2010 Annual Report Contents 2 6 9 15 30 39 48 58 67 72 94 99 119 121 125 127 129 131 Corporate Profile Corporate Information Financial Summary Directors, Supervisors, Senior Management and Staff Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders Chairman’s Statement Management’s Discussion and Analysis of Financial Conditions and Results of Operations Directors’ Report Report of the Supervisory Committee Report on Corporate Governance and Internal Control Significant Events Connected Transactions Independent Auditor’s Report Statements of Financial Position Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Shareholders’ Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Corporate Profile Aluminum Corporation of China Limited (“Chalco” or the “Company”) is a joint stock limited company established in the People’s Republic of China (the “PRC”); its shares are listed on the New York Stock Exchange, The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) and the Shanghai Stock Exchange respectively. The Company and its subsidiaries (collectively referred to as the “Group”) are principally engaged in mining of bauxite; the production and sales of alumina, primary aluminum and aluminum fabrication products; and trading of other non-ferrous metal products. The Group is the largest producer of alumina, primary aluminum and aluminum fabrication products in the PRC, and also the second largest producer of alumina as well as the third largest producer of primary aluminum in the world. The competitiveness of the Group is mainly reflected in: • its leading strategic position in the alumina, primary aluminum and aluminum fabrication markets in the PRC; • its ownership of adequate and stable supply of bauxite resources as well as refining technology; and • its comprehensive industry chain with better resistance to market risks. The Group is principally comprised of the following branches, subsidiaries and jointly controlled entity: Branches: • Shandong branch (mainly engaged in producing alumina/primary aluminum products); • Henan branch (mainly engaged in producing alumina/primary aluminum products); 2 2010 ANNUAL REPORT Corporate Profile (Continued) • 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 primary aluminum products); • Liancheng branch (mainly engaged in producing primary aluminum products); • Chongqing branch (mainly engaged in producing alumina products); • Northwest Aluminum Fabrication Plant (mainly engaged in producing aluminum fabricated products); • Zhengzhou Research Institute (mainly providing research and development services). Subsidiaries: • Shanxi Huaze Aluminum & Power Company Limited (“Shanxi Huaze”) (mainly engaged in producing primary aluminum products); • Shanxi Huasheng Aluminum Company Limited (“Shanxi Huasheng”) (mainly engaged in producing primary aluminum products); • Fushun Aluminum Company Limited (“Fushun Aluminum”) (mainly engaged in producing primary aluminum products); ALUMINUM CORPORATION OF CHINA LIMITED 3 Corporate Profile (Continued) • Zunyi Aluminum Company Limited (“Zunyi Aluminum”) (mainly engaged in producing primary aluminum products); • Shandong Huayu Aluminum and Power Company Limited (“Shandong Huayu”) (mainly engaged in producing primary aluminum products); • Gansu Hualu Aluminum Company Limited (“Gansu Hualu”) (mainly engaged in producing primary aluminum products); • Baotou Aluminum Company Limited (“Baotou Aluminum”) (mainly engaged in producing primary aluminum products); • Jiaozuo Wanfang Aluminum Company Limited (“Jiaozuo Wanfang”) (mainly engaged in producing primary aluminum products); • Chalco Qingdao Light Metal Company Limited (mainly engaged in producing recycled aluminum products); • Chalco Southwest Aluminum Cold Rolling Company Limited (“Chalco Southwest Aluminum Cold Rolling”) (mainly engaged in producing aluminum fabricated products); • Chalco Ruimin Company Limited (“Chalco Ruimin”) (mainly engaged in producing aluminum fabricated products); • Chalco Henan Aluminum Company Limited (“Henan Aluminum”) (mainly engaged in producing aluminum fabricated products); • Huaxi Aluminum Company Limited (“Huaxi Aluminum”) (mainly engaged in producing aluminum fabricated products); • Chalco Southwest Aluminum Company Limited (“Chalco Southwest Aluminum”) (mainly engaged in producing aluminum fabricated products); 4 2010 ANNUAL REPORT Corporate Profile (Continued) • Chalco Mining Company Limited (“Chalco Mining”) (mainly engaged in mining bauxite); • Chalco Zhongzhou Mining Company Limited (“Zhongzhou Mining”) (mainly engaged in mining bauxite); • China Aluminum International Trading Company Limited (“CIT”) (mainly engaged in the trading of non-ferrous metal products); • Chalco Hong Kong Limited (“Chalco Hong Kong”) (mainly engaged in developing overseas projects); • Chalco Zunyi Alumina Company Limited (“Zunyi Alumina”) (mainly engaged in producing alumina products); • Chalco Nanhai Alloy Company Limited (“Nanhai Alloy”) (mainly engaged in producing aluminum fabricated products); • Shanxi Huatai Carbon Company Limited (“Shanxi Carbon”) (mainly engaged in producing carbon products); • Shanxi Longmen Aluminum Company Limited (“Longmen Aluminum”) (mainly engaged in producing primary aluminum products); • China Aluminum Tai Yue Mining Company Limited (“Tai Yue Mining”) (mainly engaged in mining bauxite). Jointly controlled entity: • Guangxi Huayin Aluminum Company Limited (“Guangxi Huayin”) (mainly engaged in producing alumina products) in which the Company has a 33% equity interest. ALUMINUM CORPORATION OF CHINA LIMITED 5 Corporate Information 1. 2. 3. Registered name Abbreviation of Chinese name Name in English Abbreviation of English name First registration date Registered address Place of business Principal place of business in Hong Kong Internet website Corporate e-mail Legal representative Company (Board) Secretary Telephone Fax E-mail Address Representative for the Company’s securities related affairs Telephone Fax E-mail Address Department for corporate information and inquiry 中國鋁業股份有限公司 中國鋁業 ALUMINUM CORPORATION OF CHINA LIMITED CHALCO September 10, 2001 No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (Postal code: 100082) No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (Postal Code: 100082) Unit 3103, 31/F, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong http://www.chalco.com.cn IR_FAQ@chalco.com.cn Xiong Weiping Liu Qiang +86(10) 8229 8103 +86(10) 8229 8158 IR_FAQ@chalco.com.cn No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (Postal Code: 100082) Shen Hui +86(10) 8229 8560 +86(10) 8229 8158 IR_FAQ@chalco.com.cn No. 62 North Xizhimen Street, Haidian District, Beijing, the PRC (Postal Code: 100082) Secretarial Office to the Board Telephone for corporate +86(10) 8229 8560/8157/8456/8468 information and inquiry 6 2010 ANNUAL REPORT Corporate Information (Continued) 4. Share registrar and transfer office H shares: Hong Kong Registrars Limited 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong A shares: China Securities Depository and Clearing Corporation Limited, 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 10286, USA 5. Places of listing The Stock Exchange of Hong Kong Limited Stock name Stock codes Shanghai Stock Exchange New York Stock Exchange, Inc 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 ALUMINUM CORPORATION OF CHINA LIMITED 7 Corporate Information (Continued) 8. Independent auditors PricewaterhouseCoopers Certified Public Accountants 22/F, Prince’s Building, Central, Hong Kong PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11/F, PricewaterhouseCoopers Center 2 Corporate Avenue, 202 Hu Bin Road, Shanghai, the PRC (Postal code: 200021) 9. Legal advisers as to Hong Kong law and United States law: Baker & McKenzie 23/F One Pacific Place 88 Queensway Hong Kong as to PRC law: Jincheng Tongda & Neal Law Firm (北京市金誠同達律師事務所) 10/F, China World Trade Tower 3 No. 1 Jianguomennei Avenue, Chaoyang District, Beijing, the PRC 10. Corporate information database Secretarial Office to the Board 8 2010 ANNUAL REPORT Financial Summary 1. Financial summary prepared in accordance with International Financial Reporting Standards For the year ended December 31, 2010, revenue of the Group amounted to RMB120.99 billion, representing a year-on-year increase of 72.19%; profit for the year attributable to the Company’s equity holders was RMB0.78 billion while earnings per share for the year attributable to the Company’s equity holders was RMB0.06. For the years ended December 31, 2010 2009 2008 2007 (Note) 2006 (Note) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue Cost of sales 120,994,847 70,268,005 76,728,147 85,198,835 64,826,615 (113,349,941) (69,079,446) (70,960,668) (64,936,133) (43,930,699) Gross profit 7,644,906 1,188,559 5,767,479 20,262,702 20,895,916 Selling and distribution expenses (1,573,301) (1,264,920) (1,562,841) (1,355,534) (1,027,875) General and administrative expenses (2,623,740) (2,956,506) (2,507,011) (3,029,114) (2,449,268) Research and development expenses (164,235) (177,756) (177,507) (229,803) (116,389) Impairment charge/write-off on property, plant and equipment (701,781) (623,791) (1,334) (13,249) (16,924) Other revenue Other gains, net 328,853 491,024 151,142 403,836 100,781 212,840 47,067 111,846 59,832 322,429 Operating profit/(loss) 3,401,726 (3,279,436) 1,832,407 15,793,915 17,667,721 Finance costs, net (2,495,184) (2,137,825) (1,709,667) (1,040,171) (637,236) ALUMINUM CORPORATION OF CHINA LIMITED 9 Financial Summary (Continued) 1. Financial summary prepared in accordance with International Financial Reporting Standards (Continued) For the years ended December 31, 2010 2009 2008 2007 (Note) 2006 (Note) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Operating profit/(loss) after finance costs 906,542 (5,417,261) 122,740 14,753,744 17,030,485 Share of profit/(loss) of jointly controlled entities Share of profit of associates 233,784 240,028 (50,392) 77,056 1,672 10,045 (3,381) 241,945 (11,419) 105,177 Profit/(loss) before income tax 1,380,354 (5,390,597) 134,457 14,992,308 17,124,243 Income tax (expense)/benefit (411,216) 711,003 34,172 (2,869,210) (4,410,674) Profit/(loss) for the year 969,138 (4,679,594) 168,629 12,123,098 12,713,569 10 2010 ANNUAL REPORT Financial Summary (Continued) 1. Financial summary prepared in accordance with International Financial Reporting Standards (Continued) For the years ended December 31, 2010 2009 2008 2007 (Note) 2006 (Note) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Attributable to: Equity holders of the Company 778,008 (4,642,894) 19,485 10,753,042 11,841,681 Non-controlling interests 191,130 (36,700) 149,144 1,370,056 871,888 Profit/(loss) for the year 969,138 (4,679,594) 168,629 12,123,098 12,713,569 Dividends 154,179 — 703,273 4,131,749 2,190,177 Summary of the Group’s consolidated total assets and total liabilities is set out below: As of December 31, 2010 2009 2008 2007 (Note) 2006 (Note) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Total assets Total liabilities 141,332,039 133,975,189 135,612,152 105,848,068 81,941,754 84,135,184 78,394,032 75,430,722 41,354,861 32,675,192 Net assets 57,186,855 55,581,157 60,181,430 64,493,207 49,266,562 Note: Financial information as of and for the years ended December 31, 2007 and 2006 has not been restated for the Company’s business combinations under common control which occurred during 2008 and 2009. ALUMINUM CORPORATION OF CHINA LIMITED 11 Financial Summary (Continued) 2. Financial summary prepared in accordance with the PRC Accounting Standards for Business Enterprises (2006) Items Operating profit Profit for the year Profit for the year attributable to the equity holders of the Company Profit for the year attributable to the equity holders of the Company after excluding non-recurring items Net cash generated from for operating activities Non-recurring items Losses from disposal of non-current assets Government grants Realized and unrealized gain of future and option contracts, net and gain on disposal of available-for-sale financial assets Reversal of impairment of receivables Other non-operating expenses, net For the year ended December 31, 2010 RMB’000 945,183 969,138 778,008 112,234 7,103,859 For the year ended December 31, 2010 RMB’000 184,022 328,853 306,609 4,472 76,993 Note: Non-recurring items above as defined under the PRC Accounting Standards for Business Enterprises (2006) do not include impairment/write-off of property, plant and equipment. 12 2010 ANNUAL REPORT Financial Summary (Continued) 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 last two reporting periods of the Group 2010 RMB’000 2009 RMB’000 Increase/(Decrease) as compared with the previous year (%) Revenue 120,994,847 70,268,005 72.19 Profit/(loss) before income tax Profit/(loss) for the year attributable to equity holders of the Company 1,380,354 778,008 (5,390,597) (4,618,713) Profit/(loss) for the year attributable to 112,234 (5,014,758) equity holders of the Company after excluding non-recurring items Basic earnings/(losses) per share (RMB) Diluted earnings/(losses) per share (RMB) Basic earnings/(losses) per share after excluding non-recurring items (RMB) Weighted average rate of return on net assets (%) Weighted average rate of return on net assets after excluding non-recurring items (%) 0.06 0.06 0.01 1.53 0.22 N/A N/A N/A N/A N/A N/A (0.34) (0.34) (0.37) (8.76) Increased by 10.29 percentage points (9.51) Increased by 9.73 percentage points Net cash generated from/(used in) 7,103,859 (705,954) operating activities Net cash generated from/(used in) 0.53 (0.05) operating activities per share (RMB) Total assets 141,322,039 133,975,189 Equity attributable to equity holders 51,608,147 50,428,093 of the Company Net assets attributable to equity holders 3.82 3.73 of the Company per share (RMB) N/A N/A 5.48 2.34 2.41 ALUMINUM CORPORATION OF CHINA LIMITED 13 Financial Summary (Continued) 3. Comparison between the financial information prepared in accordance with International Financial Reporting Standards and PRC Accounting Standards for Business Enterprises (2006) Profit attributable to equity Equity attributable to equity holders of the Company holders of the Company For the years ended December 31, As of December 31, 2010 2009 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000 Prepared in accordance with Accounting Standards for Business Enterprises (2006) 778,008 (4,618,713) 51,608,147 50,428,093 Prepared in accordance with International Financial Reporting Standards 778,008 (4,642,894) 51,580,792 50,400,738 14 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff 1. Directors, Supervisors and Senior Management during the Reporting Period Whether receiving Total emolument or emolument allowance from paid/payable equity holders Date of by the of the Company appointment/ Company for or other Name Position Sex Age re-appointment 2010 related entity (Y.M.D) RMB’000 Xiong Weiping Chairman and CEO Luo Jianchuan Executive Director and President Chen Jihua (1) Executive Director, Vice President M M M and Chief Financial Officer Liu Xiangmin Executive Director and Vice President M Shi Chungui Non-executive Director Lv Youqing Kang Yi (2) Non-executive Director Independent Non-executive Director Zhang Zhuoyuan Independent Non-executive Director Wang Mengkui Independent Non-executive Director Zhu Demiao Independent Non-executive Director Ao Hong Yuan Li Chairman of Supervisory Committee Supervisor Zhang Zhankui Supervisor Ding Haiyan Vice President Jiang Yinggang Vice President Liu Qiang Secretary to the Board M M M M M M M M M M M F 54 47 43 48 70 47 70 77 72 46 49 52 52 52 47 47 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2007.5.18 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 2010.6.22 1,005.1 869.8 605.3 660.6 150 0 99.03 207.18 207.18 207.18 0 0 0 660.6 655.6 594.3 No No No No No Yes No No No No Yes Yes Yes No No No ALUMINUM CORPORATION OF CHINA LIMITED 15 Directors, Supervisors, Senior Management and Staff (Continued) 1. Directors, Supervisors and Senior Management during the Reporting Period (Continued) The Directors of the fourth session of the Board of the Company were elected at the 2009 annual general meeting of the Company convened on June 22, 2010, comprising four Executive Directors: namely Mr. Xiong Weiping, Mr. Luo Jianchuan, Mr. Chen Jihua and Mr. Liu Xiangmin respectively; two Non-executive Directors: namely Mr. Shi Chungui and Mr. Lv Youqing respectively; three Independent Non-executive Directors: namely Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao respectively. Note (1) Due to personal reason, Mr. Chen Jihua had resigned on October 28, 2010 from his positions as Executive Director, Vice President and Chief Financial Officer of the Company with immediate effect. At the board meeting held on February 23, 2011, the Board resolved to appoint Mr. Liu Caiming as Senior Vice President, Chief Financial Officer and a member of Executive Committee of the Company and resolved to nominate Mr. Liu Caiming as a candidate for executive Director of the 4th session of the Board of the Company subject to approval at the 2010 annual general meeting of the Company. Note (2) Since Mr. Kang Yi, the former independent non-executive Director of the Company, had served as the independent non-executive Director for six consecutive years, he ceased to be the independent non-executive Director in accordance with the requirement of the applicable law and had retired from office after the 2009 annual general meeting convened on June 22, 2010. 16 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Profiles of Directors, Supervisors and Senior Management: Executive Directors Mr. Xiong Weiping, 54, is Chairman, an executive Director and Chief Executive Officer (“CEO”) of the Company and concurrently General Manager of Aluminum Corporation of China (“Chinalco”). Mr. Xiong has been serving the Company since 2001 (he left the Company in 2006 and was re-appointed in 2009). Mr. Xiong graduated from Central South University of Industry majoring in mining materials 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 fruitful practical experiences in economics, corporate management and metal mining. Mr. Xiong is also a professor and a Ph.D. tutor of Guanghua School of Management, Peking University. He is an expert receiving special subsidies from the State Council and was recognized by the former Ministry of Personnel as a “Middle Age and Youth Expert with Outstanding Contribution to the Nation”. He was formerly the Deputy Secretary of Hunan Provincial Communist Youth League, a standing committee member of All China Youth Federation and the president of Hunan Youth Union Committee, the Standing Vice-Chancellor and Dean of the Faculty of Management, Professor, Ph.D. tutor of Central South University of Industry. Mr. Xiong had also served as Vice President of China Copper, Lead & Zinc Group Corporation, Vice President of Chinalco, Executive Director, Senior Vice President and President of Chalco and Vice Chairman and General Manager of China Travel Service (Holdings) Hong Kong Limited. ALUMINUM CORPORATION OF CHINA LIMITED 17 Directors, Supervisors, Senior Management and Staff (Continued) Mr. Luo Jianchuan, 47, is an executive Director and President of the Company, Chairman of the Development and Planning Committee of the Board as well as Vice Chairman of the Executive Committee of the Company. He has been serving 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 and is a professor-grade senior engineer. He has long engaged in corporate management of non-ferrous metals and thus has extensive professional experience and strong management skills in those fields. Mr. Luo 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 General Manager of Jinpeng Mining 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, General Manager of China Aluminum International Trading Corporation Limited, and formerly served as General Manager of the Operations and Sales Division, Vice President and Senior Vice President of the Company. Mr. Chen Jihua (resigned), 43, served as an executive Director, Vice President and Chief Financial Officer of the Company until his resignation on October 28, 2010. Mr. Chen had served the Company since 2001. He holds a Master’s degree from Central University of Finance and Economics. He has long engaged in corporate and financial management and thus has extensive and professional experience. He formerly served as Executive Manager of the International Finance Department of China Chengxin Securities Appraisal Company Limited, Financial Controller of Red Bull Vitamin Beverages Company Limited, the Regional (China) Financial Controller of Saudi Arabia ALJ (China) Limited, Financial Controller of Jitong Network Communications Company Limited, and formerly served as Assistant to the President of Chinalco and General Manager of the Company’s Finance Department. Due to personal reason, Mr. Chen Jihua resigned on October 28, 2010 from his positions as Executive Director, Vice President and Chief Financial Officer of the Company. 18 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Mr. Liu Xiangmin, 48, is an executive Director and Vice President of the Company and has been serving the Company since 2001. Mr. Liu graduated from Central South University of Industry in 1982, majoring in non-ferrous metallurgy; he has a doctorate degree from Central South University and is a professor-grade senior engineer. He has long engaged in non-ferrous metal metallurgy and corporate management and has 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. NON-EXECUTIVE DIRECTORS Mr. Shi Chungui, 70, is a non-executive Director of the Company. He has been serving the Company since 2005. He graduated from the Finance Faculty of Dongbei University of Finance and Economics in 1964. Mr. Shi is a senior economist with extensive experience in finance, government and corporate management. Mr. Shi was formerly Vice Director of Commerce Bureau of Qinhuangdao City, Hebei Province; Vice Mayor and Standing Vice Mayor of Qinhuangdao City, Hebei Province; President of Hebei Branch of China Construction Bank, President of Beijing Branch of China Construction Bank and Vice President of the Head Office of China Construction Bank; Vice President of China Cinda Asset Management Corporation; Vice Chairman of Tianjin Pipe Co., Ltd. (天津鋼管有限公司) and Vice Chairman of China Investment Society. Mr. Shi is currently an independent director of Intime Department Store (Group) Company Limited and China National Materials Company Limited. ALUMINUM CORPORATION OF CHINA LIMITED 19 Directors, Supervisors, Senior Management and Staff (Continued) Mr. Lv Youqing, 47, is a non-executive Director of the Company and also serves as Deputy General Manager of Chinalco. He has held positions in the Company since June 2010. In 1989, he graduated as a postgraduate from the Political Studies Institute, Social Science Faculty of Sichuan Province (四川省社科院政治學所). He obtained a Ph.D. degree from the School of Economics, Sichuan University and is a professor-grade senior engineer. Mr. Lv has accumulated rich experiences in management from his long-term research of national policies and engagement in enterprise management. He has previously served as Deputy Mayor of Nanchong’s Municipal Government, Sichuan Province, Standing Committee member of Luzhou’s Municipal Committee, Sichuan Province, the PRC, Deputy Mayor of Luzhou’s Municipal Government, Sichuan Province, the PRC, Deputy Secretary to the Luzhou’s Municipal Committee, Sichuan Province, the PRC and Member of Party Group and Deputy General Manager of Chinalco. Independent Non-executive Directors Mr. Kang Yi (retired), 70, served as an Independent non-executive Director and Chairman of the Remuneration Committee of the Board until June 22, 2010. Mr. Kang has been serving the Company since 2004. He is also currently Chairman of the China Nonferrous Metals Industry Association. Mr. Kang graduated from Central-South Institute of Mining and Metallurgy in 1965 majoring in the metallurgy of non-ferrous metals and is a professor-grade senior engineer. He has extensive experience and has long engaged in corporate management and public services. He formerly served as the factory manager of Qingtongxia Aluminum Plant; Head of the Economic Committee of Ningxia Hui Autonomous Region; Deputy General Manager of China Nonferrous Metals Industry Corporation and Deputy Head of the State Non-ferrous Metals Industry Bureau. Currently, Mr. Kang is a member of the National Committee of the Chinese People’s Political Consultative Conference (“CPPCC”) and the China Association for Science and Technology, Chairman of Nonferrous Metals Society of China and concurrently, an independent non- executive director of Jinduicheng Molybdenum Co., Ltd. and Baoji Titanium Industry Co., Ltd.. Mr. Kang Yi did not offer himself for re-appointment upon expiry of his term of appointment on June 22, 2010 and retired from his position as Independent non-executive Director and a member of the Remuneration Committee of the Board of the Company. 20 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Mr. Zhang Zhuoyuan, 77, is an independent non-executive Director of the Company since 2007. Mr. Zhang graduated from the Faculty of Economics of Zhongnan University of Economics and has achieved extensive professional accomplishments in the studies in political economy, price theory and marketing. Mr. Zhang formerly served as the director and researcher of the Institute of Finance, Trade and Economics of The Chinese Academy of Social Sciences, Chief Editor of “Finance & Trade Economics” and a Ph.D tutor; the director, researcher and Ph.D tutor of the Institute of Industrial Economics of The Chinese Academy of Social Sciences; the director, researcher and Ph.D tutor of the Institute of Economics of The Chinese Academy of Social Sciences, as well as Chief Editor of Economics Research Journal. Mr. Zhang is currently a committee member of the academic section of The Chinese Academy of Social Sciences, a researcher of Institute of Economics of The Chinese Academy of Social Sciences, a member of the Ninth and Tenth Sessions of CPPCC; a consultant of each of China Price Association and the Chinese Society for Urban Studies; a director of the Chinese Society for Cost Studies and the honorary director of Sun Ye Fang Foundation of Economics and Science. Mr. Wang Mengkui, 72, is an independent non-executive Director of the Company since 2008. Mr. Wang graduated from the School of Economics, Peking University, and is an economist engaged in long-term analysis of economic theory and policy. He has published many articles on economics as well as on other aspects. Mr. Wang had served as Vice Head and researcher of the economic team of the Research Office of the Secretariat of the CPC Central Committee; a commission member of the State Development and Planning Commission; Executive Vice Director of the Economic Research Centre of the State Development and Planning Commission; Vice Director and Director of the Research Office of the State Council; the director of the Development Research Center of the State Council; a member of the Tenth Standing Committee of National People’s Congress and Vice Director of the Financial and Economic Affairs Committee of National People’s Congress. He is also a professor and Ph. D tutor of Peking University. He currently serves as Chairman of the Society for China Development Research Fund and a member of the National Social Security Fund Committee of the PRC. ALUMINUM CORPORATION OF CHINA LIMITED 21 Directors, Supervisors, Senior Management and Staff (Continued) Mr. Zhu Demiao, 46, is an independent non-executive Director of the Company and the chairman of the Audit Committee of the Board. He has been serving the Company since 2008. Mr. Zhu is currently a senior consultant of Oaktree Capital (Hong Kong) Ltd. Mr. Zhu graduated from the University of Chicago GSB with a MBA degree, and obtained a Master’s degree in Economics from the Research Institute for Fiscal Science, Ministry of Finance, PRC and obtained a Bachelor’s degree in Economics from Hebei Geological Institute. Mr. Zhu is one of the early Certified Public Accountants in the PRC. He has extensive professional experience in finance, audit and capital management. Mr. Zhu previously worked in the Ministry of Finance of the PRC and in the investment analysis department of FMC. He had also served as Head of China Business of the Equity Capital Market Department and Investment Bank Department of Credit Suisse First Boston; Managing Director, a member of the Executive Committee of Asia-pacific region and Chairman of the Operation Committee of the Greater China Region of JP Morgan Chase & Co. Mr. Zhu joined Oaktree Capital (Hong Kong) Ltd. in November 2005 serving as Managing Director and has been its senior consultant since August 2010. Mr. Zhu is currently Independent Director of WSP Holdings Limited. SUPERVISORS Mr. Ao Hong, 49, currently Vice President of Chinalco, has been serving as a Supervisor of the Company since 2006. Mr. Ao graduated from Kunming University of Science and Technology majoring in metallurgy and he also holds a Master’s degree from Central South University and is a professor-grade senior engineer with extensive experience in non-ferrous metals research, corporate management, corporate governance and internal control. Mr. Ao had formerly served as an engineer, senior engineer, Head of General Office and Vice Chairman of General Research Institute for Non-ferrous Metals of Beijing; Chairman of GRINM Semiconductor Materials Co., Ltd., Guorui Electronic Materials Co., Ltd., Beijing Guojing Infrared Optical Technology Co., Ltd., Guowei Silver Anticorrosive Materials Company and Guo Jing Micro-electronic Holdings Ltd. in Hong Kong, respectively. 22 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Mr. Yuan Li, 52, is an employee-elected Supervisor of the Company and General Manager of the Corporate Culture Department of the Company. He has been serving the Company since 2001 and is an engineer with extensive administrative and managerial experience. He had formerly served as Manager of the General Management Office and Deputy Head of the Department of Research and Investigation of China Non-ferrous Metals Industry Corporation; Head of the Department of Research and Investigation as well as Head of the Secretariat and an assistant inspector of the State Bureau of Nonferrous Metals Industry; and Deputy Head of the Department of Political and Labor Affairs and Head of the Political Party Department of Chinalco. Mr. Zhang Zhankui, 52, is Head of the Finance Department of Chinalco and has been serving the Company since 2001. Mr. Zhang is a postgraduate in economic management and a senior accountant. He has extensive experience in corporate financial accounting, fund management and auditing. Mr. Zhang had formerly served as head of the Finance Division and then Head of the Audit Division of China General Design Institute for Non-ferrous Metals; Deputy General Manager of Beijing Enfei Tech-industry Group; Head of the Accounting Division of the Finance Department and Deputy Head of the Finance Department of China Copper Lead & Zinc Group Corporation; Officer-in-Charge of the Company’s assets and finance in the Listing Office of the Company; Head of the Capital Division of the Finance Department of Company and Manager of the General Division of the Finance Department of the Company as well as Deputy Head of the Finance Department of Chinalco. ALUMINUM CORPORATION OF CHINA LIMITED 23 Directors, Supervisors, Senior Management and Staff (Continued) OTHER SENIOR MANAGEMENT PERSONNEL Mr. Liu Caiming, aged 48, was appointed as Senior Vice President and Chief Financial Officer of the Company on February 23, 2011. Graduated from the School of Economics at Fudan University, Mr. Liu is a doctoral candidate, senior accountant and certified public accountant in the PRC. He joined Chinalco in January 2007. Having been engaged in financial management at large state- owned enterprises for a long time, Mr. Liu has extensive experience in finance and business management. He had served as Deputy Head and head of the Finance Department of China Non-ferrous Metals Foreign-Engineering Corporation（中 國 有 色 金 屬 對 外 工 程 公 司）, Deputy General Manager of China Non-ferrous Metals Construction Group Limited（中國有色金屬建設集 團公司）, Deputy General Manager of China Non-ferrous Construction Group Limited（中色建設集 團有限公司）, Director and Deputy General Manager of China Non-ferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd., Deputy General Manager of China Non-ferrous Metals Mining and Construction (Group) Co., Ltd., Deputy General Manager of Chinalco, Chairman of Yunnan Copper Industry (Group) Co., Ltd., Chairman of Chinalco Shanghai Copper Co., Ltd., Executive Director of Chinalco Kunming Copper Co., Ltd., as well as Director and President of China Copper Co., Ltd. (中國銅業有限公司). Mr. Liu also has acted as titular Deputy Head of Department of Finance of Yunnan Province, director of State-owned Assets Supervision and Administration Commission of Yunnan Province and assistant to the governor of Yunnan Province. Mr. Ding Haiyan, 52, Vice President of the Company, has been serving the Company since 2001. Graduated from Beijing Economics University in 1982 majoring in labor economics, Mr. Ding holds a Master’s degree in Economics and is a senior economist with extensive experience in labor, wages, insurance, enterprise mergers and acquisitions and capital operation. He once served as Head of Labor Wage Division of the Human Resources Department of China Nonferrous Metals Industry Corporation; Deputy Director of the Bureau of Labor and Insurance; Deputy Director-General of the Enterprise Reform Department of the State Bureau of Non-ferrous Metals Industry as well as Head of the Department of Assets Operation of Chinalco, Deputy Head of the Company’s Listing Office; and Assistant to the General Manager of Chinalco and Executive Director and the Secretary to the Board of the Company. 24 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Mr. Jiang Yinggang, 47, Vice President, has been serving the Company since 2001. Graduated in 1983 from Central South University of Industry majoring in the metallurgy of non-ferrous metals, Mr. Jiang holds a Master’s degree in Metallurgy Engineering of non-ferrous metals and is a professor-grade senior engineer. He has long engaged in production operation and corporate management of production enterprises and has extensive professional experience. He formerly served as Deputy Head and then Head of Corporate Management Department of Qinghai Aluminum Plant; Head of Qinghai Aluminum Smelter; Deputy General Manager and General Manager of Qinghai Aluminum Company Limited, and General Manager of Qinghai branch of the Company. He has been Vice President of the Company since 2007. Ms. Liu Qiang, 47, is Secretary to the Board and has been serving the Company since 2001. In 1989, Ms. Liu graduated from Beijing International Studies University majoring in English literature and obtained a Master’s degree in Literature (minor in translation). Ms. Liu studied finance, financial management and business administration at the University of International Business and Economics in Beijing and received trainings in finance and financial management in Hong Kong while serving in the finance department of Hong Kong Oriental Xinyuan (Holdings) Company Limited. Ms. Liu formerly served as Manager of the Finance Department of the Australian branch of China National Non-Ferrous Metals Import and Export Corporation and has extensive experience in the import and export of non-ferrous metals and analysis of the aluminum market. She formerly served as Manager of the Aluminum Department of China National Non-Ferrous Metals Import and Export Corporation; a senior market analyst for the Aluminum Industry in China National Non-Ferrous Metals Trading Group and China National Metals and Minerals Import and Export Corporation as well as Deputy Manager of the Import and Export Division of China Aluminum International Trading Corporation Limited. ALUMINUM CORPORATION OF CHINA LIMITED 25 Directors, Supervisors, Senior Management and Staff (Continued) 2. Positions Held in Shareholders of the Company by Directors, Supervisors and Senior Management during the Year Name of Date of Remuneration Name Shareholder Position(s) Appointment or Allowance Whether Receiving Xiong Weiping Chinalco President February 2009 No Lv Youqing Chinalco Deputy General December 2003 Yes Manager Ao Hong Chinalco Vice President October 2005 Yes Zhang Zhankui Chinalco Head of Finance March 2006 Yes Department 26 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) Positions in Other Entities Name of Date of Remuneration Name other entities Position(s) Appointment or Allowance Whether Receiving Shi Chungui Intime Department Store Independent Director April 2008 Yes (Group) Company Ltd China National Materials Independent Director January 2010 Yes Company Limited Zhu Demiao Oaktree Capital Senior Consultant August 2010 Yes (Hong Kong) Ltd WSP Holdings Ltd Independent Director January 2007 Yes 3. Decision Making Process and Basis of Determination of Remuneration of Directors, Supervisors and Senior Management Based on the prevailing market standards and the remuneration strategy of the Company, a designated department of the Company would formulate proposals for the remuneration of the Company’s Directors, Supervisors and senior management and submitted the same to the Remuneration Committee of the Company. Remuneration of the senior management will then be submitted to the Board for determination whereas those of the Directors and the Supervisors will then be submitted to the Board for consideration and to the shareholders’ general meeting for determination. ALUMINUM CORPORATION OF CHINA LIMITED 27 Directors, Supervisors, Senior Management and Staff (Continued) The Company determined its remunerations for Directors, Supervisors and senior management based on its development strategy, corporate culture and remuneration strategy, taking into account the remuneration standards of corresponding positions in comparable enterprises (in terms of scale, industry and nature etc.), as well as the opinion and advice of external professional consultancy organizations. The remuneration will be linked to the Company’s operating results and individual performance. In 2010, the total remuneration of the Directors, Supervisors and Senior Management of the Company amounted to RMB5.92 million (including the travelling expenses of the independent Directors), other than the discretionary bonus of RMB1.38 million which were not distributed during the year, all remuneration had been paid during the year. 4. Changes in Directors, Supervisors and Senior Management during the Year Name Position(s) Reason for change Chen Jihua Executive Director, Vice President Resigned on October 28, 2010, and Chief Financial Officer with immediate effect Kang Yi Independent Non-executive Director Office expired, retired on June 22, 2010, with immediate effect 28 2010 ANNUAL REPORT Directors, Supervisors, Senior Management and Staff (Continued) 5. Employees of the Company As of December 31, 2010, the Company had 108,256 employees. The structure of employees is as follows: By function Category Management Sales Production Others Total Number of Persons 17,676 735 88,480 1,365 108,256 By Education Background Category Number of Persons Post-graduates University graduates Technical institute graduates Secondary/technical school graduates or below Total 776 11,075 26,919 69,486 108,256 ALUMINUM CORPORATION OF CHINA LIMITED 29 Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders 1. Share Capital Structure Chinalco is the largest shareholder of the Group, which directly holds 38.56% equity interest and together with its subsidiaries holds an aggregate of 41.82% equity interest in the Company. As of December 31, 2010, the Directors of the Company regarded Chinalco as the Company’s ultimate holding company. Shareholding Structure of Chalco Chinalco 38.56% Baotou Aluminum Group 2.60% Lanzhou Aluminum Factory 0.58% Guiyang Aluminum and Magnesium 0.03% Public holders of A Shares 29.07% Public holders of H Shares 29.16% Aluminum Corporation of China Limited 30 2010 ANNUAL REPORT Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) As of December 31, 2010, the share capital structure of the Company was as follows: As of December 31, 2010 Percentage to Number of total issued shares share capital (in million) (%) 5,214.41 351.22 79.47 38.56 2.60 0.58 Holders of A shares subject to trading moratorium (Note 1) Chinaclo Baotou Aluminum (Group) Co., Ltd. (Note 2) Lanzhou Aluminum Factory (Note 2) Guiyang Aluminum Magnesium Design & Research Institute (Note 2) 4.12 0.03 Holders of A shares not subject to trading moratorium 3,931.30 29.07 Holders of H shares 3,943.97 29.16 Total 13,524.49 100 Note 1: All A shares of the Company subject to trading moratorium have become tradable since January 4, 2011. Note 2: These are subsidiaries of Chinalco. In addition, Shanxi Aluminum Plant, a subsidiary of Chinalco, holds 7.14 million tradable A shares not subject to trading moratorium, representing approximately 0.05% of the issued share capital. According to the publicly available information and to the best knowledge of the Company’s Directors, as of February 28, 2011, being the latest practicable date prior to the issue of this report, the public float of the Company is in compliance with the requirement of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Hong Kong Listing Rules”). ALUMINUM CORPORATION OF CHINA LIMITED 31 Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) 2. Changes in Shareholding and Shareholders There was no change in the share capital structure of the Company during the year ended December 31, 2010. Particulars of Shareholding Before the change After the change Issue of Share Percentage new shares Share Percentage (Number) (%) (Number) (%) I. Shares subject to trading moratorium (Note) 1. State-owned shares 5,214,407,195 38.56 N/A 5,214,407,195 38.56 2. State-owned legal person shares 434,809,850 3.21 N/A 434,809,850 3.21 Total shares subject to trading moratorium 5,649,217,045 41.77 N/A 5,649,217,045 41.77 II. Shares not subject to trading moratorium 1. Renminbi ordinary shares 3,931,304,879 29.07 N/A 3,931,304,879 29.07 2. Overseas listed foreign invested shares 3,943,965,968 29.16 N/A 3,943,965,968 29.16 Total shares not subject to trading moratorium 7,875,270,847 58.23 N/A 7,875,270,847 58.23 III. Total shares 13,524,487,892 100 N/A 13,524,487,892 100 Note: All A Shares of the Company subject to trading moratorium have become tradable since January 4, 2011. 32 2010 ANNUAL REPORT Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) Approval of Changes in Shareholding Nil Transfer of Changes in Shareholding Nil 3. Share Issuance and Listing (1) Status of share issuance in the past three years Nil (2) Changes in total number of issued shares and the shareholding structure of the Company As of December 31, 2010, the total number of issued shares of the Company amounted to 13,524,487,892 shares, which was not increased or decreased nor was there any change in the shareholding structure during the year ended December 31, 2010. 