As filed with Securities and Exchange Commission on April 25, 2013
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-15264
(Exact name of Registrant as specified in its charter)
ALUMINUM CORPORATION OF CHINA LIMITED
(Translation of Registrant's name into English)
_______________
People's Republic of China
(Jurisdiction of incorporation or organization)
_______________
No. 62 North Xizhimen Street, Haidian District, Beijing
People's Republic of China (100082)
(Address of principal executive offices)
_______________
Xiong Weiping
No. 62 North Xizhimen Street, Haidian District, Beijing
People's Republic of China (100082)
(86) 10 8229 8103
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
_______________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Name of each exchange on which registered
American Depositary Shares*
Class H Ordinary Shares**
New York Stock Exchange, Inc.
*
**
Evidenced by American Depositary Receipts. Each American Depositary Share represents 25 H Shares.
Not for trading, but only in connection with the listing of American Depositary Shares, pursuant to the requirements of the Securities and Exchange
Commission
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2012:
Domestic Shares, par value RMB1.00 per share
H Shares, par value RMB1.00 per share
9,580,521,924
3,943,965,968
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes [X] No [ ]
Yes [ ] No [X]
Note-Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and
large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP [ ] International Financial Reporting Standards as issued by the International Accounting Standards Board [X] Other [ ]
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Item 17 [ ] Item 18 [ ]
Yes [ ] No [X]
TABLE OF CONTENTS
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
INFORMATION ON THE COMPANY
UNRESOLVED STAFF COMMENTS
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
FINANCIAL INFORMATION
THE OFFER AND LISTING
ADDITIONAL INFORMATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
FORWARD-LOOKING STATEMENTS
CERTAIN TERMS AND CONVENTIONS
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.
PART II
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B. CODE OF ETHICS
ITEM 16C.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
ITEM 16G. CORPORATE GOVERNANCE
ITEM16H. MINE SAFETY DISCLOSURE
PART III
ITEM 17.
ITEM 18.
ITEM 19.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
3
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
4
5
9
9
9
9
22
53
53
74
83
90
91
92
103
106
107
107
107
107
108
108
108
108
108
109
109
110
110
110
110
110
FORWARD-LOOKING STATEMENTS
Certain information contained in this annual report, which does not relate to historical financial information, may be deemed to constitute forward-looking
statements. The words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions
are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially
from historical results and those presently anticipated or projected. You should not place undue reliance on any such forward-looking statements, which speak
only as of the date made. These forward-looking statements include, without limitation, statements relating to:
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
future general economic conditions;
future conditions in the international and China capital markets;
future conditions in the financial and credit markets;
future prices and demand for our products;
future PRC tariff levels for alumina, primary aluminum and aluminum fabrication products;
sales of our products;
the extent and nature of, and potential for, future development;
production, consumption and demand forecasts of bauxite, alumina, primary aluminum and aluminum fabrication products;
expansion, consolidation or other trends in the primary aluminum industry;
the effectiveness of our cost-saving measures;
future expansion, investment and acquisition plans and capital expenditures;
competition;
changes in legislation, regulations and policies;
estimates of proven and probable bauxite reserves;
our research and development plans; and
our dividend policy.
These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and
future developments, as well as other factors we believe are appropriate in particular circumstances. However, whether actual results and developments will
meet our expectations and predictions depends on a number of risks and uncertainties, which could cause actual results to differ materially from our
expectations. These risks are more fully described in the section headed "Item 3. Key Information - D. Risk Factors."
Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements. We cannot assure you that the
actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business
or operations.
4
CERTAIN TERMS AND CONVENTIONS
"Chalco", "the Company", "the Group", "our company", "we", "our" and "us" refer to Aluminum Corporation of China Limited and its subsidiaries
and, where appropriate, to its predecessors;
"A Shares" and "domestic shares" refer to our domestic ordinary shares, with a par value of RMB1.00 each, which are listed on the Shanghai Stock
Exchange;
"alumina-to-silica ratio" refers to the ratio of alumina to silica in bauxite by weight;
"aluminum fabrication" refers to the process of converting primary aluminum or recycled aluminum materials into plates, strips, bars, tubes and other
fabricated products;
"AUD" or "Australian dollars" refers to the lawful currency of the Commonwealth of Australia;
"Baotou Aluminum" refers to Baotou Aluminum Company Limited, our wholly-owned subsidiary established under PRC Law;
"Baotou Group" refers to Baotou Aluminum (Group) Co., Ltd., one of our shareholders;
"bauxite" refers to a mineral ore that is principally composed of aluminum;
"Bayer process" refers to a refining process that employs a strong solution of caustic soda at an elevated temperature to extract alumina from ground bauxite;
"Board" refers to our board of directors;
"Chalco Energy" refers to Chalco Energy Co., Ltd., our wholly-owned subsidiary established under PRC law;
"Chalco Hong Kong" refers to Chalco Hong Kong Limited, our wholly-owned subsidiary established under Hong Kong Law;
"Chalco Iron Ore" refers to Chalco Iron Ore Holding Limited, 65% of the equity interest of which is owned by us;
"Chalco Liupanshui" refer to Chalco Liupanshui Hengtaihe Mining Co., Ltd., 49% of the equity interest of which is owned by us;
"Chalco Mining" refers to Chalco Mining Co., Ltd., our wholly-owned subsidiary established under PRC law;
"Chalco Nanhai" refers to Chalco Nanhai Alloy Company, our subsidiary established under PRC law;
"Chalco Qingdao" refers to Chalco Qingdao Light Metal Company Limited, our subsidiary established under PRC Law;
"Chalco Ruimin" refers to Chalco Ruimin Company Limited, 93.30% of the equity interest of which is owned by us;
"Chalco Southwest Aluminum" refers to Chalco Southwest Aluminum Company Limited, 60% of the equity interest of which is owned by us;
"Chalco Southwest Aluminum Cold Rolling" refers to Chalco Southwest Aluminum Cold Rolling Company Limited, our wholly-owned subsidiary
established under PRC Law;
"Chalco Trading" or "CIT" refers to China Aluminum International Trading Co., Ltd., our wholly-owned subsidiary established under PRC Law ;
"Chalco Xing Xian" refers to the construction of Bayer process production system and ancillary facilities at Xing Xian, Lvliang City of Shanxi Province with
designed capacity of 800,000 tonnes of metallurgical grade alumina per year;
"China" and the "PRC" refers to the People's Republic of China, excluding for purposes of this annual report, Hong Kong Special Administrative Region,
Macao Special Administrative Region and Taiwan;
"China Aluminum Ningxia" refers to China Aluminum Ningxia Energy Group Co., Ltd. (formerly Ningxia Electric Power Group Co., Ltd.), 70.82% of the
equity interest has been owned by us since January 23, 2013;
5
"China Nonferrous Metals Technology" refers to China Nonferrous Metals Processing Technology Co., Ltd.;
"Chinalco" and "Chinalco Group" refer to our controlling shareholder, Aluminum Corporation of China and its subsidiaries (other than Chalco and its
subsidiaries) and, where appropriate, to its predecessors;
"Chinalco Finance" refers Chinalco Finance Co., Ltd.;
"CSRC" refers to China Securities Regulatory Commission;
"C$" refers to the legal currency of Canada;
"Dongdong Coal" refers to Shaanxi Chengcheng Dongdong Coal Co., Ltd., 45% of the equity interest of which is owned by us;
"Energy-Saving and Emission Reduction Goals" refer to the energy-saving and emission reduction goals set out in China's 12th Five-Year Plan for National
Economic and Social Development laid out in 2011, by which China expects to cut its per unit GDP energy consumption by 16 percent compared with the
2010 level by the end of 2015;
"Exchange Act" refers to the U.S. Securities Exchange Act of 1934, as amended;
"Euros" or "EUR" refers to the lawful currency of the Euro zone;
"Fushun Aluminum" refers to Fushun Aluminum Company Limited, our wholly-owned subsidiary established under PRC law;
"Gansu Hualu" refers to Gansu Hualu Aluminum Company Limited, 51% of the equity interest of which is owned by us;
"Gansu Huayang" refers to Gansu Huayang Mining Development Company Limited, 70% of the equity interest of which is owned by us;
"Guangxi Huayin" refers to Guangxi Huayin Aluminum Company Limited, 33% of the equity interest of which is owned by us;
"Guangxi Investment" refers to Guangxi Investment (Group) Co., Ltd., formerly known as Guangxi Development and Investment Co., Ltd., a PRC state-
owned enterprise and one of our promoters and shareholders;
"Guizhou Development" refers to Guizhou Provincial Materials Development and Investment Corporation, a PRC state-owned enterprise and one of our
promoters and shareholders;
"Guizhou Yuneng" refers to Guizhou Yuneng Mining Co., Ltd., 25% of the equity interest of which is owned by us;
"H Shares" refers to overseas listed foreign shares with a par value RMB1.00 each, which are listed on the Hong Kong Stock Exchange;
"Henan Aluminum" refers to Chinalco Henan Aluminum Company Limited, 90.03% of the equity interest of which is owned by us;
"HK$" and "HK dollars" refers to Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of the PRC;
"Hong Kong Stock Exchange" refers to The Stock Exchange of Hong Kong Limited;
"Hongrui Chemical" refers to Jiaozuo Hongrui Chemical Company Limited, which we acquired in October 2009 and subsequently ceased its existence as an
independent legal person and became part of our Zhongzhou branch;
"Huatong Charcoal" refers to Qinghai Aluminum Huatong Charcoal Co., Ltd., a subsidiary of Chinalco;
"Huaxi Aluminum" refers to Huaxi Aluminum Company Limited, 56.86% of the equity interest of which is owned by us;
"Bayer-sintering combined process" and "Bayer-sintering series process" refer to the two methods of refining process developed in China which involve
the combined application of the Bayer process and the sintering process to extract alumina from bauxite;
6
"Japanese Yen" refers to the lawful currency of Japan;
"Jiaozuo Wanfang" refers to Jiaozuo Wanfang Aluminum Manufacturing Co. Ltd., 24.002% of the equity interest of which was owned by us as of December
31, 2012. Jiaozuo Wanfang has been our subsidiary since January 1, 2008 after we established de facto control overs it;
"Ka" refers to kiloamperes, a unit for measuring the strength of an electric current, with one kiloampere equaling to 1,000 amperes;
"kWh" refers to kilowatt hours, a unit of electrical power, meaning one kilowatt of power for one hour;
"Lanzhou Aluminum" refers to Lanzhou Aluminum Co., Ltd., a wholly-owned subsidiary of us since April 2007 and until July 2007 when it was divided
into two wholly-owned entities: Lanzhou branch and Northwest Aluminum;
"Liancheng branch" refers to our wholly-owned branch, which was formerly known as Lanzhou Liancheng Longxing Aluminum Company Limited, before
we acquired 100% of its equity interest;
"Listing Rules" and "Hong Kong Listing Rules" refers to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange, as amended;
"LME" refers to the London Metal Exchange Limited;
"Longmen Aluminum" refers to Shanxi Longmen Aluminum Co., Ltd., 55% of the equity interest of which is owned by us;
"Luxin Company" refers to Jiexiu Luxin Coal Gasification Company Limited;
"Nanping Aluminum" refers to Fujian Nanping Aluminum Company Limited;
"NDRC" refers to China National Development and Reform Commission;
"Northwest Aluminum" refers to Northwest Aluminum Fabrication Plant, our wholly-owned branch;
"NYSE" or "New York Stock Exchange" refers to the New York Stock Exchange Inc.;
"ore-dressing Bayer process" refers to a refining process we developed to increase the alumina-to-silica ratio of bauxite;
"Pingguo Aluminum" refers to Pingguo Aluminum Company;
"Qinghai Energy" refers to Qinghai Province Energy Development (Group) Co., Ltd., 21% of the equity interest of which is owned by us;
"refining" refers to the chemical process used to produce alumina from bauxite;
"Research Institute" refers to Zhengzhou Research Institute, our wholly-owned branch mainly providing research and development services;
"Rio Tinto" refers to Rio Tinto plc, a company incorporated in England and Wales, the shares of which are listed on the London Stock Exchange and the New
York Stock Exchange;
"RMB" or "Renminbi" refers to the lawful currency of the PRC;
"SASAC" refers to State-owned Assets Supervision and Administration Commission of the State Council of China;
"SEC" refers to the U.S. Securities and Exchange Commission;
"Securities Act" refers to the U.S. Securities Act of 1933, as amended;
"Shandong Aluminum" refers to Shandong Aluminum Industry Co., Limited, a wholly-owned subsidiary of Chinalco;
"Shandong Huayu" refers to Shandong Huayu Aluminum and Power Company Limited, 55% of the equity interest of which is owned by us;
7
"Shanxi Jiexiu" refers to Shanxi Jiexiu Xinyugou Coal Industry Co., Ltd., 34% of the equity interest of which is owned by us;
"Shanxi Huasheng" refers to Shanxi Huasheng Aluminum Company Limited, 51% of the equity interest of which is owned by us;
"Shanxi Huaxing" refers to Shanxi Huaxing Aluminum Co., Ltd., our wholly-owned subsidiary;
"Shanxi Huaze" refers to Shanxi Huaze Aluminum and Power Co., Limited, 60% of the equity interest of which is owned by us;
"Shanxi Other Mines" refers to the seven of our jointly-operated mines, including Shangtan mine, Jindui mine, Shicao mine, Nanpo mine, Xishan mine,
Niucaogou mine and Sunjiata mine in Shanxi Province that became the mining areas of our new own mine in 2010;
"SHFE" refers to the Shanghai Futures Exchange;
"Shuicheng Panlong" refers to Shuicheng County Panlong Coal Co., Ltd.;
"Simandou Project" refers to the project to develop and operate the Simandou iron ore mine located in Guinea in West Africa as further described in the
Simandou joint development agreement dated July 29, 2010 entered into amongst Rio Tinto, Rio Tinto Iron Ore Atlantic Limited and us for the purpose of
development of the Simandou Project;
"sintering process" refers to a refining process employed to extract alumina from bauxite by mixing ground bauxite with supplemental materials and burning
the mixture in a coal-fired kiln;
"smelting" refers to the electrolytic process used to produce molten aluminum from alumina;
"SouthGobi" refers to SouthGobi Resources Ltd.;
"tonne" refers to the metric ton, a unit of weight, that is equivalent to 1,000 kilograms or 2,204.6 pounds;
"US$", "dollars" or "U.S. dollars" refers to the legal currency of the United States;
"Xinan Aluminum" refers to Xinan Aluminum (Group) Company Limited;
"Xincheng" refers to Henan Xincheng Construction Supervisory Services Company Limited, a subsidiary that we acquired in October 2009;
"Yichuan Power" refers to Yichuan Power Industries Group Company;
"Zhangze Electric Power" refers to Shanxi Zhangze Electric Power Co., Ltd.;
"Zhaogu Coal" refers to Jiaozuo Coal Group Xinxiang (Zhaogu) Energy Co., Ltd.;
"Zhongzhou Aluminum" refers to Henan Zhongzhou Aluminum Construction Company Limited, a subsidiary that we acquired in October 2009;
"Zunyi Alumina" refers to Chalco Zunyi Alumina Co., Ltd., 73.28% of the equity interest of which is owned by us; and
"Zunyi Aluminum" refers to Zunyi Aluminum Co., Ltd., 62.1% of the equity interest of which is owned by us.
Translations of amounts in this annual report from Renminbi to U.S. dollars and vice versa have been made at the rate of RMB6.2301 to US$1.00, the
exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board for December 31, 2012. We make no representation that any Renminbi or
U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or
at all. See "Item 3. Key Information - Selected Financial Data - Exchange Rate Information" for historical exchange rates between the Renminbi and the U.S.
dollar.
Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
8
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
KEY INFORMATION
A.
SELECTED FINANCIAL DATA
Historical Financial Information
The following tables present selected comprehensive income data and cash flows data for the years ended December 31, 2008, 2009, 2010, 2011 and
2012 and selected statement of financial position data as of December 31, 2008, 2009, 2010, 2011 and 2012 that were prepared under International
Financial Reporting Standards, or IFRS, which includes all International Accounting Standards and Interpretations, as issued by the International
Accounting Standards Board, or the IASB. The selected financial information has been derived from, and should be read in conjunction with, the audited
consolidated financial statements and their notes included elsewhere in this annual report or our previous annual reports.
Our consolidated financial statements as of December 31, 2011 and 2012 and for the years ended December 31, 2010, 2011 and 2012 included in this
annual report on Form 20-F have been prepared in accordance with IFRS. We make an explicit and unreserved statement of compliance with IFRS with
respect to our consolidated financial statements as of December 31, 2011 and 2012 and for the years ended December 31, 2010, 2011 and 2012 included
in this annual report. Ernst & Young, our current independent registered public accounting firm, has issued an unqualified auditor's report on our
consolidated statement of financial position as of December 31, 2012, and the related consolidated statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year ended December 31, 2012. PricewaterhouseCoopers, our predecessor independent registered
public accounting firm, has issued an unqualified auditor's report on our consolidated statement of financial position as of December 31, 2011, and the
related consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows for the years ended December 31,
2010 and 2011.
2008
RMB
Year Ended December 31,
2009
2010
2011
RMB
(in thousands, except per share and per ADS data)
RMB
RMB
2012
RMB
2012
US$
STATEMENT OF COMPREHENSIVE INCOME DATA
Revenue
Cost of sales
76,728,147
(70,960,668)
70,268,005
(69,079,446)
120,994,847
(113,349,941)
145,874,433
(138,111,367)
149,478,821
(149,802,658)
23,993,005
(24,044,985)
Gross profit/(loss)
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property, plant and equipment
5,767,479
(1,562,841)
(2,507,011)
(177,507)
(1,334)
9
1,188,559
(1,264,920)
(2,956,506)
(177,756)
(623,791)
7,644,906
(1,573,301)
(2,623,740)
(164,235)
(701,781)
7,763,066
(1,622,788)
(2,779,429)
(218,026)
(279,750)
(323,837)
(1,967,922)
(2,992,968)
(198,946)
(19,903)
(51,980)
(315,873)
(480,404)
(31,933)
(3,195)
Other income
Other gains/(losses), net
Operating profit/(loss)
Finance costs, net
100,781
212,840
151,142
403,836
328,853
491,024
185,501
538,033
744,490
(25,484)
119,499
(4,090)
1,832,407
(1,709,667)
(3,279,436)
(2,137,825)
3,401,726
(2,495,184)
3,586,607
(3,293,574)
(4,784,570)
(4,599,380)
(767,976)
(738,252)
Operating profit/(loss) after finance costs
Share of profits/(losses) of jointly-controlled entities
Share of profits of associates
122,740
1,672
10,045
(5,417,261)
(50,392)
77,056
906,542
233,784
240,028
293,033
122,262
402,701
(9,383,950)
37,040
254,848
(1,506,228)
5,945
40,906
Profit/(loss) before income tax
Income tax benefit/(expense)
134,457
34,172
(5,390,597)
711,003
1,380,354
(411,216)
817,996
(127,492)
(9,092,062)
448,479
(1,459,377)
71,986
Profit/(loss) for the year
168,629
(4,679,594)
969,138
690,504
(8,643,583)
(1,387,391)
Attributable to:
Owners of the parent
Non-controlling interests
Earnings/(loss) per share for profit/(loss) attributable
to ordinary equity holders of the parent
(expressed in RMB and US$ per share and per ADS):
Basic and diluted earnings/(loss) per share
Earnings/(loss) per ADS
Dividends (expressed in RMB and US$ per share and per ADS)
Interim dividends per share
Interim dividends per ADS
Special dividends per share
Special dividends per ADS
Final dividends per share
Final dividends per ADS
Proposed dividends per share
Proposed dividends per ADS
19,485
149,144
(4,642,894)
(36,700)
778,008
191,130
237,974
452,530
(8,233,754)
(409,829)
(1,321,609)
(65,782)
168,629
(4,679,594)
969,138
690,504
(8,643,583)
(1,387,391)
0.0014
0.035
(0.34)
(8.58)
0.06
1.44
0.02
0.44
(0.61)
(15.22)
(0.10)
(2.44)
0.05
1.30
-
-
-
-
-
-
10
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0114
0.2850
-
-
-
-
0.0114
0.2850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2008
RMB
2009
RMB
As of December 31,
2010
RMB
(in thousands)
2011
RMB
2012
RMB
2012
US$
STATEMENT OF FINANCIAL POSITION DATA
Total current assets
Total non-current assets
42,556,995
93,055,157
36,333,877
97,641,312
41,324,547
99,997,492
49,969,708
107,164,449
49,016,016
126,000,866
7,867,614
20,224,533
Total assets
135,612,152
133,975,189
141,322,039
157,134,157
175,016,882
28,092,147
Total current liabilities
Total non-current liabilities
38,622,098
36,808,624
40,029,861
38,364,171
55,733,547
28,401,637
62,360,398
36,619,073
83,853,411
37,392,321
13,459,401
6,001,881
Total liabilities
Net assets
75,430,722
78,394,032
84,135,184
98,979,471
121,245,732
19,461,282
60,181,430
55,581,157
57,186,855
58,154,686
53,771,150
8,630,865
Long-term interest bearing loans and borrowings
(excluding current portion)
36,042,552
37,804,482
27,723,867
35,968,526
36,635,652
5,880,428
2008
RMB
2009
RMB
Year Ended December 31,
2010
RMB
(in thousands)
2011
RMB
2012
RMB
2012
US$
OTHER FINANCIAL DATA
Net cash flows generated from/(used in) operating actives
Net cash flows used in investing activities
Net cash flows generated from financing activities
5,023,984
(22,207,473)
24,370,350
(705,954)
(9,477,193)
1,576,713
7,103,859
(8,260,317)
2,717,553
2,489,756
(9,714,547)
8,842,453
1,122,352
(23,153,090)
20,428,953
180,150
(3,716,327)
3,279,073
Net increase/(decrease) in cash and cash equivalents
7,186,861
(8,606,434)
1,561,095
1,617,662
(1,601,785)
(257,104)
11
Exchange Rate Information
The following table sets forth information concerning exchange rates between the Chinese Renminbi and the U.S. dollar for the periods indicated. These rates
are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our
periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York for the periods through
December 2008 and the Federal Reserve H.10 Statistical Release for the periods beginning on or after January 1, 2009. On April 19, 2013, the exchange rate
for Renminbi was US$1.00 = RMB6.1772.
Period
2008
2009
2010
2011
2012
October
November
December
2013
January
February
March
April (through April 19, 2013)
Period End
Average (1)
(RMB per US$1.00)
Low
High
6.8225
6.8259
6.6000
6.2939
6.2301
6.2372
6.2265
6.2301
6.2186
6.2213
6.2108
6.1772
6.9192
6.8307
6.7603
6.4475
6.2990
6.2627
6.2338
6.2328
6.2215
6.2323
6.2154
6.1927
7.2946
6.8470
6.8330
6.6364
6.3879
6.2877
6.2454
6.2502
6.2303
6.2438
6.2246
6.2078
6.7800
6.8176
6.6000
6.2939
6.2221
6.2372
6.2221
6.2251
6.2134
6.2213
6.2105
6.1720
(1)
Annual average are calculated by averaging the rates on the last business day of each month during the annual period. Monthly averages are calculated by averaging the rates on each
business day during the month.
B.
CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C.
REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D.
RISK FACTORS
Our business and financial condition and results of operations are subject to various changing business, competitive, economic, political and social
conditions in China and worldwide. In addition to the factors discussed elsewhere in this annual report, the following are some of the important factors
that could cause our actual results to differ materially from those projected in any forward-looking statements.
Demand for our products is sensitive to cyclical fluctuations and general economic conditions, and a reduction in demand could materially and
adversely affect our business, financial condition and results of operations.
Demand for our products is sensitive to cyclical fluctuations and is significantly affected by general economic conditions. The global economy started to
recover from the global financial crisis, which started in the fourth quarter of 2008, in the second half of 2009 and continued to gain its momentum in
2010. As a result, our production and sales volumes increased significantly in 2010 and continued to increase in the first half of 2011. However, since
the third quarter of 2011, the European debt crisis and the continued weakness and uncertainty regarding the durability of the emerging economic
recovery have adversely affected the global economy and resulted in a significant decrease in our sales volumes. If the European debt crisis or the
weakened global economic recovery continues or a global recession recurs, demand for our products may continue to decline. Uncertainty about future
economic conditions makes it challenging for us to forecast our results of operations, make business decisions and identify risks that may affect our
business. If we are not able to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, our business, financial
condition and results of operations may be materially and adversely affected.
Volatility in alumina, primary aluminum and other non-ferrous metal prices may adversely affect our business, financial condition and results of
operations.
12
The prices of our key products have historically fluctuated in response to general economic conditions, supply and demand and the level of global
inventories. We price our alumina and primary aluminum products by reference to international and domestic market prices, and domestic supply and
demand, each of which may fluctuate beyond our control. In the second half of 2009, as the global economy started to recover from the global financial
crisis, demand for alumina and primary aluminum gradually increased. In 2010, the Australian FOB spot price of alumina and the international spot
price of primary aluminum on the LME reached a high of US$390 per tonne and US$2,447 per tonne, respectively. In the first half of 2011, the
Australian FOB spot price of alumina and the international spot price of primary aluminum on the LME continued to increase and reached a high of
US$440 per tonne and US$2,802 per tonne, respectively. However, since the third quarter of 2011, demand for alumina and primary aluminum has been
negatively affected by the European debt crisis. As a result, the Australian FOB spot price of alumina and the international spot price of primary
aluminum on the LME have been generally decreasing and reached a low of US$308 per tonne and US$1,837 per tonne, respectively, in 2012. Our
average external selling price of self-produced alumina and primary aluminum decreased by 6.8% and 7.5%, respectively, from 2011 to 2012. Because
most of our costs are fixed, we may not be able to respond promptly to a sudden decrease in alumina or primary aluminum prices. See "- Failure to
maintain optimal utilization of our production facilities will adversely affect our gross and operating margins."
As a result of the implementation of our operational structural adjustment exercise, we established our trading business as a new operating segment in
2010. The trading segment primarily engages in the trading of alumina, aluminum ingots, other non-ferrous metal products and coal products. The
outsourced products are mainly procured from third-party suppliers on the spot market, under long-term agreements or through short-term futures and
options transactions. Sales of products manufactured by our manufacturing subsidiaries and branches through Chalco Trading are also included in the
trading segment (see further discussion in Note 5b to our audited financial statements). The profits of our trading business may be negatively affected by
fluctuations in the price of the non-ferrous metal products and coal products we trade.
As the profit margin of trading is based on price fluctuations in the short term, we need to make the correct prediction of the price fluctuations of the
non-ferrous metal products and coal products on the markets to ensure the profit margin. If the price fluctuations on the market do not match our
prediction, we may incur substantial losses. In addition, as we generate profit from the differences between the purchasing and sales prices of the non-
ferrous metal products we deal in, significant fluctuations in the prices of the commodities we deal in may cause the value of the outsourced products in
transit or in inventory to decline, and if the carrying value of our existing inventories exceeds the market price in the future periods, we may need to
make additional provisions for our inventories' value. As a result, any significant fluctuation in international market prices could materially and
adversely affect our business, financial condition and results of operations.
Our business requires substantial capital investments that we may be unable to fulfill.
Our plans to upgrade and expand our production capacity will require substantial capital expenditures. See "Item 4. Information on the Company - D.
Property, Plants and Equipment - Our Expansion." We may also need additional funding for debt servicing, working capital, other investments, potential
acquisitions and joint ventures and other corporate requirements. As a result, we expect to incur total capital expenditures of approximately RMB18.8
billion in 2013. We may seek external financing to satisfy our capital needs if cash generated from our operations is insufficient to fund our capital
expenditures or if our actual capital expenditures and investments exceed our plans. Our ability to obtain external financing at reasonable costs and on
acceptable terms is subject to a variety of uncertainties. Failure to obtain sufficient funding for our development plans could adversely affect our
business and prospects.
Our failure to successfully manage our business expansion would have a material adverse effect on our results of operations and prospects.
We may not be able to adequately manage our business growth, which we have achieved through organic growth, acquisitions and joint ventures. Our
expansion has created, and will continue to place, substantial demand on our resources. Managing our growth and integrating the acquired businesses
will require us to, among other things:
*
*
*
*
*
*
comply with the laws, regulations and policies applicable to the acquired businesses;
gain market acceptance for new products and services and establish relationships with new customers and suppliers;
achieve sufficient utilization of new production facilities to recover costs;
obtain timely approval for the construction or expansion of alumina refineries, primary aluminum smelters and mining projects as required under
PRC law;
manage relationships with employees, customers and business partners during the course of our business expansion and integration of new
businesses;
attract, train and motivate members of our management and workforce;
13
*
*
*
access debt, equity or other capital resources to fund our business expansion, which may divert financial resources otherwise available for other
purposes;
divert significant management attention and resources from our other businesses; and
strengthen our operational, financial and management controls, particularly those of our newly acquired subsidiaries, to maintain the reliability
of our reporting processes.
Any difficulty meeting the foregoing or similar requirements could significantly delay or otherwise constrain our ability to implement our expansion
plans, or result in failure to achieve the expected benefits of the combination or acquisition or write-offs of acquired assets or investments, which in turn
would limit our ability to increase operational efficiency, reduce marginal manufacturing costs or otherwise strengthen our market position. If we are not
able to manage our growth successfully, our business and prospects could be materially and adversely affected.
Risks associated with entering into new areas of business.
Since 2010, we have participated in joint ventures and made strategic investment in coal mining and iron ore production. We may not achieve our
business objectives due to our lack of experience in these new areas. For example, coal mining and the production of iron ore involve processes and
technologies that are significantly different from the production of alumina, primary aluminum and aluminum fabrication products. We will also need to
establish relationships with customers of iron ore and coal products, which will be different from our existing customers. As such, we face various risks
relating to the commencement of these new business operations, including our potential failure to:
*
*
*
*
attract, train, motivate and retain skilled employees for our coal mining and the production of iron ore business;
keep abreast of evolving industry standards and respond to competitive market conditions;
maintain adequate control of our expenses in relation to such new businesses; and
achieve acceptable quality standard for our coal and iron ore products.
If we are unsuccessful in addressing any of these risks, our business, financial condition and results of operations may be materially and adversely
affected.
Our joint ventures and strategic investment may not be successful.
We may from time to time enter into joint venture arrangements to grow our business and operations. For example, in 2012, we established Chalco
Liupanshui with Liupanshui Hengtaihe Mining Investment Co., Ltd. We currently hold 49% of the equity interest in Chalco Liupanshui with the
remaining 51% of the equity interest held by Liupanshui Hengtaihe Mining Investment Co., Ltd. In addition, we also acquired 45% of the equity interest
in Dongdong Coal from Shaanxi Sanqin Energy Co., Ltd. and 25% of the equity interest in Guizhou Yuneng from Chongqing Wujiang Shiye (Group)
Co., Ltd. in 2012.
