd. (“China Nonferrous Metals Technology”). The equity interests of the above companies were listed on China Beijing Equity Exchange for bidding at a consideration of RMB4,175 million. The three parties entered into a transfer agreement on May 21, 2008 and completed all transfer procedures May 30, 2008. The acquisition of aluminum fabrication assets enabled the Company to further optimize its industry chain, avert industry cycle risks and improve overall competitiveness. The acquisition of aluminum assets also reduced connected transactions and competitions between the Company and its controlling shareholder. 4. Further promoting overseas projects. On May 9, 2008, Chalco (Hong Kong) Limited, a subsidiary of the Company, entered into a Joint Venture Arrangement with Malaysia Mining Company (MMC) and Saudi Arabian Binladin Group (SBG). Under the Joint Venture Arrangement, the joint venture company will develop and operate a primary aluminum plant with an annual capacity of approximately one million tonnes and a self-owned power plant with an estimated construction scale of about 1,860MW per annual in Jazan Economic City of Saudi Arabia. The primary aluminum plant will be constructed in three phases. The total investment of the project is estimated to be approximately US$4.5 billion. The Company proposed to hold 40% equity interests, being the largest shareholder in the project. Currently, a feasibility study is being prepared. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 40 Chairman’s Statement (Continued) In 2007, the Company entered into the Aurukun project development agreement with the Queensland government of Australia and the land lease agreement with the aborigines, thus completing relevant legal documentation in respect of the Aurukun project. The Company obtained the mining right development license from the Queensland government for the Aurukun bauxite resources. Currently, a feasibility research report is being prepared. 5. Further reinforcing resource protection. The Group spared no effort in accelerating the pace of mine construction, strengthening ore procurement and production and improving safety and reliability of ore supply and comprehensive utilization of resources. In 2008, contribution of self-mining mines increased by approximately 11 percentage points as compared to the corresponding period last year. Furthermore, the Group acquired the mining rights of 20 bauxite mines with a bauxite reserve of 120 million tonnes, which increased the self-mining capacity of bauxite by 3.46 million tonnes. 6. Advancing energy saving and emission reduction. The Group set development goals and assurance policies for recycling and conservation of resources, aspiring to transform itself into a resource-efficient enterprise. The Group speeded up the renovation of integrated energy-saving technology by means of new production techniques and technologies, mainly by streamlining its production workflow and perfecting its product structure. In 2008, the Group saved energy equivalent to 612,000 tonnes of standard coal. It has fundamentally realized zero sewage drainage by investing an amount of RMB490 million in 13 sewage treatment projects. 7. Proactively scaling new heights in technology. The Group made significant progress in the research and development and commercialization of technological applications with breakthroughs in several key technologies. Leveraging its novel technologies for ore processing at bauxite mines, efficiency-based and energy-saving production of alumina and newly structured aluminum smelting, the Group is set to alleviate shortage of resources and energy. The successful development of ‘’3-dimensional refinements’’ will boost the strength of electric current, production volume and life span of equipment whilst reducing energy consumption. Promotion and application of new know-how in aluminum production have significantly enhanced production volume and quality, reduced cost, sparked efficiency, saved energy and reduced emission. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 41 Chairman’s Statement (Continued) 8. Further refining baseline management. In the areas of production and operation, the Group refined its production arrangement and implemented cost reduction indicators in every process along the workflow. Emergency plans have been laid down and potentials have been exploited to seek steady production. As for sales management, the Group improved production to sales ratio by tracking and analyzing market dynamics, optimizing resources for supplies and sales whilst improving customer relations. In terms of investment management, the Group compressed projects under construction and implemented management by classification, thereby exercising greater control on workflows, clarifying investment accountability and controlling investment risks. 9. Fulfilling corporate social responsibility. The Group has efficiently operated a healthy and safe environmental management system and facilitated the economic and social development of places where the enterprises of the Group were located. In the wake of snow storm and earthquake, the Group took positive initiatives to take part in emergency and disaster relief and donated a large amount of money and mechanical equipment to the stricken areas. In addition, large machineries, transportation vehicles and rescue teams were sent. 10. Gradually extending corporate culture to lower levels. A corporate culture is taking shape in the core values of accountability, creditability and excellence. Financial Results The revenue of the Group for the year 2008 amounted to RMB76.726 billion, representing a year-on-year decrease of 9.94%. The profit attributable to the equity holders of the Company was RMB9.2 million, representing a year-on-year decrease of 99.91%. Earnings per share for profit attributable to the equity holders of the Company was RMB0.00068, representing a year-on-year decrease of 99.92%. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 42 Chairman’s Statement (Continued) Dividends The Company had declared and paid an interim dividend of RMB0.052 per share (tax inclusive) for the period up to June 30, 2008, totalling RMB0.703 billion. The Board did not recommend the payment of a final dividend for the period up to December 31, 2008. Details of the dividend distributed in the last three years are as follows: Year 2008 Year 2007 Year 2006 Total dividend that should be paid in the year (RMB billion) 0.703 2.650 3.672 Ratio to profit attributable to equity holders of the Company (%) Business Prospect 7,641.30 24.64 30.33 In light of the slackening global economic growth, significant decline in demand for aluminum and plummeting aluminum prices, the Group’s operation and production will face enormous difficulties and challenges in 2009. In 2009, the Group will, firmly in line with its corporate strategy, push forward with: cost reduction, efficiency advancement, structure adjustment, resource acquisition and technology innovations. Key tasks are as follows: 1. Strengthen the production structure, promote flexibility in production in accordance with the principles for maximizing efficiency, ensure stability in production and operation. Further develop the overall advantage of the product chain, and to achieve cost reduction from collaboration among the product chain. 2. Strengthen the capability in financial controls, strengthen budget controls and centralization of capital management in all directions, optimization on the debt structure, lower financial costs and costs of capital, and maintain sufficient cash reserve. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 43 Chairman’s Statement (Continued) 3. Press ahead with the Group’s resource strategy so as to increase the capability to acquire resources. 4. Combine centralized procurement with flexible procurement to reduce inventory and procurement cost. 5. Optimize sales and marketing strategies, further utilize the advantage of centralized management of sales and marketing, ensure market share, improve liquidity and strike a production-sale balance. 6. 7. Reduce investment scale and improve investment structure. Bring the Group’s technological strategies into full play. With the theme of lowering costs and increasing efficiency, reduce energy consumption and emission and maintain technical reserves. With achieving maximum economies of scale as a priority, speed up research and development on technological projects and propel the industrialization of technologies endeavors. At the same time, to selectively develop scientific technology and applied basic research, to ensure the Company’s continuing development. 8. Further strengthen the development of the internal control system, perfect the internal supervision system. 9. Adopt a strategy of placing importance on talents, increase the skills and overall standard of all staff. In 2009, we will do our utmost to achieve our goals as a return to our shareholders. Luo Jianchuan Executive Director Beijing, the PRC March 27, 2009 Note: Please note that Mr. Luo Jianchuan, Executive Director of the Company, is authorized by the Board of the Company to sign the Chairman Statement and Report of the Directors as Mr. Xiao Yaqing, the Chairman of the Company, has resigned as the Chairman of the Company on March 27, 2009. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 44 Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis Aluminum fabrication segment, which consists of should be read in conjunction with the financial purchasing primary aluminum, other raw materials, statements together with the accompanying notes supplemental materials and electricity power, and included elsewhere in this annual report. further processing primary aluminum for the Business Segments production and sales of seven main aluminum fabricated products, including casts, planks, screens, extrusions, forges, powder and die castings. The Group is engaged principally in alumina refining, primary aluminum smelting and aluminum fabrication. We organize and manage our operations according to the following business segments: Other activities include research and development activities relating to aluminum business of the headquarters and other operations of the Group. Alumina segment, which consists of mining and purchasing bauxite and other raw materials, refining bauxite into alumina, and selling alumina both internally to the Group’s primary aluminum smelters and externally to customers outside the Group. This segment also includes the production and sales of chemical alumina (including alumina hydrate and alumina chemicals) and gallium. Primary aluminum segment, which consists of procuring alumina and other raw materials, supplemental materials and electricity power, smelting alumina to produce primary aluminum and sell them to the group’s internal aluminum fabrication plants The Group acquired equity interest in Longxing Aluminum, Chalco Southwest Aluminum Cold Rolling, Henan Aluminum, Chalco Ruimin, Chalco Southwest Aluminum and Huaxi Aluminum on May 30, 2008. After the acquisition, the business and assets of the group experienced substantial changes. According to the business nature of aluminum fabrication and requirements on segment reporting under HKFRS, the Group disclosed the segment of aluminum fabrication separately in 2008, and corresponding amounts in 2007 were reclassified accordingly. Results of Operations and external customers. This segment also includes The Group’s profit attributable to equity holders of the production and sales of carbon products and the Company in 2008 was RMB9.2 million, aluminum alloy products. representing a large decrease over RMB10,753 million T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I for the corresponding period last year. This was mainly attributable to the facts: the Group suffered significant losses due to snow storm and earthquake in China at the beginning of 2008; the Group’s production and operation encountered unprecedented hardships and challenges including international financial crisis, the sharp rise in raw material and fuel prices and the continued slump in product prices. 45 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Selling and Distribution Expenses, General and Administrative Expenses The Group’s selling and distribution expenses increased by RMB206 million or 15.19% from RMB1,356 million for the corresponding period last year to RMB1,562 million in 2008. This was primarily attributable to an increase of RMB181 million in transportation and loading expenses and an increase of RMB23 million in packaging expenses, storage fees and port expenses. The Group’s general and administrative expenses increased by RMB420 million or 13.81% from RMB3,042 million for the corresponding period last year to RMB3,462 million in 2008, which is mainly due to the devaluation of inventory in accordance with changes in market condition, representing an increase of provision for inventory obsolescence of RMB891 million. Excluding the impact of this factor, the Group’s general and administrative expenses decreased by approximately RMB471 million over the corresponding period last year. Revenue Revenue of the Group in 2008 was RMB76,726 million, representing a decrease of RMB8,473 million or 9.94% from RMB85,199 million for the corresponding period last year, which was mainly attributable to the decrease in product price. (For details please refer to “Discussion of Segment Operations” below) Cost of Sales The Group’s total cost of sales increased by RMB5,138 million or 7.91% from RMB64,936 million for the corresponding period last year to RMB70,074 million in 2008. Such increase mainly attributed to the year- on-year increase in cost resulting from the surging prices of raw and ancillary materials and influence of the snow storm and earthquake disasters. Meanwhile, t h e G ro u p a d o p t e d e ff e c t i v e m e a s u re s a n d implemented flexible production plans, which mitigated the adverse impact arising from cost hikes to a certain extent. Currently, the Company adopted proactive measures to reduce the procurement cost of raw materials and fuels and ore. At the same time, the Company adopted different means to trim down expenses and the cost of staff. Apart form these, greater efforts were put on scientific research and development by the Company, aspiring to reduce consumption and create benefits by technology. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 46 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) On December 31, 2008, the Group conducted an The Group uses the majority of its futures and options impairment test on all of its inventories, which took contracts traded on the Shanghai Futures Exchange into consideration the offset between sales by internal and the London Metal Exchange to hedge against alumina enterprises of the Group and production by fluctuations in primary aluminum price. internal aluminum smelters of the Group as a whole, adding considerations of the financial budget and As of December 31, 2008, the primary aluminum with reference to inventory turnover, purpose of future contracts held by the Group measured at fair inventories and post balance sheet events to arrive at value and accounted for as financial assets held for provisions for inventory impairment for 2008 in trading amounted to RMB58 million, increased by accordance with accounting standards. Subsequent RMB50 million from RMB8 million at the end of 2007, to a thorough testing, the provisions for inventory which were accounted for as gains from changes in impairment of the Group in 2008 amounted to fair value. RMB916 million. The loss arising from such impairment classified under administrative expenses increased by As of December 31, 2008, the options contract for RMB891 million over the corresponding period last primary aluminum held by the Group measured at fair year. In 2008, other assets have not recorded material value and accounted for as financial liabilities held for impairment loss upon evaluation. trading amounted to approximately RMB114 million. Measurement of Fair Value The Group formulated procedures for recognition, measurement and disclosure of fair value in strict compliance with requirements on fair value under the accounting principles, and undertook responsibility for the truthfulness of the measurement and disclosure Net loss from changes in fair value of options contracts accounted for in the profit or loss for the period amounted to approximately RMB72 million. Realized gains from the above futures and options contracts in 2008 amounted to RMB289 million, representing an increase of RMB197 million as compared with RMB92 million for the corresponding of fair value. Currently, the financial assets available period last year. for sale and financial assets and liabilities at fair value through profit or loss (including derivative instruments) were measured at fair value. Owing to the above factors, operating profit of the Group decreased significantly from RMB15,794 million for the corresponding period last year to RMB1,823 million in 2008. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 47 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Finance Costs, Net The Group’s finance costs, net increased by RMB670 million or 64.42% from RMB1,040 million for the corresponding period last year to RMB1,710 million in 2008. This is primarily attributable to the increase of bank loan, issuance of corporate bond and increase of interest rate which increased interest expenses by RMB639 million over the corresponding period. At the same time, there was an increase of RMB26 million in exchange loss over the corresponding period last year due to changes in foreign exchange rate. Income Tax Discussion of Segment Operations Alumina Segment Segment Revenue The Group’s revenue from products in the alumina segment of was RMB30,942 million in 2008, representing an decrease of RMB4,188 million or 1 1 . 9 2 % f r o m R M B 3 5 , 1 3 0 m i l l i o n f o r t h e corresponding period last year. The revenue from external trading for the alumina segment decreased by RMB4,924 million or 25.34% The Group’s income tax expense decreased from from RMB19,435 million for the corresponding period RMB2,869 million for the corresponding period last last year to RMB14,511 million in 2008. year to a tax benefit of RMB34 million in 2008, representing a decrease of RMB2,903 million. Such The inter-segment revenue for the alumina segment decrease was mainly due to the significant decrease slightly increased by RMB736 million from RMB15,695 in profit of the Group which led to a decrease of million for the corresponding period last year to income tax expense by RMB3,675 million as compared RMB16,431 million in 2008. with the corresponding period last year. Other items, including a decrease in tax credit arising from External sales volume of alumina of the Group investments in locally manufactured equipment, led decreased by 1,280,700 tonnes from 5,545,100 tonnes to an increase in income tax expense by RMB772 (including sales volume from trading of 1,270,000 million as compared with the corresponding period tonnes) for the corresponding period last year to T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 4,264,400 tonnes (including sales volume from trading of 1,134,800 tonnes) in 2008. The decrease was primarily due to the Group’s increased self- consumption and the cutbacks and limitation of production. The decreased external sales volume of alumina resulted in a decrease of RMB3,737 million in revenue. last year. 48 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Group’s external average selling price of alumina The internal revenue in the primary aluminum segment amounted to RMB2,710 per tonne (exclusive of value- increased by RMB817 million or 34.88% from added tax here and below), representing a decrease RMB2,342 million for the corresponding period last of RMB208 per tonne or 7.13% from RMB2,918 per year to RMB3,159 million. tonne for the corresponding period last year. The decrease in external average selling price resulted in The external sales volume of aluminum increased by a decrease of RMB887 million in revenue. 129,200 tonnes from 2,972,100 tonnes for the Segment Results corresponding period last year to 3,101,300 tonnes in 2008, mainly due to the changes in the scope for consolidation to the 2008 financial statements which As a result of the foregoing reasons, the Group’s had led to increased sales volume. Such increase in profit in the alumina segment decreased by RMB6,309 sales volume of aluminum resulted in an increase of million or 79.95% from RMB7,891 million for the RMB2,158 million in revenue. Excluding this impact, corresponding period last year to RMB1,582 million affected by the decreased demand of aluminum sales in 2008. market, limitation and shutdown of production, the sales revenue of aluminum decreased slightly over the Primary Aluminum Segment corresponding period last year. Segment Revenue Affected by the market price of primary aluminum in 2008, the Group’s average external selling price of The Group’s sales revenue from products in the primary primary aluminum was RMB14,742 per tonne, aluminum segment decreased by RMB2,590 million representing a decrease of RMB1,964 per tonne or o r 4 . 7 8 % f ro m R M B 5 4 , 1 7 7 m i l l i o n f o r t h e 11.76% from RMB16,706 per tonne for the corresponding period last year to RMB51,587 million corresponding period last year. The decreased external in 2008. Such decrease was mainly attributable to the selling price resulted in a decrease of RMB6,091 million substantial decrease in selling prices caused by in revenue. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I international financial crisis. In addition, due to snow storm in the beginning of the year, and shortage in electrical power supply, the production and sales volume was affected. The revenue from external trading in the the primary aluminum segment decreased by RMB3,406 million o r 6 . 5 7 % f ro m R M B 5 1 , 8 3 5 m i l l i o n f o r t h e corresponding period last year to RMB48,429 million in 2008. 49 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Segment Results The Group’s segment results in the primary aluminum segment amounted to RMB484 million in 2008, representing a decrease of RMB7,326 million or 93.80% from RMB7,810 million for the corresponding period last year. Aluminum Fabrication Segment Segment Revenue The Group’s sales revenue from products in the aluminum fabrication segment amounted to RMB10,900 million in 2008. Segment Results The Group’s total segment results in the aluminum fabrication segment recorded a loss of RMB314 million in 2008, primarily attributable to the decrease in consumption of aluminum fabrication products and insufficient orders due to the international financial crisis. Structure of Assets and Liabilities Current Assets and Liabilities As of December 31, 2008, the Group’s current assets amounted to RMB42,487 million, representing an increase of RMB12,212 million over RMB30,275 million as at the end of 2007. As of December 31, 2008, the Group’s bank balances a n d c a s h a m o u n t e d t o R M B 1 6 , 2 9 6 m i l l i o n , representing an increase of RMB7,241 million as compared with RMB9,055 million as at the end of 2007. As of December 31, 2008, the Group’s net inventories amounted to RMB19,876 million, representing an increase of RMB4,506 million as compared with RMB15,370 million as at the end of 2007, primarily due to the increase in reserved inventories and goods inventories. Major Sources of Revenue T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Alumina Primary aluminum Aluminum Fabrication Note: Operating Profit = turnover — operating cost — expenses during the period Operating profit margin = operating profit/operating revenue Note: Following the Group’s acquisitions of aluminum fabrication plants in May 30, 2008, the Group has expanded its business segments from two major segments in 2007 comprising alumina and primary aluminum to three major segments in 2008 comprising alumina, primary aluminum and aluminum fabrication from the respect of operations. 50 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Capital Expenditures, Capital Commitments and Investments Undertakings The Group’s capital expenditures for projects in 2008 amounted to RMB19,708 million, which consisted mainly of the investments in Phase III of the Guangxi alumina project, the self-owned power plant project of Hewan Power, the expansion and environment control works of the Guizhou alumina project, the C h o n g q i n g 8 0 0 , 0 0 0 - t o n n e a l u m i n a p ro j e c t , environmental protection, energy-saving and renovation for aluminum project of Zunyi Aluminum, the 800,000-tonne alumina project in Zunyi and renovation project of aluminum smelting ports of Baotou Aluminum, etc. As of December 31, 2008, the Group’s project capital commitment amounted to RMB40,409 million, of which those contracted but not provided for amounted to RMB10,278 million and those authorized but not contracted for amounted to RMB30,131 million. As of December 31, 2008, the Group’s external investment commitment amounted to RMB395 million, mainly for the joint investment in the Zunyi Alumina Project. The Group’s investments in new construction and renovation projects as well as external acquisitions have constantly improved its capacity and output of alumina and primary aluminum. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I As of December 31, 2008, the Group’s current liabilities amounted to RMB38,451 million, representing an increase of RMB14,909 million as compared with RMB23,542 million as at the end of 2007. Among which, short-term borrowings (including long-term borrowings which fall due within one year) and short- term bonds increased by RMB10,943 million while other payables and accrued expenses increased by RMB3,990 million. As of December 31, 2008, the current ratio of the Group was 1.10, representing a decrease of 0.19 as compared with 1.29 as at the end of 2007. The quick ratio was 0.59, representing a decrease of 0.04 as compared with 0.63 as at the end of 2007. Non-current Liabilities As of December 31, 2008, the Group’s non-current l i a b i l i t i e s a m o u n t e d t o R M B 3 6 , 8 8 0 m i l l i o n , representing an increase of RMB19,067 million as compared with RMB17,813 million as at the end of 2007. Out of that amount, long-term borrowings (excluding the portion due within one year) increased by RMB8,690 million; bonds payable increased by RMB9,983 million, mainly attributable to the medium- term notes of RMB5,000 million seperately issued by the Group in June and October 2008 primarily to supplement the Group’s working capital and to refinance bank borrowings. As of December 31, 2008, the debt to asset ratio of the Group was 55.58%, representing an increase of 16.51 percentage points as compared with 39.07% as at the end of 2007. 51 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Cash and Cash Equivalents Cash and cash equivalents of the Group as of December 31, 2008 amounted to RMB15,982 million, including foreign currency deposits denominated in Hong Kong dollars, US dollars, Euro and Australian dollars which were respectively translated to RMB as 46 million, 191 million, 10 million and 218 million. Cash Flow from Operating Activities Cash Flows from Financing Activities Net cash inflows from financing activities amounted to RMB26,937 million in 2008, representing an increased inflow by RMB30,891 million from the net outflow of RMB3,954 million for the corresponding period last year. Among which, the increase in bank borrowings of the Group in 2008 led to a year-on- year increase of RMB20,139 million in cash inflow. The issue of medium-term notes and short-term bonds led to a year-on-year increase of RMB9,984 million in Net cash from operating activities substantially cash inflow. decreased by RMB8,199 million or 76.96% from RMB10,653 million for the corresponding period last year to RMB2,454 million in 2008. Such decrease was primarily due to the decrease in the Company’s earnings. Cash Flows from Investing Activities Non-recurring Items (according to the PRC Accounting Standards for Business Enterprises (2006)) The gains from non-recurring items of the Group in 2008 amounted to RMB143 million, comprising loss of non-current asset disposal of RMB59 million, subsidy income of RMB97 million, investment loss from Net cash outflow from investing activities significantly financial assets and libilities held for trading of RMB21 increased by RMB13,641 million from RMB8,563 million, investment gain from disposal of financial million for the corresponding period last year to assets and libilities held for trading of RMB289 million RMB22,204 million in 2008. Such increase was mainly as well as gain from external entrusted loans of RMB2 attributable to the increased capital expenditures of million, net loss of other non-operating income/ the Group and the acquisition of five aluminum expenses of RMB174 million, reversal of impairment fabrication enterprises and one aluminum enterprise. of accounts receivable for separate impairment tests T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I of RMB43 million, income tax expense on the aforementioned non-recurring items of RMB53 million and the net profit attributable to the subsidiaries acquired from business combination under common control from the beginning of the period to the date of consolidation of RMB19 million. 52 Report of the Directors The Board submits the Directors’ report together with the audited financial statements for the year ended December 31, 2008. Principal Activities The Group is the largest producer of alumina, primary aluminum and aluminum fabrication products in the PRC. It is primarily engaged in the production and sales of alumina, primary aluminum and aluminum fabricated products and related research activities. Financial Summary The results of the Group for the year ended December 31, 2008 are set out in the consolidated income statement on pages 110 to 111. A five-year financial summary of the Group is set out on pages 8 to 10. Dividend The Company had declared and paid an interim dividend of RMB0.052 per share (tax inclusive) for the period up to 30 June 2008, totalling RMB0.703 billion. The Board did not recommend the payment of a final dividend for the period up to 31 December 2008.The dividends for the last 3 years are as follows: Year 2008 Year 2007 Year 2006 Total dividend that should be paid in the year (RMB billion) 0.703 2.650 3.672 Ratio to profit attributable to equity holders of the Company (%) 7,641.30 24.64 30.33 Share Capital Details of the share capital of the Company are set out in Note 18 to the consolidated financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 53 Report of the Directors (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Reserves Distributable Reserves Movements in the reserves of the Group and of the Pursuant to Article 184 of the Company’s Articles of Company during the year are set out in the Association, where the financial statements prepared consolidated statement of changes in shareholders’ in accordance with PRC accounting standards differ equity on pages 112 to 113 and Note 18 to the from those prepared under accounting principles consolidated financial statements. generally accepted in Hong Kong, distributable reserves Property, Plant and Equipment Details of the movements in property, plant and equipment of the Group and of the Company are set out in Note 7 to the consolidated financial statements. for the relevant accounting period shall be deemed to be the lesser of the amounts shown in the two different financial statements. Distributable reserves of the Company (before the 2008 final dividends) as of December 31, 2008, calculated based on the above principle, amounted to approximately RMB22,488 million. Use of Proceeds During the reporting period, the Company did not raise any proceeds or had proceeds brought forward from previous periods. 54 Report of the Directors (Continued) Use of funds not derived from raising of proceeds During the reporting period, investment projects not funded by proceeds raised: (1) Phase III of Guangxi alumina project. The total investment in the project was RMB4.43 billion. By the end of 2008, the total amount invested by the Company was RMB3.94billion. The project was completed and put into production in July 2008, with a production capacity of 880,000 tonnes of alumina. (2) Chongqing alumina project. The proposed investment in the construction of the project was RMB4.97 billion. As at the end of 2008, the total amount invested by the Company was RMB2.47 billion. The project is expected to be completed by 2010, with a production capacity of 800,000 tonnes of alumina. (3) Zunyi alumina project. The proposed investment in the construction of the project was RMB4.41 billion. By the end of 2008, the Company had made an investment of RMB2.23 billion. The project is expected to be completed by 2010, with a production capacity of 800,000 tonnes of alumina. (4) Southwest aluminum cold rolling project. The proposed investment in the construction of the project was RMB1.64 billion. By the end of 2008, the Company had made an investment of RMB1.05 billion. The project is expected to be completed by 2010, with a production capacity of 250,000 tonnes of aluminum fabrication. (5) Chalco Ruimin high precision aluminium strip and sheet project. The proposed investment in the construction of the project was RMB2.87 billion. By the end of 2008, the Company had made an investment of RMB700 million. The project is expected to be completed by 2010, with a production capacity of 250,000 tonnes of aluminum fabrication. (6) Zunyi Aluminum aluminum project. The proposed investment in the construction of the project was RMB1.51 billion. By the end o f 2 0 0 8 , t h e C o m p a n y h a d m a d e a n investment of RMB1.24 billion. The project was basically completed in August 2008, with a production capacity of 125,000 tonnes of aluminum. (7) Baotou Aluminum aluminum environment treatment and production capacity replacement project. The proposed investment in the construction of the project was RMB1.59 billion. By the end of 2008, the Company had made an investment of RMB1.5 billion. The project was completed at the end of 2008, with a production capacity of 150,000 tonnes of aluminum. (8) Fushun Aluminum aluminum renovation project. The proposed investment in the construction of the project was RMB2.52 billion. By the end of 2008, the Company had made an investment of RMB1.180 billion. The project was partly completed at the end of 2008, with a production capacity of 100,000 tonnes of aluminum. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 55 Report of the Directors (Continued) Designated Deposits and Overdue Time Deposits As of December 31, 2008, the Group had no designated deposits with any financial institution in the PRC, nor had it failed to collect any time deposits upon maturity during the year (2007: Nil). Pre-emptive Rights Under the Articles of Association of the Company and the laws of the PRC, no pre- emptive rights exist that require the Company to offer new shares to its existing shareholders in proportion to their shareholdings. Donations Donations made by the Group during the year amounted to approximately RMB26.69 million (2007: approximately RMB27.30 million). Litigation and Contingent Liabilities (a) Litigation As of December 31, 2008, Fushun Aluminum, a subsidiary of the Company was sued as jointly liable with a third party who was sued by its lending banks. The banks had demanded the repayment of a bank loans in the sum of approximately RMB171 million. Fushun Aluminum was acquired by the Company from a third party in 2006. The Directors, after obtaining independent legal advice, are of the opinion that as the acquisition was conducted on fair principle and the consideration was set close to the value of the assets acquired, no contingency provision for such claims is necessary as of December 31, 2008. (b) Contingent Liabilities As of December 31, 2008, the Group had no significant contingent liabilities. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 56 Report of the Directors (Continued) Directors, Supervisors and Senior Management The Directors and Supervisors during the year were as follows: Executive Directors Xiao Yaqing# Luo Jianchuan Chen Jihua Liu Xiangmin appointed on May 18, 2007 (re-appointed) appointed on May 18, 2007 (re-appointed) appointed on May 18, 2007 (re-appointed) appointed on May 18, 2007 (re-appointed) Non-executive Director Shi Chungui appointed on May 18, 2007 (re-appointed) Independent non-executive Directors Kang Yi Zhang Zuoyuan Wang Mengkui Zhu Demiao appointed on May 18, 2007 (re-appointed) appointed on May 18, 2007 (re-appointed) appointed on May 9, 2008 appointed on May 9, 2008 Poon Yiu Kin, Samuel resigned on May 9, 2008 Supervisors Ao Hong Yuan Li appointed on May 18, 2007 (re-appointed) appointed on May 18, 2007 (re-appointed) Zhang Zhankui appointed on May 18, 2007 (re-appointed) # Resigned from the position of Chairman of the Company on March 27, 2009 with immediate effect and resigned from the positions of CEO, executive Director and Chairman of the Nomination Committee which will take effect upon the conclusion of the 2008 annual general meeting of the Company to be held on May 26 2009. Brief biographical details of Directors, Supervisors and Senior Management are set out on pages 15 to 20. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 57 Report of the Directors (Continued) Mr. Poon Yiu Kin, an independent non-executive has entered into a service contract with the Company Director, resigned on March 17, 2008, which took for a term of three years. No Director or Supervisor effect upon the conclusion of the Annual General has entered into a service contract with the Company Meeting on May 9, 2008. Upon nomination by the which is not terminable by the employer within one Nomination Committee of the third session of the year without payment of compensation (other than Board of the Company and approval at the fourth statutory compensation). Details of the Directors’ and meeting of the third session of the Board of the Supervisors’ remuneration and the five highest paid Company, Mr. Wang Mengkui and Mr. Zhu Demiao, individuals in the Company are set out in Note 27 to as independent non-executive director candidates of the consolidated financial statements contained in the third session of the Board, were elected as directors this report. There were no arrangements under which of the Company at the 2007 Annual General Meeting a Director or Supervisor of the Company had waived held on May 9, 2008. or agreed to waive any remuneration in respect of the Mr. Xiao Yaqing, the chairman of the Board, resigned from the post of Chairman of the Company on March 27, 2009 with immediate effect. He also resigned as an executive director, Chief Executive Officer, member and Chairman of the Nomination Committee of the Board of the Company on March 27, 2009, which will take effect upon the election of a new director at the year ended December 31, 2008. Interests of Directors, Chief Executive and Supervisors in Shares of the Company or its associated corporations 2008 annual general meeting of the Company to be During the year ended December 31, 2008, none of held on May 26, 2009. Upon nomination by Chinalco the Directors or chief executive or supervisors or their and recommendation by the Nomination Committee respective associates had any interests or short of the third session of the Board, Mr. Xiong Weiping, positions in the shares, underlying shares or debentures was nominated by the third session of the Board of of the Company or its associated corporations (within the Company as an executive director candidate, the meaning of the SFO) which are (a) required to be subject to approval at the 2008 annual general meeting notified to the Company and the Hong Kong Stock of the Company to be held on May 26, 2009. Exchange pursuant to Divisions 7 and 8 of Part XV of T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I the SFO; or (b) required to be recorded in the register kept by the Company pursuant to Section 352 of the SFO; (c) required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers. Directors’ and Supervisors’ Service Contracts and Remuneration Pursuant to Articles 104 and 145 of Articles of Association of the Company, the term of office for all Directors and Supervisors, who can be re-appointed by election upon expiration of their respective tenures, is three years. Each of the Directors and Supervisors 58 Report of the Directors (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I During the year ended December 31, 2008, none of the Directors, chief executive, supervisors, senior management, their spouses or children under the Daily Management by the Board The daily management of the Board in 2008 is set out age of 18 was given the right to acquire shares, on pages 71 to 78. underlying shares or debentures of the Company or its associated corporations (within the meaning of the SFO). Interests of Directors and Supervisors in Contracts During the year ended December 31, 2008, none of the Directors or Supervisors had any material interest, Employees, Pension Plans and Welfare Fund The Group had 107,887 employees as of December 31, 2008. The remuneration package of the employees includes salary, bonuses and allowances. Employees also receive benefits including medical care, housing subsidies, child care and education, retirement pension directly or indirectly, in any contract of significance and other benefits. the Company or any of its subsidiaries was a party. 