4. Substantial Shareholders with Shareholding of 5% or more Substantial Shareholders So far as the Directors are aware, as of December 31, 2010, 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 under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (“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. ALUMINUM CORPORATION OF CHINA LIMITED 33 Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) Name of substantial Class of Number of Percentage in the relevant Percentage class of issued in total issued shareholder shares shares held Capacity share capital share capital Chinalco A Shares 5,656,357,299 (L) Beneficial owner and interests 59.04% (L) 41.82% (L) China Cinda Asset A Shares 800,759,074 (L) Beneficial owner 8.36% (L) 5.92% (L) (Note 1) of controlled corporation Management Corporation Limited China Construction Bank A Shares 709,373,136 (L) Beneficial owner 7.40% (L) 5.25% (L) Corporation Limited Templeton Asset H Shares 828,518,475 (L) Investment manager 21.01% (L) 6.13% (L) Management Ltd. Blackrock, Inc. H Shares 306,643,347 (L) Interests of controlled 23,023,512 (S) corporations (Note 2) Morgan Stanley H Shares 217,898,674 (L) Interests of controlled 201,916,981 (S) corporations (Note 3) JPMorgan Chase & Co. H Shares 204,269,215 (L) Beneficial owner, investment 21,324,692 (S) manager and custodian 73,253,600 (P) — corporation/approved (Note 4) lending agent 7.78% (L) 0.58% (S) 5.52% (L) 5.12% (S) 5.18% (L) 0.54% (S) 1.86% (P) 2.27% (L) 0.17% (S) 1.61% (L) 1.49% (S) 1.51% (L) 0.16% (S) 0.54% (P) The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interests in a lending pool. (L) (S) (P) Notes: 1. These interests included a direct interest of 5,214,407,195 A shares held by Chinalco, and an aggregate interests in 441,950,104 A shares held by various controlled subsidiary corporations of Chinalco, comprising 351,217,795 A shares held by Baotou Aluminum (Group) Co., Ltd., 79,472,482 A shares held by Lanzhou Aluminum Factory, 4,119,573 A shares held by Guiyang Aluminum Magnesium Design and Research Institute and 7,140,254 A shares held by Shanxi Aluminum Plant. 34 2010 ANNUAL REPORT Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) 2. These interests were held directly by various corporations controlled by Blackrock, Inc.. Among the aggregate interests in the long position in H shares, 450 H shares were held as derivatives. 3. These interests were held directly by various corporations controlled by Morgan Stanley. Among the aggregate interests in the long position in H shares, 139,829,143 H shares were held by Morgan Stanley & Co, Inc., 73,971,831 H shares were held by Morgan Stanley & Co. International plc., 1,539,625 H shares were held by Morgan Stanley Smith Barney LLC, 1,422,075 H shares were held by Morgan Stanley Capital Services Inc., 1,000,000 H shares were held by MSDW Equity Finance Services I (Cayman) Limited and 136,000 H shares were held by Morgan Stanley Capital (Luxembourg) S.A.. Among the aggregate interests in the short position in H shares, 136,150,943 H shares were held by Morgan Stanley & Co, Inc., 59,949,588 H shares were held by Morgan Stanley & Co. International plc., 3,000,000 H shares were held by Morgan Stanley Capital Services Inc., 1,000,000 H shares were held by MSDW Equity Finance Services I (Cayman) Limited, 112,600 H shares were held by Morgan Stanley Capital (Cayman Islands) Limited and 1,703,850 H shares were held by Morgan Stanley Asia Products Limited. 4. Among the aggregate interests in the long position in H shares, 73,253,600 H shares were held by JPMorgan Chase Bank, N.A., 92,480,000 H shares were held by JF Asset Management Limited, 13,264,162 H shares were held by J.P.Morgan Securities Ltd., 16,832,103 H shares were held by J.P. Morgan Whitefriars, Inc., 2,851,350 H shares were held by J.P.Morgan Markets Limited, 3,530,000 H shares were held by JPMorgan Asset Management (Singapore) Limited, 886,000 H shares were held by J.P.Morgan Investment Management Inc. and 1,172,000 H shares were held by JPMorgan Asset Management (UK) Limited. Among the aggregate interests in the short position in H shares, 13,264,162 H shares were held by J.P.Morgan Securities Ltd., 5,209,180 H shares were held by J.P.Morgan Whitefriars Inc. and 2,851,350 H shares were held by J.P.Morgan Markets Limited. Among the aggregate interests in the long position in H shares, 1,000,000 H shares were held as derivatives. Among the aggregate interests in the short position in H shares, 5,209,180 H shares were held as derivatives. Save as disclosed above and so far as the Directors are aware, as of December 31, 2010, no other person had any interest or short position in the shares or underlying shares of the Company (as the case may be) which would fall to be disclosed to the Company and the 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. ALUMINUM CORPORATION OF CHINA LIMITED 35 Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) 5. Number of Shareholders Total number of shareholders as of December 31, 2010 609,956 6. Particulars of Shareholdings Held by Top Ten Shareholders Unit: Number of Shareholders Number of Nature of Percentage of shares held shareholders shareholding 1 2 3 Chinalco HKSCC Nominees Limited China Cinda Asset Management 5,214,407,195 3,926,907,637 A Shares H Shares Corporation Limited 800,759,074 A Shares 4 China Construction Bank Corporation Limited 709,373,136 5 Guokai Financial Limited Company 425,858,145 6 7 Baotou Aluminum (Group) Co., Ltd. 351,217,795 Lanzhou Aluminum Factory 79,472,482 A Shares A Shares A Shares A Shares 8 Guizhou Provincial Materials Development and Investment Corporation 71,640,000 A Shares 9 Guangxi Investment Group Co., Ltd. (“Guangxi Investment”) 45,740,527 A Shares 10 ICBC — Shanghai 50 ETF Index Securities Investment Fund 16,667,252 A Shares (%) 38.56 29.04 5.92 5.25 3.15 2.60 0.58 0.53 0.34 0.12 36 2010 ANNUAL REPORT Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) 7. Summary of the 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: mineral resources exploration; bauxite mining; deployment of personnel necessary for overseas engineering projects commensurating with its capacity, scale and performance; operation and management of state-owned assets and equities; production and sales of aluminum, copper, rare earth and related non-ferrous metals mineral products, smelted products and carbon products; exploration design, general project contracting, construction and installation; equipment manufacturing; technological development and technical service; import and export businesses. ALUMINUM CORPORATION OF CHINA LIMITED 37 Particulars and Changes of Shareholding Structure, and Details of Substantial Shareholders (Continued) (2) Diagram of the Direct Equity Interests and Controlling Relationship between the Company and the Controlling Shareholder Chinalco 38.56% Aluminum Corporation of China Limited Note: Chinalco directly holds 38.56% equity interest and together with its subsidiaries holds an aggregate of 41.82% equity interest in the Company. 38 2010 ANNUAL REPORT Chairman’s Statement Dear shareholders, I hereby present the annual report of the Group for the financial year ended December 31, 2010 for shareholders’ review. On behalf of the Board of the Company and all employees, I would like to express my sincere gratitude to all shareholders for their concern and support for the Company. ALUMINUM CORPORATION OF CHINA LIMITED 39 Chairman’s Statement (Continued) Product Market Reviews The supply and demand as well as the price of aluminum are closely tied to changes in the global and the PRC macro-economies. Changes in the global and PRC economic climate have a significant impact on the aluminum market. Primary Aluminum Market Under the influence of economic stimulus packages worldwide, the global economy and the demand for aluminum gradually recovered in the year 2010, the supply of aluminum increased accordingly and the annual demand and supply of aluminum basically attained equilibrium. However, beset by the European debt crisis, China’s control policies such as those over the real estate sector and energy saving and emission reduction as well as the tight electricity supply in Europe, global aluminum prices remained range-bound with sharp fluctuations. In mid-April, China’s control policies over the real estate sector and the European debt crisis had driven the global aluminum price to plummet. Both prices of three- month aluminum futures at the London Metal Exchange (hereafter as “LME”) and Shanghai Futures Exchange of the PRC (hereafter as “SHFE”) hit year-low at USD1,844 per tonne and RMB14,580 per tonne, respectively. In November, after the introduction of quantitative easing monetary policy by the U.S. government, bulk commodity prices moved steadily upwards due to factors such as excessive liquidity, depreciation of the U.S. dollar and reduction of aluminum production as a result of China’s energy saving and emission reduction policies. Prices of three-month aluminum futures at both LME and SHFE surged to year-high reaching USD2,477 per tonne and RMB18,470 per tonne, respectively. The average three-month aluminum futures prices for 2010 at LME and SHFE were USD2,272 per tonne and RMB16,186 per tonne, representing a year-on-year increase of 34.5% and 20.3%, respectively. 40 2010 ANNUAL REPORT Chairman’s Statement (Continued) In 2010, the global output of primary aluminum was approximately 41.90 million tonnes, representing a year-on-year increase of 11.2%; the global consumption of primary aluminum was approximately 41 million tonnes, representing a year-on-year increase of 19.6%; the domestic output of primary aluminum was approximately 15.65 million tonnes, representing a year-on-year increase of 20.5% and the domestic consumption of primary aluminum was approximately 16.50 million tonnes, representing a year-on-year increase of 19.5%. As of the end of 2010, the production utilization rate of primary aluminum manufacturers in the world (inclusive of those of the PRC) was 75.5%, while that of the PRC was 80.3%. Alumina Market In 2010, international and domestic prices of spot alumina fluctuated upward. At the beginning of the year, alumina price rose as alumina supply decreased due to the resumption of production of aluminum manufacturers and the reduction of production of alumina manufacturers. Following the drop of aluminum price in the middle of the year, international and domestic prices of spot alumina fell to as low as USD300 per tonne and RMB2,400 per tonne, respectively. Since late July, alumina price gradually rebounded as a result of the launch of newly-constructed aluminum production capacity and the rise of aluminum price; the FOB price of spot alumina in the international market rose to as high as USD390 per tonne. At present, the FOB price of spot alumina in the international market is approximately USD385 per tonne and the price of spot alumina price in the domestic market is approximately RMB2,850 per tonne. The global output of alumina for 2010 was approximately 82.01 million tonnes, representing a year- on-year increase of 12.9% and the consumption was approximately 82.86 million tonnes, representing a year-on-year increase of 14.5%. The domestic output of alumina was approximately 28.94 million tonnes, representing a year-on-year increase of 21.4%; the demand for alumina was approximately 31.50 million tonnes, representing a year-on-year increase of 19.2%; imported alumina amounted to approximately 4.31 million tonnes in 2010, representing a year-on-year decrease of 16.1%. With the resumption of primary aluminum production, alumina manufacturers around the world have gradually increased their production utilization rate since the third quarter. As of the end of December 2010, the production utilization rate of alumina manufacturers in the world (inclusive of those of the PRC) was 85.0%, while that of the PRC was 82.2%. ALUMINUM CORPORATION OF CHINA LIMITED 41 Chairman’s Statement (Continued) Business Review In 2010, the volatility of aluminum price posed grave challenges to the Group’s production and operation. Focusing on its “controlling loss and increasing profit” principle and centered around structural adjustment as well as strategic transformation and based on the principle of “centralized management and delegated operations”, the Group adopted effective scientific counter-measures to further enhance its fundamental management, costs and expenses as well as investment controls and reduction of energy consumption, thus safeguarding and stabilizing production and operation of the Group, thereby turning losses into profits. At the same time, the Group has expanded its business scope to other resources to include coal and iron ore. 1. Refined fundamental management and reengineered business processes. In response to the complex market conditions, the Group, with a focus on operation transformation, initially established a standardized scientific production system through strengthening its fundamental management and proactively developing production and operation assessments. The Group’s operating performance continued to improve. In 2010, the Group’s alumina output amounted to 10.13 million tonnes, representing a year-on-year increase of 30.3%; the output of alumina chemicals amounted to 1.2 million tonnes, representing a year-on-year increase of 16.3%; the output of primary aluminum products amounted to 3.84 million tonnes, representing a year-on- year increase of 11.6%; the output of aluminum fabrication products amounted to 0.59 million tonnes, representing a year-on-year increase of 43.9%. 2. Stringent cost control, reducing costs and raising efficiency throughout its business process. The Group continued the implementation of cost reduction and efficiency improvement in every production flow and position, making the best of its potentials and consistently improved its technical and economical indicators and strived to reduce materials and energy consumption and other expenses. 3. Further tightened financial management. In accordance with the new management and control model, the Group adjusted its budget management methods and methodologies and applied a return-on-assets oriented performance assessment model. The Group also ensured the orderly operation of cash flow and maintained its cash flow at normal levels through refined cash flow management, and reduced financing expenses and controlled financial risks through adjusting its debt portfolio. 42 2010 ANNUAL REPORT Chairman’s Statement (Continued) 4. Further preservation of resources. The Group speeded up the efforts in mine constructions to increase bauxite output from self-operated mines and continued to improve the stability of bauxite supply and the level of comprehensive utilization of the resources. In 2010, the amount of bauxite from self-operated mines made a 19.4% year-on-year increase with an addition of 91 million tonnes of bauxite to its domestic reserves and 3.95 million tonnes to its self-operated mining capacity. 5. Accelerated construction of its structural adjustment exercise to actively promote projects with “short investments, low costs and quick results”. Focusing on investment cost reduction, the Group adopted effective measures to optimize project design and selected appropriate project construction method for projects based on the special features of the projects, to ensure an all- round project investment control. 6. Proactively promoted technology advancement and industrialization. The Group independently researched and developed certain advanced and practical new technologies. In particular, the Group put a major emphasis on the promotion of the technologies related to energy saving and emission reduction such as the recycle of residual heat emitted in alumina production, the improvement on cycle efficiency of Bayer process, the technology for the recycle of vanadium in alumina production, the installation of remodeled electrolytic cells in newly-built production cells as well as the application of cell-voltage-reduction in normal production cells and the recycle of residual heat from carbon production in furnace. The Group also widely applied highly effective hot/cold rolling technology with short process and conducted industrialization of double zero alloy aluminum foil with high surface quality and low pinhole degree as well as 1235H14 standard width aluminum foil billet, all of which generated significant economic benefits. 7. Making further efforts in energy saving and emission reduction. The Group set development goals and assurance policies for its recycling economy aspiring to transform itself into a resource efficient enterprise. Through streamlining its production processes, phasing out obsolete equipment and actively adjusting its industry portfolio, the Group speeded up the applications of comprehensive energy reduction technologies, which in aggregate saved energy equivalent to 0.46 million tonnes of standard coal in 2010. The Group also had a 4%, 1.3% and 11.1% year-on-year decrease in the overall consumption of energy in alumina production, alternating current in aluminum ingot production and energy in aluminum production respectively. ALUMINUM CORPORATION OF CHINA LIMITED 43 Chairman’s Statement (Continued) 8. Proactively initiating negotiations and cooperation in direct purchase of electricity. As of the end of 2010, one company of the Group directly purchased electricity throughout the entire year while another four benefited from direct electricity purchase policy at different times of the year. 9. Completion of initial establishment of comprehensive risk management system, thereby laying a solid foundation to better safeguard the Company’s operation risks and improve the standard of its risk management and control. 10. Further promotion of overseas projects. The Group entered into a new round of negotiations with the government of Queensland, Australia in relation to the development of bauxite resources in Aurukun and further progressed with the aluminum and power project in Saudi Arabia and the aluminum plant project in Sarawak, Malaysia. Furthermore, the Group entered into a joint development agreement with Rio Tinto plc and Rio Tinto Iron Ore Atlantic Limited, an affiliate of Rio Tinto plc, in relation to the joint development of the iron ore project in Simandou, Guinea. Dividends The Board recommends the payment of a final dividend for the year ended December 31, 2010 of RMB0.0114 per share (tax inclusive) in cash to its shareholders, totalling to RMB154 million, representing 35% of the Company’s profit for the year ended December 31, 2010. The proposed distribution of final dividends is subject to shareholders’ approval at the forthcoming 2010 annual general meeting. Financial Results The revenue of the Group for the year ended December 31, 2010 amounted to RMB120.99 billion, representing a year-on-year increase of 72.19%. Profit for the year attributable to the equity holders of the Company was RMB0.78 billion. Earnings per share attributable to the equity holders of the Company was RMB0.06. 44 2010 ANNUAL REPORT Chairman’s Statement (Continued) Business Outlook and Prospects While the global economy is expected to continue its slow recovery in 2011, it still faces significant challenges ahead. Influenced by factors such as inflation and currency depreciation, aluminum price is expected to fluctuate upward. The Group will focus on creating new competitive edges, and progressing with its structuring adjustment and technology innovation, to step up the transformation of its operation. The Group will also enhance its fundamental management, continuously improve its production performance, reduce production costs and strengthen its control over loss and increase profit. To steadily achieve strategic transformation, raise its profitability and risk resistance capability, the Group will put its efforts on the following aspects: 1. Continue to strengthen its fundamental management, step up the structural adjustment of its operation, and tap the full potential of its management in order to achieve lean management. The Group will continue to improve its operational performance and returns on assets by adopting an innovative business model and realizing the potentials of its existing assets. 2. Press ahead with its structural adjustment. In respect of bauxite, the Group will step up efforts to acquire and explore domestic resources and increase bauxite reserves to ensure stable resource supply, raise self-mining proportion in accordance with resources-first principle and actively participate in and promote promising international exploitation and development projects. In respect of alumina, the Group will further upgrade the production skills and techniques and optimize production process, further optimize the production layout and strategically establish alumina plants in favourable locations to replace obsolete capacity. In respect of aluminum, the Group will further refine and phase out obsolete capacity and pave way for the relocation of production capacity to coal-, water- and electricity-rich areas in order to achieve full integration of coal and aluminum operations. The Group will also promote the use of advanced equipment and technologies such as remodeled electrolytic cells and zero effect low voltage to continue the reduction of overall energy consumption. In respect of aluminum fabrication, with a focus on the development of cutting-edge aluminum materials, the Group will step up efforts in the research and development of new materials with an emphasis on aluminum materials for aerospace, aviation and transportation. ALUMINUM CORPORATION OF CHINA LIMITED 45 Chairman’s Statement (Continued) 3. Continue to adjust capital structure, optimize debt portfolio and lower financing costs. The Group will further improve its budget management and control system and continue to develop the analysis of monthly performance to optimize its performance indicators. The Group will refine the management and control of cash flow budgets and prepare for the maintenance of capital balance in low reserve periods to ensure stable cash supply. The Group will explore low-cost financing methods, and reasonably deploy various debt financing tools to reduce the cost of capital. The Group will also step up its monitoring and control over the credit risks of its subsidiaries to guard against credit risks. 4. Continue with its technology innovation. With the theme of its structural adjustment, lowering costs, enhancing efficiency and reducing energy consumption and emission, and on the basis of improving its operating performance, the Group will accelerate the industrialization of advanced technologies. It will further improve its process management in respect of common, key and major projects so as to ensure major technological breakthroughs for setting the stage for industrialization. At the same time, the Group will selectively apply scientific technology and basic research to ensure its sustainable development. 5. Further streamlining procurement process, step up the promotion and application of the use of the procurement platform of the Group’s electronic business system, continue to foster strategic cooperation with major raw materials suppliers, broaden supply channels, and optimize resource allocation, so as to maintain a stable supply and reasonable level of inventories of raw materials and effectively reduce procurement cost. The Group will continue to proactively initiate negotiations and cooperation in direct purchase of electricity. The Group will also continue to refine its sales management system by adopting innovative sales model, improving market analyses and estimates, boosting its capabilities to tap the market and raising operation standards, under the “centralized management and authorized operation” system, in order to expand its market shares and the profitability of its sales. 46 2010 ANNUAL REPORT Chairman’s Statement (Continued) 6. Proactively promote resource acquisition and mine construction, with priority given to key restructuring projects, energy-saving and emission reduction initiatives, and technological renovation projects with significant benefits that are integral to the Group’s sustainable development. The Group will effectively control and reduce project investments through the adoption of a diversified approach to project construction. The Group will also further refine its investment management system as well as its project management measures and process. 7. Further refine its risk management system on all fronts by strengthening the day-to-day operations and maintenance of the system and formulating comprehensive risk management system to strengthen risk prevention and control in key areas. 8. Further improve and optimize the three management systems in respect of (i) organization and management; (ii) statistics collection, supervision and inspection; and (iii) assessment, award and penalty, for energy saving and emission reduction. The Group will expedite its research and development of key energy saving and emission reduction technologies, such as efficient and environmental-friendly aluminum production techniques, increasingly promote the application of remodeled electrolytic cells and technologies for efficient and energy-saving alumina production, whilst actively adjusting its power structure to increase the proportion of clean energies in its energy consumption. 9. Accelerate overseas development. Apart from proceeding with the Aurukun project in Australia, the Sarawak project in Malaysia, the aluminum and power project in Saudi Arabia and the iron ore project in Guinea, the Group will also play an active role in global resource allocation. In 2011, we will do our utmost to achieve our goals as a return to our shareholders. Xiong Weiping Chairman Beijing, the PRC February 28, 2011 ALUMINUM CORPORATION OF CHINA LIMITED 47 Management’s Discussion and Analysis of Financial Conditions and Results of Operations The following discussion should be read in conjunction with the financial information of the Group together with the accompanying notes included in this report. Business Segments The Group is principally engaged in alumina refining, primary aluminum smelting, aluminum fabrication products and the trading of related products. The Group organizes its operations according to the following business segments: 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 aluminum plants and externally to customers outside the Group. This segment also includes the production and sales of chemical alumina (including alumina hydroxide and alumina chemicals) and metal 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 selling them to the Group’s internal aluminum fabrication plants and external customers. This segment also includes the production and sales of carbon products and aluminum alloy products. Aluminum fabrication segment, which consists of procuring primary aluminum, other raw materials, supplemental materials and electricity power, and further processing primary aluminum for the production and sales of seven main aluminum fabricated products, including casts, planks, screens, extrusions, forges, powder and die castings. Trading segment, which consists of the Group’s internal and external procurement and sales of alumina, primary aluminum, aluminum fabrication products, relevant metal products and raw and ancillary materials in bulk domestically and abroad. Headquarters and other operating segments, which mainly include management of headquarters, research and development activities. 48 2010 ANNUAL REPORT Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Results of Operations The Group’s profit for the year attributable to equity holders of the Company for 2010 was RMB778 million, representing a significant increase from a loss of RMB4,643 million for the preceding year. This was mainly attributable to the rebound of the market price of the Group’s major products, the effect of the Group’s “controlling loss and increasing profit” measures and the increase of the Group’s production and sales volume. Revenue The Group’s revenue for 2010 was RMB120,995 million, representing an increase of RMB50,727 million or 72.19% from RMB70,268 million for the preceding year. This was mainly attributable to the increase in the selling prices of the Group’s major products and the substantial increase of external sales volume and trading volume of products sourced from external suppliers. Cost of Sales Total cost of sales of the Group was RMB113,350 million for 2010, representing an increase of RMB44,271 million or 64.09% from RMB69,079 million for the preceding year. This was mainly attributable to the substantial increase of the external sales volume of the Group’s major products and the Group’s trading volume of products sourced from external suppliers. ALUMINUM CORPORATION OF CHINA LIMITED 49 Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Selling Expenses and Administrative Expenses The Group’s selling expenses for 2010 was RMB1,573 million, representing an increase of RMB308 million or 24.35% from RMB1,265 million for the preceding year. This was mainly attributable to the increase of the external sales of the Group’s major products leading to an increase of the relevant transportation, loading and packaging expenses. The Group’s administrative expenses for 2010 was RMB2,624 million, representing a decrease of RMB333 million or 11.26% from RMB2,957 million for the preceding year. This was mainly attributable to the decrease of RMB216 million in the retirement benefit expenses of the Group in respect of its early retirement scheme in 2010 as compared to the corresponding period of 2009. In addition, in 2010, the Group applied strict control to daily administrative expenses and adopted proactive measures to constrain all controllable expenses, resulting in a decrease of approximately RMB123 million in administrative expenses. Finance Costs, Net The Group’s finance costs for 2010 was RMB2,495 million, representing an increase of RMB357 million or 16.70% from RMB2,138 million for the preceding year. This was primarily attributable to the following reasons: notwithstanding the year-on-year increase in interest-bearing borrowings of the Group, the Group kept the total interest expenses basically constant as compared with 2009 through optimization of its debt portfolio, widening of low-cost financing channels and lowering of interest rates. As more construction in progress projects were completed and transferred to property, plant and equipment in 2010, capitalized interest expense decreased as compared with 2009, leading to an increase of approximately RMB235 million in finance costs. In order to expedite fund turnover to reduce demand for fund, the Group reduced its fund reserve and in turn interest income by approximately RMB34 million. In addition, the Group actively adopted low-cost notes financing by issuing and utilizing more notes, resulting in an increase of approximately RMB35 million in the discount on interest and the handling fees of notes during the year. Due to fluctuations in exchange rate, exchange gains for the year decreased by approximately RMB47 million as compared with the preceding year. Due to the above factors, operating profit of the Group increased by RMB6,681 million from the loss of RMB3,279 million for the preceding year to a profit of RMB3,402 million for 2010. 50 2010 ANNUAL REPORT Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Income Tax The Group’s income tax expenses for 2010 was RMB411 million, representing an increase of RMB1,122 million from a tax benefit of RMB711 million for the preceding year. This was mainly attributable to the significant increase of the Group’s total profit as the Group achieved a turnaround from loss to profit in 2010. Discussion of Segment Operations Alumina Segment Revenue The Group’s revenue in the alumina segment for 2010 was RMB26,838 million, representing an increase of RMB8,549 million or 46.74% from RMB18,289 million for the preceding year. The revenue from internal sales of alumina segment for 2010 was RMB24,690 million, representing an increase of RMB12,135 million or 96.65% from RMB12,555 million for the preceding year. The revenue from external sales of alumina segment for 2010 was RMB2,148 million, representing a decrease of RMB3,586 million or 62.54% from RMB5,734 million for the preceding year. Segment profit The Group’s total segment profit in the alumina segment for 2010 increased by RMB3,973 million from the loss of RMB2,896 million for the preceding year to a profit of RMB1,077 million. ALUMINUM CORPORATION OF CHINA LIMITED 51 Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Primary Aluminum Segment Revenue The Group’s revenue in the primary aluminum segment for 2010 was RMB53,255 million, representing an increase of RMB10,524 million or 24.63% from RMB42,731 million for the preceding year. The revenue from internal sales of primary aluminum segment for 2010 was RMB26,848 million, representing an increase of RMB10,384 million or 63.07% from RMB16,464 million for the preceding year. The revenue from external sales of primary aluminum segment for 2010 was RMB26,407 million, representing an increase of RMB139 million or 0.53% from RMB26,268 million for the preceding year. Segment Profit The Group’s total segment profit in the primary aluminum segment for 2010 was RMB359 million, representing an increase of profit of RMB1,786 million from the loss of RMB1,427 million for the preceding year. Aluminum Fabrication Segment Revenue The Group’s revenue in the aluminum fabrication segment for 2010 was RMB10,466 million, representing an increase of RMB3,363 million or 47.35% from RMB7,103 million for the preceding year. Segment loss The Group’s total segment loss in the aluminum fabrication segment for 2010 was RMB324 million, representing a decrease of RMB574 million or 63.92% from the loss of RMB898 million for the preceding year. 52 2010 ANNUAL REPORT Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Trading Segment Revenue The Group’s revenue in the trading segment for 2010 was RMB90,141 million, representing an increase of RMB51,690 million or 134.43% from RMB38,451 million for the preceding year. The Group’s sales of self-produced products in the trading segment for 2010 was approximately RMB34,444 million, representing an increase of RMB17,709 million or 105.82% from approximately RMB16,735 million for the preceding year. The Group’s sales of products sourced from external suppliers in the trading segment for 2010 was approximately RMB55,697 million, representing an increase of RMB33,981 million or 156.48% from approximately RMB21,716 million for the preceding year. Segment Profit The Group’s total segment profit in the trading segment for 2010 was RMB861 million, representing an increase of RMB228 million or 36.02% from the profit of RMB633 million for the preceding year. Headquarters and Other Operating Segments Revenue The Group’s revenue in headquarters and other operating segments for 2010 was RMB190 million, representing a decrease of RMB96 million or 33.57% from RMB286 million for the preceding year. Segment loss The Group’s total segment loss in headquarters and other operating segments for 2010 was RMB490 million, representing a decrease of RMB199 million from the loss of RMB689 million for the preceding year. ALUMINUM CORPORATION OF CHINA LIMITED 53 Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Structure of Assets and Liabilities Current Assets and Liabilities As of December 31, 2010, the Group’s current assets amounted to RMB41,325 million, representing an increase of RMB4,991 million from RMB36,334 million as of the beginning of 2010. As of December 31, 2010, the Group’s bank balances and cash amounted to RMB9,496 million, representing an increase of RMB1,637 million as compared with RMB7,859 million as of the beginning of 2010. As of December 31, 2010, the Group’s inventories amounted to RMB21,780 million, representing an increase of RMB1,357 million from RMB20,423 million as of the beginning of 2010, primarily due to the increase of the Group’s reserve of raw materials and fuels and the increase of its price. As of December 31, 2010, the Group’s current liabilities amounted to RMB55,734 million, representing an increase of RMB15,704 million from RMB40,030 million as of the beginning of 2010, primarily due to the issuance of short-term financing bonds in the amount of RMB10,700 million by the Group during the period and the expiration of the 3-year medium-term notes in the amount of RMB5,000 million issued in June 2008 within one year. As of December 31, 2010, the current ratio of the Group was 0.74, representing a decrease of 0.17 from 0.91 as of the end of 2009, and the quick ratio was 0.35, representing a decrease of 0.05 from 0.40 as of the end of 2009. Non-current Liabilities As of December 31, 2010, the Group’s non-current liabilities amounted to RMB28,402 million, representing a decrease of RMB9,962 million from RMB38,364 million as of the beginning of 2010, primarily due to the repayment of a portion of the Group’s long-term borrowings and the transfer of a portion of the medium- term notes, which will expire within one year, to current liabilities due within one year. As of December 31, 2010, the debt to asset ratio of the Group was 59.53%, representing an increase of 1.02 percentage points from 58.51% as of the end of 2009. 54 2010 ANNUAL REPORT Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) OTHER INCOME AND SHARE OF PROFIT/(LOSS) OF JOINTLY CONTROLLED ENTITIES/ASSOCIATES Other income The Group’s other income represented government grants which amounted to RMB328.85 million for the year ended December 31, 2010, representing an increase of RMB177.71 million from RMB151.14 million for the preceding year. Share of profit/(loss) of jointly controlled entities For the year ended December 31, 2010, the Group’s share of profit of jointly controlled entities amounted to RMB233.78 million, representing a profit increase of RMB284.17 million from the loss of RMB50.39 million for the preceding year, primarily due to the significant growth in the share of profits from Guangxi Huayin. Share of profit of associates For the year ended December 31, 2010, the Group’s share of profit of associates amounted to RMB240.03 million, representing an increase of RMB162.97 million from RMB77.06 million for the preceding year, primarily due to the significant growth in the share of profit from Jiaozuo Coal Group Xinxiang (Zhaogu) Energy Corporation Co., Ltd. MEASUREMENT OF FAIR VALUE The Group adopted policy for recognition, measurement and disclosure of fair value in accordance with the requirements on fair value under the relevant accounting principles, and undertook responsibility for the truthfulness of the measurement and disclosure of fair value. Currently, save as its available-for-sale financial assets and financial assets and liabilities at fair value through profit or loss (including derivative instruments) are accounted at fair value, others were stated at historical cost. ALUMINUM CORPORATION OF CHINA LIMITED 55 Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) As of December 31, 2010, the primary aluminum future contracts and foreign currency forward contracts held by the Group, which were accounted for as financial assets at fair value through profit or loss, amounted to RMB17 million, representing an increase of RMB17 million from RMB0.06 million as of the end of 2009. The changes represented the unrealized gain on future contracts, net; future contracts for primary aluminum future contracts, were accounted for as financial liabilities at fair value through profit or loss, amounted to RMB9 million, representing a decrease of RMB39 million from RMB48 million as of the end of 2009. The changes represented the unrealized gain on future and option contracts, net in the statement of comprehensive income. PROVISION FOR INVENTORY IMPAIRMENT On December 31, 2010, the Group conducted valuation on the net realizable value of its inventories on basis of the estimated selling price. The valuation took into account the intra-group matching of sales plans and production schedules of alumina plants and aluminum smelters, financial budget, inventory turnover, inventory purposes and post balance sheet events, upon a comprehensive assessment, the provisions for inventory impairment for inventories held as of December 31, 2010 amounted to RMB109 million, representing an increase of RMB35 million as compared with the provisions for impairment of RMB74 million at the end of 2009. The Company has formed a comprehensive industry chain (its scope of business covers the exploration and mining of bauxite, smelting of alumina and primary aluminum, production of aluminum alloy and refined processing of aluminum products), the continuity and integrity between its inventory turnover process and production process, and continuous processing that is required for turning raw materials and work in progress inventory into finished goods. These factors required the Group to adopt an all- round approach in calculating the provision for impairment. Based on reliable evidence such as executed sales contract, net realizable value is measured by the estimated selling price less the estimated costs, expenses and taxes for completing the sale, after taking into account the inventory nature, volume, purpose and price fluctuation, the production and operation budget and post balance sheet event. For finished goods inventory, net realizable value is calculated based on the contract price, or for quantities that exceed the contracted volumes, based on the actual selling price from the balance sheet date to the reporting date. For raw materials and work in progress inventory, the Group has established a model for calculating impairment provision, which estimates the costs to be incurred based on the expected time of sale determined by the Group’s production capacity and cycles, the correlation among raw materials, work in progress, production capacity and volume, and the calculation is based on the estimated selling price of such finished goods produced and processed. 56 2010 ANNUAL REPORT Management’s Discussion and Analysis of Financial Conditions and Results of Operations (Continued) CAPITAL EXPENDITURES, CAPITAL COMMITMENTS AND INVESTMENTS UNDERTAKINGS As of December 31, 2010, the Group’s accumulated project investment expenditures amounted to RMB9,017 million, which consisted mainly of investments in energy saving and consumption reduction, environmental protection, mine construction and scientific research, including projects such as the expansion and environmental protection alumina project of Guizhou branch, environmentally friendly energy-saving renovation aluminum project of Zunyi Aluminum, Liancheng branch’s project in relation to the phasing out of obsolete capacity and environmental protection and energy saving as well as the expansion of Bayer-process ore dressing project of Lanzhou Branch. As of December 31, 2010, the Group’s capital commitment for investment in property, plant and equipment amounted to RMB33,487 million, of which those contracted but not provided for amounted to RMB4,612 million and those authorized but not contracted for amounted to RMB28,875 million. Cash and Cash Equivalents As of December 31, 2010, the Group’s cash and cash equivalents amounted to RMB8,983 million, including foreign currency deposits of RMB303.23 million, RMB31.12 million and RMB103.64 million denominated in US dollars, Hong Kong dollars and Australian dollars, respectively. Cash Flows from Operating Activities In 2010, the Group’s net cash generated from operating activities amounted to RMB7,104 million, representing an increase of RMB7,810 million from the net cash used in operating activities of RMB706 million for the preceding year, mainly attributable to the increase of net cash inflows from the sales of products as a result of the significant growth in both selling price and sales volume of the Company’s principal products. Cash Flows from Investing Activities In 2010, the Group’s net cash used in investing activities amounted to RMB8,260 million, representing a decrease of RMB1,217 million from the net cash used in investing activities of RMB9,477 million for the preceding year, primarily due to the increase of cash inflow related to investments and government grants received, and the decrease in purchases of property, plant and equipment of the Group. Cash Flows from Financing Activities For the year 2010, the Group’s net cash flow generated from financing activities amounted to RMB2,718 million, representing an increase of RMB1,141 million from the net cash flow generated from financing activities of RMB1,577 million for the preceding year. This was mainly due to the increase of external debt financing during the year. ALUMINUM CORPORATION OF CHINA LIMITED 57 Directors’ Report The Board hereby submits the Directors’ Report together with the audited financial statements for the year ended December 31, 2010. Principal Activities The Group is the largest producer of alumina, primary aluminum and aluminum fabrication in the People’s Republic of China (the “PRC”). The Group is principally engaged in mining of bauxite, manufacture and distribution of alumina, primary aluminum and aluminum fabrication products as well as trading of non-ferrous metal products sourced from external suppliers. The scope of business of the Group includes the development of bauxite-related resources, the production, fabrication and distribution of bauxite, carbon and other smelted products. Financial Summary The results of the Group for the year ended December 31, 2010 are set out in the consolidated statement of comprehensive income on pages 125 to 126. A five-year financial summary of the Group is set out on pages 9 to 11. Dividend The Board recommends the payment of a final dividend for the year ended December 31, 2010 of RMB0.0114 per share (tax inclusive) in cash to its shareholders, totalling up RMB154 million, representing 35% of the Company’s profit for the year ended December 31, 2010. The proposal for distribution of final dividend is subject to shareholders’ approval at the forthcoming 2010 annual general meeting. Total dividends paid during the preceding two years are as follows: Total dividends paid: (RMB billion) Ratio to profits attributable to equity holders of the Company: (%) Share Capital Year 2009 Year 2008 nil nil 0.703 3,609.30 Details of the share capital of the Company are set out in Note 19 to the consolidated financial statements. 