We have non-controlling interests in a number of joint ventures. Although we have not been materially constrained by the nature of our ownership
interests, no assurance can be given that our joint venture partners will not exercise their power of veto or their controlling influence in any of our
ventures in a way that will hinder our corporate objectives and reduce any anticipated cost savings or revenue enhancement resulting from these joint
ventures. In addition, whether or not we hold majority interests or maintain operational control in such joint ventures, such arrangements necessarily
involve special risks and our partners may:
*
*
*
*
have economic or business interests or goals that are inconsistent with or opposed to ours;
exercise veto rights so as to block actions that we believe to be in our or the joint venture's best interests;
take action contrary to our policies or objectives with respect to the investments; or
as a result of financial or other difficulties, be unable or unwilling to fulfill their obligations under the joint venture, other agreements, such as
contributing capital to expansion or maintenance projects.
Failure to maintain optimal utilization of our production facilities will adversely affect our gross and operating margins.
During 2012, we expanded the production capacity by upgrading or remoulding some of our alumina and primary aluminum production facilities.
However, our primary aluminum production may be adversely affected by the administrative policies and orders implemented by the local governments
to fulfill China's Energy-Saving and Emission Reduction Goals. Please see "- We are subject to administrative policies and orders relating to China's
Energy-Saving and Emission Reduction Goals that could adversely affect our production." We also increased our external purchases of alumina and
primary aluminum for trading purposes to capitalize on fluctuating market prices in 2012 and to enhance resource planning to achieve cost savings in
our production. The increase in our external purchases has reduced our utilization of certain production facilities, but has not resulted in a proportionate
decrease in fixed costs such as leases and depreciation of plant, property and equipment. Given our high proportion of fixed costs, failure to maintain
historical utilization rates may adversely affect our gross and operating margins.
14
Furthermore, we expect our production capacity expansion in recent years to increase our costs of sales, in particular, depreciation and amortization
costs. If we are able to maintain satisfactory facility utilization rates and increase our production output, our production capacity expansion will enable
us to reduce our unit costs through economies of scale, as fixed costs will be spread over a higher volume of output units. Conversely, underutilization of
our existing and newly acquired or constructed production facilities may increase our marginal production costs and prevent us from realizing the
intended economic benefits of our expansion. For example, as a result of the decrease in our procurement of imported bauxite from Indonesia in
response to the change in Indonesian bauxite export policy, since May 2012, we have suspended the operations of certain alumina production facilities in
our Shandong branch, Henan branch and Zhongzhou branch with an aggregate annual designed production capacity of 170,000 tonnes, which adversely
affected our results of operations and financial condition. Please see "- Our profitability and operations could be adversely affected if we are unable to
obtain a steady supply of raw materials at competitive prices."
We may be required to record impairment charges in the future.
If business conditions deteriorate, long lived assets need to be reviewed for possible impairment. An impairment loss needs to be recognized to the
extent that the carrying amount exceeds the recoverable amount. We recorded impairment loss on property, plant and equipment during the three years
ended December 31, 2010, 2011 and 2012. We cannot guarantee that we will not incur increased impairment loss in the future, due to various reasons
including, but are not limited to, a sustained decline in our stock price, strategic decisions made in response to changes in economic and competitive
conditions, the impact of the economic environment on our customer base or a material adverse change in our relationship with significant customers. If
we record significant impairment charges, our results of operations may be materially and adversely affected.
Our operations consume substantial amounts of energy, and our profitability may decline if energy costs rise or if our energy supplies are
interrupted.
Our operations consume substantial amounts of energy. Although we generally expect to meet the energy requirements for our alumina refineries and
primary aluminum smelters from a combination of internal and external sources, our results of operations may be materially and adversely affected by
the following:
*
*
significant increases in electricity costs; or
curtailment of the operation of one or more refineries or smelters due to our inability to extend energy supply contracts upon their expiration.
Cost of electricity is the principal production cost in our primary aluminum operations. Our average cost per kilowatt-hour, or kWh, of electricity
increased by 2.4% from 2011 to 2012 primarily due to the electricity price adjustment under state policy. We expect the PRC economy will continue to
grow and as a result, we expect demand for and prices of electricity to increase accordingly. If we are unable to pass on increases in energy costs to our
customers, our operating margin, financial condition and results of operations could be materially and adversely affected.
15
Our business and industry may be affected by the development of alternative energy sources and climate change.
Our operations consume substantial amounts of coal. Coal combustion generates significant greenhouse gas and other pollutants, and the effects of
climate change resulting from global warming and increased pollution levels may provide incentives for governments to promote or invest in "green"
energy technologies such as wind, solar, nuclear and biomass power plants, or to reduce their consumption of conventional energy sources such as coal.
A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory changes in response to the potential
impacts of climate change. These regulatory mechanisms may impact our operations directly or indirectly through customers or our supply chain. We
may have to increase our capital expenditures in order to comply with such revised or new legislation or regulations, and may realize changes to profit or
loss arising from increased or decreased demand for our products and indirectly, from changes in costs of goods sold, which may adversely affect our
results of operations and financial condition.
In addition, we have invested in coal mining operations. We are affected by the growth of the PRC thermal power industry, which relies on coal as main
source of fuel. The PRC thermal power industry may be affected by the development of alternative energy sources, climate change and global
environmental factors. In particular, pursuant to China's 12th Five-Year Plan for Environmental Protection, the PRC government plans to continue to
encourage the development of alternative energy sources, such as wind power, solar power, biomass and geothermal energy, in the next five years. As
such, alternative energy industries may rapidly develop and gradually gain mainstream acceptance in the PRC and the rest of the world. If alternative
energy technologies continue to develop and prove suitable for wide commercial application in the PRC and overseas, demand for conventional energy
sources, such as coal, could be reduced, which could have a material and adverse effect on the coal mining industry and, consequently, our business,
results of operations and financial condition.
Losses caused by disruptions in the supply of power could materially and adversely affect our business, financial condition, results of operations and
cash flows.
Production of primary aluminum requires a substantial and continuous supply of electricity. Interruptions in the supply of power can result in costly
production shutdowns, increased costs associated with restarting production and the waste of production in progress. A sudden loss of power, if
prolonged, can cause damage to or the destruction of production equipment and facilities. In such an event, we may need to expend significant capital
and resources to repair or replace the affected production equipment to restore our production capacity. Various regions across China have experienced
shortages and disruptions in electrical power, especially during peak demand in the summer or during severe weather conditions. We cannot assure you
that our operations will not suffer from shortages or disruptions in electrical power, any occurrence of which could have a material and adverse impact
on our business, financial condition and results of operations.
Our operations consume substantial amounts of coal, and our operations may be adversely affected if we are not able to procure sufficient coal or if
coal prices rise significantly.
We rely heavily on coal as our energy and fuel source in our production of alumina. As we increase our alumina refining capacity, our consumption of
coal will increase accordingly. If we are not able to obtain the amount of coal needed for our production due to a shortage of coal, constraints on coal
transportation or any other reason, we may be forced to reduce our production output or suspend our alumina refining operations, which could materially
and adversely affect our financial condition and results of operations. Although we have acquired equity interest in a number of coal mines, we expect to
continue to rely substantially on third-party coal suppliers for the supply of coal. In addition, although our average purchase price of thermal coal per
unit tonne decreased by 6.9% from 2011 to 2012, we expect the price of coal to increase as the PRC economy continues to grow. If we are unable to pass
on increases in coal prices to our customers or offset price increases through productivity improvements, our operating margin, financial condition and
results of operations could be adversely affected.
We may be unable to continue competing successfully in the markets in which we operate.
We face competition from both domestic and international primary aluminum producers. Our principal competitors are domestic smelters, some of
which are consolidating and expanding their production capacities. These smelters compete with our primary aluminum operations on the basis of cost,
quality and pricing. In addition, we face increasing competition from international alumina and primary aluminum suppliers as a result of the elimination
of tariffs on imports of primary aluminum and alumina into China. We also face increasing competition from domestic and international aluminum
fabrication products suppliers. Increasing competition in our product markets may reduce our selling prices or sales volumes, which will have a material
adverse effect on our financial condition and results of operations. If we are unable to price our products competitively, maintain or increase our current
share of China's alumina and primary aluminum markets or otherwise maintain our competitiveness, our financial condition, results of operations and
profitability could be materially and adversely affected.
16
Our overseas expansion exposes us to political and economic risks, commercial instability and events beyond our control in the countries in which
we plan to operate.
We are currently undertaking a number of overseas projects, including the iron ore mining joint venture project in Guinea in West Africa and bauxite
mining project in Laos, which require significant capital investment. See "Item 4. Information on the Company - A. History and Development of the
Company - Overseas Development." As we are new to these overseas markets, we cannot assure you that our overseas expansion or investments will be
successful or that we will not suffer foreign exchange losses in connection with our overseas investment. For example, in 2007, we entered into a
development agreement with the Queensland State Government of Australia ("Queensland State Government") to develop a bauxite and alumina project,
the Aurukun Project. However, due to the change in market conditions of global aluminum industries, the Aurukun Project could no longer continue
under the original framework. We engaged a series of negotiations with the Queensland State Government, but in June 2011, the Queensland State
Government terminated the negotiation. As a result, we had a total impairment charge of RMB651 million of the carrying value of the capitalized
development expenditures pertaining to the Aurukun Project in 2010 and 2011. In addition, our overseas business is subject to the risk of political and
economic instability associated with these countries.
Our profitability and operations could be adversely affected if we are unable to obtain a steady supply of raw materials at competitive prices.
Historically, the price for bauxite, our most important raw material for alumina production, has been volatile. We obtain bauxite for our operations from
three major sources, including mines that we own or jointly operate and external suppliers. See "Item 4. Information on the Company - B. Business
Overview - Raw Materials - Alumina - Supply." The extent to which we procure bauxite from each of these sources affect the security of our supply or
cost of bauxite. In May 2012, the Government of Indonesia imposed a ban on the exportation of 14 types of unprocessed minerals, including bauxite,
with an exception for mining companies that plan to build local processing facilities. For mining companies with plans to build local processing
facilities, the Government of Indonesia imposes a 20% export tariff on the exportation of these 14 types of minerals. We rely on Indonesia as a major
source of imported bauxite. In response to the change in Indonesian bauxite export policy, we reduced our procurement of bauxite from Indonesia,
which resulted in a decrease in our total supply of imported bauxite. As a result, since May 2012, we have suspended the operations of certain alumina
production facilities in our Shandong branch, Henan branch and Zhongzhou branch with an aggregate annual designed production capacity of 170,000
tonnes. In addition, our results of operations are affected by increases in the cost of other raw materials and other key inputs such as energy. If we cannot
obtain a steady supply of key raw materials at competitive prices, our financial condition and results of operations could be materially and adversely
affected.
Transportation interruptions may affect our shipment of raw materials and delivery of products.
Our operations require the reliable transportation of raw materials and supplies to our refining, smelting and fabrication sites and finished products to our
customers. Our alumina products and aluminum fabrication products are mainly transported by rail or trucks, and our primary aluminum products are
delivered to our customers primarily by rail. If we are unable to make timely deliveries due to logistical and transportation disruptions, our production,
reputation and results of operations may be adversely affected.
We may not successfully develop and implement new methods and processes.
A main objective of our research and development is to develop new methods and processes to improve the efficiency of our alumina refineries to
increase our production yield from bauxite with low alumina-to-silica ratio. If the supply of high quality bauxite with a high alumina-to-silica ratio in
China declines, our failure to develop such methods and processes and incorporate them into our production could impede our efforts to reduce unit
costs and diminish our competiveness. In 2012, partly due to the decline in the quality of domestically sourced bauxite, our average cost of alumina per
tonne increased by approximately RMB152 from that in 2011.
The bauxite reserve data in this annual report are only estimates, which may prove to be inaccurate.
The bauxite reserve data on which we base our production, revenue and expenditure plans are estimates that we have developed internally and may
prove inaccurate. There are numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. If these
estimates are inaccurate or the indicated tonnages are not recovered, our business, financial condition, and results of operations may be materially and
adversely affected.
Our significant indebtedness could adversely affect our business, financial condition and results of operations.
We require a significant amount of cash to meet our capital requirements, including the expansion and upgrade of our production capacity, as well as to
fund our existing operations. As of December 31, 2012, we had approximately RMB67.9 billion in outstanding short-term bonds and short-term bank
borrowings (including the current portion of long-term bank and other borrowings) and RMB36.6 billion in outstanding long and medium-term bonds
and long-term bank and other borrowings (excluding the current portion of these borrowings). On February 9, 2012, we issued medium-term bonds in
the aggregate principal amount of RMB2 billion with three-year maturity. On October 26, 2012, we issued medium-term bonds in the aggregate
principal amount of RMB3 billion with five-year maturity. In 2012, we also issued six tranches of short-term bonds in the aggregate principal amount of
RMB16.5 billion, each with one-year maturity. On January 18, 2013, we issued long-term bonds in the aggregate principal amount of RMB3 billion with
five-year maturity. On March 14, 2013, we issued short-term bonds in the principal amount of RMB3 billion with one-year maturity. See Note 20 and
Note 38 to our audited consolidated financial statements for more detailed information about our notes. As a result, we had net current liabilities as of
December 31, 2012. This level of debt could have significant consequences on our operations, including:
17
*
*
*
making it more difficult for us to fulfill payment and other obligations under our outstanding debt, including repayment of our debt and credit
facilities should we be unable to obtain extensions for any such debt or credit facilities before they mature. As of December 31, 2012, we had
outstanding long-term borrowings (including long-term loans and borrowings, medium-term notes and long-term bonds, and the current portion
of long-term loans and borrowings and medium-term notes) maturing in 2013, 2014, 2015, 2016, 2017 and after 2017 in the aggregate principal
amount of RMB 10.9 billion, RMB10.0 billion, RMB9.8 billion, RMB6.7 billion, RMB6.1 billion and RMB4.1 billion, respectively;
reducing the availability of cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
exposing us to interest rates fluctuations on our borrowings and the risk of being unable to rollover, extend or refinance our borrowings as
necessary;
*
*
potentially increasing the cost of additional financing and making it more difficult for us to conduct equity financings in the capital markets or
obtain government approvals to seek additional financing; and
putting pressure on our ADS price due to concerns of our ability to repay our debt.
Our ability to meet our payment and other obligations under our outstanding debt depends on our ability to generate cash flows in the future or to
refinance such debt. We cannot assure you that our business will generate sufficient cash flows from operations to satisfy our obligations under our
outstanding debt and to fund other liquidity needs. If we are not able to generate sufficient cash flows to meet such obligations, we may need to
refinance or restructure our debt, reduce or delay capital investments, or seek additional equity or debt financing. The sale of additional equity securities
could result in dilution to our ADS holders. A shortage of financing could in turn impose limitations on our ability to plan for, or react effectively to,
changing market conditions or to expand through organic and acquisitive growth, thereby reducing our competitiveness. We cannot assure you that
future financing will be available in amounts or on terms acceptable to us, if at all.
We have incurred losses in the past and may not achieve sustained profitability in the future.
Although we were profitable in 2010 and 2011, we incurred a net loss of approximately RMB8.6 billion in 2012. We may continue to incur losses in the
future and we cannot assure you that we will achieve or sustain profitability in the future.
In addition, our borrowing costs and access to the debt capital markets, and thus our liquidity, depend significantly on our public credit ratings. These
ratings are assigned by rating agencies, which may reduce or withdraw their ratings or place us on "credit watch", which would have negative
implications. A history of net losses may result in a deterioration of our credit ratings, which could increase our borrowing costs and limit our access to
the capital markets, which in turn, could reduce our earnings and adversely affect our liquidity.
We may not realize the economic benefits of our expansion plans.
Since 2010, we have acquired equity interest in a number of coal mines and an iron ore mine to diversify our product offering and partially offset our
future energy costs, as well as supply a portion of the coal we consume in our operations. We may continue to acquire equity interest or establish joint
ventures in the coal mining or iron ore production business in the future. However, cost savings and other economic benefits expected from our
expansion plans may not materialize as a result of project delays, cost overruns, or changes in market conditions. Failure to obtain the intended economic
benefits from these projects could adversely affect our business, financial condition and results of operations. We may also experience mixed results
from our expansion plans in the short term.
The interests of our controlling shareholder who exerts significant influence over us may conflict with ours.
18
As of December 31, 2012, our largest shareholder, Chinalco, directly owned 38.56% of our issued share capital and indirectly owned an additional
3.12% of our issued share capital through its controlled entities. The interests of Chinalco may conflict or even compete with our interests and those of
our public shareholders. Chinalco may take actions that are in the interest of its subsidiaries, associates and other related entities to our detriment. For
example, Chinalco may seek to influence our decision as to the amount of dividends we declare and distribute. Any increase in our dividend payout
would reduce funds otherwise available for reinvestment in our businesses and thus may adversely affect our future prospects and financial condition.
In addition, Chinalco and a number of its subsidiaries and associates provide a range of services to us, including engineering and construction services,
social services, land and property leasing as well as the supply of raw and supplemental materials. It would be difficult to find an alternative source for
some services, such as educational and medical care services, that we receive from Chinalco. Our cost of operations may increase if Chinalco, its
subsidiaries and associates are unable to continue providing such services to us.
We are subject to, and incur costs to comply with, environmental laws and regulations.
As we produce air emissions, discharge waste water, and handle hazardous substances at our bauxite mines, alumina refineries, aluminum smelters and
aluminum fabrication plants, we are subject to, and incur costs to comply with, environmental laws and regulations. Each of our production plants has
implemented a system to control emissions and ensure compliance with PRC environmental regulations. We may incur significant additional costs if
relevant laws and regulations change or enforcement of existing laws and regulations becomes more rigorous. Further, although all of our overseas
expansion projects are at the early stages and have not started operation, these projects are subject to foreign environmental laws and regulations. Failure
to comply with environmental laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the
assessment of monetary penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations, all of which may
materially and adversely affect our business operations.
We are subject to administrative policies and orders relating to China's Energy-Saving and Emission Reduction Goals that could adversely affect
our production.
We are subject to administrative energy-saving and emission reduction policies and orders carried out by the central and provincial governments in
accordance with China's Energy-Saving and Emission Reduction Goals. In 2010 and 2011, some of our primary aluminum production facilities were
subject to power rationing carried out by some provincial governments to fulfill their energy-saving and emission reduction goals. Although power
rationing only slightly reduced our primary aluminum production in 2010 and 2011 and the PRC central government has denounced it as an improper
means to fulfill the Energy-Saving and Emission Reduction Goals, some or all of our primary aluminum production facilities may be subject to power
rationing or other similar policies and orders from time to time in the future, which may adversely affect our production.
Our business is subject to unplanned business interruptions that may adversely affect our performance.
We may experience accidents in the course of our operations, which may cause significant property damage and personal injuries. Significant accidents
and natural disasters may cause interruptions to our operations or result in property or environmental damage, an increase in operating expenses or loss
of revenues. The occurrence of accidents, natural disasters and the resulting consequences may not be covered adequately, or at all, by the insurance
policies we carry. In accordance with customary practice in China, we do not carry any business interruption insurance or third-party liability insurance
for personal injury or environmental damage arising from accidents on our property or relating to our operations other than for our automobiles. Losses
or payments incurred by us as a result of major accidents or natural disasters may have a material and adverse effect on our results of operations if such
losses or payments are not fully insured.
We are operating a number of mines without valid permits.
The permit to mine bauxite in one of our jointly-operated bauxite mines have expired and lapsed. While we are seeking to renew such expired license,
we may be subject to administrative fines for operating mine without a valid license, or we may be ordered to cease our mining operations at such mine
until we obtain the renewed license. Accordingly, our failure to renew such expired mining license may adversely affect our mining operations, financial
condition and results of operations.
In addition, our investments in the coal mines are subject to PRC government approval. Our coal mining operations require valid licenses and permits
issued by the PRC government. Delays or failure in securing necessary PRC government approvals, licenses or permits, as well as any adverse change in
government policies may hinder our expansion plans, which may materially and adversely affect our profitability and growth prospects.
19
We have not obtained valid titles or land use rights to certain properties or land parcels that we occupy.
We had not obtained valid ownership certificates to certain properties that we occupy. These properties are used primarily for production plants. As of
December 31, 2012, the book value of our properties with defective titles represented approximately 12.8% of our net asset value. In addition, we had
not obtained land use rights to certain land parcels, which we use primarily for our production plants. As of December 31, 2012, the book value of these
land parcels represented approximately 0.8% of our net asset value. We have applied to the appropriate authorities to obtain the relevant ownership
certificates. We cannot give any assurance that ownership dispute will not occur or that third parties will not assert any claims against us for
compensation in respect of any use of these properties or land parcels.
Our operations may be affected by uncertain mining conditions and we may suffer losses for mining safety incidents.
We currently operate 17 bauxite mines in China. In addition, we have established joint ventures to operate a bauxite mine in Laos and an iron ore mine
in Guinea. We have also invested in a number of coal mines in China. Our mining operations are subject to certain risks inherent in underground mining,
which may affect the safety of our workforce or cost of producing coal and bauxite, including, without limitation, roof collapses, minewater discharge,
ground falls and other mining hazards. Additionally, we are exposed to operational risks associated with industrial or engineering activities, such as
maintenance problems or equipment failures. Although we conduct geological assessments on mining conditions and adapt our mining plans to the
mining conditions at each mine, we cannot assure you that adverse mining conditions will not endanger our workforce, increase our production costs,
reduce our bauxite or coal output or temporarily suspend our operations. The occurrence of any of the foregoing events or conditions could have a
material adverse impact on our business and results of operations.
Our mines and operating facilities may be damaged by water, gas, fire or cave-ins due to unstable geological structures. Although we have implemented
safety measures at our mining sites, trained our employees on occupational safety and maintained liability insurance for limited property damage for
certain of our operations, we cannot assure you that safety incidents will not occur. Any significant accident, business disruption or safety incident could
result in substantial uninsured costs and the diversion of our resources, which could materially and adversely affect our business operations and financial
condition.
We may be subject to product liability claims.
Some of the products we sell or manufacture may expose us to product liability claims relating to property damage or personal injury. The successful
assertion of product liability claims against us could result in significant damage payments and harm to our reputation, which in turn could have a
material adverse effect on our business, financial condition and results of operations.
Our H Shares were removed from the Hang Seng Index and may not become a constituent stock of the Hang Seng Index again in the future.
Our H Shares were removed from the Hang Seng Index on February 7, 2013. Being a constituent stock of the Hang Seng Index may attract the interest
of tracker funds that maintain investment portfolios that track the performance of the Hang Seng Index. We have no control over the selection of the
Hang Seng Index constituent stocks and our H Shares may not become a constituent stock of the Hang Seng Index again in the future. After our H
Shares were removed from the Hang Seng Index, tracker funds may cease investing in our H Shares and our share price may decline.
The interests of the shareholders of Jiaozuo Wanfang may conflict with our interests.
The interests of non-controlling shareholders of Jiaozuo Wanfang, whose A Shares are listed on the Shenzhen Stock Exchange, may be inconsistent with
our interests in certain circumstances. Jiaozuo Wanfang must comply with a number of PRC regulations designed to protect the interests of non-
controlling shareholders. According to the relevant PRC laws, when shareholders of Jiaozuo Wanfang vote by poll on connected transactions, connected
parties such as us must abstain from voting. If we are unable to obtain approval for connected transactions from the non-controlling shareholders of
Jiaozuo Wanfang, such transactions cannot be implemented, which may affect our overall operational efficiency. Furthermore, we may be subject to
legal proceedings initiated by the non-controlling shareholders of Jiaozuo Wanfang challenging our actions as its controlling shareholder. Such legal
proceedings could result in significant damage awards payable by us and disruption to our businesses, which in turn could have an adverse effect on our
business and financial condition.
Our operations are affected by a number of risks relating to conducting business in the PRC.
As a significant majority of our assets and operations are located in the PRC, we are subject to a number of risks relating to conducting business in the
PRC, including the following:
20
*
*
The central and local PRC government continues to exercise a substantial degree of control and influence over the aluminum industry in China
and shape the structure and development of the industry through the imposition of industry policies governing major project approvals,
preferential tax treatment and safety, environmental and quality regulations. If the PRC government changes its current policies or the
interpretation of those policies that are currently beneficial to us, we may face pressure on profit margins and significant constraints on our
ability to expand our business operations.
Although China has been transitioning from a planned economy to a market-oriented economy, a substantial portion of productive assets in
China are still owned by the PRC government. The PRC government also exercises significant control over China's economic growth through
the allocation of resources, control of payments of obligations denominated in foreign currencies and monetary and tax policies. Some of these
measures benefit the overall economy of China, but may have a materially adverse impact on us.
*
*
In 2005, China adopted a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based
on supply and demand with reference to a basket of currencies. Since then the exchange rate between U.S. dollar and Renminbi has fluctuated
and become increasingly unpredictable following the global financial crisis with increasing pressure on the Renminbi to appreciate. In April
2012, the PRC government took a milestone step in turning the Renminbi into a global currency by doubling the size of its trading band against
the U.S. dollar, pushing through a crucial reform that further liberalizes its financial markets. The People's Bank of China allows the Renminbi
to rise or fall 1% from a mid-point every day, effective on April 16, 2012, compared with its previous 0.5% limit. Any appreciation of the
Renminbi will affect the value of our US dollar-denominated borrowings and overseas investments, increase the prices of our export sales
denominated in foreign currencies and reduce the Renminbi equivalent value of our trade and notes receivable denominated in foreign
currencies, which may adversely affect our financial condition and results of operations. Our financial condition and operating performance may
also be affected by changes in the value of currencies other than Renminbi in which our earnings and obligations are denominated.
Although the promulgation of laws and regulations covering general economic matters has increased since 1979, China has not developed an
adequately comprehensive legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in
China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their
lack of binding precedential nature, the interpretation and enforcement of these laws and regulations involve uncertainties. The system of laws
and the enforcement of existing laws in the PRC may not be as certain in implementation and interpretation as in the United States. The PRC
judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. The inability to enforce or obtain a remedy under any of our present or future agreements could result in a significant
loss of business, business opportunities or capital.
The audit reports included in this annual report are prepared by auditors who are not inspected by the Public Company Accounting Oversight Board
and, as such, you are deprived of the benefits of such inspection.
Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting
firms, must be registered with the US Public Company Accounting Oversight Board (United States) (the "PCAOB") and are required by the laws of the
United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards.
Because we have substantial operations within the PRC and the PCAOB is currently unable to conduct inspections of the work of our auditors as they
relate to those operations without the approval of the Chinese authorities, our auditors' work related to our operations in China is not currently inspected
by the PCAOB.
This lack of PCAOB inspections of audit work performed in China prevents the PCAOB from regularly evaluating audit work of any auditor that was
performed in China including that performed by our auditors. As a result, investors may be deprived of the full benefits of PCAOB inspections.
The inability of the PCAOB to conduct inspections of audit work performed in China makes it more difficult to evaluate the effectiveness of our
auditors' audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections on all of their work. Investors may lose
confidence in our reported financial information and procedures and the quality of our financial statements.
We may be adversely affected by the outcome of the administrative proceedings brought by the SEC against five accounting firms in China.
21
The SEC has recently brought administrative proceedings against five accounting firms in China, alleging that they refused to hand over documents to
the SEC for ongoing investigations into certain other China-based companies. We were not and are not subject to any SEC investigations, nor are we
involved in the proceedings brought by the SEC against the accounting firms. However, the independent registered public accounting firm that issues the
audit reports included in our annual reports filed with the SEC is affiliated to one of the five accounting firms named in the SEC's proceedings and we
may be adversely affected by the outcome of the proceedings, along with other U.S.-listed companies audited by these accounting firms. If the SEC
prevails in the proceedings, the China-based affiliate of our independent auditors and other four accounting firms in China that were named in the
proceedings may be barred from practicing before the SEC and hence unable to continue to be the auditors for, or participate in audits of, China-based
companies like ourselves. If none of the China-based auditors are able to continue to be auditors for, or participate in the audits of, China-based
companies listed in the U.S., we will not be able to meet the reporting requirements under the Exchange Act, which may ultimately result in our
deregistration from the SEC and delisting from NYSE.
ITEM 4.
INFORMATION ON THE COMPANY
A.
HISTORY AND DEVELOPMENT OF THE COMPANY
We were incorporated as a joint stock limited company under the Company Law of the PRC on September 10, 2001 under the corporate name
Aluminum Corporation of China Limited. Our principal executive and registered office is located in the People's Republic of China at No. 62 North
Xizhimen Street, Haidian District, Beijing, China 100082, and our telephone number is (86) 10 8229 8103.
Pursuant to a reorganization agreement entered into among Chinalco, Guangxi Investment and Guizhou Development in 2001, substantially all of
Chinalco's alumina and primary aluminum production operations, as well as a research institute and other related assets and liabilities, were transferred
to us upon our formation. We acquired our bauxite mining operations and associated mining rights from Chinalco in a separate mining rights agreement.
We are a vertically integrated aluminum producer with operations in bauxite mining, alumina refining, primary aluminum smelting and aluminum
fabrication. We also produce ancillary products and services derived from or related to our aluminum operations. In addition, we are engaged in trading
of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, coal products and raw and ancillary materials in bulk
domestically and internationally. Since 2010, we have expanded our operations into iron ore production and substantially increased our investment in
coal mining operations.
We have substantially increased the size and scope of our operations through organic growth as well as selective acquisitions and joint ventures. Our key
operating assets currently include four subsidiaries mainly engaged in bauxite mining; two integrated alumina and primary aluminum production plants;
one integrated alumina, primary aluminum and aluminum fabrication plant; six stand-alone alumina refineries, including our jointly-controlled entity,
Guangxi Huayin, and our Research Institute; thirteen stand-alone primary aluminum smelters, including our Research Institute; eight stand-alone
aluminum fabrication plants; and one carbon production plant. In addition, as of December 31, 2012, we were constructing two alumina refineries. All of
our principal production facilities are operated in accordance with ISO14001 standards.
Significant Acquisitions and Joint Ventures
In March 2012, we established Chalco Liupanshui jointly with Liupanshui Hengtaihe Mining Investment Co., Ltd. Chalco Liupanshui is a PRC limited
liability company engaging in coal production in Guizhou Province. The registered capital of Chalco Liupanshui is RMB420 million. As of December
31, 2012, we and Liupanshui Hengtaihe Mining Investment Co., Ltd. held 49% and 51%, respectively, of the equity interest in Chalco Liupanshui. We
injected RMB75 million in cash as our capital contribution to Chalco Liupanshui in March 2012.
In May 2012, we acquired 45% of the equity interest in Dongdong Coal from Shaanxi Sanqin Energy Co., Ltd. at a total consideration of RMB200
million. We paid such consideration in cash in May 2012. Dongdong Coal is a PRC limited liability company engaging in coal production in Shaanxi
Province. The registered capital of Dongdong Coal is RMB95 million.