59 Report of the Directors (Continued) In accordance with applicable PRC regulations, the repurchased shares, to amend the Company’s articles Group is currently participating in pension contribution of association and to process the respective registration plans organized by the relevant provincial and and to execute and to deal with other documents and municipal governments, under which each of the matters in relation to the repurchase of shares) not Group’s plants is required to contribute to an amount exceeding 10% of the aggregate nominal value of H of the pension fund equivalent to a specific percentage Shares in issue as at the date of the resolution passed of the sum of its employees’ salaries, bonuses and in the general meetings. The mandate is valid from various allowances. The amount of contribution as a the date of passing of the resolution in the general percentage of the employees’ salary, which depends meeting to the conclusion of the Annual General in part on the location of the plant and the average Meeting of the Company to be held in 2009. age of the employees, varies from plant to plant. The contribution of each plant accounted for approximately 20% of employees’ salary. The Group had not paid retirement benefits to its employees for the year ended December 31, 2008. Repurchase, Sale or Redemption of the Company’S Shares The Company did not redeem any of its shares during Management Contracts No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the year. Major Customers and Suppliers 2008. Neither the Company nor any of its subsidiaries The largest customer and the five largest customers purchased or sold any of its shares during 2008. of alumina of the Group accounted for 3.36% and 12.75%, respectively, of the Group’s total sales of The following resolutions were passed at the Board alumina for the year ended December 31, 2008. All meeting held on October 29, 2008, the 2008 Third of these major customers were domestic aluminum Extraordinary General Meeting, 2008 First Class smelters. Meeting of the Holders of A Shares and 2008 First Class Meeting of the Holders of H Shares held on The largest customer and the five largest customers December 29, 2008: to grant to the Board a general of primary aluminum of the Group’s primary aluminum mandate to repurchase the H shares of the Company accounted for 3.02% and 8.85%, respectively, of the (including but not limited to authorising the Board to Group’s total sales of primary aluminum for the year decide on the time, quantity and price of the ended December 31, 2008. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I repurchase, to set up overseas stock accounts and to process the respective foreign exchange registration procedures, to inform creditors and to make announcement, to attend to filing with the China Securities Regulatory Commission, to cancel the 60 Report of the Directors (Continued) The amount of raw materials (including bauxite) The Articles of Association, the Terms of Reference of provided by the largest supplier and the five largest the Audit Committee, the Terms of Reference of the suppliers of the Group in the alumina segment Supervisory Committee and the Code of Conduct accounted for 5.14% and 10.70%, respectively, of Regarding Securities Transactions by the Directors, the Group’s total cost of raw materials for the alumina Supervisors and Specific Employees form the segment. framework for the code of corporate governance practices of the Company. The Board has reviewed its The amount of raw materials provided by the largest corporate governance documents and is of the view supplier and the five largest suppliers of the Group that such documents have incorporated the principles in the primary aluminum segment accounted for and code provisions in the CG Code as set out in 4.69% and 15.58%, respectively, of the Group’s total Appendix 14 of the Hong Kong Listing Rules and the cost of raw materials for the primary aluminum Internal Control Guidelines for Listed Companies of segment. the Shanghai Stock Exchange. None of the Company’s Directors or their respective associates (as defined in the Hong Kong Listing Rules) or the existing shareholders, which, to the knowledge of the Directors of the Company, holding more than 5% of the Company’s issued share capital, had any interests in the Group’s five largest customers or suppliers of the alumina or the primary aluminum at any time during 2008. Code on Corporate Governance Practices During the year ended December 31, 2008, the Company was in compliance with the principles and code provisions of the “Code on Corporate Governance Practices” (the ‘’CG Code’’) as set out in Appendix 14 of the Hong Kong Listing Rules and the Internal Control Guidelines for Listed Companies of the Shanghai Stock Exchange. Risk Factors 1. The Company determined the price of alumina and primary aluminum with reference to international and domestic market and supply- demand dynamics of products. The Company may not be able to control all the factors. The international market prices of alumina and primary aluminum are relatively volatile, which may pose adverse impact on the business, financial condition and operating results of the Company. 2. Consistent effort needs to be made to operate and manage the business of the Company. Ineffective operation or management may pose adverse impact on the operating results of the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 61 Report of the Directors (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 3. During the production process of alumina, 4. During its operation, the Company may aluminum and aluminum fabrication, the experience material accidents which may lead Company is as reliant on raw materials and to financial loss or personal casualties. fuels such as bauxite and coal to satisfy the Significant industrial accidents and natural demand of energy and fuels as it is on massive disasters may lead to suspension of certain and ongoing supply of electricity. The Company business segments, or result in financial or has recently boosted its capacity substantially, environmental damages as well as an increase the demand for the above raw materials and in operating expenditure or reduction in sales. fuels in the production process has also The insurance of the Company may not be increased. If the supply of raw materials, fuels sufficient to compensate for related accidents a n d e n e r g y a n d p r i c e c h a n g e c a n n o t or the consequences of the accidents. Should accommodate the production needs of the there be any payment which cannot be fully Company, there will be a practical effect on the covered, the operating results of the Company financial positions and operating results of the may be adversely affected by the loss incurred. Company. 62 Report of the Directors (Continued) Audit Committee The written terms of reference in relation to the authorities and duties of the Audit Committee were prepared and adopted in accordance with and with reference to “A Guide for the Formation of an Audit Committee” published by the Hong Kong Institute of Certified Public Accountants and Rule 10A-3 of U.S. Securities and Exchange Commission. The consolidated financial statements of the Company for the year ended December 31, 2008 have been reviewed by the Audit Committee of the Company. Auditor The financial statements have been audited by PricewaterhouseCoopers, who retired and, being eligible, offered themselves for re-appointment at the 2008 Annual General Meeting. The Company has not changed its auditors in any of the five preceding financial years. By order of the Board Luo Jianchuan Executive Director Beijing, the PRC March 27, 2009 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 63 Report on the Supervisory Committee Dear Shareholders, On behalf of the third session of the Supervisory Committee of the Company, I would like to submit to the Annual General Meeting a report on the work of the Supervisory Committee in the past year. The third session of the Supervisory Committee of the Company comprises three persons, namely Ao Hong, Zhang Zhankui and Yuan Li of whom Ao Hong was the Chairman, Ao Hong and Zhang Zhankui were Supervisors representing the shareholders and Yuan Li was a staff representative Supervisor. The members of the Supervisory Committee were all re-elected supervisors. During the year, the Supervisory Committee attended four Board meetings as observers and participated in all general meetings in a manner responsible to the shareholders, and pursuant to duties given by the Company Law and the Articles of Association of the Company, and the relevant requirements of the CSRC, to hear the reports relating to the Company’s production, operation, investment and finance etc. as well as to participate in the material decision making process of the Company. The Supervisory Committee has performed its duty of supervising the Company’s operation, the directors and management in discharging their responsibilities, the finance of the Company and so forth. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 64 1. Supervisory Committee Meetings During the year, five Supervisory Committee meetings were held as follows: The fourth meeting of the third session of the Supervisory Committee was held on March 17, 2008. Three Supervisors attended the meeting which was in accordance with the requirements of the Company Law and the Articles of Association of the Company. The meeting considered and approved the annual results report of 2007, the 2007 Profit Distribution Plan and the 2007 Report of the Supervisory Committee. The fifth meeting of the third session of the Supervisory Committee was held on April 22, 2008. Three Supervisors attended the meeting which was in accordance with the requirements of the Company Law and the Articles of Association of the Company. The meeting considered and approved the 2008 First Quarterly Report of the Company. The sixth meeting of the third Session of the Supervisory Committee was held on July 30, 2008. Three Supervisors attended the meeting which was in accordance with the requirements of the Company Law and the Articles of Association of the Company. The meeting considered and approved proposals including the Report on Special Work in Self-inspection Stage to Prevent the Resurfacing of Misappropriation of Funds and Advance Corporate Governance of the Company and the Rectification Report on Special Activities to Strengthen Corporate Governance of the Company. Report on the Supervisory Committee (Continued) The seventh meeting of the third Session of the The Supervisory Committee was responsible Supervisory Committee was held on August for the supervision of the Board, the senior 29, 2008. Three Supervisors attended (including management and its members, preventing them attendance by proxy) the meeting which was from abusing their power and authorities and in accordance with the requirements of the from jeopardizing the legal interests of the Company Law and the Articles of Association shareholders, the Company and its staff. of the Company. The meeting considered and approved the 2008 Interim Report of the In 2008, the Supervisory Committee mainly Company. carried out the following work: The resolutions proposed on the eighth meeting (I) Inspection of Implementation of of the third session of the Supervisory Committee were considered by way of written resolutions on October 24, 2008. Three Supervisors had reviewed the resolution, which was in accordance with the requirements of the Company Law and the Articles of Association of the Company. The 2008 Third Quarterly Report of the Company was approved at the meeting. 2. Principal role of the Supervisory Committee The work of the Supervisory Committee focused on ways to adapt to the Company’s changing d e v e l o p m e n t , e n h a n c e i t s o p e r a t i n g transparency and standardization, build the Group’s corporate credible image in the capital market, effectively protect interests of investors, especially interests of small and medium-sized investors, as well as ways to further improve its corporate governance. Resolutions of the General Meetings Members of the Supervisory Committee attended each of the general meetings and Board meetings in person as observers. No objection has been made to the reports and proposals submitted by the Board to the general meetings for consideration. The Supervisory Committee exercised supervision and inspection on implementation of the general meetings’ resolutions by the Board, the Directors and the senior m a n a g e m e n t . T h e S u p e r v i s o r y Committee is of the opinion that none of the Directors and management of the Company has violated any laws or regulations or Articles of Association nor taken any act which jeopardizes the i n t e r e s t s o f t h e C o m p a n y a n d shareholders up to present. 65 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Report on the Supervisory Committee (Continued) (II) Inspection of Legal Compliance (IV) Inspection of the Company’s of the Company’s Operations Financial Position The Supervisory Committee exercised During the year, the Supervisory supervision on a regular basis over the Committee of the Company verified legal compliance and legality of the cautiously the financial statements of Company’s operation and management. each period, and supervised and It has also exercised supervision over the i n s p e c t e d t h e C o m p a n y ’ s work performance of the Company’s implementation of relevant financial Directors and senior management. The policies and legislation as well as details Supervisory Committee is of the opinion on the Company’s assets, financial that the Company’s operation is sound income and expenditure and connected and rational, and is in compliance with transactions. It is of the opinion that the all applicable laws, regulations and rules. operating results achieved by the The members of the Board and senior Company were true, the expenses were management of the Company have reasonable and all the connected faithfully performed their duties with transactions were entered into on a fair diligence, and accomplished the duties basis. Information on the significant imposed by the shareholders. events of the Company over the past year has been disclosed pursuant to relevant regulations. The preparation and disclosure of information of the Company are strictly in accordance with the principles of truthfulness, timeliness, accuracy, completeness and fairness. The financial reports of the Company truly reflected the financial status and operating results of the Company. The Supervisory Committee approved the Company’s financial audit report presented by PricewaterhouseCoopers, t h e i n t e r n a t i o n a l a u d i t o r s , a n d PricewaterhouseCoopers Zhong Tian CPAs Limited Company, the domestic auditors. (III) Inspection of the Company’s Daily Operating Activities The Supervisory Committee exercised s u p e r v i s i o n o v e r t h e C o m p a n y ’s operating activities. The Supervisory Committee is of the opinion that the Company has established a relatively integral, reasonable and effective internal control system, has made great progress in the formulation and implementation of its internal work procedures, and has effectively controlled its exposure to various operating risks. The Company’s operation is in compliance with PRC laws and regulations, Articles of Association and its internal work procedures. 66 Report on the Supervisory Committee (Continued) (V) Inspection of the Proceeds (VII) Inspection of the Connected Raised Transactions of the Company In the reporting period, the Company In the reporting period, the procedure has not raised any funds for any use. of entering into connected transactions (VI) Inspection of the Acquisitions and Disposals of the Company’s Assets The Supervisory Committee is of the opinion that in the reporting period, the consideration for the acquisition of assets by the Company was fair and reasonable, without insider dealings and acts i m p a i r i n g t h e i n t e r e s t s o f t h e shareholders or leading to a loss in the Company’s assets. So far, construction and merger/acquisition projects have by the Company was in compliance with the requirements under the Listing Rules. The disclosure of information in relation to connected transactions was timely and adequately made. The contracts of connected transactions fulfilled the principles of fairness and integrity, without acts impairing the interests of the shareholders and the Company. (VIII) Inspection of Special Activities t o S t r e n g t h e n C o r p o ra t e Governance of the Company been implemented pursuant to the The Company started the special contents and progresses approved, and activities to strengthen corporate income and profits have been generated governance in May 2007 according to to the Company. During the reporting the Notice on Strengthening the period, the Company has not disposed Corporate Governance Activities of of any assets of significant amounts. Listed Companies issued by CSRC and arrangements of CSRC Beijing Bureau and the Shanghai Stock Exchange. Following the completion of self-inspection, public review, on-site examination, rectification and improvement, the Board of the Company considered and approved the Rectification Report on Special Activities to Strengthen Corporate Governance of the Company, with a relevant announcement published on the website of the Shanghai Stock Exchange in December 2007. In July 2008, the Board of the Company considered and 67 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Report on the Supervisory Committee (Continued) approved the Explanations on Special The Supervisory Committee is of the Activities to Strengthen Corporate o p i n i o n t h a t t h e C o m p a n y h a s Governance of the Copmany, with a continuously improved the Articles of relevant announcement published on the Association by reference to the Company website of the Shanghai Stock Exchange Law and relevant regulations, and has in August 2008. The Supervisory managed and governed itself in strict Committee has considered the relevant accordance with the provisions of the reports and is of the opinion that the Articles of Association. The Company special activities to strengthen corporate has established an effective internal governance over these years have control system as required by regulatory increased the understanding of the authorities of international and domestic importance of perfecting the corporate capital markets. Currently, none of the governance structure and operating in a substantial shareholders or their s u b s i d i a r i e s m i s a p p ro p r i a t e s t h e Company’s funds for non-operating purpose, nor does any substantial s h a r e h o l d e r m i s a p p ro p r i a t e t h e Company’s funds in disguised forms of “repaying at the end of the period after misappropriating during the period” or disposing of assets to the Company at higher consideration, or otherwise through misappropriation for non- operating purpose. standard way under laws. (IX) Inspection of Special Work to P r e v e n t R e s u r f a c i n g o f Misappropriation of Funds and Advance Corporate Governance The Company has inspected the special work to prevent the resurfacing of misappropriation of funds and advance corporate governance, mainly including i n s p e c t i o n o n s o u n d n e s s a n d effectiveness of internal control systems and misappropriation of corporate funds, so as to implement the Notice on Promoting Special Work to Prevent Resurfacing of Misappropriation of Funds and Advance Corporate Governance issued by CSRC and CSRC Beijing Bureau. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 68 Report on the Supervisory Committee (Continued) (X) Understanding of internal operation of the Company by attending meetings of the Audit Committee of the Board During the reporting period, the Supervisory Committee attended all four meetings of the Audit Committee of the Company, in which the Supervisory Committee listened to opinions in respect of the Company’s internal control and examination and fully performed its role of guidance and supervision. The Supervisory Committee is of the opinion that the Company has established a holistic internal control system which is effective, and that the department re s p o n s i b l e f o r e x a m i n a t i o n a n d supervision of internal control of the Company has also diligently performed daily examination and supervision of internal control. In 2008, the Company overcame crucibles and seized opportunities amid the most volatile market and hardest difficulties to maintain its stable growth. In 2009, the Company will face even more challenges from all directions. In order to protect the legal interests of the Company and shareholders, the Supervisory Committee will continue to faithfully perform its duties and enhance its supervision in order for the Company to better perform and become a stronger player in the increasingly competitive landscape. By Order of the Supervisory Committee Ao Hong Chairman of the Supervisory Committee Beijing, PRC March 27, 2009 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 69 Report on Corporate Governance and Internal Control Corporate Governance Practices 2. All members of the Independent Audit Committee were Independent Non-executive Directors, of whom Mr. Zhu Demiao, the Chairman and the financial expert appointed by the Board of the Company, held the relevant professional qualification and professional knowledge related to accounting or financial management. Securities Transactions of the Directors, Supervisors & Relevant Employees The Board has formulated written guidelines on securities transactions by the Directors, Supervisors and relevant employees of the Company which are on terms no less stringent than the required standard set out in the Model Code under Appendix 10 of the Hong Kong Listing Rules and Listing Rules of Shanghai Stock Exchange. Following a specific enquiry by the Company, all Directors, Supervisors and relevant employees have confirmed that they have fully complied with the required standards set out in the written guidelines. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The Board has reviewed its corporate governance documents and internal control guidelines, and is of the view that, the Company has been in compliance with the code provisions in the “Code on Corporate Governance Practices” (the “CG Code”) as set out in Appendix 14 of the Hong Kong Listing Rules and the Guidelines of Shanghai Stock Exchange for the Internal Control of Listed Companies (“Internal Control Guidelines”). The Directors believe that the Articles of Association, the scope of responsibilities of the Audit Committee, the scope of responsibilities of the Supervisory Committee and the Codes on Securities Dealings by Directors and Certain Relevant Employees, which constitute the basis for the regular codes on corporate governance of the Company, have covered the principles and the code provisions of the CG Code as set out in Appendix 14 to the Hong Kong Listing Rules and the Guidelines of Shanghai Stock Exchange for the Internal Control of Listed Companies. In respect of the following areas, our internal corporate governance documents are more stringent than the CG Code and the Internal Control Guidelines for Listed Companies of the Shanghai Stock Exchange: 1. I n a d d i t i o n t o t h e I n d e p e n d e n t A u d i t Committee, Remuneration Committee and Nomination Committee, the Company has also established a Planning and Development Committee and Disclosure Committee. 70 Report on Corporate Governance and Internal Control (Continued) The Board During the reporting period, the third session of the Board of the Company consisted of nine Directors, with four Executive Directors, namely Mr. Xiao Yaqing, Mr. Luo Jianchuan, Mr. Chen Jihua and Mr. Liu Xiangmin, one Non-executive Directors, namely Mr. Shi Chungui, and four Independent Non-executive Directors, namely Mr. Kang Yi, Mr. Zhang Zhuoyuan Mr. Wang Mengkui and Mr. Zhu Demiao. Mr. Xiao Yaqing is the Chairman and Chief Executive Officer (“CEO”). As Mr. Xiao Yaqing has resigned as the Chairman of the Company on March 27, 2009, the Board elected Mr. Luo Jianchuan to sign documents such as the ‘’Chairman’s Statement’’ and ‘’Report of Directors’’ set out in the annual report for 2008 and to chair meetings of the Board and general meetings prior to the election of new Chairman. The Board of the Company approved the nomination of Mr. Xiong Weiping as the executive director candidate for the third session of the Board, which is subject to approval at the 2008 annual general meeting to be convened on 26 May, 2009. The Board confirmed that the annual confirmation letters made by each Independent Non-executive Director pursuant to Rule 3.13 of the H o n g K o n g L i s t i n g R u l e s re g a rd i n g h i s / h e r independence had been received, and after due enquiry, considered that Mr. Kang Yi, Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao were independent. In accordance with Articles 104 and 145 of the Company’s Articles of Association, all Directors (including Independent Non-executive Directors) and Supervisors were appointed for a three-year term. Directors are eligible for re-appointments after expiry of their respective term of office. Each Director of the Board acted in the interests of the shareholders, and used his best endeavors to perform the duties and obligations as a director in accordance with all the applicable laws and regulations. Duties of the Board included: deciding on the Company’s business plan and investment scheme, preparing the Company’s profit distribution and loss recovery proposals, formulating the Company’s capital operation proposals, and implementing resolutions approved at Shareholders’ meetings etc. The Chairman was responsible for ensuring that the Directors perform their duties and obligations and maintaining effective operation of the Board as well as ensuring discussion of all material matters on a timely basis. The Chairman has conducted interviews individually with each of the Non-executive Directors to understand their opinions and advice on the operation of the Company and the work of the Board. The Secretarial Office of the Board offered comprehensive services to the Directors and provided all the directors with sufficient information relating to the Company on a timely basis in order to enhance their understanding of the Company. It also effectively maintained communications with shareholders to ensure that the views of the shareholders reached the Board. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 71 Report on Corporate Governance and Internal Control (Continued) The Company has appointed a sufficient number of finance, economics, resources and metallurgy. They Independent Non-executive Directors with suitable have provided the Company with professional advice professional qualifications, such as expertise in with respect to the steady operation and development accounting or financial management, in accordance of the Company. They have also provided supervision with the requirements of the Hong Kong Listing Rules. in safeguarding and coordinating the interests of the The Company’s four Independent Non-executive Company and its shareholders. Directors were independent. They are professionals with extensive experience in the respective fields of Attendance of the independent non-executive directors at regular meetings of the Board: Name of independent non-executive director at Board Attendance Attendance meetings in person by proxy Required attendance Kang Yi Zhang Zhuoyuan Wang Mengkui Zhu Demiao Poon Yiu Kin, Samuel* * Resigned on 9 May, 2008 (number of times) (number of times) 4 4 2 2 2 0 0 0 0 0 4 4 2 2 2 Absence (number of times) 0 0 0 0 0 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 72 Report on Corporate Governance and Internal Control (Continued) During the reporting period, the Independent non- executive Directors of the Company did not propose any objection to the proposed resolutions at Board meetings and proposals of other meetings. Other than their working relationships with the Company, none of the Directors, Supervisors or the senior management has any financial, business or family relationships or any relationships in other material aspects with each other. Other than the service contract entered into by each of them, none of the Directors or the Supervisors has • • • • • Review of the Company’s annual and interim results reports; Review of the annual profit distribution and dividend distribution proposals; Review of significant investments and merger/ acquisition activities; Review of bonds issue and share repurchase activities; Review of the Company’s remuneration scheme any personal and substantive interest, direct or indirect, f o r D i re c t o r s , S u p e r v i s o r s a n d s e n i o r in the material contracts entered into by the Company management etc. or any of its subsidiaries during 2008. Particulars of each regular Board meetings in 2008 In 2008, the Company held four regular Board are as follows: meetings, with an average attendance rate of 100%, in which, Mr. Xiao Yaqing, Mr. Luo Jianchuan, Mr. (1) On March 17, 2008, the Company convened Chen Jihua, Mr. Liu Xiangmin, Mr. Shi Chungui, Mr. the 4th meeting of the Third session of the Zhu Demiao, Mr. Kang Yi, Mr. Zhang Zhuoyuan, Mr. Board, considered and approved a total of 17 Wang Mengkui and Poon Yiu Kin, Samuel (resigned resolutions including the 2007 annual report, on May 9, 2008) attended all meetings (including 2007 profit distribution plan and dividend attendance by proxy). 7 resolutions were formed by distribution plan, 2008 production and financial written proposals at special Board meetings. Details plan, 2008 capital expenditure plan and of the regular meetings were recorded by a designated financing plan, 2007 annual remuneration for officer, and all proposals approved in each meeting Directors, Supervisors and Senior management, were passed as resolutions of the Board, which were director candidates for the third session of the recorded and stored electronically in accordance with Board, bidding for equity interest in six relevant laws and regulations. The principal activities companies and amendments to the Articles of of the Board in 2008 were as follows: Association. Announcement of the resolutions • Review of the Company’s annual business plan Shanghai Securities News and the designated and budget; websites on March 18, 2008. was published in China Securities Journal, T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 73 Report on Corporate Governance and Internal Control (Continued) (2) On April 22, 2008, the Company convened the Implementation of Resolutions of the General Meetings 5th meeting of the third session of the Board, by Directors: considered and approved 2 resolutions including the 2008 first quarterly report. Announcement During the reporting period, in accordance with of the resolutions was published in China provisions of the relevant laws and regulations and Securities Journal, Shanghai Securities News the Articles of Association, all members of the Board and the designated websites on April 23, 2008. of the Company implemented resolutions approved by the general meetings and completed matters (3) On August 29, 2008, the Company convened assigned by the general meeting. the 6th meeting of the third session of the Board, considered and approved 5 proposals The major agendas of the half yearly and yearly Board including the 2008 interim report, 2008 interim meetings were determined in the previous year to dividend distribution plan, revision of annual ensure all Directors had the opportunity to propose caps for continuing connected transactions, matters to be discussed at the meetings. Each regular new continuing connected transactions, issue meeting of the Board was notified fourteen days of bonds, expansion of the Company’s business before convening the meeting and the resolutions scope and corresponding amendments to the would be provided to the Directors ten days prior to Articles of Association. Announcement of the the meeting, which gave them sufficient time to review resolutions was published in China Securities the resolutions. Journal, Securities Times, and the designated websites on August 30, 2008. The Board attached great importance to the influence on the Company’s development strategy arising from (4) On October 29, 2008, the Company convened the changes of the external environment. In 2008, the 7th meeting of the third session of the the Company adjusted its development strategies and Board, at which 2 proposals including the adopted emergency measures to reduce losses arising proposed grant of a general mandate to the from the natural disasters and global financial turmoil. Board by the general meeting of the Company for repurchase of H shares were considered The total remuneration, including the basic salary, a n d a p p ro v e d . A n n o u n c e m e n t o f t h e performance-linked salary, incentive-linked salary and resolutions was published in China Securities discretionary bonus of the Directors in 2008 amounted Journal, Securities Times, and the designated to RMB4.255 million. Independent Non-executive websites on October 30, 2008. Directors were only entitled to receive director’s fees but not other remuneration. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 74 Report on Corporate Governance and Internal Control (Continued) The remuneration of each Director for the year is set In 2008, the Audit Committee mainly reviewed the out on page 14. following matters: • • Considered the Company’s annual, interim and quarterly financial reports; Considered the Internal Control Assessment Report of the Company for 2007 and issued relevant opinion; • Considered the Risk Assessment Report for 2007 and the revised Risk Assessment Framework for 2007; • • • Considered the Work Report of the Audit Committee for 2007; Considered the Anti-fraud Work Report of the Company for 2007; Considered the Summary Report of the Audit Work by accounting firms, and reviewed the proposal for reappointment of the accounting firms. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I As at December 31, 2008, no stock appreciation rights had been granted under the Stock Appreciation Rights Plan adopted by the Company. Audit Committee An Audit Committee has been established under the Board. The duties of the Audit Committee are mainly to review the Company’s internal control (including financial reports of the Company), consider the appointment of independent auditors and approve audit and audit-related services, and supervise the Company’s internal financial reporting procedures and management policies. The Committee comprised four Independent Non- executive Directors, namely Mr. Zhu Demiao, Mr. Kang Yi and Mr. Zhang Zhuoyuan and Mr. Wang Mengkui. Mr. Zhu Demiao is the Chairman of the Committee. The Audit Committee would annually hold at least two meetings to review the accounting policies, internal control and the relevant financial issues and connected transactions of the Group, so as to ensure completeness, fairness and accuracy of the Company’s financial statements and other relevant information. In 2008, the Audit Committee held four meetings with an average attendance rate of 94% based on the current three members, of which, Mr. Zhu Demiao, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui attended all the meetings, while Poon Yiu Kin, Samuel (resigned on 9 May, 2008) attended the two meetings held during his tenure. 75 Report on Corporate Governance and Internal Control (Continued) Details of the meetings were recorded by a designated officer with signature of all members as confirmation, and all resolutions passed at each meeting were recorded and stored electronically in accordance with relevant rules. Members of the Audit Committee performed their duties diligently and provided suggestion in relation to the internal control, production operation and management of the Company from a fair and independent perspective. The Company has established working procedures for the Audit Committee to duly perform the duties of supervising the audit of the annual report. Before the external auditors commenced its annual audit, the Audit Committee reviewed the Company’s financial position and negotiated with the external auditors about the time arrangement for auditing of the financial report for the year. During the audit process by external auditors, the Audit Committee has frequent communications with them and urged them to complete certain audit tasks in the designated timeframe. The Audit Committee further reviewed the financial report of the Company after the external auditors has issued its preliminary audit opinions, and finally formulated a written resolution, and agreed to submit the audited financial report to the Board of the Company for its review and passed the resolution regarding the reappointment of the auditor of the Company for the year 2008 submitted by the Board. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Remuneration Committee and Nomination Committee Remuneration Committee and Nomination Committee have been established under the Board. The Remuneration Committee consisted of four Independent Non-executive Directors, namely Mr. Zhu Demiao, Mr. Kang Yi, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui. Mr. Kang Yi was the Chairman of the Committee. On June 10, 2008, Mr. Chen Jihua, an Executive Director, ceased to be a member of the Remuneration Committee under the third session of the Board. Duties of the Remuneration Committee include: 1. R e v i e w a n d d i s c u s s t h e C o m p a n y ’s remuneration policies for Directors, supervisors and senior management; 2. Review operation results indicators and the p e r f o r m a n c e a s s e s s m e n t m a n a g e m e n t measures of the Executive Committee; 3. R e v i e w a n d d i s c u s s t h e C o m p a n y ’s remuneration and bonus policies for members of the Executive Committee and senior management; 4. Provide advice on other material events regarding remuneration. 76 Report on Corporate Governance and Internal Control (Continued) The Nomination Committee consisted of two executive Mr. Xiao Yaqing had tendered resignation as a directors and three independent non-executive committee member and the chairman of the directors. Mr. Xiao Yaqing, Mr. Luo Jianchuan, Mr. Nomination Committee on March 27, 2009, which Zhang Zhuoyuan and Mr. Kang Yi were members of will take effect upon the election of a new director the Nomination Committee of the third session of the in the 2008 annual general meeting of the Company Board. Mr. Xiao Yaqing was the Chairman of the to be convened on May 26, 2009. Committee. Mr. Poon Yiu Kin, Samuel, resigned from the position of independent non-executive directors The Remuneration Committee and the Nomination on May 9, 2008, and ceased to be a member the Committee each held three meetings respectively in Nomination Committee. Duties of the Nomination 2008. The average attendance rate for the respective Committee included: meeting is 100%. Details of the meetings convened by the Remuneration Committee and Nomination 1. Discussing and recommending candidates for Committee in 2008 were as follows: independent director of the Board; 2. Discussing and recommending members of the Committee of the third session of the Board Board or other personnel to be candidates for was held on March 17, 2008, at which the members of the Special Committee; Committee considered the proposals including • The 2nd meeting of the Remuneration 3. Preparing the appointment management standards for 2008, and renewal of liability procedures and re-election plan for members insurance for years 2008 and 2009 for the of the Executive Committee and senior Company’s Directors, Supervisors and other management; senior management members, and formed the 2007 discretionary bonus, remuneration relevant resolutions. 4. Providing advice to the appointment and dismissal of the members of the Executive • The 3rd meeting of the Nomination Committee Committee and other senior management; of the third session of the Board was held on March 17, 2008. All members of the committee 5. Providing advice to the appointment and attended the meeting, at which proposal in dismissal of other personnel which is considered relation to the nomination of Mr. Wang T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I material. Mengkui and Mr. Zhu Demiao as director candidates for the third session of the Board was considered and passed. The proposal was submitted to the 4th meeting of the third session of the Board for consideration. 77 Report on Corporate Governance and Internal Control (Continued) Planning and Development Committee A Planning and Development Committee has also been established under the Board. The Committee consists of executive directors, namely, Mr. Luo Jianchuan, Mr. Liu Xiangmin and vice President Mr. Ding Haiyan. Mr. Luo Jianchuan was Chairman of the Committee. Duties of the Committee included the review and evaluation of the Company’s development, financial budget, investment, business operation and strategic plan of annual investment returns. The Planning and Development Committee has operated under its codes on procedures. Supervisory Committee The third session of Supervisory Committee of the Company consisted of three members, with one supervisor being elected from the staff as a representative of the employees. The Supervisory Committee was responsible for supervision of the Board and its members and senior management, in order to prevent them from abusing their authorities and violating the legal interests of shareholders, the Company and its staff. In 2008, the Supervisory Committee took initiatives by convening four meetings, at which the Committee reviewed the Company’s financial position and legal compliance of corporate operations as well as work performance of the senior management. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I • The 4th meeting of the Remuneration Committee of the third session of the Board was held on June 10, 2008, at which the p r o p o s a l re l a t i o n t o c h a n g e s t o t h e Remuneration Committee and Audit Committee of the third session of the Board was considered by way of written resolutions. It was resolved that Mr. Wang Mengkui and Mr. Zhu Demiao b e e l e c t e d a s n e w m e m b e r s o f t h e Remuneration Committee and Mr. Chen Jihua ceased to be a member of the Remuneration Committee and such proposal was submitted to Board for consideration and approval. After such change, the Remuneration Committee consists of Mr. Kang Yi, Mr. Wang Mengkui, Mr. Zhu Demiao, Mr. Zhang Zhuoyuan. Mr. Kang Yi was the Chairman of the Committee. It was also resolved that Mr. Zhu Demiao and Mr. Wang Mengkui be elected as new members of the Audit Committee with Mr. Zhu Demiao as the Chairman of the Committee. The p ro p o s a l w a s s u b m i t t e d t o B o a rd f o r consideration and approval. After such change, the Audit Committee consists of Mr. Zhu Demiao, Mr. Wang Mengkui, Mr. Kang Yi and Mr. Zhang Zhuoyuan. Details of each meeting were written down by a professional recording secretary. All issues approved in the meetings were recorded and filed in compliance with relevant law and regulations. The procedures for appointment of new directors are: the Nomination Committee nominate a director candidate for confirmation by the Board, which is then put forward for approved by shareholders in general meeting. 78 Report on Corporate Governance and Internal Control (Continued) Information Disclosure and Disclosure Committee First Class Meeting for Holders of A Shares held on December 29, 2008; and Great importance is attached by the Company to information disclosure on an accurate, timely, fair and transparent basis. All discloseable information (including annual and interim results) were subject to the approval of the Company’s Disclosure Committee with the CEO as its Chairman. For the purpose of disclosure of financial statements and related information, the Chief Financial Officer ensured that the Company’s results and financial position had been reflected on a true and fair basis under the relevant accounting principles and requirements. General Meeting General meeting is the highest authority of the Company. It provides a good opportunity for direct communications and building a sound relationship between the Board and the shareholders of the Company. Therefore, the Company attaches great importance to such meetings. In 2008, the Company convened four general meetings, one class meeting for holders of A shares and one class meeting for holders of H shares, namely: 2007 Annual General Meeting held on May 9, 2008; 2008 First Extraordinary General Meeting held on May 9, 2008; 2008 Second Extraordinary General Meeting held on October 28, 2008; 2008 Third Extraordinary General Meeting held on December 29, 2008; T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I First Class Meeting for holders of H Shares held on December 29, 2008. All meetings mentioned above were convened and held in the conference room of the Company at No. 62, North Xizhimen Street, Beijing. The meetings mainly considered and approved the following: • the Report of the Directors, Report of Supervisory Committee and Consolidated Financial Report for 2007; • • • • • • • • the profit distribution and final dividend distribution proposals for 2007; the remuneration proposal of 2008 for the Company’s Directors and Supervisors; the interim dividend distribution proposals for 2008; the acquisition of five aluminum fabrication plants and one primary aluminum plant; election of new independent directors; revision of the caps for the continuing connected transactions and new continuing connected transactions; the general mandate to repurchase H shares; and the issue of short-term corporate bonds and long-term bonds. 79 Report on Corporate Governance and Internal Control (Continued) On the whole, all resolutions were approved with an (2) On May 9, 2008, the Company convened the average approval rate of 98.53%. 2008 First Extraordinary General Meeting, at which 1 proposal including the acquisition of The Chairman of the Board or person authorized by five aluminum fabrication plants and one him presided over such general meetings and explained aluminium plant from Chinalco were considered to the shareholders the procedures for voting before a n d a p p ro v e d . A n n o u n c e m e n t o f t h e the shareholders considered and voted on each resolutions was published in China Securities resolution. Notice of the meetings were given to all Journal, Shanghai Securities News and the directors and some directors also attended the General designated websites on May 12, 2008. M e e t i n g s . M e m b e r s o f A u d i t C o m m i t t e e , Remuneration Committee and Nomination Committee (3) On October 28, 2008, the Company convened had been informed to attend the meetings as the 2008 Second Extraordinary General observers. Meeting, at which 3 proposals were considered and approved, including the distribution of the Particulars of each general meeting in 2008 are as 2008 interim dividend, issuance of corporate follows: bonds and amendments to the Articles of Association (including changes to the (1) On May 9, 2008, the Company convened the Company’s business scope). Announcement of 2007 Annual General Meeting, at which 13 the resolutions was published in China Securities proposals were considered and approved, Journal, Securities Times and the designated including Report of the Directors, Report on websites on October 29, 2008. the Supervisory Committee, the Audited Financial Statements for 2007, proposal for (4) On December 29, 2008, the Company profit distribution and declaration of final convened the 2008 Third Extraordinary General dividends for 2007, election of new directors Meeting, at which 5 proposals including new of the third session of the Board and issue of continuing connected transactions and revision short-term corporate bonds. Announcement of the annual caps of continuing connected of the resolutions was published in China transactions and the grant of a general mandate Securities Journal, Shanghai Securities News to the Board for the repurchase of H shares of and the designated websites on May 12, 2008. the Company were considered and approved. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Announcement of the resolutions was published in China Securities Journal, Securities Times and the designated websites on December 30, 2008. 80 Report on Corporate Governance and Internal Control (Continued) (5) On December 29, 2008, the Company recognition of the Company. In 2008, the Company convened the First Class Meeting for Holders arranged designated senior management to visit of A Shares, at which the proposal for the investors in two global roadshows, arranged 3 grant of a general mandate to the Board for corporate visits for investors, arranged more than 50 the repurchase of H shares of the Company group visits to the Company by investors, and was considered and approved. Announcement participated in 10 investors’ meetings arranged by of the resolution was published in China investment banks. In addition, our investor Securities Journal, Securities Times and the relationships department is also responsible for designated websites on December 30, 2008. answering investors’ enquiries and replying mails on (6) On December 29, 2008, the Company a timely basis. convened the First Class Meeting of the Holders As at December 31, 2008, the market capitalization of H Shares, at which the proposal for the of the Company was RMB73.1 billion. The number of grant of a general mandate to the Board for issued share of the Company was 13,524,487,892, the repurchase of H shares of the Company the A share closing price was RMB6.15, and H share was considered and approved. Announcement closing price was HKD4.08. For details of classes of of the resolution was published in China shareholders please refer to page 26. Securities Journal, Securities Times and the designated websites on December 30, 2008. Qualified Accountant Investor Relations In accordance with the waiver granted by the Hong Kong Stock Exchange from strict compliance with Rule The Company has established a designated department 3.24 of Hong Kong Listing Rules concerning the for investor relations, which is responsible for matters appointment of a qualified accountant of the Company, concerning investor relations and has formulated the the Company has appointed Mr. Wang Jianhui (an “Investor Relations Management Measures” to associate member of the Association of Chartered regulate the relationships with the investors. The Certified Accountants and a certified accountant of the C o m p a n y ’s m a n a g e m e n t m a i n t a i n s c l o s e Chinese Institute of Certified Public Accountants) in communications with investors, analysts and the media 2008 to assist Mr. Chen Jihua in the discharge of his by various means including roadshows, meetings, responsibilities as the Qualified Accountant under the individual interviews and investors’ visits to the Hong Kong Listing Rules. According to the latest revised Company, thereby further increasing investors’ provisions of the Listing Rules of the Hong Kong Stock Exchange, the Company no longer appoints qualified accountants commencing from 2009. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 81 Report on Corporate Governance and Internal Control (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Corporate Management and Internal Control The Company convened Working Committee Meetings on an irregular basis, which were chaired by the Chairman of the Working Committee and attended by its members, and President Meetings, which were chaired by the senior management with attendants including department heads from the Company’s h e a d q u a r t e r s . T h e C o m p a n y ’s o p e r a t i o n , implementation of investment projects and financial issues were considered and determined at such meetings. The Company’s management including managers from branches, subsidiaries, associated companies and department heads from the headquarters convenes annual and interim work meetings in order to summarize and arrange works on a yearly and half yearly basis. The meetings have f a c i l i t a t e d t h e o r g a n i z a t i o n , c o o r d i n a t i o n , communication and implementation of the Company’s various operations. The Board and the senior management attached much importance to the establishment and improvement of the internal control system. In 2008, the Company had fully established and evaluated the relevant internal control system in compliance with ‘’Basic Principles of Corporate Internal Control’’ and ‘’Guidelines on Internal Control for Companies Listed on the Shanghai Stock Exchange’’ of the PRC Ministry of Finance, and made further improvement in accordance with section 404 of the U.S. Sarbanes- Oxley Act. In 2008, the Board and independent directors formed the Audit Committee to review on the effectiveness of the system of internal control comprising financial control, operation control, compliance control and risk management functions. The Company had established effective internal control system which was in compliance with the requirements of regulatory bodies in the international capital market, and drew the conclusion set out in the self-evaluation report as effective. In 2008, with reference to the regulatory documents on corporate governance of listed companies issued by regulatory bodies in the PRC, Hong Kong and USA, the Company continued to improve, optimize, testify and evaluate internal controls such as production and operation, financial management and information disclosure of the Company, in particular those relevant to financial reporting when the internal control system of the Company was still in effect. – According to the Basic Standard on Internal Control of Corporations issued by Ministry of Finance, the Company streamlined and optimized its internal control on five aspects including internal environment, risk assessment, c o n t r o l a c t i v i t i e s , i n f o r m a t i o n a n d communication, and internal supervision, based on the changes in the internal and external business environment. The Company also carried out necessary tests to ensure the sustained effectiveness of the system design and operation. 82 Report on Corporate Governance and Internal Control (Continued) – In 2008, under the leadership of the Board, the Company carried out special activities on prevention against misappropriation of funds and further promotion of corporate governance. Through self-examination, the Company Directors’ and Auditors’ Acknowledgment All directors acknowledge their responsibility for preparing the accounts for the year ended December confirmed that the rectification for defects found in 2007 was effective, and published the 31, 2008. Explanation on Special Activity on Corporate Gover nance Rectification of Aluminum Corporation of China Limited on the website of the Shanghai Stock Exchange, to report its works and achievements. Auditor’s remuneration For auditors’ reporting responsibilities, please refer to the auditors’ report. Compliance and Exemption of Corporate Governance Obligations Imposed by New York Stock Exchange PricewaterhouseCoopers, Hong Kong, Certified Public Accountants, and PricewaterhouseCoopers Zhong Tian Based on its Listing Rules, New York Stock Exchange CPAs Limited Company were reappointed as the (“NYSE”) imposes a series of corporate governance Company’s independent auditors at the last Annual standards for companies listed on the NYSE. However, General Meeting for a term ending on the date of the NYSE has granted permission to listed companies of next Annual General Meeting. foreign private issuers to follow their respective “home country” practice and waivers for compliance with F o r t h e y e a r e n d e d D e c e m b e r 3 1 , 2 0 0 8 , a corporate governance standards. One of the conditions remuneration of RMB34.73 million was paid to for such waiver is for the listed company to disclose PricewaterhouseCoopers and PricewaterhouseCoopers in its annual report how the corporate governance Zhong Tian CPAs Limited Company, of which practices in its “home country” differ from those RMB28.23 million represented remuneration for audit followed by companies under NYSE listing standards. and audit related services. A remuneration of RMB6.50 million was paid for the advisory services on ERP The Company has compared the material corporate implementation project. governance standards generally adopted by the companies incorporated in the PRC and the standards developed by NYSE, as follows: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 83 Report on Corporate Governance and Internal Control (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I A majority of Independent Directors NYSE requires that the board of a listed company must comprise a majority of independent directors. There is no identical corporate governance requirement in the PRC. The Board of the Company currently comprises four independent directors and five non- independent directors which is in compliance with the requirement by the PRC securities regulatory authorities that the board of a listed company shall comprise at least one-third of independent directors. Corporate Governance Committee NYSE requires a listed company to establish a Corporate Governance Committee which comprises entirely of independent directors. The Corporate Governance Committee shall be co-established with the Nomination Committee and have a written charter. The Corporate Governance Committee is responsible (i) for recommending to the board a set of corporate governance guidelines applicable to the corporation; and (ii) for supervising the operation of the board and the management. The Corporate Gover nance Committee shall also be subject to evaluation annually. Like most of the other companies incorporated in the PRC, the Company believes that corporate governance measures are of critical importance and should be implemented by the board. The Company accordingly does not separately maintain a Corporate Governance Committee. 84 Significant Events (1) Corporate Governance The Company has strictly complied with the requirements of the Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China, relevant provisions of China Securities Regulatory Commission and Shanghai Stock Exchange Listing Rules (‘’Shanghai Stock Exchange Listing Rules’’) and seriously performed its corporate governance obligations in line with the requirements of relevant documents issued by China Securities Regulatory Commission. The Company also strictly complied with requirements on corporate governance under the Hong Kong Listing Rules. The Company has also strictly complied with the corporate governance requirements under the Hong Kong Listing Rules. In accordance with the requirements under the “Notice on Performance of the Specific Activities re g a rd i n g E n h a n c e m e n t o f C o r p o r a t e Governance of Listed Companies” issued by the China Securities Regulatory Commission as well as the specific requirements of Beijing Securities Regulatory Bureau and the Shanghai Stock Exchange, the Company launched the specific activities of corporate governance in April 2007. Having gone through self- inspection, received public comments, site inspection and improvements at various stages, the Board of the Company had considered and approved the “Report regarding Specific Corporate Governance Activities of Aluminum Corporation of China Limited” by way of written resolutions in December 2007, the announcement of which was published on the website of the Shanghai Stock Exchange on December 27, 2007. Based on the corporate governance special activities in 2007, the Company undertook a thorough internal inspection as required by the Beijing Securities Regulatory Bureau to inspect on the completeness and effectiveness of internal control and capital occupancy of the Company to align with the values of the “Notice of Preventing the Recurrence of Capital O c c u p a n c y a n d E n h a n c i n g C o r p o r a t e Governance” issued by the China Securities Regulation Commission and the Beijing Securities Regulatory Bureau. The Board approved the “Report regarding Specific Corporate Governance Activities of Aluminum Corporation of China Limited” unanimously on the July 30, 2008 by way of written resolution, the full text of the report was announced on the Shanghai Stock Exchange on August 2, 2007. The Company had further improved the corporate governance structure and understood the importance of regulations compliancy and direction for improvement through the special activities of corporate governance. From now on, the Company will continue to be in strict compliance with the requirements of relevant regulatory bodies including China Securities Regulatory Commission, Beijing Securities Regulatory Bureau and Shanghai Stock Exchange. The Company will consistently optimize ever y measures of corporate governance in compliance with regulations and under strict self-regulations to further enhance the corporate governance and internal control system of the Company. Aiming at protecting T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 85 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Significant Events (Continued) the interest of shareholders of the Company, the Company will maintain consistency, stability and healthy development to bring returns to the society and shareholders with prominent results. The Company also continued to comply with requirements on corporate governance under the Hong Kong Listing Rules. Since its incorporation, the Company has been completely independent from its controlling shareholder in terms of business, staff, assets, organization and finance. The Company has independent and complete business and has the ability to operate on its own. Aluminum fabrication plants (“Companies acquired”) Huaxi Aluminum Company Limited (“Huaxi Aluminum”) Chalco Ruimin Co., Ltd. (“Chalco Ruimin”) Chalco Southwest Aluminum Cold Rolling Company Limited (“Chalco Southwest Aluminum Cold Rolling”) (under construction) Chalco Southwest Aluminum Co., Ltd. (“Chalco Southwest Aluminum”) Chalco Henan Aluminum Company Limited (“Henan Aluminum”) Primary Aluminum Plant Lanzhou Liancheng Longxing Aluminum Company Limited (“Longxing Aluminum”) 86 (2) Material acquisitions (i) Acquisition of equity interests in fabrication plants and primary aluminum production plant during the reporting period On May 9, 2008, the First Extraordinary General Meeting for Year 2008 passed a resolution for approving the proposed acquisition of the respective equity interests in five aluminum fabrication plants and one primary aluminum plant from Chinalco by way of open tender at the China Beijing Equity Exchange, and completed all acquisitions on May 30, 2008. Detailed information about acquired companies is as follows: Percentage of equity interest held by the Company (“Equity acquired”) 56.86% 75% 100% 60% 84.02% 100% Significant Events (Continued) Table showing the aluminum fabrication capacities of each of the aluminium fabrication plants of the Companies acquired: Aluminum Fabrication Plants Annual Production Capacity (tonnes) Huaxi Aluminum Chalco Ruimin Chalco Southwest Aluminum Cold Rolling (under construction) Chalco Southwest Aluminum Henan Aluminum 16,000 120,000 250,000 350,000 355,000 The total consideration for the acquisition was RMB4,180 million. (3) Trust arrangement The Company had no affairs on trust during the reporting period. (4) Sub-Contracting As of December 31, 2008, the Company provided guarantee for RMB223.515 million of letters of credit for import issued by Chalco Trading, its subsidiary. Save as aforesaid, there was no other external guarantee provided by the Company. The Company had no sub-contracting arrangement during the reporting period. (6) Fund Management (5) Guarantees There was no fund under the management of third parties during the reporting period. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I In 2004, the Company and China Construction Bank, Shanxi Aluminum Plant Subbranch entered into a Guarantee Contract, whereby the Company provided several responsibility guarantee for the loan of RMB1.17 billion made to Shanxi Huaze, a subsidiary controlled by the Company. The guarantee would expire following two years upon the expiry of the debt performance period under the principal contract. 87 Significant Events (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I (7) Performance of undertakings The undertakings made by the Company or its shareholders holding 5% or more of interest in the Company during or subsisting to the reporting period are as follows: As at the end of the reporting period, the Company’s undertakings principally relate to the non-competition undertakings of Chinalco including: 1. the Company plans to acquire from Chinalco its aluminum fabrication business when the market condition is mature and under circumstances favorable to the Company and to acquire the pseudo-boehmite business from Chinalco within one year following the issue of the Company’s A shares; 2. the undertaking to acquire the primary aluminum business of Liancheng Aluminum by the end of 2007; In respect of the above undertakings, the Company is in the process of duly completing the matters undertaken within the time limit. It has completed the acquisition of the aluminum fabrication business of Chinalco and the primary aluminum business of Liancheng Aluminum and completed the integration of primary aluminum business with Baotou Aluminum. (8) Punishments and rectifications involved by listed companies and its directors, supervisors, senior management, shareholders, and de facto controller During the reporting period, the Company and its directors, supervisors, senior management, shareholders, and de facto controller were not under any investigation, administrative punishment, public criticism from China Securities Regulatory Commission and public censures from stock exchanges. 3. the undertaking to solve the competition (9) Profit Warning for the First with Tongchuan Xinguang within one y e a r f o l l o w i n g t h e i s s u e o f t h e Company’s A shares; and 4. the undertaking to merge the primary aluminum business of Baotou Aluminum as and when appropriate following the issue of the Company’s A shares. Quarter of 2009 Since 2009, the Company is still facing an exceptionally challenging business landscape. It is expected that the Company will record a loss for the first quarter of 2009. Details will be disclosed in the 2009 First Quarterly Report of the Company (unaudited) prepared under PRC Accounting Standard for Business Enterprises (2006). 88 Significant Events (Continued) (10) Equity Investment 1. Securities Investment Percentage of total securities Gain/loss Initial Book value investment during investment Number of at end of at end of the reporting No. Type Stock code Stock name amount shareholding the period the period (RMB) (shares) (RMB) 1. Stock 601601 China Pacific 348,000 300,000 3,336,000 Profit or loss from stock investment sold as at / Insurance the reporting period Total 348,000 / / / 3,336,000 100 (%) 100 / period (RMB) 0 0 0 Zunyi Aluminum Co., Ltd., a subsidiary of the Company, acquired 300,000 shares in China Pacific Insurance (Group) Co., Ltd. (“China Pacific Insurance”) in 1995. These shares are subject to trading moratorium for one year commencing from China Pacific Insurance’s listing on the Shanghai Stock Exchange on 25 December 2007. 2. Shareholding in other Listed Companies Unit: RMB Changes in owner’s equity Gain/loss Initial Shareholdings Book value during during the investment in the at end of the reporting reporting Source of the Stock Code Stock name amount Company the period period period Ledger shareholding (%) Jiaozuo Wanfang 000612 247,454,107.08 29 223,781,435.86 61,270,464.37 61,270,464.37 Long-term Purchasing Total 247,454,107.08 / 223,781,435.86 61,270,464.37 61,270,464.37 / / equity investment 89 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Significant Events (Continued) On September 18, 2006, the Company entered into an equity acquisition agreement with Jiaozuo Wanfang Aluminum Group (“Wanfang Group”) to acquire 29% of equity interest in Jiaozuo Wanfang with a consideration of RMB247.454 million for the acquisition. Jiaozuo Wanfang was established in March 1999, the shares of which were listed on the Shanghai Stock Exchange in September 1999. It is principally engaged in aluminum melting. 3. Shareholding in Unlisted Financial Enterprises Changes Gain/loss in owner’s Initial Shareholdings Book value during equity during investment Number of in the at end of the reporting the reporting Source of the Name amount shareholding Company the period (RMB) (shares) (%) (RMB) period (RMB) period Ledger shareholding (RMB) Dongxing Securities 2,000,000 2,000,000 0.13 2,000,000 0 0 Available Long-term Co.,Ltd. ABC-CA Fund Management for sale equity financial assets investment Co., Ltd. 30,000,000 30,000,000 15 25,257,646.03 -4,742,353.97 -4,742,353.97 Long-term Shareholding Total 32,000,000 32,000,000 / 27,257,646.03 -4,742,353.97 -4,742,353.97 / / equity investment T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 90 Connected Transactions The connected transactions (as defined in the Hong Kong Listing Rules and the Listing Rules of SSE) undertaken by the Group during the reporting period should comply with and be in line with relevant requirements as required by Hong Kong Listing Rules and the Listing Rules of SSE. Continuing Connected Transactions Set out below are the annual caps for the continuing connected transactions as compared with the actual transaction amounts incurred by the Group in 2008. For the year ended December 31, 2008, the continuing connected transactions of the Company were calculated on a consolidated basis as follows. Consolidated Percentage to consideration turnover for the year for the year ended ended December 31, December 31, Annual caps 2008 2008 in 2008 (in RMB million) (in RMB million) Transactions Expenditure: Transactions with Chinalco 1. Social welfare and logistics services Provision of certain social welfare and logistics services by Chinalco to the Group 723 0.94% 2,003 2. Mutual provision of product supplies and Ancillary services Provision of product supplies and ancillary services by Chinalco to the Group 3,527 4.60% 4,200 3. Mineral supply Provision of bauxite and limestone by Chinalco to the Group 427 0.56% 643 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 91 Connected Transactions (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Consolidated Percentage to consideration turnover for the year for the year ended ended Transactions 2008 2008 in 2008 (in RMB million) (in RMB million) December 31, December 31, Annual caps 4. Engineering design, construction and supervisory service Provision of engineering design, construction and supervisory service by Chinalco to the Group 8,244 10.74% 11,000 884 64 1.15% 1,000 0.08% 100 5. Land use rights rental paid to Chinalco 6. Building rentals paid to Chinalco Transactions with Xinan Aluminum (Group) Company Limited (“Xinan Aluminum”) 7. Purchase of aluminum alloy and aluminum alloy sheets by the Group 1,347 1.76% 4,600 Transactions with Fujian Nanping Aluminum Company Limited (“Nanping Aluminum”) 8. Purchase of aluminum alloy, aluminum alloy sheets and aluminum fabrication services by the Group 90 0.12% 400 Transactions with Guangxi Investment 9. Purchase of aluminum by the Group 345 0.45% 815 92 Connected Transactions (Continued) Consolidated Percentage to consideration turnover for the year for the year ended ended December 31, December 31, Annual caps 2008 2008 in 2008 (in RMB million) (in RMB million) Transactions Revenue: Transactions with Chinalco 1. Provision of product supplies and ancillary services by the Group to Chinalco 4,832 6.30% 7,600 Transactions with Guizhou Provincial Materials Development and Investment Corporation (“Guizhou Development”) 2. Sales of primary aluminum by the Group to Guizhou Development 100 0.13% 400 Transactions with Guangxi Investment 3. Sales of alumina and primary aluminum by the Group 1,352 1.76% 1,490 Transactions with Xinan Aluminum 4. Sales of primary aluminum, aluminum alloy and processed aluminum alloy sheets (rolls) by the Group Transactions with Nanping Aluminum 5. Sales of alumina and aluminum 2,961 3.86% 9,000 alloy ingots by the Group 286 0.37% 920 Transactions with Shanxi Guan Lv Company Limited (“Guan Lv”) 6. Sales of alumina and aluminum alloy ingots by the Group 133 0.17% 210 93 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Connected Transactions (Continued) Notes: 1. The independent non-executive directors of the Company have reviewed the above transactions and confirmed: (i) the transactions have been entered into in the ordinary and usual course of business of Further information on the connected transactions of the year I. Continuing Connected transactions the Company; (1) Provision of services by Chinalco (ii) the terms of the transactions are fair and r e a s o n a b l e a s f a r a s t h e C o m p a n y ’s shareholders are concerned; to the Group Pursuant to the Provision of Engineering, Construction and Supervisory Services (iii) the transactions have been entered into on Agreement dated November 5, 2001, normal commercial terms or, where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, they are on terms no less favourable than those available from or offered to independent third parties; and (iv) the transactions have been undertaken in accordance with the terms of relevant agreements governing such transactions. 2. The auditors of the Company have also reviewed which was for an initial term of three years expiring on June 30, 2004 and subsequently extended by two extension agreements to December 31, 2009, Chinalco agreed to provide certain e n g i n e e r i n g , c o n s t r u c t i o n a n d supervisory services to the Group at the state-guidance price, and if there was no State-guidance price, then at market price. Such services are mainly provided these transactions in accordance with agreed by subsidiaries of Chinalco including procedures and submitted a letter stating the C h i n a A l u m i n u m I n t e r n a t i o n a l following matters: Engineering Co., Ltd. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I (i) the transactions have been approved by the Company’s directors; (ii) the sample transactions reviewed have been entered into in accordance with the pricing policies of the Company and its subsidiaries; (iii) The sample transactions reviewed have been entered into in accordance with the terms of r e l e v a n t a g r e e m e n t s g o v e r n i n g s u c h transactions; and (iv) The transactions did not exceed the relevant annual caps disclosed in the previous announcements of the Company. 94 Connected Transactions (Continued) With the approval of the independent (2) Mutual provision of products shareholders given at the extraordinary general meeting held on February 27, 2007, the annual cap of the transactions under the above agreement was set at RMB3,970 million for each year from 2007 to 2009. Given the increase in projects and change in the contracting m o d e l , t h e a n n u a l c a p s f o r t h e continuing connected transactions under t h e a g r e e m e n t w e re r e v i s e d t o RMB11,000 million and RMB12,200 million respectively for each of the two years ending December 31, 2008 and 2009, as approved by the independent shareholders at the extraordinary general meeting held on December 29, 2008. For details, please refer to the circular published by the Company on November 10, 2008. The actual transaction amounts between the Group and Chinalco during the reporting period are set out in the tables from page 91 to page 93. Chinalco is a substantial shareholder of the Company and a connected person of the Company under the Hong Kong Listing Rules. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I between the Group and Guangxi I n v e s t m e n t ( i n c l u d i n g i t s subsidiaries and associates) The Group had been selling alumina and aluminum ingots to Guangxi Investment since 2001 pursuant to relevant agreements, and purchasing alumina from Guangxi Huayin, an associate of Guangxi Investment, since May 2008 pursuant to the agreement made with Guanxi Huayin. As approved at the extraordinary general meeting held on February 27, 2007, the a n n u a l c a p s f o r t h e c o n t i n u i n g connected transactions in relation to the sales of alumina and primary aluminum to the subsidiaries of Guangxi Investment for each of the three years ending December 31, 2009 were set at RMB450 million each year. As the sales by the Group to Guangxi Investment increased, during the reporting period, the annual caps in respect of the sales of alumina and aluminum products to Guangxi Investment for the two years ending December 31, 2009 were revised to RMB 1,490 million for each year. The annual caps of the transactions with Guangxi Huayin (an associate of Guangxi Investment) for the purchase of alumina by the Group from Guangxi Huayin for the two years ending December 31, 2009 were set at RMB815 million and RMB 1,770 million respectively. For details, please refer to the announcement published by the Company on October 20, 2008. 95 Connected Transactions (Continued) In order to regulate the continuing (3) Mutual Provision of Products and Services between the Group and Xinan Aluminum X i n a n A l u m i n u m ( i n c l u d i n g i t s subsidiaries and associates) has business relationships with the Company since the establishment of the Company in 2001, including the purchases of products from the Group and sales of products and services to the Group. Upon completion of the acquisition of 60% equity interests in Chalco Southwest Aluminum by the Company (see Page 100) on May 30, 2008, Xinan Aluminum, being a substantial shareholder (holding 4 0 % e q u i t y i n t e re s t s ) o f C h a l c o S o u t h w e s t A l u m i n u m , b e c a m e a connected person of the Company under the Hong Kong Listing Rules. The transactions between Xinan Aluminum and the Group therefore constituted connected transactions. connected transactions between the G r o u p a n d G u a n g x i I n v e s t m e n t (including its subsidiaries and associates), the Company and Guangxi Investment entered into the Mutual Provision of Products Framework Agreement on October 20, 2008, which is effective from the execution date until December 31, 2009. Pursuant to the agreement, the Group would continue to sell alumina and aluminum ingots to Guangxi Investment (including its subsidiaries and associates) and purchase alumina from Guangxi Investment (including its subsidiaries and associates). For the actual amount of the transactions between the Group and Guangxi Investment during the reporting period, please refer to the tables on page 92 and page 93. As Guangxi Investment is one of the promoters of the Company, pursuant to the Hong Kong Listing Rules, Guangxi I n v e s t m e n t , i t s s u b s i d i a r i e s a n d associates are connected persons of the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 96 Connected Transactions (Continued) In order to regulate the continuing (4) Mutual Provision of Products and connected transactions between the Group and Xinan Aluminum (including its subsidiaries and associates), the Company and Xinan Aluminum entered into the Mutual Provision of Products and Services Framework Agreement on October 20, 2008, which is effective from June 1, 2008 until December 31, 2009. As approved at the extraordinary general meeting held on December 29, 2008, the annual caps for the sale transactions by the Group to Xinan Aluminum for the two years ending D e c e m b e r 3 1 , 2 0 0 9 w e re s e t a t RMB9,000 million and RMB7,000 million re s p e c t i v e l y w h i l e t h e p u rc h a s e transactions by the Group from Xinan Aluminum were set at RMB4,600 million and RMB4,000 million respectively. For details of the transactions between the Group and Xinan Aluminum, please refer to the circular dated November 10, 2008. For the actual amount of the transactions between the Group and Xinan Aluminum during the reporting period, please refer to the tables on page 92 and page 93. Pursuant to the Hong Kong Listing Rules, Xinan Aluminum is a connected person of the Company by reason of its being a substantial shareholder of Chalco Southwest Aluminum. Services between the Group and Guizhou Development The continuing connected transactions between the Group and Guizhou Development include sale of aluminum ingots by Guizhou Development as an agent for the Company (“Agency Transactions”) and sale of primary aluminum to the Group by Guizhou Development (“Sales Transactions”). During the reporting period, as the amount of Agency Transactions between the Group and Guizhou Development was de minimus under the Hong Kong Listing Rules, such transactions were not subject to any disclosure requirements under the Hong Kong Listing Rules. Pursuant to the spot contract dated January 1, 2008 which was effective until December 31, 2008, Guizhou Development had purchased up to a maximum of 24,000 tonnes of primary aluminum at market price from one of the Company’s indirect non-wholly owned subsidiaries, Chalco Kailin. The value of the transactions accrued up to June 30, 2008 was de minimus under the Hong Kong Listing Rules. It was estimated that the continuing of these transactions from July 1, 2008 would exceed the de minimus threshold and T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 97 Connected Transactions (Continued) the transactions would be subject to the According to relevant agreements reporting requirements under the Hong between the Group and Nanping Kong Listing Rules. The annual caps for Aluminum (including its subsidiaries and the Sales Transactions between the a s s o c i a t e s ) , N a n p i n g A l u m i n u m Group and Guizhou Development for purchases alumina, primary aluminum the two years ending December 31, 2009 and aluminum alloy ingots from the were set at RMB 400 million and RMB450 Group, and Chalco Ruimin, a subsidiary million respectively. For details, please of the Company, purchases aluminum refer to the announcement published by sheets and fabrication services from the Company on October 20, 2008. Nanping Aluminum. All the above transactions are conducted on normal For the actual amount of the Sales commercial terms and at market prices. transactions between the Group and The annual caps for the transactions in Guizhou Development during the relation to the sales of alumina, primary reporting period, please refer to the table aluminum and aluminum alloy ingots by on page 93. the Group to Nanping Aluminum for the two years ending December 31, 2009 Pursuant to the Hong Kong Listing Rules, were set at RMB920 million and Guizhou Development is a connected RMB1,030 million respectively. The person of the Company by reason of its annual caps for the transactions in being a promoter of the Company. relation to Chalco Ruimin’s purchase of aluminum sheets and fabrication services (5) Mutual Provision of Products and from Nanping Aluminum for the two years ending December 31, 2009 were set at RMB400 million and RMB450 million respectively. For details, please refer to the announcement published by the Company on October 20, 2008. Services between the Group and Nanping Aluminum Upon completion of the acquisition of 75% equity interests in Chalco Ruimin by the Company (see Page 100) on May 30, 2008, Nanping Aluminum, being a substantial shareholder (holding 25% of its equity interests) of Chalco Ruimin, became a connected person of the Company. The transactions between Nanping Aluminum and the Group constituted connected transactions. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 98 Connected Transactions (Continued) For the actual amount of the transactions For the actual amount of the transactions between the Group and Nanping between the Group and Guan Lv during Aluminum during the reporting period, the reporting period, please refer to the please refer to the table on page 92. table on page 93. Pursuant to the Hong Kong Listing Rules, As Guan Lv holds 49% equity interests Nanping Aluminum is a connected in Shanxi Huasheng, a subsidiary of the person of the Company by reason of its Company, pursuant to the Hong Kong being a substantial shareholder of Chalco Listing Rules, Guan Lv is a connected Ruimin. person of the Company. (6) Mutual Provision of Products and Save for the above continuing connected transactions, the Company’s other continuing connected transactions are transactions with Chinalco, which are c o n d u c t e d p u r s u a n t t o re l e v a n t agreements in the ordinary course of business. During the reporting period, no changes were made to the annual caps of such transactions. For the actual amount of the transactions between the Group and Chinalco, please refer to the tables from page 91 to page 93. Services between the Group and Shanxi Guan Lv G u a n L v p u rc h a s e s a l u m i n a a n d aluminum alloy ingots from the Group p u r s u a n t t o a l o n g t e r m s u p p l y agreement dated August 22, 2006 (valid for 3 years from January 1, 2007 to December 31, 2009) and certain spot contracts signed from time to time. All t h e a b o v e c o n t i n u i n g c o n n e c t e d transactions are conducted on normal commercial terms and generally in cash with delivery against payment. The annual caps for such transactions for the two years ending December 31, 2009 were set at RMB210 million and RMB260 million respectively. For details, please refer to the announcement published by the Company on October 20, 2008. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 99 Connected Transactions (Continued) II Connected Transactions (2) Engaging Huasheng Jiangquan to construct a new aluminum smelter T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I (1) Acquisition of equity interests in five aluminum fabrication plants and one aluminum production f r o m C h i n a l c o a n d C h i n a Nonferrous Metals Technology. On May 12, 2008, the Company submitted a bid to acquire 100% of the equity interests in Longxing Aluminum Company Limited, 100% of the equity interests in Chalco Southwest Aluminum Cold Rolling, 84.02% of the equity interests in Chalco Henan Aluminum, 75% of the equity interests in Chalco Ruimin, 60% of the equity interests in Chalco Southwest Aluminum. and 56.86% of the equity interests in Huaxi Aluminum from Chinalco and China Nonferrous Metals Technology. The equity interests of the above companies were listed on China Beijing Equity Exchange for bidding at a consideration of RMB4,174.7589 million. The three parties entered into a transfer agreement on May 21, 2008 and completed all transfer procedures on May 30, 2008. Chinalco is a substantial shareholder in the Company and a connected person of the Company under the Hong Kong Listing Rules. 100 Pursuant to an agreement dated 30 July 2008, Shandong Huayu Aluminum and Power Co., Ltd. (“Huayu Aluminum”), a non wholly-owned subsidiary of the Company, engaged Huasheng Jiangquan Group Co., Ltd. (“Huasheng Jiangquan ”) to construct an aluminum smelter with an annual capacity of 100,000 tonnes in Linyi City, Shandong Province. The construction period was from January 2008 to December 2008. The consideration for the agreement was R M B 4 2 0 . 0 9 m i l l i o n ( o f w h i c h approximately RMB340.14 million had been paid up to December 31, 2008), which was determined in accordance w i t h t h e P r i c i n g S t a n d a r d o n Construction Estimates of the Nonferrous Metals Industry drawn up by the China Nonferrous Metals Industry Association, adjusted with reference to the local conditions in Shandong province. For relevant details, please refer to the a n n o u n c e m e n t p u b l i s h e d b y t h e Company on November 3, 2008. As Huasheng Jiangquan is the holding company of Linyi Jiangtai Aluminum Co., Ltd. which, in turn, is a substantial shareholder of Huayu Aluminum, a non w h o l l y - o w n e d s u b s i d i a r y o f t h e Company, pursuant to the Hong Kong Listing Rules, Huasheng Jiangquan is a connected person of the Company. Connected Transactions (Continued) (3) Acquisition of Assets from Pingguo (4) During the reporting period, save Aluminum By an asset acquisition agreement dated 30 September 2008, the Company a g re e d t o a c q u i r e a n d P i n g g u o A l u m i n u m C o m p a n y ( “ P i n g g u o Aluminum”) agreed to sell certain of its assets to the Company. The assets include the majority but not all of Pingguo Aluminum’s assets, mainly comprising of an alloy plant and related e q u i p m e n t , i n t e re s t i n P i n g g u o Aluminum Building Company, a fleet of passenger vehicles and other ancillary facilities and apparatus. The assets retained by Pingguo Aluminum consist of a hospital, a child care centre, a guest house and certain allocated land. The consideration of the acquisition is R M B 9 6 . 3 9 2 7 m i l l i o n , w h i c h w a s determined based on the appraised value of Pingguo Aluminum’s net assets as at September 30, 2007 by an independent and duly qualified PRC valuer appointed by the Company. The consideration would be paid in cash within 5 days from the effective date of the agreement. Currently, the transaction has been completed. For details, please refer to the announcement published by the Company on October 20, 2008. Pursuant to the Listing Rules, Pingguo Aluminum is a connected person of the Company by reason of its being a wholly- owned subsidiary of Chinalco. as to the connected transaction relating to the debts guarantee between the Company and related parties as disclosed in the notes to t h e c o n s o l i d a t e d f i n a n c i a l statement, there was no non- recurring debts due to or from the Company or any guarantee. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 101 Independent Auditor’s Report 羅 兵 咸 永 道 會 計 師 事 務 所 Independent Auditor’s Report To the shareholders of Aluminum Corporation of China Limited (incorporated in the People’s Republic of China with limited liability) PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong Telephone (852) 2289 8888 Facsimile (852) 2810 9888 www.pwchk.com We have audited the consolidated financial statements of Aluminum Corporation of China Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 104 to 251, which comprise the consolidated and Company balance sheets as of December 31, 2008, and the consolidated income statement, the consolidated statement of changes in shareholders’ equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 102 Independent Auditor’s Report (Continued) Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as of December 31, 2008 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. PricewaterhouseCoopers Certified Public Accountants Hong Kong, March 27, 2009 103 Consolidated Balance Sheet As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) ASSETS Non-current assets Intangible assets Property, plant and equipment Land use rights Interests in jointly controlled entities Interests in associates Available-for-sale financial assets Deferred income tax assets Other non-current assets Note 6 7 8 10(a) 10(b) 11 12 13 2008 2007 Restated (Note 5) 2,966,879 86,014,123 1,730,550 2,688,232 69,285,278 1,460,681 701,850 104,809 38,714 698,504 785,103 636,296 553,920 40,113 562,173 346,496 Total non-current assets 93,040,532 75,573,189 Current assets Prepaid income tax Inventories, net Accounts receivable, net Other current assets, net Financial assets at fair value through profit or loss Bank balances and cash 14 15 16 17 748,668 — 19,876,015 15,369,782 2,035,324 3,473,531 3,718,806 2,123,623 57,864 8,103 16,295,585 9,054,565 Total current assets 42,486,987 30,274,879 Total assets 135,527,519 105,848,068 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 104 Consolidated Balance Sheet (Continued) As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) SHAREHOLDERS’ EQUITY Share capital and reserves attributable to equity holders of the Company Share capital Reserves Retained earnings Proposed dividend Others Minority interest Note 2008 2007 Restated (Note 5) 18(a) 13,524,488 18,985,988 13,524,488 23,151,365 32 — 716,798 22,488,006 23,295,412 54,998,482 60,688,063 5,198,340 3,805,144 Total shareholders’ equity 60,196,822 64,493,207 LIABILITIES Non-current liabilities Borrowings Deferred income tax liabilities Other non-current liabilities 19 12 13 36,132,552 17,459,597 53,768 693,549 172,460 180,555 Total non-current liabilities 36,879,869 17,812,612 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 105 Consolidated Balance Sheet (Continued) As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Current liabilities Accounts payable Other payables and accrued expenses Financial liabilities at fair value through profit or loss Dividends payable Current income tax liabilities Borrowings Note 20 21 2008 2007 Restated (Note 5) 4,761,940 4,486,141 11,151,653 7,162,129 114,047 108,812 24,161 — 37,015 510,416 19 22,290,215 11,346,548 Total current liabilities 38,450,828 23,542,249 Total liabilities 75,330,697 41,354,861 Total shareholders’ equity and liabilities 135,527,519 105,848,068 Net current assets 4,036,159 6,732,630 Total assets less current liabilities 97,076,691 82,305,819 The notes on pages 117 to 251 are an integral part of these consolidated financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Jianchuan Luo Director Jihua Chen Director 106 Balance Sheet As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) ASSETS Non-current assets Intangible assets Property, plant and equipment Land use rights Investments in subsidiaries Interests in jointly controlled entities Interests in associates Available-for-sale financial assets Deferred income tax assets Other non-current assets Note 2008 2007 6 7 8 9 10(a) 10(b) 11 12 13 2,796,273 2,676,724 55,229,897 45,679,629 386,878 10,629,464 718,398 105,600 7,000 350,336 254,764 241,122 7,099,198 654,516 323,054 7,000 273,870 85,654 Total non-current assets 70,478,610 57,040,767 Current assets Prepaid income tax Inventories, net Accounts receivable, net Other current assets, net Bank balances and cash 14 15 16 17 615,907 11,705,718 4,478,281 3,120,883 7,030,857 — 9,654,909 2,661,544 1,903,819 5,121,705 Total current assets 26,951,646 19,341,977 Total assets 97,430,256 76,382,744 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 107 Balance Sheet (Continued) As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) SHAREHOLDERS’ EQUITY Share capital and reserves Share capital Reserves Retained earnings Proposed dividend Others Note 2008 2007 18(a) 18(b) 32 13,524,488 19,981,862 13,524,488 21,243,160 — 716,798 20,735,428 20,668,229 Total shareholders’ equity 54,241,778 56,152,675 LIABILITIES Non-current liabilities Borrowings Deferred income tax liabilities Other non-current liabilities 19 12 13 24,723,465 7,274,037 — 178,730 147,144 148,297 Total non-current liabilities 24,902,195 7,569,478 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 108 Balance Sheet (Continued) As of December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Current liabilities Accounts payable Other payables and accrued expenses Dividends payable Current income tax liabilities Borrowings Note 2008 2007 20 21 32 19 2,638,718 4,808,860 — — 2,829,364 4,886,564 19,415 323,839 10,838,705 4,601,409 Total current liabilities 18,286,283 12,660,591 Total liabilities 43,188,478 20,230,069 Total shareholders’ equity and liabilities 97,430,256 76,382,744 Net current assets 8,665,363 6,681,386 Total assets less current liabilities 79,143,973 63,722,153 The notes on pages 117 to 251 are an integral part of these financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Jianchuan Luo Director Jihua Chen Director 109 Consolidated Income Statement For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Revenue Cost of sales Gross profit Selling and distribution expenses General and administrative expenses Research and development expenses Other gains, net Operating profit Interest income Interest expense Exchange loss, net Finance costs, net Note 23 23 24 25 23 2008 2007 Restated (Note 5) 76,725,941 85,198,835 (70,073,660) (64,936,133) 6,652,281 20,262,702 (1,562,409) (3,462,472) (177,507) 372,771 (1,355,534) (3,042,363) (229,803) 158,913 1,822,664 15,793,915 193,046 198,193 (1,864,742) (1,226,175) (37,870) (12,189) (1,709,566) (1,040,171) Operating profit after finance costs 113,098 14,753,744 Shares of profits/(losses) of jointly controlled entities Shares of profits of associates Profit before income tax benefits/(expense) 10(a) 10(b) 1,672 10,045 (3,381) 241,945 124,815 14,992,308 Income tax benefits/(expense) 29 33,557 (2,869,210) Profit for the year 158,372 12,123,098 110 Consolidated Income Statement (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Note 2008 2007 Restated (Note 5) 9,228 149,144 10,753,042 1,370,056 158,372 12,123,098 Attributable to: Equity holders of the Company Minority interest Basic earnings per share for profit attributable to the equity holders of the Company (expressed in RMB per share) 31 RMB0.00068 RMB0.84 Dividends 703,273 4,131,749 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The notes on pages 117 to 251 are an integral part of these consolidated financial statements. 111 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Consolidated Statement of Changes in Shareholders’ Equity For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Total Minority shareholders’ interest equity Attributable to equity holders of the Company Statutory Discretionary Cumulative Available- for-sale financial asset Share capital Capital reserve surplus reserve surplus translation revaluation Retained reserve difference reserve earnings (Note18(a)) (Note18(b)(i)) (Note18(b)(ii)) As of January 1, 2007, as previously stated Common control business combinations (Note 5) 11,649,876 10,521,480 5,384,956 70,867 — 2,248,660 63,814 656 As of January 1, 2007, as restated 11,649,876 12,770,140 5,448,770 71,523 Changes in equity for the year ended December 31, 2007 Fair value changes from available-for-sale financial asset - gross (Note 11) Fair value changes from available-for-sale financial asset - tax (Note 12) Adjustment on equity change of an associate Cumulative translation difference Net income recognized directly in equity Profit for the year ended December 31, 2007 Total recognized income and expense for the year Issuance of new shares Share issuance expenses Acquisitions of minority interest (Note 5) Capital injection from minority interest Profit appropriation Appropriation of surplus reserve Distribution to shareholders Adjustment to surplus reserves (Note 18(b)(ii)) — — — — — — — — — 168 — 168 — 168 1,874,612 7,852,275 — — — — — — (179,000) (3,028,896) — — — — — — — — — — — — — — — 1,083,388 — — — — — — — — — — — — — — (813,074) (71,523) — — — — — — 10,047 — 17,168,564 4,470,819 49,266,562 — (177,348) 888,237 3,024,019 — 16,991,216 5,359,056 52,290,581 8,879 (1,332) — — — — — — — 5,608 14,487 (841) (2,173) — — 168 10,047 4,767 22,529 10,047 7,547 — — 10,753,042 1,370,056 12,123,098 10,047 7,547 10,753,042 1,374,823 12,145,627 — — — — — — — — — — — — — — — — — — — — 9,726,887 (179,000) (2,472,094) (5,500,990) 10,094 10,094 (1,083,388) — — (3,533,257) (466,735) (3,999,992) 884,597 — — As of December 31, 2007 13,524,488 17,414,687 5,719,084 — 10,047 7,547 24,012,210 3,805,144 64,493,207 112 Consolidated Statement of Changes in Shareholders’ Equity (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Total Minority shareholders’ interest equity Attributable to equity holders of the Company Statutory Discretionary Cumulative Available- for-sale financial asset Share capital Capital reserve surplus reserve surplus translation revaluation Retained reserve difference reserve earnings As of January 1, 2008, as previously stated Common control business combinations (Note 5) (Note18(a)) (Note18(b)(i)) (Note18(b)(ii)) 13,524,488 15,039,593 5,719,084 — 2,375,094 — As of January 1, 2008, as restated 13,524,488 17,414,687 5,719,084 Changes in equity for the year ended December 31, 2008 Fair value changes from available-for-sale financial asset - gross (Note 11) Fair value changes from available-for-sale financial asset - tax (Note 12) Grants payable transferred to capital reserve Cumulative translation difference Net loss recognized directly in equity Profit for the year ended December 31, 2008 Total recognized income and expense for the year Common control business combinations (Note 5) Reversal of over-provision of share issuance expenses Acquisition of a subsidiary (Note 9) Acquisition of minority interest (Note 9) Disposals of subsidiaries Capital injection from minority interest Others Profit appropriation Appropriation of surplus reserve Distribution to shareholders — — — — — — — — — — — — — — — — — — — — — — — 98,000 — 98,000 — 98,000 — (4,223,414) 28,000 — — — — 5,067 — — — — — — — — As of December 31, 2008 13,524,488 13,322,340 5,832,445 — — 113,361 — T T R R O O P P E E R R L L A A U U N N N N A A 8 8 0 0 0 0 2 2 D D E E T T I I M M I I L L A A N N H H C C I I F F O O N N O O I I T T A A R R O O P P R R O O C C M M U U N N M M U U L L A A I I — — — — — — — — — — — — — — — — — — — — 10,047 7,547 23,643,388 3,072,622 61,016,769 — — 368,822 732,522 3,476,438 10,047 7,547 24,012,210 3,805,144 64,493,207 — — — (180,400) (7,048) 1,057 — — (180,400) (5,991) — — — — — (4,451) (11,499) 668 1,725 — — 98,000 (180,400) (3,783) (92,174) — — 9,228 149,144 158,372 (180,400) (5,991) 9,228 145,361 66,198 — — — — — — — — — — — — — — — — — — — — — — — — — (26,441) (4,249,855) — 28,000 1,171,803 1,171,803 2,958 (7,554) 555,443 27,956 2,958 (7,554) 555,443 33,023 (113,361) — — (1,420,071) (476,330) (1,896,401) (170,353) 1,556 22,488,006 5,198,340 60,196,822 The notes on pages 117 to 251 are an integral part of these consolidated financial statements. 113 Consolidated Cash Flow Statement For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Note 2008 2007 Restated (Note 5) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Cash flows generated from operating activities Profit before income tax expense Shares of (profits)/losses of jointly controlled entities Shares of profits of associates Depreciation of property, plant and equipment Net loss on disposal of property, plant and equipment Impairment loss on property, plant and equipment Amortization of intangible assets Expensing off prepaid land use rights Amortization of long-term deferred expenses Loss/(Gain) on disposals of investments Realized and unrealized gain on futures and option contracts Interest income Interest expense Others 7 28 28 6 23 Changes in working capital: Increase in inventories Decrease/(Increase) in accounts receivable (Increase)/Decrease in other current assets Increase in restricted cash Increase in other non-current assets (Decrease)/Increase in accounts payable Increase/(Decrease) in other payables and accrued expenses (Decrease)/Increase in other non-current liabilities 124,815 14,992,308 (1,672) (10,045) 5,269,853 3,381 (241,945) 4,821,208 59,189 167,953 1,334 52,755 46,501 87,806 324 (267,328) (193,046) 1,864,742 (4,986) 13,249 31,056 47,677 76,028 (3,484) (108,362) (198,193) 1,226,175 — 7,030,242 20,827,051 (3,860,311) 1,998,898 (1,303,371) (104,213) (396,526) (66,125) (2,939,644) (556,751) 85,359 (6,122) (230,487) 136,760 3,186,343 (14,759) (1,166,223) 27,475 Cash generated from operating activities 6,470,178 16,177,418 Interest received Interest paid PRC enterprise income taxes paid 186,683 (2,563,012) (1,639,415) 96,069 (1,490,304) (4,130,577) Net cash generated from operating activities 2,454,434 10,652,606 114 Consolidated Cash Flow Statement (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Note 2008 2007 Restated (Note 5) Cash flows generated from investing activities Purchases of intangible assets Purchases of property, plant and equipment Purchases of land use rights Proceeds from sales of property, plant and equipment Proceeds from disposal of an associate Cash and cash equivalents acquired from acquisitions of subsidiaries Investment in a jointly controlled entity Investment in an associate Acquisition of minority interest Acquisitions of subsidiaries Increase of available-for-sale financial assets Decrease in short-term cash investment Dividend received Prepaid investment Interest received Others 5 10(a) 10(b) (180,814) (124,293) (16,788,443) (10,850,232) (277,397) 23,225 — 247,784 (63,882) (30,000) — (4,858,396) — — 33,067 (250,000) 6,364 (66,002) (440,799) 165,302 790 313,662 (63,883) — (564,865) (140,000) (2,500) 2,981,946 52,004 — 130,391 (20,972) Net cash used in investing activities (22,204,494) (8,563,449) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 115 Consolidated Cash Flow Statement (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) Note 2008 2007 Restated (Note 5) Cash flows generated from financing activities Issuance of shares, net of issuance expenses — (119,000) 19(d) 19(b) 19(b) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Issuance of short-term bonds, net of issuance expenses Issuance of medium-term notes, net of issuance expenses Issuance of long-term bonds, net of issuance expenses Repayments of short-term bonds Drawdown of short-term loans Drawdown of long-term loans Shareholder’s loans Repayments of short-term loans Repayments of long-term loans Dividends paid by subsidiaries to minority shareholders Capital injection from minority shareholders Dividends paid Investment refund to minority shareholders of a subsidiary Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange losses on cash and cash equivalents 4,980,000 2,988,000 9,970,000 — — 1,978,500 (3,000,000) (5,000,000) 21,107,101 11,294,303 276,270 (13,432,454) (2,616,640) 7,160,149 5,101,948 180,000 (8,224,234) (3,929,976) (386,891) 184,800 (476,889) 10,094 (1,439,486) (3,528,563) — (94,128) 26,937,003 (3,954,099) 7,186,943 8,824,971 (29,785) (1,864,942) 10,691,925 (2,012) Cash and cash equivalents at end of the year 17 15,982,129 8,824,971 The notes on pages 117 to 251 are an integral part of these consolidated financial statements. 116 Notes to the Consolidated Financial Statements For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 1. General information Aluminum Corporation of China Limited (中國鋁業股份有限公司) (the “Company”) and its subsidiaries (together the “Group”) are principally engaged in bauxite mining, alumina refining and aluminum smelting. Its principal products are alumina, primary aluminum and aluminum fabrication products. The Company is a joint stock company incorporated on September 10, 2001 in the People’s Republic of China (the “PRC”) with limited liability. The address of its registered office is No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC. The Company had its dual listing on The Stock Exchange of Hong Kong Limited and New York Stock Exchange in 2001. The Company also listed its A shares on the Shanghai Stock Exchange (the “SSE”) on April 30, 2007. These consolidated financial statements have been approved for issue by the Board of Directors on March 27, 2009. 2. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation of financial statements These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets and liabilities at fair value through profit and loss (including derivative instruments). The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 117 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (a) Basis of preparation of financial statements (Continued) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group The following standards and amendments to existing standards have been published and are relevant to the operations of the Group. They are mandatory for the Group’s accounting periods beginning on or after January 1, 2009 or later periods, but has not been early adopted by the Group: • Hong Kong Accounting Standard (“HKAS”) 1 (Revised), ‘Presentation of financial statements’ (effective for annual periods beginning on or after January 1, 2009). The revised standard will prohibit the presentation of items of income and expenses (that is, ‘non-owner changes in shareholders’ equity’) in the statement of changes in shareholders’ equity, requiring ‘non- owner changes in equity’ to be presented separately from owner changes in equity. All non- owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the consolidated income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Group will apply HKAS 1 (Revised) from January 1, 2009. It is likely that both the consolidated income statement and statement of comprehensive income will be presented as performance statements. • HKAS 23 (Revised), ‘Borrowing costs’ (effective for annual periods beginning on or after January 1, 2009). The amendment requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The adoption of HKAS 23 (Revised) will not affect the Group as interest and other costs on borrowings to finance the construction of property, plant and equipment are capitalized under the existing accounting policy of the Group. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 118 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (a) Basis of preparation of financial statements (Continued) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group (Continued) • HKAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective for annual periods beginning on or after July 1, 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost where any remaining interest in the entity is re-measured to fair value and a gain or loss is recognized in profit or loss. The adoption of HKAS 27 (Revised) will not affect the Group as changes in non-controlling interests which do not lead to loss of control in a subsidiary are recorded in equity under the existing accounting policy of the Group. • HKAS 27 (Amendment), “Cost of an investment in a subsidiary, jointly controlled entity or associate” (effective for annual periods beginning on or after July 1, 2009). The amendment removes the definition of the cost method from HKAS 27 and includes a requirement to present dividends as income in the separate financial statements of the investor. The Company will apply HKAS 27 (Amendment) prospectively from January 1, 2010 in the separate financial statements. • HKFRS 3 (Revised), ‘Business combinations’ (effective for annual periods beginning on or after July 1, 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the consolidated income statement. There is a choice on an acquisition by acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group will apply HKFRS 3 (Revised) in its financial statements from any acquisition effective after December 31, 2009. • HKFRS 8, ‘Operating segments’ (effective for annual periods beginning on or after January 1, 2009). HKFRS 8 replaces HKAS 14 and requires a “management approach”, under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply HKFRS 8 from January 1, 2009. Management considered there is no material impact from adopting this new standard on the financial statements of the Group. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 119 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (a) Basis of preparation of financial statements (Continued) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group (Continued) • Improvements to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants published in October 2008 — HKAS 1 (Amendment), ‘Presentation of financial statements’ (effective for annual period beginning on or after January 1, 2009). The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with HKAS 39, ‘Financial instruments: recognition and measurement’ are examples of current assets and liabilities respectively. The Group will apply the HKAS 1 (Amendment) from January 1, 2009. It is not expected to have a material impact on the Group’s financial statements. — HKAS 19 (Amendment), ‘Employee benefits’ (effective for annual period beginning on or after January 1, 2009) — The distinction between short-term and long-term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered. — HKAS 37, ‘Provisions, contingent liabilities and contingent assets’ requires contingent liabilities to be disclosed, not recognized. HKAS 19 has been amended to be consistent. The Group will apply HKAS 19 (Amendment) from January 1, 2009. It is not expected to have a material impact on the Group’s financial statements. — HKAS 20 (Amendment), ‘Accounting for government grants and disclosure of government assistance’ (effective for annual period beginning on or after January 1, 2009). The benefit of a below-market rate government loan is measured as the difference between the carrying amount in accordance with HKAS 39, ‘Financial instruments: recognition and measurement’ and the proceeds received with the benefit accounted for in accordance with HKAS 20. The Group will apply HKAS 20 (Amendment) from January 1, 2009. The impact is still assessed by the management. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 120 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (a) Basis of preparation of financial statements (Continued) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group (Continued) • Improvements to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants published in October 2008 (Continued) — HKAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to HKAS 32, ‘Financial Instruments: presentation’ and HKFRS 7, ‘Financial instruments: disclosures’) (effective for annual period beginning on or after January 1, 2009). An investment in an associate is treated as a single asset for the purposes of impairment testing and any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Group will apply the HKAS 28 (Amendment) to impairment tests related to investments in associates and any related impairment losses from January 1, 2009. — HKAS 36 (Amendment), ‘Impairment of assets’ (effective for annual period beginning on or after January 1, 2009). Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The Group will apply the HKAS 36 (Amendment) and provide the required disclosure where applicable for impairment tests from January 1, 2009. — HKAS 38 (Amendment), ‘Intangible assets’ (effective for annual period beginning on or after January 1, 2009). The amendment deletes the wording that states that there is ‘rarely, if ever’ support for use of a method that results in a lower rate of amortization than the straight line method. The amendment will not currently have an impact on the Group’s operations as all intangible assets are currently amortized using the straight line method. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 121 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (a) Basis of preparation of financial statements (Continued) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group (Continued) • Improvements to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants published in October 2008 (Continued) — HKFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’ (effective for annual period beginning on or after July 1, 2009). The amendment clarifies that all assets and liabilities of a subsidiary are classified as held for sale if a partial disposal sale plan results in loss of control, and relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. The Group will apply the HKFRS 5 (Amendment) prospectively to all partial disposals of subsidiaries resulting from loss of control from January 1, 2010. — There are a number of minor amendments to HKAS 8, ‘Accounting policies, changes in accounting estimates and errors’, HKAS 10, ‘Events after the balance sheet date’, HKAS 16 ‘Property, plant and equipment’, HKAS 20, HKAS 23, HKAS 34, ‘Interim financial reporting’ and HKFRS 7, which are not addressed above. These amendments are unlikely to have material impact on the Group’s financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 122 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (b) Consolidated financial statements The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to December 31. (i) Subsidiaries Subsidiaries are investees over which the Group has the power to exercise control, i.e. the power to govern the financial and operating policies and obtains benefits from the operating activities of the investees. When determining whether the Group exercises control over an investee, the impact from potential voting rights of the investee, such as currently convertible bonds and exercisable warrants, etc. is taken into account. Subsidiaries are consolidated from the date when control is transferred to the Group. They are de-consolidated from the date when control ceases. All the significant intra-group balances, transactions and unrealized profit are eliminated in the preparation of the consolidated financial statements. The portion of the shareholders’ equity and current period profit or loss of the subsidiaries, which is not attributable to the parent company, is separately presented as minority interest in the shareholders’ equity and net profit in the consolidated financial statements. When there is any inconsistency in the accounting policies or financial periods adopted between subsidiaries and the Company, the financial statements of subsidiaries are adjusted according to the accounting policies or financial period adopted by the Company in preparing consolidated financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 123 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (b) Consolidated financial statements (Continued) (i) Subsidiaries (Continued) (a) Common control business combination Merger accounting method stipulated under Hong Kong Accounting Guideline 5 ‘Merger accounting for common control combinations’ is used to account for acquisitions of businesses under common control before and after the acquisitions. The difference between fair value of acquisition consideration and carrying amount of net assets acquired is adjusted to capital reserve. When equity securities are used as acquisition consideration, the carrying amount of net assets acquired is recognized as deemed acquisition costs. Direct costs attributable to the business combination are recorded in current period profit and loss. Any charges or commission arising from issuance of equity securities for business combination are offset against premium of those equity securities. The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are combined using the existing carrying amounts from the controlling parties’ perspective. The consolidated income statement includes the results of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under common control (whichever period is shorter regardless of the date of the common control combination). The comparative amounts in the consolidated financial statements are presented as if those entities or businesses had been combined at the previous balance sheet date or when they first came under common control (whichever period is shorter). T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 124 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (b) Consolidated financial statements (Continued) (i) Subsidiaries (Continued) (b) Non-common control business combination T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Purchase accounting is used to account for the acquisitions of subsidiaries by the Group from third parties. The acquisition costs and identifiable net assets obtained by acquirer are measured at the fair value on the acquisition date. Related separate financial statements are adjusted on the basis of the fair value of the identifiable net assets on acquisition date when preparing consolidated financial statements. The excess of acquisition costs over the proportionate share of the fair value of the identifiable net assets acquired is recorded as goodwill. The shortfall of acquisition costs to the proportionate share of the fair value of the identifiable net assets acquired is recognized through current period profit and loss. Direct costs attributable to the business combination are recorded as acquisition costs. Any charges or commission arising from issuance of equity securities for business combination are offset against premium of those equity securities. In balance sheet of the Company, investments in subsidiaries are stated at cost less provision for impairment losses (if any) (Note 2(i)). Investment income from investments in subsidiaries is accounted for by the Company based on dividends received and receivable to the extent of proportionate share to cumulated profit generated by the investees in post-investment period. Any excess profit appropriation or cash dividends received is regarded as a return of initial investment cost. (ii) Transactions with minority interest The Group treats transactions with minority interest as transactions with equity owners of the Group. When accounting for acquisition of minority interest in consolidated financial statements, the difference between the increased long-term equity investment cost arising from acquisition of minority interest and proportionate share of carrying amounts of net identifiable assets newly acquired calculated from the acquisition date is adjusted to equity. Upon disposal of minority interest, difference between consideration received and related share of minority interest is recorded in equity. 125 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (b) Consolidated financial statements (Continued) (iii) Jointly controlled entities and associates A jointly controlled entity is an investee over which the Group and other parties exercise joint control. An associate is an investee over which the Group has significant influence on the financial and operating decisions. Investments in jointly controlled entities and associates are initially recognized at cost and are subsequently measured using the equity method of accounting. The excess of the initial investment cost over the proportionate share of the fair value of identifiable net assets of investee acquired is included in the initial investment cost. Any shortfall of the initial investment cost to the proportionate share of the fair value of identifiable net assets of investee acquired is recognized in current period profit and loss and long-term investment cost is adjusted accordingly. When applying equity accounting, the Group recognized investment income based on the proportionate share of net profit or loss of the investees. Net losses of investees are recognized to the extent of carrying amount of long-term equity investments and any other constituting long-term equity investments in investees in substance. However, the Group will continue to recognize investment losses and provision should it bears additional obligations which meet the recognition criteria under the provision standard. The Group recognizes into related equity items based on its proportionate share on other shareholders’ equity movements of the investees other than net profit or loss, given there is no change in shareholding ratio. When the investees appropriate profit or declare dividends, the carrying amount of long- term equity investments are reduced correspondingly by the proportionate share of the distribution. Profit or loss from transactions between the Group and the investees is eliminated to the extent of the Group’s interest in the investees. Loss from transactions between the Group and the investees is fully recognized and not eliminated when there is evidence for asset impairment. In the Company’s balance sheet, the investments in jointly controlled entities and associates are stated at cost less provision for impairment losses (if any) (Note 2(i)). Investment income from investments in jointly controlled entities and associates is accounted for by the Company based on dividends received and receivable. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 126 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (c) Segment reporting A business segment is a significant part of the Group which can be identified and provides a single or groups of products or services. Such a segment is subject to risks and rewards that are different from those of other business segments. A geographical segment is a part of the Group which can be identified and provides products or services within a particular economic environment. Such a segment is subject to risks and rewards of providing goods or services that are different from those of segments operating in other economic environments. The Group presents business segment as its primary segments reporting. Transaction pricing among segments are set based on the market prices. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Renminbi (“RMB”), which is the Company’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency at the spot exchange rate on the transaction date. On the balance sheet date, foreign currency monetary items are translated into the functional currency at the spot exchange rate on the balance sheet date. Exchange difference is directly expensed in current period profit and loss unless it arises from foreign currency specific loans borrowed for purchasing, constructing or producing qualifying assets which is eligible for capitalization. Foreign currency non-monetary items measured at the historical cost are translated at the spot exchange rate on the transaction date. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 127 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (e) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an equity investment over the proportionate share of the fair value of the net identifiable assets of the investee at the date of investment. Goodwill arising from business combination is included in ‘intangible assets’ of consolidated financial statements. The excess of the cost of investment of acquiring jointly controlled entity and associate over the fair value of the proportionate share of the net identifiable assets is included in the carrying amount of long-term equity investment. Upon disposal of such investments, goodwill relating to disposed investment is included in disposal gain or loss. Goodwill arising from business combination is tested for impairment at least annually. When performing impairment testing, the carrying amount of goodwill is allocated to cash- generating units (“CGUs”) or a group of CGUs and by each business segment according to synergy effect arising from business combination. Accounting policy on impairment test of CGUs or a group of CGUs is described in Note 2(i). Goodwill is stated at the net of cost less provision for impairment losses at the end of the period. (ii) Mining rights Mining rights are initially recorded at cost which includes payments of consideration for extraction rights, exploration rights, exploration and other direct costs. Amortization is provided on a straight-line basis according to the shorter of expiration date of mining certificate or the mineable period of natural resources (not more than 30 years). (iii) Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (5 years). T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 128 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (e) Intangible assets (Continued) (iv) Periodic review of the useful life and amortization method For intangible assets with finite useful life, the estimated useful life and amortization method are reviewed annually at the end of each fiscal year and adjust when necessary. (f) Property, plant and equipment Property, plant and equipment refers to tangible assets which are held for the purpose of producing goods, rendering service or administration management with useful lives of more than one year. Property, plant and equipment includes buildings, machinery, transportation facilities and office equipment, etc. Property, plant and equipment acquired or constructed are initially recognized at cost. Subsequent costs about property, plant and equipment are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other subsequent costs are charged in current period profit or loss when they are incurred. Depreciation of property, plant and equipment is provided based on carrying amount less estimated residual value over estimated useful life using straight-line method. For those impaired property, plant and equipment, depreciation is provided based on carrying amount after deducting impairment provision over estimated useful life. Estimated useful lives for property, plant and equipment are as follows: Buildings Machinery Transportation facilities Office and other equipment 15 - 40 years 10 - 32 years 6 - 12 years 5 - 10 years At the end of each year, the Group reviews the estimated useful life, estimated residual value and the depreciation method of the property, plant and equipment and adjusts when necessary. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 129 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (f) Property, plant and equipment (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Property, plant and equipment is derecognized when they are disposed of, or expected that cannot bring economic benefit through use or disposal. The amount of disposal income arising from sale, transfer, disposal or write-off of the property, plant and equipment less carrying amount and related tax expenses is recorded in general and administrative expenses. (g) Construction-in-progress (“CIP”) CIP is measured at cost. Cost comprises construction expenditures, other expenditures necessary for the purpose of preparing the CIP for its intended use and those borrowing costs incurred before the assets ready for intended use that are eligible for capitalization. CIP is transferred to property, plant and equipment when the CIP are ready for its intended use. (h) Research and development Research and development expenditures are classified as research expenditures and development expenditures according to the nature of the internal research and development expenditures and whether there is significant uncertainty of development activities transforming to assets. Research expenditures are recognized in current period profit and loss. Development expenditures are recognized as assets when all of the following criteria are met: (i) it is technically feasible to complete the asset so that it will be available for use or sale; (ii) management intends to complete the asset and uses or sells it; (iii) it can be demonstrated that the asset will generate probable future economic benefits; (iv) there are adequate technical, financial and other resources to complete the development of the asset and management has the ability to use or sell the asset; and (v) the expenditure attributable to the asset during its development phase can be reliably measured. 130 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (h) Research and development (Continued) Development expenditures that do not meet the criteria above are recorded in current period profit and loss as incurred. Development expenditures that have been recorded in profit and loss in previous period will be not recognized as assets in subsequent period. Capitalized development expenditures are included in property, plant and equipment and intangible assets according to their natures, where appropriate. (i) Impairment of non-financial assets Property, plant and equipment, CIP, intangible assets with finite useful life and long-term equity investments in subsidiaries, jointly controlled entities and associates are tested for impairment when there is any impairment indication on balance sheet date. If impairment test results show that the recoverable amount of the asset is less than its carrying amount, that difference is recognized as an impairment provision and recorded in general and administration expenses. Recoverable amount is the higher of fair value less cost to sell of the asset and present value of its expected future cash flows. Asset impairment is calculated and recognized on individual asset basis. If it is difficult to estimate recoverable amount for the individual assets, the recoverable amount is determined based on the recoverable amount of the CGU to which the asset belongs. CGU is the smallest group of assets that independently generates cash flows. Goodwill that is separately presented in financial statements is tested for impairment at least once annually irrespective of whether there is impairment indication. When performing impairment test, carrying amount of goodwill is allocated to CGU or groups of CGUs which is expected to be benefited from synergy effect arising from business combinations. If testing results show that the recoverable amount of the CGU or groups of CGUs containing allocated goodwill is less than its carrying amount, impairment loss is recognized accordingly. Impairment loss is firstly deducted from the carrying amount of goodwill that is allocated to the CGU or groups of CGUs, and is then deducted from the carrying amount of the other assets in the CGU or groups of CGUs (excluding goodwill) on a pro rata basis based on the weighting of carrying amount of individual assets. Except for goodwill, all impaired non-financial assets are subject to review for possible reversal of impairment at each reporting date. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 131 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (j) Financial assets T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Financial assets are classified as the following categories at initial recognition: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the intention and ability of the Group to hold the financial assets. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include: financial assets held for the purpose of selling in the short-term and derivatives not designated and not qualified for hedge accounting. These assets are presented as current assets on the balance sheet. (ii) Loans and receivables Loans and receivables refer to the non-derivative financial assets for which there is no quotation in the active market with fixed or determinable amount, including accounts receivable, net, other receivables and cash and cash equivalents. These receivables are presented as current assets but classified as non-current assets when matured beyond 12 months from balance sheet date. (iii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available- for-sale at initial recognition or not classified in any of the other categories. They are included in current assets when management intends to dispose of the available-for-sale financial assets within 12 months of the balance sheet date. 132 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (j) Financial assets (Continued) (iv) Recognition and measurement Regular way purchases and sales of financial assets are measured using trade-date accounting for recognition and derecognition - trade-date refers to the date on which the Group commits to purchase or sell the asset. Financial assets are recognized when the Group entered into the agreement and measured at fair value in the balance sheet. Financial assets at fair value through profit or loss are initially recognized at fair value and related transaction costs incurred when acquiring the assets are recorded in current period profit and loss. Other financial assets are initially recognized at fair value plus transaction costs. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or all risks and rewards related to the ownership of the financial assets have been transferred to the transferee. Financial assets at fair value through profit or loss and available-for-sale are subsequently measured at fair value. When an active market exists for a financial instrument, fair value is determined based on quoted prices in the active market. When no active market exists, fair value is determined by using valuation techniques. Valuation techniques includes making reference to the prices used by knowledgeable and willing parties in a recent transaction, the current fair value of other financial assets that are same in substance, discounted cash flow method and option pricing model ,etc.. When applying valuation techniques, the Group uses market parameters to the fullest extent possible and use specific parameters of the Group as little as possible. Loans and receivables are carried at amortized cost using effective interest method. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Changes in fair value of the financial assets at fair value through profit or loss are recorded in the income statement within ‘other gains, net’. Except for impairment loss, changes in fair value of available-for-sale financial assets are recorded in shareholders’ equity. When these financial assets are derecognized, the accumulated fair value changes originally recorded in equity are included in ‘other gains, net’. Cash dividends on available-for-sale equity instruments are recognized in ‘other gains, net’ when the investees declare dividends. 133 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (j) Financial assets (Continued) (v) Impairment of financial assets T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Except for financial assets at fair value through profit or loss, the Group performs assessment on the carrying amount of financial assets on balance sheet date. Provision for impairment is made when there is objective evidence showing that a financial asset is impaired. When there is significant or prolonged decline in fair value of equity securities classified as available-for-sale financial asset, changes in the fair value that originally recorded in shareholders’ equity should be recorded as impairment loss. Impairment loss on available- for-sale equity instrument is not reversed through profit and loss. For those impaired equity investments without quoted prices in active market and their fair value cannot be reliably measured, impairment loss is not reversed even when the value is recovered in subsequent period. Please refer to Note 2(l) for impairment testing of accounts receivable and other receivables. (k) Inventories Inventories comprise raw materials, work-in-progress, finished goods and spare parts and are stated at the lower of cost and net realizable value. Inventories are initially recorded at cost when acquired. Issuances of materials, work-in-progress, finished goods and spare parts are accounted for using weighted average cost method. The cost of finished goods and work-in-progress comprise the cost of materials, direct labor and an appropriate allocation of production overhead under normal production capacity. Provision for inventory obsolescence is usually determined by the excess of cost over net realizable value on single item basis and recorded in general and administrative expenses in the income statement. Net realizable values are determined based on the estimated selling price less estimated conversion costs, selling expenses and related taxes in the ordinary course of business. 134 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (l) Accounts receivable and other receivables Loans and receivables include accounts receivable, other receivables, etc. Accounts receivable arising from the Group’s external sales of goods or services rendered are initially recorded at fair value of price receivable from buyer stipulated in the contract or agreement. Loans and receivables are subsequently measured at amortized cost less provision for doubtful debts using effective interest method. Provision for impairment of accounts receivable and other receivables is made when there is objective evidence that the Group will not be able to collect the amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivables are impaired. The provision amount is the difference between carrying amount of the asset and the present value of estimated future cash flows discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and related loss amount is recognized in ‘general and administrative expenses’. When a receivable is uncollectible, it is written off against the allowance account for the receivable. If there is objective evidence that the value of receivables has been recovered, and which objectively related to an event occurring after the loss was recognized, or amounts previously written off are subsequently recovered, the original impairment loss recognized is reversed and recognized as ‘general and administrative expenses’. (m) Cash and cash equivalents Cash listed in the cash flow statement represents cash on hand and deposits held at call with banks. Cash equivalents refers to short-term (3 months or less), highly-liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. For the cash flow statement, time deposits and other cash investments with original maturities of more than 3 months are excluded from cash and cash equivalents. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 135 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (n) Borrowings T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the terms of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (o) Government grants Government grants are recognized when the Group fulfils the conditions attached to them and there is reasonable assurance that the grant will be received. When government grant is in the form of monetary assets, they are measured at actual amount received. When the grant is provided based on a fixed standard rate, it is measured at the amount receivable. Asset-related government grant is recognized as deferred income and is amortized evenly in the income statement over the useful lives of related assets. Income-related government grant that is used to compensate subsequent related expenses or losses of the Group is recognized as deferred income and recorded in the income statement when the related expenses or losses are incurred. When the grant is used to compensate expenses or losses that were already incurred, they are directly recognized in current period profit and loss. (p) Accounts payable and other payables Accounts payables and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. 136 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (q) Employee benefits Employee benefits mainly include salaries, bonuses, allowances and subsidies, retirement benefit obligations, other social insurance and housing funds, labor union fees, employees’ education fees and other expenses related to the employees for their services. The Group recognizes employee benefits as liabilities during the accounting period when employees rendered services and allocates to related cost of assets and expenses based on different beneficiaries. (i) Bonus plans The expected cost of bonus plan is recognized as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. (ii) Retirement benefit obligations The Group primarily pays contribution on a monthly basis to various defined contribution retirement benefit plans organized by relevant municipal and provincial governments in the PRC. The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired employees payable under these plans. The Group has no legal or constructive obligations for further contributions if the fund does not hold sufficient assets to pay all employees the benefit relating to their current and past services. (iii) Other social insurance and housing funds T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The Group provides other social insurance and housing funds based on certain percentages of salaries and at no more than the upper limits of the requirements. These benefits are paid to social security organization and the amounts paid are expensed as incurred. The Group has no legal or constructive obligations for further contributions if the fund does not hold sufficient assets to pay all employees the benefit relating to their current and past services. 137 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (r) Current and deferred income tax The income tax expense for the period comprises current and deferred income tax of the Group. Shares of income tax expense of jointly controlled entities and associates are included in “Share of profits/(losses) of jointly controlled entities/associates”. Income tax expense is recognized in the income statement except to the extent that it related to items recognized directly in equity. In this case, the tax is also recognized in equity. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted in the countries where the Company, its subsidiaries, jointly controlled entities and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax assets and liabilities are recognized based on the differences between tax bases of assets and liabilities and respective carrying amount (temporary differences). For deductible tax losses or tax credit that can be brought forward in accordance with tax law requirements for deduction of taxable income in subsequent years, related deferred income tax assets are recognized. No deferred income tax liability is recognized for temporary difference arising from initial recognition of goodwill. For those temporary differences arising from initial recognition of an asset or liability in a non-business combination transaction that affects neither accounting profit nor taxable profit (or deductible loss) at the time of the transaction, no deferred income tax asset and liability is recognized. On the balance sheet date, deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. The Group recognizes deferred income tax assets for all deductible temporary differences to the extent that it is probable that taxable profit will be available to offset the deductible temporary difference. On balance sheet date, if there is conclusive evidence showing sufficient taxable profit be probably available to offset against deductible temporary difference, prior period unrecognized deferred income tax asset is recognized. Deferred income tax assets and liabilities arising from temporary difference relating to investments in subsidiaries, jointly controlled entities and associates are recognized. However, when the Company and the Group are able to control the timing of the reversal of the temporary difference and it is probable that this temporary difference will not reverse in foreseeable future, no deferred income tax is recognized. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 138 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (r) Current and deferred income tax (Continued) Deferred income tax assets and deferred income tax liabilities are offset in financial statements when meeting all the conditions below: (i) deferred income tax assets and deferred income tax liabilities are related to the income tax levied by the same tax authorities; (ii) the Group has the legal enforceable right to settle current income tax assets and current income tax liabilities on a net basis. (s) Revenue recognition Revenue is recognized based on the fair value of the consideration received or receivable for the sale of goods and rendering of services under contracts in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax. The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s activities (see descriptions below). (i) Sales of goods Revenue from the sale of goods is recognized when the Group has already transferred significantly the risks and rewards of ownership of the goods to the buyers, retained neither continuing managerial involvement and control over the goods, economic benefits related to the transaction will flow into the Group, and that revenue and related costs incurred can be measured reliably. (ii) Interest income Interest income is recognized on a time-proportion basis using effective interest method. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 139 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) (t) Leases (as the lessee for operating lease) Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the term of the lease. (u) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of any qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Borrowing costs capitalized are those costs that would have been avoided if the expenditure on the qualifying assets had not been made, which are either the actual costs incurred on a specific borrowing or an amount calculated using the weighted average method, considering all borrowing costs incurred on general borrowings outstanding. Other borrowing costs are expensed as incurred. (v) Dividend distribution Cash dividend is recognized as a liability in the period when the dividend is approved in the shareholders’ meeting. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 140 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (a) Financial risk management The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, cash flow interest rate risk and commodity price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Risk management is carried out by the treasury management department (the “Group Treasury”) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks through close co-operation with the Group’s operating units. (i) Market risk • Foreign currency risk Foreign currency risk primarily arises from certain significant foreign currency deposits, short-term and long-term loans denominated in US Dollar (“USD”), Australian Dollar (“AUD”), Japanese Yen (“JPY”), Euro (“EUR”) and Hong Kong Dollar (“HKD”). Related exposures are disclosed in Notes 17 and 19 to the financial statements, respectively. The Group Treasury closely monitors the international foreign currency market on the changing exchange rates and takes these into consideration when investing in foreign currency deposits and loans raising. As the foreign currency denominated assets and liabilities are minimal to the assets and liabilities of the Group, the Directors are of the opinion that the Group is not exposed to any significant foreign currency risk as of December 31, 2007 and 2008. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 141 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (i) Market risk (Continued) • Cash flow interest rate risk As the Group has no significant interest-bearing assets except for bank deposits (Note 17), the Group’s income and operating cash flows are substantially independent of changes in market interest rates. Most of the bank deposits are maintained in the savings and fixed deposit accounts in the PRC. The interest rates are regulated by the People’s Bank of China while the Group Treasury closely monitors the fluctuation on such rates periodically. As the average interest rates applied to the deposits are relatively low, the Directors are of the opinion that the Group is not exposed to any significant interest rate risk for these financial assets held as of December 31, 2007 and 2008. The interest rate risk of the Group primarily arises from long-term loans. Loans borrowed at variable interest rates expose the Group to cash flow interest rate risk. The exposures to these risks are disclosed separately in Note 19 to the financial statements. The Group enters into debt obligations to support general corporate purposes including capital expenditures and working capital needs. The Group Treasury closely monitors the market interest rates and maintains a balance between variable rate and fixed rate borrowings in order to reduce the exposures to the interest rate risk described above. At December 31, 2008, if interest rate had increased/decreased by 0.678% (2007: 0.062%) with all other variables held constant, post-tax profit for the year would have been RMB184 million (2007: RMB9 million) lower/higher, respectively. The ranges of such sensitivity disclosed above were determined based on the observation of management on the historical trend of related interest rates during the previous year under each analysis period and are consistent with the measures reported to key management personnel in assessing this risk. The change from 2007 is primarily attributable to the increased advances of principal during the year. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 142 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (i) Market risk (Continued) • Commodity price risk T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The Group uses a limited number of futures and option contracts to reduce its exposure to fluctuations in the price of primary aluminum. The Group uses the majority of its future and European option contracts traded on the Shanghai Futures Exchange and London Metal Exchange (the “LME”) to hedge against fluctuations in primary aluminum price. In addition, the Group entered into certain Asian option contracts on primary aluminum in 2008. The notional quantities of primary aluminum per settlement month totaled 25,000 tons. For the year ended December 31, 2008, realized gain and unrealized loss for these Asian option contracts amounted to approximately USD4.4 million (equivalent to RMB30 million) and USD16.7 million (equivalent to RMB114 million), respectively. These future and option contracts are marked to market at the balance sheet date and the corresponding unrealized holding gains/losses are recorded in the income statement for the year (Note 23). The exposure of the Group on such future and option contracts is presented on the balance sheet. At December 31, 2008, if the primary aluminum futures price had been increased/ decreased by 2% (2007: 1%) and all other variables held constant, post-tax profit would have been increased/decreased by RMB30 million (2007: RMB0.9 million). The range of such sensitivity was determined based on the historical trend of related commodity price during the previous 3 years under each analysis period and was consistent with the measures reported to key management personnel in assessing this risk. The change from 2007 is primarily attributable to the significant increase in the number of unsettled contracts in 2008. 143 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (ii) Credit risk Credit risk is managed on a group basis. Credit risk arises from bank balances, other receivables as well as credit exposures of customers, including outstanding receivables and committed transactions. The Company also provided financial guarantees to certain subsidiaries. The carrying amount of these receivables and amounts of respective financial guarantees included in Notes 15, 16, 17 and 19 to the financial statements represent the Group’s maximum exposure to credit risk in relation to its financial assets and guarantees. The Group maintains substantially most of its bank balances and cash in several major state- owned financial institutions in the PRC (Note 33(c)). With strong State support provided to these state-owned financial institutions, the Directors are of the opinion that there is no significant credit risk on such assets being exposed. With regard to accounts receivable, the marketing department assesses the credit quality of the customers, taking into account their financial positions, past experience and other factors. The Group performs periodic credit evaluations of its customers and believes that adequate provision for doubtful debts have been made in the financial statements. Management does not expect any further losses from non-performance by these counterparties. The Group does not hold any collateral as security for these receivables. As of December 31, 2007 and 2008, none of the individual customers exceed 10% of the Group’s total revenue, and thus, no significant concentration of credit risk existed. The Company assessed the credibility of the subsidiaries by reviewing the operating results and gearing ratios annually when measuring any potential liabilities arising from the liquidity risk of such subsidiaries. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 144 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (iii) Liquidity risk Prudent liquidity risk management includes maintaining sufficient cash and short-term deposits, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury maintains flexibility in funding by maintaining availability under committed credit lines. As of December 31, 2008, the Group had total banking facilities of approximately RMB70,668 million (2007: RMB59,965 million). Out of the total banking facilities granted, amounts totaling RMB41,238 million have been utilized as of December 31, 2008 (2007: RMB22,291 million). Banking facilities of approximately RMB46,988 million will be subject to renewals in 2009. The Directors of the Company are confident that such banking facilities can be renewed upon expiration based on their past experience and good credit standing. In addition, as of December 31, 2008, the Group had credit facilities through its primary aluminum futures agent at the LME amounting to USD117 million (equivalent to RMB800 million) (2007: USD74 million (equivalent to RMB541 million)) of which USD17 million (equivalent to RMB114 million) (2007: nil) has been utilized. The futures agent has the right to adjust the related credit facilities. Management also monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The table below analyzes the Group’s and the Company’s long-term financial liabilities and financial liabilities at fair value through profit or loss that will be settled on a net basis into relevant maturity groupings based on the remaining period from the balance sheet to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows. Except for the amounts presented below, all other financial liabilities, primarily including accounts payable, other payables, accruals, short-term loans and short-term bonds are due within the next 12 months from the balance sheet date. As the impact of the discounting is not significant, the expected future cash flows of balances within 12 months approximate their carrying amounts. 145 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (iii) Liquidity risk (Continued) Group Within 1 year 1-2 years 2-5 years Over 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of December 31, 2008 Long-term loans 2,949,730 3,412,099 13,259,118 7,498,252 27,119,199 Medium-term notes Long-term bonds Interest payables — — — — 10,000,000 — 10,000,000 — 2,000,000 2,000,000 for borrowings 2,249,839 1,562,719 2,919,781 999,735 7,732,074 Interest payables for bonds 828,700 584,000 1,222,000 360,000 2,994,700 Financial liabilities at fair value through profit or loss 119,055 — — — 119,055 6,147,324 5,558,818 27,400,899 10,857,987 49,965,028 As of December 31, 2007 Long-term loans 2,477,022 2,919,427 5,806,759 6,753,728 17,956,936 Long-term bonds Interest payables — — — 2,000,000 2,000,000 for borrowings 1,261,007 892,758 1,853,131 665,433 4,672,329 Interest payables for bonds 196,500 90,000 270,000 450,000 1,006,500 3,934,529 3,902,185 7,929,890 9,869,161 25,635,765 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 146 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (a) Financial risk management (Continued) (iii) Liquidity risk (Continued) Company Within 1 year 1-2 years 2-5 years Over 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of December 31, 2008 Long-term loans 1,149,422 881,345 7,517,034 4,362,003 13,909,804 Medium-term notes Long-term bonds Interest payables — — — — 10,000,000 — 10,000,000 — 2,000,000 2,000,000 for borrowings 1,055,210 859,119 1,743,643 559,689 4,217,661 Interest payables for bonds 828,700 584,000 1,222,000 360,000 2,994,700 3,033,332 2,324,464 20,482,677 7,281,692 33,122,165 As of December 31, 2007 Long-term loans 1,549,938 1,051,969 1,893,908 2,348,477 6,844,292 Long-term bonds Interest payables — — — 2,000,000 2,000,000 for borrowings 407,111 311,949 561,927 181,261 1,462,248 Interest payables for bonds 196,500 90,000 270,000 450,000 1,006,500 2,153,549 1,453,918 2,725,835 4,979,738 11,313,040 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 147 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (b) Fair value estimation T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The fair value of financial instruments traded in active markets (such as trading and available-for- sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Techniques such as estimated discounted cash flows, are used to determine fair value for the financial instruments. The carrying amount less provision for doubtful debt of accounts and other receivables, bank balances and cash, accounts and other payables and accrued expenses, short-term bonds and short-term loans are assumed to approximate their fair values. The fair values of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rates that are available to the Group for similar financial instruments. (c) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debts. Consistent with other entities in the industry, the Group monitors capital on the basis of its gearing ratio. This ratio is calculated as net debts divided by total capital. Net debts are calculated as total borrowings (including borrowings, other non-current liabilities, accounts payable, other payables and accrued expenses and financial liabilities at fair value through profit or loss, as shown in the consolidated balance sheet) less bank balances and cash. Total capital is calculated as equity, as shown in the consolidated balance sheet, plus net debts less minority interest. 148 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) (c) Capital risk management (Continued) During 2008, the change in sales price has brought adverse impact on profitability and net operating cash flow of the Group. The Group raise more finance in order to ensure sufficient operating cash flows and thus, adjust the strategy to maintain gearing ratios between 30% and 60%. The gearing ratios of the Group as of December 31, 2007 and 2008 were as follows: Total borrowings Less: bank balances and cash 2008 2007 RMB’000 RMB’000 75,143,956 40,634,970 (16,295,585) (9,054,565) Net debts 58,848,371 31,580,405 Total equity Add: net debts Less: minority interest Total capital Gearing ratio 60,196,822 64,493,207 58,848,371 31,580,405 (5,198,340) (3,805,144) 113,846,853 92,268,468 51.69% 34.23% T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 149 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 4. Critical accounting estimates and judgments The Group continuously evaluates estimates and judgments based on historical experience and other factors, including reasonable expectations of future events. Critical estimates and assumptions that have a significant risk of causing a material impact on the carrying amount of assets and liabilities within the next financial year are discussed below: (a) Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2(e)(i). The recoverable amounts of CGUs have been determined based on value-in-use calculations. These calculations require the use of estimates. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could have a material impact on assessed goodwill impairment. (b) Useful lives of property, plant and equipment The Group’s management determines the estimated useful lives of its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. Management will adjust the depreciation charge where useful lives vary with previously estimated lives, or they will write off or write down technically obsolete or non-strategic assets that have been abandoned. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could have a material impact on the carrying amount of property, plant and equipment. (c) Impairment of property, plant and equipment The Group also tests whether property, plant and equipment suffered any impairment whenever any impairment indication exists. In accordance with the Note 2(i), an impairment loss is recognized for the amount by which the recoverable amount of property, plant and equipment being lower than its carrying amount. As of December 31, 2008, no property, plant and equipment was impaired based on the impairment assessment performed by management. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material impact on the carrying amount of property, plant and equipment. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 150 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 4. Critical accounting estimates and judgments (Continued) (d) Estimated obsolescence of inventories In accordance with Note 2(k), the Group’s management tests whether inventory suffered any impairment based on estimate on the net realizable value of the inventory. For different types of inventories, it requires the exercise of accounting estimates on selling price, costs of conversion, selling expenses and related tax expense to calculate its net realizable value. It is reasonably possible, that if there is a significant change in circumstances, outcomes within the next financial year would be significantly affected if there is a significant change in circumstances, including the Group’s business and the external environment. 5. Business combinations and acquisitions of minority interest Business combinations 2008 On May 30, 2008, the Company acquired the following six entities from Aluminum Corporation of China (“Chinalco”) and China Nonferrous Metals Processing Technology Co., Ltd. (“China Nonferrous Metals Technology”) (an entity controlled by Chinalco) for total cash consideration of RMB4,174.759 million. On October 1, 2008, the Company also acquired the aluminum alloy (a kind of primary aluminum product) business from Pingguo Aluminum Company (an entity controlled by Chinalco) (“Aluminum alloy business of Pingguo Aluminum”) for cash consideration of RMB96.393 million. Pursuant to the terms set out in the acquisition agreements, the original shareholders of the acquirees are entitled to profit or loss generated by the entities acquired between the agreed-upon valuation benchmark dates and respective effective acquisition dates. In this connection, the Company is required to pay to and receive from original shareholders an additional RMB5.740 million and RMB27.037 million, respectively. These entities (the “seven common control entities acquired in 2008”) are incorporated and operated in the PRC. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 151 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2008 (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Name of acquiree Principal activities Entity interest acquired Lanzhou Liancheng Longxing Manufacture and distribution of 100% Aluminum Company Limited primary aluminum (“Longxing Aluminum”) Huaxi Aluminum Company Limited Manufacture and distribution of 56.86% (“Huaxi Aluminum”) aluminum fabrication products Chalco Ruimin Company Limited Manufacture and distribution of 75% (“Chalco Ruimin”) aluminum fabrication products Chalco Southwest Aluminum Manufacture and distribution of 100% Cold Rolling Company Limited aluminum fabrication products (“Chalco Southwest Aluminum Cold Rolling”) Chalco Southwest Aluminum Manufacture and distribution of 60% Company Limited aluminum fabrication products (“Chalco Southwest Aluminum”) Chalco Henan Aluminum Manufacture and distribution of 84.02% Company Limited (“Henan Aluminum”) aluminum fabrication products Aluminum alloy business of Pingguo Manufacture and distribution of 100% Aluminum aluminum alloy rods As both the Company and the above seven acquirees are under the common control of Chinalco before and after the acquisitions, these transactions were accounted for as common control business combinations, using merger accounting for all periods presented herein. The following is a reconciliation of the effect arising from the common control business combinations above on the consolidated balance sheet. 152 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2008 (Continued) The consolidated balance sheet as of December 31, 2008: Group (before 2008 Seven common common control entities Consolidation control business acquired adjustments combinations) RMB’000 in 2008 RMB’000 (Note) Consolidated RMB’000 RMB’000 Investments in seven common control entities acquired in 2008 4,249,855 — (4,249,855) — Other assets, net 56,946,250 3,250,572 — 60,196,822 Net assets 61,196,105 3,250,572 (4,249,855) 60,196,822 Share capital Capital reserve Surplus reserves Cumulative translation 13,524,488 15,170,658 5,832,445 2,543,067 (2,543,067) 13,524,488 — (1,848,318) 13,322,340 37,515 (37,515) 5,832,445 difference (170,353) Available-for-sale financial asset revaluation reserve Retained earnings Minority interest 1,556 22,225,569 4,611,742 — — — — (170,353) 1,556 669,990 (407,553) 22,488,006 — 586,598 5,198,340 Total Note: 61,196,105 3,250,572 (4,249,855) 60,196,822 The above adjustments represent the elimination of investments of the Company in the seven common control entities acquired in 2008. 153 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2008 (Continued) The consolidated balance sheet as of December 31, 2007: Group (before 2008 Seven common common control entities Consolidation control business acquired adjustments combinations) RMB’000 in 2008 RMB’000 (Note) Consolidated RMB’000 RMB’000 Net assets 61,016,769 3,521,132 (44,694) 64,493,207 Share capital Capital reserve Surplus reserves Cumulative translation difference Available-for-sale financial asset revaluation reserve Retained earnings Minority interest 13,524,488 15,039,593 5,719,084 10,047 7,547 23,643,388 3,072,622 3,531,947 (3,531,947) 13,524,488 — 2,375,094 17,414,687 32,869 (32,869) 5,719,084 — — — — (50,481) 6,797 419,303 725,725 10,047 7,547 24,012,210 3,805,144 Total Note: 61,016,769 3,521,132 (44,694) 64,493,207 The above adjustments represent: (i) the increase of the capital reserve of the Company for acquisitions of the net assets of the seven common control entities acquired in 2008; and (ii) the elimination of unrealized profit on inventories among the Group and these acquirees. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 154 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2007 Acquisition of Lanzhou Aluminum Co., Limited (“Lanzhou Aluminum”) Prior to April 24, 2007, the Company held 28% equity interest in Lanzhou Aluminum, a company listed on the SSE and principally engaged in the manufacturing and trading of primary aluminum products. On April 24, 2007, the Company issued 632 million A shares in exchange for the remaining 72% equity interest owned by the other shareholders of Lanzhou Aluminum. Upon the effective date of this acquisition, Lanzhou Aluminum became a wholly-owned subsidiary of the Company and was delisted on April 30, 2007. The acquired business contributed revenue and profit of approximately RMB3,415 million and RMB524 million to the Group, prior to intra-group elimination with the Group, for the period from the date of acquisition to December 31, 2007, respectively. If the acquisition occurred on January 1, 2007, the acquired business would have contributed unaudited revenue and unaudited profit for the year of approximately RMB4,510 million and RMB672 million to the Group, prior to intra-group elimination with the Group, respectively. Details of net assets acquired and goodwill are as follows: Acquisition costs- fair value of purchase consideration (Note (a)) Less: proportionate share of fair value of net identifiable assets acquired (Note (b)) Goodwill (Note (c)) RMB’000 4,324,319 (2,400,060) 1,924,259 155 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2007 (Continued) Acquisition of Lanzhou Aluminum (Continued) Notes: (a) The fair value of purchase consideration was determined by reference to the proportionate interest in the fair value of Lanzhou Aluminum as of April 24, 2007. (b) The fair values of the assets and liabilities arising from the acquisition approximated their carrying amounts and are as follows: Bank balances and cash Property, plant and equipment (Note 7) Land use rights Available-for-sale financial assets (Note 11) Inventories Receivables and prepayments Other current assets Deferred income tax assets (Note 12) Other non-current assets Payables and accruals Borrowings Other liabilities Minority interest Net identifiable assets Percentage of interest acquired RMB’000 313,662 5,739,957 78,150 5,000 823,792 766,983 19,380 15,477 1,513 (634,435) (3,169,662) (226,234) (400,165) 3,333,418 72% Proportionate share of fair value of net identifiable assets acquired 2,400,060 Cash and cash equivalents from the subsidiary acquired 313,662 (c) Goodwill arising from this acquisition is attributable to the high profitability of the acquired business and the significant synergies expected to arise after the acquisition. 156 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Business combinations (Continued) 2007 (Continued) Acquisition of Baotou Aluminum Co., Limited (“Baotou Aluminum”) On December 28, 2007, the Company acquired 100% of the equity interest of Baotou Aluminum, a company listed on the SSE and principally engaged in the manufacturing and trading of primary aluminum products. The Company issued 638 million A shares in exchange for all the shares of Baotou Aluminum. Baotou Aluminum was delisted on December 26, 2007. Upon the effective date of this acquisition, Baotou Aluminum became a wholly-owned subsidiary of the Company. As both the Company and Baotou Aluminum are under the common control of Chinalco before and after the acquisition, this transaction is accounted for as a common control business combination. The Company adopted merger accounting. The operating results and equity changes for 2007 were restated in 2007 financial statements. Acquisitions of minority interest Acquisition of minority interest in Chalco Ruimin On April 2, 2007, Chinalco paid cash of RMB110.810 million for the acquisition of 25% equity interest owned by a minority shareholder of Chalco Ruimin. The relevant share of the carrying amount of the net assets acquired was RMB111.660 million. As Chalco Ruimin is one of the entities acquired under common control during the year described above, the transaction is regarded as acquisition of minority interest during the year. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 157 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations and acquisitions of minority interest (Continued) Acquisitions of minority interest (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Acquisition of minority interest in Shandong Aluminum Industry Co., Ltd. (“Shandong Aluminum”) Prior to April 24, 2007, the Company held a 71.43% equity interest in Shandong Aluminum, a company listed on the SSE. On April 24, 2007, the Company issued 605 million A shares in exchange for the remaining 28.57% equity interest owned by the other shareholders of Shandong Aluminum. Upon the effective date of this acquisition, Shandong Aluminum became a wholly-owned subsidiary of the Company and was delisted on April 30,2007. The fair value of purchase consideration was determined by reference to the proportionate interest in fair value of Shandong Aluminum. The difference between the consideration paid and the relevant share of the carrying amount of net assets of the subsidiary acquired amounted to approximately RMB3,058 million is deducted from equity. Acquisition of minority interest in Lanzhou Aluminum Hewan Power Generation Company Limited (“Hewan Power”) Hewan Power was 51% owned by Lanzhou Aluminum at the time of the Group’s acquisition of Lanzhou Aluminum. On November 23, 2007, the Company acquired the remaining 49% equity interest in Hewan Power. Upon the effective date of this acquisition, Hewan Power became a wholly-owned subsidiary of the Company. The cash paid for the acquisition was RMB497 million. The difference between the consideration paid and the relevant share of the carrying amount of net assets acquired amounted to approximately RMB97 million is deducted from equity. 158 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets Group Computer software and Goodwill Mining rights RMB’000 RMB’000 others RMB’000 Total RMB’000 As of January 1, 2007 Cost, as previously stated 406,686 444,423 6,680 857,789 Seven common control entities acquired in 2008 (Note 5) — — 7,606 7,606 Cost, as restated 406,686 444,423 14,286 865,395 Accumulated amortization, as previously stated Seven common control entities acquired in 2008 (Note 5) Accumulated amortization, — — (141,199) (445) (141,644) — (2,258) (2,258) as restated — (141,199) (2,703) (143,902) Net book amount 406,686 303,224 11,583 721,493 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 159 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets (Continued) Group Computer software and Goodwill Mining rights RMB’000 RMB’000 others RMB’000 Total RMB’000 Year ended December 31, 2007 Opening net book amount 406,686 303,224 11,583 721,493 Acquisition of a subsidiary (Note 5) Additions Amortization 1,924,259 — — — 29,547 (24,700) — 1,924,259 43,989 (6,356) 73,536 (31,056) Closing net book amount 2,330,945 308,071 49,216 2,688,232 As of December 31, 2007 Cost, as previously stated 2,330,945 405,510 46,938 2,783,393 Seven common control entities acquired in 2008 (Note 5) — — 9,061 9,061 Cost, as restated 2,330,945 405,510 55,999 2,792,454 Accumulated amortization, as previously stated Seven common control entities acquired in 2008 (Note 5) Accumulated amortization, as restated — — — (97,439) (3,590) (101,029) — (3,193) (3,193) (97,439) (6,783) (104,222) Net book amount 2,330,945 308,071 49,216 2,688,232 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 160 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets (Continued) Group Computer software and Goodwill Mining rights RMB’000 RMB’000 others RMB’000 Total RMB’000 Year ended December 31, 2008 Opening net book amount 2,330,945 308,071 Acquisition of a subsidiary 31,790 Additions Amortization — — — 228,763 (25,058) 49,216 1,363 69,486 (27,697) 2,688,232 33,153 298,249 (52,755) Closing net book amount 2,362,735 511,776 92,368 2,966,879 As of December 31, 2008 Cost Accumulated amortization 2,362,735 — 634,272 (122,496) 127,652 (35,284) 3,124,659 (157,780) Net book amount 2,362,735 511,776 92,368 2,966,879 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 161 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets (Continued) Company Computer software and Goodwill Mining rights RMB’000 RMB’000 others RMB’000 Total RMB’000 As of January 1, 2007 Cost Accumulated amortization 406,686 — 444,423 (141,199) 6,680 (445) 857,789 (141,644) Net book amount 406,686 303,224 6,235 716,145 Year ended December 31, 2007 Opening net book amount 406,686 303,224 6,235 716,145 Transfer from a subsidiary to a branch Additions Amortization 1,924,259 — — — 29,547 (24,700) — 1,924,259 35,578 (4,105) 65,125 (28,805) Closing net book amount 2,330,945 308,071 37,708 2,676,724 As of December 31, 2007 Cost Accumulated amortization 2,330,945 — 405,510 (97,439) 41,101 (3,393) 2,777,556 (100,832) Net book amount 2,330,945 308,071 37,708 2,676,724 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 162 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets (Continued) Company Computer software and Goodwill Mining rights RMB’000 RMB’000 others RMB’000 Total RMB’000 Year ended December 31, 2008 Opening net book amount 2,330,945 308,071 37,708 2,676,724 Transfer from a branch to a subsidiary Transfer from a subsidiary to a branch Additions Amortization — — — — (40,078) (219) (40,297) — 128,652 (14,389) 2,914 66,179 (23,510) 2,914 194,831 (37,899) Closing net book amount 2,330,945 382,256 83,072 2,796,273 As of December 31, 2008 Cost Accumulated amortization 2,330,945 — 479,133 (96,877) 112,712 (29,640) 2,922,790 (126,517) Net book amount 2,330,945 382,256 83,072 2,796,273 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 163 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Intangible assets (Continued) Impairment tests for goodwill Goodwill is allocated to the Group’s CGUs and groups of CGUs identified according to business segments. A segment level summary of goodwill allocation is presented below: Qinghai Branch Guangxi Branch Lanzhou Branch Jiaozuo AES Wanfang Power Co., Ltd. (“Wanfang Power”) 2008 2007 Alumina RMB’000 Primary aluminum RMB’000 Alumina RMB’000 Primary aluminum RMB’000 — 217,267 — 217,267 189,419 — 189,419 — — 1,924,259 — 1,924,259 — 31,790 — — 189,419 2,173,316 189,419 2,141,526 The recoverable amounts of CGUs or group of CGUs are determined based on value-in-use calculation. These calculation are based on five-year financial budgets approved by management using cash flow forecast. A growth rate of 2% is applied for cash flows beyond the five-year period, as this rate does not exceed the long-term average growth rate for respective businesses and is consistent with forecast information contained in industry reports. Key assumptions applied in the impairment tests include the expected product price, demand for the products, product cost and related expenses. Management determined these key assumptions based on past performance and its expectations on market development. Management adopts a pre-tax rate of 11% that can reflect specific risks related to CGUs and groups of CGUs as discount rates. The assumptions above are used in analyzing recoverable amounts of CGUs and groups of CGUs within business segments. As of December 31, 2007 and 2008, no goodwill was impaired based on impairment tests of the Group T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I above. 164 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment Group Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1, 2007 Cost, as previously stated 20,216,530 50,017,564 2,121,513 479,908 4,457,316 77,292,831 Seven common control entities acquired in 2008 (Note 5) 1,644,873 4,065,403 133,516 88,159 1,380,406 7,312,357 Cost, as restated 21,861,403 54,082,967 2,255,029 568,067 5,837,722 84,605,188 Accumulated depreciation and impairment, as previously stated (5,833,264) (19,220,223) (1,029,490) (169,502) (16,876) (26,269,355) Seven common control entities acquired in 2008 (Note 5) (292,526) (865,252) (57,397) (42,223) — (1,257,398) Accumulated depreciation and impairment, as restated (6,125,790) (20,085,475) (1,086,887) (211,725) (16,876) (27,526,753) Net book amount 15,735,613 33,997,492 1,168,142 356,342 5,820,846 57,078,435 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 165 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) Group Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Year ended December 31, 2007 Opening net book amount 15,735,613 33,997,492 1,168,142 356,342 5,820,846 57,078,435 Acquisition of a subsidiary (Note 5) Additions 718,659 1,130,745 32,684 97,928 Transfers/Reclassification 2,425,425 4,777,551 115,170 93,638 625,346 49 3,775,334 5,739,957 20,158 11,390,190 11,634,598 119,087 (7,947,409) — Depreciation (806,677 ) (3,726,123) (200,941 ) (87,467) — (4,821,208) Impairment loss (Note 28) (63) (9,740) Disposals (134,445 ) (192,826) (32) (4,674) (46) (1,310) (3,368) (13,249) — (333,255) Closing net book amount 17,971,196 36,075,027 1,796,649 406,813 13,035,593 69,285,278 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 166 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) Group Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of December 31, 2007 Cost, as previously stated 23,227,463 54,553,388 2,992,450 612,950 11,704,765 93,091,016 Seven common control entities acquired in 2008 (Note 5) 1,770,268 5,228,067 141,645 88,299 1,351,072 8,579,351 Cost, as restated 24,997,731 59,781,455 3,134,095 701,249 13,055,837 101,670,367 Accumulated depreciation and impairment, as previously stated (6,695,490) (22,569,710) (1,276,864) (250,476) (20,244) (30,812,784) Seven common control entities acquired in 2008 (Note 5) (331,045) (1,136,718) (60,582) (43,960) — (1,572,305) Accumulated depreciation and impairment, as restated (7,026,535) (23,706,428) (1,337,446) (294,436) (20,244) (32,385,089) Net book amount 17,971,196 36,075,027 1,796,649 406,813 13,035,593 69,285,278 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 167 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) Group Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Year ended December 31, 2008 Opening net book amount 17,971,196 36,075,027 1,796,649 406,813 13,035,593 69,285,278 Acquisitions of subsidiaries (Note 9) Additions 709,384 1,989,700 37,625 338,762 22,548 30,003 23,492 60,058 2,805,182 13,015 18,857,859 19,277,264 Transfers/Reclassification 2,591,350 8,633,962 (25,279) (95,687) (11,104,346) — Depreciation (886,088 ) (4,106,954) (213,087 ) (63,724) Impairment loss (Note 28) Disposals — (18,517) (1,334) (57,007) — — (5,464) (1,426) — — — (5,269,853) (1,334) (82,414) Closing net book amount 20,404,950 42,872,156 1,605,370 282,483 20,849,164 86,014,123 As of December 31, 2008 Cost 28,549,306 71,095,600 3,046,370 578,339 20,869,408 124,139,023 Accumulated depreciation and impairment (8,144,356) (28,223,444) (1,441,000) (295,856) (20,244) (38,124,900) Net book amount 20,404,950 42,872,156 1,605,370 282,483 20,849,164 86,014,123 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 168 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) Company Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1, 2007 Cost 14,200,886 35,688,431 1,913,039 347,176 3,731,414 55,880,946 Accumulated depreciation and impairment (4,702,159) (15,811,555) (960,764) (130,554) (16,876) (21,621,908) Net book amount 9,498,727 19,876,876 952,275 216,622 3,714,538 34,259,038 Year ended December 31, 2007 Opening net book amount 9,498,727 19,876,876 Additions 4,536 74,803 Transfers/Reclassification 1,612,055 2,630,368 952,275 50,151 536,523 216,622 3,714,538 34,259,038 8,848 7,353,083 7,491,421 110,801 (4,889,747) — Transfers from subsidiaries to branches (Notes 9 and 10(b)) 1,966,171 3,807,056 186,488 2,386 1,334,641 7,296,742 Depreciation Impairment loss Disposals (523,120) (2,418,857) (163,175) (55,843) — (3,160,995) — — — (59,536) (141,901) (1,424) — (348 ) (3,368) (3,368) — (203,209) Closing net book amount 12,498,833 23,828,345 1,560,838 282,466 7,509,147 45,679,629 As of December 31, 2007 Cost 18,363,831 43,530,611 2,763,587 479,763 7,529,391 72,667,183 Accumulated depreciation and impairment (5,864,998) (19,702,266) (1,202,749) (197,297) (20,244) (26,987,554) Net book amount 12,498,833 23,828,345 1,560,838 282,466 7,509,147 45,679,629 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 169 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Company Office and Plant and Transportation other Construction- Buildings machinery facilities equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Year ended December 31, 2008 Opening net book amount 12,498,833 23,828,345 1,560,838 282,466 7,509,147 45,679,629 Additions 381 19,560 Transfers/Reclassification 1,887,706 6,291,858 10,171 (50,539) 4,433 9,353,005 9,387,550 (52,134) (8,076,891) — Transfers from subsidiaries to branches (Notes 9 and 10(b)) 586,065 931,217 46,791 8,497 3,133,446 4,706,016 Transfers from branches to subsidiaries (Notes 9 and 10(b)) (75,628) (62,041) (75,699) (5,191) (644,590) (863,149) Depreciation Disposals (642,371 ) (2,765,330) (168,404 ) (43,672) (12,335) (47,356) (459 ) (222) — — (3,619,777) (60,372) Closing net book amount 14,242,651 28,196,253 1,322,699 194,177 11,274,117 55,229,897 As of December 31, 2008 Cost 20,990,377 50,731,886 2,595,764 414,899 11,294,361 86,027,287 Accumulated depreciation and impairment (6,747,726) (22,535,633) (1,273,065) (220,722) (20,244) (30,797,390) Net book amount 14,242,651 28,196,253 1,322,699 194,177 11,274,117 55,229,897 170 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Property, plant and equipment (Continued) Note: At December 31, 2008, the Group uses property, plant and equipment, net of RMB900.230 million (2007: RMB1,429.039 million) in pledges for loans. Please refer to Note 22 for details. For the year ended December 31, 2008, depreciation expenses of RMB4,693.943 million, RMB5.260 million, RMB225.482 million and RMB345.168 million (2007: RMB4,330.897 million, RMB4.386 million, RMB218.043 million, and RMB267.882 million) were recorded in cost of sales, selling expenses, general and administrative expenses and inventories, respectively. Interest expense of RMB920.394 million (2007: RMB372.873 million) arising from borrowings for the construction of property, plant and equipment during the year were capitalized and are included in ‘Additions’ in property, plant and equipment. The annual capitalization rate of approximately 6.77% (2007: 5.68%) was used. During 2008, impairment loss of RMB10.490 million (2007: RMB113.058 million) was included in the computation of disposal gain or loss on related property, plant and equipment. 8. Land use rights Details of land use rights are as follow: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 95,157 103,532 — — In Hong Kong, held on: Leases between 10 to 50 years Outside Hong Kong, held on: Leases less than 10 years 16,285 42,036 16,285 42,036 Leases between 10 to 50 years 1,618,926 1,314,929 370,411 198,902 Leases over 50 years 182 184 182 184 1,730,550 1,460,681 386,878 241,122 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 171 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries Investment, at cost: Listed securities in the PRC (Note) Unlisted securities Company 2008 2007 RMB’000 RMB’000 223,782 — 10,405,682 7,099,198 10,629,464 7,099,198 Market value of listed securities (Note) 1,030,458 N/A Note: Listed securities in 2008 represent investments in Jiaozuo Wanfang Aluminum Manufacturing Co., Ltd. (“Jiaozuo Wanfang”), a company with its A shares listed on the SSE in the PRC. The Company has determined that de facto control over Jiaozuo Wanfang was established in 2008. Jiaozuo Wanfang and its subsidiary, Shanghai Wanfang Aluminum Trading and Development Co., Ltd. (“Wanfang Trading”) are therefore consolidated from January 1, 2008 onwards. The fair value of net identifiable assets acquired on January 1, 2008 approximated its carrying amount. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 172 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) The following is a list of principal subsidiaries as of December 31, 2008: (a) Subsidiaries acquired from common control business combinations Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Baotou Aluminum PRC Limited liability RMB500,000,000 Manufacture and distribution of 100% — (包頭鋁業有限公司) (Note (i)) company primary aluminum, aluminum alloy and related fabrication products and carbon products Wuxi Xinbao Aluminum PRC Limited liability RMB2,000,000 Sales of metal materials, carbon — 90% Co., Ltd. (無錫新包鋁業有限公司) (Note (ii)) company products, fire-resisting and heat preservation materials and chemical products Longxing Aluminum PRC Limited liability RMB 988,880,000 Manufacture and distribution of 100% — (蘭州連城隴興鋁業 有限責任公司) (Note (iii)) company primary aluminum, other aluminum products and carbon products; export activities of self -manufactured products Shanghai Changle Industrial PRC Limited liability RMB10,000,000 Trading of nonferrous materials, — 60% and Trading Co., Ltd. (“Shanghai Changle”) (上海暢樂工貿有限責任公司) (Note (iv)) company metal materials, machinery and aluminum smelting materials, etc. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Chalco Ruimin PRC Limited liability RMB 416,244,027 Manufacture of aluminum, 75% (中鋁瑞閩鋁板帶有限公司) company magnesium and related alloy products, export activities Huaxi Aluminum PRC Limited liability RMB604,360,000 Manufacture and distribution of 56.86% (華西鋁業有限責任公司) company primary aluminum, other aluminum products, mechanical and electrical products and equipment — — 173 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (a) Subsidiaries acquired from common control business combinations (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Chalco Southwest Aluminum PRC Limited liability RMB 540,000,000 Manufacture and distribution of 60% — (中鋁西南鋁板帶有限公司) company metal materials (excluding precious metals), sales of general machinery and equipment Chalco Southwest Aluminum PRC Limited liability RMB50,000,000 Rolling aluminum and aluminum 100% — Cold Rolling (中鋁西南鋁冷連軋板帶 有限公司) company alloy processing, development of high precision aluminum strip production technology, import and export activities on goods and technology Henan Aluminum PRC Limited liability RMB 932,460,000 Manufacture and distribution of 84.02% — (中鋁河南鋁業有限公司) company aluminum and alloy related products The English names of subsidiaries represent the best effort by the management of the Group in translating their Chinese names as they do not have any official English names. Notes: (i) In May 2008, Baotou Aluminum was deregistered and its net assets was injected into Baotou Aluminum Co., Ltd., a newly established entity. The registered capital of Baotou Aluminum is changed to RMB500 million. (ii) In December 2008, Baotou Aluminum divested its interests in Wuxi Xinbao Aluminum Co., Ltd.. The deregistration of Wuxi Xinbao Aluminum Co., Ltd is in process. (iii) The assets and liabilities of Longxing Aluminum were injected into Liancheng Branch of the Company on November 30, 2008. The deregistration of Longxing Aluminum is in process. (iv) Shanghai Changle, a subsidiary of Longxing Aluminum, was liquidated in November 2008. The deregistration is in process. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 174 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect China Aluminum International PRC Limited liability RMB200,000,000 Import and export activities 90.50% — Trading Co., Ltd. (“Chalco Trading”) (中鋁國際貿易有限公司) company Chalco Foshan Trading Co., Ltd. PRC Limited liability RMB10,000,000 Distribution of nonferrous (中鋁佛山貿易有限公司) company materials and mineral products Chalco Chongqing Trading Co., Ltd.PRC Limited liability RMB3,000,000 Distribution of nonferrous materials (中鋁重慶銷售有限公司) company and mineral products China Aluminum International PRC Limited liability RMB6,000,000 Provision of transportation services — — — 89.60% 90.05% 88.69% Shipping and Forwarding company (Beijing) Corp., Ltd. (中鋁國貿(北京)貨運有限公司) Shanghai Chalco Kailin PRC Limited liability RMB3,000,000 Distribution of nonferrous materials — 89.60% Aluminum Co., Ltd. company and mineral products (上海中鋁凱林鋁業有限公司) Chalco Qinghai Western Int’l PRC Limited liability RMB15,000,000 Direct and indirect import and — 81.45% Trading Co., Ltd. (中鋁青海西部國際貿易 有限公司) company export of goods and services Chalco Shandong International PRC Limited liability RMB10,000,000 Import and export activities — 81.90% Trading Co. Ltd. company (中鋁山東國際貿易有限公司) Chalco Henan International PRC Limited liability RMB3,000,000 Import and export activities — 81.90% Trading Co. Ltd. company (中鋁河南國際貿易有限公司) Shenyang China Aluminum PRC Limited liability RMB10,000,000 Distribution of nonferrous materials — 90.50% Trading Co., Ltd. (瀋陽中鋁貿易有限公司) company and mineral products T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 175 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Chalco Wuhan Kaihua Aluminum PRC Limited liability RMB5,000,000 Distribution of nonferrous materials — 90.50% Trading Co., Ltd. (中鋁武漢凱華鋁材銷售 有限公司) company and mineral products Chalco Foshan Aluminum PRC Limited liability RMB5,010,000 Distribution of nonferrous materials — 90.50% Trading Co., Ltd. company and mineral products (中鋁佛山鋁材銷售有限公司) Chalco Chengdu Aluminum PRC Limited liability RMB5,000,000 Distribution of nonferrous materials — 90.50% Trading Co., Ltd. company and mineral products (中鋁成都鋁材銷售有限公司) Shanghai Chalco Kaihua PRC Limited liability RMB5,000,000 Distribution of nonferrous materials — 90.50% Aluminum Trading Co., Ltd. company and mineral products (上海中鋁凱華鋁材銷售 有限公司) Chalco Kaihua (Beijing) PRC Limited liability RMB5,000,000 Distribution of nonferrous materials and — 90.50% Aluminum Trading Co., Ltd. company mineral products (中鋁凱華(北京)鋁材銷售 有限公司) Shanxi Longmen Aluminum PRC Limited liability RMB35,977,626 Manufacture and distribution of 55% — Co., Ltd. (山西龍門鋁業有限公司) company primary aluminum Shanxi Huatai Carbon Co., Ltd. PRC Limited liability RMB42,000,000 Manufacture and distribution of 93.81% 4.53% (山西華泰炭素有限公司) company carbon related products Shanxi Aluminum Factory PRC Limited liability RMB11,820,000 Manufacture of backup cathode and 72.57% — Carbon Plant (山西鋁廠碳素廠) company anode carbon blocks used in manufacture of primary aluminum T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 176 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect The Institute of Shandong Qiyun PRC Limited liability RMB9,900,000 Provision of design and consultation 100% — Colored Metallurgy Engineering company service of nonferrous metallurgy Co., Ltd. (山東齊韻有色冶金工程設計院 有限公司) engineering projects and processing quotation consultation Henan Huahui Colored PRC Limited liability RMB5,000,000 Provision of design service of 100% — Engineering & Design Co., Ltd. company nonferrous metallurgy engineering (河南華慧有色工程設計 有限公司) projects and processing quotation consultation Zibo Wancheng Industrial PRC Limited liability RMB13,830,000 Provision of repairs and maintenance 100% Trading Co., Ltd. (淄博萬成工貿有限公司) company services for electrical plant and machinery Zhengzhou Hicer Hitech PRC Limited liability RMB5,000,000 Manufacture and distribution of 80% Ceramics Co., Ltd. (鄭州海賽高科技陶瓷 有限責任公司) company alumina ceramic products China Aluminum Nanhai PRC Limited liability RMB100,000,000 Processing and distribution of 100% Alloy Co., Ltd. (中鋁南海合金有限公司) company nonferrous metal Shanxi Huasheng Aluminum PRC Limited liability RMB1,000,000,000 Manufacture and distribution of 51% Co., Ltd. (山西華聖鋁業有限公司) company primary aluminum, aluminum alloy and carbon-related products Shanxi Huaze Aluminum and PRC Limited liability RMB1,500,000,000 Manufacture and distribution of 60% Power Co., Ltd. (“Shanxi Huaze”) (山西華澤鋁電有限公司) company primary aluminum and anode carbon products and electricity generation and supply — — — — — 177 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Shandong Aluminum Electronic PRC Limited liability RMB20,000,000 Manufacture and distribution of 75% Technology Co., Ltd. company electronic products (山東山鋁電子技術有限公司) Lanzhou Aluminum PRC Limited liability RMB1,500,000 Provision of construction services 93.33% Construction & Installation company Co., Ltd. (蘭州鋁業建築安裝有限公司) Hewan Power PRC Limited liability RMB816,330,000 Thermal power generation and N/A (蘭州鋁業河灣發電有限公司) company (Note (i)) development and utilization of power generation by-products Fushun Aluminum Co., Ltd. PRC Limited liability RMB500,000,000 Aluminum smelting, manufacture and 100% (“Fushun Aluminum”) (撫順鋁業有限公司) company distribution of nonferrous metals Fushun Fluorizate Salt Co., Ltd. PRC Limited liability RMB30,000,000 Manufacture of metal structures, 100% (撫順氟化鹽有限公司) company development of fluorizate salt related technology Zunyi Aluminum Co., Ltd. PRC Limited liability RMB260,000,000 Manufacture and distribution of 61.29% (遵義鋁業股份有限公司) company primary aluminum Chalco Zunyi Alumina PRC Limited liability Registered capital Manufacture and distribution of 67% Co., Ltd. (“Zunyi Alumina”) company RMB1,400,000,000 alumina (中國鋁業遵義氧化鋁有限公司) Paid-in-capital RMB840,000,000 — — — — — — — Chongqing Qianbei Aluminum PRC Limited liability RMB1,000,000 Distribution of nonferrous metal — N/A Trading Co., Ltd. company materials, nonferrous metal (重慶黔北鋁銷售公司) (Note (ii)) and chemical products and materials Shandong Huayu Aluminum and PRC Limited liability RMB1,627,696,671 Manufacture and distribution of 55% — Power Co., Ltd. (山東華宇鋁電有限公司) company primary aluminum T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 178 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Gansu Hualu Aluminum PRC Limited liability RMB529,236,439 Manufacture and distribution of 51% — Co., Ltd. (甘肅華鷺鋁業有限公司) company primary aluminum Baiyin Ruiyuan Metal Co., Ltd. PRC Limited liability RMB4,800,000 Processing and distribution of — 48.87% (白銀瑞園金屬有限公司) company light nonferrous products China Aluminum Taiyue Mining PRC Limited liability Registered capital Acquisition and distribution of 51% — Co., Ltd. (中鋁太嶽礦業 company RMB60,000,000 bauxite and iron ore mines 有限公司) Paid-in-capital RMB20,600,000 Chalco Hong Kong Ltd. Hong Kong Limited liability HKD849,940,471 Oversea investments and alumina 100% — (中國鋁業香港有限公司) company import and export activities Chalco Singapore Pte. Ltd. The Republic of Limited liability Singapore Dollar1 Investment holding (中國鋁業新加坡有限公司) Singapore company Chalco Australia Holdings The Limited liability AUD1 Investment holding Pty. Ltd. Commonwealth company (中國鋁業澳大利亞控股 of Australia 有限公司) (“Australia”) Chalco Australia Pty. Ltd. Australia Limited liability AUD2 Manufacture of alumina (中國鋁業澳大利亞有限公司) company Aurukun Alumina Refinery Australia Limited liability AUD1 Exploration and development of Pty Ltd. (奧魯昆氧化鋁有限公司) company bauxite mines — — — — 100% 100% 100% 100% China Aluminum Mining Co., Ltd. PRC Limited liability RMB1,000,000,000 Manufacture, acquisition and 100% — (“Chalco Mining”) company distribution of bauxite mines, (中鋁礦業有限公司) (Note (iii)) limestone ore, aluminum magnesium ore and related nonferrous metal products T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 179 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Place of incorporation and Registered and Business nature and scope of Equity interest held Name operation Legal status fully paid capital operations Direct Indirect Ruzhou Jinhua Mining Co., Ltd. PRC Limited liability RMB6,000,000 Exploration of dewalquite, — 51% (汝州金華礦業有限公司) company development of fluorizate salt (Note (iv)) related technology Qingdao Light Metals Co., Ltd. PRC Limited liability RMB418,000,000 Processing and distribution of 100% — (青島輕金屬有限責任公司) company aluminum and related products (Note (iii)) and import, processing and utilization of recycled nonferrous metals Qingdao Huaye Industrial and PRC Limited liability RMB6,000,000 Processing and distribution of — 100% Trading Co., Ltd. (青島華燁工貿有限公司) company aluminum and related products and import, processing and utilization of recycled nonferrous metals Jiaozuo Wanfang (焦作萬方股份有限公司) Wanfang Trading PRC PRC Limited liability RMB480,176,000 Aluminum smelting, manufacture 29% — company and distribution of nonferrous metals Limited liability RMB10,000,000 Distribution of nonferrous metals, — 26.10% (上海萬方鋁業經貿發展 company 有限公司) metal materials, mechanical equipment, instrumentation, construction materials, raw materials for aluminum smelting, etc. Wanfang Power PRC Limited liability RMB447,580,000 Operations, maintenance and — 29% (焦作愛依斯萬方電力 有限公司 (Note (v)) company repairs of self-used power plants, sales and utilization of electricity The English names of subsidiaries represent the best effort by the management of the Group in translating their Chinese names as they do not have any official English names. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 180 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Investments in subsidiaries (Continued) (b) Subsidiaries acquired in non-common control business combinations and obtained through other methods (Continued) Notes: (i) The assets and liabilities of Hewan Power were injected into Lanzhou Branch of the Company on January 1, 2008. The legal status of Hewan Power has been deregistered. (ii) Chongqing Qianbei Aluminum Trading Co., Ltd. was deregistered in June 2008. (iii) The assets and liabilities of Mining Branch and Qingdao Secondary Aluminum Alloy Branch of the Company were injected into Chalco Mining and Qingdao Light Metals Co., Ltd., newly established companies, on January 1 and August 6, 2008, respectively. (iv) Chalco Mining, a subsidiary of the Company, acquired 51% equity interest in Ruzhou Jinhua Mining Co., Ltd. in May 2008, with acquisition cost amounted to RMB3.060 million. Net cash outflow arising from this subsidiary acquisition amounted to RMB2.958 million. (v) On December 1, 2008, Jiaozuo Wanfang acquired the remaining equity interest in Wanfang Power, and Wanfang Power then became a wholly-owned subsidiary of Jiaozuo Wanfang. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 181 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (a) Interests/Investments in jointly controlled entities Movements in interests/investments in jointly controlled entities are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 636,296 63,882 575,794 63,883 654,516 63,882 590,633 63,883 Beginning of the year Additional investments Share of net profit/ (loss) under equity method 1,672 (3,381) — — End of the year 701,850 636,296 718,398 654,516 Jointly controlled entities of the Group, all of which are unlisted, are as follows: Place of incorporation Equity Registered and interest Name and operation Legal status Principal activities fully paid capital Shanxi Jinxin Aluminum PRC Limited liability Manufacture and RMB20,000,000 Co., Ltd. (山西晉信鋁業有限公司) company distribution of primary aluminum held 50% Guangxi Huayin Aluminum PRC Limited liability Manufacture and RMB2,122,815,000 33% Co. Ltd. (廣西華銀鋁業有限公司) company distribution of alumina The English names of jointly controlled entities represent the best effort by the management of the Group in translating their Chinese names as they do not have any official English names. All investments are directly held by the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 182 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (Continued) (a) Interests/Investments in jointly controlled entities (Continued) The Group’s shares of interests in its jointly controlled entities are as follows: Assets: Non-current assets Current assets Liabilities: Non-current liabilities Current liabilities Net assets Income Expenses 2008 2007 RMB’000 RMB’000 2,244,869 1,796,704 743,740 604,335 2,988,609 2,401,039 (616,141) (17,618) (1,670,618) (1,747,125) (2,286,759) (1,764,743) 701,850 636,296 610,699 (609,027) 23,922 (27,303) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Net profit/(loss) 1,672 (3,381) Proportionate interests in jointly controlled entities’ capital commitments 199,650 907,802 There are no material contingent liabilities relating to the Group’s interests in the jointly controlled entities and the jointly controlled entities themselves. 183 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (Continued) (b) Interests/Investments in associates Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Unlisted securities 109,815 75,600 105,600 75,600 Listed securities in the PRC (Note 9) — 247,454 Proportionate share of net assets (5,006) 230,866 — — 247,454 — 104,809 553,920 105,600 323,054 Market value of listed securities N/A 6,242,625 N/A 6,242,625 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 184 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (Continued) (b) Interests/Investments in associates(Continued) Movements in interests/investments in associates are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Beginning of the year Additional investments 553,920 30,000 1,273,707 — 323,054 30,000 1,091,492 — Transfers from associates to subsidiaries Share of net profit under equity method Other equity movement Cash dividends declared Disposal of an associate (461,075) (933,755) (247,454) (768,438) 10,045 241,945 — 168 (28,081) (27,850) — (295) — — — — — — — — End of the year 104,809 553,920 105,600 323,054 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 185 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (Continued) (b) Interests/Investments in associates (Continued) As of December 31, 2008, associates of the Group are as follows: Place of incorporation Equity Registered and interest Name and operation Legal status Principal activities fully paid capital Jiaozuo Coal Group PRC Limited liability Coal production RMB252,000,000 held 30% Xinxiang (Zhaogu) Energy Corporation Co., Ltd. (焦作煤業集團新鄉(趙固) 能源有限責任公司) company ABC-CA Fund Management PRC Limited liability Investments RMB200,000,000 15% Co., Ltd. (農銀匯理基金管理有限公司) (Note (i)) company Jiaozuo Wanfang Industry PRC Limited liability Sales of construction RMB10,000,000 8.7% Co., Ltd. (焦作市萬方實業有限公司) (Note (ii)) company materials and other goods The English names of certain associates represent the best effort by the management of the Group in translating their Chinese names as they do not have any official English names. Notes: (i) The Company exercises significant influence on ABC-CA Fund Management Co., Ltd. through its appointment of a director into the board. (ii) Jiaozuo Wanfang Industry Co., Ltd. is an associate of Jiaozuo Wanfang, a subsidiary of the Company, which Jiaozo Wanfang holds 30% direct equity interest in this investee. All the other investments are directly held by the Company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 186 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Interests/Investments in jointly controlled entities/associates (Continued) (b) Interests/Investments in associates (Continued) The Group’s shares of interests in its associates are as follows: Assets Liabilities Revenue Profit 11. Available-for-sale financial assets 2008 2007 RMB’000 RMB’000 539,437 434,628 66,016 10,045 1,282,265 728,345 1,815,736 241,945 Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Beginning of the year Acquisition of subsidiaries Additions Transfer from a subsidiary to a branch Disposals 40,113 10,100 — — — 18,182 5,000 2,500 — (56) Fair value changes (11,499) 14,487 7,000 — — — — — — — 2,000 5,000 — — End of the year 38,714 40,113 7,000 7,000 Available-for-sale financial assets are denominated in RMB. Except for the investment in China Pacific Insurance (Group) Co., Ltd., which is stated at fair value, all the other available-for-sale financial assets are unquoted equity securities in which no quoted market prices are available in the PRC. They are stated at cost as their fair value cannot be reliably estimated and the portion of such assets is not material to the Group’s consolidated financial statements. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 187 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same tax authority. The offset amounts are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Deferred income tax assets: — Deferred income tax asset to be recovered after more than 12 months — Deferred income tax asset to be recovered within 12 389,961 361,920 215,740 167,401 months 308,543 200,253 134,596 106,469 Sub-total 698,504 562,173 350,336 273,870 Deferred income tax liabilities: — Deferred income tax liabilities to be settled after more than 12 months 48,363 160,183 — 138,164 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I — Deferred income tax liabilities to be settled within 12 months Sub-total Total 188 5,405 12,277 53,768 172,460 — — 8,980 147,144 644,736 389,713 350,336 126,726 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax (Continued) The gross movement on the deferred income tax is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 389,713 (49,654) 339,810 15,477 — — — — 1,725 (2,173) 126,726 114,146 — (23,957) 71,067 — — — 209,926 — Beginning of the year Acquisitions of subsidiaries Transfers from branches to subsidiaries Transfers from subsidiaries to branches Recognition in equity Recognition in income statement (Note 29) 302,952 36,599 176,500 (197,346) End of the year 644,736 389,713 350,336 126,726 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 189 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax (Continued) The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Movement of deferred income tax assets: Group Tax deduction on purchases of domestically Reversal Provision for Impairment receivables of property, and plant and Accrued manufactured Deductible Unrealized of asset inventories equipment wages equipment tax losses profit revaluation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1, 2007 68,978 51,682 289,725 37,499 Acquisitions of subsidiaries (Note 5) 2,703 12,774 — — Recognition in income statement (6,388 ) (42,297 ) (217,678 ) 195,563 As of December 31, 2007 Acquisition of a subsidiary 65,293 4,146 22,159 1,352 72,047 233,062 — — — — — — — 52,107 536,880 36,889 — — — 12,826 69,080 (1,290 ) — 15,477 9,816 49,715 69,080 50,817 562,173 — — — 5,498 Recognition in income statement 160,348 (396 ) (68,333 ) 47,235 211,845 (49,715 ) (8,714 ) 2,542 294,812 As of December 31, 2008 229,787 23,115 3,714 280,297 211,845 — 60,366 53,359 862,483 190 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax (Continued) Movement of deferred income tax assets: (Continued) Company Tax deduction on purchases of domestically Reversal Provision for Impairment receivables of property, and plant and Accrued manufactured Deductible Unrealized of asset inventories equipment wages equipment tax losses profit revaluation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1, 2007 29,171 29,105 233,030 — Transfers from subsidiaries to branches 16,416 22,329 — 159,776 Recognition in income statement (3,298 ) (31,745 ) (204,171 ) (14,340 ) As of December 31, 2007 42,289 19,689 28,859 145,436 Transfers from subsidiaries to branches Transfers from branches to subsidiaries Recognition in income 8,117 (322 ) — — 2,189 (1,621 ) — — — — — — — — — 15,515 (5,471 ) 10,044 — — — — — — 15,800 307,106 — 214,036 11,753 (247,272 ) 27,553 273,870 60,761 — 71,067 — (22,014 ) (23,957 ) statement 77,361 3,183 (28,390 ) 116,136 5,860 (10,044 ) (395 ) (430 ) 163,281 As of December 31, 2008 127,445 22,872 1,037 261,572 5,860 — 60,366 5,109 484,261 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 191 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax (Continued) Movement of deferred income tax liabilities: Group Fair value Depreciation changes of of property, Amortization Interest financial plant and of intangible Asset capitalization assets equipment assets revaluation Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1, 2007 Recognition in equity Recognition in income 197,070 — — 2,173 — — — — statement (49,926) 3,297 18,500 1,346 As of December 31, 2007 147,144 Acquisition of a subsidiary Recognition in equity Recognition in income — — 5,470 — (1,725) 18,500 1,346 — — — — 55,152 — statement (13,914) (3,297) 9,498 674 (1,101) (8,140) As of December 31, 2008 133,230 448 27,998 2,020 54,051 217,747 192 — — — — 197,070 2,173 (26,783) 172,460 55,152 (1,725) Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Deferred income tax (Continued) Movement of deferred income tax liabilities: (Continued) Company Depreciation of property, Interest plant and capitalization equipment Total RMB’000 RMB’000 RMB’000 192,960 4,110 (49,926) 147,144 (13,914) — — — — 695 192,960 4,110 (49,926) 147,144 (13,219) As of January 1, 2007 Transfers from subsidiaries to branches Recognition in income statement As of December 31, 2007 Recognition in income statement As of December 31, 2008 133,230 695 133,925 Deductible temporary differences of unrecognized deferred income tax assets relating to deductible tax losses are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Maturity 2008 2009 2010 2011 2012 2013 Total N/A — — 16,270 279,094 397,956 — — — 16,270 279,094 N/A N/A — — — — 2,903 693,320 295,364 2,903 — — — — — N/A — 193 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 13. Other non-current assets/liabilities (a) Other non-current assets T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Prepayment for alumina purchases (Note) 432,525 — — Prepayment for coal purchases Others 196,000 156,578 232,000 114,496 196,000 58,764 — — 85,654 785,103 346,496 254,764 85,654 (b) Other non-current liabilities Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 432,228 261,321 — — — 180,555 178,730 148,297 693,549 180,555 178,730 148,297 Alumina consideration received in advance (Note) Others Note: These amounts represented portions of prepayments made and advances received for alumina to be fulfilled under long-term contracts entered into by Chalco Trading, a subsidiary of the Company. 194 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 14. Inventories, net Raw materials Work-in-progress Finished goods Spare parts Less: provision for Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 7,426,426 5,322,238 7,088,859 1,022,981 5,403,013 4,522,779 4,636,755 896,978 5,346,750 3,432,332 2,668,470 725,389 4,475,127 2,761,466 1,886,248 593,592 20,860,504 15,459,525 12,172,941 9,716,433 inventory obsolescence (984,489) (89,743) (467,223) (61,524) 19,876,015 15,369,782 11,705,718 9,654,909 Movements on the provision for inventory obsolescence are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1 89,743 70,559 61,524 66,385 Provision for inventory obsolescence 916,256 40,330 418,740 12,215 Transfer from subsidiaries to branches Transfer from a branch to a subsidiary Reversal upon sales of inventories Other reversal — — — — 1,361 2,594 (655) — (21,510) — (6,169) (14,977) (13,747) — (6,169) (13,501) As of December 31 984,489 89,743 467,223 61,524 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 195 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 15. Accounts receivable, net Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 1,213,875 1,167,035 361,482 704,129 Trade receivables Less: provision for doubtful debts (267,454) (281,379) (249,122) (263,690) Trade receivables from related parties Less: provision for 946,421 885,656 112,360 440,439 521,021 450,099 3,919,204 837,595 doubtful debts (154,403) (156,425) (154,403) (156,425) 366,618 293,674 3,764,801 681,170 Notes receivable 1,313,039 722,285 1,179,330 2,539,476 3,877,161 601,120 1,121,609 1,539,935 2,035,324 3,718,806 4,478,281 2,661,544 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 196 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 15. Accounts receivable, net (Continued) Certain of the Group’s sales were on advanced payments or documents against payment. In respect of sales to large and long-established customers, subject to negotiation, a credit period for up to one year may be granted. The credit policies of some of the entities within Chinalco were receivables on demand. As of December 31, 2008, the ageing analysis of trade receivables is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year 1,964,801 3,651,991 4,355,693 2,527,641 Between 1 and 2 years Between 2 and 3 years Over 3 years 33,173 17,834 441,373 31,792 15,399 457,428 21,330 11,031 493,752 35,379 9,755 508,884 2,457,181 4,156,610 4,881,806 3,081,659 The credit quality of accounts receivable that are neither past due nor impaired is assessed by reference to the counterparty’s default history. There is no history of default for the customers above. Accounts receivable that are generally past due less than one year are not considered impaired. As of December 31, 2008, accounts receivable of RMB29 million (2007: RMB42 million) of the Group and RMB21 million (2007: RMB39 million) of the Company were past due but not impaired. These relate to a number of individual customers for whom there is no recent history of default. The ageing analysis of these accounts receivable is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 14,340 1,596 2,115 11,207 29,450 3,150 3,879 5,977 9,742 1,222 1,838 8,031 28,771 3,102 3,704 3,546 29,258 42,456 20,833 39,123 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 197 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 15. Accounts receivable, net (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I As of December 31, 2008, accounts receivable of RMB438 million (2007: RMB449 million) of the Group and RMB414 million (2007: RMB420 million) of the Company were substantially impaired and provided for. The individually impaired receivables mainly relate to customers which are in unexpected difficult economic situations. It was assessed that a small portion of the receivables is expected to be recovered. The ageing of these receivables is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Between 2 and 3 years Over 3 years 11,478 427,006 9,025 439,815 3,982 409,527 1,584 418,857 438,484 448,840 413,509 420,441 Movements on the provision for doubtful debts of accounts receivable are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 As of January 1 Provision for doubtful debts 437,804 5,533 467,102 10,303 420,115 766 387,449 3,310 Transfer from a subsidiary to a branch — — 1,545 42,122 Accounts receivables written off Reversal (13,674) (7,806) (12,268) (27,333) (13,725) (5,176) (9,564) (3,202) As of December 31 421,857 437,804 403,525 420,115 198 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 16. Other current assets, net Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Prepayments to third parties Prepayments to related parties 601,774 835,181 1,453,427 90,212 188,516 107,680 353,388 83,090 Total prepayments 1,436,955 1,543,639 296,196 436,478 Contract performance deposits Staff advances Value-added tax recoverable Export tax refund receivable Dividends receivable Receivables from sales of materials Receivables from sales of 548,592 38,617 756,551 62,385 — 52,427 40,912 138,438 43,565 7,690 18,563 125,131 — — 141,651 6,280 19,516 30,067 2,012 4,656 68,507 84,531 57,761 82,578 water and electricity 32,733 34,051 21,321 22,749 Receivables from sales of spare parts Deposits for investments Others Receivables from related 18,728 255,054 397,511 22,803 5,054 297,679 16,113 255,054 173,650 22,503 5,054 106,276 parties (Note) 82,440 136,189 2,223,292 1,406,646 Less: provision for doubtful debts 2,261,118 855,649 3,040,226 1,708,337 (224,542) (275,665) (215,539) (240,996) Total other receivables 2,036,576 579,984 2,824,687 1,467,341 Total other current assets, net 3,473,531 2,123,623 3,120,883 1,903,819 Note: Included in related party receivables at Company level were certain entrusted loans to subsidiaries amounting to RMB665 million (2007: RMB270 million) maturing within one year. The annual interest rates for the year ended December 31, 2008 ranged from 5.51% to 7.47% (2007: 5.51% to 6.56%). T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 199 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 16. Other current assets, net (Continued) As of December 31, 2008, the ageing analysis of other receivables is as follows: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year 1,928,039 471,164 1,866,701 1,386,436 Between 1 and 2 years Between 2 and 3 years Over 3 years 25,816 11,472 295,791 29,296 20,878 334,311 901,033 8,262 264,230 29,629 14,419 277,853 2,261,118 855,649 3,040,226 1,708,337 The credit quality of other receivables that are neither past due nor impaired is assessed by reference to the counterparty’s default history. There is no history of default for the receivables above. Other receivables that are generally past due less than one year are not considered impaired. As of December 31, 2008, other receivables of RMB53 million (2007: RMB85 million) of the Group and RMB48 million (2007: RMB74 million) of the Company were past due but not impaired. These were contracts bound by repayment terms on demand. The ageing analysis of these other receivables is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 6,311 8,557 6,095 31,607 22,772 22,423 6,000 33,617 4,773 8,555 6,090 28,530 22,767 15,321 5,960 30,293 52,570 84,812 47,948 74,341 200 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 16. Other current assets, net (Continued) As of December 31, 2008, other receivables of RMB251 million (2007: RMB279 million) of the Group and RMB223 million (2007: RMB241 million) of the Company were impaired and provided for. The individually impaired receivables mainly relate to sales of materials and others, which are in unexpected difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Between 2 and 3 years Over 3 years 2,630 248,665 4,606 274,210 1,551 221,591 3,146 238,026 251,295 278,816 223,142 241,172 Movements on the provision for doubtful debts of other receivables are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 275,665 4,744 — (25,721) (30,146) 293,686 2,878 — (17,384) (3,515) 240,996 31,719 — (25,740) (19,379) 253,647 1,722 728 (12,926) (2,175) As of January 1 Provision for doubtful debts Transfer from a subsidiary to a branch Other receivables written off Reversal Transfer from a branch to a subsidiary — — (12,057) — As of December 31 224,542 275,665 215,539 240,996 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 201 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 17. Bank balances and cash Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Cash and cash equivalents 15,982,129 8,824,971 7,030,857 5,121,705 Short-term cash investments (Note (a)) Restricted cash (Note (b)) 70,703 242,753 96,054 133,540 — — — — Total Notes: 16,295,585 9,054,565 7,030,857 5,121,705 (a) The annual effective interest rate of fixed deposits during the year was 7.60% (2007: 7.01%) with average maturity days of 365 days (2007: 365 days). (b) Restricted cash primarily represented credit and note deposits. (c) Material non-cash transactions For the year ended December 31, 2008, there was a material non-cash transaction, which was a capital injection of property, plant and equipment amounting to RMB370.643 million to a subsidiary of the Company by a minority shareholder of the subsidiary. For the year ended December 31, 2007, the material non-cash transactions were the issuances of A shares as consideration for the acquisitions disclosed in Note 5. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 202 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 17. Bank balances and cash (Continued) Bank balances and cash of the Group and the Company were denominated in the following currencies: RMB USD HKD EUR AUD Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 15,830,194 8,733,697 7,027,974 5,118,042 190,679 46,416 9,891 218,405 52,739 128,283 32,406 107,440 — — — — — — 2,883 3,663 16,295,585 9,054,565 7,030,857 5,121,705 18. Issued capital and reserves (a) Share capital Group and Company 2008 2007 Number of shares Share capital Number of shares Share capital Beginning of the year 13,524,487,892 13,524,488 11,649,876,153 Issuance of shares — — 1,874,611,739 RMB’000 RMB’000 11,649,876 1,874,612 End of the year 13,524,487,892 13,524,488 13,524,487,892 13,524,488 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 203 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 18. Issued capital and reserves (Continued) (a) Share capital (Continued) As of December 31, 2007 and 2008, all issued shares are registered and fully paid, divided into 13,524,487,892 shares (2007: 13,524,487,892 shares) of RMB1.00 par value each, comprised 9,580,521,924 A shares and 3,943,965,968 H shares (2007: 9,580,521,924 A shares and 3,943,965,968 H shares). Both A shares and H shares rank pari passu to each other. On April 24, 2007, the Company issued 1,237 million A shares to acquire 72% equity interest of Lanzhou Aluminum and 28.57% equity interest of Shandong Aluminum. These A shares were then listed on the SSE on April 30, 2007. On December 28, 2007, the Company issued 638 million A shares to acquire 100% equity interest of Baotou Aluminum. Of the issued A shares, 3,931,304,879 A shares (2007: 1,430,619,989 shares) are freely tradable while the remaining A shares can only be traded after lock-up periods. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 204 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 18. Issued capital and reserves (Continued) (b) Reserves Capital reserve (Note (b)(i)) RMB’000 10,009,225 8,752,122 (179,000) (3,058,271) — — — — As of January 1, 2007 Issuance of new shares Share issuance expenses Transfers from subsidiaries to branches Profit for the year Appropriation to surplus reserve Distribution to shareholders Adjustment to surplus reserve (Note (b)(ii)) Company Statutory surplus reserve (Note (b)(ii)) RMB’000 Retained earnings Total RMB’000 RMB’000 4,778,015 15,058,886 — — — — 1,083,388 — — — 2,782,989 7,899,171 (1,083,388) (3,414,950) 29,846,126 8,752,122 (179,000) (275,282) 7,899,171 — (3,414,950) (142,319) 142,319 — As of December 31, 2007 15,524,076 5,719,084 21,385,027 42,628,187 Reversal of over-provision of share issuance expenses 28,000 Acquisition of subsidiaries (1,378,451) Transfers from subsidiaries to branches Grants payable transfer to capital reserve Profit for the year Appropriation to surplus reserve Deregistration of a subsidiary Distribution to shareholders (97,056) 88,000 — — — — — — — — — 98,209 — — — — 28,000 (1,378,451) 139,806 42,750 — 641,072 (98,209) 87,803 88,000 641,072 — 87,803 (1,420,071) (1,420,071) As of December 31, 2008 14,164,569 5,817,293 20,735,428 40,717,290 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 205 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 18. Issued capital and reserves (Continued) (b) Reserves (Continued) (i) Capital reserve Group Company 2008 RMB’000 2007 RMB’000 2008 RMB’000 2007 RMB’000 Share premium 12,908,281 14,728,601 13,765,745 15,213,252 Merger reserve (Note 5) Others — 414,059 2,375,094 310,992 — 398,824 — 310,824 13,322,340 17,414,687 14,164,569 15,524,076 The capital reserve can only be used to increase share capital. Merger reserve was created as a result of acquisitions of the seven common control entities acquired in 2008 (Note 5). Others primarily consist of the national debt fund. The specific national fund of the Ministry of Finance of the People’s Republic of China (“MOF”) was granted to support certain national key technical projects of certain branches of the Company. Pursuant to relevant MOF document, these funds were treated as a capital injection of Chinalco into the Company, and therefore can only be used to increase Chinalco’s shares in the Company after satisfying all necessary shares increase conditions. These funds are regarded as capital reserve solely attributable to Chinalco before meeting these share increase conditions. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 206 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 18. Issued capital and reserves (Continued) (b) Reserves (Continued) (ii) Statutory surplus reserve Pursuant to the Company Law of the PRC, articles of association and board resolutions of the Company, the Company provides 10% from its net profit prepared in accordance with PRC accounting standards for the statutory surplus reserve until the balance reaches 50% of the paid-up share capital where the Company can opt for not providing. Statutory surplus reserve can be used to reduce any losses incurred or to increase share capital upon approval. Statutory surplus reserve balance should not fall below 25% of the registered capital after any such shares issuance. The Group adopted the Accounting Standards for Business Enterprises promulgated by the MOF on February 15, 2006 (the “new PRC GAAP”) on January 1, 2007. According to the relevant requirements under the new PRC GAAP, certain adjustments were made to the retained earnings in previous years upon first-time adoption. While the new PRC GAAP no longer permits the Group’s share of surplus reserves of subsidiaries to be presented on a consolidated basis, an additional adjustment on surplus reserve and retained earnings was made in 2007. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 207 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Non-current: Long-term loans (Note (a)) 24,169,469 15,479,914 12,760,382 5,294,354 Medium-term notes and long-term bonds (Note (b)) Current: Long-term loans (repayable within 11,963,083 1,979,683 11,963,083 1,979,683 36,132,552 17,459,597 24,723,465 7,274,037 one year) (Note (a)) 2,949,730 Short-term loans (Note (c)) 14,188,202 Short-term bonds (Note (d)) 5,152,283 2,477,022 5,818,055 3,051,471 1,149,422 4,537,000 5,152,283 1,549,938 — 3,051,471 22,290,215 11,346,548 10,838,705 4,601,409 Total 58,422,767 28,806,145 35,562,170 11,875,446 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 208 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans Group Company 2008 Original 2007 Original 2008 Original 2007 Original currency’000 RMB’000 currency’000 RMB’000 currency’000 RMB’000 currency’000 RMB’000 Guaranteed loans — Secured (Note 22) — Guaranteed Unsecured loans RMB JPY RMB USD RMB USD 613,000 613,000 815,400 815,400 697,834 52,819 735,895 47,190 — — — — — — — — 5,535,874 5,535,874 7,460,223 7,460,223 353,922 353,922 1,699,292 1,699,292 27,000 184,534 — — — — — — 20,633,082 20,633,082 9,582,816 9,582,816 13,555,882 13,555,882 5,145,000 5,145,000 14,615 99,890 7,024 51,307 — — — — Total long-term loans 27,119,199 17,956,936 13,909,804 6,844,292 Less: long-term loans within 1 year — Secured (Note 22) — Guaranteed — Unsecured Total long-term loans RMB JPY RMB RMB 215,000 215,000 198,364 198,364 38,763 2,934 42,416 2,720 — — — — 1,398,543 1,398,543 241,938 241,938 262,169 262,169 — — — — — — 1,333,253 1,333,253 2,034,000 2,034,000 887,253 887,253 1,549,938 1,549,938 repayables with 1 year 2,949,730 2,477,022 1,149,422 1,549,938 Total Long-term loans (non-current portion) Estimated fair value of total long-term loans 24,169,469 15,479,914 12,760,382 5,294,354 27,111,431 17,949,069 13,039,804 6,844,292 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 209 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans (Continued) As of December 31, 2008, long-term fixed-rate loans of the Group and the Company amounted to RMB52 million (2007: RMB47 million) and Nil (2007: Nil). Annual fixed interest rate was 2.30% (2007: 0.30% to 7.83%). The remaining long-term loans are subject to floating interest rates from 2.55% to 8.51% (2007: 2.55% to 7.83%) per annum. The estimated fair value of long-term loans (including current portion) is calculated based on discounted cash flow using applicable discount rate from the prevailing market interest rates offered to the Group for debts with substantially the same characteristics and maturity dates. The discount rates applied as of December 31, 2007 and 2008 were 2.01% to 8.51% and 2.20% to 7.83%, respectively. The estimated fair value of borrowings due within 1 year approximates their carrying amounts. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 210 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans (Continued) As of December 31, 2008, guaranteed loans were as follows: Group Company Guarantors 2008 RMB’000 2007 RMB’000 2008 RMB’000 2007 RMB’000 Chinalco（中鋁公司） 2,902,228 2,640,058 250,000 300,000 780,000 780,000 — — Shanxi Zhangze Electric Power Co., Ltd. (“Zhangze Electric Power”) （山西漳澤 電力股份有限公司） (Note (i)) Baotou Aluminum (Group) Co., Ltd. (“Baotou Group”) （包頭鋁業（集團） 有限責任公司） (Note (ii)) Luoyang Economic Investment Co., Ltd. （洛陽市經濟投資 250,000 250,000 有限公司） (Note (iii)) 115,738 122,153 Luoyang Longquan Aluminum Products Co., Ltd. （洛陽龍泉 鋁業有限公司） (Note (iv)) Yichuan Power Industrial Group Company (“Yichuan Power”) （伊川電力集團總公司） 57,000 57,000 (Note (v)) 76,380 76,380 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I — — — — — — — — 211 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans (Continued) As of December 31, 2008, guaranteed loans were as follows: (Continued) Group Company Guarantors 2008 RMB’000 2007 RMB’000 2008 RMB’000 2007 RMB’000 Lanzhou Aluminum Factory （蘭州鋁廠） (Note (vi)) 103,922 1,399,292 103,922 1,399,292 China Nonferrous Metals Technology Henan Tire Group Co., Ltd.（河南輪胎 集團有限公司） Jiaozuo Wanfang Group Co., Ltd. （焦作市萬方 集團有限責任公司） (Note (vii)) and Henan 48,340 48,340 150,000 — — Tire Group Co., Ltd. 66,800 — — — — — — Total 4,550,408 5,373,223 353,922 1,699,292 212 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans (Continued) Notes: (i) Shanxi Zhangze Electric Power is a minority shareholder of Shanxi Huaze, a subsidiary of the Company. (ii) Baotou Group is a subsidiary of Chinalco and one of the shareholders of the Company. (iii) Luoyang Economic Investment Co., Ltd. is a minority shareholder of Henan Aluminum, a subsidiary of the Company. (iv) Luoyang Longquan Aluminum Products Co., Ltd is a minority shareholder of Henan Aluminum, a subsidiary of the Company. (v) Yichuan Power is a minority shareholder of Henan Aluminum, a subsidiary of the Company. (vi) Lanzhou Aluminum Factory is a subsidiary of Chinalco and one of the shareholders of the Company. (vii) Jiaozuo Wanfang Group Co., Ltd. is a minority shareholder of Jiaozuo Wanfang, a subsidiary of the Company. In addition, as of December 31, 2008, the Company provided guarantees to its subsidiaries for loans amounting to RMB1,170 million (2007: RMB2,087 million). T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 213 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (a) Long-term loans (Continued) The maturity of long-term loans is as follows: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Group Company Bank loans Other loans Bank loans Other loans 2008 2007 2008 2007 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year 2,908,374 2,452,600 Between 1 and 2 years 3,393,820 2,905,974 Between 2 and 5 years 13,204,281 5,766,400 41,356 18,279 54,837 24,422 1,111,000 1,549,938 13,453 866,000 1,051,969 40,359 7,471,000 1,893,908 Wholly repayable within 5 years Over 5 years 19,506,475 11,124,974 114,472 78,234 9,448,000 4,495,815 7,399,102 6,594,877 99,150 158,851 4,301,000 2,348,477 38,422 15,345 46,034 99,801 61,003 26,905,577 17,719,851 213,622 237,085 13,749,000 6,844,292 160,804 — — — — — — (b) Medium-term notes and long-term bonds In June 2007, the Company issued long-term bonds with a total face value of RMB2 billion at par (face value of RMB100 per unit) with ten-year terms for capital expenditure purposes. The fixed annual coupon and effective interest rates of these bonds are 4.50% and 4.64%, respectively. In June 2008, the Company issued medium-term notes with a total face value of RMB5 billion at par (face value of RMB100 per unit) with three-year terms for operating cash flows and bank loans re-financing. The fixed annual coupon and effective interest rates of these notes are 5.30% and 5.62%, respectively. 214 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (b) Medium-term notes and long-term bonds (Continued) In October 2008, the Company issued medium-term notes with a total face value of RMB5 billion at par (face value of RMB100 per unit) with five-year terms for operating cash flows and bank loans re-financing. The fixed annual coupon and effective interest rates of these notes are 4.58% and 4.92%, respectively. As of December 31, 2008, the fair values of bonds payable above of RMB12.499 billion (2007: RMB1.843 billion) is derived from discounted future cash flows using annual corporate bond interest rates with same terms between 3.52% to 3.90% (2007: 5.55%). (c) Short-term loans Group Company 2008 Original 2007 Original 2008 Original 2007 Original currency’000 RMB’000 currency’000 RMB’000 currency’000 RMB’000 currency’000 RMB’000 Guaranteed loans — Secured (Note 22) — Guaranteed Unsecured Loans RMB RMB RMB USD 260,000 260,000 22,615 22,615 1,591,000 1,591,000 2,005,000 2,005,000 — — — — 12,274,043 12,274,043 3,704,640 3,704,640 4,537,000 4,537,000 9,241 63,159 11,746 85,800 — — Total 14,188,202 5,818,055 4,537,000 — — — — — — — — — For the year ended December 31, 2008 and 2007, all short-term loans of the Group were fixed- rate loans with annual interest rates from 4.49% to 7.47% and from 5.02% to 7.34%, respectively. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 215 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (c) Short-term loans (Continued) As of December 31, 2008, details of guaranteed loans were as follows: Group Company Guarantors Baotou Group Yichuan Power Chinalco Lanzhou Baochuan Aluminum Company Ltd. (“Lanzhou Baochuan Aluminum”) （蘭州寶川鋁業 有限公司） (Note) China Nonferrous Metals Technology Luoyang Economic 2008 RMB’000 818,000 40,000 633,000 2007 RMB’000 915,000 140,000 850,000 — 50,000 50,000 50,000 Investment Co., Ltd. 50,000 — Total Note: 1,591,000 2,005,000 2008 RMB’000 2007 RMB’000 — — — — — — — — — — — — — — Lanzhou Baochuan Aluminum is a subsidiary of LanZhou LianCheng Aluminum Industrial Co., Ltd., a subsidiary of Chinalco. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 216 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 19. Borrowings (Continued) (d) Short-term bonds In June 2007, the Company issued short-term bonds with a total face value of RMB3 billion at par (face value of RMB100 per unit) with one-year term for working capital purposes. The fixed annual coupon and effective interest rates of these bonds were 3.55% and 3.95%, respectively. These short-term bonds have matured and were fully redeemed in June 2008. In February 2008, the Company issued short-term bonds with a total face value of RMB2 billion at par (face value of RMB100 per unit) with one-year term for working capital purposes. The fixed annual coupon and effective interest rates of these bonds were 4.99% and 5.40%, respectively. In July 2008, the Company issued short-term bonds with a total face value of RMB3 billion at par (face value of RMB100 per unit) with one-year terms for working capital purpose. The fixed annual coupon and effective interest rates of these bonds were 4.83% and 5.25%, respectively. 20. Accounts payable Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 4,024,529 3,782,357 2,403,035 2,576,029 319,401 312,724 202,683 216,835 Trade payables Trade payables to related parties Notes payable (Note) 418,010 391,060 33,000 36,500 4,343,930 4,095,081 2,605,718 2,792,864 4,761,940 4,486,141 2,638,718 2,829,364 Note: Notes payable are repayable within six months (2007: six months). T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 217 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 20. Accounts payable (Continued) The ageing analysis of the trade payables and notes payable is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year 4,631,664 4,343,436 2,558,748 2,756,047 Between 1 and 2 years Between 2 and 3 years Over 3 years 70,967 17,474 41,835 67,862 28,012 46,831 50,978 10,876 18,116 40,983 13,188 19,146 4,761,940 4,486,141 2,638,718 2,829,364 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 218 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Other payables and accrued expenses Construction payables Sales deposits from customers Utilities payable Accrued payroll and bonus Staff welfare payables Pension Taxes other than income tax payable (Note) Equity investments payable Contract performance deposits Other guarantees and deposits Interest payables Others Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 3,042,479 3,956,631 51,700 42,830 71,444 47,180 227,658 — 2,020,352 1,975,576 1,666,543 960,106 137,981 527,733 100,686 46,632 116,181 260,000 197,839 7,883 6,913 43,298 15,588 167,628 — 394,632 15,194 149,471 40,290 24,040 189,386 260,000 294,131 481,894 295,385 476,744 203,314 247,888 336,762 212,016 86,895 452,893 115,298 213,333 126,707 160,150 68,820 243,872 8,522,017 5,403,369 3,165,448 3,689,142 Amounts due to related parties 2,629,636 1,758,760 1,643,412 1,197,422 11,151,653 7,162,129 4,808,860 4,886,564 Note: Taxes other than income tax payable mainly comprise accruals for value-added tax, resource tax, city construction tax and education surcharge. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 219 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 22. Pledge of assets As mentioned in Note 19, the Group has pledged various assets as collateral against certain loans. A summary of pledged assets is as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Property, plant and equipment 900,230 1,429,039 Land use rights Inventories 52,262 44,148 49,481 — 996,640 1,478,520 — — — — — — — — Note: As of December 31, 2008, no short-term loans of Chalco Ruimin were secured by notes receivable (2007: RMB2.615 million). As of December 31, 2008, the Group pledged notes receivable of RMB33 million (2007: RMB110 million) to certain banks for opening of certain notes payable. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 220 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting The Group is principally engaged in the production and sales of alumina, primary aluminum and aluminum fabrication products in the PRC. Revenues recognized during the year are as follows: Revenue Sales of goods, net of value-added tax Other revenue (Note) 2008 2007 RMB’000 RMB’000 73,675,820 81,719,663 3,050,121 3,479,172 Total revenue 76,725,941 85,198,835 Expenses related to sales of goods Expenses related to other revenue (Note) (66,992,733) (61,423,335) (3,080,927) (3,512,798) Total cost of sales (70,073,660) (64,936,133) Other gains, net Government grants Realized and unrealized gain on future and option contracts, net Others 6,652,281 20,262,702 100,781 47,067 267,328 4,662 108,362 3,484 372,771 158,913 Revenue and gains, net 7,025,052 20,421,615 Note: Other revenue primarily includes revenue from sales of scrap and other materials and coal, supply of electricity, gas, heat and water and provision of transportation and packaging services, machinery processing and other services. Expenses related to other revenue include costs arising from generating these revenues. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 221 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments The Group is primarily engaged in three main business segments in the PRC: • • • Alumina segment-comprising mining and processing of bauxite into alumina and the associated distribution activities Primary aluminum segment-comprising production of primary aluminum and the associated distribution activities Aluminum fabrication segment-comprising production of aluminum fabrication products and the associated distribution activities Others cover activities of the headquarters and other operations of the Group, including research and development activities relating to aluminum business. Segment assets consist primarily of intangible assets, property, plant and equipment, inventories, receivables and operating cash, and exclude assets not dedicated to a particular segment. Segment liabilities consist primarily of operating liabilities and exclude liabilities not dedicated to a particular segment. Capital expenditures comprise additions of property, plant and equipment and intangible assets, including those additions arising from business combinations. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 222 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) 2008 Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment revenue Including: external sales 14,510,664 48,428,759 10,899,660 2,886,858 — 76,725,941 inter- segment sales 16,431,380 3,158,609 — — (19,589,989) — 30,942,044 51,587,368 10,899,660 2,886,858 (19,589,989) 76,725,941 Segment expenses (29,359,960) (51,103,295) (11,213,743) (2,850,564) 19,856,163 (74,671,399) Segment results 1,582,084 484,073 (314,083) 36,294 266,174 2,054,542 Add: unallocated income and expenses Finance costs, net Shares of profits/ (losses) of jointly controlled entities 3,039 (1,367) Share of profits/ (losses) of associates — 15,051 — — — (5,006) — — Profit before income tax benefits Income tax benefits Profit for the year (231,878) (1,709,566) 1,672 10,045 124,815 33,557 158,372 223 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) Other segment items included in the income statement are as follows: 2008 Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Depreciation and amortization 2,228,506 2,400,489 331,807 144,784 — 5,105,586 Add: depreciation and amortization of unallocated assets Total depreciation and amortization included in profit and loss Provision for impairment loss on property, plant and equipment — 1,334 — Net loss on disposal of property, plant and equipment 45,789 11,859 1,525 Provision for inventory obsolescence 252,759 477,684 185,813 Reversal of doubtful debts on receivables (18,578) (5,607) (3,490) — 16 — — — — — — 224 227,542 5,333,128 1,334 59,189 916,256 (27,675) Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) The segment assets and liabilities as of December 31, 2008 are as follows: Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Other assets 48,659,269 63,674,919 12,345,116 12,426,424 (6,762,607) 130,343,121 Jointly controlled entities Associates Unallocated assets Total assets 701,403 — 447 — — — — 104,809 — — 701,850 104,809 4,377,739 135,527,519 Segment liabilities (6,801,213) (12,702,017) (1,905,614) (956,614) 6,762,607 (15,602,851) Unallocated liabilities Total liabilities (59,727,846) (75,330,697) Capital expenditure 8,582,811 10,668,948 1,805,806 138,921 — 21,196,486 Unallocated capital expenditure Total capital expenditure 1,217,362 22,413,848 225 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) 2007 Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment revenue Including: external sales 19,435,211 51,834,908 12,491,304 1,437,412 — 85,198,835 inter- segment sales 15,694,685 2,342,364 — — (18,037,049) — 35,129,896 54,177,272 12,491,304 1,437,412 (18,037,049) 85,198,835 Segment expenses (27,238,667) (46,366,919) (12,359,024) (1,458,006) 18,466,866 (68,955,750) Segment results 7,891,229 7,810,353 132,280 (20,594) 429,817 16,243,085 Add: unallocated income and expenses Finance costs, net Shares of losses of jointly controlled (449,170) (1,040,171) entities (2,165) (1,216) Shares of profits of associates — 241,945 — — — — — — (3,381) 241,945 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Profit before income tax expense Income tax expense Profit for the year 226 14,992,308 (2,869,210) 12,123,098 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) Other segment items included in the income statement are as follows: 2007 Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Depreciation and amortization 2,122,831 2,056,515 265,654 159,785 — 4,604,785 Add: depreciation and amortization of unallocated assets Total depreciation and amortization included in profit and loss Provision for impairment loss on property, plant and equipment — 9,880 — 3,369 Net loss on disposal of property, plant and equipment 62,881 42,402 179 62,491 55,625 4,660,410 — — 13,249 167,953 Provision for/ (Reversal of) inventory obsolescence Provision for/ (Reversal of) doubtful debts on 3,627 17,624 16,416 (12,314) — 25,353 receivables 1,279 (4,054) (11,651) (3,241) — (17,667) 227 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Revenue, other gains, net and segment reporting (Continued) Primary reporting format - business segments (Continued) The segment assets and liabilities as of December 31, 2007 are as follows: Primary Aluminum Alumina RMB’000 aluminum fabrication Others Elimination Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Other assets 37,987,759 45,137,809 10,534,783 8,159,828 (2,420,536) 99,399,643 Jointly controlled entities Associates Unallocated assets Total assets 634,482 — 1,814 553,920 — — — — — — 636,296 553,920 5,258,209 105,848,068 Segment liabilities (3,995,910) (4,836,138) (2,305,777) (664,462) 2,420,536 (9,381,751) Unallocated liabilities Total liabilities (31,973,110) (41,354,861) Capital expenditure 4,634,932 12,651,715 1,203,204 493,746 — 18,983,597 Unallocated capital expenditure Total capital expenditure 497,954 19,481,551 Secondary reporting format — geographical segments As the business, operating activities and related assets are primarily located in the PRC, with same risks and rewards in general in each region, no geographical segments are presented. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 228 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 24. Selling and distribution expenses Transportation and loading expenses Packaging expenses Port expenses Salaries and welfare expenses Sales commissions and other handling fee Storage fee Marketing and advertising expenses Depreciation - non-production property, plant and equipment Others 2008 2007 RMB’000 RMB’000 1,057,839 202,116 62,121 39,267 17,546 27,412 16,406 5,260 134,442 877,054 190,875 53,770 41,930 23,001 24,489 15,643 4,386 124,386 1,562,409 1,355,534 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 229 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 25. General and administrative expenses Salaries and welfare expenses Taxes other than income tax expense (Note) Depreciation - non-production property, plant and equipment Expensing off prepaid land use rights Traveling and entertainment Utilities and office supplies Pollutants discharge fees Repairs and maintenance Insurance Rental expenses Pre-operation costs Legal and professional fees Auditors’ remuneration Net loss on disposal of property, plant and equipment Provision for inventory obsolescence Others Note: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 2008 2007 RMB’000 RMB’000 622,659 566,984 225,482 41,468 163,128 90,559 26,025 76,019 68,572 201,754 10,120 38,313 39,351 59,189 916,256 316,593 580,330 759,803 218,043 46,056 175,012 99,491 33,437 106,136 62,378 168,049 21,106 94,737 45,634 167,953 25,353 438,845 3,462,472 3,042,363 Taxes other than income tax expense mainly comprise land use tax, property tax and stamp duty. 230 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 26. Staff costs Salaries and bonus Housing fund Pension (Note (a)) Staff welfare and other expenses (Note (b)) 2008 2007 RMB’000 RMB’000 3,770,002 2,941,985 364,223 761,817 800,769 297,331 585,227 787,702 5,696,811 4,612,245 Notes: (a) The employees of the Group participate in various retirement benefit schemes organized by the relevant provincial and municipal governments. In each year, the Group makes monthly defined contributions at rates of 20% (2007: 20%) of the employees’ salaries. The Group’s contributions to these defined contribution schemes are expensed as incurred and are not reduced by forfeited contributions. These schemes are operated by the respective governments and related assets are held separately from the Group. (b) Staff welfare and other expenses include staff welfare, staff union expenses, staff education expenses and unemployment insurance expenses, etc. Staff costs include remuneration payables to Directors, Supervisors and senior management as set out in Note 27. 27. Directors’, Supervisors and senior management’s remuneration (a) Directors’ and Supervisors’ remuneration The aggregate amounts of remuneration payables to Directors and Supervisors of the Company during the year are as follows: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Fees Basic salaries, housing allowances, other allowances and benefits in kind Discretionary bonus Pension 2008 2007 RMB’000 RMB’000 947 970 2,606 1,121 115 4,789 2,972 1,827 114 5,883 231 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 27. Directors’, Supervisors and senior management’s remuneration (Continued) (a) Directors’ and Supervisors’ remuneration (Continued) The remuneration of each Director and Supervisor for the year ended December 31, 2008 is set out below: Names of Directors and Supervisors Fees RMB’000 Salary RMB’000 Discretionary bonus RMB’000 Pension RMB’000 Total RMB’000 Directors: Xiao Yaqing Luo Jianchuan Chen Jihua Liu Xiangmin Shi Chungui Kang Yi Poon Yiu Kin, Samuel (resigned on May 9, 2008) Zhang Zhuoyuan Zhu Demiao (appointed on May 9, 2008) Wang Mengkui (appointed on May 9, 2008) — — — — 150 214 84 214 143 142 947 684 572 468 468 — — — — — — 374 312 169 169 — — — — — — 2,192 1,024 23 23 23 23 — — — — — — 92 1,081 907 660 660 150 214 84 214 143 142 4,255 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 232 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 27. Directors’, Supervisors and senior management’s remuneration (Continued) (a) Directors’ and Supervisors’ remuneration (Continued) The remuneration of each Director and Supervisor for the year ended December 31, 2008 is set out below: (Continued) Names of Directors and Supervisors Fees RMB’000 Salary RMB’000 Discretionary bonus RMB’000 Pension RMB’000 Total RMB’000 Supervisors: Ao Hong Yuan Li Zhang Zhankui — — — — — 414 — 414 — 97 — 97 — 23 — 23 — 534 — 534 Total 947 2,606 1,121 115 4,789 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 233 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 27. Directors’, Supervisors and senior management’s remuneration (Continued) (a) Directors’ and Supervisors’ remuneration (Continued) The remuneration of each Director and Supervisor for the year ended December 31, 2007 is set out below: Names of Directors and Supervisors Fees RMB’000 Salary RMB’000 Discretionary bonus RMB’000 Pension RMB’000 Total RMB’000 Directors: Xiao Yaqing Wang Dianzuo (resigned on May 18, 2007) Luo Jianchuan Chen Jihua Joseph C. Muscari (resigned on May 18, 2007) Helmut Wieser (appointed on May 18, 2007 and resigned on September 17, 2007) Liu, Xiangmin (appointed on May 18, 2007) Shi Chungui Poon Yiu Kin, Samuel Kang Yi Zhang Chengzhong (resigned on May — 91 — — 58 743 577 — 622 500 — 480 261 — — 51 — — — 150 229 233 500 — — — 261 — — — 18, 2007) — 208 109 21 — 21 21 — — 21 — — — 9 1,341 91 1,123 782 58 51 782 150 229 233 326 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 234 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 27. Directors’, Supervisors and senior management’s remuneration (Continued) (a) Directors’ and Supervisors’ remuneration (Continued) The remuneration of each Director and Supervisor for the year ended December 31, 2007 is set out below: (Continued) Names of Directors and Supervisors Fees RMB’000 Salary RMB’000 Discretionary bonus RMB’000 Pension RMB’000 Total RMB’000 Zhang Zhuoyuan (appointed on May 18, 2007) Supervisors: Ao Hong Yuan Li Zhang Zhankui 158 970 — — — — — — 2,573 1,688 — 399 — 399 — 139 — 139 — 93 — 21 — 21 158 5,324 — 559 — 559 Total 970 2,972 1,827 114 5,883 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 235 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 27. Directors’, Supervisors and senior management’s remuneration (Continued) (a) Directors’ and Supervisors’ remuneration (Continued) The remuneration of the Directors and Supervisors fell within the following bands: RMBNil to RMB1,000,000 RMB1,000,001 to RMB1,500,000 Number of individuals 2008 2007 12 1 13 2 During the year, no options were granted to the Directors or the Supervisors (2007: Nil). During the year, no emoluments were paid to the Directors or the Supervisors (including the five highest paid employees) as an inducement to join or upon joining the Company or as compensation for loss of office (2007: Nil). No Directors or Supervisors of the Company waived any remuneration during the respective years. (b) Five highest paid individuals During the current year, the five highest paid individuals of the Group include 4 (2007: 4) Directors whose remuneration are reflected in the analysis presented above. The remuneration payable to the remaining 1 (2007: 1) individual during the year, is as follows: T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Basic salaries, housing allowances, other allowances and benefits in kind Discretionary bonus Pension 2008 2007 RMB’000 RMB’000 468 169 23 660 500 261 21 782 236 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 28. Expenses/(Income) charged/(credit) to the consolidated income statement 2008 2007 RMB’000 RMB’000 Net loss on disposal of property, plant and equipment 59,189 167,953 Provision for impairment loss on property, plant and equipment (Note 7) Operating lease rentals in respect of land and buildings Provision for inventory obsolescence Reversal of doubtful debts on receivables (Notes 15 and 16) Bad debts recovery Loss on production shutdown (Note) 1,334 847,815 916,256 (27,675) (6,394) 370,216 13,249 604,425 25,353 (17,667) (3,854) — Note: In 2008, the Group suspended certain production lines after taking into account existing market environment, depreciation, unallocated overheads and related labor costs amounted to RMB370.216 million (2007: nil) were not inventorized and directly recorded in cost of sales. 29. Income tax (benefits)/expense Current income tax Deferred income tax (Note 12) 2008 2007 RMB’000 RMB’000 269,395 2,905,809 (302,952) (36,599) (33,557) 2,869,210 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The current PRC enterprise income tax of the Group has been provided on the estimated assessable profit and the appropriate tax rates for the year. Certain branches and subsidiaries of the Company located in special regions of the PRC were granted tax concessions including paying preferential tax rate of 15% for a period of 10 years, exempting them from income tax for the first 5 years from its first production date, etc. In addition, the Group also enjoys preferential policy on tax credit approved in prior years in respect of domestically manufactured production equipment purchased. 237 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 29. Income tax (benefits)/expense (Continued) T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I On March 16, 2007, the National People’s Congress approved the “Corporate Income Tax Law of the People’s Republic of China” (the “new CIT Law”). The new CIT Law became effective from January 1, 2008, and the applicable corporate income tax rate of the Company was adjusted from 33% implemented previously to 25%. For those branches and subsidiaries of the Company which are applying 15% income tax rate, the income tax rate will gradually increase to 25% over 5 years while those entities located in western region continue to enjoy income tax rate of 15% without any upward adjustment before 2011 when such income tax rate will change to 25% thereafter. Reconciliation of income tax (benefits)/expense from consolidated profit: 2008 2007 RMB’000 RMB’000 Profit before income tax (benefits)/expense 124,815 14,992,308 Tax calculated at standard tax rate of 25% (2007: 33%) 31,204 4,947,462 Impact on original deferred income tax record upon promulgation of new CIT Law Preferential income tax expense differentials — (601) of certain branches and subsidiaries (11,897) (1,253,034) Tax losses for which no deferred income tax asset was recognized Non-taxable income Non-deductible costs, expenses and losses Tax credit for equipment investment Adjustment of income tax in prior years Utilization of prior years’ unrecognized 99,489 (31,603) 33,294 (92,397) (17,844) 92,101 (319,094) 262,464 (805,564) (54,070) deductible loss and expenses (43,803) (454) Income tax (benefits)/expense (33,557) 2,869,210 Average effective tax rate (26.89%) 19.14% 238 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 29. Income tax (benefits)/expense (Continued) Note: Share of income tax expense of associates including in ‘Shares of profits of associate’ amounted to RMB5 million (2007: RMB109 million), respectively. The jointly controlled entities did not incur any income tax expense for the year (2007: nil). The decrease of the average effective tax rate is mainly attributable to that taxable income of the Company and certain subsidiaries are loss and the tax credit in respect of acquisition of qualified equipment. 30. Profit attributable to equity holders of the Company The profit attributable to equity holders of the Company is dealt within the financial statements of the Company to the extent of RMB641 million (2007: RMB7,899 million). 31. Earnings per share (a) Basic earnings per share The calculation of basic earnings per share of the year 2008 and 2007 were based on the consolidated profit attributable to equity holders of the Company of RMB9 million and RMB10,753 million and the weighted average number of 13,524 million ordinary shares and 12,792 million ordinary shares in issue during the respective periods. (b) Diluted earnings per share Diluted earnings per share is calculated based on consolidated profit attributable to equity holders of the Company for the year adjusted for the profit and loss impact from potential diluted ordinary share and the adjusted weighted average number of ordinary share in issue during the respective periods. During 2008 and 2007, as the Company did not have any dilutive ordinary share, there was no difference between basic and diluted earnings per share. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 239 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 32. Dividends According to the articles of association of the Company, the Company considers the lower of the sum of current period net profit and opening retained earnings of financial statements prepared under HKFRS; and the sum of current period net profit and opening retained earnings derived under PRC GAAP and related regulations as the maximum limit in profit appropriation to shareholders. A 2006 final special dividend of RMB0.013 per ordinary share, totaling approximately RMB168 million was declared and approved in the shareholders’ meeting on October 12, 2007. The 2006 final special dividends were fully paid before June 30, 2008. The 2007 final dividends distribution plan of the Company was approved in the shareholders’ meeting on May 9, 2008. Applying total share capital of 13,524,487,892 shares as of December 31, 2007 as the basis and excluding those interim dividends paid, cash dividends per share distributed amounted to RMB0.053, totaling approximately RMB717 million and was fully paid as of June 30, 2008. The 2008 interim dividends distribution plan of the Company was approved in extraordinary shareholders’ meeting on October 28, 2008. Applying total share capital of 13,524,487,892 shares as of September 30, 2008 as the basis, cash dividends per share distributed amounted to RMB0.052 (2007 interim: RMB0.137), totaling approximately RMB703 million (2007 interim: RMB1,765 million) and was fully paid as of December 24, 2008. The Board did not recommend the payment of a final dividend for the period up to December 31, 2008. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 240 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions Related parties refer to entities in which the Company has the ability, directly or indirectly, to control or jointly control the other party, or exercise significant influence over the other party in making financial and operating decisions, or Directors or officers of the Company and of its holding company, jointly controlled entities and associates. State-owned enterprises and their subsidiaries, other than entities under Chinalco (also a state-owned enterprise), directly or indirectly controlled by the PRC government are also defined as related parties of the Group in accordance with HKAS 24 “Related Party Disclosures”. Given that the PRC government still owns a significant portion of the productive assets in the PRC despite the continuous reform of the governments structure, the majority of the Group’s business activities are conducted with enterprises directly or indirectly owned or controlled by the PRC government (“other state-owned enterprises”), including Chinalco and its subsidiaries (collectively “Chinalco Group”), its associates and jointly controlled entities in the ordinary course of business. For the purpose of the related party balances and transactions disclosure, the Group has established procedures to determine, to the extent possible, the identification of the ownership structure of its customers and suppliers as to whether they are state-owned enterprises. However, many state-owned enterprises have a multi-layered corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Nevertheless, management believes that all material related party balances and transactions have been adequately disclosed. Chinalco does not publish financial statements for public use. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 241 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (a) Related party balances with Chinalco Group (i) Due from Chinalco Group Amounts due from Chinalco Group are as follows: Group Company 2008 RMB’000 2007 RMB’000 2008 RMB’000 2007 RMB’000 Trade receivables 319,623 249,682 262,954 214,805 Prepayments and other receivables Less: provision for doubtful debts 848,719 155,051 56,822 91,986 1,168,342 404,733 319,776 306,791 (171,360) (203,723) (171,360) (203,723) 996,982 201,010 148,416 103,068 Receivables from Chinalco Group are unsecured, non-interest bearing and receivable on demand. (ii) Due to Chinalco Group Amounts due to Chinalco Group are as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Trade payables 312,542 306,887 183,841 178,077 Other payables 2,625,164 1,727,699 1,568,761 1,072,931 2,937,706 2,034,586 1,752,602 1,251,008 Payables to Chinalco Group are unsecured, non-interest bearing and repayable on demand. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 242 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (b) Other related party balances (i) Due from other related parties Amounts due from other related parties are as follows: Jointly controlled entities Associates Subsidiaries Others Less: provision for doubtful debts Group Company 2008 RMB’000 2007 RMB’000 2008 RMB’000 2007 RMB’000 42,322 17,631 — — 100 — 17,631 — 17,631 100 5,882,020 1,984,482 227,978 254,036 30,749 18,327 270,300 271,767 5,930,400 2,020,540 (34) (16,954) (34) (16,954) 270,266 254,813 5,930,366 2,003,586 Amounts due from other related parties are unsecured, non-interest bearing and receivable on demand. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 243 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (b) Other related party balances (Continued) (ii) Due to other related parties Amounts due to other related parties are as follows: Jointly controlled entities Associates Subsidiaries Others Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 332 1,580 — 9,419 1,898 12,020 — 22,980 332 — 92,326 835 366 12,020 138,880 11,983 11,331 36,898 93,493 163,249 Amounts due to other related parties are unsecured, non-interest bearing and repayable on demand. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 244 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (c) Related party balances with other state-owned enterprises T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Included in the balance sheets, balances with other state-owned enterprises are as follows: Group Company 2008 RMB’000 38,172 796,573 2007 RMB’000 87,292 332,127 2008 RMB’000 20,911 337,565 2007 RMB’000 54,586 67,118 Current assets Accounts receivables, net Other current assets, net Bank balances 15,496,391 8,565,640 6,529,832 4,942,906 Non-current liabilities Long-term bank loans 23,721,674 15,258,843 12,599,579 5,180,062 Current liabilities Accounts payable and other liabilities Short-term loans Current portion of 2,728,012 14,148,202 1,145,123 5,753,055 1,073,450 4,537,000 911,828 — long-term bank loans 2,949,730 2,332,600 1,149,422 1,549,938 Except for bank balances and loans stated above, all the balances of assets and liabilities with other state-owned enterprises mentioned above are unsecured, non-interest bearing and receivable/ repayable within one year. Terms of bank balances, long-term loans and short-term loans are described in Notes 17 and 19, respectively. For the year ended December 31, 2008, the annual interest rates of long-term loans and short- term loans from other state-owned enterprises are from 3.54% to 8.51% and from 4.49% to 7.47% (2007: 0.30% to 7.83% and from 5.02% to 7.34%), respectively. As of December 31, 2008, loans amounting to RMB1,336 million (2007: RMB1,176 million) were guaranteed by other state-owned enterprises. 245 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (d) Related party transactions with Chinalco Group and other related parties Save as disclosed elsewhere in the consolidated financial statements, significant related party transactions which were carried out in the normal course of the Group’s business during the year were as follows: Note (I) Sales of materials and finished goods, including: Chinalco Group Jointly controlled entities Associates Other related parties Provision of utility services, including: (II) Chinalco Group Associates Other related parties Provision of engineering, construction and supervisory services, including: (III) Chinalco Group Other related parties 2008 2007 RMB’000 RMB’000 2,703,461 2,533,702 20,939 3,274 5,736,264 16,882 2,167,047 8,120,244 8,463,938 12,837,875 580,042 439,766 5,461 44 3,659 57 585,547 443,482 8,373,067 3,435,029 22,585 24,342 8,395,652 3,459,371 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 246 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (d) Related party transactions with Chinalco Group and other related parties (Continued) Note RMB’000 RMB’000 2008 2007 Purchases of key and auxiliary materials from, including: Chinalco Group Jointly controlled entities Associates Other related parties Provision of social services and logistics services by Chinalco Group Provision of utilities services by other related parties Rental expenses for land use rights and buildings charged by Chinalco Group (IV) (V) (III) 1,804,594 2,051,360 6,260 345,029 243,524 — 3,113,918 5,037,148 5,269,801 7,332,032 723,129 903,272 4,010 1,514 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I (VI) 948,396 728,743 247 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (d) Related party transactions with Chinalco Group and other related parties (Continued) Notes: (I) Sales of materials and finished goods comprised sales of alumina, primary aluminum and scrap materials. Transactions entered are covered by general agreements on mutual provision of production supplies and ancillary services. The pricing policy is summarized below: (i) Adoption of the price prescribed by the PRC government (“Stated-prescribed price”); (ii) If there is no State-prescribed price then adoption of State-guidance price; (iii) If there is neither State-prescribed price nor State-guidance price, then adoption of market price (being price charged to and from independent third parties); and (iv) If none of the above is available, then adoption of a contractual price (being reasonable costs incurred in providing the relevant services plus not more than 5% of such costs). (II) Utility services, including electricity, gas, heat and water, are supplied at the prices as set out in (I)(i) above. (III) Engineering, project construction and supervisory services were provided for construction projects of the Company. The State-guidance price as stated in (I)(ii) or prevailing market price in (I)(iii) (including tender price where by way of tender) is adopted for pricing purposes. (IV) The pricing policy for purchases of key and auxiliary materials (including bauxite, limestone, carbon, cement, coal, etc.) is the same as that set out in (I) above. (V) Social services and logistics services provided by Chinalco Group cover public security, fire services, education and training, school and hospital services, cultural and physical education, newspaper and magazines, broadcasting and printing as well as property management, environmental and hygiene, greenery, nurseries and kindergartens, sanatoriums, canteens and offices, public transport and retirement management and other services. Provisions of these services are covered by the Comprehensive Social and Logistics Services Agreement. The pricing policy is the same as that set out in (I) above. (VI) Pursuant to the Land Use Rights Lease Agreements entered into between the Group and Chinalco Group, operating leases for industrial or commercial land are charged at market rent rate. The Group also entered into building rental agreement with Chinalco Group and pays rent based on market rate for its lease of buildings owned by Chinalco. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 248 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 33. Related party balances and transactions (Continued) (d) Related party transactions with Chinalco Group and other related parties (Continued) Notes: (Continued) (VII) Pursuant to Trademark License Agreement, the Company granted to Chinalco a non-exclusive right to use two trademarks for a period of ten years from July 1, 2001 to June 30, 2011 at zero cost. The Company will be responsible for the payment of a total annual fee of no more than RMB1,000 to maintain effective registration. According to the agreement terms, Chinalco may negotiate extension of effective period in using these trademarks. (VIII) As of December 31, 2008, the Company provided guarantee to its subsidiary in opening letters of credit amounted to RMB223.515 million (2007: RMB312.162 million). (e) Related party transactions with other state-owned enterprises Sales of goods Purchases of raw materials Purchases of electricity Purchase of property, plant and equipment 2008 2007 RMB’000 RMB’000 12,885,826 10,304,947 5,033,356 5,820,666 14,966,469 12,800,946 (including construction services and materials) 1,253,629 915,477 Drawdown of loans (including short-term and long-term) Interest expense paid 31,941,421 11,826,200 2,255,532 1,370,749 (f) Key management personnel compensation T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Basic salaries, housing allowances, other allowances and benefits in kind Discretionary bonus Pension 2008 2007 RMB’000 RMB’000 3,130 1,362 130 4,622 3,413 2,123 123 5,659 249 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 34. Contingent liabilities Litigation As of December 31, 2008, Fushun Aluminum, a subsidiary of the Company was named in the claims by various banks for its joint and several liabilities amounting to approximately RMB171 million (2007: RMB681 million) for the repayments of loans due from a third party. Fushun Aluminum was acquired by the Company from the third party. The Directors of the Company are of the opinion that as the acquisition was conducted on fair principle and the consideration was set close to the asset value of the assets acquired, no contingency provision for such claims is provided as of December 31, 2008 (2007: Nil). 35. Commitments (a) Capital commitments of property, plant and equipment Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Contracted but not provided for 10,278,172 10,946,124 4,633,825 7,348,435 Authorized but not contracted for 30,131,209 25,473,768 21,300,222 9,998,984 40,409,381 36,419,892 25,934,047 17,347,419 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 250 Notes to the Consolidated Financial Statements (Continued) For the year ended December 31, 2008 (Amounts expressed in thousands of RMB unless otherwise stated) 35. Commitments (Continued) (b) Commitments under operating leases Pursuant to non-cancelable lease agreements entered, the future aggregate minimum lease payments are summarized as follows: Group Company 2008 2007 2008 2007 RMB’000 RMB’000 RMB’000 RMB’000 Not later than one year 905,493 686,921 803,252 634,522 Later than one year and not later than five years 3,621,972 2,747,684 3,220,685 2,538,092 Later than five years 30,877,194 23,713,941 28,723,165 23,147,813 35,404,659 27,148,546 32,747,102 26,320,427 (c) Commitments for capital contribution The Company entered into investment agreement with Guizhou Wujiang Hydropower Development Co., Ltd. on April 17, 2006 in establishing Zunyi Alumina with registered capital of RMB1,400 million. Including which, the Company is required to inject RMB938 million, holds 67% equity interest. As of December 31, 2008, the Company has injected capital of RMB562.80 million (2007: RMB387.60 million) and is still obliged for capital injection of RMB375.20 million (2007: RMB550.40 million). As of December 31, 2008, the Company committed further capital injection into its subsidiary, China Aluminum Taiyue Mining Co., Ltd. amounted to RMB20 million (2007: RMB 20 million). 36. Ultimate holding company The Directors regard Chinalco, a company incorporated in the PRC, as being the ultimate holding company. T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I 251 Supplementary Information T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I The consolidated financial statements for the years ended December 31, 2007 and 2008 have been prepared in accordance with HKFRS. HKFRS may differ in various material respects from accounting principles generally accepted in the United States (“US GAAP”). Such differences involve different measurements for items shown in these financial statements, as well as additional disclosures required by US GAAP. In preparing the summary of differences between HKFRS and US GAAP, the Directors of the Company are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the estimates of gains and expenses. Accounting estimates have been employed in these financial statements to determine reported amounts, including useful lives of tangible and intangible assets. Actual results could differ from those estimates. Effect on net profit of significant differences between HKFRS and US GAAP is as follows: Profit under HKFRS US GAAP adjustments: Additional depreciation on revalued property, plant and equipment Unrecognized excess of interest in the net fair value of net assets acquired over cost Additional amortization on revalued mining rights Common control business combinations Impairment of goodwill Minority interest Income tax effect of US GAAP adjustments 2008 2008 2007 Note RMB’000 USD’000 RMB’000 158,372 23,172 12,123,098 (a) (c) (d) (g) (g) (h) (i) 269,999 39,505 269,999 11,103 1,625 21,921 9,307 1,362 9,307 (214,679) (31,411) (1,016,337) (6,690,223) (978,876) — (149,144) (21,822) (1,370,056) (41,721) (6,104) (138,304) Net (loss)/profit under US GAAP (6,646,986) (972,549) 9,899,628 Basic and diluted net (loss)/earnings per share under US GAAP RMB(0.49) USD(0.07) RMB0.79 252 Supplementary Information (Continued) Effect on equity of significant differences between HKFRS and US GAAP is as follows: Equity under HKFRS US GAAP adjustments: Revaluation of property, plant and equipment, net of related depreciation Amortization of goodwill Unrecognized excess of interest in the net fair value of net assets acquired over cost Revaluation of mining rights, net of related amortization Difference on fair value of acquisition considerations Acquisition of minority interest Common control business combinations Impairment of goodwill Minority interest Income tax effect of US GAAP adjustments 2008 2008 2007 Note RMB’000 USD’000 RMB’000 60,196,822 8,807,658 64,493,205 (a) (b) (c) (d) (e) (f) (g) (g) (h) (i) (1,781,721) (260,691) (2,051,720) 73,944 10,819 73,944 (191,926) (28,081) (203,029) (215,193) (31,486) (224,500) (789,739) (115,550) (789,739) 1,955,426 286,107 1,955,426 12,799,089 1,872,690 8,372,437 (6,690,223) (978,875) — (5,198,340) (760,592) (3,805,144) 166,938 24,425 626,576 Equity under US GAAP 60,325,077 8,826,424 68,447,456 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Notes: (a) Revaluation of property, plant and equipment Under HKFRS, property, plant and equipment transferred from Chinalco to the Group were accounted for in the financial statements using acquisition accounting. As a result, the Group’s property, plant and equipment were revalued at fair value under HKFRS. As the transfers of these property, plant and equipment are regarded as common control transactions, no new cost basis was established under US GAAP. When an asset is transferred from the parent to its wholly-owned subsidiary, the subsidiary should record the asset at the parent’s carrying value. 253 Supplementary Information (Continued) Notes: (Continued) (b) Amortization of goodwill T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Until December 31, 2004, under HKFRS, goodwill arising from acquisitions under purchase accounting was recognized as an intangible asset and amortized on a straight-line basis over its estimated useful economic life of not more than 20 years. Under US GAAP, annual amortization of goodwill ceased from January 1, 2002. Goodwill is subject to annual impairment testing and is written down if carrying value exceeds fair value. In accordance with HKFRS 3 effective from January 1, 2005, the Group ceased amortization of goodwill and goodwill is subject to annual impairment testing. Except for the differences with US GAAP recognized in prior years, there is no further difference. (c) Unrecognized excess of interest in the net fair value of net assets acquired over cost Excess of interest in the net fair value of net assets acquired over cost arises from business combinations where the shares of fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities are in excess of acquisition cost. Under HKFRS, the identification and measurement of identifiable assets, liabilities and contingent liabilities are required to re-assess. After reassessment, any remaining portion is recognized in income statement immediately. Under US GAAP, any excess after reassessment is used to reduce proportionately the fair values assigned to the non- current assets acquired (with certain exceptions). Any remaining excess is then recognized in the income statement as an extraordinary gain. (d) Revaluation of mining rights As part of the Group reorganization and pursuant to the Mining Rights Transfer Agreement, the Group acquired mining rights for eight bauxite mines and four limestone quarries from Chinalco for consideration of RMB285,341,000. Under HKFRS, mining rights acquired are stated at acquisition cost less accumulated amortization and accumulated impairment loss. Amortization of mining rights is calculated on a straight-line basis over their estimated useful lives of not more than 30 years. Under US GAAP, as the transfer was a transaction under common control, a new cost basis was not established for the Group. (e) Fair value of consideration on acquisitions In November 2006, the Company entered into agreements with other shareholders of Lanzhou Aluminum to acquire the remaining equity interests of this entity. On April 24, 2007, the Company acquired such equity interests through the issuance of A shares. These A shares were then listed on the SSE on April 30, 2007. Under HKFRS, the fair value of the acquisition cost was measured at the fair value of these instruments on the closing date of the transaction. Under US GAAP, the fair value of the acquisition was measured over a reasonable period of time before and after the agreement and announcement of the terms of acquisition. Accordingly, the balance of goodwill and the related impacts on equity (see (f) below) are different between HKFRS and US GAAP. 254 Supplementary Information (Continued) Notes: (Continued) (f) Acquisition of minority interest Prior to 2007, the Company held a 71.43% equity interest in Shandong Aluminum. In April 2007, the Company acquired the remaining 28.57% equity interest in this subsidiary. In addition, in connection with the acquisition of Lanzhou Aluminum (see (e) above), the Company obtained a 51% indirect equity interest in Hewan Power in 2007. In November 2007, the Company acquired the remaining 49% equity interest in Hewan Power. Under HKFRS, the acquisitions above do not qualify as business combinations and any difference between the consideration paid and the proportionate shares of the carrying amount of net assets acquired are accounted for in equity. Under US GAAP, acquisitions of minority interest are accounted for using the purchase method. Accordingly, the balance of goodwill and the related impacts on equity and income are different between HKFRS and US GAAP. (g) Common control business combinations In July 2007, the Company entered into agreements with Baotou Aluminum to acquire all the equity interest from their shareholders. On December 28, 2007, the Company acquired 100% equity interest of Baotou Aluminum through the issuance of A shares. On May 30, 2008, the Company acquired Longxing Aluminum, Huaxi Aluminum, Chalco Ruimin, Chalco Southwest Aluminum Cold Rolling, Chalco Southwest Aluminum and Henan Aluminum from Chinalco and China Nonferrous Metals Technology for cash. In addition, on October 1, 2008, the Company further acquired the aluminum alloy business of Pingguo Aluminum from Pingguo Aluminum Company for cash. Under HKFRS, these transactions are considered common control transactions as the Company, Baotou Aluminum and the seven common control entities acquired in 2008 are under de facto and actual control of Chinalco, respectively, and therefore, merger accounting is used to account for these transactions. However, for US GAAP purposes, the Company is not considered to be controlled by Chinalco. Therefore, under US GAAP, these are not regarded as common control transactions and are accounted for under the purchase method. The fair value of the consideration paid for the acquisition of Baotou Aluminum was measured over a reasonable period of time before and after the agreement and announcement of the terms of acquisition while proportionate shares of all the net identifiable assets acquired were recorded at fair value based on the respective acquisition dates. Accordingly, the balance of goodwill and the related impacts on equity and income are different between HKFRS and US GAAP. During 2008, management performed annual impairment test for goodwill using the two-step approach according to SFAS 142. Except for goodwill arising from the acquisition of Baotou Aluminum, the fair values of those reporting units into which goodwill is allocated, exceed their respective carrying amounts including goodwill. Management concluded that the goodwill arising from the acquisition of Baotou Aluminum was impaired. A discount rate of 11% was applied to determine the implied fair value of goodwill based on the five-year financial budget approved by management. A growth rate of 2% was applied for cash flows beyond the five-year period, which does not exceed the long-term average growth rate for respective businesses and is consistent with forecast information contained in industry reports. An impairment loss of RMB6.690 billion was recorded as a result. This impairment is mainly attributable to the decline of the 2008 operating results of Baotou Aluminum due to changes in the economic environment and management considered the synergy initially expected to arise from acquisition of Baotou Aluminum was affected. 255 T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Supplementary Information (Continued) Notes: (Continued) (h) Minority interest T R O P E R L A U N N A 8 0 0 2 D E T I M I L A N H C I F O N O I T A R O P R O C M U N M U L A I Under HKFRS, minority interest is included as a component of equity and the profit and loss attributable to minority interest is included as a component of the Group’s total net profit. Under US GAAP, minority interest is excluded from equity and presented as a separate item before net profit. (i) Income tax effect of U.S. GAAP adjustments Under US GAAP, deferred income tax relating to the reversal of the property, plant and equipment revaluation, mining rights revaluation, the effect of unrecognized excess of interest in the fair value of net assets acquired over cost and the effect of common control business combinations are recognized. (j) Other disclosure: effects of tax holiday Six branches and five subsidiaries of the Company located in the western region of China were granted tax concessions to pay PRC enterprise income tax at a preferential rate of 15%. The preferential tax rate is applicable to qualified businesses of the six branches and five subsidiaries in specified regions with effect from January 1, 2001 for a ten-year period to December 31, 2010. The preferential treatment persists so long as the qualified businesses of these branches and subsidiaries continue to operate during the applicable period. A subsidiary of the Company, located in Xining Economic and Technology Developing District had registered in October 2003. Pursuant to “Certain policies under the Strategic Development of Western Region in Qinghai Province” (Qing Zheng [2003] No. 35), the subsidiary is exempted from PRC enterprise income tax for the first 5 years starting from the commencement of its business and is entitled to a preferential rate of 15% for the years after. Under US GAAP, the aggregate amount and effect on earnings per share of the tax holiday are as follows: The aggregate amount of tax holiday 14,621 2,139 Effect on basic earnings per share RMB0.0011 USD0.0002 2008 RMB’000 2008 USD’000 2007 RMB’000 954,681 RMB0.08 (k) Recent U.S. accounting pronouncements In December 2007, the Financial Accounting Standard Board (the “FASB”) issued FASB Statement No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R provides additional guidance on improving the relevance, representational faithfulness, and comparability of the financial information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. In December 2007, the FASB issued FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. 256 2007 Annual Report 2006 Annual Report 2005 Annual Report Designed and produced by: Wonderful Sky Financial Group Limited Tel.: 2851 1038 

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