58 2010 ANNUAL REPORT Directors’ Report (Continued) Debentures Details of debentures of the Company are set out in Note 21 to the consolidated financial statements. Reserves Movements in the reserves of the Group and of the Company during the year are set out in the consolidated statement of changes in shareholders’ equity on pages 127 to 128 and Note 20 to the consolidated financial statements, respectively. 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 8 to the consolidated financial statements. Distributable Reserves Pursuant to Article 184 of the Articles of Association of the Company, where there are differences between PRC accounting standards and the accounting principles generally accepted in Hong Kong, the distributable reserves for the relevant period shall be the lesser of the amounts shown in the two different financial statements. As such, as of December 31, 2010, the distributable reserves of the Group amounted to approximately RMB18.50 billion. Use of Proceeds During the year, the Company did not raise any proceeds or use any proceeds brought forward from previous periods. ALUMINUM CORPORATION OF CHINA LIMITED 59 Directors’ Report (Continued) Use of Non-Proceeds During the year, the uses of funding not derived from proceeds are set out as follows: (1) Chongqing branch’s 800,000-tonne alumina project: the proposed investment in the project was RMB5.50 billion. As of the end of 2010, the Company had invested RMB5.39 billion in total. The project has commenced production in 2010, with production capacity of 800,000 tonnes of alumina. (2) Zunyi 800,000-tonne alumina project of Chalco Zunyi Alumina Co., Ltd.: the proposed investment in the project was RMB4.78 billion. As of the end of 2010, the Company had invested RMB4.64 billion in total. The project has commenced production in 2010, with an annual production capacity of 800,000 tonnes of alumina. (3) Liancheng branch, the phasing out of obsolete capacity, environmental protection and energy- saving project: the proposed investment in the project was RMB3.80 billion. As of the end of 2010, the Company had invested RMB1.79 billion in total. The project is expected to be completed by 2011, with production capacity of 388,000 tonnes of aluminum. (4) The energy-saving and environmental protection technology refinement project for Gansu Hualu’s aluminum and carbon system: the proposed investment in the project was RMB0.73 billion. As of the end of 2010, the Company had invested RMB0.47 billion in total. The project is expected to be completed by 2011, with production capacity of 70,000 tonnes of aluminum. (5) Chalco Ruimin high precision aluminum strip and sheet project: the proposed investment in the project was RMB3.05 billion. As of the end of 2010, the Company had invested RMB2.16 billion in total. The project has commenced production in 2010, with additional production capacity of 250,000 tonnes of aluminum fabrication products. (6) Northwest Aluminum Fabrication Plant aluminum foil project: the proposed investment in the project was RMB1.34 billion. As of the end of 2010, the Company had invested RMB0.85 billion. The project is expected to commence production by 2011, with capacity of 35,000 tonnes of aluminum fabrication products. 60 2010 ANNUAL REPORT Directors’ Report (Continued) (7) Southwest aluminum cold rolling project: the proposed investment in the project was RMB1.80 billion. As of the end of 2010, the Company had invested RMB1.44 billion in total. The project has commenced production in 2010, with production capacity of 250,000 tonnes of aluminum fabrication products. Pre-emptive Rights Pursuant to the Articles of Association of the Company and the PRC laws, there are no pre-emptive rights that require the Company to offer new shares to its existing shareholders on a pro-rata basis. Donations The Group had donated approximately RMB21.92 million during the year (2009: approximately RMB6.80 million). Litigation and Contingent Liabilities (a) Litigation There was no material litigation pending during the year which was required to be disclosed. (b) Contingent Liabilities During the year, the Group had no material contingent liabilities required to be disclosed. ALUMINUM CORPORATION OF CHINA LIMITED 61 Directors’ Report (Continued) Directors and Supervisors The Directors and Supervisors during the year and up to the date of this report were: Executive Directors Xiong Weiping Luo Jianchuan Chen Jihua# Liu Xiangmin Non-executive Director re-appointed on June 22, 2010 re-appointed on June 22, 2010 resigned on October 28, 2010 re-appointed on June 22, 2010 Shi Chungui Lv Youqing re-appointed on June 22, 2010 appointed on June 22, 2010 Independent non-executive Directors Kang Yi# Zhang Zuoyuan Wang Mengkui Zhu Demiao Supervisors Ao Hong Yuan Li Zhang Zhankui retired from office on June 22, 2010 re-appointed on June 22, 2010 re-appointed on June 22, 2010 re-appointed on June 22, 2010 re-appointed on June 22, 2010 re-appointed on June 22, 2010 re-appointed on June 22, 2010 Profiles of the Directors and Supervisors are set out on pages 15 to 29. # Due to personal reason, Mr. Chen Jihua resigned on October 28, 2010 from the positions of Executive Director, Vice President, Chief Financial Officer, Member of Executive Committee and Member of Development and Planning Committee. At the board meeting held on February 23, 2011, the Board resolved to appoint Mr. Liu Caiming as Senior Vice President, Chief Financial Officer and a member of Executive Committee of the Company and resolved to nominate Mr. Liu Caiming as a candidate for executive Director of the 4th session of the Board of the Company subject to approval at the 2010 annual general meeting of the Company. Having served as Independent Non-executive Director for six consecutive years, Mr. Kang Yi retired from office after the 2009 Annual General Meeting convened on June 22, 2010 upon expiry of his term of office. 62 2010 ANNUAL REPORT Directors’ Report (Continued) Directors’ and Supervisors’ Service Contracts and Remuneration Pursuant to Articles 104 and 145 of the Articles of Association of the Company, the term of office for Directors and Supervisors is three years, subject to re-election. Each Director and Supervisor has therefore entered into a service contract with the Company for a term of three years, but none of their service contracts is not terminable by the Company within one year without payment of compensation (other than statutory compensation). Details of the Directors’ and Supervisors’ remuneration and the five highest paid individuals are set out in Note 31 to the consolidated financial statements. For the year ended December 31, 2010, there were no arrangements under which any Director or Supervisor of the Company had waived or agreed to waive any remuneration. Interests of Directors, Chief Executive and Supervisors in Shares of the Company and Its Associated Corporations During the year ended December 31, 2010, none of the Directors, chief executive, Supervisors or their respective associates had any interests or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of the Hong Kong SFO), which are (a) required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Hong Kong SFO; or (b) required to be recorded in the register kept by the Company pursuant to Section 352 of the Hong Kong 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 companies. During the year ended December 31, 2010, none of the Directors, chief executive, Supervisors, senior management or their respective spouses or children under eighteen was given any right to acquire shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of the Hong Kong SFO). ALUMINUM CORPORATION OF CHINA LIMITED 63 Directors’ Report (Continued) Interests of Directors and Supervisors in Contracts During the year ended December 31, 2010, none of the Directors or Supervisors had any material direct or indirect interest in any contract of significance to which the Company or any of its subsidiaries was a party. Employees and Pension Schemes As of December 31, 2010, the Group had 108,256 employees. The remuneration package includes salaries, bonuses and allowances. Employees also receive benefits including medical care, housing subsidies, child care and education, retirement pension and other benefits. In accordance with applicable PRC regulations, the Group has currently enrolled in pension schemes organized by various provincial and municipal governments, under which each of the Group’s plants is required to contribute a fixed percentage of its employees’ salaries, bonuses and various allowances to the schemes. The specific percentage, which is around 20%, varies from plant to plant depending on the difference in locality of the plant and the average age of the employees. Repurchase, Sale and Redemption of the Company’s Shares The Company did not redeem any of its shares during 2010. Neither the Company nor any of its subsidiaries purchased or sold any of its shares during 2010. Management Contracts No contracts concerning the management or administration of the whole or any substantial part of the business of the Company were entered into or subsisted during the year. 64 2010 ANNUAL REPORT Directors’ Report (Continued) Major Customers and Suppliers For the year ended December 31, 2010, no more than 30% of the Company’s total sales was attributable to the five largest customers of the Company. For the year ended December 31, 2010, no more than 30% of the Company’s total cost of sales was attributable to the raw materials provided to the Company by the five largest suppliers of the Company. Code on Corporate Governance Practices For the year ended December 31, 2010, save for the deviation in respect of segregating the roles of chairman and chief executive officer, the Company was in compliance with the principles and code provisions of the Code on Corporate Governance Practices (the “CG Code”) set out in Appendix 14 of the Hong Kong Listing Rules and the Internal Control Guidelines for Listed Companies of the Shanghai Stock Exchange. The Articles of Association, the Terms of Reference of the Audit Committee, the Terms of Reference of the Supervisory Committee and the Code of Conduct Regarding Securities Transactions by the Directors, Supervisors and Specific Employees form the framework for the code of corporate governance practices of the Company. The Board has reviewed its corporate governance documents and is of the view that such documents, except for the principle regarding segregation of the roles of chairman and chief executive officer, have incorporated the principles and code provisions in 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. ALUMINUM CORPORATION OF CHINA LIMITED 65 Directors’ Report (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, 2010 have been reviewed by the Audit Committee of the Company. Auditor The financial statements have been audited by PricewaterhouseCoopers whose term of office expired and being eligible offer themselves for re-appointment. The Company has not changed its auditors in any of the three preceding financial years. Xiong Weiping Chairman Beijing, the PRC February 28, 2011 66 2010 ANNUAL REPORT Report of the Supervisory Committee Dear Shareholders, On behalf of the fourth session of the Supervisory Committee of Aluminum Corporation of China Limited, I would like to submit to the Annual General Meeting a report on the work of the Supervisory Committee in the past year. During the year, the Supervisory Committee attended general meetings and Board meetings held by the Company pursuant to duties given by the Company Law and the Articles of Association, focusing on ways to adapt to the Company’s changing development, enhance its operating transparency and standardization, build up the Company’s corporate credible image in the capital market, in particular to effectively protect interests of investors, especially interests of small and medium-sized investors, to hear the reports relating to the Company’s production, operation, investment and finance etc. as well as to supervise the material decision making process of the Company. 1. Members of the Supervisory Committee The term of office of all Supervisors of the third session of the Supervisory Committee of the Company expired at the conclusion of the Company’s 2009 annual general meeting. As recommended by Chinalco, the controlling shareholder of the Company, Mr. Ao Hong and Mr. Zhang Zhankui were appointed as the candidates for Supervisors of the fourth session of the Supervisory Committee of the Company and were nominated at the 19th meeting of the third session of the Board of the Company held on March 26, 2010. The appointments of Mr. Ao Hong and Mr. Zhang Zhankui as the Supervisors representing the shareholders for the fourth session of the Supervisory Committee of the Company were considered and approved at the Company’s 2009 annual general meeting which were held on June 22, 2010. Their tenures will expire at the conclusion of the 2012 annual general meeting. As recommended by the Company and democratically elected by the employees of the Company, Mr. Yuan Li has been appointed as the employee-representative Supervisor for the fourth session of the Supervisory Committee of the Company, with a term of office expiring at the conclusion of the 2012 annual general meeting. The fourth session of the Supervisory Committee of the Company was thereby formed. At the first meeting of the fourth session of the Supervisory Committee of the Company on June 22, 2010, it was unanimously resolved and approved that Mr. Ao Hong was to take up the position of Chairman of the fourth session of the Supervisory Committee of the Company. ALUMINUM CORPORATION OF CHINA LIMITED 67 Report of the Supervisory Committee (Continued) 2. Supervisory Committee Meetings During the year, five Supervisory Committee meetings were held by the Supervisory Committee of the Company, which mainly involved the following: The thirteenth meeting of the third session of the Supervisory Committee was held on March 26, 2010 with two Supervisors attending the meeting and one Supervisor attending by proxy (3 persons with valid votes), which was in accordance with the requirements of the Company Law and the Articles of Association. The meeting considered and approved the annual report of 2009, the 2009 Work Report of the Supervisory Committee, the Anti-fraud Work Report of the Company for 2009 and 2009 Self-assessment Report on Internal Control. The fourteenth meeting of the third session of the Supervisory Committee was held by means of written resolution on April 20, 2010, which was in accordance with the requirements of the Company Law and the Articles of Association. The Supervisory Committee considered and approved the 2010 First Quarterly Financial Report of the Company. The first meeting of the fourth session of the Supervisory Committee was held on June 22, 2010, with three Supervisors attending the meeting with 3 valid votes, which was in accordance with the requirements of the Company Law and the Articles of Association. The Chairman of the Supervisory Committee was elected at the meeting. The second meeting of the fourth session of the Supervisory Committee was held on August 23, 2010. Three Supervisors attended the meeting with 3 valid votes, which was in accordance with the requirements of the Company Law and the Articles of Association. The meeting considered and approved the 2010 Interim Financial Report of the Company and the Anti-fraud Work Report of the Company for the First Half of 2010. The third meeting of the fourth session of the Supervisory Committee was held by way of written resolution on October 25, 2010, which was in accordance with the requirements of the Company Law and the Articles of Association. The Supervisory Committee considered and approved the 2010 Third Quarterly Financial Report of the Company. 68 2010 ANNUAL REPORT Report of the Supervisory Committee (Continued) 3. Major Duties of the Supervisory Committee and its Independent Opinion During the year, the Supervisory Committee of the Company performed its duties in a diligent manner in accordance with the terms of reference prescribed by the Company Law and the Articles of Association. (I) Inspection of Implementation of Resolutions of the General Meetings Members of the Supervisory Committee attended the general meetings and Board meetings as observers. No objection had 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 management. The Supervisory Committee is of the opinion that the Directors and management of the Company have diligently discharged their responsibilities in accordance with the resolutions approved by the general meetings. None of the Directors and management of the Company was found to have violated any laws or regulations or Articles of Association nor taken any act which jeopardized the interests of the Company and shareholders in discharging their duties up to present. (II) Inspection of Legal Compliance of the Company’s Operations The Supervisory Committee exercised supervision in routine work over the legal compliance and legality of the Company’s operation and management. It has also exercised supervision over the work performance of the Company’s Directors and senior management. The Supervisory Committee is of the opinion that the legal compliance of the Company’s operation, together with its business and decision-making procedures, have complied with the relevant provisions of the Company Law and the Articles of Association; the Directors and senior management of the Company have discharged their duties according to the principle of diligence and good faith; and no violations of any laws, regulations or the Articles of Association and damages to the interests of the Company have been found during the discharging of duties by the abovementioned staffs during the year. ALUMINUM CORPORATION OF CHINA LIMITED 69 Report of the Supervisory Committee (Continued) (III) Inspection of the Company’s Financial Position During the year, the Supervisory Committee verified cautiously the financial statements of each period, and supervised and inspected the Company’s implementation of relevant financial policies and legislation as well as details on the Company’s assets, financial income and expenditure and connected transactions. It is of the opinion that the operating results achieved by the Company were true and all the connected transactions were entered into on a fair basis. The financial reports of the Company truly reflected the financial status and operating results of the Company. The preparation and review procedures for the reports were in compliance with the requirements of laws and regulations, the Articles of Association and the Company’s internal control system. Information on the significant events of the Company over the past year has been disclosed pursuant to relevant regulations. The preparation and disclosure of information of the Company were strictly in accordance with the principles of truthfulness, timeliness, accuracy, completeness and fairness. The Supervisory Committee approved the Company’s financial and audit reports presented by PricewaterhouseCoopers, the international auditor and PricewaterhouseCoopers Zhong Tian CPAs Company Limited, the domestic auditor. (IV) Inspection of the Utilization of Proceeds Raised by the Company During the year, the Company had no proceeds raised or funds brought forward from previous periods. (V) Inspection of the Acquisitions and Disposals of the Company’s Assets The Supervisory Committee is of the opinion that during the year, the consideration for the major acquisition and major disposal of assets by the Company was fair, without insider dealings and acts impairing the interests of the shareholders or leading to a loss in the Company’s assets. 70 2010 ANNUAL REPORT Report of the Supervisory Committee (Continued) (VI) Inspection of Connected Transactions of the Company During the year, the procedures for entering into connected transactions by the Company were in compliance with the requirements under the Hong Kong Listing Rules. The contracts of connected transactions observed the principles of fairness and integrity, without acts impairing the interests of the shareholders and the Company. (VII) Review of Self-assessment Report on Internal Control During the year, the Supervisory Committee attended work meetings of the Audit Committee of the Board and listened to reporting in respect of the Company’s internal control and examination and fully performed its role of guidance and supervision. The Supervisory Committee reviewed “2010 Self-assessment Report on Internal Control of the Company” and the “Directors’ Draft Workings in respect of the Review of ‘Directors’ Self- assessment Report in respect of Internal control of the Company‘”, and is of the opinion that the Company has established and maintained internal controls relating to the financial reporting in accordance with the requirements of ”Basic Principles of Corporate Internal Control” and”Guidelines on Internal Control for Companies Listed on the Shanghai Stock Exchange”, thereby ensuring the truthfulness, completeness and reliability of the information contained in the financial report and preventing risks of material misstatements. In 2011, the Supervisory Committee will perform the duties of the Company’s standing supervisory body in a diligent manner in accordance with the terms of reference prescribed by the Articles of Association. The Supervisory Committee will also perform its duty of supervising the Company’s operation, the discharge of responsibilities by directors and management, and aspects of finance of the Company and so forth. The Supervisory Committee will also be responsible for the supervision of the Board and its members and the senior management, to prevent them from abusing their power and authorities and from jeopardizing the legal interests of the shareholders, the Company and its staff. By Order of the Supervisory Committee Ao Hong Chairman of the Supervisory Committee ALUMINUM CORPORATION OF CHINA LIMITED 71 Report on Corporate Governance and Internal Control Corporate Governance Practices The Board has reviewed its corporate governance documents and internal control guidelines, and is of the view that, except for the overlapping roles of Chairman and CEO being performed by the same person, 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 the Shanghai Stock Exchange for the Internal Control of Listed Companies (“Internal Control Guidelines”). The Directors believe that, save for the principle regarding the segregation of the roles of Chairman and CEO, 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, Supervisors and Specified Employees, which constitute the framework for the 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 the Shanghai Stock Exchange for the Internal Control of Listed Companies. The internal corporate governance documents of the Company are more stringent than the CG Code and the Internal Control Guidelines in the following areas: 1. In addition to the Independent Audit Committee, Remuneration Committee and Nomination Committee, the Company has also established the Development and Planning Committee, Disclosure Committee, Executive Committee and Occupational Health and Safety and Environment Committee. 2. All members of the Independent Audit Committee were Independent Non-executive Directors, of whom Mr. Zhu Demiao, the Chairman, possesses extensive professional experience in finance, auditing and capital management and is the financial expert of the Board. Securities Transactions by the Directors, Supervisors & Relevant Employees The Board has formulated written guidelines on securities transactions by the Directors, Supervisors and relevant employees of the Company, the terms of which are more stringent than the required standards set out in the Model Code under Appendix 10 of the Hong Kong Listing Rules and the Listing Rules of the Shanghai Stock Exchange. Following a specific enquiry by the Company, all Directors, Supervisors and relevant employees have confirmed their compliance with the required standards set out in the written guidelines. 72 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) The Board During the year, the third session of the Board of the Company consisted of nine Directors, with four executive Directors, namely Mr. Xiong Weiping, Mr. Luo Jianchuan, Mr. Chen Jihua and Mr. Liu Xiangmin, one Non-executive Director, Mr. Shi Chungui, and four independent non-executive Directors, namely Mr. Kang Yi, Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao. Mr. Xiong Weiping was the Chairman and CEO. On June 22, 2010, at the 2009 annual general meeting of the Company, four executive Directors, namely Mr. Xiong Weiping, Mr. Luo Jianchuan, Mr. Chen Jihua and Mr. Liu Xiangmin, two non-executive Directors, namely Mr. Shi Chungui and Mr. Lv Youqing and three independent non-executive Directors, namely Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao were elected as Directors of the fourth session of the Board of the Company. As Mr. Kang Yi, the former independent non-executive Director of the Company, had served as an independent non- executive Director of the Company for six consecutive years and in accordance with the PRC law, he could not continue to hold such position and retired from office after the 2009 Annual General Meeting convened on June 22, 2010. Mr. Xiong Weiping was elected as the Chairman of the fourth session of the Board of the Company at the first meeting of the fourth session of the Board of the Company held on the same day. Due to personal reason, Mr. Chen Jihua resigned on October 28, 2010 from his positions as executive Director, Vice President, Chief Financial Officer, member of the Executive Committee and member of the Development and Planning Committee of the Company. The Company published an announcement regarding the matters of his resignation on October 29, 2010. The Board confirmed that it has received the annual written confirmation of independence from each independent non-executive Director pursuant to Rule 3.13 of the Hong Kong Listing Rules, and after due enquiry, considered that Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao were independent. Code Provision A.2.1 under Appendix 14 of the Hong Kong Listing Rules stipulates that the roles of Chairman and CEO should be separate and should not be performed by the same individual. Mr. Xiong Weiping is Chairman and CEO of the Company. The Board believes that vesting the roles of both Chairman and CEO in the same person provides the Company with strong and consistent leadership and allows for effective and efficient planning and implementation of business decisions and strategies. The Board believes that such arrangement will not have negative influence on the balance of rights and authorizations between the Board and the management of the Company. ALUMINUM CORPORATION OF CHINA LIMITED 73 Report on Corporate Governance and Internal Control (Continued) Each Director acted in the interests of the shareholders, and used his best endeavors to perform the duties and obligations in accordance with all the applicable laws and regulations. The duties of the Board include: deciding on the Company’s business plans and investment proposals, formulating the Company’s profit distribution and loss recovery proposals, determining the Company’s capital operation proposals, and implementing shareholders’ resolutions, etc. The Chairman was responsible for ensuring that the Directors perform their requisite duties and obligations, and maintaining effective operation of the Board, as well as ensuring timely discussion of all major matters. The Chairman has separately discussed with the Non-executive Directors, and fully understood their opinions and advices 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 on a timely basis in order to enhance their understanding of the Company. It also effectively maintained communications with shareholders to ensure that their views have reached the Board. The Company has appointed a sufficient number of independent non-executive Directors with suitable professional qualifications, such as expertise in accounting or financial management, in accordance with the requirements of the Hong Kong Listing Rules. The three independent non-executive Directors of the Company were independent. They are professionals with extensive experience in the respective fields of finance and economics. They have diligently provided the Company with professional advice with respect to the steady operation and development of the Company. They have also coordinated with the Company for the purpose of safeguarding the interests of the Company and its shareholders. Details of attendance of the independent non-executive Directors at Board meetings are as follows: Required Attendance at Name of independent physical Board Attendance Attendance non-executive Director meetings for 2010 in person by proxy Absence (number of times) (number of times) (number of times) (number of times) Kang Yi (Retired) Zhang Zhuoyuan Wang Mengkui Zhu Demiao 2 5 5 5 1 5 4 3 1 0 1 2 0 0 0 0 74 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) During the year, the independent non-executive Directors of the Company did not raise any objection to the resolutions proposed at Board meetings and other meetings. Other than their appointments in the Company, none of the Directors, Supervisors or the senior management has any financial, business, family or other significant relationships with each other. Other than their respective service contracts, none of the Directors or the Supervisors has any significant personal interest, direct or indirect, in the material contracts entered into by the Company or any of its subsidiaries during 2010. In 2010, the Company held twelve Board meetings, including five physical meetings and seven meetings by means of telecommunications. The average attendance rate of all Directors, including Mr. Xiong Weiping, Mr. Luo Jianchuan, Mr. Chen Jihua (resigned on October 28, 2010), Mr. Liu Xiangmin, Mr. Shi Chungui, Mr. Lv Youqing, Mr. Kang Yi (retired on June 22, 2010), Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao at the five physical Board meetings was 100% (including attendance by proxy). Details of the physical meetings were recorded by a designated person, and the approved proposals were passed as Board resolutions, which were recorded and filed in accordance with relevant laws and regulations. The work of the Board in 2010 mainly included: • • • • • • • • Review of the Company’s annual, interim and quarterly results reports; Review of the annual production and business plans and budget; Review of the annual profit distribution proposal; Review of the matters regarding the issue of shares and bonds; Review of the Company’s continuing connected transactions over the next three years; Review of the amendments to the Articles of Association; Review of the composition of each special committee under the Board; and Review of the Company’s remuneration proposal for Directors, Supervisors and senior management, etc. ALUMINUM CORPORATION OF CHINA LIMITED 75 Report on Corporate Governance and Internal Control (Continued) Particulars of each Board meeting in 2010 are as follows: (1) On February 9, 2010, the Board convened the 18th meeting of the third session of the Board by means of telecommunications. The Board considered and approved the resolution relating to the entering into of a framework agreement between the Company and GIIG Holdings Sdn Bhd of Malaysia, for the joint construction of an aluminum plant. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on February 9. (2) On March 26, 2010, the Board convened the 19th meeting of the third session of the Board. The Board considered and approved a total of nineteen resolutions including the 2009 annual report, the proposed non-distribution of dividends for year 2009, 2010 budget, capital expenditure plan and financing plan, the candidates for Director of the fourth session of the Board of the Company, annual remuneration for Directors, Supervisors and senior management of the Company for 2010, the amendments to the Articles of Association, issuance of short term financing bonds and medium-term notes, and Report of Corporate Social Responsibility and Self-assessment Report on Internal Control of the Company. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on March 27. (3) On April 20, 2010, the Board convened the 20th meeting of the third session of the Board. The Board considered and approved the resolution in relation to the 2010 First Quarterly Report. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on April 20, 2010. (4) On May 7, 2010, the Board convened the 21st meeting of the third session of the Board by means of telecommunications. The Board considered and approved the resolutions namely, resolutions in relation to the reappointment of auditors of the Company for the year 2010. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on May 7, 2010. 76 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) (5) On June 22, 2010, the Board convened the first meeting of the fourth session of the Board. The Board considered and approved 11 resolutions including resolutions in relation to the election of the Chairman of the fourth session of the Board of the Company, the appointment of the Chief Executive Officer of the Company, the appointment of the members of the Executive Committee of the Company, the appointment of the President, Vice President and Chief Financial Officer of the Company, the appointment of the Secretary to the Board of the Company and the appointment of the members of each special committee under the Board. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on June 22, 2010. (6) On July 29, 2010, the Board convened the 2nd meeting of the fourth session of the Board by means of telecommunications. The Board considered and approved the resolution in relation to the joint development by the Company and Rio Tinto of the Simandou iron ore project located in Guinea, West Africa. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on July 29, 2010. (7) On August 10, 2010, the Board convened the 3rd meeting of the fourth session of the Board by means of telecommunications. The Board considered and approved the resolution in relation to the preparatory work of the Company’s participation in the coal resources integration project in Jiexiu, Shanxi. (8) On August 23, 2010, the Board convened the 4th meeting of the fourth session of the Board. The Board considered and approved the resolution regarding the 2010 interim report of the Company and the proposed non-distribution of 2010 interim dividends. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of the Hong Kong Stock Exchange on August 23, 2010. (9) On October 25, 2010, the Board convened the 5th meeting of the fourth session of the Board. The Board considered and approved five resolutions in relation to the 2010 third quarterly report of the Company, the expansion of business scope of the Company and the corresponding amendments to the Articles of Association, the counter guarantee in favour of Chinalco for its guarantee provided for the Simandou project located in Guinea, West Africa, and the approval of the Company’s participation in the coal resources integration project in Jiexiu, Shanxi. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on October 25, 2010. ALUMINUM CORPORATION OF CHINA LIMITED 77 Report on Corporate Governance and Internal Control (Continued) (10) On November 22, 2010, the Board convened the 6th meeting of the fourth session of the Board by means of telecommunications. The Board considered and approved the resolution in relation to the 2010 Performance Appraisal and Remuneration Allocation System for the Members of the Management Team of Aluminum Corporation of China Limited. (11) On December 10, 2010, the Board convened the 7th meeting of the fourth session of the Board by means of telecommunications. The Board considered and approved the resolution relating to the proposal to adjust the term of depreciation for the Company’s fixed assets. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on December 10, 2010. (12) On December 29, 2010, the Board convened the 8th meeting of the fourth session of the Board by means of telecommunications. The Board considered and approved resolutions such as the proposed acquisition of 9.5% equity interests in China Aluminum International Trading Co., Ltd. by the Company and the proposed issue of debt financing instruments of the Company. The announcement of the resolutions was published on Shanghai Securities News, Securities Times, the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on December 29, 2010. Implementation of Shareholders’ Resolutions by Directors: During the year, all Board members of the Company implemented the shareholders’ resolutions and completed all matters delegated by the general meeting in accordance with provisions of the relevant laws and regulations and the Articles of Association. The major agendas of the half yearly and yearly Board meetings were determined in the previous year to ensure all Directors had the opportunity to propose matters to be discussed at the meetings. Notice would be given to the Directors fourteen days before the meeting and the proposed resolutions of the Board would be provided to the Directors ten days prior to the meeting, which gave them sufficient time to review the resolutions. The Board attached great importance to the influence on the Company’s development strategy caused by the changes of the external environment. In 2009, the Company swiftly adjusted its development strategies and adopted contingency measures to reduce losses of profit arising from the global financial turmoil. 78 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) The total remuneration, including the basic salary, performance-linked salary, incentive-linked salary and discretionary bonus of the Directors in 2010 amounted to RMB4.01 million, among which independent non-executive Directors are only entitled to receive director’s fees but not other remuneration. The remuneration of each Director for the year is set out in note 31 to the consolidated financial statements. As of December 31, 2010, no stock appreciation rights scheme had been adopted by the Company. Audit Committee The Audit Committee has been established under the Board. Its duties are mainly to review the financial reports, audits of financial reports, internal control system, corporate governance and financial position 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 Audit Committee of the third session of the Board of the Company consisted of four independent non-executive Directors, including Mr. Zhu Demiao, Mr. Kang Yi, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui, with Mr. Zhu Demiao as the chairman of the Committee. Mr. Kang Yi retired as an independent non-executive Director of the Company at the conclusion of the annual general meeting held on June 22, 2010 as a result of the expiry of his term of office. Mr. Zhu Demiao, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui have been appointed as the members of the Audit Committee of the fourth session of the Board of the Company and Mr. Zhu Demiao was appointed as the chairman of the committee upon consideration and approval on the first meeting of the fourth session of the Board on June 22, 2010. The term of office of the Audit Committee members will expire at the conclusion of the Company’s 2012 Annual General Meeting. In accordance with its work rules, the committee would hold at least four meetings annually to review the accounting policies, periodic financial reports, internal control and relevant financial issues, and connected transactions of the Group, so as to ensure completeness, accuracy and fairness of the Company’s financial statements and other relevant information. In 2010, the Audit Committee held six meetings in total with an average attendance rate of 100% (including attendance by proxy) based on the current four members, of which, Mr. Zhu Demiao, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui attended all the meetings in person, while Mr. Kang Yi attended twice in person. ALUMINUM CORPORATION OF CHINA LIMITED 79 Report on Corporate Governance and Internal Control (Continued) In 2010, major duties of the Audit Committee were as follows: 1. Supervised the Company’s financial reporting, and considered the Company’s annual, interim and quarterly financial reports; 2. Considered the Annual Work Report of the Audit Committee; 3. Considered the Annual and Half-year Anti-fraud Work Report of the Company; 4. Considered the Self-assessment Report on Internal Control of the Company; 5. Considered the Annual Risk Assessment Report of the Company; 6. Supervised the accounting system of the Company, including in relation to the deployment of accounting and financial staff, and considered the Company’s Report on Improvement in Internal Control; and 7. Considered the work report of the auditors. Details of the meetings were recorded by a designated person with signatures of all members as confirmation, and all resolutions passed at each meeting were recorded and filed in accordance with relevant rules. Members of the committee performed their duties diligently and provided recommendations in relation to the operation and management, financial reports, internal control and production operation of the Company from an independent and impartial perspective. The Company has established work procedures for the Audit Committee for the performance of its supervisory role in auditing. Before the external auditors commenced its annual audit, the Audit Committee reviewed the Company’s financial position and negotiated with the external auditors about audit timetable for the year. Throughout the audit by the external auditors, the Audit Committee maintained communications with them and ensured completion of audit within the designated timeframe. The Audit Committee further reviewed the financial report of the Company after the external auditors issued their preliminary audit opinions, before finalising their recommendations for submission of the audited financial report to the Board of the Company for review; the committee also resolved on the reappointment of the auditors of the Company for the year 2010 which was further submitted to the Board for review. 