In May 2012, we acquired 25% of the equity interest in Guizhou Yuneng from Chongqing Wujiang Shiye (Group) Co., Ltd. at a total consideration of
RMB473 million. We paid such consideration in May 2012. Guizhou Yuneng is a PRC limited liability company engaging in coal production in
Guizhou Province. The registered capital of Guizhou Yuneng is approximately RMB209.7 million.
On 23 April 2012, we entered into a share sale and purchase agreement with Winsway Resources Holdings Limited ("Winsway Resources") and Mr.
Wang Xingchun, chairman and chief executive officer of Winsway Coking Coal Holdings Limited ("Winsway") and controlling shareholder of
Winsway, beneficially owning approximately 48.64% of the total issued share capital of Winsway. Pursuant to the agreement, we agreed to purchase
and Winsway Resources agreed to sell 1,128,186,410 ordinary shares of Winsway legally and beneficially held by Winsway Resources, representing
29.9% of the issued share capital of Winsway, at a total cash consideration of HK$2,391,755,189.20, representing HK$2.12 per share to be acquired. In
addition, pursuant to the agreement, Mr. Wang Xingchun agreed unconditionally and irrevocably to guarantee all obligations of Winsway Resources
under the share sale and purchase agreement. The principal business of Winsway includes procurement, transportation, storage, processing and
marketing of coking coal. Winsway is listed on the Main Board of Hong Kong Stock Exchange. Completion of the acquisition was conditional upon the
fulfillment or waiver of a number of conditions set out in the share sale and purchase agreement on or before September 30, 2012 (or such other date as
agreed by the parties), including obtaining of all required regulatory approvals. The acquisition was approved by our shareholders at the 2011 annual
general meeting held on June 29, 2012. As we were unable to obtain all the necessary approvals from relevant PRC and overseas government and
regulatory authorities by September 30, 2012, the parties agreed on September 28, 2012 to terminate the share sale and purchase agreement and the
acquisition of 29.9% of the equity interest in Winsway contemplated thereunder.
22
On August 11, 2012 and August 13, 2012, we entered into an equity transfer agreements with each of China Zhongtou Trust Co., Ltd. and Bank of China
Group Investment Limited for the acquisition of an aggregate of 35.3% of the equity interest in China Aluminum Ningxia for a total consideration of
approximately RMB674.9 million and an equivalent amount in HK dollars of approximately RMB1,347.7 million calculated on the benchmark
exchange rate for HK dollars to RMB as announced by the PBOC on the payment date. On December 14, 2012, we submitted a bid in response to an
open tender of Huadian Power International Corporation Limited for its 23.66% of the equity interest in China Aluminum Ningxia announced on
November 30, 2012. We won the bid on December 28, 2012 and entered into an equity transfer agreement with Huadian Power International
Corporation Limited on December 31, 2012 to acquire 23.66% of the equity interest in China Aluminum Ningxia for a total consideration of
approximately RMB1,361.5 million. On December 31, 2012, we entered into a capital increase and share subscription agreement with China Aluminum
Ningxia and Ningxia State-owned Investment and Operation Limited Liability Company, Beijing Energy Investment (Holding) Co., Ltd. and Ningxia
Power Investment Corporation, pursuant to which, China Aluminum Ningxia will increase its registered capital by RMB1,452.66 million and we will
subscribe for all such additional registered capital at an aggregate subscription price of RMB2 billion. China Aluminum Ningxia is an integrated power
generation company with coal mines located in Ningxia Autonomous Region. Its principal business includes conventional coal-fire power generation
and renewable energy generation. We completed the acquisitions and capital contribution in January 2013 and currently hold 70.82% of the equity
interest in China Aluminum Ningxia.
Construction Projects
As of the date of this annual report, we have undertaken a number of facility expansion projects in China. See "- D. Property, Plants and Equipment -
Our Expansion."
Overseas Development
On July 29, 2010, we entered into a joint development agreement with Rio Tinto and Rio Tinto Iron Ore Atlantic Limited, an affiliate of Rio Tinto, for
the development and operation of the Simandou Project, a premium open-pit iron ore mine located in Guinea, West Africa. This agreement provides that
we (via our subsidiary) would acquire 47% of the equity interest in a joint venture company to be incorporated by Rio Tinto for an earn-in payment of
US$1.35 billion, and Rio Tinto would transfer its entire 95% of the equity interest in its project company for the Simandou Project, Simfer S.A., to the
joint venture company. On April 22, 2011, Rio Tinto Mining & Exploration Limited, a wholly-owned subsidiary of Rio Tinto, Simfer S.A. and the
Government of Guinea entered into a settlement agreement, which, amongst other things, provided that the Government of Guinea would be entitled to
acquire up to 35% of the equity interest in Simfer S.A. On November 28, 2011, we, through Chalco Hong Kong, established Chalco Iron Ore under the
laws of Hong Kong with the China-Africa Development Fund and three leading PRC enterprises in the steel, port building and railway construction
industries to serve as an investment vehicle for investing in the Simandou Project. We, through Chalco Hong Kong, hold 65% and the other investors
collectively hold 35% of the equity interest in Chalco Iron Ore. Following the approvals of the relevant PRC authorities in March and April 2012,
Chalco Hong Kong contributed approximately US$878 million to Chalco Iron Ore, representing 65% of the US$1.35 billion earn-in to be paid by
Chalco Iron Ore to Simfer Jersey Limited, the joint venture company incorporated by Rio Tinto under the laws of Jersey to implement the joint
development agreement, as amended. On April 24, 2012, Chalco Iron Ore paid in full the total earn-in payment of US$1.35 billion to Rio Tinto and
acquired its 47% equity interest in Simfer Jersey Limited. Simfer Jersey Limited currently holds 95% of the equity interest in Simfer S.A., with the
remaining 5% being held by International Finance Corporation. In addition, during the period from May 2012 to end of the 2012, Chalco Iron Ore
injected US$480 million in the form of capital contribution based on its proportion of equity interest to Simfer Jersey Limited for the development and
operation of the Simandou Project pursuant to the joint development agreement, as amended. Meanwhile, the other shareholder of Simfer Jersey Limited
also injected the capital contribution based on its proportion of equity interest to Simfer Jersey Limited during the same period. As of the date of this
annual report, the Simandou Project was in the exploration stage and preparation for development.
23
On April 2, 2012, we announced the offer to acquire up to (but not more than) 60%, but not less than 56% of the issued and outstanding common shares
of SouthGobi, a limited liability company incorporated in Canada and listed on Toronto Stock Exchange and Hong Kong Stock Exchange, by way of a
partial offer. SouthGobi is an integrated coal mining, development and exploration company with metallurgical and thermal coal mines in Mongolia's
South Gobi region. The offer was conditioned upon the fulfillment and/or waiver of conditions of the offer as set out in the lock-up agreement and was
made for a cash consideration of C$8.48 for each common share, with a total consideration of C$925.28 million for 60% of the common shares of
SouthGobi. We intended to fund the cash required to effect the offer from our internal funds, external financing through bank borrowings, or a
combination of both. In connection with the offer, we entered into a lock-up agreement with Turquoise Hill Resources Ltd. (formerly Ivanhoe Mining
Ltd.), pursuant to which Turquoise Hill Resources Ltd. has agreed, among others, to tender to the offer all of the common shares held or subsequently
acquired by it during the offer period, which were expected to amount to an aggregate of approximately 104,807,155 common shares or 57.6% of the
total common shares of SouthGobi. On March 27, 2012, we entered into consultancy agreements with nine key senior executives and officers of
SouthGobi to retain their services for a certain period after we become a shareholder of SouthGobi. We also entered into a cooperation agreement with
SouthGobi on March 27, 2012, pursuant to which we agreed to provide certain support services to SouthGobi and its subsidiaries after we become a
shareholder of SouthGobi, including an off-take arrangement to purchase SouthGobi's coal output and assistance with the power supply for SouthGobi's
operations. Subject to the fulfillment and/or waiver of conditions set out in the lock-up agreement, we expected to formally commence the offer no later
than July 5, 2012. On April 16, 2012, the Mineral Resources Authority of Mongolia announced a request to suspend exploration and mining activity on
certain licenses owned by SouthGobi Sands LLC, a wholly-owned division of SouthGobi. On June 29, 2012, the transaction was approved by our
shareholders at the 2011 annual general meeting. On July 3, 2012, we announced an agreed 30-day extension in time for us to commence the offer. On
August 2, 2012, we announced another agreed 30-day extension in time for us to commence the offer, which was to expire on September 4, 2012. On
September 3, 2012, Turquoise Hill Resources Ltd. and we agreed to terminate the lock-up agreement and the proportional takeover transaction
contemplated thereunder.
Proposed non-public Offering of A Shares
On March 8, 2012, our Board resolved to issue up to 1.25 billion A Shares in the PRC. The A Share issue plans previously proposed by our Board on
June 30, 2009 and January 30, 2011 and approved by our shareholders at the extraordinary general meeting, A Share class meeting and H Share class
meeting held on August 24, 2009 and on April 14, 2011, respectively, ceased. Pursuant to the new issue plan approved by our Board on March 8, 2012,
we will issue up to 1.25 billion A Shares, with a nominal value of RMB1.00 each, by way of private placement for expected proceeds of not exceeding
RMB8 billion. We will issue the A Shares to no more than ten specific target subscribers within six months from obtaining the approval of the CSRC.
The issue price of A Shares to be offered will be not less than 90% of the average trading price of our A Shares in twenty trading days immediately
preceding the pricing determination date. We intend to apply proceeds from this private placement to finance Chalco Xing Xian alumina project, Chalco
Zhongzhou Ore-dressing Bayer Process expansion construction project and to supplement working capital. The issue plan was approved by the SASAC
on April 5, 2012 and by our shareholders at the extraordinary general meeting, A Share class meeting and H Share class meeting held on May 4, 2012.
On August 24, 2012, our Board resolved to adjust the issue plan by proposing, among others, to increase the number of A Shares to be issued to up to
1.45 billion A Shares. The adjusted issue plan was approved by the SASAC and our shareholders at an extraordinary general meeting, A Share class
meeting and the H Share class meeting on October 12, 2012 and by the CSRC on December 7, 2012. On March 14, 2013, we obtained the approval from
the CSRC on our proposed non-public offering of A Shares under such adjusted issue plan, with effective period of six months after the approval date.
As of the date of this annual report, the Company has not issued any A Shares under the issue plan.
24
Proposed Issuance of H Shares
On June 29, 2012, our shareholders at the 2011 annual general meeting passed a special resolution, which is valid until the earliest of (i) the end of 12
months from the date of passage, (ii) the conclusion of our next annual general meeting or (iii) the date on which the authority set out in this resolution is
revoked or varied by a special resolution at a general meeting. The resolution authorizes us to issue up to 20% of the total nominal value of H Shares in
issue as of the resolution date. Our Board is authorized to determine the use of the proceeds. The proposed issuance is subject to the approval by the
CSRC and/or other relevant PRC government authorities.
B.
BUSINESS OVERVIEW
Our Principal Products
We are the largest producer of alumina, primary aluminum and aluminum fabrication products in China in terms of production volume. We have
benefited from the strong growth of the PRC aluminum market, one of the world's fastest growing major aluminum markets. Our aluminum operations
span the aluminum market value and industry chain from bauxite mining to aluminum fabrication. Bauxite is refined into alumina, which is then smelted
into primary aluminum. Primary aluminum, in turn, is a widely used metal and the key raw material in aluminum fabrication. Aluminum fabrication
products have applications in the construction, transportation, power generation, automobile, packaging, machinery and durable goods industries. In
addition to alumina, primary aluminum and aluminum fabrication products, we also produce and sell a relatively small amount of alumina chemical
products (alumina hydrate and alumina-based industrial chemical products), carbon products (carbon anodes and cathodes) and gallium. We are also
engaged in the trading of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, coal products and raw and
ancillary materials in bulk both manufactured by us and sourced from external suppliers domestically and abroad. Accordingly, we organize and manage
our operations in four business segments: alumina segment, primary aluminum segment, aluminum fabrication segment and trading segment. After
elimination of inter-segment sales, revenues attributable to our alumina, primary aluminum, aluminum fabrication and trading segments accounted for
approximately 2.5%, 21.7%, 5.6% and 70.1%, respectively, of our total revenues in 2012. The remainder of our revenues were derived from research
and development activities and other products and services.
Our alumina segment includes the mining and purchasing of bauxite and other raw materials, and production and sale of alumina as well as alumina-
related products, such as alumina hydrate, alumina-based chemical products and gallium. Alumina accounted for approximately 93.8% of the total
production volume for this segment in 2012. Alumina chemical products are used in the production of chemical, pharmaceutical, ceramic and
construction materials. In the process of refining bauxite into alumina, we produce a small amount of gallium as a by-product. Gallium is a rare, high
value metal with applications in the electronics and telecommunication industries.
Our primary aluminum segment includes the production and sale of primary aluminum and aluminum-related products, such as carbon products. Our
principal primary aluminum product is ingots, which accounted for approximately 74.5% of our total production volume of primary aluminum in 2012.
Our standard 20 kilogram remelt ingots are used for general aluminum fabrication in the construction, power generation, automobile, packaging,
machinery and durable goods industries. We internally produce substantially all the carbon products used at our smelters and sell our remaining carbon
products to external customers.
Our aluminum fabrication segment includes the production and sale of aluminum fabrication products, including casts, planks, strips, screens,
extrusions, ingots and profiles, which are widely used in the construction, power generation, automobile, packaging, machinery and durable goods
industries. We use recycled aluminum materials at Chalco Qingdao and Chalco Nanhai, two of our aluminum fabrication plants, to produce aluminum
fabrication products.
Our trading segment includes sales of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, coal products and
raw and ancillary materials in bulk both manufactured by us and sourced from external suppliers domestically and abroad. We established our trading
business as a separate segment in July 2010 as a result of the implementation of our operational structural exercise.
Since 2010, we have expanded our operations to iron ore production to diversify our product offering. In addition, we believe our investments in coal
mining operations will partially offset the effect of the increase in the cost of energy and enable us to secure a portion of our coal supply. See "-
Supplemental Raw Materials, Electricity and Fuel - Alumina."
Our Production Capacity
Our annual alumina production capacity increased from approximately 14.8 million tonnes as of December 31, 2011 to approximately 15.5 million
tonnes as of December 31, 2012. Our annual production capacity for primary aluminum and aluminum fabrication products as of December 31, 2012
was approximately 4.3 million tonnes and 1.7 million tonnes, respectively, the same as those as of December 31, 2011. The following table sets forth the
production capacity of each of our principal plants by business segment as of the indicated date:
25
As of December 31, 2012
Alumina
Primary
Aluminum
(in thousand tonnes) (1)
Aluminum
Fabrication
Products
2,210.0
2,980.0
-
2,747.0
1,200.0
2,410.0
1,770.0
800.0
800.0
-
-
-
-
-
-
-
-
-
530.0
20.0
-
-
-
-
-
-
-
-
-
-
139.5
-
367.0
-
403.7
56.0
55.0
-
-
350.0
388.0
220.0
330.0
412.0
235.0
200.0
230.0
388.0
-
18.0
523.0
17.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
135.0
120.0
350.0
250.0
370.0
355.0
22.0
110.0
15,467.0
4,322.2
1,722.0
Plant
Guangxi branch
Zhongzhou branch
Qinghai branch
Shanxi branch
Guizhou branch
Henan branch
Shandong branch
Zunyi Alumina
Chongqing branch
Shanxi Huaze
Lanzhou branch
Shanxi Huasheng
Fushun Aluminum
Jiaozuo Wanfang(2)
Zunyi Aluminum
Shandong Huayu
Gansu Hualu
Baotou Aluminum
Guangxi Huayin(3)
Research Institute
Liancheng branch
Longmen Aluminum
Northwest Aluminum
Chalco Qingdao
Chalco Southwest Aluminum
Chalco Southwest Aluminum Cold Rolling
Chalco Ruimin
Henan Aluminum
Huaxi Aluminum
Chalco Nanhai
Total
(1)
(2)
(3)
Production capacity is calculated based on designed capacity, which accounts for various assumptions including downtime for ordinary maintenance and repairs, the ore
grade of bauxite feedstock and subsequent capacity modifications.
As of December 31, 2012, we had de facto control over Jiaozuo Wanfang although we held only 24.002% of its equity interest. As it was a consolidated subsidiary as of
December 31, 2012, the indicated production capacity represents Jiaozuo Wanfang's entire production capacity.
As of December 31, 2012, we held 33% of the equity interest in Guangxi Huayin as its second largest equity holder. The indicated production capacity represents our pro rata
share of Guangxi Huayin's production capacity.
In 2012, we produced approximately 12.4 million tonnes of alumina, 4.2 million tonnes of primary aluminum and 622,900 tonnes of aluminum
fabrication products. Our production of alumina, primary aluminum and aluminum fabrication products represented approximately 25.0%, 16.0% and
5.0%, respectively, of the total output in China in 2012.
The following table sets forth a breakdown of our production volume by product segment for the periods indicated:
Year Ended December 31,
Production Volume by Product
2010
2011
2012
(in thousand tonnes, except Gallium)
Alumina segment
Alumina
Alumina chemical products
Gallium (in tonnes)
Primary aluminum segment
Primary aluminum(1)
Carbon
Aluminum fabrication
Aluminum fabrication products
10,131.4
1,173.7
20.2
11,667.0(2)
1,192.0
35.9
12,436.0(2)
1,312.0
39.2
26
3,835.1
1,812.0
588.0
3,915.0
1,906.0
662.0
4,219.0
1,957.2
622.9
(1)
Including ingots and other primary aluminum products.
(2)
As of December 31, 2012, we held 33% of the equity interest in Guangxi Huayin as its second largest equity holder. The indicated production volume of alumina in 2011 and
2012 includes our pro rata share of Guangxi Huayin's production volume, which was not included in 2010.
Production Process
Alumina
Alumina is refined from bauxite, an aluminum-bearing ore, through a chemical refining process. The refining process applied is determined by the
mineral composition of the bauxite used in production. Our refineries may employ the Bayer process, the Bayer-sintering series process, the Bayer-
sintering combined process or the ore-dressing Bayer process. Most of the bauxite reserves in China contain diasporic bauxite, which contains high
alumina content and relatively high silica content, resulting in bauxite reserves with low alumina-to-silica ratio. The Bayer process cannot efficiently
refine diasporic bauxite that has not undergone processing to increase its alumina-to-silica ratio. The sintering process or the Bayer-sintering combined
process is suitable for refining low alumina-to-silica ratio bauxite. We have developed and improved these processes to increase our refining yield.
When we refine alumina using the Bayer process, we produce gallium as a by-product, which undergoes further processing before sale. In the process of
refining alumna, we also produce a relatively small amount of alumina chemical products (alumina hydrate and alumina-based industrial chemical
products).
Primary Aluminum
We smelt alumina into primary aluminum through electrolytic reduction. The electrolytic process takes place in a reduction cell, or pot, a steel shell
lined with carbon cathodes and refractory materials. Powerful electric currents are passed through the pot to produce molten aluminum. The molten
aluminum is transferred to holding furnaces and then poured directly into molds to produce foundry ingots, or further refined to form fabricating ingots,
which may be used directly in the aluminum fabrication process. Most of the primary aluminum we produce is in the form of ingots.
All of our primary aluminum smelters use pre-bake anode reduction pot-lines. In the pre-bake reduction process, the anodes are pre-formed in a separate
facility where pollutants can be contained. The cells themselves are enclosed with removable panels so that waste gas produced during the process can
be extracted using large exhaust fans. Our waste gas is treated and purified to reduce dust and fluoride emissions to acceptable levels set by state
environmental protection agencies.
Aluminum Fabrication Products
Aluminum fabrication products are formed from primary aluminum. Our aluminum fabrication plants, Chalco Qingdao and Chalco Nanhai, also use
recycled aluminum materials to produce aluminum fabrication products. The major categories of aluminum fabrication products that we produce include
casts, planks, strips, screens, extrusions, ingots and profiles.
Production Facilities
Alumina
We currently operate nine alumina refineries and one research institute with a total designed annual production capacity of approximately 15.5 million
tonnes as of December 31, 2012. Three of our refineries are integrated with primary aluminum smelters. In 2012, we produced approximately 12.4
million tonnes of alumina, approximately 1.3 million tonnes of alumina chemical products and approximately 39.2 tonnes of gallium. The overall
utilization rate for our refineries decreased from 94.2% in 2011 to 84.6% in 2012, primarily because we have suspended the operations of certain
alumina production facilities in our Shandong branch, Henan branch and Zhongzhou branch with an aggregate annual designed production capacity of
170,000 tonnes since May 2012 as we reduced our importation of bauxite from Indonesia in response to the change in Indonesian bauxite export policy.
In 2012, we supplied approximately 6.9 million tonnes, or 55.7% of our total production, of alumina to our own smelters and sold the remaining alumina
to other domestic smelters. All of the alumina chemical products that we produced in 2012 were sold by alumina refineries directly to external customers
or internally to Chalco Trading for subsequent external trading. Our Shanxi branch and Henan branch completed their respective remoulding and
upgrading projects in 2012, which increased our total annual alumina production capacity by 690,000 tonnes. We expect our Chalco Xing Xian alumina
project to be completed in 2013 and increase our annual alumina production capacity by 800,000 tonnes.
27
The following table sets forth the annual production capacity, output of alumina and alumina chemical products, utilization rate of and production
process applied in each of our alumina refineries and our Research Institute.
As of
December 31,
2012
For the Year Ended December 31, 2012
Shanxi branch
Henan branch
Shandong branch
Guizhou branch
Zhongzhou branch
Guangxi branch
Zunyi Alumina
Chongqing branch
Guangxi Huayin(3)
Research Institute(4)
Total
(1)
(2)
(3)
(4)
Annual
Production
Capacity(1)
Alumina
Production
Output
Alumina
Chemical
Products
Output
Utilization
Rate(2) Production Process
(in thousand tonnes, except percentages)
2,747.0
2,410.0
1,770.0
1,200.0
2,980.0
2,210.0
800.0
800.0
530.0
20.0
1,924.0
1,928.0
1,512.0
1,019.0
1,901.0
2,413.0
851.0
386.0
502.0
-
14.0
125.0
748.0
29.0
208.0
165.0
-
3.0
-
20.0
100% Bayer-sintering Combined
74.3% Bayer-sintering Combined
68.1% Sintering and Bayer
100% Bayer-sintering Combined
73.8% Sintering and Bayer
100% Bayer
100% Bayer
50.0% Bayer-sintering Series
100% Bayer
- Bayer
15,467.0
12,436.0
1,312.0
84.6%
Production capacity is calculated based on designed capacity, which accounts for various assumptions including downtime for ordinary maintenance and repairs, the ore
grade of bauxite feedstock and subsequent capacity modifications.
Capacity utilization rate in 2012 is calculated by dividing our utilized production capacity by our total designed production capacity in 2012. Before 2011, we calculated
capacity utilization rates by dividing the sum of (i) the output of alumina chemical products multiplied by a quotient based on the alumina content of the respective alumina
chemical product and (ii) the output of alumina by production capacity of a particular plant.
Guangxi Huayin's designed production capacity and production volume represents our pro rata share of this jointly-controlled entity.
The alumina chemical products produced at our Research Institute are sold commercially, and such sales are included in our total revenues.
Primary Aluminum
We operate 16 primary aluminum smelters located across nine provinces in China, including our Research Institute, which produces a limited amount of
primary aluminum in connection with its research and development activities. Our smelters had an aggregate annual production capacity of
approximately 4.3 million tonnes as of December 31, 2012. Three of our smelters are integrated with alumina refineries and do not need to source
alumina externally.
In 2012, we produced approximately 4.2 million tonnes of primary aluminum and the average utilization rate for our smelters was 98.7% for the year. In
2012, Fushun Aluminum completed its remoulding and upgrading project, which increased our total annual primary aluminum production capacity by
90,000 tonnes. The annual primary aluminum production capacity of Liancheng branch decreased by 90,000 tonnes because we ceased the operation of
some obsolete primary aluminum production facilities in December 2012. In addition, we ceased the operation of our obsolete primary aluminum
production facilities of Henan branch in January 2013, which reduced our annual primary aluminum production capacity by 56,000 tonnes.
The following table sets forth the annual production capacity, aluminum output, utilization rate and smelting equipment used in each of our aluminum
smelters and our Research Institute:
28
As of
December 31,
2012
Annual
Production
Capacity(1)
For the Year Ended December 31, 2012
Aluminum
Output
Utilization
Rate(2) Smelting Equipment
(in thousand tonnes, except percentages)
388.0
330.0
230.0
139.5
403.7
56.0
412.0
388.0
367.0
18.0
200.0
55.0
220.0
400.0
263.0
220.0
110.0
403.0
-
451.0
415.0
387.0
4.0
219.0
53.0
216.0
100% 200Ka, 240Ka and
400Ka pre-bake
95.7% 200Ka and 350Ka pre-bake
99.5% 160Ka and 210Ka pre-bake
81.4% 160Ka and 320Ka pre-bake
93.4% 160Ka, 186Ka and
230Ka pre-bake
- 85Ka pre-bake
99.6% 280Ka pre-bake
98.3% 200Ka and 350Ka pre-bake
97.7% 160Ka and 200Ka pre-bake
- 150Ka and 300Ka pre-bake
100% 240Ka pre-bake
100% 200Ka pre-bake
100% 300Ka pre-bake
Plant
Baotou Aluminum
Fushun Aluminum
Gansu Hualu
Guangxi branch
Guizhou branch
Henan branch(3)
Jiaozuo Wanfang
Lanzhou branch
Qinghai branch
Research Institute(4)
Shandong Huayu
Shandong branch
Shanxi Huasheng
Shanxi Huaze
Zunyi Aluminum
Liancheng branch
Longmen Aluminum
Total
350.0
235.0
523.0
17.0
349.0
234.0
495.0
-
99.8% 300Ka pre-bake
99.3% 200Ka, 350Ka pre-bake
99.5% 200Ka and 500Ka pre-bake
- 75Ka pre-bake
4,332.2 (5)
4,219.0
98.7%
(1)
Production capacity takes into account designed capacity, downtime for ordinary maintenance and repairs and subsequent capacity modifications.
(2)
(3)
(4)
(5)
Capacity utilization rate in 2012 is calculated by dividing our utilized production capacity by our total designed production capacity in 2012. Before 2011, we calculated
capacity utilization rates by dividing the production output by production capacity.
We ceased the operation of our obsolete primary aluminum production facilities of Henan branch in January 2013.
The primary aluminum produced at our Research Institute is sold commercially, and such sales are included in our total revenues.
Not including the aluminum alloy business of Pingguo Aluminum.
Aluminum Fabrication Products
We currently operate nine aluminum fabrication plants in China, among which, five plants were acquired in 2008. Our annual aluminum fabrication
production capacity was approximately 1.7 million tonnes as of December 31, 2012. In 2012, we produced approximately 622,900 tonnes of aluminum
fabrication products and the average utilization rate of our aluminum fabrication plants was approximately 36.2%.
The following table sets forth the annual production capacity, output of aluminum fabrication products, principal products and utilization rate of each of
our aluminum fabrication plants:
Plant
Northwest Aluminum
Chalco Ruimin
Huaxi Aluminum
Chalco
Southwest Aluminum
Chalco
Southwest Aluminum Cold Rolling
Henan Aluminum
Shandong branch
Chalco Qingdao(3)
Chalco Nanhai(3)
As of
December 31,
2012
Aluminum
Annual
Production
Capacity(1)
For the Year Ended December 31, 2012
Fabrication
Product
Output
Utilization
Rate(2) Principal Products
(in thousand tonnes, except percentages)
135.0
370.0
22.0
350.0
250.0
355.0
10.0
120.0
110.0
34.2
173.8
14.3
212.8
62.5
83.8
7.9
7.3
26.3
25.3% extrusions, planks,
strips and screens
47.0% planks, strips and screens
65.0% strips and screens
60.8% strips
25.0% planks and strips
23.6% planks, strips and screens
79.0% profiles
6.6% casts, ingots
23.9% casts
Total
1,722.0
622.9
36.2%
(1)
Production capacity takes into account designed capacity, downtime for ordinary maintenance and repairs and subsequent capacity modifications.
(2)
(3)
Capacity utilization rate is determined by dividing the production output by production capacity.
Chalco Qingdao and Chalco Nanhai use recycled aluminum materials to produce aluminum fabrication products, while our other aluminum fabrication plants primarily use
ingots and other primary aluminum products to produce aluminum fabrication products.
29
Raw Materials
Alumina
Bauxite is the principal raw material in alumina production. Most of the bauxite in China is AL2O3.H2O mineral. Bauxite deposits have been discovered
across a broad area of central China and are especially abundant in the southern and northern parts of central China. The largest bauxite deposit in China
lies in Shanxi Province.
Rock Formation and Mineralization. The bauxite deposits of our mines, except those of Guangxi Pingguo mine which is an accumulation deposit due to
original erosion, usually have similar stratigraphical sequences. Primary bauxite deposit, as a type of sedimentary AL2O3.H2O of Carboniferous or
Permian age, is contained in clay rock, limestone or coal seams. A zonary red shale is usually located at the bottom of the bauxite and the red seam
distributes over the irregular "karst-type" erosion face on the top of Ordovician limestone. Aluminum deposits in northern China are usually covered
with a very thick Quaternary weathering.
The thickness and quality of deposits vary with our mine locations. Quality is usually consistent in smooth sections but changes sharply in karst
"billabong" terrain. The level of hardness of minerals also varies. A sequence that includes a seam of hard bauxite of fine quality in the middle and soft
bauxite of inferior quality on the bottom and top seams is common in deposits.
Generally, deposits are horizontal or with an obliquity of 0 to 8 degrees, but there are also steep deposits at an angle of 75 degrees, such as the Guizhou
No. 2 mine. Most of the original mineralization is not influenced by folds and faults, and some fractures of a low obliquity and folds emerge in certain
deposits, which is evident in the Guizhou No. 2 mine area where the underground mining method must be used due to the obliquity of its bauxite body
reaching 70 degrees with the influence of folds and several meters of dislocation arising from partial faults.
Economic Significance. Our bauxite deposits are divided into three groups. They are primarily distinguished by drill hole spacing and the composition of
the deposit, which can encompass rock formations such as intercalated clays, bauxite, footwall iron clay or Ordovician limestone. Bauxite deposit groups
vary in the thickness and mineral quality of its reserves.
We use the Chinese bauxite deposit estimation method, which is calculated using cutoff grades and thickness to outline continuous areas within the
limits defined by samples of marginal grade. We utilize actual limiting sample points that are joined to create a polygonal outline, and grades are then
calculated using a length weighted arithmetic average. The Chinese program of systematic and accurate method of test boring, inspection pit, trial
trench, density, tonnage analysis and calculation applied to the geological work of bauxite in China is an appropriate method to analyze these types of
deposits.
