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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
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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:
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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);
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Aluminum Cold Rolling”) (mainly engaged in
producing aluminum fabricated products; under
construction);
03
Corporate Profile (Continued)
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•
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
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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
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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
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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)
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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
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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.
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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
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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)
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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
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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
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8
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O
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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
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8
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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..
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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.
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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
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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
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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
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21
Directors, Supervisors,
Senior Management and Staffs (Continued)
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8
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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.
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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
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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
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U
N
M
U
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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.
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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.
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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.
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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.
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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%.
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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.
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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.
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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
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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.
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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.
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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
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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.
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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
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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.
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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
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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.
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53
Report of the Directors (Continued)
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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.
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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.
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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.
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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
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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)
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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.
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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
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Report of the Directors (Continued)
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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
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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.
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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
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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
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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.
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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
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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.
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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.
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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
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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,
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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.
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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.
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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.
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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
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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.
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•
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;
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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.
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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.
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81
Report on Corporate Governance and
Internal Control (Continued)
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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:
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Report on Corporate Governance and
Internal Control (Continued)
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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
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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.
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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)
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(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
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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
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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
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91
Connected Transactions (Continued)
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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
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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.
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(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.
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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.
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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
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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.
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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.
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99
Connected Transactions (Continued)
II
Connected Transactions
(2)
Engaging Huasheng Jiangquan to
construct a new aluminum smelter
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(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.
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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.
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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
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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
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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
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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.
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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
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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
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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
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O
C
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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.
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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.
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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.
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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.
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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.
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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).
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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
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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.
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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.
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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).
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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.
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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)
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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.
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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
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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.
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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
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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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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
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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
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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
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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%
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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.
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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.
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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)
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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
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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.
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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
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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.
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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)
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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
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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
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P
E
R
L
A
U
N
N
A
8
0
0
2
D
E
T
I
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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
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O
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M
U
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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.
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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
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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
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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.
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251
Supplementary Information
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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
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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
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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
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Supplementary Information (Continued)
Notes: (Continued)
(h)
Minority interest
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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
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