80 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) The Audit Committee and the management discussed the internal control system of the Company, so as to make sure that the management had performed their duties in establishing an effective internal control system, which included considering whether or not the Company had sufficient resources with qualified and experienced staff to perform accounting and financial reporting duties, and whether or not relevant staff were well trained and the relevant budget was sufficient. The Audit Committee is of the view that the Company had complied with the requirements of the above corporate internal control system during the year. Remuneration Committee and Nomination Committee Remuneration Committee and Nomination Committee have been established under the Board. The Remuneration Committee of the third session of the Board consisted of four independent non- executive Directors, namely Mr. Kang Yi, Mr. Zhu Demiao, Mr. Wang Mengkui and Mr. Zhang Zhuoyuan. Mr. Kang Yi was the chairman of the Committee. On June 22, 2010, the Remuneration Committee of the fourth session of the Board consisted three independent non-executive Directors, namely Mr. Zhu Demiao, Mr. Wang Mengkui and Mr. Zhang Zhuoyuan and one non-executive Director, namely Mr. Lv Youqing. Mr. Zhang Zhuoyuan is the chairman of the committee. Duties of the Remuneration Committee include: 1. Review and discuss the Company’s remuneration policies for Directors, Supervisors and senior management; 2. Review operation results indicators and the performance assessment management measures of the Executive Committee; 3. Review and discuss the Company’s remuneration and bonus policies for members of the Executive Committee and senior management; 4. Provide advice on other material events regarding remuneration. ALUMINUM CORPORATION OF CHINA LIMITED 81 Report on Corporate Governance and Internal Control (Continued) The Remuneration Committee of the third session of the Board held one meeting in 2010 which was attended by Mr. Kang Yi, Mr. Zhu Demiao, Mr. Wang Mengkui and Mr. Zhang Zhuoyuan. The attendance rate for the meeting was 100%. Mr. Zhu Demiao, Mr. Wang Mengkui, Mr. Zhang Zhuoyuan and Mr. Lv Youqing attended the first meeting of the Remuneration Committee of the fourth session of the Board. The attendance rate for the meeting was 100%. Details of the meeting convened by the Remuneration Committee of the Company in 2010 were as follows: The 4th meeting of the Remuneration Committee of the third session of the Board was held on March 26, 2010, at which the committee considered the proposals including the basic framework of remuneration standards for 2010 and renewal of liability insurance for years 2010-2011 for the Company’s Directors, Supervisors and other senior management members, and formed relevant resolutions. On November 15, 2010, the Remuneration Committee held the first meeting of the fourth session of the Board by means of a written resolution, at which the committee considered and approved the 2010 Performance Appraisal and Remuneration Allocation System of the Members of the Management Team of Aluminum Corporation of China Limited, which further specified the annual remuneration standards, performance appraisal and award system for three senior management positions including Chief Executive Officer, President and Vice President (Chief Financial Officer), which were also considered and approved at the 6th meeting of the fourth session of the Board of the Company held on November 22, 2010. The third session of the Nomination Committee consisted of two executive Directors, Mr. Xiong Weiping and Mr. Luo Jianchuan, as well as two independent non-executive Directors, Mr. Kang Yi and Mr. Zhang Zhuoyuan, with Mr. Xiong Weiping as the chairman of the committee. On June 22, 2010, two executive Directors, Mr. Xiong Weiping and Mr. Luo Jianchuan, as well as three independent non-executive Directors, Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao, were elected as the new session of the Nomination Committee under the fourth session of the Board of the Company, with Mr. Xiong Weiping as the chairman of the committee. Duties of the Nomination Committee include: 1. Discuss and recommending candidates for independent directors of the Board; 2. Discuss and recommending members of the Board or other personnel to be candidates for members of special committees; 82 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) 3. Prepare the appointment procedures and re-election plan for members of the Executive Committee and other senior management members; 4. Provide advice to the appointment and dismissal of the members of the Executive Committee and other senior management members; 5. Provide advice to the appointment and dismissal of other personnel which is considered important. The procedures for appointment of new Directors of the Company are: the Nomination Committee of the Board nominates a director candidate for consideration and approval of the Board, which is then put forward for election at a general meeting. Mr. Xiong Weiping succeeded as the chairman of the Nomination Committee after being appointed as an executive Director at the 2008 Annual General Meeting, and was re-appointed to undertake the above positions at the 2009 Annual General Meeting. The Nomination Committee held two meetings in 2010 and all members attended the meetings (including attendance by proxy). Details of the meetings convened by the Nomination Committee in 2010 were as follows: • The 7th meeting of the third session of the Nomination Committee of the Company was held on March 26, 2010, at which the candidates nominated for the fourth session of the Board of the Company were considered by the committee and relevant resolutions were formed. • The first meeting of the Nomination Committee of the fourth session of the Board was held on June 22, 2010. The Nomination Committee considered the nomination of CEO and the members of Executive Committee; the nomination of the candidates for President, Vice President, Chief Financial Officer and Secretary to the Board; the nomination of the candidates for the Remuneration Committee, Audit Committee, Development and Planning Committee, Occupational Health and Safety and Environment Committee and formed relevant resolutions. Details of each meeting of the Remuneration Committee and Nomination Committee were written down by a designated person. All issues approved in the meetings were recorded and filed in compliance with relevant laws and regulations. ALUMINUM CORPORATION OF CHINA LIMITED 83 Report on Corporate Governance and Internal Control (Continued) Development and Planning Committee The Development and Planning Committee has also been established under the Board. The committee consists of executive Directors, namely, Mr. Luo Jianchuan and Mr. Liu Xiangmin with Mr. Luo Jianchuan as the chairman of the committee. Duties of the Development and Planning Committee include reviewing and evaluation of the Company’s development, financial budget, investment, business operation and strategic plan of annual investment returns. The Development and Planning Committee has operated in an orderly manner in accordance with its procedural rules. Executive Committee The Board has established the Executive Committee, which comprises Mr. Xiong Weiping (Chairman), Mr. Luo Jianchuan (President), Mr. Liu Xiangmin (Executive Director), Mr. Ding Haiyan (Vice President), Mr. Jiang Yinggang and Mr. Xie Hong. Mr. Xiong Weiping and Mr. Luo Jianchuan served as the chairman and vice chairman of the current session of the Executive Committee respectively. Mr. Liu Caiming (Senior Vice President and Chief Financial Officer) was appointed as a member of the Executive Committee on February 23, 2011. Information Disclosure and Disclosure Committee Great importance is attached by the Company to accurate, timely, fair and transparent disclosure of information. All information (including annual and interim results) to be disclosed would be 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 will ensure that the Company’s results and financial position will be reflected on a true and fair basis in accordance with the relevant accounting principles and requirements. 84 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) Occupational Health and Safety and Environment Committee The establishment of Occupational Health and Safety and Environment Committee was approved, and the committee was established on the 19th meeting of the third session of the Board of the Company held on March 26, 2010. Occupational Health and Safety and Environment Committee comprises Directors, Mr. Lv Youqing and Mr. Liu Xiangmin, with Mr. Lv Youqing as the chairman. Duties of Occupational Health and Safety and Environment Committee include consideration of the Company’s annual planning on health, environmental protection and safety, supervision of the Company’s actual implementation of the planning on health, environmental protection and safety initiatives, inquiring into serious incidents and inspecting and supervising over the handling of such incidents, as well as making recommendations to the Board on major decisions on health, environmental protection and safety. The Occupational Health and Safety and Environment Committee has operated in an orderly manner in accordance with its procedural rules. Supervisory Committee The third session of the Supervisory Committee of the Company consisted of three members, with one employee representative supervisor being elected by the employees. The Supervisory Committee was responsible for supervising the Board and its members and senior management, in order to prevent them from abusing their authorities and violating the legitimate interests of shareholders, the Company and its staff. Tenures of all members of the third session of the Supervisory Committee of the Company expired at the conclusion of the 2009 Annual General Meeting of the Company. As recommended by Chinalco, the controlling shareholder of the Company, Mr. Ao Hong and Mr. Zhang Zhankui were nominated as the candidates for Supervisors of the fourth session of the Supervisory Committee of the Company. Upon nomination at the 19th meeting of the third session of the Board of the Company on March 26, 2010, the appointments of Mr. Ao Hong and Mr. Zhang Zhankui as the shareholder representative Supervisors of the fourth session of the Supervisory Committee of the Company were considered and approved at the 2009 Annual General Meeting of the Company held on June 22, 2010, with a term of office expiring at the conclusion of the 2012 Annual General Meeting. As recommended by the Company and democratically elected by the employees of the Company, Mr. Yuan Li has been appointed as the employee-representative Supervisor of the fourth session of the Supervisory Committee of the Company, with a term of office expiring at the conclusion of the 2012 Annual General Meeting. In 2010, the Supervisory Committee convened five meetings, at which the committee reviewed the Company’s financial position and the legal compliance of its operations as well as diligence of the senior management, and kick-started all tasks on the principle of good faith. ALUMINUM CORPORATION OF CHINA LIMITED 85 Report on Corporate Governance and Internal Control (Continued) General Meetings 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 2010, the Company convened two general meetings, one class meeting for holders of A shares and one class meeting for holders of H shares, namely: • • • • 2009 Annual General Meeting held on June 22, 2010; 2010 First Extraordinary General Meeting held on August 23, 2010; 2010 First Class Meeting for Holders of A Shares held on August 23, 2010; 2010 First Class Meeting for holders of H Shares held on August 23, 2010. 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 Director’s Report, Report of Supervisory Committee and Consolidated Financial Report for 2009; • • • • the proposed non-distribution of final dividends for year 2009 and interim dividends for 2010; the election of the Directors of the fourth session of the Board and the Supervisors of the fourth session of the Supervisory Committee of the Company; the year 2010 remuneration proposal for the Company’s Directors and Supervisors; the expansion of business scope of the Company and the corresponding amendments to the Articles of Association; • the issue of short term financing bonds and medium term notes; 86 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) • • the general mandate granted to the Board of the Company to issue H shares; and the one-year extension of the validity period of the relevant resolutions and authorisation for the issue of non-public offering of A shares of the Company. On the whole, all resolutions were approved with an average approval rate of 99.08%. The Chairman of the Board or person authorized by him presided over such general meetings and explained to the shareholders the procedures for voting before the shareholders considered and voted on each resolution. Notices of the meetings were given to all Directors and Supervisors, and some of whom also attended the general meetings. Members of Audit Committee, Remuneration Committee and Nomination Committee had also been notified to attend the meetings as observers. Particulars of each general meeting in 2010 were as follows: (1) On June 22, 2010, the Company convened the 2009 Annual General Meeting, at which thirteen resolutions were considered and approved, including the Director’s Report and Report of Supervisory Committee for 2009, the Audited Financial Statements for 2009, election of Directors of the fourth session of the Board and Supervisors of the fourth session of the Supervisory Committee of the Company, amendments to the Articles of Association, issue of short-term corporate bonds and issue of medium term notes. The announcement of the resolutions was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on June 22, 2010. (2) On August 23, 2010, the Company convened the 2010 First Extraordinary General Meeting, at which the proposal in relation to a one-year extension of the validity period of relevant resolutions and authorisation for the non-public offering of A shares of the Company was approved. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on August 23, 2010. ALUMINUM CORPORATION OF CHINA LIMITED 87 Report on Corporate Governance and Internal Control (Continued) (3) On August 23, 2010, the Company convened the 2010 First Class Meeting for Holders of A Shares, at which the proposal in relation to a one-year extension of the validity period of relevant resolutions and authorisation for the non-public offering of A shares of the Company was approved. The announcement of the resolution was published on Shanghai Securities News, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on August 23, 2010. (4) On August 23, 2010, the Company convened the 2010 First Class Meeting for Holders of H Shares, at which the resolution in relation to a one-year extension of the validity period of relevant resolutions and authorisation for the non-public offering of A shares of the Company was approved. The announcement of the resolution was published on Shanghai Securities Journal, Securities Times and the PRC designated websites and disclosed on the website of The Hong Kong Stock Exchange Limited on August 23, 2010. Investor Relations The Company has established a designated department for investor relations, which is responsible for matters concerning investor relations and has formulated the “Investor Relations Management Measures” to regulate the relationships with the investors. The Company’s management maintains close communications with investors, analysts and the media by various means including roadshows, meetings, individual interviews and investors’ visits to the Company, thereby further increasing investors’ recognition of the Company. In 2010, the Company arranged its senior management to visit investors in two global roadshows and arranged four corporate visits for investors and more than 80 group visits to the Company by investors, and participated in ten investors’ meetings arranged by investment banks. In addition, our investor relationships department is also responsible for answering investors’ enquiries and replying mails on a timely basis. 88 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) As of December 31, 2010, the total market capitalization of the Company was approximately RMB120.9 billion, among which, the market capitalization of A shares subject to trading moratorium was approximately RMB57.28 billion, the market capitalization of tradable A shares was approximately RMB39.86 billion and the market capitalization of H shares was approximately HK$27.96 billion (equivalent to approximately RMB23.79 billion). Note: As of December 31, 2010, the number of issued shares of the Company was 13,524,487,892, including 5,649,217,045 A shares subject to trading moratorium, 3,931,304,879 tradable A shares and 3,943,965,968 H shares. The A share closing price was RMB10.14, and H share closing price was HK$7.09 as of December 31, 2010. For details of classes of shareholders please refer to page 32. Corporate Management and Internal Control Corporate management As and when required, the Company convened Executive Committee meetings, which were chaired by the chairman of the Executive Committee and attended by its members, and the presidential office meetings, which were chaired by the senior management with attendants including department heads from the Company’s headquarters. The Company’s operation, 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 convened annual, interim and monthly work meetings in order to summarize and arrange works on a yearly, year-half and monthly basis. The meetings have facilitated the organization, coordination, communication and implementation of the Company’s various operations. ALUMINUM CORPORATION OF CHINA LIMITED 89 Report on Corporate Governance and Internal Control (Continued) Internal control The Board and the management attached much importance to the establishment and improvement of the internal control system. The Company had fully established and evaluated the relevant internal control system across three spectrums covering the corporate governance and system, business and accounting procedures and information system control in compliance with the requirements of “Basic Principles of Corporate Internal Control” and its implementation guidelines, “Guidelines on Internal Control for Companies Listed on the Shanghai Stock Exchange” and Sarbanes-Oxley, and obtained the audit opinion from the external auditors confirming the effectiveness of the Company’s internal control. The internal control system served as a reasonable guarantee of the legal compliance of the operation and management of the company, its asset safety and truthfulness and completeness of its financial reports and relevant information, and increased the operational efficiency and performance of the Company, which safeguarded the smooth implementation of the Company’s development strategies. The internal control system of the Company was applied in various aspects such as production, sales, finance and supply. The Company performed annual reviews on the system in order to track its operation in a timely manner, and revised or abolished some regulations in accordance with relevant PRC laws and regulations and actual conditions of the Company. As a special committee established under the Board, the Audit Committee of the Company has supervised and inspected the comprehensiveness and implementation of the internal control system of the Company, and regularly discussed with the management on the internal control system in order to ensure that the management had performed its duties to establish an effective internal control system. The Company set up departments dedicated to daily examination and supervision of internal control, and designated personnel to examine and supervise internal control according to the relevant provisions and conditions of the Company. The department assigned for such purpose inspected and oversaw the periodic internal control test of all functional departments and units in headquarters. At the end of the year, all functional departments and units in headquarters are required to evaluate their internal control and sign a statement for verification. The Board of the Company will also conduct self-evaluation and sign a statement regarding the internal control of the Company as a whole. 90 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) In 2010, 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 improved, optimized, testified and evaluated internal control over production and operation, financial management and information disclosure of the Company, in particular those relevant to financial reporting whilst ensuring that the internal control system of the Company was still in effect. The conclusion set out in the management’s self-evaluation report on the effectiveness of internal control on financial reporting was valid. Key internal controls exercised by the Company were as follows: The Company had further improved the internal control system across three spectrums covering corporate governance system, business and accounting procedures and information system control, in compliance with the requirements of the “Basic Principles of Corporate Internal Control” of the Ministry of Finance, “Guidelines on Internal Control for Companies Listed on the Shanghai Stock Exchange” and the U.S. Sarbanes-Oxley Act. According to the Basic Standards 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, control activities, information and 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. The Company revamped its accounting-related internal control regarding capital management measures in accordance with the relevant laws and regulations of the PRC and the actual conditions of the Company. Under the authorization of the Board of the Company, the Audit Committee of the Company performed its functions in accordance with the authority given under the Articles of Association and the Work Rules for the Board and formulated the Work Rules for the Audit Committee. Since the listing of the Company, the finance department of the Company has been preparing the Company’s financial reports in accordance with the Hong Kong Financial Reporting Standards and supplemented the reports with the Reconciliation Table under U.S. Standards (美國準則下差異調節 表) in compliance with the requirements of the Hong Kong Stock Exchange and the U.S. Securities and Exchange Commission. In 2007, the U.S. Securities and Exchange Commission issued an order permitting listed companies in the U.S. to prepare its financial reports in accordance with the International Financial Reporting Standards; and agreed that in so doing, companies would be exempted from submitting the supplementary Reconciliation Table under U.S. Standards (美國準則下差異調節表). ALUMINUM CORPORATION OF CHINA LIMITED 91 Report on Corporate Governance and Internal Control (Continued) Auditor’s Remuneration PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian CPAs Company Limited (collectively, “PricewaterhouseCoopers Firms”) were re-appointed as the Company’s international and domestic independent auditors, respectively, at the last Annual General Meeting for a term ending on the date of the next Annual General Meeting. Aggregate fees in respect of audit and audit related services provided by PricewaterhouseCoopers Firms during the year were RMB16.4 million. Directors’ and Auditors’ Acknowledgment All directors acknowledged their responsibility for preparing the accounts for the year ended December 31, 2010. For auditors’ reporting responsibilities, please refer to the auditors’ report. Compliance and Exemption of Corporate Governance Obligations Imposed by New York Stock Exchange Based on its Listing Rules, New York Stock Exchange (“NYSE”) imposed a series of corporate governance standards for companies listed on the NYSE. However, NYSE has granted permission to listed companies of foreign issuers to follow their respective “home country” practice and has granted waivers for compliance with corporate governance standards. One of the conditions for such waiver is for the listed company to disclose in its annual report how the corporate governance practices in its “home country” differ from those followed by companies under NYSE listing standards. The Company had compared the corporate governance standards generally adopted by the companies incorporated in the PRC and the standards developed by NYSE, as follows: 92 2010 ANNUAL REPORT Report on Corporate Governance and Internal Control (Continued) Independent Directors Constituting the Majority 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 three 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 Governance 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. ALUMINUM CORPORATION OF CHINA LIMITED 93 Significant Events (1) Corporate Governance The Company has strictly complied with the requirements of the Company Law, the Securities Law, relevant provisions of China Securities Regulatory Commission and Shanghai Stock Exchange Listing Rules (“Shanghai Stock Exchange Listing Rules”) and seriously performed its governance obligations in line with the requirements of the relevant documents issued by CSRC. The Company has also strictly complied with requirements on corporate governance under the Hong Kong Listing Rules. The Company will continue to be in strict compliance with the requirements of the relevant regulatory bodies including the CSRC, Beijing Securities Regulatory Bureau, the Shanghai Stock Exchange and the Hong Kong Stock Exchange. The Company will consistently optimize every measures of corporate governance in compliance with regulations and take initiatives to further enhance the corporate governance and internal control system of the Company. Aiming at protecting the interest of shareholders of the Company, the Company will maintain consistent, stable and sound developments and to use satisfactory performance results to return to the society and its shareholders. The Company will also continue to comply with requirements on corporate governance under the Hong Kong Listing Rules. Since its incorporation, and in relation to its controlling shareholder, the Company has completely separated its business, staff, assets, organization and finance from the controlling shareholder. The Company has independent and complete business and its own operations. (2) Material Acquisitions On July 29, 2010, the Company, Rio Tinto plc and Rio Tinto Iron Ore Atlantic Limited, an affiliate of Rio Tinto plc, entered into a Joint Development Agreement for the development and operation of a premium open-pit iron ore mine located in Guinea, West Africa (the “Simandou Project”). Pursuant to the agreement, the Company (via its subsidiary) will acquire by stages up to 47% equity interests in a joint-venture company to be incorporated by Rio Tinto, to which Rio Tinto will transfer its entire 95% equity interest in the Simandou Project. The total consideration of USD1.35 billion (equivalent to approximately RMB9.17 billion) for the acquisition will be paid in installments by the Company fulfilling the sole funding obligation for the development of the Simandou Project over a period of approximately 3 to 5 years. Such project is in active progress. The Company had no other material acquisition that is required to be disclosed during the year. 94 2010 ANNUAL REPORT Significant Events (Continued) (3) Trust Arrangement The Company had no trust arrangement required to be disclosed during the year. (4) Sub-contracting The Company had no sub-contracting arrangement required to be disclosed during the year. (5) Guarantees In 2004, the Company and Shanxi Aluminum Plant Subbranch, China Construction Bank, entered into a Guarantee Contract, whereby the Company provided joint liability guarantee for the loan of RMB1.02 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. On October 25, 2010, the Board of the Company approved the resolution relating to the provision of counter guarantee for the guarantee provided by Chinalco in respect of the Simandou Project located in Guinea, west Africa. Save as aforesaid, there was no other external guarantees provided by the Company which are required to be disclosed. (6) Fund Management There was no fund under the management of third parties that is required to be disclosed during the year. ALUMINUM CORPORATION OF CHINA LIMITED 95 Significant Events (Continued) (7) Performance of Undertakings The undertakings made by Chinalco during or subsisting in the year were as follows: Upon the offering of A shares, Chinalco’s undertakings were principally related to the non- competition undertakings of Chinalco, including: (1) Chinalco will arrange to dispose of its aluminum fabrication business, or the Company will acquire the aluminum fabrication business from Chinalco, and acquire the pseudo- boehmite business from Chinalco within a certain period of time following the listing of the Company’s A shares. (2) the injection of quality aluminum assets (including but not limited to assets and equity interest of its aluminum, aluminum fabrication and other businesses) as and when appropriate, in order to further optimize the Company’s industry chain. To date, both Shanxi Aluminum Plant, a wholly-owned company of Chinalco, and the Shandong branch of the Company had minor activities in the pseudo-boehmite market. However, as the pseudo-boehmite business was not among the principal activities of the Company, the revenue from this segment made up an insignificant portion of the Company’s revenue. Further, the sales locations of pseudo-boehmite of Shandong branch and Shanxi Aluminum Plant are different. In this regard, the competition between Chinalco and the Company in respect of pseudo-boehmite business is limited. As a result of the immature market conditions, Chinalco proposes not to inject the pseudo- boehmite business to the Company’s portfolio for the time being. When condition becomes mature, the Chinalco will continue to duly complete the matters undertaken within the time limit. 96 2010 ANNUAL REPORT Significant Events (Continued) (8) Punishments and Rectifications Involved by Listed Companies and Their Directors, Supervisors, Senior Management, Shareholders, and De Facto Controllers During the year, the Company and its Directors, Supervisors, senior management, shareholders, and de facto controller were not under any investigation, administrative punishment, public criticism from CSRC and public censures from stock exchanges. (9) Explanation of Other Significant Events Non-public Offering of A Shares On June 30, 2009, the resolution of proposed non-public offering of A shares to no more than ten target subscribers was approved by the Board of the Company, details of which are as follows: not more than 1 billion RMB denominated ordinary shares (A shares) would be issued. The issue price of A shares to be offered will be not less than 90% of the average trading price of the A shares of the Company in the 20 trading days immediately preceding the pricing determination date. The implementation of the proposal was approved by the shareholders at the extraordinary general meeting, Class Meeting for Holders of A Shares and Class Meeting for Holders of H Shares held on August 24, 2009. Period of validity of the resolutions which approved the offering: 12 months from the date of the resolutions passed at the extraordinary general meeting, Class Meeting for Holders of A Shares and Class Meeting for Holders of H Shares. The non-public offering of A shares of the Company was also approved by the China Securities Regulatory Commission (“CSRC”) on April 12, 2010, with a validity period of six months starting from the approval date. Since the resolution related to the A Share Issue approved on the general meeting had been expired on August 23, 2010, at the extraordinary general meeting held on the same date, it was considered and approved that the validity period of relevant resolutions and authorisation in respect of the non-public offering of A shares of the Company be extended for one year to August 22, 2011. Due to the proposed adjustments in the issue price and use of proceeds, the Board of the Company resolved on January 30, 2011 a new issue plan and a new extraordinary general meeting, Class Meeting for Holders of A Shares and Class Meeting for Holders of H Shares, and upon approval by the shareholders, the Company will apply to CSRC for issue of not more than 1 billion A shares. ALUMINUM CORPORATION OF CHINA LIMITED 97 Significant Events (Continued) A New Round of Negotiation for Aurukun Project Since entering into a development agreement (“Development Agreement”) between the Company and the Queensland State Government of Australia (“Queensland State Government”) for the project of exploration and development of the Aurukun bauxite resources on March 23, 2007, there had been apparent adverse changes in the globe aluminum industry. Under the framework of the Development Agreement for exploration and development, the progress of the Aurukun Project had been hindered by various unfavorable factors. To resolve the issue, both the Company and the Queensland State Government entered into active negotiations and both parties agreed that the Development Agreement be automatically terminated after its expiration date (i.e. June 30, 2010). Upon the termination of the Development Agreement, the Group has entered into a new round of negotiations with the Queensland State Government in respect of the project of exploration and development of the Aurukun bauxite resources. Details of the project of exploration and development of the Aurukun bauxite resources are set out in Note 8 to the consolidated financial statements. 98 2010 ANNUAL REPORT Connected Transactions The connected transactions (as defined in the Hong Kong Listing Rules and the Listing Rules of the Shanghai Stock Exchange) undertaken by the Group during the year should comply with and be in line with relevant requirements as required by Hong Kong Listing Rules and the Listing Rules of Shanghai Stock Exchange. Continuing Connected Transactions Set out below are the annual caps for the continuing connected transactions and the actual transaction amounts incurred by the Group in 2010. For the year ended December 31, 2010, the continuing connected transactions of the Company were calculated on a aggregated basis as follows Aggregated Percentage of consideration turnover (For the year (For the year ended ended Transaction 2010) 2010) for the year 2010 (in RMB million) (in RMB million) December 31, December 31, Annual cap Transactions Expenditure: (A) Comprehensive Social and 264 0.22% 880 Logistics Services Agreement (Counterparty: Chinalco) (B) Mutual Supply Agreement 4,384 3.62% 4,450 (Counterparty: Chinalco) ALUMINUM CORPORATION OF CHINA LIMITED 99 Connected Transactions (Continued) Aggregated Percentage of consideration turnover (For the year (For the year ended ended Transaction 2010) 2010) for the year 2010 (in RMB million) (in RMB million) December 31, December 31, Annual cap (C) Provision of Aluminum and 2,473 2.04% 4,200 Aluminum Alloy Ingots and Aluminum Fabrication Services Agreement (Counterparty: Xinan Aluminum (Group) Company Limited (“Xinan Aluminum”)) (E) Sale and Purchase Agreement 66 0.05% 450 (Counterparty: Fujian Nanping Aluminum Company Limited (“Nanping Aluminum”(4))) (F) Provision of Alumina and 1,321 1.09% 1,500 Aluminum Products Agreement (Counterparty: Guangxi Investment Group Co., Ltd. (“Guangxi Investment”(3))) (I) Mineral Supply Agreement 12 0.01% 890 (Counterparty: Chinalco) 100 2010 ANNUAL REPORT Connected Transactions (Continued) Aggregated Percentage of consideration turnover (For the year (For the year ended ended Transaction 2010) 2010) for the year 2010 (in RMB million) (in RMB million) December 31, December 31, Annual cap (J) Provision of Engineering, 3,503 2.90% 13,500 Construction and Supervisory Services Agreement (Counterparty: Chinalco) (K) Land Use Rights Leasing 572 0.47% 1,100 Agreement (Counterparty: Chinalco) (L) Leases (Counterparty: Chinalco) (M) Framework Agreement for Aluminum Products Fabrication Services(5) (Counterparty: Chinalco) Revenue: 72 138 0.06% 0.11% 110 N/A (B) Mutual Supply Agreement 6,402 5.29% 9,500 (Counterparty: Chinalco) (C) Provision of Aluminum and 4,453 3.68% 8,000 Aluminum Alloy Ingots and Aluminum Fabrication Services Agreement (Counterparty: Xinan Aluminum) ALUMINUM CORPORATION OF CHINA LIMITED 101 Connected Transactions (Continued) Aggregated Percentage of consideration turnover (For the year (For the year ended ended Transaction 2010) 2010) for the year 2010 (in RMB million) (in RMB million) December 31, December 31, Annual cap (D) Long Term Agreement for 538 0.44% 1,500 Sale and Purchase of Alumina (Counterparty: Nanping Aluminum(4)) (F) Provision of Alumina and 1,156 0.96% 1,500 Aluminum Products Agreement (Counterparty: Guangxi Investment(3)) (G) Agreement for Sale and — — 500 Purchase of Aluminum Products (Counterparty: Guizhou Provincial Materials Development and Investment Corporation (“Guizhou Development”(3))) (H) Long Term Sale and Purchase 30 0.02% 500 Agreement for Alumina (Counterparty: Shanxi Guan Lv Company Limited) (“Guan Lv”) 102 2010 ANNUAL REPORT 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 the Company; (ii) the terms of the transactions are fair and reasonable as far as the Company’s shareholders are concerned; (iii) the transactions have been entered into on 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. Pursuant to Rule 14A.38 of the Hong Kong Listing Rules, the Board engaged the auditor of the Company to conduct a limited assurance engagement on the above continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Over Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The auditor has reported their conclusion to the Board stating that: a. nothing has come to the auditor’s attention that causes the auditor to believe that the disclosed continuing connected transactions have not been approved by the Company’s board of directors. b. for transactions involving the provision of goods or services by the Group, nothing has come to the auditor’s attention that causes the auditor to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Company. c. nothing has come to the auditor’s attention that causes the auditor to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions. d. with respect to the aggregate amount of each of the continuing connected transactions set out above, nothing has come to the auditor’s attention that causes the auditor to believe that such continuing connected transactions have exceeded the maximum aggregate annual value disclosed in the previous announcement dated December 30, 2009 made by the Company in respect of each of the disclosed continuing connected transactions. 3. Guangxi Investment and Guizhou Development, the promoters of the Company, are no longer connected persons of the Company upon amendments of the Hong Kong Listing Rules on June 3, 2010, whereby a promoter is no longer defined as a connected person of a listed issuer. The aggregated consideration for the year ended December 31, 2010 do not exclude transactions with Guangxi Investment and Guizhou Development from June 3, 2010 to December 31, 2010. 4. Nanping Aluminum is no longer a connected person of the Company upon dilution of its shareholding in the relevant subsidiary to below 10%. 5. For details of continuing connected transaction in respect of aluminum products fabrication services, please refer to section “Continuing Connected Transactions” set out in the “Connected Transactions” in this annual report. 6. Certain connected transactions in note 36 to the consolidated financial statements also constitute continuing connected transactions (as defined in Chapter 14A of the Hong Kong Listing Rules) pursuant to the Hong Kong Listing Rules. ALUMINUM CORPORATION OF CHINA LIMITED 103 Connected Transactions (Continued) Further information on the continuing connected transactions of the year 1. Continuing Connected Transactions (A) Comprehensive Social and Logistics Services Agreement Date: November 5, 2001 Parties: Chinalco as provider the Company as recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: (i) Social Welfare Services: public security and fire fighting services, education and training, schools, hospitals and hygiene, cultural and physical education, newspapers and magazines publication and broadcasting, printing and other services; and (ii) Logistics Services: property management, environmental and hygiene, greenery, nurseries and kindergartens, sanatoriums, canteens, guest-houses, offices, public transportation, retirement management and other services. 104 2010 ANNUAL REPORT Connected Transactions (Continued) Price determination: the services will be provided: (i) according to state-prescribed price; (ii) if there is no state- prescribed price but there is a state-guidance price, then according to the state-guidance price; and (iii) if there is neither a state-prescribed price nor a state-guidance price, then according to the market price; and (iv) if none of the above is applicable, then according to the contractual price. Payment term: monthly payment (B) Mutual Supply Agreement Date: November 5, 2001 Parties: Chinalco as both provider and recipient the Company as both provider and recipient Existing term: 3 years expiring on December 31, 2012 ALUMINUM CORPORATION OF CHINA LIMITED 105 Connected Transactions (Continued) Nature of Transaction: (A) Supplies and Ancillary Services Provided by Chinalco to the Company: (i) Production Supplies: carbon ring, carbon products, cement, coal, oxygen, bottled water, steam, fire brick, aluminum fluoride, cryolite, lubricant, resin, clinker, fabricated aluminum and other similar supplies; (ii) Transportation and Loading Services: vehicle transportation, loading services, railway transportation and other loading services; and (iii) Supporting Services and Ancillary Production Services: communications, repair, processing and fabrication, quality testing, project construction, environmental protection, road maintenance and other similar services (B) Supplies and Ancillary Services Provided by the Company to Chinalco: (i) Production Supplies: alumina, primary aluminum, scrap materials, pitch and other similar supplies (ii) Supporting Services and Ancillary Production Services: electricity supply, gas, heat and water, repair, measurement, quality testing, spare parts, production transportation, steam and other similar services Price determination: same as in the Comprehensive Social and Logistics Services Agreement Payment term: cash on delivery 106 2010 ANNUAL REPORT Connected Transactions (Continued) (C) Provision of Aluminum and Aluminum Alloy Ingots and Aluminum Fabrication Services Agreement Date: October 20, 2008 Parties: Xinan Aluminum as both provider and recipient the Company as both provider and recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: (i) sale of products by the Company and its branches and relevant subsidiaries to Xinan Aluminum; such products include, among other things, primary aluminum and aluminum alloy ingots (ii) purchase of products and services by Chalco Southwest Aluminum Co., Ltd. (“Chalco Southwest Aluminum”), a subsidiary of the Company, from Xinan Aluminum; such products and services include, among other things: aluminum alloy ingots, provision of equipment, water, electricity and gas; provision of maintenance and repair services; provision of unloading, transportation and storage services (iii) sale of products by Chalco Southwest Aluminum to Xinan Aluminum, such products include, among other things: aluminum alloy sheets or rolls, aluminum fabrication scraps (iv) purchase of products by CIT, a subsidiary of the Company, from Xinan Aluminum, such products mainly include aluminum fabrication products ALUMINUM CORPORATION OF CHINA LIMITED 107 Connected Transactions (Continued) Price determination: same as in the Comprehensive Social and Logistics Services Agreement Payment term: cash on delivery (D) Long Term Agreement for Sale and Purchase of Alumina Date: October 9, 2004 Parties: Nanping Aluminum as recipient* the Company as provider Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: purchase of alumina, primary aluminum and aluminum ingots Price determination: market price Payment term: cash on delivery * Nanping Aluminum is no longer a connected person of the Company upon dilution of its shareholding in the relevant subsidiary to below 10%. 