Supply. To support the growth of our alumina production, we continuously seek opportunities to streamline and optimize our bauxite procurement,
including the ongoing restructuring of our joint mining operators. Except for our Shandong branch, all of our refineries are located in the four provinces
where over 90% of China's potentially mineable bauxite has been found. We generally source our bauxite from mines close to our refineries to control
transportation costs. Historically, we have procured our bauxite supply principally from three sources:
*
*
*
our own bauxite mining operations;
jointly-operated mines; and
other suppliers, which principally include small independent mines in China and, to a lesser extent, international suppliers.
On average, our refineries consume approximately 2.4 tonnes of bauxite to produce one tonne of alumina in 2012. We used approximately 24.2 million
tonnes, 27.7 million tonnes and 29.8 million tonnes of bauxite in our alumina production in 2010, 2011 and 2012, respectively. The production of our
own mines reached approximately 17.3 million tonnes in 2012, representing an increase of approximately 27.2% from 2011. Our jointly-operated mine
did not produce bauxite in 2012, compared with approximately 4,300 tonnes of output in 2011. We purchase bauxite from a number of suppliers and do
not depend on any supplier for our bauxite requirements. In 2012, bauxite secured from other suppliers accounted for approximately 49.2% of our total
bauxite supply, primarily because our demand for bauxite exceeded the production of our own mines and our joint-operated mines. We had 17 own
mines as of December 31, 2012 and we continue to explore new bauxite reserves to replenish our reserves.
30
The following table sets forth the volumes and percentages of bauxite supplied by our own mines, jointly-operated mines and other suppliers for the
periods indicated:
Year Ended December 31,
2010
2011
2012
Bauxite
Supply
Percentage
of Bauxite
Supply (%)
Bauxite
Supply
Percentage
of Bauxite
Supply (%)
Bauxite
Supply
Percentage
of Bauxite
Supply (%)
(in thousand tonnes, except percentages)
Own mines
Jointly-operated mines
Other suppliers
12,729.9
40.0
13,005.0
49.4
0.2
50.4
13,564.6
4.3
14,209.5
48.8
-
51.2
17,262.0
-
16,689.0
50.8
-
49.2
Total
25,774.9
100.0
27,778.4
100.0
33,951.0
100.0
Own Mines. As of December 31, 2012, we owned and operated 17 mines that had approximately 246.1 million tonnes of aggregate bauxite reserves. As
none of our mines produces bauxite for external sales, we have full access to the bauxite produced by our own mines. For the three years ended
December 31, 2010, 2011 and 2012, we extracted approximately 12.7 million tonnes, 13.6 million tonnes and 17.3 million tonnes, respectively, of
bauxite from our own mines. In order to retain the title to our mines, or obtain the title to new mines, we are required to comply with mining
qualifications approved by the relevant PRC authorities and pay an annual fee equivalent to RMB1,000 per km2 for our mines.
Our reported bauxite reserves for our own mines do not exceed the quantities that we estimate could be extracted economically if future prices were at
similar levels to average historical prices for traded metals for the years ended December 31, 2010, 2011 and 2012, or the three year historical contracted
prices for bulk commodities. However, we do not use the three year historical bauxite or aluminum price to determine bauxite reserves, nor did we
utilize any currency conversion factors or pricing related mechanisms. Instead, the primary criteria are the specifications required by our aluminum
refineries, as well as certain modifying factors that are dependent on reserve quality.
Each of our own mines is accessible by motor vehicles via public roads, highways or both. All of our own mines are powered by diesel fuel or
generators and have access to water from local rivers, lakes or underground sources. The following table sets forth information for our own mines as of
December 31, 2012:
Mine
Location
Nature of
Ownership(1)
Mining
Method
Permit
Present Condition/
Renewal(1)
Current State of Exploration
Capacity(2)
Bauxite
Production
(in thousand
(in thousand
tonnes)
tonnes)
Pingguo mine
Guangxi Zhuang
100% owned and
Open pit
January 2011 -
Fully developed and operational
4,950.0
6,180.0
Autonomous Zone
operated by Chalco
April 2036
Guizhou mine(3)
Guizhou Province
100% owned and
Open pit /
October 2004 -
Fully developed and operational
operated by Chalco
underground
December 2038
Zunyi mine
Guizhou Province
100% owned and
Open pit/
December 2008 -
Two stopes are
1,400.0
600.0
810.0
630.0
Xiaoyi mine
Shanxi Province
100% owned and
Open pit
September 2001 -
Fully developed and operational
3,180.0
3,794.6
operated by Chalco
underground
May 2021
currently under development
operated by Chalco
September 2031
Shanxi Other Mines
Shanxi Province
100% owned and
Open pit/
November 2010 -
Fully developed and operational or
1,050.0
1,005.4
Mianchi mine
Henan Province
100% owned and
Open pit /
October 2001-
operated by Chalco
underground
July 2016
under construction(6)
Three stopes are currently
operated by Chalco
underground
October 2031
under development
Luoyang mine
Henan Province
100% owned and
Open pit/
October 2001 -
Fully developed and operational
200.0
750.0
266.0
579.8
Henan Province
100% owned and
Open pit /
October 2001-
Fully developed and operational
720.0
1,066.4
operated by Chalco
underground
October 2031
Xiaoguan mine(4)
Gongyi mine(4)
Dengfeng mine(4)
Henan Province
100% owned and
Open pit /
January 2008 -
Fully developed and operational
operated by Chalco
underground
October 2031
operated by Chalco
underground
April 2029
Henan Province
100% owned and
Open pit /
January 2008 -
Fully developed and operational
operated by Chalco
underground
June 2019
Sanmenxia mine
Henan Province
100% owned and
Underground
April 2005 -
Under construction
operated by Chalco
January 2026
31
Xuchang mine (5)
Henan Province
100% owned and
Open pit /
August 2010 -
Fully developed and operational
operated by Chalco
underground
January 2016
Jiaozuo mine
Henan Province
100% owned and
Open pit/
September 2008 -
Fully developed and operational
operated by Chalco
underground
February 2022
420.0
210.0
80.0
220.0
42.0
502.4
-
0.8
144.3
312.1
Pingdingshan mine
Henan province
100% owned and
Open pit /
February 2008 -
Fully developed and operational
208.0
1,033.6
Yangquan mine
Shanxi Province
100% owned and
Open pit
September 2001-
Fully developed and operational
operated by Chalco
underground
September 2021
operated by Chalco
September 2031
Nanchuan mine
Chongqing
100% owned and
Underground
December 2010 -
Fully developed and operational
Municipality
operated by Chalco
December 2022
400.0
1,650.0
250.0
690.0
(1)
(2)
(3)
(4)
(5)
(6)
All conditions to retain our properties or leases have been fulfilled as of December 31, 2012. Each mine may be covered by one or more mining permits and the range of
permit renewal dates is set forth above.
The annual production capacity of our own mines was approximately 16.1 million tonnes of bauxite as of December 31, 2012.
Including Guizhou No. 1 mine and Guizhou No. 2 mine.
Xiaoguan mine was divided into three mines, namely, Xiaoguan mine, Gongyi mine and Dengfeng mine in 2011.
Yuzhong mine was renamed Xuchang mine in 2009.
Three mining areas of Shanxi Other Mines are under construction, four mining areas are fully developed and operational and one mining area ceased production in 2008.
We are required to obtain mining rights permits to conduct mining activities. Under PRC laws and regulations, a mine owner must prepare and submit
exploration reports for a mine to the local government to obtain a mining rights permit for a mine. If an applicant for the mining rights permit is not the
owner of a mine, the applicant must first enter into a lease agreement with the mine owner before submitting an application. The mining rights permit is
subject to renewal on a regular basis. Furthermore, we are required to obtain land use rights on the land in order to operate these mines. We lease the
land use rights relating to foregoing mines from Chinalco pursuant to a land use rights lease agreement that became effective upon our formation.
Chinalco's land use rights relating to over 90% of our mining properties are for 50-year terms beginning on July 1, 2001. The remaining land use rights
relating to the mines we own and operate are for shorter terms, some as short as one year. All of our land use rights lease agreements end on the expiry
date of the mining rights or the end of the working life of the mine, whichever is earlier. Both the land use rights and land use rights lease agreements are
renewable.
The following table sets forth certain estimated details of the reserves for our own mines as of December 31, 2012:
Mine
Area (km2)
Reserves(1)(2)
Al2O3
Ratio of
SiO2 Average A/S(3)
Total
Average Grade (%)
(in million
Pingguo mine
Guizhou No. 1 mine
Guizhou No. 2 mine
Zunyi mine
Xiaoyi mine
Shanxi Other Mines
Mianchi mine
Luoyang mine
Xiaoguan mine(4)
Gongyi mine(4)
Dengfeng mine(4)
Sanmenxia mine
Xuchang mine
Jiaozuo mine
Pingdingshan mine
Yangquan mine
Nanchuan mine
tonnes)
85.64
2.02
15.23
3.83
20.12
15.65
2.49
4.93
22.30
3.16
0.43
29.27
0.23
1.04
3.42
3.74
32.62
186.19
6.40
28.52
11.25
10.21
37.47
11.19
9.68
56.10
8.21
11.12
15.68
10.92
17.45
32.39
4.13
20.96
54.62
65.49
62.43
58.85
63.47
61.52
62.99
60.67
63.75
64.10
60.01
64.95
61.87
58.56
62.62
60.42
61.05
4.97
11.71
9.40
8.60
12.96
10.73
12.34
9.56
14.89
13.80
8.80
11.02
16.57
13.54
12.97
12.74
13.62
11.00
5.60
6.64
6.85
4.90
5.73
5.10
6.35
4.28
4.65
6.82
5.89
3.73
4.32
4.83
4.74
4.48
Total (average)
477.87
246.12
59.89
9.70
6.17
By reserve type
Proven reserve
Probable reserve
127.22
118.90
60.52
59.22
10.17
9.20
Total (average) reserves
246.12
59.89
9.70
5.95
6.44
6.17
(1)
Our reserves take into consideration mining dilution and loss factors, which generally vary from 5% to 10% and are based on the planned mining method and selected drill
data for each site.
32
(2)
(3)
(4)
Our metallurgical recovery factors are calculated in accordance with the relevant PRC mining standards and vary from mine to mine.
Refers to the ratio of average grade of Al2O3 to the average grade of SiO2 of the reserves.
Xiaoguan mine was divided into three mines, namely, Xiaoguan mine, Gongyi mine and Dengfeng mine in 2011.
We have implemented a safety control program to achieve the targets set in our internal guidelines for safety and risk control management and to
maintain compliance with the National Mining Safety Law and related rules and regulations in China. Our safety control program combines close
supervision and routine inspection of mining conditions with continual implementation of safety measures and procedures at our own bauxite mines and
safety training for our mining personnel. In 2012, we extracted approximately 17.3 million tonnes of bauxite from our own mines and did not experience
any production accidents that involved serious work injuries or death.
Jointly-Operated Mines. To optimize our resources and reduce costs, we currently manage our jointly-operated mines by contracting with local
companies for their mining services to operate mines owned by us. Generally, we are able to control the mining operations of our jointly-operated mines,
including determination of production schedules as well as the amounts and grades of bauxite produced. In the years ended December 31, 2010, 2011
and 2012, our jointly-operated mines produced 40,000 tonnes, 4,300 tonnes and nil of bauxite, respectively.
The number of our jointly-operated mines in China decreased from three as of December 31, 2011 to two as of December 31, 2012 because in 2012,
Xinzhuang mine became a mining area of Yangquan mine, one of our own mines. Each of our jointly-operated mines is accessible by motor vehicles via
public roads, highways or both. Our jointly-operated mines are powered by diesel fuel and have access to water from local rivers, lakes or underground
sources. The following table sets forth information on our jointly-operated mines as of December 31, 2012:
Mine
Province
Operator
Name of Joint
Mining
Method
Permit
Present Condition/
Renewal(2)
Current State of Exploration
Current Status
Dayu mine
Shanxi
Xiataohua mine
Shanxi
n/a(1)
n/a(1)
Open pit
December 2009 (3)
under development
Open pit
June 2013
exploration is finished
The previous mining rights holder is in the process of
transferring the mining rights to us and we will become the
sole owner of the mine and are conducting research on the
development plan of the mine.
The previous mining rights holder is in the process of
transferring the mining rights to us and we will become the
sole owner of the mine and are conducting research on the
development plan of the mine. We are searching for
operators for future development.
(1)
(2)
(3)
We have decided to cooperate with other parties to undertake the mining operations in these mines. However, as of December 31, 2012, we had not confirmed any party as
our partner.
All conditions to retain jointly-owned properties or jointly-held leases have been fulfilled as of December 31, 2012.
We are in the process of restructuring the operations of Dayu mine and we expect to resume the operations of Dayu mine by the end of 2013, which will become a mining
area of one of our own mines. We plan to renew the mining permit after such restructuring.
The following table sets forth the specific details of our jointly-operated mines as of December 31, 2012:
Total
Average Grade (%)
Mine
Area (km2)
Reserves(1)(2)
Al2O3
Ratio of
SiO2 Average A/S(3)
Dayu mine
Xiataohua mine
Total (average)
By reserve type
Proven reserve
Probable reserve
Total (average) reserves
0.99
2.50
3.49
(in million
tonnes)
0.76
7.59
8.35
7.25
1.10
8.35
65.63
59.40
59.97
59.40
63.71
10.98
13.75
13.50
13.75
11.83
59.97
13.50
5.98
4.32
4.44
4.32
5.38
4.44
(1)
(2)
(3)
Our reserves take into consideration mining dilution and loss factors, which generally vary from 5% to 10% and are based on the planning mining method and selected drill
data for each site.
Our metallurgical recovery factors are calculated in accordance with the relevant PRC mining standards and vary from mine to mine.
Refers to the ratio of average grade of Al2O3 to the average grade of SiO2 of the reserves.
Other Suppliers. In addition to our own mines and our jointly-operated mines, we also source bauxite from other suppliers. A majority of other suppliers
are small independent mines. Small independent mines are not affiliated with us and generally have annual bauxite production capacities not exceeding
200,000 tonnes. These mines have been an important source of bauxite for our operations. We purchase bauxite directly from small independent mines
or through local distributors that procure bauxite from these mines. In addition, we also secure a portion of bauxite overseas. Bauxite secured from other
suppliers accounted for 49.2% of our total bauxite supply in 2012.
33
Bauxite Procurement. The corporate management department at our headquarters is responsible for the oversight and coordination of our supply of
bauxite. To determine how our bauxite requirement will be allocated among our principal sources each year, we first estimate our total bauxite needs for
the year. Based on market conditions, production costs and other factors, we determine the amount of bauxite that we wish to source from our own
mines, and allocate the remaining requirements among the jointly-operated mines and other suppliers. Our management or operational control of our
own mines and jointly-operated mines generally allows us to adjust procurement from these sources during the course of the year to accommodate
changes in our plans or market conditions.
Alumina-to-Silica Ratio. The production method for alumina refining is determined by the mineral composition of the bauxite, in particular, its alumina-
to-silica ratio. Most of the bauxite reserves in China are diasporic with low alumina-to-silica ratios. Based on our current technology, an efficient
application of the Bayer process requires bauxite with an alumina-to-silica ratio of 10:1 or higher, while the sintering process can refine bauxite with an
alumina-to-silica ratio as low as 4:1. The average alumina-to-silica ratio of the proven and probable reserves of our mines ranges from approximately
3.7:1 to 14.2:1.
Prices. There is neither governmental regulation on bauxite prices nor an official trading market for bauxite in China. We negotiate bauxite prices with
our suppliers based on ore quality, mining costs, market conditions, transportation costs and various governmental taxes or levies, including a resource
tax imposed by local governments. As we procure bauxite from three different sources, our total bauxite cost is influenced by the following factors:
*
*
*
the cost of our mining operations;
the terms of our operational arrangements with respect to our jointly-operated mines; and
the market conditions relating to purchases from small independent mines.
The average purchase price of bauxite per tonne from our joint operations and other suppliers in 2010, 2011 and 2012 was approximately RMB386.7,
RMB353.6 and RMB309.0, respectively. The average cost of bauxite from our own mines per tonne in 2010, 2011 and 2012 was approximately
RMB202.4, RMB176.0 and RMB207.0, respectively. Our jointly-operated mines did not produce bauxite in 2012.
We purchase a substantial amount of bauxite to protect the resources at the mines that we have already acquired despite our unutilized capacity at these
mines. Additionally, to fully utilize the bauxite from our mines, we refine all bauxite that meets the minimum technical requirements for our production
of alumina.
We also purchase higher grade ore from other suppliers and blend the ore of various grades to meet the technical requirements for our alumina
production. This practice allows for flexibility and the inclusion of lower grade bauxite to optimize the use of bauxite deposits available to us. We do not
use our historical average purchase prices for 2010, 2011 and 2012, or any other historical index to estimate our bauxite reserves.
The following table sets forth our capital expenditures for our bauxite mines in China for the periods indicated:
Year Ended December 31,
Capital Expenditures
Infrastructure construction
Facility upgrade
Total
Primary Aluminum
2010
2011
2012
(RMB in thousands)
417,235.9
135,321.3
157,000.0
56,000.0
335,440.0
-
552,557.2
213,000.0
335,440.0
An average of approximately 1.9 tonnes of alumina and 13,929 kWh of electricity were required to produce one tonne of primary aluminum in 2012.
Alumina and electricity, the two principal components of costs in the smelting process, accounted for approximately 35.4% and 43.0%, respectively, of
our unit primary aluminum production costs in 2012. Apart from alumina and electricity, we also require carbon anodes, carbon cathodes and sodium
fluoride for our smelting operations.
34
Alumina is the main raw material in the production of primary aluminum. In 2012, our smelters consumed approximately 8.1 million tonnes of alumina
to produce approximately 4.2 million tonnes of primary aluminum. Our Shandong, Henan, Guizhou and Guangxi branches have historically sourced all
or substantially all of the alumina required for their primary aluminum production from their respective integrated refineries. Our primary aluminum
plants that do not have integrated alumina refining operations onsite obtain alumina internally from our alumina refineries located elsewhere or
externally on the market.
Aluminum Fabrication Products
The main raw material for our aluminum fabrication operations is primary aluminum. We also use other metal raw materials in aluminum fabrication,
depending on the type of products. We meet the primary aluminum requirements of our aluminum fabrication segment with primary aluminum supplied
by our own aluminum smelters. In addition, Chalco Qingdao and Chalco Nanhai use recycled aluminum materials to produce aluminum fabrication
products.
Supplemental Materials, Electricity and Fuel
The procurement department at our headquarters coordinates and manages our supply chain for all our major raw materials in conjunction with the
distribution center at each production facility, which manages the logistics and inventory of raw materials locally. We are able to purchase diesel, the
main fuel used by our mining and manufacturing equipment, from the public markets, and we source our water from local rivers, lakes or underground
sources.
Alumina
Electricity, coal, alkali (caustic soda or soda ash) and heavy oil are the principal materials used in our alumina production. Electricity is one of the
principal cost components in our refining process. We generate electricity at a number of refineries and purchase our remaining electric power
requirement from regional power grids at government-mandated rates. Most of our power supply plans are one to three year renewable plans. Power
prices in China can vary, sometimes substantially, from one region to another, based on demand and power production costs in the region. Power costs
for our various alumina refineries vary accordingly.
Large quantities of coal is used as a reducing agent and fuel to produce steam and gas in the alumina refining process. As of the date of this annual
report, we held minority interests in a number of coal mining enterprises, including Shanxi Jiexiu, Qinghai Energy, Zhaogu Coal, Xuehugou Coal
Industry Co., Ltd., Datong Coal Group Huasheng Wanjie Coal Co., Ltd., Dongdong Coal, Hejin Dujiagou Coal Industry Co., Ltd., Chalco Liupanshui,
Huozhou Coal Group Xingshengyuan Coal Co., Ltd. and Guizhou Yuneng. We hold 70% of the equity interest in Gansu Huayang, which holds mining
rights for coal deposits in the Luochuan mining area, Gansu Province.
All of the coal mining enterprises in which we directly or indirectly have equity interest are currently in the trial production or commercial production
stage, except:
*
*
*
*
Panlong mine, one of the coal mines of Chalco Liupanshui, a joint venture company in which we hold 49% of the equity interest;
Huozhou Coal Group Xingshengyuan Coal Co., Ltd., a joint venture company in which Shanxi Huasheng holds 43.03% of the equity interest;
Guizhou Yuneng, a joint venture company in which we hold 25% of the equity interest; and
Gansu Huayang.
Gansu Huayang is currently under exploration. Panlong mine, Huozhou Coal Group Xingshengyuan Coal Co., Ltd. and Guizhou Yuneng are under
development. We also entered into a mining rights transfer agreement to acquire the mining rights for coal deposits in the Laodonghe mining area,
Guizhou Province. By investing in coal mining enterprises and acquiring mining rights for coal deposits, we plan to partially offset our future energy
costs, and secure a portion of the coal we consume in our operations.
Alkali is used as a supplemental material in alumina refining. The sintering process and the Bayer-sintering combined process require soda ash while
caustic soda is used in the Bayer process. Our alumina refineries use heavy oil, natural gas and coal gas as fuel to refine alumina. There is no
governmental regulation of the prices of coal, alkali or fuel. We purchase these raw materials from external suppliers under negotiated supply contracts,
which we believe are competitively priced. We have not experienced difficulty in obtaining these materials in sufficient quantity and at acceptable
prices.
35
Primary Aluminum
Smelting primary aluminum requires a substantial and continuous supply of electricity. In 2012, we consumed 58.7 billion kWh of electricity for our
primary aluminum production. The availability and price of electricity are key factors in our primary aluminum production. Electricity costs have
fluctuated in recent years due to periodic shortages of electricity in China, cyclical demand and government policies to regulate key industries. See "Item
5. Operating and Financial Review and Prospects - A. Operating Results - Overview - Factors Affecting Our Results of Operations - Manufacturing
Costs."
We generate electricity at three of our smelters and purchase our remaining electric power requirement from regional power grids or directly from power
generation enterprises. Except for two of our smelters that have entered into direct purchase agreements with power generation enterprises, we purchase
electricity from the regional power grids at prices set by the government. Industrial users within each region are generally subject to a common
electricity tariff schedule, but prices vary, sometimes substantially, across regions. We believe our power supply from regional grids is generally not
reliant upon any particular generation facility supplying the grid. Electricity purchased from different power grids is subject to different tariff levels in
2012. The average electricity cost of our smelters was RMB0.4115/kWh in 2012.
Carbon anodes and cathodes are key raw materials in the smelting process. Each of our smelters is able to produce carbon products necessary for its
operations other than carbon cathodes. Most of our carbon cathodes are supplied by our Guizhou branch, which operates our only carbon cathode
production facility and sells carbon cathodes to external smelters in China.
Sales and Marketing
We coordinate substantially all of our sales and marketing activities of our self-produced alumina products and some of our sales and marketing
activities of our self-produced primary aluminum products through Chalco Trading. Our subsidiaries and branches sell substantially all of our self-
produced aluminum fabrication products and some of our self-produced primary aluminum products directly to external customers. Our alumina
refineries sell our self-produced alumina chemical products directly to external customers or indirectly through Chalco Trading for subsequent external
trading. For all of our self-produced products that are sold either through Chalco Trading for subsequent external sale or directly to external customers,
our subsidiaries and branches play an important role in providing after-sales services and strengthening our presence in the marketplace. Since late 2009,
we also have been engaged substantially in the trading of non-ferrous metal products including alumina, primary aluminum, copper, zinc and lead as
well as coal products that we source from third-party suppliers through Chalco Trading.
Alumina
We sell our self-produced alumina to customers primarily through Chalco Trading, giving priority to customers with whom we have long-standing
relationships and who have established a strong credit history, after reserving sufficient alumina for our forecasted primary aluminum production. In
2012, we supplied approximately 6.9 million tonnes of alumina produced at our refineries to our own smelters, which represented approximately 55.7%
of our total alumina production, and sold the remainder to our customers. In addition, we also procure and sell outsourced alumina under long-term
agreements or on the spot market through Chalco Trading. We sold approximately 3.2 million tonnes of outsourced alumina in 2012.
The sales prices of alumina that our alumina refineries sell internally to Chalco Trading are determined at a percentage of the average three-month
primary aluminum futures prices on the SHFE in the past calendar month. Chalco Trading coordinates the external sales of our alumina products. In the
fourth quarter of each year, Chalco Trading hosts an annual national sales conference for our primary aluminum smelter customers and alumina
suppliers with the presence of the representatives from our branches with alumina operations. At the sales conference, Chalco Trading enters into most
of our external sales contracts for alumina.
Chalco Trading sells our self-produced alumina and alumina sourced from third-party suppliers to smelters throughout China. All of our major
customers in the past three years have been domestic smelters. In the case of alumina sourced from third-party suppliers, we may procure alumina under
long-term supply agreements or on the spot market. Our long-term supply agreement for the procurement of alumina normally sets forth the quantity of
alumina to be procured by us in each month with the price for each monthly delivery to be determined through negotiations in the month before delivery.
We are normally required to pay the full price of the outsourced alumina before each delivery.
We sell most of our self-produced alumina and a portion of the outsourced alumina under long-term sales agreements with terms ranging from one year
to five years. Our long-term sales agreement for alumina normally sets forth the quantity of alumina to be sold by us in each year or month with the price
for each monthly delivery to be determined at a percentage of the average three-month primary aluminum futures prices on the SHFE in the calendar
month before delivery. Our customer is normally required to pay for its procurement before each delivery. As a result, fluctuations of primary aluminum
prices on the SHFE affect alumina prices under our long-term sales agreements.
36
Chalco Trading sells the rest of our self-produced and outsourced alumina products on the spot market. We set, and adjust as necessary, reference sales
prices for the self-produced alumina products. In 2012, our highest and lowest reference spot price of domestic alumina was RMB2,750 per tonne and
RMB2,480 per tonne, respectively. We set the price for the external sales of alumina products by reference to alumina prices at reference markets and
taking into account the following considerations:
*
*
*
*
*
*
alumina imports into China, CIF Chinese ports;
international and domestic transportation costs;
our short-term and mid-term projections for alumina;
the 17% value-added tax applicable to our products;
import related fees; and
domestic supply and demand.
We sell the rest of the outsourced alumina on the spot market at prices determined through negotiations with our customers, taking into consideration
factors including our procurement prices and the prevailing market conditions.
Primary Aluminum
Our primary aluminum manufacturing subsidiaries and branches sell a portion of our primary aluminum output directly to external customers. Our
primary aluminum manufacturing subsidiaries and branches also sell a portion of our primary aluminum output internally to Chalco Trading at prices
based on the futures prices of primary aluminum on SHFE. Chalco Trading then coordinates the external sales of primary aluminum. We consume the
remaining primary aluminum output at our own aluminum fabrication plants. Our subsidiaries and branches including Chalco Trading sell our self-
produced primary aluminum products to external customers through the following three channels:
*
*
*
Contract sales. Most of our primary aluminum sales are made pursuant to contracts entered into directly with our long-standing customers.
Terms of the sales contracts for primary aluminum are typically one year. We price our primary aluminum products based on the SHFE futures
prices.
Sales on the SHFE. As part of our effort to manage market risk, we sell a portion of our primary aluminum products on the SHFE through
futures contracts with terms ranging from one month to twelve months to hedge against declines in primary aluminum prices.
Sales on the spot market. We also sell our primary aluminum products on the spot market at the reference prices we set and adjust as necessary.
In addition, we also procure and sell outsourced primary aluminum on the spot market or through short-term futures and options transactions. We sold
approximately 2.2 million tonnes of outsourced primary aluminum in 2012.
We hold an annual national primary aluminum sales conference through Chalco Trading with the presence of representatives from our subsidiaries and
branches in the fourth quarter of each year to procure sales and plan production for the following year.
To improve the efficiency of our distribution, we divide our China market into several regions as follows:
*
*
*
*
*
southern China (including Guangdong and Fujian Provinces);
eastern China (including Jiangsu and Zhejiang Provinces and Shanghai Municipality);
southwestern China (including Sichuan Province and Chongqing Municipality);
the Beijing-Tianjin-Tanggu area; and
northeastern China (including Liaoning and Heilongjiang Provinces).
37
We sell substantially all of our self-produced and outsourced primary aluminum to domestic customers. We expect China to remain our key market for
primary aluminum for the foreseeable future. Although we have conducted export sales in the past, all of our external sales of primary aluminum in 2012
were domestic sales. Customers of our primary aluminum products principally consist of aluminum fabricators and distributors that resell our primary
aluminum products to aluminum fabricators or other purchasers.
We establish pricing guidelines for Chalco Trading to conduct external domestic sales of our self-produced primary aluminum products, taking into
account three main factors: the primary aluminum spot prices and futures price on the SHFE; our production costs and expected profit margins; and
supply and demand. We determine our sales prices of the outsourced primary aluminum through negotiations with our customers, taking into
consideration factors including our procurement prices and the prevailing market conditions. As part of our efforts to coordinate and centralize sales, we
also set minimum prices for primary aluminum products that are sold directly to external consumers by our subsidiaries and branches with respect to
each region in China where our primary aluminum is sold. These minimum prices are determined by reference to the SHFE spot price for primary
aluminum. The smelter filling a particular order from a external customer is generally responsible for negotiating the pricing and delivery terms and
must comply with the minimum pricing guidelines unless it obtains prior approval from our headquarters. In general, we satisfy each purchase order
with products from our nearest smelter to minimize transportation costs.
Aluminum Fabrication Products
We produce aluminum fabrication products based on market demand. In 2012, our aluminum fabrication subsidiaries and branches sold substantially all
of our aluminum fabrication products directly to external customers. In 2012, we sold approximately 586,900 tonnes of self-produced aluminum
fabrication products.
In 2012, we derived more than 80% of our aluminum fabrication products revenues from sales in China. We extend credit terms for sales of aluminum
fabrication products, requiring payment within a short period after delivery. The prices for our aluminum fabrication products are set by agreement with
our customers.
Alumina Chemical Products and Gallium
Alumina chemical products and gallium are derived from our alumina production. We adjust our production of these products based on market demand.
Our alumina refineries sell our alumina chemical products directly to external customers or indirectly to external customers through Chalco Trading for
subsequent external trading.
We sell most of our alumina chemical products and gallium in China. Prices for our alumina chemical products and gallium are determined through
negotiations with our customers, taking into consideration the market conditions. Our total sales of gallium in 2010, 2011 and 2012 amounted to
approximately RMB67.0 million, RMB118.0 million and RMB56.8 million, respectively.