108 2010 ANNUAL REPORT Connected Transactions (Continued) (E) Sale and Purchase Agreement Date: August 27, 2008 Parties: Nanping Aluminum as provider* the Company as recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: purchase of alumina plates and provision of fabrication services Price determination: market price Payment term: cash on delivery * Nanping Aluminum is no longer a connected person of the Company upon dilution of its shareholding in the relevant subsidiary to below 10%. ALUMINUM CORPORATION OF CHINA LIMITED 109 Connected Transactions (Continued) (F) Provision of Alumina and Aluminum Products Agreement Date: October 20, 2008 Parties: Guangxi Investment (for itself and/or on behalf of its associates and subsidiaries) as provider and recipient; the Company (for itself and/or on behalf of its relevant subsidiaries) as provider and recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: (i) sale of primary aluminum and alumina by the Company and its branches and relevant subsidiaries to Guangxi Investment and/or its associates or subsidiaries (ii) purchase of alumina by the Company from Guangxi Investment and/or its associates and subsidiaries Price determination: same as in the Comprehensive Social and Logistics Services Agreement Payment term: cash on delivery 110 2010 ANNUAL REPORT Connected Transactions (Continued) (G) Agreement for Sale and Purchase of Aluminum Products Date: August 27, 2008 Parties: Guizhou Development as recipient the Company as provider Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: sale of primary aluminum Price determination: market price Payment term: cash on delivery ALUMINUM CORPORATION OF CHINA LIMITED 111 Connected Transactions (Continued) (H) Long Term Sale and Purchase Agreement for Alumina Date: August 22, 2006 Parties: Guan Lv as recipient the Company as provider Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: alumina and aluminum alloy ingots Price determination: market price Payment term: cash on delivery 112 2010 ANNUAL REPORT Connected Transactions (Continued) (I) Mineral Supply Agreement Date: November 5, 2001 Parties: Chinalco as supplier the Company as recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: supply of bauxite and limestone; before meeting the Company’s bauxite and limestone requirements, Chinalco is not entitled to provide bauxite and limestone to any third parties Price determination: (1) for the supplies of bauxite and limestone from Chinalco’s own mining operations, at reasonable costs incurred in providing the same, plus not more than 5% of such reasonable costs (a buffer for surges in the price level and labour costs); (2) for the supplies of bauxite and limestone from jointly operated mines, at contractual price paid by Chinalco to such third parties Payment term: cash on delivery ALUMINUM CORPORATION OF CHINA LIMITED 113 Connected Transactions (Continued) (J) Provision of Engineering, Construction and Supervisory Services Agreement Date: November 5, 2001 Parties: Chinalco as provider the Company as recipient Existing term: 3 years expiring on December 31, 2012 Nature of Transaction: metallurgical engineering design, project construction and supervisory services Price determination: services are provided according to state guidance price, and if none, market price Payment term: 10 to 20% before service; a maximum of 70% during provision of service; and 10 to 20% upon successful provision of service. 114 2010 ANNUAL REPORT Connected Transactions (Continued) (K) Land Use Rights Leasing Agreement Date: November 5, 2001 Parties: Chinalco as landlord the Company as tenant Term: 50 years expiring on June 30, 2051 As previously disclosed in the letter from Taifook Capital Limited, the then independent financial adviser, to the Independent Board Committee and independent shareholders in relation to certain continuing connected transactions dated December 27, 2006 (“Taifook Letter”), it is in the interests of the Company and the independent shareholders to have a longer lease term of the land to minimize the disruption of the Group’s production and business operations arising from relocation which may be difficult and impracticable given (i) the size of the leased land and the facilities erected thereon; and (ii) the consideration resources to be expended in establishing new production plants and related facilities. The Directors are of the view that it is normal business practice for contracts of this type to be of such duration. Properties: 470 pieces or parcels of land covering an aggregate area of approximately 61.22 million square meters, which are located in the PRC Price determination: the rent shall be reviewed every three years at a rate not higher than prevailing market rent as confirmed by an independent valuer Payment term: monthly payment ALUMINUM CORPORATION OF CHINA LIMITED 115 Connected Transactions (Continued) (L) Leases Buildings Leasing Agreement Date: November 5, 2001 Parties: Chinalco as landlord and tenant the Company as landlord and tenant Term: 20 years expiring on June 30, 2020 As previously disclosed in the Taifook Letter, a longer lease term is essential to the smooth operations of the Group’s business. The Directors are of the view that it is normal business practice for contracts of this type to be of such duration. Properties: 59 buildings with an aggregate gross floor area of 62,189 square meters leased to Chinalco, and 100 buildings with an aggregate gross floor area of 273,637 square meters leased to the Company Price determination: the rent shall be reviewed every two years and shall not be higher than prevailing market rent as confirmed by an independent valuer 116 2010 ANNUAL REPORT Connected Transactions (Continued) Payment term: monthly payment Head Office Leasing Agreement Date: March 5, 2009 Parties: Chinalco as landlord the Company as tenant Term: 3 years expiring on October 15, 2011 Nature of Transaction: leasing of head office from Chinalco Price determination: the rent shall be reviewed every three years and shall not be higher than the prevailing market rent as determined by an independent valuer Payment term: prepay semi-annually ALUMINUM CORPORATION OF CHINA LIMITED 117 Connected Transactions (Continued) (M) Framework Agreement for Aluminum Products Fabrication Services Shandong Aluminum, a wholly-owned subsidiary of Chinalco, has been providing aluminum products fabrication services to the Shandong branch of the Company since the financial year 2009. In addition, Qinghai Aluminum Co., Ltd.*, a wholly-owned subsidiary of Chinalco, has been providing aluminum products fabrication services to Chalco Ruimin Company Limited, a subsidiary of the Company, since the financial year 2010. In 2009 and 2010, an aggregate of approximately RMB51 million and RMB138 million were paid by the relevant branch and subsidiary of the Company to the two relevant subsidiaries of Chinalco for the provision of aluminum products fabrication services respectively. To better regulate the aluminum products fabrication services to be provided by Chinaclo, the Company and Chinalco executed the Framework Agreement For Aluminum Products Fabrication Services on 28 February 2011. It is expected that the annual caps for the two years ended December 31, 2012 will be approximately RMB240 million and RMB240 million, respectively. For details of such continuing connected transaction, please refer to the Company’s announcement dated February 28, 2011. Connected Transaction Disposal of 5% Equity Interests in CICL The 5% equity interests in China Aluminum International Construction Limited (hereafter as “CICL”) held by China Aluminum International Trading Co., Ltd.* (中鋁國際貿易有限公司) (hereafter as “CIT”), a subsidiary of the Company, was listed on China Beijing Equity Exchange Group (hereafter as “CBEX”) on November 22, 2010 for open bidding by public bidders. Chinalco successfully bid the equity interests through CBEX on December 20, 2010 and entered into an agreement with CIT as vendor and with Chinalco as purchaser for the disposal of 5% equity interests in CICL to Chinalco for a consideration of RMB156,986,000. For details of such connected transaction, please refer to the Company’s announcement dated December 20, 2010. Joint Investment in Shanxi Jiexiu Xinyugou Coal Industry (Group) Corporation with Shanxi Aluminum Plant The Company and Shanxi Aluminum Plant, a subsidiary of Chinalco and a connected person of the Company, jointly invested in the establishment of Shanxi Jiexiu Xinyugou Coal Industry (Group) Corporation (hereafter as “Coal Industry (Group)”) together with Shanxi Jiexiu Luxin Coal Gasification Company Limited* (hereafter as “Luxin Company”). The Company and Shanxi Aluminum Plant invested approximately RMB537 million and RMB253 million in Coal Industry (Group) and hence hold approximately 34% and 16% equity interests, respectively, in Coal Industry (Group) while the remaining equity interests are held by capital contributors such as Luxin Company. As of December 31, 2010, the transaction was in progress. For details of such connected transaction, please refer to the Company’s announcement dated October 27, 2010. 118 2010 ANNUAL REPORT Independent Auditor’s Report PricewaterhouseCoopers 22nd Floor, Prince’s Building Central, Hong Kong To the shareholders of Aluminum Corporation of China Limited (incorporated in the People’s Republic of China with limited liability) 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 121 to 272, which comprise the consolidated and company statements of financial position as of December 31, 2010, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Consolidated Financial Statements The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. ALUMINUM CORPORATION OF CHINA LIMITED 119 Independent Auditor’s Report (Continued) Auditor’s Responsibility (Continued) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 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, 2010, and of the Group’s profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. Other Matters This report, including the opinion, has been prepared for and only for 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. PricewaterhouseCoopers Certified Public Accountants Hong Kong, February 28, 2011 120 2010 ANNUAL REPORT As of December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) STATEMENTS OF FINANCIAL POSITION Group Company December 31, December 31, December 31, December 31, Note 2010 2009 2010 2009 ASSETS Non-current assets Intangible assets Property, plant and equipment Non-current assets held for sale Land use rights and leasehold land Investments in subsidiaries Investments in jointly controlled entities Investments in associates Available-for-sale financial assets Deferred income tax assets Other non-current assets 7 8 8(a) 9 10 11(a) 11(b) 12 13 14 3,033,875 3,049,475 2,793,212 2,792,744 90,778,672 89,661,081 57,639,389 55,969,575 40,965 — 40,965 — 2,180,946 1,943,547 754,917 628,099 — — 13,450,264 12,926,415 990,568 1,212,608 685,459 197,070 44,878 56,313 1,410,781 1,647,240 304,199 401,127 805,855 60,000 7,000 940,422 197,622 734,530 30,000 7,000 1,199,094 248,156 99,997,492 97,641,312 76,689,646 74,535,613 ALUMINUM CORPORATION OF CHINA LIMITED 121 STATEMENTS OF FINANCIAL POSITION (Continued) As of December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) Group Company December 31, December 31, December 31, December 31, Note 2010 2009 2010 2009 Current assets Non-current assets held for sale Inventories Trade and notes receivable Other current assets Financial assets at fair value through profit or loss Restricted cash Time deposits Cash and cash equivalents 8(a) 15 16 17 18 18 18 621,705 — — — 21,780,047 20,423,227 11,244,601 10,586,033 3,269,973 3,203,082 2,590,032 2,924,286 6,139,969 4,848,744 5,771,661 4,086,323 17,208 462,935 50,000 64 365,409 91,941 — 57,121 — — 31,418 — 8,982,710 7,401,410 5,343,707 4,350,873 41,324,547 36,333,877 25,007,122 21,978,933 Total assets 141,322,039 133,975,189 101,696,768 96,514,546 122 2010 ANNUAL REPORT As of December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) STATEMENTS OF FINANCIAL POSITION (Continued) Group Company December 31, December 31, December 31, December 31, Note 2010 2009 2010 2009 EQUITY Equity attributable to equity holders of the Company Share capital Other reserves Retained earnings — proposed final dividend — others 19 20 34 20 13,524,488 13,524,488 13,524,488 13,524,488 19,553,623 19,083,252 20,766,550 20,616,530 154,179 — 154,179 — 18,348,502 17,792,998 17,423,738 17,206,139 Non-controlling interests 5,606,063 5,180,419 — — 51,580,792 50,400,738 51,868,955 51,347,157 Total equity 57,186,855 55,581,157 51,868,955 51,347,157 LIABILITIES Non-current liabilities Borrowings Deferred income tax liabilities Other non-current liabilities 21 13 22 27,723,867 37,804,482 17,776,480 26,531,501 — 677,770 34,535 525,154 — — 454,960 320,472 28,401,637 38,364,171 18,231,440 26,851,973 ALUMINUM CORPORATION OF CHINA LIMITED 123 STATEMENTS OF FINANCIAL POSITION (Continued) As of December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) Group Company December 31, December 31, December 31, December 31, Note 2010 2009 2010 2009 Current liabilities Financial liabilities at fair value through profit or loss 8,559 47,855 4,876 29,952 Borrowings Other payables and accrued expenses Trade and notes payable 21 23 24 41,719,869 25,819,757 24,919,636 11,231,966 7,533,069 7,927,988 4,249,757 4,482,268 6,376,342 6,172,443 2,422,104 2,571,230 Current income tax liabilities 95,708 61,818 — — 55,733,547 40,029,861 31,596,373 18,315,416 Total liabilities 84,135,184 78,394,032 49,827,813 45,167,389 Total equity and liabilities 141,322,039 133,975,189 101,696,768 96,514,546 Net current (liabilities)/assets 2.1.1 (14,409,000) (3,695,984) (6,589,251) 3,663,517 Total assets less current liabilities 85,588,492 93,945,328 70,100,395 78,199,130 The accompanying notes are an integral part of these financial statements. The financial statements on pages 121 to 272 were approved for issue by the Board of Directors on February 28, 2011 and were signed on its behalf. Xiong Weiping Director Luo Jianchuan Director 124 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Revenue Cost of sales Gross profit Selling and distribution expenses General and administrative expenses Research and development expenses Impairment charge/write-off of property, plant and equipment Other income Other gains, net Operating profit/(loss) Finance income Finance costs Share of profit/(loss) of jointly controlled entities Share of profit of associates For the year ended December 31, Note 2010 2009 6 120,994,847 70,268,005 (113,349,941) (69,079,446) 7,644,906 1,188,559 (1,573,301) (2,623,740) (164,235) (1,264,920) (2,956,506) (177,756) (701,781) 328,853 491,024 (623,791) 151,142 403,836 3,401,726 (3,279,436) 91,109 125,139 (2,586,293) (2,262,964) 233,784 240,028 (50,392) 77,056 26 27 8 28(a) 28(b) 29 29 11(a) 11(b) Profit/(loss) before income tax 1,380,354 (5,390,597) Income tax (expense)/benefit 32 (411,216) 711,003 Profit/(loss) for the year 969,138 (4,679,594) Other comprehensive income, net of tax: Reclassification of cumulated fair value changes on available-for-sale financial assets upon disposal Fair value changes on available-for-sale financial assets Currency translation differences (1,155) — 40,833 — (1,374) 115,427 ALUMINUM CORPORATION OF CHINA LIMITED 125 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) For the year ended December 31, Note 2010 2009 Total other comprehensive income for the year, net of tax 39,678 114,053 Total comprehensive income/(loss) for the year 1,008,816 (4,565,541) Profit/(loss) for the year attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income/(loss) for the year attributable to: Equity holders of the Company Non-controlling interests 778,008 191,130 (4,642,894) (36,700) 969,138 (4,679,594) 818,127 190,689 (4,528,309) (37,232) 1,008,816 (4,565,541) Basic and diluted earnings/(losses) per share for profit/(loss) attributable to the equity holders of the Company during the year (expressed in RMB per share) 33 0.06 (0.34) The accompanying notes are an integral part of these financial statements. For the year ended December 31, 2010 2009 154,179 — Note 34 Dividends 126 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY Non- controlling interests Total equity Attributable to equity holders of the Company Capital reserves (Note 20) Other Statutory Currency Investment Share Share capital surplus Special translation revaluation Retained capital premium reserves reserve reserve differences reserve earnings Total (Note 19) (Note 20) (Note 20) Balance as of January 1, 2009 13,524,488 12,929,215 428,833 5,799,232 34,227 (170,353) 1,556 22,435,892 54,983,090 5,198,340 60,181,430 Comprehensive income/(loss) Loss for the year — — — — — — — (4,642,894) (4,642,894) (36,700) (4,679,594) Other comprehensive income/(loss): Fair value changes on available-for-sale financial assets - gross Fair value changes on available-for-sale financial assets - tax effect Currency translation differences Total other comprehensive income/(loss) Total comprehensive income/(loss) Transactions with owners: Release of deferred government grants Acquisition of and capital injection from non-controlling interests Acquisition of subsidiaries under common control (Note 5) Increase in reserve Share of reserve of an associate Dividends paid to non-controlling interests Total transactions with owners — — — — — — — — — — — — — — — — — — — — — — — 3,767 (42,575) (37,755) — — — — — — — — (80,330) 3,767 — — — — — — — — — — — — — — — — — — — — 18,111 4,409 — 22,520 — — 115,427 (992) 150 — 115,427 (842) — — — — (992) (626) (1,618) 150 115,427 94 — 244 115,427 114,585 (532) 114,053 115,427 (842) (4,642,894) (4,528,309) (37,232) (4,565,541) — — — — — — — — — — — — — — — — — — — — — 3,767 2,274 6,041 (42,575) 55,648 13,073 (37,755) 18,111 4,409 — — 10,796 (37,755) 18,111 15,205 — (49,407) (49,407) (54,043) 19,311 (34,732) Balance as of December 31, 2009 13,524,488 12,848,885 432,600 5,799,232 56,747 (54,926) 714 17,792,998 50,400,738 5,180,419 55,581,157 ALUMINUM CORPORATION OF CHINA LIMITED 127 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) Attributable to equity holders of the Company Capital reserves (Note 20) Other capital Share premium reserves Statutory surplus reserve Currency Investment Special translation revaluation Retained reserve differences reserve earnings Total (Note 20) (Note 20) Share capital (Note 19) Non- controlling interests Total equity Balance as of January 1, 2010 13,524,488 12,848,885 432,600 5,799,232 56,747 (54,926) 714 17,792,998 50,400,738 5,180,419 55,581,157 Comprehensive income/(loss) Profit for the year Other comprehensive income/(loss): Reclassification of cumulated fair value changes on available-for-sale financial assets upon disposal - gross Reclassification of cumulated fair value changes on available-for-sale financial assets upon disposal - tax effect Currency translation differences Total other comprehensive income/(loss) Total comprehensive income/(loss) Transactions with owners: Release of deferred government grants Acquisition of non-controlling interests Capital injection from non-controlling interests Partial disposal of interest in a subsidiary (Notes 10 (iv)) Increase in reserve Share of reserve of an associate Appropriation of statutory surplus reserve Dividend paid to non-controlling interests Total transactions with owners — — — — — — — 778,008 778,008 191,130 969,138 — — — — — — — — — — — — — — — — — — — — (1,366) — — — — — — — — — — — 88,769 — — 258,335 — 357 — — — — — — — — — — — — — 68,325 — — — — — — — — — (806) 17,431 (793) — — (1,366) 347,461 68,325 15,832 — — 40,833 (851) 137 — 40,833 (714) — — — — (851) (519) (1,370) 137 40,833 78 — 215 40,833 40,119 (441) 39,678 40,833 (714) 778,008 818,127 190,689 1,008,816 — — — — — — — — — — — — — — — — — — — — — — — — (68,325) — 88,769 (1,366) 4,259 1,366 93,028 — — 203,100 203,100 257,529 17,431 (436) — — 112,202 — (2,704) — 369,731 17,431 (3,140) — (83,268) (83,268) (68,325) 361,927 234,955 596,882 Balance as of December 31, 2010 13,524,488 12,847,519 780,061 5,867,557 72,579 (14,093) — 18,502,681 51,580,792 5,606,063 57,186,855 The accompanying notes are an integral part of these financial statements. 128 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) CONSOLIDATED CASH FLOW STATEMENT For the year ended December 31, Note 2010 2009 Net cash generated from/(used in) operating activities 35 7,103,859 (705,954) Cash flows used in investing activities Purchases of intangible assets 7 (7,099) (14,618) Purchases of property, plant and equipment Purchases of land use rights and leasehold land Proceeds from disposal of property, plant and equipment Proceeds from partial disposal of a subsidiary Deemed disposal - transformation from a subsidiary to an associate Capital injection to associates Capital injection to a jointly controlled entity Payments of consideration for acquisitions of subsidiaries, net of cash acquired Proceeds from disposal of available-for-sale financial assets Interest received Decrease in time deposits Cash inflow from settlement of futures and option contracts, net Deposit for investment projects Refund of deposit for an investment project Asset-related government grants received Others (8,325,947) (9,597,274) (2,937) (260,670) 233,007 510,783 (23,601) (748,650) (71,325) 38,503 — — — (34,001) — (99,354) 158,635 4,879 47,278 203,237 (849,809) 269,575 385,299 (43,642) — 4,785 — 458,041 — — — 27,395 11(b) 11(b) 11(a) 12 28 17 17 Net cash used in investing activities (8,260,317) (9,477,193) ALUMINUM CORPORATION OF CHINA LIMITED 129 CONSOLIDATED CASH FLOW STATEMENT (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) For the year ended December 31, Note 2010 2009 Cash flows generated from financing activities Installment payment of shares and bonds issuance expenses Issuance of short-term and long-term bonds Repayments of short-term bonds (30,000) (62,000) 12,694,000 — — (5,000,000) Drawdown of short-term and long-term loans 34,141,516 38,057,460 Repayments of shareholder’s loans, net — (456,270) Repayments of short-term and long-term loans (41,195,138) (27,644,308) Capital injection from non-controlling interests Dividends paid to non-controlling interests Interest paid 203,100 (109,974) 13,073 (59,460) (2,985,951) (3,271,782) Net cash generated from financing activities 2,717,553 1,576,713 Net increase/(decrease) in cash and cash equivalents 1,561,095 (8,606,434) Cash and cash equivalents at beginning of year Exchange gains on cash and cash equivalents Cash and cash equivalents at end of year 18 18 7,401,410 15,983,923 20,205 23,921 8,982,710 7,401,410 The accompanying notes are an integral part of these financial statements. 130 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 manufacture and distribution of alumina, primary aluminum and aluminum fabrication products. The Group is also engaged in the development of bauxite related resources, the production, fabrication and distribution of bauxite, carbon and relevant non-ferrous metal products and trading of non-ferrous metal products. The Company is a joint stock company which was 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’s shares have been listed 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 (“SSE”) in 2007. These financial statements are presented in Chinese Renminbi (“RMB”) unless otherwise stated. 2. Summary of significant accounting policies The principal accounting policies applied 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. 2.1 Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”). In addition, these financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Companies Ordinance. 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) and certain properties, plant and equipment, intangible assets and investments in subsidiaries were stated at deemed costs. ALUMINUM CORPORATION OF CHINA LIMITED 131 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) The preparation of financial statements in conformity with IFRS 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. 2.1.1 Going concern As of December 31, 2010, the Group’s current liabilities exceeded its current assets by approximately RMB14,409 million (2009: RMB3,696 million). The Board of Directors of the Company has considered the Group’s available sources of funds as follows: • • The Group’s expected net cash inflow from operating activities in 2011; Unutilized banking facilities of approximately RMB50,007 million as of December 31, 2010 (Note 3), of which approximately RMB32,692 million are subject to renewal during the next 12 months from the date the Group’s financial statements were approved; and • Other available sources of financing from banks and other financial institutions given the Group’s credit history. In addition, the Group will continue to optimize its fund raising strategy from short, medium and long-term perspectives and to seize the opportunity in the capital markets to take advantage of low interest rates by issuing medium to long-term debts with low financing cost. After making enquiries, the Board of Directors of the Company believe that the Group and the Company has adequate resources to continue in operational existence for the foreseeable future not less than 12 months from the date these financial statements were approved. The Board of Directors of the Company therefore continue to adopt the going concern basis in preparing these financial statements. 132 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (a) New and amended standards adopted by the Group The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2010. • IFRS 3 (revised), ‘Business combinations’, and consequential amendments to IAS 27 (revised), ‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’, and IAS 31, ‘Interests in joint ventures’, are effective 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 July 1, 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. 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 are expensed. IFRS 3 (revised) has had no impact to the Group’s financial statements as there was no business combination that occurred in the year ended December 31, 2010. ALUMINUM CORPORATION OF CHINA LIMITED 133 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (a) New and amended standards adopted by the Group (Continued) IAS 27 (revised) 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. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognized in profit or loss. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. The Group adopted IAS 27 (revised) from January 1, 2010. The adoption of IAS 27 (revised) resulted in recognition of deficit balance of non-controlling interest amounting to RMB62 million for the year ended December 31, 2010. 134 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (a) New and amended standards adopted by the Group (Continued) • IAS 17 (amendment), ‘Leases’, deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of IAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, lease of land which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Land use rights and leasehold land”, and amortized over the lease term. IAS 17 (amendment) has been applied retrospectively for annual periods beginning January 1, 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired leasehold land and land use rights as of January 1, 2010 on the basis of information existing at the inception of those leases, and recognized the leasehold lands in Hong Kong as finance lease retrospectively. All of the land use rights are amortized or depreciated over time using straight-line method. Except for the inclusion of certain additional disclosure in relation to leasehold lands located in Hong Kong according to the relevant disclosure requirements for financial leases, the adoption of this amendment did not have a significant impact to the Group’s financial statements. ALUMINUM CORPORATION OF CHINA LIMITED 135 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (a) New and amended standards adopted by the Group (Continued) • IAS 36 (amendment), ‘Impairment of assets’, effective January 1, 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, ‘Operating segments’ (that is, before the aggregation of segments with similar economic characteristics). IAS 36 (amendment) has had no impact on the consolidated financial statement of the Group as the cash-generating units and groups of units of the Group to which goodwill was allocated for the purposes of impairment testing are not larger than operating segments. • IFRS 5 (amendment), ‘Non-current assets held for sale and discontinued operations’. The amendment clarificaties that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The adoption of IFRS 5 (amendment) did not result any impact to the Group as the Group’s existing policy comply with the requirements under IFRS 5 (amendment). 136 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (b) New and amended standards, and interpretations mandatory for the first time for the financial year beginning January 1, 2010 but not currently relevant to the Group. IAS1 (amendment) Presentation of financial statements IFRS 2 (amendment) Group cash-settled share-based payment transactions IFRIC 9 Reassessment of embedded derivatives and IAS 39, IFRIC 16 IFRIC 17 IFRIC 18 Financial instruments: Recognition and measurement Hedges of a net investment in a foreign operation Distribution of non-cash assets to owners Transfers of assets from customers (c) New standards, amendments and interpretations have been issued but are not effective for the financial year beginning January 1, 2010 and have not been early adopted. • IFRS 9, ‘Financial instruments’, issued in November 2009 and October 2010 (effective for financial year beginning January 1, 2013). It contains new measurement and classification rules for financial assets. On the basis of financial assets and liabilities it has as of December 31, 2010, it is likely that the adoption will effect the Group’s accounting for its financial assets. The Group will adopt IFRS 9 from January 1, 2013. ALUMINUM CORPORATION OF CHINA LIMITED 137 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (c) New standards, amendments and interpretations have been issued but are not effective for the financial year beginning January 1, 2010 and have not been early adopted. (Continued) • IFRIC - Int 19, ‘Extinguishing financial liabilities with equity instruments’, (effective for financial year beginning July 1, 2010). The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognized in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The Group will adopt the interpretation from January 1, 2011. 138 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) 2.1.2 Changes in accounting policy and disclosures (Continued) (c) New standards, amendments and interpretations have been issued but are not effective for the financial year beginning January 1, 2010 and have not been early adopted. (Continued) • Amendments to IFRS 7, ‘Financial instruments: disclosures’. The amendments were as a result of the May 2010 Improvements (effective for financial year beginning January 1, 2011) and amendments on disclosure requirements of transfers of financial assets released in October 2010 (effective for financial year beginning July 1, 2011), respectively. The May 2010 Improvements clarified certain quantitative disclosures and removed the disclosure requirements on financial assets with renegotiated terms. The amendments on transfers of financial assets clarified and strengthened the disclosure requirements of transfers of financial assets which help users of financial statements evaluating related risk exposures and the effect of those risks on the financial position of the Group. The Group will adopt the amendments to IFRS 7 from January 1, 2011 and January 1, 2012, respectively. The Group has already commenced an assessment of the related impact of the above revised standards, amendments and interpretations to the Group’s financial statements. The Group is not yet in a position to state whether any substantial changes to the Group’s accounting policies and presentation of its financial statements will result. ALUMINUM CORPORATION OF CHINA LIMITED 139 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.2 Consolidation The consolidated financial statements include the financial statements of the Company and all of its subsidiaries as of December 31. (a) Merger accounting for business combinations under common control 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 book values from the controlling parties’ perspective. No amount is recognized in consideration for goodwill or excess of the acquirers’ interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of the common control combination, to the extent of the continuation of the controlling party’s interest. The difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the acquiree is recorded in equity. The consolidated statement of comprehensive income includes the results of each 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, where this is shorter, regardless of the date of the common control combination. Transaction costs, including professional fees, registration fees, costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses etc., incurred in relation to the common control combination that is to be accounted for by using merger accounting is recognized as an expense in the period in which it is incurred. 140 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.2 Consolidation (Continued) (b) Acquisition method of accounting for other business combinations The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group, other than business combination under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any 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. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of comprehensive income. (c) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. ALUMINUM CORPORATION OF CHINA LIMITED 141 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.2 Consolidation (Continued) (c) Subsidiaries (Continued) Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary in the consolidated financial statements to ensure consistency with the policies adopted by the Group. In the Company’s statement of financial position, as permitted under IFRS 1, the investments in subsidiaries acquired prior to January 1, 2008, being the date of transition to IFRS, are stated at deemed cost as required under the previously adopted accounting standards. Subsidiaries acquired after that date are stated at cost less provision for impairment losses (Note 2.9). The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable. (d) Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit and loss. 142 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.2 Consolidation (Continued) (d) Transactions with non-controlling interests (Continued) If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit and loss where appropriate. (e) Jointly controlled entities and associates A jointly controlled entity is the result of contractual arrangements whereby the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity. Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in jointly controlled entities/associates acquired are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s share of its jointly controlled entities’/associates’ post-acquisition profits or losses is recognized in the statement of comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a jointly controlled entity/associate equals or exceeds its interest in the jointly controlled entity/associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the jointly controlled entity/associate. ALUMINUM CORPORATION OF CHINA LIMITED 143 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.2 Consolidation (Continued) (e) Jointly controlled entities and associates (Continued) Unrealized gains on transactions between the Group and its jointly controlled entities/ associates are eliminated to the extent of the Group’s interest in the jointly controlled entities/associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of jointly controlled entities/associates have been changed where necessary to ensure consistency with the policies adopted by the Group. In the Company’s statement of financial position, the investments in jointly controlled entities/associates are stated at cost less provision for impairment losses, if any. The results of jointly controlled entities/associates are accounted for by the Company on the basis of dividends received and receivable. 2.3 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee that makes strategic decisions. 144 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.4 Foreign currency translation (a) 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 RMB, which is the Company’s functional and the Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within ‘finance costs, net’. All other foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains, net’. ALUMINUM CORPORATION OF CHINA LIMITED 145 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.4 Foreign currency translation (Continued) (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the balance sheet date; (ii) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange differences are recognized in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are recognized in the statement of comprehensive income as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 146 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.5 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, 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 any replaced parts is derecognized. All other repairs and maintenance are charged in the statement of comprehensive income during the financial period in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs over their estimated useful lives down to their residual values, as follows: Buildings Machinery Transportation facilities Office and other equipment 10–45 years 10–30 years 10 years 4-5 years The assets’ depreciation method, residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9). ALUMINUM CORPORATION OF CHINA LIMITED 147 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.5 Property, plant and equipment (Continued) Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset and are recognized within ‘other gains, net’ in the statement of comprehensive income. Changes in accounting estimate In July 2010, the Group has reassessed and adjusted the useful lives of certain property, plant and equipment based on the past experience. A summary of the changes in the estimated useful lives of different asset groups is as follows: Buildings Machinery Effect of useful lives Increased 2–8 years — device tools, electricity distribution line and gas Decreased 2–4 years — others Office and other equipment Increased 0–2 years Increased 0–2 years The effect of this change in accounting estimate was recognized prospectively from July 1, 2010 onward. As a result of this change, depreciation expense for the year ended December 31, 2010 and the net carrying value of property, plant and equipment as of December 31, 2010 are lowered and higher by approximately RMB384 million and RMB384 million, respectively. Annual depreciation expense is expected to be lowered by approximately RMB838 million in next year. 148 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.6 Construction-in-progress (“CIP”) CIP represents buildings under construction, and plant and equipment pending installation, and is stated at cost less accumulated impairment losses. 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 are ready for their intended use that are eligible for capitalization. CIP is transferred to property, plant and equipment when the CIP are ready for its intended use. 2.7 Intangible assets (a) Goodwill Goodwill represents the excess of purchase consideration over the fair value of the Group’s share of the net identifiable assets of subsidiaries/jointly controlled entities/ associates acquired at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of jointly controlled entities and associates is included in investments in jointly controlled entities and associates respectively. Goodwill is tested for impairment annually or when an indication of impairment exists and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purposes of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. ALUMINUM CORPORATION OF CHINA LIMITED 149 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.7 Intangible assets (Continued) (b) Mining rights Mining rights are initially recorded at cost which includes payments of consideration for extraction rights, exploration and other direct costs. Amortization is provided on a straight-line basis according to the shorter of the expiration date of the mining certificate or the mineable period of natural resources. Estimated useful lives of the majority of the mining rights range from 3 to 20 years; others’ are not more than 30 years. (c) 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 5 years, their estimated useful lives. (d) 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 year and adjusted when necessary. 150 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.8 Research and development Research and development expenditures are classified as research expenditures and development expenditures according to the nature of the 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 intends and has the ability to use or sell 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. 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 periods will be not recognized as assets in subsequent periods. Capitalized development expenditures are included in property, plant and equipment and intangible assets as appropriate according to their natures. ALUMINUM CORPORATION OF CHINA LIMITED 151 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.9 Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash- generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. 2.10 Financial assets (a) Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the assets were acquired. Management determines the classification of these assets at initial recognition. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. 152 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.10 Financial assets (Continued) (a) Classification (Continued) (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as trade and other receivables in the statement of financial position (Note 2.12). (iii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. (b) Recognition and measurement Regular way purchases and sales of financial assets are recognized on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method. ALUMINUM CORPORATION OF CHINA LIMITED 153 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.10 Financial assets (Continued) (b) Recognition and measurement (Continued) Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of comprehensive income within ‘other gains, net’, in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established. Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognized in profit or loss; translation differences on non-monetary securities are recognized in other comprehensive income. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income are included in the statement of comprehensive income as ‘other gains, net’. Interest on available-for-sale securities calculated using the effective interest method is recognized in the statement of comprehensive income as part of other income. Dividends on available-for-sale equity instruments are recognized in the statement of comprehensive income as ‘other income’ when the Group’s right to receive payments is established. 154 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.10 Financial assets (Continued) (b) Recognition and measurement (Continued) The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets are impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss is removed from other comprehensive income and recognized in the statement of comprehensive income. Impairment losses recognized in the statement of comprehensive income on equity instruments are not reversed through the statement of comprehensive income. Impairment testing of trade receivables is described in Note 2.12. 2.11 Inventories Inventories comprise raw materials, work-in-progress, finished goods, spare parts and packaging materials are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Work-in-progress and finished goods, comprise materials, direct labor and an appropriate proportion of all production overhead expenditure (based on normal operating capacity). Borrowing costs are excluded. Provision for impairment of inventory is usually determined by the excess of cost over net realizable value and recorded in the statement of comprehensive income. 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. Provision for or reversal of impairment of inventory are recognized within ‘cost of sales’ in the statement of comprehensive income. ALUMINUM CORPORATION OF CHINA LIMITED 155 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.12 Trade and notes receivable and other receivables Trade and notes receivable and other receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of these receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non- current assets. Trade and notes receivable and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. 2.13 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments (including time deposits) with original maturities of three months or less. Bank overdrafts, if any, are shown within borrowings in current liabilities on the statement of financial position. Time deposits and other cash investments with original maturities of more than three months are excluded from cash and cash equivalents. 2.14 Borrowings 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 statement of comprehensive income over the terms of the borrowings using the effective interest method. 156 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.14 Borrowings (Continued) Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates. 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. 2.15 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 the government grant is in the form of monetary assets, they are measured at the actual amount received. When the grant is provided based on a pre-determined rate, it is measured at the amount receivable. Asset-related government grants are recognized as deferred income and are amortized evenly in the statement of comprehensive income over the useful lives of the related assets. Income-related government grants that are used to compensate subsequent related expenses or losses of the Group are recognized as deferred income and recorded in the statement of comprehensive income 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. 2.16 Trade and notes payable and other payables Trade and notes payables and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. ALUMINUM CORPORATION OF CHINA LIMITED 157 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.17 Employee benefits Employee benefits mainly include salaries, bonuses, allowances and subsidies, retirement benefit obligations, 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 the services and allocates the related cost of assets and expenses based on different beneficiaries. (a) 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. (b) Retirement benefit obligations The Group primarily pays contributions on a monthly basis to various defined contribution retirement benefit plans organized by relevant municipal and provincial governments in the PRC. The Group makes monthly defined contributions at rates of 20% (2009: 20%) of the qualified employees’ basic salaries. 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. 158 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.17 Employee benefits (Continued) (c) Other social insurance and housing funds The Group provides other social insurance and housing funds to the qualified employees in the PRC based on certain percentages of their salaries. These percentages are not to exceed the upper limits of the percentages prescribed by Ministry of Human Resources and Social Security of the PRC. These benefits are paid to social security organization and the amounts 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. (d) Termination benefits and early retirement benefits Termination and early retirement benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy and/or early retirement in exchange for these benefits. The Group recognizes termination and early retirement benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy and/or early retirement. The specific terms vary among the terminated and early retired employees depending on various factors including position, length of service and district of the employee concerned. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value. ALUMINUM CORPORATION OF CHINA LIMITED 159 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.18 Current and deferred income tax The income tax expense for the period comprises current and deferred income tax. 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 statement of comprehensive income except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. 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 is recognized using the liability method on temporary differences arising between tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The Group recognizes deferred income tax assets for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. 160 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.18 Current and deferred income tax (Continued) Deferred income tax assets and liabilities arising from temporary differences 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. Deferred income tax assets and liabilities are offset in financial statements when they meet 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 authority; (ii) the Group has a legally enforceable right to settle current income tax assets and current income tax liabilities on a net basis. 2.19 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). ALUMINUM CORPORATION OF CHINA LIMITED 161 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.19 Revenue recognition (Continued) (a) Sales of goods Revenue from the sales of goods is recognized when the Group transfers significant risks and rewards of ownership of the goods to the buyers, the Group has retained neither continuing managerial involvement nor control over the goods, it is probable that the economic benefits related to the transaction will flow into the Group, and the revenue and related costs incurred can be measured reliably. (b) Rendering of services The Group provides transportation and packaging services to external customers. These services are recognized in the period when the related services are provided. (c) Interest income Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognized using the original effective interest rate. (d) Dividend income Dividend income is recognized when the right to receive payment is established. 162 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of significant accounting policies (Continued) 2.20 Leases 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 statement of comprehensive income on a straight-line basis over the period of the lease. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term. 2.21 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. ALUMINUM CORPORATION OF CHINA LIMITED 163 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 2. Summary of significant accounting policies (Continued) 2.22 Dividend distribution Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s and Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. 2.23 Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognized when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. 164 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management 3.1 Financial risk management The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, cash flow and fair value 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 of the Company. Group Treasury identifies, evaluates and hedges financial risks through close co-operation with the Group’s operating units. (a) Market risk (i) Foreign currency risk Foreign currency risk primarily arises from certain significant foreign currency deposits and 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 18 and 21, 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 issuing loans. As the foreign currency denominated assets and liabilities are minimal relative to the total assets and liabilities of the Group, the directors of the Company are of the opinion that the Group is not exposed to any significant foreign currency risk as of December 31, 2010 and 2009. ALUMINUM CORPORATION OF CHINA LIMITED 165 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (a) Market risk (Continued) (ii) Cash flow and fair value interest rate risk As the Group has no significant interest bearing assets except for bank deposits (Note 18), 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 savings and fixed deposit accounts in the PRC. The interest rates are regulated by the People’s Bank of China and 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 of the Company are of the opinion that the Group is not exposed to any significant interest rate risk for its financial assets held as of December 31, 2010 and 2009. 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 21. The Group enters into debt obligations to support general corporate purposes including capital expenditures and working capital needs. The Group Treasury closely monitors 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. As of December 31, 2010, if interest rates had been 1% (2009: 1%) higher/ lower with all other variables held constant, profit for the year would have been RMB361 million lower/higher (2009: Loss for the year: RMB509 million higher/lower), respectively. 166 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (a) Market risk (Continued) (ii) Cash flow and fair value interest rate risk (Continued) The fair value interest rate risk of the Group mainly arises from long-term bonds, medium-term notes and short-term bonds issued at fixed rates. As the fluctuation of comparable interest rates of corporate bonds with similar terms is relatively low, the directors of the Company are of the opinion that the Group is not exposed to any significant fair value interest rate risk for its fix interest rate borrowings held as of December 31, 2010 and 2009. (iii) Commodity price risk The Group uses futures and option contracts to reduce its exposure to fluctuations in the price of primary aluminum. According to the Group’s policy, the total quantity of primary aluminum which can be hedged using these financial instruments is limited to 50% of the annual quantity produced by the Group. The Group uses mainly futures contracts and option contracts traded on the Shanghai Futures Exchange and London Metal Exchange (the “LME”) to hedge against fluctuations in primary aluminum prices. As of December 31, 2010, the fair value of outstanding future contracts amounting to RMB0.5 million and RMB8.6 million are recognized in financial assets and liabilities at fair value through profit or loss, respectively. As of December 31, 2010, the Group did not hold any option contract. ALUMINUM CORPORATION OF CHINA LIMITED 167 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (a) Market risk (Continued) (iii) Commodity price risk (Continued) A summary of future contacts held as of December 31, 2010 is as follows: As of December 31, 2010 Contract Market Contract Quantity value value maturity (expressed in tones) Primary aluminum: — Short position 34,305 562,569 571,118 January to November 2011 — Long position 1,000 16,557 16,790 March 2011 Copper: — Short position 675 47,829 47,547 January 2011 168 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (a) Market risk (Continued) (iii) Commodity price risk (Continued) As of December 31, 2009 Contract Market Contract Quantity value value maturity (expressed in tones) Primary aluminum: — Short position 60,135 971,242 1,034,003 January to October 2010 — Long position 7,015 102,687 117,574 January to February 2010 Zincum: — Short position 10,580 224,591 224,508 April 2010 As of December 31, 2010, if the primary aluminum futures price had been increased/decreased by 3% (2009: 3%) and all other variables held constant, profit for the year would have been decreased/increased by RMB202 million (2009: Loss for the year decreased/increased by RMB140 million). ALUMINUM CORPORATION OF CHINA LIMITED 169 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (b) Credit risk 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 16, 17, 18 and 21 represent the Group’s maximum exposure to credit risk in relation to its financial assets and guarantees. The Group maintains substantially all of its bank balances and cash in several major state-owned banks in the PRC. With strong state support provided to these state- owned banks, the directors of the Company are of the opinion that there is no significant credit risk on such assets being exposed to losses. With regard to trade and notes 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 impairment of receivables 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, 2010 and 2009, none of the individual customers exceed 10% of the Group’s total revenue, and thus, the directors of the Company are of the opinion that the Group is not exposed to any significant concentration of credit risk as of December 31, 2010 and 2009. 170 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (c) Liquidity risk Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group Treasury. Group Treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable, external regulatory or legal requirements, for example, currency restrictions. As of December 31, 2010, the Group had total banking facilities of approximately RMB96,706 million (2009: RMB88,664 million) of which amounts totaling RMB46,699 million have been utilized as of December 31, 2010 (2009: RMB49,897 million). Banking facilities of approximately RMB68,463 million will be subject to renewals in 2011. 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, 2010, the Group had credit facilities through its primary aluminum futures agent at the LME amounting to USD107 million (equivalent to RMB708.63 million) (2009: USD117 million (equivalent to RMB798.90 million)) of which USD15 million (equivalent to RMB99.12 million) (2009: USD0.06 million (equivalent to RMB0.38 million)) 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. ALUMINUM CORPORATION OF CHINA LIMITED 171 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (c) Liquidity risk (Continued) The table below analyzes the Group’s and the Company’s non-derivative 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 balance sheet dates to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows. Within 1 year 1-2 years 2-5 years Over 5 years Total Group As of December 31, 2010 Long-term bank and other loans 5,264,528 3,624,508 11,457,145 3,726,011 24,072,192 Long-term bonds Medium-term notes Short-term bonds Short-term bank loans — 5,000,000 10,700,000 20,589,680 — — — — — 2,000,000 2,000,000 7,000,000 — — — — — 12,000,000 10,700,000 20,589,680 Interest payables for borrowings 2,599,084 1,322,756 2,157,311 372,181 6,451,332 Financial liabilities at fair value through profit or loss 8,559 Other payables and accrued expenses (Note) Trade and notes payable 6,897,074 6,376,342 — — — — — — — — — 8,559 6,897,074 6,376,342 57,435,267 4,947,264 20,614,456 6,098,192 89,095,179 172 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (c) Liquidity risk (Continued) Within 1 year 1-2 years 2-5 years Over 5 years Total Group As of December 31, 2009 Long-term bank and other loans 2,826,472 5,909,537 13,916,224 6,073,488 28,725,721 Long-term bonds Medium-term notes — — 5,000,000 5,000,000 — — 2,000,000 2,000,000 Short-term bank loans 22,993,285 — — — — 10,000,000 22,993,285 Interest payables for borrowings 3,264,567 1,652,829 2,665,592 621,619 8,204,607 Financial liabilities at fair value through profit or loss 47,855 Other payables and accrued expenses (Note) Trade and notes payable 7,609,285 6,172,443 — — — — — — — — — 47,855 7,609,285 6,172,443 42,913,907 12,562,366 21,581,816 8,695,107 85,753,196 ALUMINUM CORPORATION OF CHINA LIMITED 173 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (c) Liquidity risk (Continued) Company Within 1 year 1-2 years 2-5 years Over 5 years Total As of December 31, 2010 Long-term bank and other loans 2,753,975 746,475 6,789,226 1,324,576 11,614,252 Long-term bonds Medium-term notes Short-term bonds Short-term bank loans — 5,000,000 10,000,000 7,000,000 — — — — — 2,000,000 2,000,000 7,000,000 — — — — — 12,000,000 10,000,000 7,000,000 Interest payables for borrowings 1,642,055 864,362 1,430,931 252,697 4,190,045 Financial liabilities at fair value through profit or loss 4,876 Other payables and accrued expenses (Note) Trade and notes payable 3,853,719 2,422,104 — — — — — — — — — 4,876 3,853,719 2,422,104 32,676,729 1,610,837 15,220,157 3,577,273 53,084,996 174 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.1 Financial risk management (Continued) (c) Liquidity risk (Continued) Company Within 1 year 1-2 years 2-5 years Over 5 years Total As of December 31, 2009 Long-term bank and other loans 431,966 3,123,345 8,716,534 2,786,389 15,058,234 Long-term bonds Medium-term notes — — 5,000,000 5,000,000 — — 2,000,000 2,000,000 Short-term bank loans 10,800,000 — — — — 10,000,000 10,800,000 Interest payables for borrowings 2,027,251 1,188,465 1,907,431 415,292 5,538,439 Financial liabilities at fair value through profit or loss 29,952 Other payables and accrued expenses (Note) Trade and notes payable 4,273,274 2,571,230 — — — — — — — — — 29,952 4,273,274 2,571,230 20,133,673 9,311,810 15,623,965 5,201,681 50,271,129 Note: Accrued payroll and bonus, staff welfare payables, contribution payable for retirement benefits and obligations in relation to early retirement schemes are excluded for the purpose of the above analysis. ALUMINUM CORPORATION OF CHINA LIMITED 175 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.2 Fair value estimation Below is a summary of analysis on financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: — Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); — Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and — Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. As of December 31, 2010, all available-for-sale financial assets of the Group are measured at Level 3 fair value (2009: Level 3, except for available-for-sale financial assets amounting to RMB1 million are measured at Level 1); except for financial assets at fair value through profit or loss amounting to RMB17 million (2009: nil), are measured at Level 2 fair value, all other financial assets and liabilities at fair value through profit or loss are measured at Level 1 (2009: Level 1) fair value. 176 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Financial and capital risks management (Continued) 3.2 Fair value estimation (Continued) The carrying amount less provision for impairment of trade and other receivables, bank balances and cash, trade 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. 3.3 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 and other liabilities (including borrowings, other non-current liabilities, trade and notes payable, other payables and accrued expenses and financial liabilities at fair value through profit or loss, as shown in the consolidated statement of financial position) less restricted cash, time deposits and cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus net debts less non-controlling interests. ALUMINUM CORPORATION OF CHINA LIMITED 177 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 3. Financial and capital risks management (Continued) 3.3 Capital risk management (Continued) During 2010 and 2009, the change in sales price of the Group’s primary products has adversely impacted profitability and net operating cash flows of the Group. The Group has entered into additional bank borrowings in order to ensure sufficient operating cash flows. The gearing ratio as of December 31, 2010 is as follows: 2010 2009 Total borrowings and other liabilities 84,039,476 78,297,679 Less: restricted cash, time deposits and cash and cash equivalents (9,495,645) (7,858,760) Net debts Total equity Add: net debts Less: non-controlling interests 74,543,831 70,438,919 57,186,855 55,581,157 74,543,831 70,438,919 (5,606,063) (5,180,419) Total capital attributable to equity holders of the Company 126,124,623 120,839,657 Gearing ratio 59% 58% There is no significant change in gearing ratio between December 31, 2010 and 2009. 178 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Critical accounting estimates and judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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) Property, plant and equipment — recoverable amount In accordance with the Group’s accounting policy (Note 2.9), each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, an estimate of recoverable amount is performed and an impairment loss recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties and is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, and its eventual disposal. ALUMINUM CORPORATION OF CHINA LIMITED 179 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 4. Critical accounting estimates and judgments (Continued) (a) Property, plant and equipment — recoverable amount (Continued) Value in use is also generally determined as the present value of the estimated future cash flows, but only those expected to arise from the continued use of the asset in its present form and its eventual disposal. Present values are determined using a risk-adjusted pre-tax discount rate appropriate to the risks inherent in the asset. Future cash flow estimates are based on expected production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors) and operating costs. This policy requires management to make these estimates and assumptions which are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be impaired and the impairment would be charged against the statement of comprehensive income. (b) Property, plant and equipment and intangible assets — estimated useful lives and residual values The Group’s management determines the estimated useful lives and residual values (if applicable) and consequently related depreciation/amortization charges for its property, plant and equipment and intangible assets. These estimates are based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions, or based on value-in-use calculations or market valuations according to the estimated periods that the Group intends to derive future economic benefits from the use of intangible assets. Management will increase the depreciation/amortization charge where useful lives are less than previously estimated lives, and it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives; and actual residual values may differ from estimated residual values. Periodic review could result in a change in depreciable lives and residual values and therefore depreciation/amortization expense in future periods. 180 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Critical accounting estimates and judgments (Continued) (c) Estimated impairment of inventories — net realizable value In accordance with the Group’s accounting policy (Note 2.11), the Group’s management tests whether inventory suffered any impairment based on estimates of 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. For inventories held for executed sales contracts, the management estimates net realizable value based on the contracted price; for other inventories, the management estimates realizable future price based on the actual prices during the period from the balance sheet date to the date these financial statements were approved for issue by the Board of Directors of the Company and takes into account the nature and balance of inventories and future estimated price trends. For raw materials and work-in-progress, the management has established a model in estimating the net realized value at which the inventories can be realized in the normal course of business after considering the Group’s manufacturing cycles, production capacity and forecasts, estimated future conversion costs and selling prices. The management also takes into account the price or cost fluctuations and other related matters occurring after the balance sheet date which reflect conditions that existed as of the balance sheet date. It is reasonably possible that if there is a significant change in circumstances including the Group’s business and the external environment, outcomes within the next financial year would be significantly affected. ALUMINUM CORPORATION OF CHINA LIMITED 181 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 4. Critical accounting estimates and judgments (Continued) (d) Income tax The Group estimates its income tax provision and deferred income taxation in accordance with the prevailing tax rules and regulations, taking into account any special approvals obtained from relevant tax authorities and any preferential tax treatment to which it is entitled in each location or jurisdiction in which the Group operates. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made. For temporary differences which give rise to deferred income tax assets, the Group has assessed the likelihood that the deferred income tax assets could be recovered. Major deferred income tax assets relate to deductible tax losses and provision for impairment of assets and accruals of expenses not yet deductible for tax purposes. Due to the effects of these temporary differences on income tax, the Group has recorded deferred income tax assets amounting to approximately RMB1,536 million as of December 31, 2010 (2009: approximately RMB1,818 million). Deferred income tax assets are recognized based on the Group’s estimates and assumptions that they will be recovered from taxable income arising from continuing operations in the foreseeable future. 182 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Critical accounting estimates and judgments (Continued) (d) Income tax (Continued) The Group believes it has recorded adequate current tax provision and deferred income taxes based on the prevailing tax rules and regulations and its current best estimates and assumptions. In the event that future tax rules and regulations or related circumstances change, adjustments to current and deferred income taxation may be necessary which would impact the Group’s results or financial position. (e) Goodwill — recoverable amount In accordance with the Group’s accounting policy (Note 2.7(a)), goodwill is allocated to the Group’s operating segment as it represents the lowest level within the Group at which the goodwill is monitored for internal management purposes and is tested for impairment annually by preparing a formal estimate of the recoverable amount. The recoverable amount is estimated as the value in use of the operating segment. Similar considerations to those described above in respect of assessing the recoverable amount of property, plant and equipment apply to goodwill. ALUMINUM CORPORATION OF CHINA LIMITED 183 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 5. Business combinations under common control On October 29, 2009, the Company acquired 100% equity interest of the following companies/ business from Zhongzhou Aluminum Factory, a company registered in Henan province in the PRC and a subsidiary of Aluminum Corporation of China (“Chinalco”) (中國鋁業公司), the Company’s immediate and ultimate holding company, and Zhongzhou Aluminum Factory Labour Services Company Limited for total cash consideration of RMB35 million. Pursuant to the terms set out in the acquisition agreements, the original shareholders/owners of these companies/business are entitled to any profit or loss generated by the entities acquired between the agreed-upon valuation dates, March 31, 2009, and October 29, 2009. In this connection, the Company had paid an additional RMB2 million to the original shareholders/owners of these companies/business in February 2010. The acquired companies/business are: Name of acquiree Principal activities Henan Zhongzhou Aluminum Construction Provision of construction and engineering services Company Ltd (“Zhongzhou Construction”) for mining industry (河南中州鋁建設有限公司) Jiaozuo Hongrui Chemical Company Ltd Supply of chemical products and accessory supplies (焦作市鴻銳化工有限責任公司) for the mining industry Henan Xincheng Construction Supervisory Provision of management services for construction Services Company Ltd projects work (“Xincheng Construction”) (河南鑫誠建設監理有限公司) Limestone mine business of Zhongzhou Supply of limestone products Aluminum Fengying Company Ltd. (中州鋁廠馮營石灰石礦業務) As both the Company and all the above acquired companies/business are under the common control of Chinalco immediately before and after the acquisitions, these transactions were accounted for as common control business combinations, using merger accounting for all periods presented herein as if the merger had been consummated since the inception of common control. There is no business combination under common control completed during the year ended December 31, 2010. 184 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Revenue and segment information (a) Revenue Revenue recognized during the year is as follows: For the year ended December 31, 2010 2009 Sales of goods (net of value-added tax) 118,374,341 68,556,451 Other revenue 2,620,506 1,711,554 120,994,847 70,268,005 Other revenue primarily includes revenue from sales of scrap and other materials, supply of electricity, gas, heat and water and provision of machinery processing and other services. (b) Segment information The chief operating decision-maker of the Company has been identified as the Company’s Executive Committee. The Executive Committee is responsible for the review of the internal reports in order to allocate resources to operating segments and assess their performance. The Executive Committee assesses the performance of operating segments based on profit or loss before income tax in related periods. Unless otherwise stated below, the manner of assessment used by the Executive Committee is consistent with that applied in this consolidated financial statements. Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions. ALUMINUM CORPORATION OF CHINA LIMITED 185 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Revenue and segment information (Continued) (b) Segment information (Continued) In July 2010, as result of the implementation of the Group’s operational structural adjustment exercise, the Group’s trading business was established as a new operating segment. In addition, the Group also redesigned its internal reports periodically reviewed by the Executive Committee in order to better align with the Group’s operational structure. As a result of these changes, the Executive Committee considers the business from a product perspective comprising alumina, primary aluminum, aluminum fabrication for the Group’s manufacturing business, and trading business is identified as a separate reportable operating segment. In addition, the Group’s operating segments also include corporate and other services which cover other operating activities of the Group including research and development. Accordingly, 2009 comparative information has been reclassified to conform to 2010 presentation/classification. 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 aluminum plants 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 metal 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 selling them to the Group’s internal aluminum fabrication plants and external customers. This segment also includes the production and sales of carbon products and aluminum alloy products. Aluminum fabrication segment, which consists of procuring primary aluminum, other raw materials, supplemental materials and electricity power, and further processing primary aluminum for the production and sales of seven main aluminum fabricated products, including casts, planks, screens, extrusions, forges, powder and die castings. 186 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Revenue and segment information (Continued) (b) Segment information (Continued) The trading segment, which engages in the trading of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products and raw materials and supplemental materials to external customers in the PRC. The products are sourced from fellow subsidiaries, and international and domestic suppliers to the Group. Sales of products manufactured by the Group’s manufacturing business are included in the total revenue of the trading segment and are eliminated from the segment revenue of the respective segments which supplied the products to trading segment. Segment assets mainly exclude prepaid current income tax and deferred income tax assets. Segment liabilities mainly exclude the current income tax liabilities and deferred income tax liabilities. All sales among the operating segments were conducted at terms mutually agreed among group companies, and have been eliminated at the consolidated level. For the year ended December 31, 2010 Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total Total revenue 26,837,922 53,255,011 10,466,016 90,141,373 190,326 (59,895,801) 120,994,847 Inter-segment revenue (24,689,632) (26,847,748) (150,676) (8,159,134) (48,611) 59,895,801 — Revenue from external customers 2,148,290 26,407,263 10,315,340 81,982,239 141,715 — 120,994,847 Segment profit/(loss) Income tax expense Profit for the year 1,077,144 358,782 (323,568) 860,637 (490,258) (102,383) 1,380,354 (411,216) 969,138 ALUMINUM CORPORATION OF CHINA LIMITED 187 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Revenue and segment information (Continued) (b) Segment information (Continued) For the year ended December 31, 2010 Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total 17,572 18,493 4,824 13,210 37,010 — 91,109 (532,291) (1,307,058) (309,644) (90,976) (346,324) — (2,586,293) Other items Finance income Finance costs Share of profit of jointly controlled entities Share of profit of associates Amortization of land use rights — — — 230,098 — 570 — — 8 233,784 9,360 2,190 and leasehold land 27,779 21,123 7,645 Depreciation and amortization 2,756,616 3,075,767 362,391 3,246 100,612 (Gain)/loss on disposal of property, plant and equipment (2,473) (26,974) Impairment charge/write-off of property, plant and equipment 372,629 329,152 48 — Provision/(reversal) for impairment of inventories 15,562 18,798 (86) Provision for impairment of receivables, net of bad debts recovered 20,066 1,157 1,711 — — — — 75 — — 4,800 Additions to non-current assets during the year Intangible assets Land use rights 69,598 19,546 444 1,082 37,183 166,527 117,094 15,840 — — Property, plant and equipment 4,124,751 3,365,592 1,042,731 14,047 42,374 188 2010 ANNUAL REPORT — — — — — — — — — — — 233,784 240,028 58,745 6,298,632 (29,324) 701,781 34,274 27,734 127,853 299,461 8,589,495 For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Revenue and segment information (Continued) (b) Segment information (Continued) For the year ended December 31, 2009 Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total Total revenue 18,289,471 42,731,218 7,102,579 38,451,272 286,088 (36,592,623) 70,268,005 Inter-segment revenue (12,555,416) (16,463,537) (1,062,138) (6,511,532) — 36,592,623 — Revenue from external customers 5,734,055 26,267,681 6,040,441 31,939,740 286,088 — 70,268,005 Segment (loss)/profit (2,895,597) (1,426,521) (897,907) 632,500 (689,217) (113,855) (5,390,597) Income tax benefit Loss for the year 711,003 (4,679,594) ALUMINUM CORPORATION OF CHINA LIMITED 189 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Revenue and segment information (Continued) (b) Segment information (Continued) For the year ended December 31, 2009 Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total 10,635 28,693 6,701 13,457 65,653 — 125,139 (383,409) (1,231,458) (315,643) (1,378) (331,076) — (2,262,964) Other items Finance income Finance costs Share of loss of jointly controlled entities Share of profit of associates Amortization of land use rights — — — 75,498 — — — — — (50,392) 1,558 7,442 and leasehold land 14,833 17,828 7,419 Depreciation and amortization 2,574,998 2,662,595 341,062 2,950 134,200 (Gain)/loss on disposal of property, plant and equipment (5,319) 20,503 — Impairment charge/write-off of property, plant and equipment 128,775 335,432 159,584 — — Reversal for impairment of inventories (213,736) (501,391) (194,617) (423) 12,160 — — Provision for impairment of receivables, net of bad debts recovered 10,862 1,039 603 — 175 Additions to non-current assets during the year Intangible assets Land use rights 71,580 250,091 33,309 10,579 383 — — — 22,125 — — — — — — — — — — — (50,392) 77,056 47,522 5,715,805 27,344 623,791 (910,167) 12,679 127,397 260,670 Property, plant and equipment 5,389,115 2,770,827 2,054,675 2,155 80,705 — 10,297,477 190 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Revenue and segment information (Continued) (b) Segment information (Continued) Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total 54,746,269 54,253,441 15,508,792 7,979,162 13,434,371 (6,315,016) 139,607,019 1,410,781 304,239 141,322,039 As of December 31, 2010: Segment assets Unallocated: Deferred income tax assets Prepaid income tax Total assets Segment liabilities 27,038,548 31,115,258 11,712,111 6,568,614 13,703,723 (6,098,778) 84,039,476 Unallocated: Current income tax liabilities Total liabilities 95,708 84,135,184 ALUMINUM CORPORATION OF CHINA LIMITED 191 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 6. Revenue and segment information (Continued) (b) Segment information (Continued) Corporate and other Inter- Primary Aluminum operating segment Alumina aluminum fabrication Trading segments elimination Total 52,302,401 53,257,537 13,818,766 6,937,975 11,071,289 (5,351,526) 132,036,442 1,647,240 291,507 133,975,189 As of December 31, 2009: Segment assets Unallocated: Deferred income tax assets Prepaid income tax Total assets Segment liabilities 26,219,954 31,110,437 9,926,120 6,243,025 10,035,814 (5,237,671) 78,297,679 Unallocated: Deferred income tax liabilities Current income tax liabilities Total liabilities 34,535 61,818 78,394,032 192 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Revenue and segment information (Continued) (b) Segment information (Continued) The Company is domiciled in the PRC. Geographical information on operating segments is as follows: Segment revenue from external customers — The PRC — Other countries Non-current assets (excluding financial assets and deferred income tax assets) — The PRC — Other countries For the year ended December 31, 2010 2009 120,990,827 70,241,729 4,020 26,276 120,994,847 70,268,005 As of December 31, 2010 2009 98,112,058 95,239,803 429,775 697,956 98,541,833 95,937,759 For the year ended December 31, 2010, revenues of approximately RMB28,945 million (2009: RMB13,645 million) are derived from entities directly or indirectly owned or controlled by the PRC government. These revenues are mainly attributable to the alumina, primary aluminum, aluminum fabrication and trading segments. There is no other individual customer with its proportion of segment revenue more than 10%. ALUMINUM CORPORATION OF CHINA LIMITED 193 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Intangible assets Group Computer Mining software Goodwill rights and others Total As of January 1, 2009 Cost Accumulated amortization 2,362,735 — 655,034 (122,554) 128,381 (35,527) 3,146,150 (158,081) Net book amount 2,362,735 532,480 92,854 2,988,069 Year ended December 31, 2009 Opening net book amount 2,362,735 Additions Amortization — — 532,480 92,166 (45,740) 92,854 35,231 (20,251) 2,988,069 127,397 (65,991) Closing net book amount 2,362,735 578,906 107,834 3,049,475 As of December 31, 2009 Cost Accumulated amortization 2,362,735 — 741,292 (162,386) 163,612 (55,778) 3,267,639 (218,164) Net book amount 2,362,735 578,906 107,834 3,049,475 194 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Intangible assets (Continued) Group Computer Mining software Goodwill rights and others Total Year ended December 31, 2010 Opening net book amount 2,362,735 Additions Reclassification (Note 8) Amortization — — — 578,906 72,754 (75,876) (45,388) 107,834 55,099 — (22,189) 3,049,475 127,853 (75,876) (67,577) Closing net book amount 2,362,735 530,396 140,744 3,033,875 As of December 31, 2010 Cost Accumulated amortization 2,362,735 — 738,170 (207,774) 218,711 (77,967) 3,319,616 (285,741) Net book amount 2,362,735 530,396 140,744 3,033,875 For the year ended December 31, 2010, amortization expense recognized in the consolidated statement of comprehensive income is analyzed as follows: For the year ended December 31, 2010 2009 Cost of sales General and administrative expenses (Note 27) 52,584 14,993 43,486 22,505 67,577 65,991 ALUMINUM CORPORATION OF CHINA LIMITED 195 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Intangible assets (Continued) Company Computer Mining software Goodwill rights and others Total As of January 1, 2009 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 Year ended December 31, 2009 Opening net book amount 2,330,945 Additions Amortization — — 382,256 12,838 (24,145) 83,072 26,407 (18,629) 2,796,273 39,245 (42,774) Closing net book amount 2,330,945 370,949 90,850 2,792,744 As of December 31, 2009 Cost Accumulated amortization 2,330,945 — 491,971 (121,022) 139,119 (48,269) 2,962,035 (169,291) Net book amount 2,330,945 370,949 90,850 2,792,744 196 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Intangible assets (Continued) Goodwill Year ended December 31, 2010 Opening net book amount 2,330,945 Additions Amortization — — Company Mining rights 370,949 8,220 (25,161) Computer software and others Total 90,850 36,818 (19,409) 2,792,744 45,038 (44,570) Closing net book amount 2,330,945 354,008 108,259 2,793,212 As of December 31, 2010 Cost Accumulated amortization 2,330,945 — 500,191 (146,183) 175,937 (67,678) 3,007,073 (213,861) Net book amount 2,330,945 354,008 108,259 2,793,212 Impairment test for goodwill Goodwill is allocated to the Group’s cash-generating units (“CGUs”) and groups of CGUs identified according to operating segments. A segment level summary of goodwill allocation is presented below: December 31, 2010 December 31, 2009 Primary Primary Alumina aluminium Alumina aluminium Qinghai Branch Guangxi Branch Lanzhou Branch Jiaozuo Wanfang Power Co., Ltd. (“Wanfang Power”) — 217,267 — 217,267 189,419 — 189,419 — — 1,924,259 31,790 — — — 1,924,259 31,790 189,419 2,173,316 189,419 2,173,316 ALUMINUM CORPORATION OF CHINA LIMITED 197 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 7. Intangible assets (Continued) Impairment test for goodwill (Continued) The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a 5-year period. Cash flows beyond the 5-year period are extrapolated using the estimated growth rates which not exceeding the long-term average growth rates for the businesses in which the CGU operates. Other 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. Further, management adopts a pre-tax rate of 14.31% (2009: 10.50%) that reflects 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 operating segments. The directors of the Company are of the view that, based on its assessment, there was no impairment of goodwill as of December 31, 2010 (2009: Nil). A one percentage point increase or decrease in the discount rate, with all other variables held constant, would result in a decrease or increase in the recoverable amount of 7.86% and 6.95% respectively. A one percent increase or decrease in estimated growth, with all other variables held constant, would result in a increase or decrease in the recoverable amount of 6.47% and 4.73% respectively. 