Trading of Outsourced Non-ferrous Metal Products and Other Materials
Since late 2009, we have been substantially engaged in the trading of alumina and primary aluminum sourced from third-party suppliers. Please see "-
Alumina" and "- Primary Aluminum" for more details. We also sell other non-ferrous metal products such as copper, zinc and lead as well as coal
products that we procure from our third-party suppliers to external customers on the spot market or under long-term sales agreements. In 2012, we sold
approximately 519,400 tonnes of outsourced copper, zinc and lead and approximately 5.2 million tonnes of outsourced coal products. In addition, we
also sell outsourced raw and ancillary materials in bulk to customers such as steel manufacturers and copper processing companies on the spot market.
Chalco Trading has a team with trading expertise to conduct research on the markets of non-ferrous metal products and other materials. From time to
time, we may enter into futures and options transactions to hedge against price fluctuations in the non-ferrous metal product market.
Delivery
We rely on rail shipping and trucks for the delivery of products within China. Our alumina is transported by rail or trucks, and transportation costs are
generally borne by our customers and excluded from our sales prices. For long-distance deliveries, we maintain spur lines connecting our plants to the
national railway routes. The price of rail shipping on the PRC national railway system is fixed by the government.
Most of our primary aluminum products are transported by rail. In view of the substantial distance between our smelters and aluminum fabrication
plants, most of which are concentrated in southern and eastern China, we maintain subsidiaries (often with warehousing capacity leased from third
parties) in major cities in eastern and southern China to facilitate and coordinate deliveries.
38
Our customers are generally responsible for arranging and bearing the costs associated with transporting aluminum fabrication products from our
production facilities.
Principal Facilities
Our principal facilities include 28 principal production plants and our Research Institute. Set forth below is a description of our principal production
plants. Our production is organized and managed according to our three business segments: alumina, primary aluminum and aluminum fabrication.
Guangxi Branch
The Guangxi branch commenced operations in 1994 and is located in Guangxi Zhuang Autonomous Region in southwestern China, an area rich in
bauxite reserves. The Guangxi branch obtains bauxite delivered via highway from the Pingguo mine, one of our wholly-owned mines, located less than
17 kilometers from the Guangxi branch.
The Pingguo mine contains large, easily exploitable bauxite reserves with high alumina-to-silica ratios. The Guangxi branch is our only principal
refinery that exclusively uses the Bayer process. With technology and production equipment imported from Europe, the Guangxi refinery features a high
level of automation and energy efficiency. Since its inception, we have continually increased the designed production capacity at this branch by
removing production bottlenecks and investing in capacity expansions. Guangxi branch had an annual alumina production capacity of approximately
2,210,000 tonnes as of December 31, 2012. In 2012, the Guangxi branch produced approximately 2,413,000 tonnes of alumina, along with
approximately 165,000 tonnes of alumina chemical products. Most of the alumina output at the Guangxi branch is used in the primary aluminum smelter
at the same branch and the remainder is sold to third-party smelters.
Our Guangxi branch also uses advanced 160Ka and 320Ka pre-bake reduction pot-lines developed by us in its smelting operations. As of December 31,
2012, our Guangxi branch's annual primary aluminum production capacity was approximately 139,500 tonnes and it produced approximately 110,000
tonnes of primary aluminum in 2012.
Guizhou Branch
The Guizhou branch commenced its smelting operations in 1966 and was subsequently expanded to include alumina refining operations in 1978. Our
alumina refinery at this branch is one of the most advanced alumina refineries in China, having imported many of its key technologies and equipment.
Our alumina refinery at this branch uses the Bayer-sintering combined process to refine bauxite supplied from our own mines as well as external
suppliers into alumina. Bauxite from our own mines is delivered by trucks and train. The majority of the alumina produced at the Guizhou branch is used
in the smelting operations at the same plant and the remainder is sold to third-party smelters. Our Guizhou branch uses 160Ka, 186Ka and 230Ka pre-
bake reduction pot-lines in its primary aluminum production. As a result of technological innovations and overhauls since its inception, our Guizhou
smelter is among the most technologically advanced smelters in China. As of December 31, 2012, our Guizhou branch had an annual alumina
production capacity of approximately 1,200,000 tonnes and an annual primary aluminum production capacity of approximately 403,700 tonnes. In 2012,
our Guizhou branch produced approximately 1,019,000 tonnes of alumina, 29,000 tonnes of alumina chemical products and 403,000 tonnes of primary
aluminum.
Our Guizhou branch also contains a modern carbon production facility, which produces carbon cathodes in addition to carbon anodes. As the Guizhou
branch is our only facility that produces carbon cathodes, it supplies carbon cathodes to seven of our primary aluminum smelters and our Research
Institute. Its carbon cathodes are also sold to external customers throughout China.
Henan Branch
The Henan branch commenced its alumina refining operation in 1966 and primary aluminum smelting operation in 1967 in Henan Province, a province
rich in bauxite reserves. Bauxite is delivered to our Henan branch via railway and highway from the following mines: Xiaoguan mine, Gongyi mine and
Dengfeng mine located in Zhengzhou, Luoyang mine in Luoyang, Mianchi mine in Mianchi, Xuchang mine in Zhengzhou, Sanmenxia mine in
Sanmenxia and Jiaozuo mine in Jiaozuo. Our Henan branch was the first refinery in China to develop the Bayer-sintering combined process. We also
have an alumina production line that uses the ore-dressing Bayer process, which we developed to refine low alumina-to-silica ratio bauxite. Since its
inception, the Henan branch's production facilities have undergone substantial technological upgrades, based on equipment imported from Germany and
Denmark. The refinery has also benefited from its access to high alumina-to-silica ratio bauxite from our own mines and through purchases on the
market. Its alumina output is first used to satisfy its primary aluminum production, and the remainder is sold to our other smelters and external
customers. After the completion of its expansion project in 2012, Henan branch's annual alumina production capacity reached approximately 2,410,000
tonnes as of December 31, 2012. In 2012, our Henan branch produced approximately 1,928,000 tonnes of alumina and 125,000 tonnes of alumina
chemical products. Henan branch currently has the largest power generation capacity among our alumina refineries.
39
In January 2013, we ceased the operation of the obsolete primary aluminum production facilities of Henan branch. In 2012, our Henan branch did not
produce any primary aluminum.
Shandong Branch
The Shandong branch commenced operations in 1954 and has the capacity to produce alumina, primary aluminum and aluminum fabrication products.
Bauxite is delivered to our Shandong branch via railway and highway from the Yangquan mine in Yangquan, Shanxi Province. Its alumina refinery was
China's first production facility for alumina. It produces the majority of its alumina through the sintering process and Bayer process, but has an ore-
dressing sintering operation. The Shandong branch purchases the majority of the bauxite required for its production from small third-party mines in
Henan and Shanxi Provinces. Its alumina output is first used to satisfy its primary aluminum production, and the remainder is sold to our other smelters
as well as external customers. Shandong branch had an annual alumina production capacity of approximately 1,770,000 tonnes as of December 31, 2012.
It produced approximately 1,512,000 tonnes of alumina in 2012.
In addition, our Shandong branch produces substantial amounts of alumina chemical products and produced approximately 748,000 tonnes of alumina
chemical products in 2012. It is the largest and most technologically advanced alumina chemical products production facility in China with the ability to
produce the widest variety of alumina chemical products.
As of December 31, 2012, our Shandong branch's annual primary aluminum production capacity was approximately 55,000 tonnes and it produced
approximately 53,000 tonnes of primary aluminum in 2012.
Our Shandong branch also uses its self-produced primary aluminum to produce aluminum fabrication products. As of December 31, 2012, our Shandong
branch had an annual aluminum fabrication production capacity of 10,000 tonnes and it produced approximately 7,929 tonnes of aluminum fabrication
products in 2012.
Qinghai Branch
Located in Qinghai Province, our Qinghai branch is a stand-alone primary aluminum production facility. This branch commenced operations in 1987
and is one of the most technologically advanced primary aluminum smelters in China. It operates 160Ka and 200Ka automated pre-bake anode reduction
pot-lines that were developed domestically. It benefits from relatively low electricity costs in Qinghai Province due to the hydroelectric power stations in
the region. The Qinghai branch sources alumina from our Shanxi, Shandong, Henan and Zhongzhou branches, but incurs higher transportation costs for
both raw materials and its primary aluminum products than our other branches. The Qinghai branch produced approximately 387,000 tonnes of primary
aluminum in 2012, slightly exceeding its designed annual production capacity of approximately 367,000 tonnes as of December 31, 2012.
Shanxi Branch
Our Shanxi branch commenced operations in 1987 and is located in Shanxi Province, a province rich in bauxite deposits. Bauxite is transported to our
Shanxi branch via railway and highway from the Xiaoyi mine in Shanxi Province. Our Shanxi branch is a stand-alone alumina plant. After the
completion of its expansion project in 2012, our Shanxi branch's annual alumina production capacity reached approximately 2,747,000 tonnes as of
December 31, 2012. Our Shanxi branch produced approximately 1,924,000 tonnes of alumina and 14,000 tonnes of alumina chemical products in 2012.
Our Shanxi branch's production facilities are primarily imported. Shanxi branch relies on bauxite from our own mines as well as external suppliers. It is
in the proximity of large coal mines and substantial water resources and currently has the second largest power generation capacity among our alumina
refineries.
Zhongzhou Branch
Located in Henan Province, our Zhongzhou branch is a stand-alone alumina plant, located near abundant bauxite, coal and water supplies. It commenced
operations in 1993 and is equipped with imported and self-developed technology and has undergone various improvements and upgrades, in particular to
its sintering process and Bayer process. Our Zhongzhou branch obtains bauxite supplies from Henan Province and Shanxi Province.
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Our Zhongzhou branch had an annual alumina production capacity of approximately 2,980,000 tonnes as of December 31, 2012. Our Zhongzhou branch
produced approximately 1,901,000 tonnes of alumina and approximately 208,000 tonnes of alumina chemical products in 2012.
Zunyi Alumina
Zunyi Alumina is located in Zunyi, Guizhou Province. In April 2006, we entered into a joint venture agreement with Guizhou Wujiang Hydroelectric
Co., Ltd, to establish a joint venture company, Zunyi Alumina. We held 73.28% of the equity interests in Zunyi Alumina as of December 31, 2012.
Zunyi Alumina completed the construction of alumina production facilities and commenced operations in 2010. It had an annual alumina production
capacity of approximately 800,000 tonnes as of December 31, 2012. Zunyi Alumina produced approximately 851,000 tonnes of alumina in 2012.
Chongqing Branch
Our Chongqing branch is located in Chongqing. Chongqing branch completed the construction of alumina production facilities in 2010 and its annual
alumina production capacity was approximately 800,000 tonnes as of December 31, 2012. Chongqing branch produced approximately 386,000 tonnes of
alumina and 3,000 tonnes of alumina chemical products in 2012.
Lanzhou Branch
Located in Lanzhou city in Gansu Province, our Lanzhou branch is a stand-alone primary aluminum plant. It was part of Lanzhou Aluminum before July
2007 and was acquired by us through share exchange in April 2007. In July 2007, Lanzhou Aluminum was divided into two wholly-owned entities:
Lanzhou branch and Northwest Aluminum. Our Lanzhou branch owns a primary aluminum smelting plant with a designed annual primary aluminum
production capacity of approximately 388,000 tonnes as of December 31, 2012. It produced approximately 415,000 tonnes of primary aluminum in
2012.
Jiaozuo Wanfang
Jiaozuo Wanfang is situated in Jiaozuo city in Henan Province and is a stand-alone primary aluminum plant. Jiaozuo Wanfang was established in 1993.
In May 2006, we acquired 29% of the issued share capital and thus became its largest shareholder. In 2010, we partially disposed our equity interest in
Jiaozuo Wanfang. As of December 31, 2012, we held 24.002% equity interest of Jiaozuo Wanfang. Jiaozuo Wanfang has been our subsidiary since 2008
when we established the de facto control over it. Jiaozuo Wanfang had an annual primary aluminum production capacity of approximately 412,000
tonnes as of December 31, 2012 and produced approximately 451,000 tonnes of primary aluminum in 2011.
Shanxi Huaze
Shanxi Huaze is situated in Shanxi Province. In March 2003, we established the joint venture company, Shanxi Huaze, with Zhangze Electric Power to
commence the construction of a primary aluminum production facility. Shanxi Huaze's designed annual production capacity of primary aluminum was
approximately 350,000 tonnes as of December 31, 2012 and it produced approximately 349,000 tonnes of primary aluminum in 2012. We currently hold
60% of the equity interest of Shanxi Huaze.
Shanxi Huasheng
Shanxi Huasheng is situated in Shanxi Province. In December 2005, we entered into a joint venture agreement with Shanxi Guan Lv Company Limited
to establish a joint venture company, Shanxi Huasheng. Shanxi Huasheng commenced operations in March 2006 and had a designed annual production
capacity of primary aluminum of approximately 220,000 tonnes as of December 31, 2012. In 2012, Shanxi Huasheng produced approximately 216,000
tonnes of primary aluminum. We currently hold 51% of the equity interest in Shanxi Huasheng.
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Zunyi Aluminum
Zunyi Aluminum is situated in Guizhou Province. In June 2006, we entered into a share purchase agreement with Guizhou Wujiang Hydropower
Development Co., Ltd. and eight other companies, which were the shareholders of Zunyi Aluminum, to purchase part of the equity interest from
Guizhou Wujiang Hydropower Development Co., Ltd. and all the equity interest held by the other eight companies. We have completed our purchase
and currently hold 62.1% of the equity interest in Zunyi Aluminum. Zunyi Aluminum's annual primary aluminum production capacity was
approximately 235,000 tonnes as of December 31, 2012 and it produced approximately 234,000 tonnes of primary aluminum in 2012.
Fushun Aluminum
Fushun Aluminum is situated in Liaoning Province, and is a stand-alone primary aluminum plant. In March 2006, we entered into a share transfer
agreement with Liaoning Fushun Aluminum Plant to acquire 100% of the equity interests in Fushun Aluminum for a consideration of RMB500 million.
Fushun Aluminum's primary business is the production of primary aluminum and carbon products. After the completion of its expansion project in 2012,
Fushun Aluminum's annual primary aluminum production capacity reached approximately 330,000 tonnes as of December 31, 2012. Fushun Aluminum
produced approximately 263,000 tonnes of primary aluminum in 2012.
Shandong Huayu
Shandong Huayu is situated in Shandong Province and is a stand-alone primary aluminum plant. In July 2006, we entered into a share transfer
agreement with Shandong Huasheng Jiangquan Group to acquire 55% of the equity interest of Shandong Huayu, a subsidiary of Shandong Huasheng
Jiangquan Group. We currently hold 55% of the equity interest in Shandong Huayu. Shandong Huayu had an annual primary aluminum production
capacity of approximately 200,000 tonnes as of December 31, 2012. Shandong Huayu also has supporting facilities and coal-fired generators. In 2012,
Shandong Huayu produced approximately 219,000 tonnes of primary aluminum.
Gansu Hualu
Gansu Hualu is situated in Gansu Province, and is a stand-alone primary aluminum plant. In August 2006, we entered into a share transfer agreement
with Baiyin Nonferrous Metal (Group) Co., Ltd. ("Baiyin Nonferrous") and Baiyin Ibis Aluminum Co., Ltd. ("Baiyin Ibis"). Baiyin Nonferrous
contributed 127,000 tonnes of primary aluminum smelting and supporting facilities owned by Baiyin Ibis as capital contribution and holds a 49% equity
interest in Gansu Hualu, a subsidiary of Baiyin Ibis, and we hold 51% of the equity interest in Gansu Hualu. Gansu Hualu had an annual primary
aluminum production capacity of approximately 230,000 tonnes as of December 31, 2012 and it produced approximately 220,000 tonnes of primary
aluminum in 2012.
Baotou Aluminum
Baotou Aluminum is located in Inner Mongolia Autonomous Region, and is a stand-alone primary aluminum plant. On December 28, 2007, through A
Shares issuance and exchange for Baotou Aluminum shares, we acquired 100% of the equity interest of Baotou Aluminum. Baotou Aluminum had a
designed annual production capacity of approximately 388,000 tonnes as of December 31, 2012. In 2012, it produced approximately 400,000 tonnes of
primary aluminum.
Liancheng branch
Liancheng branch is located in Gansu Province. In late May, 2008, we acquired 100% of the equity interest of Liancheng Longxing Aluminum
Company Limited from Chinalco on the China Beijing Equity Exchange and subsequently turned it into our Liancheng branch which specializes in
producing primary aluminum. Liancheng branch had an annual primary aluminum production capacity of approximately 523,000 tonnes as of December
31, 2012. It produced approximately 495,000 tonnes of primary aluminum in 2011.
Longmen Aluminum
Located in Shanxi Province, Longmen Aluminum is established in 1991. We hold 55% of its equity interests. It specializes in producing primary
aluminum. As of December 31, 2012, Longmen Aluminum had an annual primary aluminum production capacity of approximately 17,000 tonnes and it
did not produce any primary aluminum in 2012.
Chalco Qingdao
Located in Qingdao, Shandong Province, Chalco Qingdao specializes in using recycled aluminum materials to produce aluminum fabrication products.
As of December 31, 2012, Chalco Qingdao had an annual alumina fabrication production capacity of approximately 120,000 tonnes and produced
approximately 7,300 tonnes of aluminum fabrication products in 2012.
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Northwest Aluminum
Northwest Aluminum is situated in Lanzhou City in Gansu Province and is an aluminum fabrication plant. It was part of Lanzhou Aluminum before July
2007 which we acquired through share exchange in April 2007. Lanzhou Aluminum's A shares were listed on Shanghai Stock Exchange until April 24,
2007 when we acquired it through share exchange. In July 2007, Lanzhou Aluminum was divided into two wholly-owned entities: Lanzhou branch and
Northwest Aluminum. Northwest Aluminum had an annual aluminum fabrication production capacity of approximately 135,000 tonnes as of December
31, 2012 and it produced approximately 34,206 tonnes of aluminum fabrication products in 2012.
Chalco Ruimin
Located in Fujian, Chalco Ruimin commenced production in 1996 and specializes in aluminum fabrication. In late May 2008, we purchased 75% of the
equity interest of Chalco Ruimin from Chinalco on the China Beijing Equity Exchange. Chalco Ruimin completed a RMB2.87 billion expansion plan in
2010. Chalco Ruimin had an annual aluminum fabrication capacity of approximately 370,000 tonnes as of December 31, 2012. Chalco Ruimin produced
approximately 173,814 tonnes of aluminum fabrication products in 2012. We currently hold 93.30% of the equity interest in Chalco Ruimin.
Huaxi Aluminum
Located in Chengdu, Sichuan Province, Huaxi Aluminum commenced production in 1997 and specializes in aluminum fabrication. In late May 2008, we
purchased 56.86% of the equity interest of Huaxi Aluminum from Chinalco on the China Beijing Equity Exchange. As of December 31, 2012, Huaxi
Aluminum had an annual aluminum fabrication production capacity of approximately 22,000 tonnes and it produced approximately 14,328 tonnes of
aluminum fabrication products in 2012.
Chalco Southwest Aluminum
Established in September 2004 and located in Chongqing, Chalco Southwest Aluminum specializes in aluminum fabrication. On May 30, 2008, we
purchased 60% of the equity interest of Chalco Southwest Aluminum from Chinalco on the China Beijing Equity Exchange. As of December 31, 2012,
Chalco Southwest Aluminum had an annual aluminum fabrication production capacity of approximately 350,000 tonnes and produced approximately
212,819 tonnes of aluminum fabrication products in 2012.
Chalco Southwest Aluminum Cold Rolling
Established in March 2006 and located in Chongqing, Chalco Southwest Aluminum Cold Rolling specializes in rolling aluminum and aluminum alloy
processing, development of high precision aluminum strip production technology and import and export activities on goods and technology. On May 30,
2008, we acquired 100% of the equity interests of Chalco Southwest Aluminum Cold Rolling from Chinalco. In 2010, we completed the construction of
production facilities of Chalco Southwest Aluminum Cold Rolling. As of December 31, 2012, Chalco Southwest Aluminum Cold Rolling had an annual
aluminum fabrication production capacity of approximately 250,000 tonnes. It produced approximately 62,493 tonnes of aluminum fabrication products
in 2012.
Henan Aluminum
Established in August 2005 and located in Luoyang, Henan Province, Henan Aluminum specializes in aluminum fabrication. In late May 2008, we
acquired 84.02% of the equity interest of Henan Aluminum from Chinalco and China Nonferrous Metals Technology on the China Beijing Equity
Exchange. As of December 31, 2012, Henan Aluminum had an annual aluminum fabrication production capacity of approximately 355,000 tonnes and
produced approximately 83,839 tonnes of aluminum fabrication products in 2012. We currently hold 90.03% of the equity interest in Henan Aluminum.
Chalco Nanhai
Established in June 2007 and located in Foshan, Chalco Nanhai specializes in aluminum fabrication. Chalco Nanhai commenced its commercial
operation in 2011 and had an annual aluminum fabrication production capacity of approximately 110,000 tonnes as of December 31, 2012. It produced
approximately 26,292 tonnes of aluminum fabrication products in 2012.
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Research Institute
Established in August 1965 and located in Zhengzhou, Henan Province, the Research Institute specializes in the research and development of technology
for smelting aluminum. It is the only research institute in China dedicated to light metals research and has played a key role in bringing about
technological innovations in China's aluminum industry. The Research Institute is central to our research and development efforts. The Research
Institute operates test facilities, which produce alumina chemical products and primary aluminum. The Research Institute was approved by the Ministry
of Science and Technology of the PRC in 2003 to establish the National Research Center of Aluminum Refinery Technologies and Engineering. Our
Research Institute has a limited alumina and primary aluminum production capacity, which it uses in connection with its research and development
efforts.
Competition
Competition from Domestic Competitors
Alumina
As the largest producer of alumina in China, we believe that we will not face significant competition from domestic alumina producers in the short-term
for the following reasons:
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a new producer would need access to a substantial and stable supply of bauxite as well as approval from the relevant departments under the State
Council of China;
we are experienced in alumina production and our production technologies are specifically adapted to the particular chemical composition of
bauxite found in China;
we have strong capacity in technology research and hold certain proprietary technologies and patents;
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our substantial workforce that has extensive experience in production and management; and
we enjoy strong government support under state policy.
In order to improve the efficiency and competitiveness of the Chinese alumina industry as well as to protect the environment, NDRC published
"Entrance Conditions for Aluminum Industry" (the "Entrance Conditions") in November 2007. According to the Entrance Conditions, new bauxite
projects must be approved by the provincial authority or the relevant department of the State Council of China depending on the amount of total
investment, and any new alumina project must be approved by the relevant department of the State Council of China. The Entrance Conditions also
provide detailed requirements for capital size, service period and resource utilization rate for a new bauxite or alumina project to be approved. The
Entrance Conditions have established a high entry barrier for new alumina producers in China.
Primary Aluminum
We derived all of our primary aluminum revenues from domestic sales in 2012. Our competitors include other domestic and international primary
aluminum producers that conduct sales in China. In 2012, our primary aluminum production represented approximately 16.0% of total domestic
production in China.
There are over 60 primary aluminum smelting companies operating in China, which sell substantially all of their products in China. We are the largest
integrated alumina and primary aluminum producer in China. Currently, six primary aluminum producers in China (including Chalco) have annual
production capacities of one million tonnes or more, which represent approximately 53% of the total primary aluminum production capacity in China. 10
primary aluminum producers in China (including Chalco) have annual production capacity of 800,000 tonnes or more, which represent approximately
65% of the total primary aluminum production capacity in China. The PRC government encourages consolidation in the Chinese primary aluminum
industry to create larger, more efficient producers that are better positioned to implement measures to reduce emissions. Accordingly, the larger smelters
are granted preferential treatment, including priority in the allocation of raw materials and electricity supplies, which give them a competitive advantage
over small domestic smelters. Moreover, according to the Entrance Conditions, effective from 2007, new aluminum projects for expanding production
capacity must be approved by the relevant department of the State Council of China. As of the date of the annual report, the relevant department of the
State Council of China is not expected to approve any new aluminum projects except those environmental protection upgrade projects and expired
equipment exchange projects planned by the PRC government.
Although we face competition from other large domestic smelters, we have several advantages over such competitors, including:
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Scale of production. With 16 primary aluminum smelters including our Research Institute, we can achieve significant economies of scale. In
addition, our scale of production enables us to achieve high production volumes to fill large customer orders and maintain a large customer base.
Through our national distribution network, we are able to make timely deliveries to customers from our local warehouses.
Technology. We believe we have more sophisticated and efficient technology than most of our domestic competitors. Our Liancheng and
Lanzhou branches are among the most technologically advanced primary aluminum smelting facilities in China. In addition, our technological
support and research and development capabilities are superior to other domestic smelters.
Vertical integration. As the largest integrated alumina and primary aluminum producer in China, we are able to supply alumina internally to our
primary aluminum plants. As a result, we save on transportation, warehousing and related costs. In addition, because we operate our own
alumina refineries, we are able to assure a stable supply of alumina for our primary aluminum smelting operations. Quality. The quality of our
primary aluminum is generally higher than that of the primary aluminum produced by most of our domestic competitors.
The primary aluminum produced by most of our smelters satisfies the quality standards of the LME.
Aluminum Fabrication Products
We derived more than 80% of our aluminum fabrication products revenues from sales in China in 2012. Our competitors include other domestic and
international producers of aluminum fabrication products that sell aluminum fabrication products in China. The aluminum fabrication market in China is
highly fragmented. There are more than 2,000 aluminum fabrication producers in China with an aggregate annual capacity of approximately 33.0 million
tonnes as of the end of 2012. In 2012, the aluminum fabrication producers in China produced approximately 30.7 million tonnes of aluminum fabrication
products. We are the largest producer of aluminum fabrication products in China and our major competitors are largely medium- and small-scale
regional producers of aluminum fabrication products. We believe we have advantages over such competitors in scale of production, production
technologies, research and development, variety of product offerings and experienced workforce.
Competition from International Competitors
The tariff rate for alumina and primary aluminum imports was eliminated on January 1, 2008 and August 1, 2007, respectively. In 2012, China imported
approximately 5.0 million tonnes of alumina, representing approximately a 163.2% increase from 2011. China had net import of approximately 392,900
tonnes of primary aluminum in 2012, which represented a 174.6% increase from 2011. Competition from international suppliers of alumina and primary
aluminum is expected to increase. Such competitors are likely to be large international companies. Some competitors may also consider establishing
joint venture companies with local producers in China to gain access to the resources in China and to lower transportation costs. However, we expect to
continue benefiting from certain PRC governmental policies that promote the growth of large domestic smelters.
International suppliers used to be dominant in certain types of advanced aluminum fabrication products in China. Since 2007, the import of aluminum
fabrication products has been slightly decreasing. However, as we began to produce some types of these advanced aluminum fabrication products,
including aluminum CTP plates, precision aluminum tubes and some other types of aluminum strips, plates and screens used in electronic industry, to
our customers in China, we expect the competition from these international suppliers will increase. We aim to provide high quality products at
competitive prices to our customers.
Research and Development
Our research and development efforts over the years have facilitated the expansion of our production capacity and reduced our unit costs. We have
successfully commercialized our previous research and development results in various technologies. In 2012, we completed 114 technological projects,
including 11 technology development projects, 10 industrialization, promotion and application of advanced technologies projects and 98 basic
application projects. In addition, we filed a total of 173 patent applications in 2012.
As of December 31, 2012, we owned 1,836 patents, which were primarily related to technologies and know-how, equipment and new products. Once
registered, a patent in China for a new invention is valid for 20 years and for a new function or a new design, 10 years from the date of the patent
application. As of December 31, 2012, we owned 37 trademarks, each of which had a term of 10 years.
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We do not regard any single patent, license, or trademark to be material to our sales and operations as a whole. We have no material patents, licenses, or
trademarks, the duration of which cannot, in the judgment of our management, be extended as necessary. We are neither involved in any material
intellectual property disputes against us nor are we pursuing any legislation relating to intellectual property rights against any party.
Environmental Protection
Our operations are subject to a wide variety of PRC national and local environmental laws and regulations, including those governing waste discharge,
generation, treatment and disposal of hazardous materials, land reclamation, air and water emissions and mining matters. For example, the PRC
government has set discharge standards for emissions to air and water. To enforce these standards, national environmental protection authorities have
imposed discharge fees that increase for each incremental amount of discharge up to the limit set by the regulation. The relevant PRC government
agencies are authorized to order any operations that exceed discharge limits to take remediation measures, which are subject to the relevant agency's
approval, or order the closure of any operations that fail to comply with applicable regulations. On February 6, 2010, the State Council of China issued
"Notice on Further Strengthening the Elimination of Obsolete Production Capacities", which recommends all pre-bake reduction pot-lines below 100 Ka
be closed by the end of 2011. Some of our primary aluminum utilities with a total capacity of 437,000 tonnes were shut down in compliance with this
notice in 2011.
The pollutants discharged from our alumina refining process include red mud, waste water and gas emissions and particulates. Our primary aluminum
production process generates fluorides, pitch fume and particulates. It is illegal to release these pollutants untreated, or those after treatment but still not
complying with discharge limits, the discharge of these pollutants must comply with national and local discharge limits.
Each of our alumina refineries, primary aluminum smelters and other production plants has its own waste treatment facilities onsite or has developed
other methods to dispose of industrial waste in compliance with applicable environmental laws and regulations. We were granted ISO14001
accreditations issued by China Quality Certification Center and the International Certification Network in 2004. In 2012, we passed the review and the
accreditations were renewed.
We have increased our energy-efficiency by implementing new production techniques and technologies, upgrading our production facilities, optimizing
our production process and enhancing our logistics and operations management. Through these efficiency initiatives, we estimate that we conserved the
energy equivalent of 135,700 tonnes of standard coal in 2012. We have incorporated clean technology and processes into our operations with a view to
promoting the concept of "zero emission" plants. Since 2009, we have achieved our target of zero industrial waste water emission.
Our total expenditures for maintaining compliance with environmental laws and regulations were RMB1,151.0 million, RMB1,524.6 million and
RMB1,073.7 million for the years ended December 31, 2010, 2011 and 2012, respectively. We believe that our operations are substantially in
compliance with currently applicable national and provincial environmental regulations.
Insurance
We maintain insurance coverage for our property, plant and equipment, in particular our transportation vehicles and assets that we consider to be subject
to significant operating risks. We also have limited coverage for natural disaster such as typhoons, tornados, floods, landslides and lightning strikes.
However, there are certain types of losses, such as losses from war, acts of terrorism and natural disasters, for which we cannot obtain insurance at a
reasonable cost or at all.
We are covered under the injury and accidental death insurance provided by the local government labor departments and do not separately maintain
coverage for such risks. Consistent with what we believe to be the customary practice in China, we generally do not carry any third-party liability
insurance to cover personal injury, environmental damage arising from accidents arising from property or related to our operations (other than our
automobiles) or business interruption insurance. More extensive insurance is either unavailable in China or would impose a cost on our operations that
would reduce our competitiveness.