198 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Property, plant and equipment Group Office Plant and Transportation and other Construction- Buildings machinery facilities equipment in-progress Total As of January 1, 2009 Cost 28,503,020 71,116,046 3,051,914 580,191 20,870,953 124,122,124 Accumulated depreciation and impairment (8,142,809) (28,229,722) (1,443,698) (296,625) (20,244) (38,133,098) Net book amount 20,360,211 42,886,324 1,608,216 283,566 20,850,709 85,989,026 Year ended December 31, 2009 Opening net book amount 20,360,211 42,886,324 1,608,216 283,566 20,850,709 85,989,026 Transfers/reclassifications 2,786,508 8,259,495 172,847 296 (11,219,146) — Additions Disposals Depreciation 58,023 (13,820) 218,337 (30,572) 2,221 (706) 6,260 (444) 9,910,720 10,195,561 (20,305) (65,847) (1,060,987) (4,565,604) (241,323) (67,870) — (5,935,784) Currency translation differences 3,217 (95) Impairment loss (144,150) (315,703) (2) (4,014) (1) (341) 98,797 101,916 (159,583) (623,791) Closing net book amount 21,989,002 46,452,182 1,537,239 221,466 19,461,192 89,661,081 As of December 31, 2009 Cost 31,325,327 78,965,256 3,203,745 562,745 19,637,651 133,694,724 Accumulated depreciation and impairment (9,336,325) (32,513,074) (1,666,506) (341,279) (176,459) (44,033,643) Net book amount 21,989,002 46,452,182 1,537,239 221,466 19,461,192 89,661,081 ALUMINUM CORPORATION OF CHINA LIMITED 199 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 8. Property, plant and equipment (Continued) Group Office Plant and Transportation and other Construction- Buildings machinery facilities equipment in-progress Total Year ended December 31, 2010 Opening net book amount 21,989,002 46,452,182 1,537,239 221,466 19,461,192 89,661,081 Transfers/reclassifications (Note 7) 3,098,411 5,615,592 122,885 11,035 (8,772,047) 75,876 Transfer to non-current assets held for sale Additions Disposals Depreciation — 47,787 (14,913) (41,162) 9,397 (103,223) (567) 6,098 (5,094) (509) 2,742 (346) (620,432) (662,670) 8,523,471 8,589,495 (184,868) (308,444) (1,091,191) (4,497,643) (242,367) (66,256) — (5,897,457) Currency translation differences 455 68 Impairment loss (4,596) (323,547) (51) (164) (22) (845) 22,122 22,572 (372,629) (701,781) Closing net book amount 24,024,955 47,111,664 1,417,979 167,265 18,056,809 90,778,672 As of December 31, 2010 Cost 34,139,583 82,844,111 3,167,132 564,879 18,461,694 139,177,399 Accumulated depreciation and impairment (10,114,628) (35,732,447) (1,749,153) (397,614) (404,885) (48,398,727) Net book amount 24,024,955 47,111,664 1,417,979 167,265 18,056,809 90,778,672 200 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Property, plant and equipment (Continued) Company Office Plant and Transportation and other Construction- Buildings machinery facilities equipment in-progress Total As of January 1, 2009 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 Year ended December 31, 2009 Opening net book amount 14,242,651 28,196,253 1,322,699 194,177 11,274,117 55,229,897 Transfers/reclassifications 1,318,756 5,404,954 92,472 (5,340) (6,810,842) — Transformation from subsidiaries to branches Additions Disposals Depreciation Impairment loss 11,463 5,304 (2,737) 6,844 15,073 (3,128) 1,913 1,132 (411) 43 1,919 (372) — 20,263 5,337,933 5,361,361 (20,305) (26,953) (737,160) (3,177,499) (191,288) (44,838) (144,150) (315,703) (4,014) (341) — — (4,150,785) (464,208) Closing net book amount 14,694,127 30,126,794 1,222,503 145,248 9,780,903 55,969,575 As of December 31, 2009 Cost 22,311,407 55,758,343 2,662,166 388,916 9,797,778 90,918,610 Accumulated depreciation and impairment (7,617,280) (25,631,549) (1,439,663) (243,668) (16,875) (34,949,035) Net book amount 14,694,127 30,126,794 1,222,503 145,248 9,780,903 55,969,575 ALUMINUM CORPORATION OF CHINA LIMITED 201 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 8. Property, plant and equipment (Continued) Company Office Plant and Transportation and other Construction- Buildings machinery facilities equipment in-progress Total Year ended December 31, 2010 Opening net book amount 14,694,127 30,126,794 1,222,503 145,248 9,780,903 55,969,575 Transfers/reclassifications 1,333,483 2,321,632 106,147 2,594 (3,763,856) — Transfer to non-current assets held for sale Additions Disposals Depreciation Impairment loss — — (40,965) — (11,187) (89,968) (736,571) (3,006,504) — (10,181) — 609 (4,884) (190,749) — — 847 (138) (42,601) — (40,965) 5,836,793 5,838,249 — — (106,177) (3,976,425) — (34,687) (44,868) Closing net book amount 15,279,852 29,300,808 1,133,626 105,950 11,819,153 57,639,389 As of December 31, 2010 Cost 23,332,460 56,502,622 2,607,988 383,865 11,870,716 94,697,651 Accumulated depreciation and impairment (8,052,608) (27,201,814) (1,474,362) (277,915) (51,563) (37,058,262) Net book amount 15,279,852 29,300,808 1,133,626 105,950 11,819,153 57,639,389 For the year ended December 31, 2010, depreciation expense recognized in the consolidated statement of comprehensive income is analyzed as follows: Cost of sales General and administrative expenses (Note 27) Selling and distribution expenses (Note 26) For the year ended December 31, 2010 2009 6,014,643 5,404,648 207,075 9,337 238,174 6,992 6,231,055 5,649,814 202 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Property, plant and equipment (Continued) As of December 31, 2010, the Group is in the process of applying for the ownership certificates of buildings at net book value of RMB2,869 million (2009: RMB2,268 million). As of December 31, 2010, net book value of buildings amounting to RMB6 million (2009: RMB7 million) are situated in Hong Kong. For the year ended December 31, 2010, interest expenses of RMB645 million (2009: RMB880 million) arising from borrowings attributable to the construction of property, plant and equipment during the year were capitalized at an annual rate of approximately 4.77% (2009: 5.30%), and were included in ‘additions’ to property, plant and equipment. As of December 31, 2010, the Group has pledged property, plant and equipment at net book value amounting to RMB1,117 million (2009: RMB1,712 million) for bank and other borrowings as set out in Note 25. Impairment test for property, plant and equipment When any indicators of impairment are identified, property, plant and equipment are reviewed for impairment based on each CGU. The cash generating units are individual plant/entity. The carrying value of these individual plant/entity was compared to the recoverable amount of the CGUs, which was based predominantly on value-inuse. Value-in-use calculations use pre-tax cash flow projections based on financial budgets approved by management covering a 5-year period. Cash flows beyond the 5-year period are extrapolated using the estimated growth rates which not exceeding the long-term average growth rates for the businesses in which the CGU operates. Other key assumptions applied in the impairment tests include the expected product price, demand for the products, product cost, related expenses and applicable exchange rate. Management determined these key assumptions based on past performance and its expectations on market development. Further, management adopts a pre-tax rate of 10.12% (2009: 10.50%) that reflects 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 operating segments. ALUMINUM CORPORATION OF CHINA LIMITED 203 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 8. Property, plant and equipment (Continued) Impairment test for property, plant and equipment (Continued) Where it is considered more likely than not that an individual CGU will be disposed within the near-term rather than continue to be held and operated by the Group, the recoverable amount is based on the estimated net disposal value of the CGU less cost to disposal rather than by reference to its value-in-use. Except for the assets to be retired or dispose of and the assets related to the exploration and development of bauxite resources in Aurukun, Queensland, Australia (the “AuruKun Project”) mentioned in Notes 8(a) and 8(b), based on management’s impairment assessment, there was no impairment to other property, plant and equipment of the Group as of December 31, 2010 (2009: nil). A one percentage point increase or decrease in the discount rate, with all other variables held constant, would result in a 4.40% and 4.63% decrease or increase in the estimated recoverable amount of property, plant and equipment respectively. A one percent increase or decrease in estimated growth, with all other variables held constant, would result in a 0.88% and 1.01% increase or decrease in the estimated recoverable amount of property, plant and equipment respectively. For the year ended December 31, 2010, impairment charges and write-off in aggregate amounting to RMB702 million (2009: RMB624 million) was recognized in the consolidated statement of comprehensive income. Details of these impairment charges and write-off are analyzed as follows: (a) As a result of adjustment to the Group’s operational structure from late 2009 through 2010, the Group determined that certain properties, plant and equipment would be retired (including certain constructions in progress would be abandoned) or disposed through a sale transaction. As of December 31, 2010, an impairment loss amounted to RMB329 million (2009: RMB624 million) represented the difference between the carrying value of these property, plant and equipment of RMB370 million (2009: RMB1,600 million) and their estimated recoverable amounts (estimated fair value less costs to sell). 204 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Property, plant and equipment (Continued) Impairment test for property, plant and equipment (Continued) (a) (Continued) In addition, property, plant and equipment amounting to RMB663 million (2009: nil) as of December 31, 2010 are reclassified to ‘current assets’ as non-current assets held for sale in accordance with the requirement under IFRS 5 ‘Non-current assets held for sales and discontinued operations’, of which non-current assets held for sale amounting to RMB41 million (2009: nil) are classified in ‘non-current assets’ as these assets will be exchanged for interest in an associate. (b) On March 23, 2007, the Company entered into a development agreement (“Development Agreement”) with the Queensland State Government of Australia for the Aurukun Project. Pursuant to the Development Agreement, the Company would mine the bauxite resources, build and operate a bauxite refinery smelting plant in Queensland, Australia. However, due to adverse changes in the aluminum industry after the financial crisis in 2008, the Aurukun Project had been hindered by various unfavorable factors to the extent that it could not be implemented in accordance with the timetable specified in the Development Agreement. On June 30, 2010, the Development Agreement automatically terminated upon its expiration date. After the expiration of the Development Agreement, the Company and Queensland State Government agreed to continue discussion in ways to continue development of the Aurukun Project. In October 2010, the Company submitted a proposal to the Queensland State Government a revised development plan pursuant to which the Company could continue to mine the bauxite resources but postponing or terminating the building of the bauxite refinery plant, at the same time, to seek alternative investment projects, which could enable the Company to earn a reasonable profit. On December 3, 2010, Queensland State Government has offered to the Company a revised development agreement which allowing the Company to change the AuruKun Project from a mining plus refinery plant integrated project to a mining plus replacement project. With the approval from the Company’s Executive Committee, the Company and the Queensland State Government are currently in discussion based on this revised development agreement and aim to finalize the relevant terms and conditions that can be mutually agreeable between the parties. As of December 31, 2010, no formal agreement has been reached between the parties. ALUMINUM CORPORATION OF CHINA LIMITED 205 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 8. Property, plant and equipment (Continued) Impairment test for property, plant and equipment (Continued) (b) (Continued) As of December 31, 2010, total capitalized development costs in relation to Aurukun Project amounts to RMB733 million (2009: RMB636 million). In view of the planned cessation of building of alumina plant, all capitalized development costs attributable to the refinery plant as of December 31, 2010 were fully provided for which resulting a charge of RMB373 million (2009: nil) recognized in the consolidated statement of comprehensive income. With respect to the mining operation, management conducted an impairment assessment at December 31, 2010 in accordance with the aforementioned methodology, and concluded that there was no impairment of the capitalized development attributable to the mining operation (2009: nil). The level of impairment is predominantly dependent upon judgments used in arriving at project disposal value, future growth rates, the discount rate applied to cash flow projections and successfully develop the mining operation of the Aurukun Project. The estimates and judgment used in the aforementioned assessment represent management’s best estimate based on current experience and information available, which may be different from the actual result in the future due to changes in the Group’s business and other external environment. Any significant changes in estimated average alumina price, USD:AUD exchange rate, expected capital expenditures or new development agreement would lead to some or all of the capitalized assets would have been impaired. 9. Land use rights and leasehold land Details of land use rights and leasehold land are as follows: Finance leases: In Hong Kong, held on: Leases between 10 to 50 years Operating leases: In the mainland of the PRC, held on: Leases less than 10 years Leases between 10 to 50 years Leases over 50 years Group Company December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009 87,281 92,660 — — 10,807 2,075,731 7,127 16,083 1,834,625 179 10,807 743,934 176 12,293 615,627 179 2,180,946 1,943,547 754,917 628,099 206 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Land use rights and leasehold land (Continued) (a) Finance leases As of January 1, Cost Accumulated amortization Group 2010 2009 98,724 (6,064) 98,875 (3,718) Net book amount 92,660 95,157 Year ended December 31, Opening net book amount Exchange differences Amortization 92,660 (3,317) (2,062) 95,157 (151) (2,346) Closing net book amount 87,281 92,660 As of December 31, Cost Accumulated amortization 95,407 (8,126) 98,724 (6,064) Net book amount 87,281 92,660 As of December 31, 2010, finance lease represent leasehold land situated in Hong Kong held on lease of 36 years (2009: 37 years). For the year ended December 31, 2010, amortization expense is recognized in ‘general and administrative expenses’ in the consolidated statement of comprehensive income. ALUMINUM CORPORATION OF CHINA LIMITED 207 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 9. Land use rights and leasehold land (Continued) (b) Operating leases prepayments Group Company 2010 2009 2010 2009 As of January 1, Additions Amortization 1,850,887 1,635,393 299,461 (56,683) 260,670 (45,176) 628,099 153,324 (26,506) 386,878 258,909 (17,688) As of December 31, 2,093,665 1,850,887 754,917 628,099 As of December 31, 2010, the Group is in the process of applying for the certificates of land use rights amounted to RMB371 million (2009: RMB338 million). For the year ended December 31, 2010, amortization expense is recognized in ‘general and administrative expenses’ in the consolidated statement of comprehensive income. 10. Investments in subsidiaries Investment, at cost: Listed securities (Note) Unlisted securities Less: impairment loss Company December 31, December 31, 2010 2009 185,213 223,782 13,671,880 12,702,633 13,857,093 12,926,415 (406,829) — 13,450,264 12,926,415 Market value of listed securities 2,512,473 3,899,030 Note: As of December 31, 2010 and 2009, all listed securities represent equity interests investments in Jiaozuo Wanfang Aluminum Manufacturing Co., Ltd. (“Jiaozuo Wanfang”), a joint stock company incorporated in PRC. 208 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Investments in subsidiaries (Continued) The following is a list of principal subsidiaries as of December 31, 2010: Place of incorporation Registered and Business nature and Effective equity Name and operation Legal status fully paid capital scope of operations interest held 2010 2009 Directly held: Baotou Aluminum Co., Limited PRC Limited liability company 500,000 Manufacture and distribution 100% 100% (包頭鋁業有限公司) of primary aluminum, aluminum alloy and related fabrication products and carbon products Chalco Ruimin Co., Limited PRC Limited liability company 1,360,494 Manufacture of aluminum, 92.18% 90.12% (“Chalco Ruimin”) (中鋁瑞閩鋁板帶有限公司) (Note (i)) magnesium and related alloy products, export activities Chalco Southwest Aluminum PRC Limited liability company 540,000 Manufacture and distribution 60% 60% Co., Limited (中鋁西南鋁板帶有限公司) of metal materials (excluding precious metals), sales of general machinery and equipment Chalco Southwest Aluminum PRC Limited liability company 624,190 Rolling aluminum and 100% 100% Cold Rolling Co., Limited (中鋁西南鋁冷連軋板帶 有限公司) aluminum alloy processing, development of high precision aluminum strip production technology, import and export activities on goods and technology ALUMINUM CORPORATION OF CHINA LIMITED 209 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Investments in subsidiaries (Continued) Place of incorporation Registered and Business nature and Effective equity Name and operation Legal status fully paid capital scope of operations interest held 2010 2009 Chalco Henan Aluminum PRC Limited liability company 1,132,460 Manufacture and distribution 90.03% 90.03% Co., Limited (中鋁河南鋁業有限公司) of aluminum and alloy related products China Aluminum International PRC Limited liability company 200,000 Import and export activities 90.50% 90.50% Trading Co., Ltd (中鋁國際貿易有限公司) Shanxi Huasheng Aluminum PRC Limited liability company 1,000,000 Manufacture and distribution 51% 51% Co., Ltd. (山西華聖鋁業有限公司) of primary aluminum, aluminum alloy and carbon- related products Shanxi Huaze Aluminum and PRC Limited liability company 1,500,000 Manufacture and distribution 60% 60% Power Co., Ltd. (山西華澤鋁電有限公司) of primary aluminum and anode carbon products and electricity generation and supply Fushun Aluminum Co., Ltd. PRC Limited liability company 700,000 Aluminum smelting, 100% 100% (撫順鋁業有限公司) manufacture and distribution of nonferrous metals Zunyi Aluminum Co., Ltd. PRC Limited liability company 802,620 Manufacture and distribution 62.10% 62.10% (遵義鋁業股份有限公司) of primary aluminum 210 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Investments in subsidiaries (Continued) Place of incorporation Registered and Business nature and Effective equity Name and operation Legal status fully paid capital scope of operations interest held 2010 2009 Chalco Zunyi Alumina Co., Ltd. PRC Limited liability company Registered capital Manufacture and distribution 67% 67% (“Zunyi Alumina”)(中國鋁業 遵義氧化鋁有限公司) (Note(ii)) 1,400,000 of alumina Paid-in-capital 1,234,677 Shandong Huayu Aluminum and PRC Limited liability company 1,627,697 Manufacture and distribution 55% 55% Power Co., Ltd. (山東華宇鋁電有限公司) of primary aluminum Gansu Hualu Aluminum PRC Limited liability company 529,240 Manufacture and distribution 51% 51% Co., Ltd. (甘肅華鷺鋁業有限公司) of primary aluminum Chalco Hong Kong Ltd. Hong Kong Limited liability company HKD849,940,471 Oversea investments and alumina 100% 100% (中國鋁業香港有限公司) import and export activities China Aluminum Mining PRC Limited liability company Registered capital Manufacture, acquisition and 100% 100% Co., Ltd. (中鋁礦業有限公司) (Note (iii)) 1,000,000 distribution of bauxite mines, Paid-in-capital limestone ore, aluminum 700,000 magnesium ore and related nonferrous metal products Jiaozuo Wanfang PRC Limited liability company 480,176 Aluminum smelting, 24.002% 29% (焦作萬方股份有限公司) (Note (iv)) manufacture and distribution of nonferrous metals 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. ALUMINUM CORPORATION OF CHINA LIMITED 211 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 10. Investments in subsidiaries (Continued) Notes: (i) In June 2010, the Company injected cash amounting to RMB287 million (2009: RMB657 million) into Chalco Ruimin. Thereafter, the Group’s equity interest in Chalco Ruimin increased from 90.12% to 92.18%. (ii) In September 2010, the Company injected cash amounting to RMB101 million (2009: RMB197 million), represented its share of the capital injection into Zunyi Alumina. As of December 31, 2010, the capital verification is in progress and other equity holder of Zunyi Alumina has not made its share of the capital injection. (iii) The difference between paid-in capital and registered capital is due to the company was split up in 2010 and the capital verification is in progress, the registered capital remained unchanged. (iv) In October 2010, the Company disposed a total of 5% equity interest of Jiaozuo Wanfang in an open market at market quoted price of the shares. Total cash proceeds less commission and other direct selling costs amounted to approximately RMB480 million. As a result of the disposal, the Company’s equity interest in Jiaozuo Wanfang decreased from 29% to 24.002%, but the Company remains the single largest shareholder and its rights to nominate 5 of the 6 non-independent directors remained unchanged as of December 31, 2010. The balance of equity holdings in Jiaozuo Wanfang is dispersed and the other shareholders have not organized their interests and cannot easily organize themselves in such a way that they exercise more votes than the minority holder. In additions, all resolutions proposed by the Company in the past 3 years were approved. The directors of the Company are of the view that the Company has de facto control over Jiaozuo Wanfang. (v) During the year ended December 31, 2010, apart from the capital injection as set out in Notes (i) and (ii), the Company injected cash amounting to RMB611 million (2009: RMB839 million) to other subsidiaries of the Company. 212 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Investments in jointly controlled entities/associates (a) Investments in jointly controlled entities Movements in investments in jointly controlled entities are as follows: Group Company 2010 2009 2010 2009 As of January 1, Capital injections Share of profit/(loss) for the year Impairment loss 685,459 71,325 233,784 — 701,850 34,001 (50,392) — 734,530 71,325 — — 718,398 34,001 — (17,869) As of December 31, 990,568 685,459 805,855 734,530 As of December 31, 2010, jointly controlled entities of the Group, all of which are unlisted, are as follows: Place of incorporation Registered and Business nature and Effective equity Name and operation Legal status fully paid capital scope of operations interest held 2010 2009 Shanxi Jinxin Aluminum PRC Limited liability 20,000 Manufacture and 50% 50% Co., Ltd. (“Jinxin Aluminum”) company (山西晉信鋁業有限公司) (Note (i)) distribution of primary aluminum Guangxi Huayin Aluminum PRC Limited liability 2,441,987 Manufacture and 33% 33% Co. Ltd. (廣西華銀鋁業 有限公司) (Note (ii)) company distribution of alumina ALUMINUM CORPORATION OF CHINA LIMITED 213 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 11. Investments in jointly controlled entities/associates (Continued) (a) Investments in jointly controlled entities (Continued) 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. Notes: (i) As of December 31, 2010, the Group’s investments in Jinxin Aluminum have been fully written-down and the Group does not have obligation to share any additional losses of Jinxin Aluminum. (ii) During the year ended December 31, 2010, the Company injected cash amounting to RMB71 million (2009: RMB34 million) to Guangxi Huayin Aluminum Co. Ltd. For the year ended December 31, 2010, the Group’s shares of interests in its jointly controlled entities are as follows: Assets Liabilities Revenue Profit/(loss)for the year December 31, December 31, 2010 2009 2,787,528 2,754,414 (1,796,960) (2,068,955) 1,333,472 233,784 771,048 (50,392) Proportionate interests in jointly controlled entities’ capital commitments 26,996 169,652 There were no material contingent liabilities relating to the Group’s interests in the jointly controlled entities and the jointly controlled entities themselves. 214 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Investments in jointly controlled entities/associates (Continued) (b) Investments in associates Movements in investments in associates are as follows: Group Company 2010 2009 2010 2009 As of January 1, 197,070 104,809 30,000 105,600 Capital injection/additions (Note (i)) Transformation from a subsidiary to an associate (Note (ii)) Disposal of an associate Share of profit for the year Share of change in reserves 748,650 30,000 — 240,028 (3,140) — — — 77,056 15,205 — 30,000 — — — — — (75,600) — — As of December 31, 1,212,608 197,070 60,000 30,000 Notes: (i) During the year ended December 31, 2010, the Group injected cash amounting to RMB549 million (2009: nil) and RMB200 million (2009: nil) to Jiaozuo Coal Group Xinxiang (Zhaogu) Energy Corporation Co., Ltd. (焦 作煤業集團新鄉(趙固)能源有限責任公司) and Henan Zhongfu Special Aluminum Co., Ltd (河南中孚特種鋁 材有限公司), respectively, according to the Group’s proportionate interest in the respective associates. (ii) In March 2010, the Company entered into an investment agreement with Duofuduo Chemical Co., Ltd. (“Duofuduo Chemical”) (多氟多化工有限公司). Pursuant to the agreement, Duofuduo Chemical injected cash of RMB37 million into Fushun Fluoride Co., Ltd. (“Fushun Fluoride”) (撫順氟化鹽有限公司) for 55% equity interest in Fushun Fluoride. Thereafter, the Company’s equity interest in Fushun Fluoride decreased from 100% to 45% and the Company ceased to have control from June 30, 2010 onwards. At the same time, Fushun Fluoride changed its name to Duofuduo (Fushun) Technology Development Co., Ltd. (多氟多 （撫順）科技開發有限公司). ALUMINUM CORPORATION OF CHINA LIMITED 215 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 11. Investments in jointly controlled entities/associates (Continued) (b) Investments in associates (Continued) As of December 31, 2010, associates of the Group, all of which are unlisted, are as follows: Place of incorporation Registered and Business nature and Effective equity Name and operation Legal status fully paid capital scope of operations interest held 2010 2009 ABC-CA Fund Management PRC Limited liability 200,000 Investments 15% 15% Co., Ltd. (農銀匯理基金 管理有限公司) (Note (i)) company Jiaozuo Coal Group Xinxiang PRC Limited liability 800,000 Coal production 7.2% 8.7% (Zhaogu) Energy Corporation company Co., Ltd. (焦作煤業集團新鄉 （趙固）能源有限責任公司） (Note (ii)) Jiaozuo Wanfang Industry PRC Limited liability 10,000 Sales of construction 7.2% 8.7% Co., Ltd. (焦作市萬方實業 company 有限公司) (Note (ii)) materials and other goods Duofuduo(Fushun) Technology PRC Limited liability 66,660 Manufacture and 45.0% Development Co., Ltd company distribution of fluoride (多氟多（撫順）科技開發 有限公司) products Henan Zhongfu Special PRC Limited liability Registered capital Manufacture and 23.4% Aluminum Co., Ltd (河南中孚 company 769,000 distribution of 特種鋁材有限公司) Paid-in-capital aluminum farbrication 251,088 products — — 216 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Investments in jointly controlled entities/associates (Continued) (b) Investments in associates (Continued) The English names of 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 over ABC-CA Fund Management Co., Ltd. through its appointment of a director into the board of directors of ABC-CA Fund Management Co., Ltd. (ii) Jiaozuo Wanfang Industry Co., Ltd. and Jiaozuo Coal Group Xinxiang (Zhaogu) Energy Corporation Co., Ltd. are associate companies of the Group’s 24.002% (2009: 29%) subsidiary, Jiaozuo Wanfang, in which it holds a 30% (2009: 30%) direct equity interest. As of December 31, 2010, the Group’s effective interest in these associate companies decreased from 8.7% to 7.2% as a result of the partial disposal of Jiaozuo Wanfang (Note 10). For the year ended December 31, 2010, the Group’s shares of interests in its associates are as follows: Assets Liabilities Revenue Profit for the year December 31, December 31, 2010 2009 1,761,469 (548,861) 998,846 240,028 603,273 (406,203) 459,605 77,056 ALUMINUM CORPORATION OF CHINA LIMITED 217 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 12. Available-for-sale financial assets As of January 1, Additions Disposals Fair value changes Group Company 2010 2009 2010 2009 56,313 — (10,065) (1,370) 38,214 20,000 (283) (1,618) 7,000 7,000 — — — — — — As of December 31, 44,878 56,313 7,000 7,000 In December 2010, the Group disposed all its 5% equity interest in China Aluminum International Engineering Corporation Limited, a fellow subsidiary of the Company, to its parent company at a cash consideration of approximately RMB165 million (2009: nil). The disposal resulted a gain of RMB155 million (2009: nil) (Note 28(b)). As of December 31, 2010, all (2009: RMB55 million) are unlisted securities in the PRC. All available-for-sale financial assets are denominated in RMB (2009: all in RMB). 218 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. 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. As of December 31, 2010, the analysis of deferred income tax assets and deferred income tax liabilities is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Deferred income tax assets: — Deferred income tax assets to be recovered after more than 12 months 404,650 767,915 94,624 615,996 — Deferred income tax assets to be recovered within 12 months 1,006,131 879,325 845,798 583,098 1,410,781 1,647,240 940,422 1,199,094 Deferred income tax liabilities: — Deferred income tax liabilities to be settled after more than 12 months — Deferred income tax liabilities to be settled within 12 months — — — 31,600 2,935 34,535 — — — — — — 1,410,781 1,612,705 940,422 1,199,094 ALUMINUM CORPORATION OF CHINA LIMITED 219 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 13. Deferred income tax (Continued) The movements in deferred income tax are as follows: Group Company 2010 2009 2010 2009 As of January 1, Recognition in other comprehensive income Recognition in reserve Recognition in profit or loss 1,612,705 663,768 1,199,094 350,336 215 (110,402) (91,737) 244 — — — — — 948,693 (258,672) 848,758 As of December 31, 1,410,781 1,612,705 940,422 1,199,094 220 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Deferred income tax (Continued) The movements in deferred income tax assets and liabilities during the year ended December 31, 2010, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Movement of deferred income tax assets: Provision for impairment of Impairment of Group Tax deduction on purchases of domestically Unrealized receivables and property, plant Accrued manufactured Deductible profit at Reversal of asset inventories and equipment expenses equipment tax losses consolidation revaluation Others Total As of January 1, 2009 Recognition in profit or loss As of December 31, 2009 Recognition in reserve Recognition in profit or loss 229,789 (157,436) 72,353 — 2,851 23,115 115,607 138,722 — (51,000) 3,714 79,242 82,956 — 57,615 280,297 (220,205) 211,845 1,089,638 60,092 1,301,483 — (51,166) (110,402) (126,402) 19,030 20,845 39,875 — 31,702 60,366 (6,936) 53,430 — (27,238) 53,359 15,998 881,515 936,753 69,357 1,818,268 — (7,964) (110,402) (171,602) As of December 31, 2010 75,204 87,722 140,571 8,926 1,064,679 71,577 26,192 61,393 1,536,264 Provision for impairment of Impairment of Company Tax deduction on purchases of domestically Unrealized receivables and property, plant Accrued manufactured Deductible profit at Reversal of asset inventories and equipment expenses equipment tax losses consolidation revaluation Others Total As of January 1, 2009 Recognition in profit or loss As of December 31, 2009 Recognition in profit or loss 127,445 (75,488) 51,957 6,006 22,872 115,608 138,480 (103,603) 1,037 70,910 71,947 28,127 261,572 (201,480) 5,860 939,868 60,092 (51,166) 945,728 (247,359) — — — 10,462 60,366 (6,936) 53,430 (27,238) 5,109 16,261 21,370 103,544 484,261 858,743 1,343,004 (281,227) As of December 31, 2010 57,963 34,877 100,074 8,926 698,369 10,462 26,192 124,914 1,061,777 ALUMINUM CORPORATION OF CHINA LIMITED 221 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 13. Deferred income tax (Continued) Movement of deferred income tax liabilities: Group Fair value Depreciation changes of property, Amortization Interest of financial plant and of intangible capitalization assets equipment assets Others Total As of January 1, 2009 Recognition in other 133,230 448 27,998 2,020 54,051 217,747 comprehensive income Recognition in profit or loss — (5,973) (244) 17 — 6,618 — 674 — (13,276) (244) (11,940) As of December 31, 2009 127,257 221 34,616 2,694 40,775 205,563 Recognition in other comprehensive income Recognition in profit or loss — (5,902) (215) 2,570 — — — (34,616) (2,694) (39,223) (215) (79,865) As of December 31, 2010 121,355 2,576 — — 1,552 125,483 Company Depreciation of property, Interest Unrealized plant and capitalization loss equipment Total As of January 1, 2009 Recognition in profit or loss 133,230 (5,973) — 16,653 695 (695) 133,925 9,985 As of December 31, 2009 Recognition in profit or loss 127,257 (5,902) 16,653 (16,653) As of December 31, 2010 121,355 — — — — 143,910 (22,555) 121,355 222 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Deferred income tax (Continued) Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group has not recognized deferred income tax assets of RMB529 million (2009: RMB468 million) in respect of accumulated tax losses amounting to RMB2,117 million (2009: RMB1,871 million) that can be carried forward against future taxable income as it was not considered probable that those assets would be realized. As of December 31, 2010, the expiry profile of these tax losses are analyzed as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 16,270 279,094 397,956 971,634 451,856 16,270 279,094 397,956 1,177,855 — — — — 10,426 — — — — 10,426 — 2,116,810 1,871,175 10,426 10,426 Expiring in 2011 2012 2013 2014 2015 Total 14. Other non-current assets Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Advances and deposits to suppliers Other prepayments 164,745 139,454 237,555 163,572 140,000 57,622 168,000 80,156 304,199 401,127 197,622 248,156 ALUMINUM CORPORATION OF CHINA LIMITED 223 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 15. Inventories Raw materials Work-in-progress Finished goods Spare parts Packaging materials and others Less: provision for impairment Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 9,498,670 5,710,686 5,632,858 1,033,063 13,366 8,635,393 4,863,109 5,944,645 1,045,263 9,139 5,870,079 3,396,319 1,405,895 661,467 7,682 5,537,227 3,173,130 1,238,701 700,770 3,901 21,888,643 20,497,549 11,341,442 10,653,729 of inventories (108,596) (74,322) (96,841) (67,696) 21,780,047 20,423,227 11,244,601 10,586,033 Note: The Group classifies all alumina products manufactured by group companies which are held for primary aluminum production of other group companies as ‘raw materials’ at balance sheet date. Prior to 2010, the Group classifies all alumina product manufactured by group companies as ‘finished goods’. Accordingly, the above 2009 comparative figures were reclassified to conform to current year presentation. Movements on the provision for impairment of inventories are as follows: As of January 1, Provision for impairment of inventories Reversal arising from increase in net realisable value Reversal upon sales of inventories Group Company 2010 2009 2010 2009 74,322 984,489 67,696 467,223 360,889 33,756 135,757 27,858 (199,305) (127,310) — (943,923) (84,560) (22,052) — (427,385) As of December 31, 108,596 74,322 96,841 67,696 224 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 16. Trade and notes receivable Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Trade receivables 1,689,469 1,840,813 1,735,699 2,157,087 Less: provision for impairment of receivables (401,066) (423,362) (379,537) (403,065) Notes receivable 1,288,403 1,981,570 1,417,451 1,785,631 1,356,162 1,233,870 1,754,022 1,170,264 3,269,973 3,203,082 2,590,032 2,924,286 As of December 31, 2010, except for trade and notes receivable of the Group amounting to RMB530 million (2009: RMB739 million) and RMB8 million (2009: RMB6 million) which denominated in USD and EUR respectively, all other trade and notes receivable were denominated in RMB. All trade and notes receivable of the Company were denominated in RMB (2009: all). 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, generally a credit period from 3 to 12 months may be granted. The credit terms for sales to certain subsidiaries of Chinalco are receivable on demand. As of December 31, 2010, the ageing analysis of trade and notes receivable is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 3,148,858 3,062,131 2,288,302 2,682,250 33,477 54,716 433,988 89,570 27,595 447,148 73,874 130,734 476,659 133,237 17,599 494,265 3,671,039 3,626,444 2,969,569 3,327,351 ALUMINUM CORPORATION OF CHINA LIMITED 225 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 16. Trade and notes receivable (Continued) The credit quality of trade and notes receivable that are neither past due nor impaired is assessed by reference to the counterparty’s default history. As of December 31, 2010, there is no history of default for these customers above. Trade and notes receivable that are past due less than one year are not considered impaired. As of December 31, 2010, trade and notes receivable of RMB103 million (2009: RMB131 million) of the Group and RMB284 million (2009: RMB218 million) of the Company were past due but not impaired. These receivables relate to a number of individual customers for whom there is no recent history of default. The ageing analysis of these trade and notes receivable is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 13,610 33,117 41,290 15,214 25,478 78,040 11,597 15,868 9,676 73,611 118,150 83,061 6,203 122,403 4,488 84,924 103,231 130,983 284,498 218,018 226 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 16. Trade and notes receivable (Continued) As of December 31, 2010, trade and notes receivable of RMB432 million (2009: RMB447 million) of the Group and RMB406 million (2009: RMB422 million) of the Company were substantially impaired and a provision of RMB401 million (2009: RMB423 million) and RMB380 million (2009: RMB403 million) was made, respectively. The individually impaired receivables mainly relate to customers which are in unexpected difficult economic situations. However, 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 December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Between 2 and 3 years Over 3 years 13,426 418,774 15,998 431,280 12,584 393,598 13,111 409,341 432,200 447,278 406,182 422,452 Movements on the provision for impairment of trade and notes receivable are as follows: Group Company 2010 2009 2010 2009 As of January 1, Provision for impairment Written off Reversal 423,362 4,000 (25,680) (616) 421,862 20,690 (13,248) (5,942) 403,065 2,686 (25,680) (534) 403,525 18,700 (13,239) (5,921) As of December 31, 401,066 423,362 379,537 403,065 ALUMINUM CORPORATION OF CHINA LIMITED 227 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 17. Other current assets Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Advances and deposits to suppliers Advances to employees 328,864 35,179 395,457 33,822 Value-added tax recoverable 1,769,908 1,587,023 Receivable of value-added tax refund Dividends receivable Receivables from sales of non-core 141,511 — 89,073 — 58,788 20,954 408,667 — 23,170 17,106 278,832 — 141,651 141,651 businesses 134,334 134,585 89,575 116,670 Deposits for investments projects (Note) Loans and receivables Advance to subsidiaries Others 854,809 282,437 — 255,054 381,804 — 854,809 143,809 255,054 167,352 3,335,782 2,527,363 170,748 217,686 138,310 148,167 3,717,790 3,094,504 5,192,345 3,675,365 Less: provision for impairment of other receivables (186,553) (221,332) (175,250) (211,915) Prepaid income tax 304,239 291,507 Prepayments to suppliers for purchases 2,304,493 1,684,065 216,978 537,588 218,933 403,940 3,531,237 2,873,172 5,017,095 3,463,450 Total other current assets 6,139,969 4,848,744 5,771,661 4,086,323 228 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Other current assets (Continued) Note: As of December 31, 2010, deposits for investments projects mainly represent deposits paid for the proposed acquisition of certain business and assets related to coal and bauxite mines amounting to RMB640 million and RMB210 million, respectively. As of December 31, 2009, deposits for investments projects mainly represent deposits paid for the proposed acquisitions of Fushun Power Plant and certain assets of other companies. As the proposed acquisitions did not implement according to the framework agreement, the entire deposits amounting to RMB255 million were refunded in February 2010. As of December 31, 2010, except for other current assets of the Group amounting to RMB0.04 million (2009: RMB7.40 million), RMB3 million (2009: RMB0.5 million) and RMB7 million (2009: RMB0.5 million) which denominated in USD, HKD and AUD respectively, all other current assets were denominated in RMB. All other current assets of the Company were denominated in RMB (2009: all). As of December 31, 2010, the ageing analysis of other receivables is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 3,380,547 2,665,489 114,525 9,871 212,847 123,717 17,574 287,724 3,212,560 1,655,899 14,332 309,554 1,949,373 616,434 846,501 263,057 3,717,790 3,094,504 5,192,345 3,675,365 The credit quality of other receivables that are neither past due nor impaired is assessed by reference to the counterparty’s default history. ALUMINUM CORPORATION OF CHINA LIMITED 229 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 17. Other current assets (Continued) Other receivables that are past due less than one year are generally not considered impaired. As of December 31, 2010, other receivables of RMB46 million (2009: RMB72 million) of the Group and RMB152 million (2009: RMB876 million) of the Company were past due but not impaired. The credit terms of these receivables were repayment on demand. The ageing analysis of these other receivables is as follows: Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 4,642 9,456 9,410 22,157 18,727 14,758 9,182 29,362 1,390 6,194 14,279 130,198 1,270 3,652 839,933 30,788 45,665 72,029 152,061 875,643 As of December 31, 2010, other receivables of RMB191 million (2009: RMB265 million) of the Group and RMB179 million (2009: RMB239 million) of the Company were impaired and a provision of RMB187 million (2009: RMB221 million) and RMB175 million (2009: RMB212 million) was made, respectively. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Between 2 and 3 years Over 3 years 59 190,690 7,033 258,362 53 179,356 6,568 232,269 190,749 265,395 179,409 238,837 230 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Other current assets (Continued) Movements on the provision for impairment of other receivables are as follows: Group Company 2010 2009 2010 2009 As of January 1 Provision for impairment Written off Reversal 221,332 28,206 (60,400) (2,585) 224,544 844 (2,004) (2,052) 211,915 26,320 (60,400) (2,585) 215,539 164 (1,958) (1,830) As of December 31 186,553 221,332 175,250 211,915 18. Bank balance and cash Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Restricted cash Time deposits 462,935 50,000 365,409 91,941 57,121 — 31,418 — Cash and cash equivalents 8,982,710 7,401,410 5,343,707 4,350,873 9,495,645 7,858,760 5,400,828 4,382,291 As of December 31, 2010, restricted cash mainly represented deposits held for issued letters of credit and notes payable (Note 24). As of December 31, 2010, the annual effective interest rate of the above time deposits was 2.75% (2009: 5.00%) with average maturity of one year (2009: one year). ALUMINUM CORPORATION OF CHINA LIMITED 231 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 18. Bank balance and cash (Continued) As of December 31, 2010, bank balances and cash on hand of the Group and of the Company were denominated in the following currencies. RMB USD HKD EUR AUD 19. Share capital A shares H shares Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 9,054,616 303,253 31,131 3,003 103,642 7,540,715 5,400,828 4,382,291 103,754 46,822 2,380 165,089 — — — — — — — — 9,495,645 7,858,760 5,400,828 4,382,291 Group and Company December 31, December 31, 2010 2009 9,580,522 3,943,966 9,580,522 3,943,966 13,524,488 13,524,488 As of December 31, 2010 and 2009, all issued shares are registered and fully paid. Both A shares and H shares rank pari passu to each other. Of the total issued A shares, the trading of the 5,649,217,045 A shares (2009: 5,649,217,045 A shares) held by Chinalco and its subsidiaries are subject to the Trading Moratorium and the Terms of the Trading Moratorium. Accordingly, these shares can only be traded after a lock-up period of 3-year, which expired on January 4, 2011. 232 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) otherwise stated) 20. Reserves Share premium Company Other capital reserves (Note (i)) Statutory surplus reserve (Note (ii)) Special reserve (Note (iii)) Retained earnings Total As of January 1, 2009 Loss for the year Increase in reserve Release of deferred government grants Transformation from subsidiaries to branches As of December 31, 2009 Profit for the year Appropriation of surplus reserve Increase in reserve Release of deferred government grants 14,392,675 — — 398,824 — — 5,799,232 — — 18,061 — 8,229 20,735,428 (3,529,289) — 41,344,220 (3,529,289) 8,229 — 1,400 (1,891) — — — — — — — 1,400 (1,891) 14,390,784 — 400,224 — 5,799,232 — 26,290 — 17,206,139 440,103 37,822,669 440,103 — — — — — 68,325 — 78,401 — — 3,294 — (68,325) — — 3,294 — 78,401 As of December 31, 2010 14,390,784 478,625 5,867,557 29,584 17,577,917 38,344,467 Notes: (i) Other capital reserves Other capital reserves mainly represent national debt fund reserve granted to certain branches and subsidiaries of the Company by the Ministry of Finance of the PRC (“MOF”) to support various qualified technical projects of the Group. Pursuant to the relevant MOF documents, these funds were accounted for as a capital injection into the Company after all necessary share increase conditions are satisfied. These funds are mainly regarded as capital reserve before the relevant share increase conditions are met. (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 for the year determined in accordance with China Accounting Standards for the statutory surplus reserve until the balance of this reserve reaches 50% of the paid-up share capital. Statutory surplus reserve can be used to reduce any losses incurred or to increase share capital of the Company. Statutory surplus reserve balance should not fall below 25% of the registered capital after any such shares issuance. (iii) Special reserve Special reserve mainly represents funds set aside for the purpose of certain safety production activities. Pursuant to certain regulations issued by the State Administration of Work Safety of the PRC, the Group is required to set aside funds mainly for mining of bauxite and coal, coal gas production and construction service activities at prescribed rates. These funds can be used for maintenance and/or improvements of safety of these activities, and is not available for distribution to shareholders. ALUMINUM CORPORATION OF CHINA LIMITED 233 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Borrowings Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Long-term borrowings Bank and other loans (Note (a)) — Secured (Note 25) 705,405 798,627 — Guaranteed (Note (e)) 2,883,313 4,250,715 — 36,200 — 92,354 — Unsecured 20,483,474 23,676,379 11,578,052 14,965,880 24,072,192 28,725,721 11,614,252 15,058,234 Medium-term notes and Long-term bonds (Note (b)) — Guaranteed (Note (e)) 1,986,133 1,983,983 1,986,133 — Unsecured 11,923,820 9,921,250 11,923,820 1,983,983 9,921,250 13,909,953 11,905,233 13,909,953 11,905,233 Total Long-term borrowings 37,982,145 40,630,954 25,524,205 26,963,467 Current portion of Long-term borrowings (10,258,278) (2,826,472) (7,747,725) (431,966) Non-current portion of long term-borrowings Estimated fair value of 27,723,867 37,804,482 17,776,480 26,531,501 total Long-term borrowings 37,886,755 40,785,144 25,423,944 27,115,070 234 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. Borrowings (Continued) Short-term borrowings Bank loans (Note (c)) — Secured (Note 25) — Guaranteed (Note (e)) — Unsecured Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 215,000 1,225,000 645,000 880,000 — — — — 19,149,680 21,468,285 7,000,000 10,800,000 20,589,680 22,993,285 7,000,000 10,800,000 Short-term bonds, unsecured (Note (d)) 10,871,911 — 10,171,911 — Current portion of Long-term borrowings Total Short-term borrowings and current portion of Long-term borrowings 10,258,278 2,826,472 7,747,725 431,966 41,719,869 25,819,757 24,919,636 11,231,966 As of December 31, 2010, except for borrowings of the Group amounting to RMB50 million (2009: RMB49 million) and RMB938 million (2009: RMB299 million) which denominated in JPY and USD respectively, all other borrowings were denominated in RMB. All borrowings of the Company were denominated in RMB (2009: all). ALUMINUM CORPORATION OF CHINA LIMITED 235 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Borrowings (Continued) Notes: (a) Long-term bank and other loans (i) The maturity of long-term bank and other loans of the Group are set out below: Bank and other financial institution loans Other loans December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years 5,252,402 3,612,382 2,775,641 5,891,327 Between 2 and 5 years 11,420,768 13,861,595 Over 5 years 3,673,783 5,999,298 12,126 12,126 36,377 52,228 50,831 18,210 54,629 74,190 23,959,335 28,527,861 112,857 197,860 Wholly repayable within 5 years 19,788,446 21,958,438 — — 236 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. Borrowings (Continued) Notes: (Continued) (a) Long-term bank and other loans (Continued) (ii) The maturity of long-term bank and other loans of the Company are set out below: Bank and other financial institution loans Other loans December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years 2,745,000 737,500 6,762,300 1,307,000 384,000 3,108,000 8,670,500 2,746,500 8,975 8,975 26,926 17,576 47,966 15,345 46,034 39,889 11,551,800 14,909,000 62,452 149,234 Wholly repayable within 5 years 9,935,000 11,867,000 — — (iii) The weighted average annual interest rates of Long-term bank and other loans for the year ended December 31, 2010 and 2009 are 5.25% and 5.28%, respectively. ALUMINUM CORPORATION OF CHINA LIMITED 237 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Borrowings (Continued) Notes: (Continued) (b) Medium-term notes and long-term bonds As of December 31, 2010, outstanding long-term bonds and Medium-term notes are summarized as follows: Face value/ Effective December 31, December 31, maturity interest rate 2010 2009 2007 Long-term bonds 2,000,000/2017 4.64% 1,986,133 1,983,983 2008 Medium-term notes 5,000,000/2011 5.62% 4,993,750 4,978,750 2008 Medium-term notes 5,000,000/2013 4.92% 4,957,500 4,942,500 2010 Medium-term notes 1,000,000/2015 4.34% 2010 Medium-term notes 1,000,000/2015 4.20% 986,381 986,189 — — 13,909,953 11,905,233 Long-term bonds and Medium-term notes were issued for capital expenditure purposes and operating cash flows and bank loans re-financing, respectively. (c) Short-term bank loans The weighted average annual interest rates of Short-term bank loans for the year ended December 31, 2010 and 2009 are 4.55% and 4.96%, respectively. 238 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. Borrowings (Continued) Notes: (Continued) (d) Short-term bonds As of December 31, 2010, outstanding short-term bonds are summarized as follows: Face value/ Effective December 31, December 31, maturity interest rate 2010 2009 2010 Short-term bonds 5,000,000/2011 3.04% 2010 Short-term bonds 5,000,000/2011 3.17% 2010 Short-term bonds 300,000/2011 2010 Short-term bonds 400,000/2011 3.70% 3.82% 5,101,634 5,070,277 300,000 400,000 10,871,911 — — — — — All the above Short-term bonds were issued for working capital. ALUMINUM CORPORATION OF CHINA LIMITED 239 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Borrowings (Continued) Notes: (Continued) (e) Guaranteed long-term and short-term bank and other loans Details of long-term and short-term bank and other loans in which the Group received guarantees are set out as follows: Guarantors Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Long-term bonds Bank of Communications (交通銀行股份有限公司) 1,986,133 1,983,983 1,986,133 1,983,983 1,581,301 2,315,760 — 400,000 — — — — Long-term loans Chinalco Shanxi Zhangze Electric Power Co., Ltd. (山西漳澤電力股份有限公司) (Note (ii)) Luoyang Economic Investment Co., Ltd. (“Luoyang Economic”) (洛陽市經濟投資有限公司) (Note (ii)) 98,832 101,111 — — Lanzhou Aluminum Factory (蘭州鋁廠) (Note (i)) 36,200 92,354 36,200 92,354 240 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. Borrowings (Continued) Notes: (Continued) (e) Guaranteed long-term and short-term bank and other loans (Continued) Details of long-term and short-term bank and other loans in which the Group received guarantees are set out as follows: (Continued) Guarantors Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Yichuan Power Industrial Group Company (“Yichuan Power”) (伊川電力集團總公司) (Note (ii)) 58,595 70,115 Luoyang Longquan Aluminum Products Co., Ltd. (洛陽龍泉鋁業有限公司) (Note (ii)) 51,300 57,000 China Nonferrous Metals Processing Technology Co.,Ltd. (中色科技股份有限公司) (Note (iii)) The Company 37,085 44,375 1,020,000 1,170,000 — — — — — — — — 2,883,313 4,250,715 36,200 92,354 ALUMINUM CORPORATION OF CHINA LIMITED 241 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 21. Borrowings (Continued) Notes: (Continued) (e) Guaranteed long-term and short-term bank and other loans (Continued) Details of long-term and short-term bank and other loans in which the Group received guarantees are set out as follows: (Continued) Guarantors Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Short-term loans Chinalco The Company Notes: 1,225,000 — 180,000 700,000 1,225,000 880,000 — — — — — — (i) Guarantor is a subsidiary of Chinalco and a shareholder of the Company. (ii) Guarantors are non-controlling shareholders of certain subsidiaries of the Company. (iii) Guarantor is a subsidiary of Chinalco. 22. Other Non-current liabilities Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Advances from customers Obligations in relation to early retirement schemes Others — 68,847 — — 208,378 469,392 231,273 225,034 171,314 283,646 190,313 130,159 677,770 525,154 454,960 320,472 242 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. Other Non-current liabilities (Continued) Obligations in relation to early retirement schemes: During the years ended December 31, 2010 and 2009, certain subsidiaries and branches implemented certain early retirement benefit schemes which allow qualified employees to early retire on a voluntary basis. As of December 31, 2010, included in ‘other non-current liabilities’ were obligations in relation to retirement benefits under the Group’s early retirement schemes as follows: Group Company 2010 2009 2010 2009 As of January 1, Provision made during the year (Note 30) Interest costs Utilization during the year 303,205 69,072 5,778 (85,193) 24,757 284,562 — (6,114) 250,758 63,843 2,267 (69,659) 6,913 247,065 — (3,220) As of December 31, 292,862 303,205 247,209 250,758 Non-current Current (Note 23) 208,378 84,484 231,273 71,932 171,314 75,895 190,313 60,445 292,862 303,205 247,209 250,758 ALUMINUM CORPORATION OF CHINA LIMITED 243 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 23. Other payables and accrued expenses Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Payable for capital expenditures Sales and other deposits from customers Accrued payroll and bonus Staff welfare payables Contribution payable 4,201,502 1,215,080 353,292 159,579 4,382,597 1,679,594 8,677 192,826 2,577,742 2,787,657 336,815 220,371 90,075 454,294 — 134,493 for retirement benefits 38,640 45,268 9,697 14,056 Current portion of obligation in relation to early retirement schemes (Note 22) 84,484 71,932 75,895 60,445 Taxes other than income taxes payable (Note) Consideration payable for acquisition 391,074 353,547 268,303 209,526 of businesses 5,740 13,497 5,740 13,497 Payables withheld as guarantees and deposits Dividends Payable Accrued interest Others 177,568 89,272 359,990 456,848 157,817 115,978 338,476 567,779 112,827 108,957 — 307,477 244,815 — 304,855 394,488 7,533,069 7,927,988 4,249,757 4,482,268 Note: Taxes other than income taxes payable mainly comprise accruals for value-added tax, resource tax, city construction tax and education surcharge. 244 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 23. Other payables and accrued expenses (Continued) As of December 31, 2010, except for other payables and accured expenses of the Group amounting to RMB2 million (2009: RMB2 million), RMB1 million (2009: nil) and RMB7 million (2009: RMB16 million) which denominated in HKD, EUR and AUD respectively, all other other payables and accured expenses were denominated in RMB. As of December 31, 2010, all other payables and accrued expense of the Company were denominated in RMB. As of December 31, 2009, except for other payables and accured expenses of the Company amounting to RMB4 million which denominated in HKD, all other other payables and accured expenses were denominated in RMB. 24. Trade and notes payable Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Trade payables Notes payable 4,339,300 2,037,042 4,440,736 1,731,707 2,388,614 2,060,028 33,490 511,202 6,376,342 6,172,443 2,422,104 2,571,230 As of December 31, 2010, except for trade and notes payable of the Group amounting to RMB41 million (2009: RMB70 million) and RMB1 million (2009: RMB54 million) which denominated in USD and EUR respectively, all other trade and notes payable were denominated in RMB. All trade and notes payable of the Company were denominated in RMB (2009: all). ALUMINUM CORPORATION OF CHINA LIMITED 245 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 24. Trade and notes payable (Continued) As of December 31, 2010, the ageing analysis of trade and notes payable is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Within 1 year Between 1 and 2 years Between 2 and 3 years Over 3 years 6,152,987 5,892,834 2,364,729 2,486,570 68,421 117,265 37,669 212,488 31,131 35,990 21,160 17,503 18,712 43,621 20,105 20,934 6,376,342 6,172,443 2,422,104 2,571,230 25. Pledge of assets The Group has pledged various assets as collateral against certain secured borrowings as set out in Note 21. As of December 31, 2010, a summary of these pledged assets is as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Property, plant and equipment 1,116,883 1,711,957 Land use rights Inventories Trade and notes receivable 126,153 45,000 55,000 320,055 57,500 15,000 1,343,036 2,104,512 — — — — — — — — — — 246 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 26. Selling and distribution expenses Transportation and loading expenses Packaging expenses Port expenses Employee benefit expenses Sales commissions and other handling fees Warehouse and other storage fees Marketing and advertising expenses Depreciation of non-production property, plant and equipment (Note 8) Others For the year ended December 31, 2010 2009 1,090,831 180,523 59,429 37,799 12,990 30,119 14,818 9,337 137,455 812,479 145,518 71,418 36,954 22,123 32,273 12,253 6,992 124,910 1,573,301 1,264,920 ALUMINUM CORPORATION OF CHINA LIMITED 247 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 27. General and administrative expenses Employee benefit expenses Taxes other than income tax expense (Note) Depreciation of non-production property, plant and equipment (Note 8) Amortization of land use rights and leasehold land (Note 9) Amortization of intangible assets (Note 7) Operating lease rental expenses Traveling and entertainment Utilities and office supplies Pollutants discharge fees Repairs and maintenance Insurance expense Auditors’ remuneration Legal and other professional fees Others For the year ended December 31, 2010 2009 840,371 614,704 207,075 58,745 14,993 106,098 141,472 82,737 33,985 43,911 79,513 25,698 23,370 1,025,009 546,810 238,174 47,522 22,505 198,975 125,686 78,850 40,230 48,644 81,424 30,636 46,451 351,068 425,590 2,623,740 2,956,506 Note: Taxes other than income tax expense mainly comprise land use tax, property tax and stamp duty. 248 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 28. Other income and other gains, net (a) Other income For the year ended December 31, 2010, other income represented government grants amounting to RMB329 million (2009: RMB151 million). (b) Other gains/(losses), net Realized gain on future and option contracts, net 248,799 456,337 For the year ended December 31, 2010 2009 Unrealized gain/(loss) on future and option contracts, net Gain/(loss) on disposal of property, plant and equipment Gain on disposal of available-for-sale financial assets Others 29. Finance costs, net 56,440 (34,012) 29,324 156,066 395 (27,344) 5,827 3,028 491,024 403,836 For the year ended December 31, 2010 2009 Finance income — interest income from banks (91,109) (125,139) Interest expense, net of capitalized interest (Note 8) Exchange losses/(gains), net Finance cost Finance cost, net 2,575,661 10,632 2,299,780 (36,816) 2,586,293 2,262,964 2,495,184 2,137,825 Interest capitalization rate 4.77% 5.30% ALUMINUM CORPORATION OF CHINA LIMITED 249 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 30. Employee benefit expenses Salaries and bonus Housing fund Staff welfare and other expenses (Note) Employment expense in relation to early retirement schemes (Note 22) Retirement benefit costs-defined contribution schemes For the year ended December 31, 2010 2009 4,231,627 3,992,582 339,615 747,314 69,072 695,866 355,305 773,575 284,562 809,877 6,083,494 6,215,901 Note: Staff welfare and other expenses include staff welfare, staff union expenses, staff education expenses and unemployment insurance expenses, etc. Employee benefit expenses include remuneration payables to directors, supervisors and senior management as set out in Note 31. 250 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 31. 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: Fees Basic salaries, housing fund, other allowances and benefits in kind Discretionary bonus Retirement benefit costs-defined contribution schemes For the year ended December 31, 2010 2009 870 994 2,099 929 2,536 1,055 113 131 4,011 4,716 ALUMINUM CORPORATION OF CHINA LIMITED 251 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 31. Directors’, supervisors and senior management’s remuneration (Continued) (a) Directors’ and supervisors’ remuneration (Continued) The remuneration of each director and supervisor of the Company for the year ended December 31, 2010 is set out below: Name of directors and supervisors Directors: Xiong Weiping Luo Jianchuan Chen Jihua (resigned on October 28, 2010) Liu Xiangmin Shi Chungui Lv Youqing (appointed on June 22, 2010) Kang Yi (resigned on June 22,2010) Zhang Zhuoyuan Zhu Demiao Wang Mengkui Supervisors: Ao Hong Yuan Li Zhang Zhankui Discretionary Fees Salary bonus Pension Total — — — — 150 — 99 207 207 207 870 — — — — 648 556 428 467 — — — — — — 328 285 151 165 — — — — — — 29 29 26 29 — — — — — — 1,005 870 605 661 150 — 99 207 207 207 2,099 929 113 4,011 — — — — — — — — — — — — — — — — Total 870 2,099 929 113 4,011 252 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 31. Directors’, supervisors and senior management’s remuneration (Continued) (a) Directors’ and supervisors’ remuneration (Continued) The remuneration of each director and supervisor of the Company for the year ended December 31, 2009 is set out below: Name of directors and supervisors Discretionary Fees Salary bonus Pension Total Directors: Xiong Weiping (appointed on May 26, 2009) Xiao Yaqing (resigned on March 27, 2009) Luo Jianchuan Chen Jihua Liu Xiangmin Shi Chungui Kang Yi Zhang Zhuoyuan Wang Mengkui Zhu Demiao Supervisors: Ao Hong Yuan Li Zhang Zhankui — — — — — 150 211 211 211 211 994 — — — — 382 271 560 469 469 — — — — — 2,151 — 385 — 385 191 137 293 169 169 — — — — — 959 — 96 — 96 16 11 26 26 26 — — — — — 589 419 879 664 664 150 211 211 211 211 105 4,209 — 26 — 26 — 507 — 507 Total 994 2,536 1,055 131 4,716 ALUMINUM CORPORATION OF CHINA LIMITED 253 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 31. Directors’, supervisors and senior management’s remuneration (Continued) (a) Directors’ and supervisors’ remuneration (Continued) The remuneration of the directors and supervisors of the Company fell within the following bands: nil to 1,000 1,000 to 1,500 Number of individuals 2010 2009 12 1 13 — During the year, no options were granted to the directors or the supervisors of the Company (2009: nil). During the year, no emoluments were paid to the directors or the supervisors of the Company (including the five highest paid employees) as an inducement to join or upon joining the Company or as compensation for loss of office (2009: nil). No directors or supervisors of the Company waived any remuneration during the respective years. (b) Five highest paid individuals During the year ended December 31, 2010, the five highest paid individuals of the Group include 3 (2009: 3) directors whose remunerations are reflected in the analysis presented above. The remuneration payable to the remaining 2 (2009: 2) individual during the year is as follows: Basic salaries, housing fund, other allowances and benefits in kind Discretionary bonus Retirement benefit costs-defined contribution plans For the year ended December 31, 2010 2009 935 330 52 936 339 49 1,317 1,324 254 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 32. Income tax expense/(benefit) Current income tax expense: — PRC enterprise income tax Deferred income tax expense/(benefit) (Note 13) For the year ended December 31, 2010 2009 319,479 91,737 237,690 (948,693) 411,216 (711,003) The current income tax of the Group has been provided on the estimated assessable profit and the appropriate tax rates for the period. Certain branches and subsidiaries of the Company located in special regions of the PRC were granted tax concessions including preferential tax rates of 15% for a period of 10 years. In addition, the Group also enjoys a preferential policy on tax credits approved in prior years in respect of domestically manufactured production equipment purchased. Upon the implementation of the new Corporate Income Tax Law (“CIT Law”) from January 1, 2008, the applicable corporate income tax rate of the Group was adjusted to 25%. However, for those branches and subsidiaries of the Company which were entitled to a preferential rate of 15%, their income tax rate gradually increase to 25% over 5 years, while those entities located in the western region of China continue to enjoy the applicable preferential income tax rate of 15% without any upward adjustment before 2011, but will change to 25% thereafter. Deferred income tax is calculated in full on temporary differences under the liability method using tax rates substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. ALUMINUM CORPORATION OF CHINA LIMITED 255 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 32. Income tax expense/(benefit) (Continued) The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profit/(loss) of the consolidated entities as follows: For the year ended December 31, 2010 2009 Profit /(loss)before income tax 1,380,354 (5,390,597) Tax expense/(benefit) calculated at standard income tax rate of 25% (2009: 25%) 345,089 (1,347,649) Tax effects of: Preferential income tax rates applicable to certain branches and subsidiaries Impact of change on income tax rate Tax losses for which no deferred income tax assets (37,288) 54,252 63,925 — were recognized (Note 13) 110,015 294,464 Utilization of previously unrecognized tax losses and expenses (48,606) — Tax credit for purchases of qualified domestic-made equipment not recognized (Note 13) — 220,205 Tax incentive in relation to deduction limits of certain expenses Income not subject to tax Expenses not deductible for tax purposes (13,267) (147,484) 148,505 (23,777) (9,420) 91,249 Income tax expense/(benefit) 411,216 (711,003) Weighted average effective tax rate 29.79% 13.19% Share of income tax expense of associates and jointly controlled entities of RMB77 million (2009: RMB27 million) and RMB23 million (2009: nil) were included in ‘shares of profits of associate’ and ‘shares of profits of jointly controlled entities’, respectively. The change of the weighted average effective tax rate is mainly caused by certain tax losses for which no deferred income tax assets were recognized. 256 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 33. Earnings/(losses) per share (a) Basic Basic earnings/(losses) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of shares in issue during the year. For the year ended December 31, 2010 2009 Profit/(loss) attributable to equity holders of the Company (RMB) Weighted average number of ordinary shares in issue 778,008,000 (4,642,894,000) 13,524,487,892 13,524,487,892 Basic earnings/(losses) per share (RMB) 0.06 (0.34) (b) Diluted Basic earnings/(losses) per share for the years ended December 31, 2010 and 2009 is the same as the diluted earnings/(losses) per share as there are no dilutive potential shares. ALUMINUM CORPORATION OF CHINA LIMITED 257 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 34. Dividends According to the articles of association of the Company, the Company considers the maximum limit of profit appropriation to its shareholders is the lower of: (i) the sum of current period net profit and opening retaining earnings in accordance with IFRS, (ii) the sum of current period net profit and opening retaining earnings in accordance with China Accounting Standards, and (iii) amount limited by the Company Law of the PRC. No dividend was paid by the Company for the year ended December 31, 2010 (2009: nil). A dividend in respect of the year ended December 31, 2010 of RMB0.0114 per ordinary share, amounting to a total dividend of RMB154 million (2009: nil), is to be proposed at the forecoming annual general meeting. These financial statements do not reflect this dividend payable. 258 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 35. Cash flows generated from/(used in) operating activities For the year ended December 31, Note 2010 2009 Cash flows generated/(used in) from operating activities Profit/(loss) before income tax Share of (profits)/losses of jointly controlled entities 11(a) Share of profits of associates 11(b) Depreciation of property, plant and equipment Net (gain)/loss on disposal of property, plant and equipment Gain on disposals of available-for-sale financial assets Impairment charge/write-off on property, plant and equipment Amortization of intangible assets Amortization of prepaid land use rights Amortization of prepaid expenses Realized and unrealized gain on futures and option contracts 8 28 28 8 7 9 28 Interest income Interest expense Others 1,380,354 (5,390,597) (233,784) (240,028) 50,392 (77,056) 5,889,393 5,935,784 (29,324) 27,344 (156,066) (5,827) 701,781 623,791 67,577 58,745 68,385 65,991 47,522 25,982 (305,239) (4,879) (422,325) (4,785) 2,586,293 2,262,964 (19,967) (3,026) 9,763,241 3,136,154 ALUMINUM CORPORATION OF CHINA LIMITED 259 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 35. Cash flows generated from/(used in) operating activities (Continued) For the year ended December 31, Note 2010 2009 Changes in working capital: Increase in inventories Increase in trade and notes receivable Increase in other current assets Increase in restricted cash 18 Decrease in other non-current assets Increase in trade and notes payable (1,356,821) (512,804) (237,764) (515,519) (97,526) 72,809 53,100 (1,342,354) (650,380) (122,656) 391,040 1,585,853 Decrease in other payables and accrued expenses (252,088) (2,967,557) Decrease in other non-current liabilities (25,102) (21,878) Cash generated from/(used in) operating activities 7,404,330 (504,582) PRC enterprise income taxes paid (300,471) (201,372) Net cash generated from/(used in) operating activities 7,103,859 (705,954) 260 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 36. Significant related party balances and transactions The Company is controlled by Chinalco, the parent company and a state-owned enterprise established in the PRC. Chinalco itself is controlled by the PRC government, which also owns a significant portion of the productive assets in the PRC. In accordance with IAS 24 (revised), “Related Party Disclosures”, government-related entities and their subsidiaries, directly or indirectly controlled, jointly controlled or significantly influenced by the PRC government are defined as related parties of the Group. On that basis, related parties include Chinalco and its subsidiaries (other than the Group), other government-related entities and their subsidiaries (“other state- owned enterprises”), other entities and corporations in which the Company is able to control or exercise significant influence and key management personnel of the Company and Chinalco as well as their close family members. For the purposes of the related party transaction disclosures, the directors of the Company believe that meaningful information in respect of related party transactions has been adequately disclosed. In addition to the related party information and transactions disclosed elsewhere in the consolidated financial statements, the following is a summary of significant related party transactions entered in the ordinary course of business between the Group and its related parties during the year. ALUMINUM CORPORATION OF CHINA LIMITED 261 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 36. Significant related party balances and transactions (Continued) (a) Significant related party transactions For the year ended December 31, Note 2010 2009 Sales of goods and services rendered: Sales of materials and finished goods, including: (i) Chinalco and its subsidiaries Associates of Chinalco Associates Non-controlling shareholder of a subsidiary 6,069,774 2,788,571 31,869 — 3,596 396 and its subsidiaries 4,452,683 3,638,739 Provision of utility services, including: (ii) Chinalco and its subsidiaries Associates of Chinalco Non-controlling shareholder of a subsidiary 10,554,326 6,431,302 332,701 8,156 341,172 9,572 and its subsidiaries — 1,510 340,857 352,254 262 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 36. Significant related party balances and transactions (Continued) (a) Significant related party transactions (Continued) For the year ended December 31, Note 2010 2009 Purchase of goods and services: Purchase of engineering, construction and supervisory services from, including: (iii) Chinalco and its subsidiaries 3,503,363 4,947,307 Non-controlling shareholder of a subsidiary and its subsidiaries 5,894 19,740 Purchases of key and auxiliary materials and finished goods from, including: (iv) Chinalco and its subsidiaries Associates of Chinalco Jointly controlled entities Associates 3,509,257 4,967,047 4,232,369 2,630,835 323,835 1,321,202 1,458 74,818 911,462 4,665 Non-controlling shareholder of a subsidiary and its subsidiaries 2,483,173 2,595,829 8,362,037 6,217,609 ALUMINUM CORPORATION OF CHINA LIMITED 263 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 36. Significant related party balances and transactions (Continued) (a) Significant related party transactions (Continued) For the year ended December 31, Note 2010 2009 Provision of social services and logistics services by, including: (v) Chinalco and its subsidiaries 264,049 502,999 Non-controlling shareholder of a subsidiary and its subsidiaries 475 5,565 Provision of utilities services by, including: (ii) Chinalco and its subsidiaries Associates of Chinalco Non-controlling shareholder of a subsidiary 264,524 508,564 163,708 7,663 212,312 — and its subsidiaries 100,952 73,369 Rental expenses for land use rights and buildings charged by Chinalco and its subsidiaries Commission processing by Chinalco and its subsidiaries (vi) (i) 272,323 285,681 643,432 762,278 137,601 50,687 264 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 36. Significant related party balances and transactions (Continued) (a) Significant related party transactions (Continued) During the year ended December 31, 2010, the Group’s significant transactions with other state-owned enterprises (excluding Chinalco and its subsidiaries) are a large portion of its sales of goods and purchases of raw materials, electricity, property, plant and equipment and services. In addition, substantially all restricted cash, time deposits, cash and cash equivalents and borrowings as of December 31, 2010 and the relevant interest earned or paid during the year are transacted with banks and other financial institutions controlled by the PRC government. All transactions with related parties are conducted on prices and terms mutually agreed by the parties involved, and determined based on the following: (i) Sales of materials and finished goods comprised sales of alumina, primary aluminum, copper 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: (1) Adoption of the price prescribed by the PRC government (“Stated-prescribed price”); (2) If there is no State-prescribed price then adoption of state-guidance price; (3) 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 (4) If none of the above is available, then adoption of a contractual price. (ii) Utility services, including electricity, gas, heat and water, are supplied at Stated- prescribed price. ALUMINUM CORPORATION OF CHINA LIMITED 265 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 36. Significant related party balances and transactions (Continued) (a) Significant related party transactions (Continued) (iii) Engineering, project construction and supervisory services were provided for construction projects of the Company. The state-guidance price or prevailing market price (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.) and finished goods(including alumina, primary aluminum, other non-ferrous metal products, 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. (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 RMB1,000.00 to maintain effective registration. According to the agreement terms, Chinalco may negotiate extension of effective period in using these trademarks. 266 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 36. Significant related party balances and transactions (Continued) (b) Balances with related parties Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at year-end are as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Trade and notes receivable Subsidiaries of the Company Chinalco and its subsidiaries Associates of Chinalco Non-controlling shareholder of a subsidiary and its subsidiaries — 397,098 683 — 1,015,859 1,471,845 329,194 656 301,217 656 265,276 656 119,309 146,663 21,221 20,180 Less: provision for impairment of receivables (150,261) (150,315) (150,261) (150,315) 517,090 476,513 1,338,953 1,757,957 366,829 326,198 1,188,692 1,607,642 ALUMINUM CORPORATION OF CHINA LIMITED 267 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 36. Significant related party balances and transactions (Continued) (b) Balances with related parties (Continued) Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at year-end are as follows: (Continued) Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 — 60,070 — 13,915 53,887 — 48,838 8,362 — 17,631 2,974,561 2,225,421 23,965 — — 17,631 23,258 8,362 — 17,631 Other current assets Subsidiaries of the Company Chinalco and its subsidiaries Associates of Chinalco Associates Jointly controlled entity Non-controlling shareholder of a subsidiary and its subsidiaries 10,070 43,718 — 56,822 Less: provision for impairment of receivables (35,912) (19,274) (35,912) (19,274) 137,942 118,549 3,016,157 2,331,494 102,030 99,275 2,980,245 2,312,220 Trade and notes payable Subsidiaries of the Company — — Chinalco and its subsidiaries 146,078 284,593 Associates of Chinalco Associates Non-controlling shareholder of 1,095 1,001 1,415 210 a subsidiary and its subsidiaries 3,655 7,467 89,838 44,899 874 — 177 10,555 46,809 1,380 — 83 151,829 293,685 135,788 58,827 268 2010 ANNUAL REPORT For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 36. Significant related party balances and transactions (Continued) (b) Balances with related parties (Continued) Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at year-end are as follows: (Continued) Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Other payables and accrued expense Subsidiaries of the Company — — 250,396 237,349 Chinalco and its subsidiaries 2,337,462 2,383,291 1,179,959 1,362,928 Associates of Chinalco Jointly controlled entity Associates Non-controlling shareholder of 756 332 2,400 656 3,729 — 473 332 2,100 473 332 — a subsidiary and its subsidiaries 13,436 14,914 493 3,993 2,354,386 2,402,590 1,433,753 1,605,075 As of December 31, 2010, included in long-term borrowings and short-term borrowings and current portion of long-term borrowings are borrowings payable to other state-owned enterprises amounting to RMB20,148 million (2009: RMB25,602 million), RMB23,959 million (2009: RMB22,653 million) and RMB5,252 million (2009: RMB2,742 million), respectively. The terms of all balances were in accordance with terms as set out in the respective agreements or as mutually agreed between the parties concerned. ALUMINUM CORPORATION OF CHINA LIMITED 269 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 36. Significant related party balances and transactions (Continued) (c) Key management personnel compensation Fees Basic salaries, housing fund, other allowances and benefits in kind Discretionary bonus Pension costs-defined contribution schemes For the year ended December 31, 2010 2009 870 994 3,476 1,384 192 3,914 1,521 206 5,922 6,635 37. Contingent liabilities As of December 31, 2010, the Group and the Company do not have significant contingent liabilities. 270 2010 ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 38. Commitments (a) Capital commitments of property, plant and equipment Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Contracted but not provided for 4,611,998 3,918,198 3,100,290 2,288,292 Authorized but not contracted for 28,875,235 30,492,501 14,464,758 24,414,538 33,487,233 34,410,699 17,565,048 26,702,830 (b) Commitments under operating leases Pursuant to non-cancelable lease agreements entered into by the Group and the Company, the future aggregate minimum lease payments as of December 31, 2010 are summarized as follows: Group Company December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Not later than one year 626,204 782,744 190,562 269,076 Later than one year and not later than five years 2,484,490 3,110,657 729,116 Later than five years 19,052,618 23,877,969 4,964,211 1,043,177 7,047,293 22,163,312 27,771,370 5,883,889 8,359,546 ALUMINUM CORPORATION OF CHINA LIMITED 271 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2010 (Amounts expressed in thousands of RMB unless otherwise stated) 38. Commitments (Continued) (c) Commitments for capital contribution In April, 2006, the Company entered into an investment agreement with Guizhou Wujiang Hydropower Development Co., Ltd. to jointly establish Zunyi Alumina in which the Company holds 67% equity interest. As of December 31, 2010, the Company had injected a total of RMB861 million (2009: RMB760 million) and is obliged to inject an additional RMB101 million under the revised agreement which is expected to be completed in 2011. In May 2010, the Company entered into an investment agreement with Xiaoyi Mining Co., Ltd. to jointly establish Shanxi Huayi Mining Co., Ltd. with registered capital amounting to RMB80 million. The Company is obliged to inject cash amounting to RMB41 million and holds 51% equity interest of the investee under the agreement. As of December 31, 2010, the Company had injected a total of RMB8 million (2009: nil) and is obliged to inject an additional RMB33 million. In December 2010, the Company entered into an investment agreement with Guizhou Industrial Investment (Group) Co., Ltd. and Shanghai Enyuan Industry Co., Ltd. to jointly establish Guizhou Chalco Aluminum Co., Ltd. with registered capital amounting to RMB320 million. The Company is obliged to inject capital amounting to RMB128 million including equipment amounting to RMB45 million and cash amounting to RMB83 million, and holds 40% equity interest of the investee under the agreement. As of December 31, 2010, the Company did not inject any capital. 39. Subsequent events On January 30, 2011, the Board of Directors approved the Company’s private placement of not more than one billion A shares to raise not more than RMB9 billion (the “A Share Placement”). The target subscribers are institutional investors and general public investors. The A Share Placement is subject to approval by the equity holders of the Company and the relevant authorities in the PRC. 272 2010 ANNUAL REPORT