We paid a total of RMB79.5 million, RMB75.9 million and RMB58.8 million in insurance premiums in 2010, 2011 and 2012, respectively.
Seasonality
Our business is not subject to seasonality.
Regulatory Overview
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Producers of alumina and primary aluminum are subject to national industrial policies and relevant laws and regulations in areas of environmental
protection, import and export, land use, foreign investment regulation and taxation. We are also subject to regulations relating to activities such as
mining.
We are principally subject to governmental supervision and regulation by two agencies of the PRC government:
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the NDRC, which sets and implements the major policies concerning China's economic and social development, approves investments
exceeding certain amounts, coordinates and improves the reform of the economic system, and formulates industrial policies and investment
guidelines for all industries including the aluminum industry; and
the Ministry of Land and Resources of China, which has the authority to grant land use licenses and mining right permits.
The following is a brief summary of the principal laws, regulations, policies and administrative directives to which we are subject.
Requirements for Capital Investments
Any capital markets financing activities by an enterprise or company incorporated in the PRC such as those to finance capital projects, are subject to
approval by the CSRC and/or other relevant authorities in China, regardless of whether the funds are raised in China or on the international capital
markets. An issuer incorporated in the PRC must obtain prior approval from the CSRC for issuance of equity securities or equity-linked securities.
Offering of corporate bonds in the PRC by a listed PRC-incorporated company is subject to approval from the CSRC, while offering of enterprise bonds
in the PRC by other enterprises is subject to approval from the People's Bank of China or the NDRC and/or other relevant authorities. Offering of bonds
by a PRC-incorporated company outside the PRC is subject to approval from the NDRC and/or the State Administration of Foreign Exchange. For all
overseas financing activities by an enterprise or company incorporated in the PRC, the issuer must register with and obtain prior approval from the
NDRC and the administrative authorities of foreign exchange. Foreign investment in the exploring and mining of alumina and primary aluminum is
permitted by the PRC government.
Entrance Conditions for Aluminum Industry
"Entrance Conditions for Alumina Industry" provides that, (i) all new bauxite projects must be approved by relevant authorities at the provincial
governments, with an exception for those projects with a total investment of RMB500 million or above, for which the approval from the competent
authority under the State Council of China is required. In addition, all new bauxite projects applying for approval should have an annual production
capacity of not less than 300,000 tonnes with a service period of over 15 years; (ii) all new alumina projects must obtain approval from the competent
authority under the State Council of China. Any alumina project which consumes domestic bauxite must have an annual production capacity of 800,000
tonnes or above and service duration of bauxite mines must exceed 30 years. Any alumina projects which consumes imported bauxite must have an
annual production capacity of 600,000 tonnes or above and have reliable bauxite supply. Raw materials supplied under long-term purchase agreements
with terms of over five years must exceed 60% of the total raw material demand; and (iii) all primary aluminum projects for expanding production
capacity must be approved by the competent authority under the State Council of China. In near future, approval will only be granted to environmental
protection upgrade projects and those projects under state plan to replace out-of-date equipment. All update or replacement project must have reliable
alumina supply, power supply and transportation access.
Pricing
The PRC government does not impose any limitations with respect to the pricing of alumina, primary aluminum and related products. Thus, alumina and
primary aluminum producers are free to set prices for their products. All the raw materials, supplemental materials and other supplies that we purchase
are based on market prices. Freight transportation on the national railway system is subject to government mandated pricing.
Electricity Supply and Price
The State Electricity Regulatory Commission of China is responsible for the supervision and administration of the power industry in China. The NDRC
and local governments regulate electricity pricing. Electricity suppliers may not change their electricity prices without governmental authorization.
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The Electric Power Law of China and related rules and regulations govern construction, generation, supply and consumption of electric power.
Currently, China's state-owned power companies, through their respective local subsidiaries, operate all the regional power grids in China from which
we obtain most of our electricity requirements. In October 2007, Chinese government issued "Notice on Further Solutions of the Difference in
Electricity Rates", according to which the preferential electricity prices originally enjoyed by Chinese primary aluminum enterprises have been gradually
abolished. In May 2010, Chinese government issued "Notice of Eliminating Preferential Electricity Rate for High Energy Consuming Enterprises and
Related Matters", which further eliminated the preferential electricity price arrangement enjoyed by Chinese primary aluminum enterprises.
Regulations Concerning Imports and Exports of Alumina and Primary Aluminum
Import taxes on alumina and primary aluminum have been eliminated. The export tariff on certain primary aluminum products has been 15% since
August 1, 2007.
Environmental Protection Laws and Regulations
The Ministry of Environmental Protection of China is responsible for supervision and administration of environmental protection in China. It formulates
national environmental quality and discharge standards and monitors China's environmental system. Environmental protection bureaus at the county
level or above are responsible for environmental protection within their respective jurisdictions.
Environmental regulations require each enterprise to file an environmental impact report with the relevant environmental bureau for approval before
undertaking the construction of a new production facility or any major expansion or renovation of an existing production facility. New facilities built
pursuant to this approval are not permitted to operate until the relevant environmental bureau has performed an inspection and concluded that the
facilities are in compliance with environmental standards.
The Environmental Protection Law requires any facility that produces pollutants or other hazards to incorporate environmental protection measures in its
operations and establish an environmental protection responsibility system. Such system includes adoption of effective measures to control and properly
dispose of waste gases, waste water, waste residue, dust or other waste materials. Any entity that discharges pollution must register with the relevant
environmental protection authority.
Penalties for breaches of the Environmental Protection Law include warning, payment of damages and imposition of fines. Any entity undertaking a
construction project that fails to install pollution prevention and control facilities in compliance with environmental standards for a construction project
may be ordered to suspend production or operations or to cease operations and may be fined. Criminal liability may be imposed for a material violation
of environmental laws and regulations that causes any significant loss of property or personal injuries or death.
Mineral Resources Laws and Regulations
All mineral resources in China are owned by the state under the current Mineral Resources Law. Exploration, exploitation and mining operations must
comply with the relevant provisions of the Mineral Resources Law and are under the supervision of the Ministry of Land and Resources. Exploration
and exploitation of mineral resources are also subject to examination and approval by the Ministry of Land and Resources and relevant local authorities.
Upon approval, the relevant administrative authorities, which are responsible for supervision and inspection of mining exploitation in their jurisdiction,
will issue a exploration permit or mining permit. The holders of mining rights are required to file with the relevant administrative authorities annually.
The PRC government permits mine operators of collectively owned mines to exploit mineral resources in designated areas and individuals to mine
scattered mineral resources. Such mine operators and individuals are subject to government regulation. Mining activities by individuals are restricted.
Individuals are not permitted to exploit mineral reserves allocated for exploitation by a mining enterprise or company, or specified minerals prescribed
by the state for protective mining. Indiscriminate mining that damages mineral resources is prohibited.
If mining activities result in damage to arable land, grassland or afforested area, the mining operator must take measures to return the land to an arable
state within the prescribed time frame. Any entity or individual which fails to fulfill its remediation obligations may be fined and denied application for
land use rights for new land by the relevant land and natural resources authorities.
It is unlawful for an entity or individual to conduct mining operations in areas designated for other legal mining operators. A mining operator whose
exploitation causes harm to others in terms of production or in terms of living standards is liable for compensation and is required to take necessary
remedial measures. When a mine is closed, a mine closure report and information concerning the mining facilities, hidden dangers, remediation and
environmental protection must be submitted for examination and approval in accordance with the relevant PRC law and regulations.
48
The mineral products illegally extracted and the income derived from such activities may be confiscated and may result in fines, revocation of the
mining permit and, in serious circumstances, criminal liability.
Tax Laws and Regulation
In March 2007, the PRC government promulgated the Enterprise Income Tax Law which became effective from January 1, 2008. The Enterprise Income
Tax Law imposes a single income tax rate of 25% on both domestic and foreign invested enterprises. Certain branches and subsidiaries of us were
granted tax concessions including preferential tax rates of 15%. On December 6, 2007, PRC government promulgated the Enterprise Income Tax Law
Implementation Rules which also became effective on January 1, 2008.
C.
ORGANIZATIONAL STRUCTURE
Below is a summary of our corporate structure and principal subsidiaries as of December 31, 2012:
Company
Percentage of
ownership interest
attribution to the
Company
Principal activities
Baotou Aluminum Co., Limited
Chalco Hong Kong Ltd.(1)
Chalco Ruimin Co., Limited
Chalco Southwest Aluminum Co., Limited
100%
100%
93.30%
60%
Chalco Southwest Aluminum Cold Rolling Co., Limited
100%
Chalco Zunyi Alumina Co., Ltd.
China Aluminum International Trading Co., Ltd.
China Mining Co., Ltd.
Fushun Aluminum Co., Ltd.
Gansu Hualu Aluminum Co., Ltd.
Chalco Henan Aluminum Co., Limited
Jiaozuo Wanfang Aluminum Manufacturing Co., Ltd
Shandong Huayu Aluminum and Power Co., Ltd.
Shanxi Huasheng Aluminum Co., Ltd.
Shanxi Huaze Aluminum and Power Co., Ltd.
Zunyi Aluminum Co., Ltd.
Shanxi Huaxing Alumina Co., Ltd.
Gansu Huayang Mining Development Company Limited
Chalco Energy Co., Ltd.
Chalco Iron Ore Holding Ltd.
73.28%(2)
100%
100%
100%
51%
90.03%
24.002%(3)
55%
51%
60%
62.10%
100%
70%
100%
65%
Manufacture and distribution of primary aluminum, aluminum alloy and related
fabrication products and carbon products
Overseas investments and alumina import and export activities
Manufacture of aluminum, magnesium and related alloy products; export activities
Manufacture and distribution of metal materials (excluding precious metals); sales of
general machinery and equipment
Rolling aluminum and aluminum alloy processing; development of high precision
aluminum strip production technology; import and export activities on goods and
technology
Manufacture and distribution of alumina
Import and export activities
Manufacture, acquisition and distribution of bauxite mines, limestone ore, aluminum
magnesium ore and related nonferrous metal products
Aluminum smelting, manufacture and distribution of nonferrous metals
Manufacture and distribution of primary aluminum
Manufacture and distribution of aluminum and alloy related products
Aluminum smelting, manufacture and distribution of nonferrous metals
Manufacture and distribution of primary aluminum
Manufacture and distribution of primary aluminum, aluminum alloy and carbon-related
products
Manufacture and distribution of primary aluminum and anode carbon products and
electricity generation and supply
Manufacture and distribution of primary aluminum
Manufacture and distribution of alumina
Manufacture and distribution of coal and other mineral products
Thermoelectric supply and investment management
Overseas investment
(1)
Chalco Hong Kong Ltd. is incorporated in Hong Kong and all other principal subsidiaries are incorporated in the PRC.
49
(2)
(3)
In August 2012, we injected RMB165 million in cash into Zunyi Alumina. As a result, our equity interest in Zunyi Alumina increased from 67% to 73.28%. .
In October 2010, we disposed of 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, our equity interest in Jiaozuo Wanfang decreased from
29% to 24.002%, but we remained the single largest shareholder and retained the rights to nominate five of the six non-independent directors as of December 31, 2011 and
2012. 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 shareholder. In additions, all resolutions proposed by us in the past five years were approved. The directors are of
the view that we had de facto control over Jiaozuo Wanfang as of December 31, 2011 and 2012.
50
D.
PROPERTY, PLANTS AND EQUIPMENT
Mines
Bauxite Mines
The following map sets forth details of the area surrounding Pingguo mine, our largest bauxite mine in China:
The Guangxi Pingguo plant, located in the Guangxi Zhuang Autonomous Region, commenced operations in 1994. The surrounding infrastructure
includes roadways and waterways.
On March 30, 2011, Chalco Hong Kong entered into a joint venture agreement with Laos Service Co., Ltd. to acquire 60% of the equity interest in Laos
Mineral Services Co., Ltd. for the development and operation of a bauxite mine and other mineral resources in Laos. As of the date of this annual report,
the bauxite mine is at the exploration stage and neither proven nor probable reserves have been established.
Modernization and Physical Condition, Equipment, Infrastructure and Other Facilities
We have modern facilities at our mines in China, which were designed by professional PRC mine design institutes and adhere to international standards.
Our mines are either open pit or underground. Our mines generally have mining offices and transportation facilities that have access to local roads and
highways. In addition, we utilize advanced heavy equipment such as bulldozers and scrapers.
Source of Power and Water
All of our mining facilities in China are connected to the local or regional electric power grids. In addition, our mining facilities are connected to reliable
water sources, all of which were sufficient for the requirements of each individual mine.
51
Coal Mines
We acquired 70% of the equity interest in Gansu Huayang in March 2011, which holds mining rights for coal deposits in the Luochuan mining area,
Gansu Province. Luochuan mine is an underground mine and is currently under exploration. As of the date of this annual report, neither proven nor
probable reserves have been established.
On May 16, 2011, We entered into a mining rights transfer agreement to acquire the mining rights for coal deposits in the Laodonghe mining area,
Guizhou Province, with the previous mining rights holder. As of the date of this annual report, the previous mining rights holder is still in the process of
transferring the mining rights to us. We have completed the exploration of Laodonghe mine. Laodonghe mine is an underground mine and has a
designed annual production capacity of non-caking coal of 300,000 tonnes. As of the date of this annual report, neither proven nor probable reserves
have been established.
Land
Chinalco leases to us 457 pieces or parcels of land, located in eight provinces, covering an aggregate area of approximately 63.2 million square meters
for any purpose related to our operations and businesses. Currently, all leases for our properties are valid and have not expired. The leased land mainly
consists of:
*
*
445 pieces of allocated land with an area of approximately 61.9 million square meters. Chinalco has obtained authorization from the relevant
administrative authorities to manage and lease the land use rights for such land; and
12 pieces of land with an area of approximately 1.3 million square meters. Chinalco has paid the land premiums and obtained land use rights
certificates.
The land is leased for the following terms:
*
*
*
allocated land: 50 years commencing from July 1, 2001 (except for land use rights of mines operated by us, whose leased terms shall end on the
expiration date of the mining rights or at the end of the actual mine life, whichever is earlier);
granted land: until expiration of the relevant land use right permits; and
for both allocated or granted land: normal commercial terms that stipulate, among other conditions, the terms of use, monthly or annual rental
amounts payable in RMB and a six-month notification provision for termination of any lease agreement.
Buildings
Our principal executive offices, which we lease from Chinalco, are located at No. 62 North Xizhimen Street, Hai Dian District, Beijing, People's
Republic of China, 100082.
Pursuant to the reorganization in connection with our initial public offering in 2001, Chinalco transferred to us, among other operating assets, ownership
of the buildings and properties for the operation of our core businesses. Chinalco retained its remaining buildings and properties for its operations. The
buildings transferred to us comprise 4,631 buildings with an aggregate gross area of approximately 4.2 million square meters. These buildings may be
sold or transferred only with the consent of Chinalco and in accordance with applicable land transfer procedures. Chinalco has undertaken to provide its
consent and the necessary assistance to affect land grant procedures to ensure that our buildings can be legally transferred or sold.
We and Chinalco also lease to each other a number of other buildings and properties for ancillary uses, which comprise mainly buildings for offices,
dormitory, canteen and storage purposes. We lease 59 buildings to Chinalco, with an aggregate gross area of approximately 62,189 square meters.
Chinalco leases 100 buildings to us, with an aggregate gross area of approximately 273,637 square meters. The lease terms of all these buildings are 20
years commencing from July 1, 2001. Chinalco had obtained proper land and building title certificates for all of the buildings it leases to us by the end of
2004. On March 28, 2005, we entered into a tenancy agreement with China Aluminum Development Company Limited, a wholly-owned subsidiary of
Chinalco, for leasing the office premises at 12th to 16th floors and 18th to 31st floors of No. 62 North Xizhimen Street, Hai Dian District, Beijing, PRC
with an aggregate gross floor area of 30,160.81 square meters for a term of three years. On October 15, 2008, our tenancy agreement with China
Aluminum Development Company Limited expired, and we renewed the tenancy agreement to extend it for another three years commencing on October
16, 2008, pursuant to which, the aggregated gross floor area we leased under such tenancy agreement was increased to 30,188.0 square meters. On
October 10, 2010, we entered into a supplemental tenancy agreement with China Aluminum Development Company Limited, pursuant to which, the
aggregate gross floor area we lease under the tenancy agreement was reduced to 26,036.3 square meters. On October 15, 2011, we renewed the tenancy
agreement to extend it for another two years, pursuant to which, the aggregate gross floor area we lease under the tenancy agreement was further reduced
to 23,551 square meters.
52
For environmental issues in relation to the utilization of our assets, please refer to "- Environmental Protection."
Our Expansion
In 2013, we plan to expand our annual production capacity for alumina and bauxite by approximately 800,000 tonnes and 990,000 tonnes, respectively.
Our expansion projects in 2013 primarily include:
*
*
Chalco Xing Xian alumina project: This project is expected to be completed in 2013, and we expect the completion of this project to increase our
annual production capacity for alumina and bauxite by approximately 800,000 tonnes and 990,000 tonnes, respectively. We expect to invest a
total amount of approximately RMB4.6 billion in this project and we had invested approximately RMB2.4 billion as of December 31, 2012. We
used internal resources to fund this project.
Baotou Aluminum captive power plant project: This project is expected to be completed in 2014, with an electricity production capacity of
approximately 3.9 kWh. We expect to invest a total amount of approximately RMB2.7 billion in this project and we had invested approximately
RMB482 million as of December 31, 2012. We used internal resources to fund this project.
We intend to fund these capital expenditures through a combination of internal funds derived from our own operations and the proceeds from medium-
term and long-term debt financing.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and selected historical financial
data, in each case together with the accompanying notes included elsewhere in this annual report. This section contains certain "forward-looking
statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of
our future performance or results and our actual results could materially differ from those disclosed in the forward-looking statements. In evaluating our
business, you should carefully consider the information provided in "Item 3. Key Information - D. Risk Factors."
A.
OPERATING RESULTS
Overview
We are the largest producer of alumina, primary aluminum and aluminum fabrication products in China. We are engaged principally in alumina refining,
primary aluminum smelting, aluminum fabricating and trading of non-ferrous metal products, coal products and other products. We organize and
manage our operations according to the following key segments:
*
*
*
*
*
Alumina segment, which consists of the mining and purchasing of bauxite and other raw materials, and production and sale of alumina as well as
alumina-related products, such as alumina hydrate, alumina-based chemical products and gallium. Alumina accounted for approximately 93.8%
of the total production volume for this segment in 2012. Alumina chemical products are used in the production of chemical, pharmaceutical,
ceramic and construction materials. In the process of refining bauxite into alumina, we produce a small amount of gallium as a by-product.
Gallium is a rare, high value metal with applications in the electronics and telecommunication industries.
Primary aluminum segment, which consists of the production and sale of primary aluminum and aluminum-related products, such as carbon
products. Our principal primary aluminum product is ingots, which accounted for approximately 74.5% of our total production volume for this
segment in 2012. Our standard 20 kilogram remelt ingots are used for general aluminum fabrication in the construction, power generation,
automobile, packaging, machinery and durable goods industries. We internally produce substantially all the carbon products used at our smelters
and sell our remaining carbon products to external customers.
Aluminum fabrication segment, which consists of the production and sale of aluminum fabrication products, including casts, planks, strips,
screens, extrusions, ingots and profiles, which are widely used in the construction, power generation, automobile, packaging, machinery and
durable goods industries. We use recycled aluminum materials at Chalco Qingdao and Chalco Nanhai, two of our aluminum fabrication plants,
to produce aluminum fabrication products.
53
Trading segment, which consists of sales of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal, coal products
and raw and ancillary materials in bulk both manufactured by us and sourced from external suppliers domestically and abroad. We established
our trading business as a separate segment in July 2010, as a result of the implementation of our operational structural exercise.
Corporate and other operating segments, which mainly include management of headquarters, research and development activities.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB, which requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the accounting policies. The areas in our financial reporting
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements
are disclosed in Note 4 to our consolidated financial statements. We have established procedures and processes to facilitate the making of such
judgments in the preparation of our consolidated financial statements. Management has used the best information available but actual performance may
differ from our management's estimates and future changes in key variables could change future reported amounts in our consolidated financial
statements.
Property, Plant and Equipment- recoverable amount
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.
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 flows 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 profit or loss.
Property, plant and equipment and intangible assets - estimated useful lives and residual values
Our management determines the estimated useful lives and residual values (if applicable) and consequently related depreciation/amortization charges for
our 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
we intend to derive future economic benefits from the use of intangible assets. Our 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.
Goodwill - recoverable amount
Goodwill is allocated to our operating segments as it represents the lowest level at which the goodwill is monitored for internal management purposes
and is tested for impairment annually based on a formal estimate of the recoverable amount prepared by our management. 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.
54
Estimated impairment of trade and other receivables and inventories
A provision for impairment of trade and other receivables is established when there is objective evidence that we will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the
provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. Cash flows relating to trade and other receivables are discounted if the effect of discounting is material. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statements of comprehensive income.
When a trade and other receivable is uncollectible, it is written-off against the allowance account for trade and other receivables. Subsequent recoveries
of amounts previously written-off are recognized as income in profit or loss. The impairment is subject to our management's assessment as of the end of
the reporting period, and hence, the provision amount is subject to uncertainty.
Our 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
their net realizable value. For inventories held for executed sales contracts, our management estimates the net realizable value based on the contractual
price; for other inventories, our management estimates the 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 issuance by our Board, taking into account the nature and balance of inventories and future
estimated price trends. For raw materials and work-in-progress, our 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 our 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 end of the reporting period which reflect conditions that existed as of the end of the reporting period.
It is reasonably possible that if there is a significant change in circumstances including our business and the external environment, outcomes within the
next financial year may be significantly affected.
Income Tax
We estimate our 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 we are entitled in each location or jurisdiction in
which we operate. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of
business. We recognize 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 tax assets, we have assessed the likelihood that the deferred tax assets could be recovered based on
our forecast of future taxable profits and also tax planning opportunities available to us. Major deferred 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, we recorded deferred tax assets of approximately RMB2,261 million as of December 31, 2012, compared with approximately RMB1,628
million as of December 31, 2011. Deferred tax assets are recognized based on our estimates and assumptions that they will be recovered from taxable
income arising from continuing operations in the foreseeable future.
We believe we have recorded adequate current tax provision and deferred income taxes based on the prevailing tax rules and regulations and our 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 our results or financial position.
Going concern
As set out in Note 2.1 to the consolidated financial statements, our ability to continue operations depends on obtaining the necessary financing
borrowings and continued operations to generate sufficient cash flows to meet our liabilities as they fall due. In the event we are unable to obtain
adequate funding, there is uncertainty as to whether we will be able to continue as a going concern. The consolidated financial statements do not include
any adjustments related to the carrying values and classifications of assets and liabilities that would be necessary should we be unable to continue as a
going concern.
New IFRS Pronouncements
For a detailed discussion of new accounting pronouncements, please see Note 2 to our audited consolidated financial statements.
55
Factors Affecting Our Results of Operations
We believe that the following factors which impact our various revenue and expense items (as described below) have had, and will continue to have, a
significant effect on the development of our business, financial position and results of operation.
Economic Condition of China and the World
As the major aluminum product market is globalized, the demand for and prices of our products are highly correlated with the general economic
condition of China and the world and the performance of the major aluminum and related product markets. In recent years, China's economy has
experienced rapid growth despite the negative effect of the recent global financial crisis beginning in the second half of 2008. The growth of China's
economy has led to increased demand in major aluminum product market, which in turn resulted in increased demand for our products. In 2012, China's
GDP grew at 7.8%. However, despite the growth in China's economy, global economic depression, excessive supply over demand in the aluminum
industry and fierce competition among aluminum producers remained unchanged in 2012. As a result, demand for our products in both domestic and
global market only increased slightly.
The global output of alumina in 2012 was approximately 93.5 million tonnes, representing an increase of 3.1% from 2011. The global alumina
consumption in 2012 reached approximately 92.0 million tonnes, representing an increase of 2.9% from 2011. In 2012, the domestic output of alumina
products reached approximately 41.7 million tonnes, representing an increase of 7.5% from 2011 and the domestic consumption for alumina was
approximately 40.2 million tonnes, representing an increase of 3.0% from 2011. In 2012, alumina imported into the PRC amounted to approximately 5.0
million tonnes, representing a decrease of 163.2% from 2011.
The global output of primary aluminum in 2012 reached approximately 47.1 million tonnes, representing an increase of 3.2% from 2011. The global
consumption of primary aluminum in 2012 reached approximately 46.6 million tonnes, representing an increase of 3.3% from 2011. In 2012, the
domestic output of primary aluminum was approximately 21.3 million tonnes, representing an increase of 9.2% from 2011 and the domestic
consumption of primary aluminum was approximately 21.5 million tonnes, representing an increase of 10.2% from 2011.
In addition, as China's economy continued to grow at a steady speed in 2012, the prices of various raw materials and energy cost also increased in China,
which in turn increased our cost and decreased in our profitability and ultimately resulted in an adverse impact on our result of operations. For the year
ended December 31, 2012, we incurred a gross loss of RMB323.8 million, compared with the gross profit of RMB7,763.1 million we had for the year
ended December 31, 2011.
Mix and Pricing of Our Products
We are engaged principally in alumina refining, primary aluminum smelting, aluminum fabrication products manufacturing and sales of these products
and trading of non-ferrous metal products and other products. We sell most of our self-produced products through Chalco Trading, taking into account
the relevant LME and SHFE prices. In 2012, revenues generated from alumina, primary aluminum, aluminum fabrication products and trading segments
(after elimination of inter-segment sales) accounted for 2.5%, 21.7%, 5.6% and 70.1%, respectively, of our consolidated total revenues after elimination
of inter-segment sales. We apply different policies to price different products. For information on our pricing of different products, please see the section
headed "Item 4. Information of the Company - B. Business Overview - Sales and Marketing."
The sales prices of alumina that our alumina refineries sell internally to Chalco Trading are determined at a percentage of the average primary aluminum
futures prices on the SHFE for the past three months. Chalco Trading coordinates the external sales of our alumina products. In 2012, excessive supply
over demand in the international and domestic market resulted in a continual drop in alumina prices. In 2012, the spot price of alumina in the
international market reached a high of approximately US$333 per tonne and bottomed out at approximately US$303 per tonne, and the average spot
price of alumina in the international market was approximately US$319 per tonne, representing a decrease of 22.8% from 2011. The spot price of
alumina in the domestic market reached a high of RMB2,750 per tonne and bottomed out at RMB2,480 per tonne, and the average spot price of alumina
in the domestic market was approximately RMB2,648 per tonne, representing a decrease of 5.0% from 2011. Our average selling price of alumina
decreased by 6.3% from RMB2,863 per tonne in 2011 to RMB2,681 per tonne in 2012.
Like most primary aluminum producers in China, we price our primary aluminum products by reference to the SHFE spot prices. SHFE primary
aluminum spot prices generally reflect LME primary aluminum spot prices, but also account for international transportation costs, import tariffs, value-
added tax and other import-related costs. Fluctuations in the SHFE spot prices, and LME spot prices by extension, have a significant effect on our
operating results. In 2012, under the influence of global economic depression and deterioration of Euro debt crisis, international primary aluminum
prices remained at low levels throughout the year. Domestic primary aluminum prices, impacted by continued increase in supply and China's downward
adjustment to economic expectation, also continued to decrease in 2012. The average three-month aluminum futures prices at LME decreased by 14.9%
from US$2,410 per tonne in 2011 to US$2,051 per tonne in 2012. The average three-month aluminum futures prices at SHFE decreased by 6.5% from
RMB16,893 per tonne in 2011 to RMB15,795 per tonne in 2012. Our average selling price of primary aluminum decrease by 7.2% from RMB16,911
per tonne in 2011 to RMB15,694 per tonne in 2012.
56
Price Volatility of Non-ferrous Metal and Coal Products.
Since late 2009, as a result of the implementation of our operational structural adjustment, we have been engaged substantially in the trading of
outsourced non-ferrous metal products to increase our profit. In 2012, we began to engage in the trading of significant amount of outsourced coal
products to diversify our product portfolio. Although the profit margin of sales of outsourced products is typically lower than that of our self-produced
products, we generated substantial revenues and profit from trading of outsourced products in 2012 due to our significant trading volumes. In 2012, the
gross profit margin of our external sales of products purchased from external sources in our trading segment was approximately 1.1%, compared with
approximately 0.7% for our external sales of self-produced products in our trading segment. Our revenue and gross profit generated from external sales
of products purchased from external sources in 2012 was approximately RMB66,589.3 million and RMB698.3 million, respectively, representing
approximately 63.6% and 73.1%, respectively, of total revenue and gross profit from external sales in our trading segment. From time to time, we may
enter into futures and option transactions in addition to the simple buy-low-sell-high trading model to hedge against price fluctuations in non-ferrous
metal and coal products market. However, short-term price volatility of these products remains a key factor affecting our operation result, as we need to
make the correct prediction of the price trends of these products on the markets to ensure substantial revenues through large trading volume. If the
market price trend does not match our prediction, we may be forced to sell trading products at low prices or to purchase trading products at high prices,
which may adversely affect gross margins and profitability.
Manufacturing Costs.
Our cost of revenues consists primarily of the costs of the raw materials, overhead cost and the electric power cost which is our principal energy cost. As
China's economy continued to grow at a steady speed in 2012, the prices of various raw materials and energy cost also increased in China, which in turn
increased our cost and ultimately resulted in a decrease in our profitability.
Our principal raw material is bauxite. For the years ended December 31, 2010, 2011 and 2012, bauxite produced by us accounted for 49.4%, 48.8% and
50.8% of our total bauxite used in the production of alumina. The unit cost of bauxite produced by us is generally lower than the unit cost of bauxite
procured from external suppliers. However, unit cost of bauxite produced by us may exceed the unit cost of outsourced bauxite if the domestic and
global bauxite prices decrease. To mitigate such risk, we also purchase a substantial amount of bauxite from external suppliers. This practice allows us
flexibility to control our production cost. We also apply this practice to our primary aluminum manufacturing. In 2012, partly due to the decline in the
quality of domestically sourced bauxite, our average cost of alumina per tonne increased by approximately RMB152 from that in 2011.
Given our high proportion of fixed costs, we must generate sufficient sales to absorb our fixed costs to maintain or increase our operating margins. Our
acquisitions and production expansion in recent years have significantly increased our costs that are relatively fixed in nature such as leases and
depreciation of property, plant and equipment and employee benefit expenses. If we are able to maintain satisfactory facility utilization rates and
productivity, our production capacity expansion will enable us to reduce our unit costs through economies of scale and recover associated increased
costs through higher output. In 2012, we continued to focus on lowering the production costs through using the technology to reduce raw materials
consumption. In 2012, we decreased our costs by decreasing our consumption of materials in our production through improving technology and internal
management. However, the phasing out of obsolete capacity and centralized retirement of fixed assets expanded our nonrecurring loss to a certain extent.
Primary aluminum is one of our major aluminum products and is produced by smelting operations. Smelting operations require a substantial and
continuous supply of electricity. Electricity cost is the most significant component of our primary aluminum production cost and accounted for
approximately 43.0% of our unit production cost for primary aluminum in 2012. The availability and price of electricity are key considerations in our
primary aluminum operations. Interruptions of electricity supply can result in lengthy production shutdowns, increased costs associated with restarting
production and waste of production in progress, and prolonged interruptions can cause damage to or the destruction of production equipment and
facilities. The preferential electricity prices formerly enjoyed by Chinese primary aluminum enterprises were eliminated in 2009. In 2012, Jiaozuo
Wanfang received reductions on electricity prices. In addition, some of our branches were entitled to electricity prices subsidies in 2012. Our average
annual electricity price increased by 5.7% from 2010 to 2011 and further by 4.7% from 2011 to 2012.
Availability and Costs of Financing
We require a significant amount of capital to fund our operations. For example, we need substantial amount of funds for expanding our operations,
purchasing and maintaining equipment and procuring commodities. We have in the past funded our capital expenditures primarily with bank loans and
issuance of medium-term notes and bonds and long-term bonds. The availability of financing is subject to various factors, including our credit history
and PRC Government's policy on credit markets. Over the years, we have maintained good relationships with the commercial banks in China, which
enables us to access bank financing at relatively low costs. However, in recent years, the PRC government has tightened its monetary policies to control
inflation, including increasing interest rates on bank loans and deposits and tightening the money supply. Such stricter lending policies may, among
other things, affect our ability to obtain financing and may in turn adversely affect our operating results.
57
Our finance costs increased by 43.2% from 2011 to 2012, primarily due to our structural adjustment and strategic transformation, which expanded the
size of interest-bearing debts. The increase in our finance costs was also caused by the increase in the interest rates of our bank and other loans. If we are
unable to secure sufficient external funding when required, we may not be able to fund our working capital requirements and necessary capital
expenditures, which could adversely affect our business, financial performance and prospects.
In addition, our borrowing costs and access to debt financing depend significantly on our credit ratings. These ratings, including long term corporate
credit ratings and financing bond credit ratings, are assigned by rating agencies, which may lower or withdraw their ratings. Any change in our credit
ratings or average interest rate could have negative implications, which may increase our finance costs and affect our financial results.
Regulatory Environment
The central and local governments in PRC continues to exercise a substantial degree of control and influence over the aluminum and other non-ferrous
metal product industry in China and shape the structure and development of the industry through the imposition of industry policies governing major
project approvals, preferential tax treatment and safety, environmental and quality regulations, including but not limited to the "Aluminum Industry
Development Policy", "Notice on Guiding Opinions for Accelerating Aluminum Industrial Restructuring", "Environmental Protection Guide for
Developing Cyclic Economy in Aluminum Industry", "Notice of the State Council of China on Further Strengthening the Elimination of Obsolete
Production Capacities" and "Non-ferrous Metals Industry Restructuring and Revitalization Planning", etc. Certain existing laws and regulations involve
barriers to entry, production quotas, setting, amending or abolishing import tariffs and limitations and duties on the export of aluminum and certain non-
ferrous metals and related products. If PRC government changes its current policies or the interpretation of those policies that are currently beneficial to
us, we may face pressure on profit margins and significant constraints on our ability to expand our business operations.
Selected Statement of Operation Items
Revenue
We generate revenue primarily from sales of alumina, primary aluminum, aluminum fabrication products and other non-ferrous metal products and coal
products. Historically, Chalco Trading mainly generated revenue by selling self-produced products procured from our alumina, primary aluminum and
aluminum fabrication plants. As a result of the implementation of our operational structural adjustment exercise, we established our trading business as a
new business segment in 2010. In connection with the significant increase of trading revenue, we refined our existing accounting system to separately
capture sales of self-produced products and products sourced from external suppliers within the trading segment in 2011 and 2012. However, similar
analysis for 2010 is not available as such information was not captured prior to 2011.
Cost of Sales
Our cost of sales consists primarily of purchase of inventories in relation to trading activities, the cost of the raw materials, the electric power cost which
is our principal energy cost and the fixed cost. For the years ended December 31, 2010, 2011 and 2012, our cost of sales was RMB113,349.9 million,
RMB138,111.4 million and RMB149,802.6 million, and accounted for 93.7%, 94.7% and 100.2% of the total consolidated revenues, respectively.
Operating Expenses
Selling and Distribution Expenses. Our selling and distribution expenses consist primarily of transportation and loading expenses, packaging expense
and, to a lesser extent, port expenses, employee benefit expenses for employees in selling and distribution department, warehouse and other storage fees,
depreciation of non-production property, plant and equipment, sales commissions and other handling fees, marketing and advertising expenses, and
others. Selling and distribution expenses accounted for 31.1%, 33.1% and 38.0% of our total operating expenses for the years ended December 31, 2010,
2011 and 2012, respectively.
General and Administrative Expenses.Our general and administrative expenses consist primarily of employee benefit expenses for directors and officers
and employees in administrative department, travelling and entertainment, taxes other than income tax expense, depreciation of non-production property,
plant and equipment, operating lease rental expenses and, to a lesser extent, utilities and office supplies, amortization of land use rights and leasehold
land, insurance expense, pollutants discharge fees, repairs and maintenance, legal and other professional fees, auditors' remuneration, amortization of
intangible assets, and others. General and administrative expenses accounted for 51.8%, 56.8% and 57.8% of our total operating expenses for the years
ended December 31, 2010, 2011 and 2012, respectively. Employee benefit expenses, including salaries and bonus, housing fund, staff welfare and other
expenses, employment expense in relation to early retirement schemes, and retirement benefit cost-defined contribution schemes, comprise the largest
component of our general and administrative expenses, accounting for 32.0%, 29.3% and 30.3% of our total general and administrative expenses for the
years ended December 31, 2010, 2011 and 2012, respectively. Our taxes other than income tax expense, consisting primarily of land use tax, property
tax and stamp duty, comprise the second largest component of our general and administrative expenses, accounting for 23.4%, 23.9% and 19.5% of our
total general and administrative expenses for the years ended 2010, 2011 and 2012, respectively.
58
Research and Development Expenses. Our research and development expenses accounted for 3.2%, 4.4% and 3.8% of our total operating expenses for
the years ended December 31, 2010, 2011 and 2012, respectively.
Impairment loss on property, plant and equipment. Our impairment loss on property, plant and equipment accounted for 13.9%, 5.7% and 0.4% of our
total operating expenses for the years ended December 31, 2010, 2011 and 2012, respectively.
Other Income
Our other income represents government grants, which were primarily research subsidies and grants on environmental protection projects and electricity
price subsidies from government.
Other Gains/(Losses), net
Our other gains, net consist primarily of gain on acquisition of the investment in an associate and realized gain on future, forward and option contracts.
Our other losses, net consist primarily of loss on disposal of property, plant and equipment, realized loss on future, forward and option contracts, and
others.
Finance Income
Our finance income consists primarily of interest income from banks. For the years ended December 31, 2010, 2011 and 2012, our finance income was
RMB91.1 million, RMB138.8 million and RMB314.2 million, and accounted for 0.1%, 0.1% and 0.2% of the total consolidated revenues, respectively.
Finance Costs
Our financing costs consist primarily of interest expense on our borrowings, which we have incurred mainly to fund our capital expenditures. Interest
rates on loans related to capital expenditures and working capital set by banks generally follow guidelines issued by the People's Bank of China. The
People's Bank of China regulates the interest rates for commercial loans charged by state-owned banks from time to time as part of the PRC
government's efforts to regulate the PRC economy. In 2012, we incurred interest expense (net of capitalized interest) of RMB4,921.7 million on our
borrowings.
Share of Profits of Jointly Controlled Entities
Our share of profits of jointly controlled entities is the profits attributable to us from our jointly controlled entities, based on our equity interests in such
jointly controlled entities. A jointly controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having
unilateral control over its economic activity.
Share of Profits of Associates
Our share of profits of associates is the profits attributable to us from our associates, based on our equity interests in such associates. An associate is an
entity over which we have significant influence but not control, in which we generally hold between 20% and 50% of the voting rights.
59
Consolidated Results of Operations
The following table sets forth certain income and expense items as a percentage of our revenues from our consolidated statements of comprehensive
income for the periods indicated:
Year Ended December 31,
2010
2011
RMB
(%)
RMB
(in millions, except percentages)
(%)
RMB
2012
US$
Revenue
Cost of sales
120,994.8
(113,349.9)
100.0
(93.7)
145,874.4
(138,111.4)
100.0
(94.7)
149,478.8
(149,802.6)
23,993.0
(24,045.0)
Gross profit/(loss)
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property,
plant and equipment
Other income
Other gains/(losses), net
Operating profit/(loss)
Finance income
Finance costs
Share of profits of jointly
controlled entities
Share of profits of associates
7,644.9
(1,537.3)
(2,623.8)
(164.2)
(701.8)
328.9
491.0
3,401.7
91.1
(2,586.3)
233.8
240.1
Profit/(loss) before income tax
1,380.4
6.3
(1.3)
(2.2)
(0.1)
(0.6)
0.3
0.4
2.8
0.1
(2.2)
0.2
0.2
1.1
7,763.1
(1,622.8)
(2,779.4)
(218.0)
(279.8)
185.5
538.0
3,586.6
138.8
(3,432.4)
122.3
402.7
5.3
(1.1)
(1.9)
(0.1)
(0.2)
0.1
0.4
2.5
0.1
(2.3)
0.0
0.3
(323.8)
(1,967.9)
(2,993.0)
(198.9)
(19.9)
744.5
(25.5)
(4,784.5)
314.2
(4,913.6)
37.0
254.8
(52.0)
(315.9)
(480.4)
(31.9)
(3.2)
119.5
(4.1)
(768.0)
50.4
(788.6)
5.9
40.9
818.0
0.6
(9,092.1)
(1,459.4)
(6.1)
(%)
100.0
(100.2)
(0.2)
(1.3)
(2.0)
(0.2)
-
0.5
-
(3.2)
0.2
(3.3)
-
0.2
Income tax (expense)/benefit
(411.3)
(0.3)
(127.5)
(0.1)
448.5
72.0
0.3
Profit/(loss) for the year
969.1
0.8
690.5
0.5
(8,643.6)
(1,387.4)
(5.8)
No customer individually accounted for more than 10% of our total sales or any of our segment sales for the year ended December 31, 2012. Sales to
Chinalco and its subsidiaries, jointly-controlled entities, associates and other related parties accounted for approximately 9.0%, 7.4% and 4.9% of
consolidated revenues for the years ended December 31, 2010, 2011 and 2012, respectively. For information on related party transactions, see "Item 7 -
Major Shareholders and Related Party Transactions - B. Related Party Transactions" and Note 35 to our audited consolidated financial statements.
Year Ended December 31, 2012 Compared with Year Ended December 31, 2011
Revenue
Our revenue increased by 2.5% from RMB145,874.4 million for the year ended December 31, 2011 to RMB149,478.8 million for the year ended
December 31, 2012, primarily due to the increase in our trading volume, partially offset by the decrease in the selling prices of our major products. In
2012, under the influence of global economic depression and deterioration of Euro debt crisis, international alumina and aluminum product prices
remained at low levels throughout the year. Domestic alumina and aluminum product prices, impacted by continued increase in supply and China's
downward adjustment to economic expectation, also continued to decrease in 2012. Our average selling price of alumina decreased by 6.3% from
RMB2,863 per tonne in 2011 to RMB2,681 per tonne in 2012. Our average selling price of primary aluminum decrease by 7.2% from RMB16,911 per
tonne in 2011 to RMB15,694 per tonne in 2012.
Cost of Sales
Our cost of sales increased by 8.5% from RMB138,111.4 million for the year ended December 31, 2011 to RMB149,802.6 million for the year ended
December 31, 2012, primarily due to the increases in our trading volume and increase in costs of alumina and electricity used in our primary aluminum
production. In 2012, partly due to the decline in the quality of domestically sourced bauxite, our average cost of alumina per tonne increased by
approximately RMB152 from that in 2011. In addition, our average annual electricity price increased by 4.7% from 2011 to 2012.
Selling and Distribution Expenses
Our selling and distribution expenses increased by 21.3% from RMB1,622.8 million for the year ended December 31, 2011 to RMB1,967.9 million for
the year ended December 31, 2012, primarily due to an increase in transportation and storage expenses as a result of an increase in trading volume of
aluminum products and coal products.
60
General and Administrative Expenses
Our general and administrative expenses increased by 7.7% from RMB2,779.4 million for the year ended December 31, 2011 to RMB2,993.0 million
for the year ended December 31, 2012, primarily due to an increase in the management expenses upon the completion of our construction in progress
and the consultation fees paid for our acquisitions and mergers.
Research and Development Expenses
Our research and development expenses decreased by 8.8% from RMB218.0 million for the year ended December 31, 2011 to RMB198.9 million for the
year ended December 31, 2012.
Impairment Loss on Property, Plant and Equipment
Our impairment loss on property, plant and equipment decreased by 92.9% from RMB279.8 million for the year ended December 31, 2011 to RMB19.9
million for the year ended December 31, 2012, primarily because we recognized impairment charge of RMB278 million on Aurukun Project in 2011,
whereas we did not recognize such impairment loss in 2012. See Note 7 to our audited consolidated financial statements for detailed information.
Other Income
Other income increased significantly from RMB185.5 million for the year ended December 31, 2011 to RMB744.5 million for the year ended December
31, 2012, primarily due to the increase in government grants on electricity price subsidies from government of RMB559.0 million.
Other Gains/(Losses), Net
Our net other gains were RMB538.0 million for the year ended December 31, 2011, whereas we recognized net other losses of RMB25.5 million for the
year ended December 31, 2012, primarily due to losses realized on future, forward and option contracts and disposal of property, plant and equipment,
partially offset by the gain we recognized on acquisition of the investment in an associate.
Operating Profit/(Loss)
As a result of the foregoing, our operating profit was RMB3,586.6 million for the year ended December 31, 2011, whereas we had an operating loss of
RMB4,784.5 million for the year ended December 31, 2012.
Finance Income
Our finance income increased significantly from RMB138.8 million for the year ended December 31, 2011 to RMB314.2 million for the year ended
December 31, 2012, due to an increase in the average balance of time deposits and entrusted loans.
Finance Costs
Our finance costs increased by 43.2% from RMB3,432.4 million for the year ended December 31, 2011 to RMB4,913.6 million for the year ended
December 31, 2012, primarily due to an increase in our interest-bearing indebtedness and an increase in the interest rate of our bank and other
borrowings.
Share of profits of jointly controlled entities
Our share of profits of jointly controlled entities decreased by 69.7% from RMB122.3 million for the year ended December 31, 2011 to RMB37.0
million for the year ended December 31, 2012, primarily due to a decrease in the profit of Guangxi Huayin.
Share of profits of associates
Our share of profits of associates decreased by 36.7% from RMB402.7 million for the year ended December 31, 2011 to RMB254.8 million for the year
ended December 31, 2012, primarily due to a decrease in the profit of Zhaogu Coal.
Income Tax
Our income tax expense was RMB127.5 million for the year ended December 31, 2011, whereas we had income tax benefit of RMB448.5 million for
the year ended December 31, 2012. For the years ended December 31, 2011 and 2012, our weighted average effective rates were 15.59% and 4.93%.
The decrease in the weighted average effective rate is mainly due to fluctuations in the profitability of certain subsidiaries and branches, the existence of
tax losses for which no deferred income tax assets were recognised and the written off of deferred tax assets on tax losses for certain subsidiaries
because the utilization of the relevant tax losses carried over is not probable for the reasonable foreseeable future due to changes of markets condition
and operating environment in 2012 and for the near future.
61
Results of Operations
As a result of the foregoing, our net profit was RMB690.5 million for the year ended December 31, 2011, whereas we had net loss of RMB8,643.6
million for the year ended December 31, 2012.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Revenue
Our revenue increased by 20.6% from RMB120,994.8 million for the year ended December 31, 2010 to RMB145,874.4 million for the year ended
December 31, 2011, primarily due to the increase in the sales of our major products and the trading volumes. The aggregate external sales of our self-
produced products made directly by our alumina, primary aluminum and aluminum fabrication segments increased by 19.4% from RMB38,870.9
million for the year ended December 31, 2010 to RMB46,399.9 million for the year ended December 31, 2011 and our revenue generated from trading
segment increased by 21.2% from RMB81,982.2 million for the year ended December 31, 2010 to RMB99,324.1 million for the year ended December
31, 2011, reflecting the increased demand for these products as a result of the continued recovery of the PRC and global economy.
Cost of Sales
Our cost of sales increased by 21.8% from RMB113,349.9 million for the year ended December 31, 2010 to RMB138,111.4 million for the year ended
December 31, 2011, primarily due to the increases in our sales and trading volume. Our purchase of inventories in relation to trading activities increased
by 24.3% from RMB50,843.1 million for the year ended December 31, 2010 to RMB63,216.5 million for the year ended December 31, 2011, primarily
due to the increase in our trading volume. The raw materials and consumables used increased by 45.8% from RMB27,042.8 million for the year ended
December 31,2010 to RMB39,424.4 million for the year ended December 31, 2011, primarily due to the increase in the prices of raw materials. The
power and utilities cost increased by 12.2% from RMB19,622.1 million for the year ended December 31, 2010 to RMB22,018.4 million for the year
ended December 31, 2011, primarily due to the increase in the prices of fuels and power. Our gross profit margin decreased from 6.3% for the year
ended December 31, 2010 to 5.3% for the year ended December 31, 2011, primarily because the prices of raw materials and power utilities increased
faster than the average selling prices of our products. It is also due to the growth of our trading segment, which generally had a lower gross margin than
our overall gross margin.
Selling and Distribution Expenses
Our selling and distribution expenses increased by 3.1% from RMB1,573.3 million for the year ended December 31, 2010 to RMB1,622.8 million for
the year ended December 31, 2011, primarily due to an increase in the external sales of our major products.
General and Administrative Expenses
Our general and administrative expenses increased by 5.9% from RMB2,623.8 million for the year ended December 31, 2010 to RMB2,779.4 million
for the year ended December 31, 2011, primarily due to the net effect of an increase in fees and expenses as a result of establishment and acquisition of
new subsidiaries in 2011, partially offset by a decrease in non-fixed expenses such as employee benefit expenses and insurance expenses as a result of
our efforts to reduce costs and enhance efficiency.
Research and Development Expenses
Our research and development expenses increased by 32.8% from RMB164.2 million for the year ended December 31, 2010 to RMB218.0 million for
the year ended December 31, 2011, reflecting our increased research and development efforts.
Impairment loss on Property, Plant and Equipment
Our impairment loss on property, plant and equipment decreased by 60.1% from RMB701.8 million for the year ended December 31, 2010 to
RMB279.8 million for the year ended December 31, 2011, primarily because we discontinued the use of certain production equipment and reduced the
carrying amount of these pieces of equipment to our estimated net proceeds, or recoverable amount, from their disposal in 2010, whereas we did not
have such impairment loss in 2011. In addition, we had a partial write-off of the expenditure on Aurukun Project of RMB373 million, and in 2011, we
recognized an additional impairment charge of RMB278 million on Aurukun Project. See Note 7(b) to our audited consolidated financial statements for
detailed information.
62
Other Income
Other income decreased by 43.6% from RMB328.9 million for the year ended December 31, 2010 to RMB185.5 million for the year ended December
31, 2011, primarily due to the decrease in government grants on research and development of RMB94.9 million and the one-off government reward of
RMB68.0 million for our contribution to the local economic development in 2010.
Other Gains, Net
Our net other gains increased by 9.6% from RMB491.0 million for the year ended December 31, 2010 to RMB538.0 million for the year ended
December 31, 2011, primarily due to an increase in realized gain on futures, forward and option contracts of RMB244.5 million, partly offset by a
decrease in gain on disposal of available-for-sale investments.
Operating Profit
As a result of the foregoing, our operating profit increased by 5.4% from RMB3,401.7 million for the year ended December 31, 2010 to RMB3,586.6
million for the year ended December 31, 2011.
Finance Income
Our finance income increased from RMB91.1 million for the year ended December 31, 2010 to RMB138.8 million for the year ended December 31,
2011, due to an increase in the average balance of deposits and entrusted loans.
Finance Costs
Our finance cost increased by 32.71% from RMB2,586.3 million for the year ended December 31, 2010 to RMB3,432.4 million for the year ended
December 31, 2011, primarily due to the increase in our interest-bearing indebtedness and the increases in the PBOC's benchmark interest rates, which
resulted in an increase in our weighted average annual interest rate. Our weighted average annual interest rate of long-term bank and other loans
increased from 5.25% for the year ended December 31, 2010 to 5.62% for the year ended December 31, 2011.
Share of profits of jointly controlled entities
Our share of profits of jointly controlled entities decreased by 47.7% from RMB233.8 million for the year ended December 31, 2010 to RMB122.3
million for the year ended December 31, 2011, primarily due to a decrease of RMB106.9 million in the profits of Guangxi Huayin. The share of profits
of jointly controlled entities accounted for 14.9% of our profit before income tax in 2011, as compared with 16.9% in 2010.
Share of profits of associates
Our share of profits of associates increased by 67.8% from RMB240.0 million for the year ended December 31, 2010 to RMB402.7 million for the year
ended December 31, 2011, primarily due to an increase in the profits of our associate engaged in coal production, Zhaogu Coal. The share of profits of
associates accounted for 49.2% of our profit before income tax in 2011, as compared with 17.4% in 2010.
Income Tax
Our income tax expense decreased by 69.0% from RMB411.3 million for the year ended December 31, 2010 to RMB127.5 million for the year ended
December 31, 2011, primarily due to the significant decrease in our profit before tax by approximately 40.7% from RMB1,380 million for 2010 to
RMB818 million for 2011, which led to a corresponding decrease in income tax expense. This was partially reduced by the increase of deferred income
tax assets arising from the changes in applicable income tax rate for certain branches and subsidiaries. In 2011, the applicable tax rate of certain branches
and subsidiaries situated in the Western region of China changed from 15% to 25% upon expiration of the relevant preferential tax rate entitlement.
Upon the relevant new requirements and conditions pertaining to the preferential tax rate entitlement, which was enacted in July 2011, these branches
and subsidiaries were not qualified. Accordingly, they are subject to the normal corporate tax rate of 25%. As a consequence, the recognized deferred tax
assets increased by approximately RMB115 million.
Results of Operations
As a result of the foregoing, our net profit decreased by 28.7% from RMB969.1 million for the year ended December 31, 2010 to RMB690.5 million for
the year ended December 31, 2011.
Discussion of Segment Operations
We account for our operations on a segmental basis, that is, separately prepare the accounting for our alumina, primary aluminum, aluminum fabrication
and trading segments as well as other segment operations. Unless otherwise indicated, also included in these segments are other revenue derived from
activities such as supplying electricity, gas, heat and water to our affiliates, selling scrap and other materials and providing services including
transportation and research and development to third parties. For additional information relating to our business segments and segment presentation, see
Note 5 to our audited consolidated financial statements.
63
The following table sets forth a breakdown of our revenues by segment and the contribution of external sales and inter-segment sales for the periods
indicated:
Before Elimination of
Inter-segment Sales
Year Ended December 31,
After
Elimination
of Inter-
segment Sales
Revenue
Alumina:
External sales
Inter-segment sales
2010
RMB
2011
RMB
2012
RMB
2012
US$
(in millions, except percentages)
2,148.3
24,689.6
3,060.8
28,066.3
3,677.0
28,168.9
590.2
4,521.4
Total
26,837.9
31,127.1
31,845.9
5,111.6
Primary aluminum:
External sales
Inter-segment sales
26,407.3
26,847.7
31,887.9
26,091.8
32,454.9
25,581.4
5,209.4
4,106.1
Total
53,255.0
57,979.7
58,036.3
9,315.5
Aluminum fabrication:
External sales
Inter-segment sales
10,351.3
150.7
11,451.2
343.6
8,307.4
1,259.9
1,333.4
202.2
Total
10,466.0
11,794.8
9,567.3
1,535.6
Trading
External sales
Inter-segment sales
81,982.2
8,159.2
99,324.1
9,848.3
104,773.4
12,521.6
16,817.3
2,009.9
Total
90,141.4
109,172.4
117,295.0
18,827.2
Corporate and others
External sales
Inter-segment sales
141.7
48.6
150.4
25.6
266.1
41.7
Total
190.3
176.0
307.8
42.7
6.7
49.4
2012
%
2.5
21.7
5.6
70.1
0.1
2012
%
1.7
13.0
14.7
14.9
11.8
26.7
3.8
0.6
4.4
48.3
5.8
54.1
0.1
-
0.1
Total Revenue before
inter-segment eliminations
Eliminations of inter-segment sales
180,890.6
(59,895.8)
210,250.0
(64,375.6)
217,052.3
(67,573.5)
34,839.3
(10,846.3)
100.0
Consolidated total revenue
120,994.8
145,874.4
149,478.8
23,993.0
100.0
64
The following table sets forth segment results by segment for the periods indicated:
Alumina:
Revenue
Cost and expenses(1)
Segment results(2)
Primary aluminum:
Revenue
Year Ended December 31,
2010
RMB
2011
RMB
(in millions)
2012
RMB
2012
US$
26,837.9
(25,760.8)
31,127.1
(30,775.2)
31,845.9
(35,590.8)
5,111.6
(5,712.7)
1,077.1
351.9
(3,744.9)
(601.1)
53,255.0
57,979.7
58,036.3
9,315.5
Cost and expenses(1)
Segment results(2)
Aluminium Fabrication:
Revenue
Cost and expenses(1)
Segment results(2)
Trading
Revenue
Cost and expenses(1)
Segment results(2)
Corporate and others:
Revenue
Cost and expenses(1)
Segment results(2)
Elimination(3)
Total profit/(loss)
before income tax
(52,896.2)
(57,074.2)
(61,121.0)
(9,810.6)
358.8
905.5
(3,084.7)
(495.1)
10,466.0
(10,789.6)
11,794.8
(12,130.7)
9,567.3
(10,953.2)
1,535.6
(1,758.1)
(323.6)
(335.9)
(1,385.9)
(222.5)
90,141.4
(89,280.8)
109,172.4
(108,501.8)
117,295.0
(116,857.4)
18,827.2
(18,756.9)
860.6
670.6
437.6
70.3
190.3
(680.6)
176.0
(1,227.5)
307.8
(1,757.2)
49.4
(282.0)
(490.3)
(1,051.5)
(1,449.4)
(232.6)
(102.2)
277.4
135.2
21.7
1,380.4
818.0
(9,092.1)
(1,459.4)
(1)
Consist of cost of sales, operating expenses, other income, other gains, finance income, finance costs and others attributable to each segment.
(2)
(3)
Segment results refer to profit/(loss) before income tax.
Elimination refers to the aggregate inter-segment eliminations of segment results of each segment.
Year Ended December 31, 2012 Compared with Year Ended December 31, 2011
Alumina Segment
Revenue. Total revenue generated by the alumina segment increased by 2.3% from RMB31,127.1 million for the year ended December 31, 2011 to
RMB31,845.9 million for the year ended December 31, 2012, primarily due to an increase in the sales volume of alumina, partially offset by a decrease
in the average selling price. Our sales volume of alumina increased by 8.5% from 2011 to 2012. Our average selling price of alumina decreased by 6.3%
from RMB2,863 per tonne in 2011 to RMB2,681 per tonne in 2012.
Revenue from external sales of alumina segment increased by 20.1% from RMB3,060.8 million for the year ended December 31, 2011 to RMB3,677.0
million for the year ended December 31, 2012, primarily due to an increase in the external sales volume of alumina, partially offset by a decrease in the
average external selling price of alumina.
Revenue from inter-segment sales of alumina segment remained stable from RMB28,066.3 million for the year ended December 31, 2011 to
RMB28,168.9 million for the year ended December 31, 2012.
Cost and expenses. The total cost and expenses for our alumina segment increased by 15.6% from RMB30,775.2 million for the year ended December
31, 2011 to RMB35,590.8 million for the year ended December 31, 2012, primarily due to an increase in sales volume of alumina manufactured by us.
Segment results. We had segment loss of RMB3,744.9 million for the year ended December 31, 2012, whereas we had segment profit of RMB351.9
million for the year ended December 31, 2011.
65
Primary Aluminum Segment
Revenue. Total revenue generated by the primary aluminum segment increased slightly from RMB57,979.7 million for the year ended December 31,
2011 to RMB58,036.3 million for the year ended December 31, 2012, primarily due to an increase in the sales volume of primary aluminum, partially
offset by a decrease in the average selling price. Our sales volume of primary aluminum increased by 9.3% from 3,843,000 tonnes for the year ended
December 31, 2011 to 4,201,000 tonnes for the year ended December 31, 2012. Our average selling price of primary aluminum decrease by 7.2% from
RMB16,911 per tonne in 2011 to RMB15,694 per tonne in 2012.
Revenue from external sales of the primary aluminum segment increased by 1.8% from RMB31,887.9 million for the year ended December 31, 2011 to
RMB32,454.9 million for the year ended December 31, 2012, primarily due to an increase in external sales volume of primary aluminum manufactured
by us.
Revenue from inter-segment sales of primary aluminum segment decreased by 2.0% from RMB26,091.8 million for the year ended December 31, 2011
to RMB25,581.4 million for the year ended December 31, 2012, primarily due to a decrease in the selling price and sales volume of primary aluminum
manufactured by us through our trading segment.
Cost and expenses. The total cost and expenses for our primary aluminum segment increased by 7.1% from RMB57,074.2 million for the year ended
December 31, 2011 to RMB61,121.0 million for the year ended December 31, 2011, primarily due to the increases in the prices of raw materials, the
electric power cost and sales volume of primary aluminum manufactured by us.
Segment results. Segment profit for our primary aluminum segment was RMB905.5 million for the year ended December 31, 2011, whereas we had
segment loss of RMB3,084.7 million for the year ended December 31, 2012. Included in this segment loss was share of profits of associates, which
decreased by 38.9% from RMB390.4 million in 2011 to RMB238.7 million in 2012, primarily due to a decrease in the profit of Zhaogu Coal.
Aluminum Fabrication Segment
Revenue. Total revenue generated by the aluminum fabrication segment decreased by 18.9% from RMB11,794.8 million for the year ended December
31 2011 to RMB9,567.3 million for the year ended December 31, 2012, primarily due to a decrease in sales volume of various aluminum fabrication
products manufactured by us as a result of a decrease in demand.
Revenue from external sales of the aluminum fabrication segment decreased by 27.5% from RMB11,451.2 million for the year ended December 31,
2011 to RMB8,307.4 million for the year ended December 31, 2012, primarily due to a decrease in the sales volume of aluminum fabrication products
directly sold by the aluminum fabrication plants.
Revenue from inter-segment sales of aluminum fabrication increased significantly from RMB343.6 million for the year ended December 31, 2011 to
RMB1,259.9 million for year ended December 31, 2012, primarily due to a significant increase in the sales volume of self-produced aluminum
fabrication products through our trading segment.
Cost and expenses. The total cost and expenses for our aluminum fabrication segment decreased by 9.7% from RMB12,130.7 million for the year ended
December 31, 2011 to RMB10,953.2 million for the year ended December 31, 2012, primarily due to the decrease in the sales volume of aluminum
fabrication products manufactured by us.
Segment results. Segment loss for our aluminum fabrication segment increased significantly from RMB335.9 million for the year ended December 31,
2011 to RMB1,385.9 million for the year ended December 31, 2012.
Trading Segment
Revenue. Total revenue generated by the trading segment increased by 7.4% from RMB109,172.4 million for the year ended December 31 2011 to
RMB117,295.0 million for the year ended December 31, 2012, primarily due to an increase in volumes of major aluminum and other non-ferrous metal
and coal products procured and sold through our trading segment.
Revenue from external sales of the trading segment increased by 5.5% from RMB99,324.1 million for the year ended December 31, 2011 to
RMB104,773.4 million for the year ended December 31, 2012. Revenue from external sales of trading segment for the year ended December 31, 2012
included RMB38,184.1 million of external sales of products produced by us and sold through the trading segment and RMB66,589.3 million of external
sales of commodities including alumina, primary aluminum, carbon products, aluminum fabrication products, coal products and non-ferrous metal
products purchased from external sources.
Revenue from internal sales of the trading segment increased by 27.1% from RMB9,848.3 million for the year ended December 31, 2011 to
RMB12,521.6 million for the year ended December 31, 2012. Revenue from internal sales of trading segment for the year ended December 31, 2012
included RMB1,531.0 million of internal sales of products purchased from our internal sources and RMB10,990.6 million of internal sales of products
purchased from our external sources.
66
Cost and expenses. The total cost and expenses for our trading segment increased by 7.7% from RMB108,501.8 million for the year ended December 31,
2011 to RMB116,857.4 million for the year ended December 31, 2011, primarily due to the increase in volumes of major aluminum and other non-
ferrous metal and coal products procured and sold through our trading segment.
Segment results. Segment profit for our trading segment decreased by 34.8% from RMB670.6 million for the year ended December 31, 2011 to
RMB437.6 million for the year ended December 31, 2012.
Corporate and other operating segment
Revenue. Revenue from the headquarters and other operating segments increased by 74.9% from RMB176.0 million for the year ended December 31,
2011 to RMB307.8 million for the year ended December 31, 2012.
Segment loss. Segment loss for our corporate and other operating segment increased by 37.8% from RMB1,051.5 million for the year ended December
31, 2011 to RMB1,449.4 million for the year ended December 31, 2012, primarily due to an increase in finance costs as a result of the increase in our
interest-bearing indebtedness and an increase in our interest rate.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Alumina Segment
Revenue. Total revenue generated by the alumina segment increased by 16.0% from RMB26,837.9 million for the year ended December 31, 2010 to
RMB31,127.1 million for the year ended December 31, 2011, primarily due to increases in the average selling price and the sales volume of alumina
manufactured by us. Our average selling price and sales volume of alumina increased by 5.0% and 11.7%, respectively, from the year ended December
31, 2010 to the year ended December 31, 2011, primarily due to an increase in demand.
Revenue from external sales of alumina segment increased by 42.5% from RMB2,148.3 million for the year ended December 31, 2010 to RMB3,060.8
million for the year ended December 31, 2011, primarily due to an increase in the average selling price and an increase in the external sales volume of
the alumina products as a result of increased demand.
Revenue from inter-segment sales of alumina segment increased by 13.7% from RMB24,689.6 million for the year ended December 31, 2010 to
RMB28,066.3 million for the year ended December 31, 2011, primarily due to an increase in the average selling price and an increase in the sales
volume of alumina from our alumina segment to the trading segment.
Cost and expenses. The total cost and expenses for our alumina segment increased by 19.5% from RMB25,760.8 million for the year ended December
31, 2010 to RMB30,775.2 million for the year ended December 31, 2011, primarily due to the increase in the prices of raw materials and sales volume of
alumina manufactured by us.
Segment results. Segment profit for alumina segment decreased by 67.3% from RMB1,077.1 million for the year ended December 31, 2010 to
RMB351.9 million for the year ended December 31, 2011.
Primary Aluminum Segment
Revenue. Total revenue generated by the primary aluminum segment increased by 8.9% from RMB53,255.0 million for the year ended December 31,
2010 to RMB57,979.7 million for the year ended December 31, 2011, primarily due to an increase in the average selling price of primary aluminum
manufactured by us. Our average selling price of primary aluminum increased by 6.9% from the year ended December 31, 2010 to the year ended
December 31, 2011, primarily due to an increase in demand. Our sales volume of primary aluminum increased slightly by 0.6% from 3,821,000 tonnes
for the year ended December 31, 2010 to 3,843,000 tonnes for the year ended December 31, 2011.
Revenue from external sales of the primary aluminum segment increased by 20.8% from RMB26,407.3 million for the year ended December 31, 2010 to
RMB31,887.9 million for the year ended December 31, 2011, primarily due to the increase in the average selling price and external sales volume of
primary aluminum manufactured by us. Our sales volume to external customers increased by 10.8% from 2010 to 2011.
Revenue from inter-segment sales of primary aluminum segment decreased by 2.8% from RMB26,847.7 million for the year ended December 31, 2010
to RMB26,091.8 million for the year ended December 31, 2011, primarily due to a decrease in the sales volume of primary aluminum manufactured by
us through our trading segment.
67
Cost and expenses. The total cost and expenses for our primary aluminum segment increased by 7.9% from RMB52,896.2 million for the year ended
December 31, 2010 to RMB57,074.2 million for the year ended December 31, 2011, primarily due to the increase in the prices of raw materials, the
electric power cost and sales volume of primary aluminum manufactured by us.
Segment results. Segment profit for our primary aluminum segment increased by 152.4% from RMB358.8 million for the year ended December 31,
2010 to RMB905.5 million for the year ended December 31, 2011. Included in this segment profit was share of profit of associates of RMB390 million,
primarily due to an increase in the profits of Qinghai Province Energy Development (Group) Co., Ltd and Zhaogu Coal, our associates engaged in coal
production.
Aluminum Fabrication Segment
Revenue. Total revenue generated by the aluminum fabrication segment increased by 12.7% from RMB10,466.0 million for the year ended December
31, 2010 to RMB11,794.8 million for the year ended December 31 2011, primarily due to an increase in the selling prices and sales volume of various
aluminum fabrication products manufactured by us.
Revenue from external sales of the aluminum fabrication segment increased by 11.0% from RMB10,315.3 million for the year ended December 31,
2010 to RMB11,451.2 million for the year ended December 31, 2011, primarily due to the increase in the selling prices of various aluminum fabrication
products and the sales volume of aluminum fabrication products directly sold by the aluminum fabrication plants as a result of increased market
demand.
Revenue from inter-segment sales of aluminum fabrication increased by 128.0% from RMB150.7 million for year ended December 31, 2010 to
RMB343.6 million for the year ended December 31, 2011, primarily due to a significant increase in the sales volume of self-produced aluminum
fabrication products through our trading segment.
Cost and expenses. The total cost and expenses for our aluminum fabrication segment increased by 12.4% from RMB10,789.6 million for the year
ended December 31, 2010 to RMB12,130.7 million for the year ended December 31, 2011, primarily due to the increase in the prices of raw materials
and sales volume of aluminum fabrication products manufactured by us.
Segment Results. Segment loss for our aluminum fabrication segment increased by 3.8% from RMB323.6 million for the year ended December 31, 2010
to RMB335.9 million for the year ended December 31, 2011.
Trading Segment
Revenue. Total revenue generated by the trading segment increased by 21.1% from RMB90,141.4 million for the year ended December 31, 2010 to
RMB109,172.4 million for the year ended December 31 2011, primarily due to an increase in the average selling price and sales volume of self-
produced alumina and primary aluminum through our trading segment, and an increase in trading volume of non-ferrous metal products sourced from
external suppliers.
Revenue from internal sales of the trading segment increased by 20.7% from RMB8,159.2 million for the year ended December 31, 2010 to
RMB9,848.3 million for the year ended December 31, 2011. Revenue from internal sales of trading segment for the year ended December 31, 2011
included RMB406 million of internal sales of products purchased from our internal sources and RMB9,442 million of internal sales of products
purchased from our external sources.
Revenue from external sales of the trading segment increased by 21.2% from RMB81,982.2 million for the year ended December 31, 2010 to
RMB99,324.1 million for the year ended December 31, 2011. Revenue from external sales of trading segment for the year ended December 31, 2011
included RMB35,916 million of external sales of products produced by us and sold through the trading segment and RMB63,408 million of external
sales of commodities including alumina, primary aluminum, carbon products, aluminum fabrication products, coal and non-ferrous metal products,
purchased from external sources.
Cost and expenses. The total cost and expenses for our trading segment increased 21.5% from RMB89,280.8 million for the year ended December 31,
2010 to RMB108,501.8 million for the year ended December 31, 2011, primarily due to the increase in the prices and volumes of major aluminum and
other non-ferrous metal products procured and sold through our trading segment.
Segment results. Segment profit for our trading segment decreased by 22.1% from RMB860.6 million for the year ended December 31, 2010 to
RMB670.6 million for the year ended December 31, 2011.
Corporate and other operating segment
Revenue. Revenue from the headquarters and other operating segments decreased by 7.4% from RMB190.3 million for the year ended December 31,
2010 to RMB176.0 million for the year ended December 31, 2011.
68
Segment loss. Segment loss for our corporate and other operating segment increased by 114.5% from RMB490.3 million for the year ended December
31, 2010 to RMB1,051.5 million for the year ended December 31, 2011, primarily due to an increase of RMB530 million in finance costs as a result of
the increase in our interest-bearing indebtedness and the increases in the PBOC's benchmark interest rates, which resulted in an increase in our weighted
average annual interest rate. Our weighted average annual interest rate of long-term bank and other loans increased from 5.25% for the year ended
December 31, 2010 to 5.62% for the year ended December 31, 2011.
B.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary sources of funding have been cash generated from operating activities, prepayments and deposits from customers, bank and
other loans and proceeds from equity or notes and bonds offerings. Our primary uses of funds have been working capital for production, capital
expenditures and repayments of short-term, medium-term and long-term borrowings.
As of December 31, 2012, our current assets amounted to RMB49,016.0 million, representing a decrease of 1.9% from RMB49,969.7 million as of
December 31, 2011, primarily due to a decrease in trade and notes receivable and cash and cash equivalents. As of December 31, 2012, our trade and
notes receivable amounted to RMB2,615.9 million, representing a decrease of 53.6% from RMB5,631.8 million as of December 31, 2011. As of
December 31, 2012, our restricted cash and time deposit and cash and cash equivalents balance amounted to RMB10,191.6 million, representing an
decrease of 12.5% from RMB11,644.7 million as of December 31, 2011, primarily due to a decrease in cash and cash equivalents.
As of December 31, 2012, our current liabilities amounted to RMB83,853.4 million, representing an increase of 34.5% from RMB62,360.4 million as of
December 31, 2011. Our current liabilities increased primarily due to the increase in the short-term interest bearing loans and borrowings in the amount
of RMB21,177.4 million during the period.
As of December 31, 2012, our current liabilities exceeded our current assets by approximately RMB34,837.4 million and our net current liabilities
amounted to RMB34,837.4 million, representing a significant increase from RMB12,390.7 million as of December 31, 2011. As of December 31, 2012,
our current ratio (current assets/current liabilities) was 0.58, compared with 0.80 as of December 31, 2011. Our quick ratio ((current assets -
inventories)/current liabilities) was 0.28 as of December 31, 2012, compared with 0.41 as of December 31, 2011.
The Board has considered our available sources of funds as follows:
*
*
*
Our expected net cash inflow from operating activities in 2013;
As of December 31, 2012, we had total banking facilities of approximately RMB161,761 million, of which RMB64,819 million had been
utilized and unutilized banking facilities amounted to RMB96,942 million as of December 31, 2012, among which, banking facilities of
approximately RMB54,859 million will be subject to renewal during the next 12 months from January 1, 2013. Our directors are confident that
all banking facilities could be renewed upon their expiration based on our past experience with banks and our good credit standing; and
Other available sources of financing from banks and other financial institutions based on our good credit history.
The Board believes that we have 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 therefore continues to adopt the going concern basis in preparing these financial statements.
Cash Flows and Working Capital
The following table sets forth a condensed summary of our statement of cash flows for the periods indicated:
Net cash flows generated from operating activities
Net cash flows used in investing activities
Net cash flows generated from financing activities
2010
RMB
7,103.9
(8,260.3)
2,717.5
Year Ended December 31,
2011
RMB
(in millions)
2,489.8
(9,714.5)
8,842.4
2012
RMB
1,122.4
(23,153.1)
20,428.9
2012
US$
180.2
(3,716.3)
3,279.0
Net increase/ (decrease) in cash and cash equivalents
1,561.1
1,617.7
(1,601.8)
(257.1)
69
Net Cash Flows Generated from Operating Activities
For the year ended December 31, 2012, we had a cash inflows before changes in working capital but after adjustments for non-cash items and non-
operating cash outflows of RMB1,862.8 million and net cash generated from operating activities of RMB1,122.4 million. Net cash flows generated from
operating activities consisted primarily of interest expense of RMB4,913.6 million, depreciation of property, plant and equipment of RMB6,141.0
million, loss before income tax of RMB9,092.1 million, an outflow of RMB569.1 million for changes in working capital and income tax of RMB171.3
million. The outflows from changes in working capital consisted primarily of (i) increase in inventories of RMB1,472.1 million, (ii) decrease in trade
and notes payable of RMB1,342.1 million and (iii) increase in other current assets of RMB921.4 million, partially offset by decrease in trade and notes
receivable of RMB3,015.9 million.
For the year ended December 31, 2011, we had a cash inflow before changes in working capital but after adjustments for non-cash items and non-
operating cash outflows of RMB9,326.0 million and net cash generated from operating activities of RMB2,489.8 million. Net cash flows generated from
operating activities consisted primarily of our profit before tax of RMB818.0 million, an outflow of RMB6,558.7 million for changes in working capital
and income tax of RMB277.5 million. The outflows from changes in working capital consisted primarily of (i) increase in trade and notes receivable of
RMB3,474.2 million, primarily due to our increased sales, (ii) increase in inventories of RMB2,353.2 million , and (iii) increase in other current assets of
RMB2,089.8 million, partially offset by increase in trade and notes payable of RMB2,025.0 million.
For the year ended December 31, 2010, we had a cash inflow before changes in working capital but after adjustments for non-cash items and non-
operating cash outflows of RMB9,763.2 million and net cash generated from operating activities of RMB7,103.9 million. Net cash flows generated from
operating activities consisted primarily of an outflow of RMB2,358.9 million for changes in working capital, our profit before tax of RMB1,380.4
million and income tax of RMB300.5 million. The outflow from changes in working capital consisted primarily of (i) increase in inventories of
RMB1,356.8 million and (ii) increase in other current assets of RMB515.6 million, partially offset by decrease in other non-current assets of RMB72.8
million and increase in trade and notes payable of RMB53.1 million.
Net Cash Flows Used in Investing Activities
Net cash flows used in investing activities increased significantly from RMB9,714.5 million for the year ended December 31, 2011 to RMB23,153.1
million for the year ended December 31, 2012, primarily due to the increase of cash outflows related to investments in jointly controlled entities and
associates and purchases of property, plant and equipment. Our net cash used in investing activities for the year ended December 31, 2012 consisted
primarily of investments in jointly controlled entities and associate of RMB13,406.8 million and purchase of property, plant and equipment of
RMB9,148.5 million.
Net cash flows used in investing activities increased by 17.6% from RMB8,260.3 million for the year ended December 31, 2010 to RMB9,714.5 million
for the year ended December 31, 2011, primarily due to the increase of cash outflows related to purchases of property, plant and equipment, and the
decrease in proceeds from disposal of a subsidiary. Our net cash used in investing activities for the year ended December 31, 2011 consisted primarily of
(i) purchase of property, plant and equipment of RMB8,552.7 million, (ii) investment in associates of RMB817.0 million and (iii) deposit for investment
projects of RMB536.7 , partially offset by (i) net proceeds from settlement of futures and option contracts of RMB550.9 million and (ii) government
grants/subsidies received of RMB392.3 million.
Net cash flows used in investing activities decreased by 12.8% from RMB9,477.2 million for the year ended December 31, 2009 to RMB8,260.3 million
for the year ended December 31, 2010, primarily due to the increase of cash inflows related to investments and government grants received, and the
decrease in purchases of property, plant and equipment. Our net cash used in investing activities for the year ended December 31, 2010 consisted
primarily of (i) purchase of property, plant and equipment of RMB8,325.9 million and (ii) deposit for investment projects of RMB849.8 million and (iii)
capital injection to associates of RMB748.7 million.
Net Cash Flows Generated from Financing Activities
Net cash flows generated from financing activities increased significantly from RMB8,842.4 million for the year ended December 31, 2011 to
RMB20,428.9 million for the year ended December 31, 2012, primarily due to the increase in the drawdown of short-term and long-term loans and
issuance of short-term bonds and medium-term notes during the year. Our net cash generated from financing activities for the year ended December 31,
2012 consisted primarily of drawdown of short-term and long-term loans of RMB74,346.5 million and issuance of short-term bonds and medium-term
notes of RMB29,468.1 million, partially offset by repayments of short-term and long-term loans of RMB63,925.1 million and repayments of short-term
bonds and medium-term notes of RMB18,000.0 million.
70
Net cash flows generated from financing activities increased significantly from RMB2,717.5 million for the year ended December 31, 2010 to
RMB8,842.4 million for the year ended December 31, 2011, primarily due to the increase in the drawdown of short-term and long-term loans during the
year. Our net cash generated from financing activities for the year ended December 31, 2011 consisted primarily of drawdown of short-term and long-
term loans of RMB56,477.6 million, partially offset by repayments of short-term and long-term loans of RMB45,378.1 million.
Net cash flows generated from financing activities increased from RMB1,576.7 million for the year ended December 31, 2009 to RMB2,717.5 million
for the year ended December 31, 2010, primarily due to the increase of external debt financing during the year. Our net cash generated from financing
activities for the year ended December 31, 2010 consisted primarily of drawdown of short-term and long-term loans of RMB34,141.5million, partially
offset by repayments of short-term and long-term loans of RMB41,195.1 million.
Loans and Borrowings
During the past years, we engaged in debt financing to fund our operations and business expansion. As of December 31, 2012, our gearing ratio (net
debts/total capital as defined in Note 3.3 to our audited consolidated financial statements) was approximately 72% as compared with approximately 63%
as of December 31, 2011.
Our net borrowings were as follows as of December 31, 2011 and 2012:
As of December 31,
2011
2012
2012
Short-term loans and borrowings
Short-term bank and other loans
Short-term bonds
Current portion of medium-term notes
Current portion of long-term bank and other loans
RMB
RMB
US$
(in millions)
32,322.7
10,250.6
-
4,164.5
40,313.2
16,670.0
4,986.0
5,946.0
6,470.7
2,675.7
800.3
954.4
Sub-total
46,737.8
67,915.2
10,901.1
Long-term loans and borrowings
Long-term bank and other loans
Medium-term notes and bonds and long-term bonds
Less:
Current portion of medium-term notes
Current portion of long-term bank and other loans
Sub-total
Total borrowings
23,430.5
16,702.5
-
(4,164.5)
25,856.7
21,710.9
(4,986.0)
(5,946.0)
35,968.5
36,635.6
4,150.3
3,484.8
(800.3)
(954.4)
5,880.4
82,706.3
104,550.8
16,781.5
Less: Bank balances and cash
(11,644.7)
(10,191.6)
(1,635.9)
Net
71,061.6
94,359.2
15,145.6
Bank and Other Loans
The weighted average annual interest rate of short-term bank and other loans for the year end December 31, 2012 was 5.85%. Our short-term bank and
other loans will mature within one year.
The weighted average annual interest rate of long-term bank and other loans for the years ended December 31, 2012 was 5.54%. The following table sets
forth the aggregate maturities of our outstanding long-term bank and other loans as of December 31, 2012:
71
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over five years
Total
As of December 31, 2012
RMB
(in millions)
5,946.0
8,049.0
7,771.1
4,090.6
25,856.7
US$
954.4
1,292.0
1,247.3
656.6
4,150.3
As of December 31, 2012, we had secured loans of RMB900.5 million (including long-term and short-term loans) and we, on a stand- alone basis,
provided guarantees in respect of RMB4,703.2 million of long-term loans for our subsidiaries. As of December 31, 2012, Chinalco guaranteed
RMB972.0 million of our long-term bank loans and RMB600.0 million of our short-term bank loans.
As of December 31, 2012, we had foreign currency denominated loans with principal amount of RMB40 million in Japanese Yen and RMB7,421
million in U.S. dollars.
Notes and Bonds
The following table sets forth the face value, maturity, effective interest rate and outstanding amount of our outstanding long-term bonds and medium-
term notes as of December 31, 2012:
2007 long-term bonds
2008 medium-term notes
2,000,000/2017
5,000,000/2013
4.64%
4.92%
1,989,245
4,986,037
Face value /maturity
Effective interest rate
December 31, 2012
(RMB in thousand)
992,007
991,822
4,984,110
797,361
1,994,435
1,993,350
2,982,535
21,710,902
2010 medium-term notes
2010 medium-term notes
2011 medium-term notes (1)
2011 Jiaozuo Wanfang medium-term notes
2011 medium-term bonds
2012 medium-term bonds
2012 medium-term bonds
1,000,000/2015
1,000,000/2015
5,000,000/2016
800,000/2016
2,000,000/2014
2,000,000/2015
3,000,000/2017
4.34%
4.20%
6.03%
6.85%
6.36%
5.13%
5.77%
Total
(1)
The medium-term notes were issued at a fixed annual coupon rate of 5.86% with a five year term. Pursuant to the terms of the bonds, the holders of the bonds have an option
to negotiate and adjust the fixed coupon rate according to market conditions or to request repayment of some or all outstanding balances at the end of the third anniversary
from issuance of the notes.
The following table sets forth face value, maturity, effective interest rate and outstanding amount of our outstanding short-term bonds as of December
31, 2012:
Face value /maturity
Effectiveinterest rate
December 31, 2012
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
Total
5,000,000/2013
2,000,000/2013
4,000,000/2013
2,000,000/2013
1,500,000/2013
2,000,000/2013
3.89%
4.60%
4.28%
4.56%
4.60%
4.76%
72
(RMB in thousand)
5,074,762
2,013,115
4,050,486
2,022,444
1,507,956
2,001,205
16,669,968
Restriction on Cash Dividends
Our PRC subsidiaries are required to set aside a certain amount of their retained profits each year, if any, to fund certain statutory reserves and these
reserves may not be distributed as cash dividends. In addition, when our subsidiaries incur debts on their own behalf, the instruments governing the debt
may restrict their ability to pay dividends or make other distributions to us. Our directors are of the view that we will continue to be able to meet our
borrowing payment obligations as they fall due from cash generated from our operating activities.
Capital Expenditures and Capital Commitments
The following table sets forth our capital expenditures by operating segment for the years ended 2010, 2011 and 2012, and the capital expenditures of
each segment as a percentage of our total capital expenditures for the periods indicated:
Year Ended December 31
2010
2011
2012
RMB
%
RMB
%
RMB
%
(in millions, except percentages)
Alumina
Primary aluminum
Aluminum fabrication
Trading
Corporate and others
4,360.9
3,502.2
1059.0
15.1
79.6
48.4
38.8
11.7
0.2
0.9
2,619.0
4,539.2
2,881.1
9.5
896.8
23.9
41.5
26.3
0.1
8.2
4,243.3
4,604.8
483.5
48.5
246.1
44.1
47.8
5.0
0.5
2.6
Total
9,016.8
100.0
10,945.6
100.0
9,626.2
100.0
In 2012, we spent approximately RMB9,626 million of our capital expenditures primarily on investments in energy saving and consumption reduction,
environmental protection, resource acquisition and scientific research, which mainly included the thermal power project of Jiaozuo Wanfang, the Baotou
Aluminum power plant and the alumina project of Shanxi Huaxing in Xing County.
Our capital expansion plan for 2013 requires a total of approximately RMB18.8 billion in capital expenditures for technology upgrading and
infrastructure construction. We expect to increase our annual production capacity of alumina by approximately 1.0 million tonnes by the end of 2013. In
addition, we continually evaluate potential acquisition and joint venture projects for opportunities that are in our and our shareholders' interests.
As of December 31, 2012, our capital commitment for investment in property, plant and equipment amounted to RMB40,975.6 million, of which those
contracted but not provided for amounted to RMB8,415.5 million and those authorized but not contracted for amounted to RMB32,560.1 million.
As of December 31, 2012, our commitment under operating leases amounted to RMB22,610.4 million, of which amount payable within one year was
RMB705.3 million, amount payable from two to five years was RMB2,784.1 million and amount payable after five years was RMB19,120.9 million.
As of December 31, 2012, our commitments to make capital contribution to our associates, jointly controlled activities and available-for-sale financial
investment amounted to RMB3,596.1 million. We will contribute RMB3,435.7 million to our two associates, namely, China Aluminum Ningxia and
Huozhou Coal Group Xingshengyuan Coal Co., Ltd. for acquisition of equity interests and coal business expansion. We will also contribute RMB130.8
million to one jointly controlled entity, namely, Chalco Liupanshui for coal business expansion.
We expect to use primarily operating cash flow in meeting such commitments with the shortfall to be satisfied by proceeds of bank loans, short-term and
long- term bonds and medium-term notes.
C.
RESEARCH AND DEVELOPMENT
Our department of science and technology management coordinates the research and development efforts undertaken at our Research Institute and
technology centers at our plants. The Research Institute, the only organization in China dedicated to aluminum smelting research, is responsible for the
research and development of technologies for our operations. The technology centers at our plants focus on providing engineering solutions and
applying our developed technologies. Each of the plants also conducts operational testing and pilot experimentation relating to various research and
development topics. Although we collaborate with universities and other research institutions in China on some of our projects, we generally do not
outsource our research and development.
73
Our total expenditure for research and development was approximately RMB164.2 million, RMB218.0 million and RMB198.9 million for 2010, 2011
and 2012, respectively.
D.
TREND INFORMATION
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period
from January 1, 2012 to December 31, 2012 that are reasonably likely to have a material adverse effect on our revenue, profitability, liquidity or capital
resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E.
OFF-BALANCE-SHEET ARRANGEMENTS
There are no material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
F.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations and commercial commitments for the periods indicated as of December 31, 2012:
Long-term debts
Long-term bonds
Medium-term notes
Interest payments
Operating leases
Capital commitments
Commitments for capital contribution
Payment due by period
Total
2013
2014-2015
2016-2017
Thereafter
25,856.7
2,000.0
19,800.0
6,932.5
22,610.4
8,415.5
3,596.1
(RMB in millions)
5,946.0
-
5,000.0
1,788.8
705.3
8,415.5
3,596.1
13,829.3
-
6,000.0
3,163.6
1,395.4
-
-
1,990.8
2,000.0
8,800.0
1,074.3
1,387.8
-
-
4,090.6
-
-
905.8
19,121.9
-
-
Total
89,211.2
25,451.7
24,388.3
15,252.9
24,118.3
G.
Safe Harbor
See "Forward-Looking Statements" at the beginning of this annual report.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
DIRECTORS AND SENIOR MANAGEMENT
Directors
The fourth session of our Board currently consists of nine directors, including three executive directors, three non-executive directors and three
independent non-executive directors. In accordance with our Articles of Association, our affairs are managed by our Board. The business address of
each of our directors is No. 62 North Xizhimen Street, Hai Dian District, Beijing, People's Republic of China, 100082.
We follow our home country practice in relation to the composition of our Board in reliance on the exemption provided under Section 303A.00 of the
NYSE Corporate Governance Rules available to foreign private issuers. Our home country practice does not require a majority of directors of a listed
company to be independent directors. As such, the majority of our directors are not independent within the meaning of NYSE Corporate Governance
Rules.
The table and discussion below set forth information concerning our directors who served on our Board during the year ended December 31, 2012.
Name
Age
Positions with the Company
Executive Directors
Xiong Weiping
Luo Jianchuan
56
49
Chairman of the Board and Chief Executive Officer
Director and President
74
Liu Caiming(1)
Liu Xiangmin
Non-executive Directors
Lv Youqing
Shi Chungui
Independent Non-executive Directors
Zhang Zhuoyuan
Wang Mengkui
Zhu Demiao
50
50
49
72
79
74
48
Director, Senior Vice President and Chief Financial Officer
Director and Senior Vice President
Non-executive Director
Non-executive Director
Independent Director
Independent Director
Independent Director
(1)
On March 8, 2013, Mr. Liu Caiming resigned from the positions as the senior vice president, chief financial officer and a member of the executive committee of the
Company. As Mr. Liu Caiming no longer assumed any administrative function with the Company, he has been re-designated from an executive director to a non-executive
director with the same term of the current session of the Board.
Executive Directors
Xiong Weiping, aged 56, serves as the chairman of the Board, our chief executive officer and the general manager of Chinalco. Mr. Xiong served on
our Board from 2001 to 2006 and was re-appointed to the Board in 2009. Mr. Xiong holds a doctorate degree of engineering from Central South
University of Industry where he studied mining engineering. He completed his post-doctoral research in economics at the Guanghua School of
Management at Peking University where he is a professor and a Ph.D tutor. He has received grants from the State Council of China and was recognized
as the "Middle-Aged and Young Expert with Outstanding Contributions to the Nation" by the former Ministry of Personnel of the PRC. He was
previously the deputy secretary of Hunan Provincial Communist Youth League, a member of standing committee of the All China Youth Federation,
president of Hunan Youth Union Committee and standing vice-chancellor and dean of the Faculty of Management and professor and Ph.D. tutor at the
Central South University of Industry. Mr. Xiong previously served as the vice president of China Copper, Lead & Zinc Group Corporation, a vice
president of Chinalco, an executive director, senior vice president and president of Chalco and the vice chairman and general manager of China National
Travel Service (HK) Group Corporation (China Travel Service (Holdings) Hong Kong Limited).
Luo Jianchuan, aged 49, serves as an executive director on our Board, chairman of the development planning committee, vice chairman of the
executive committee, and our president. He has been employed by us since 2001. Mr. Luo holds a bachelor's degree in mining from Kunming University
of Science and Technology and a doctorate degree from Central South University, and he 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
previously 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 general manager of Jinpeng Mining Development Corporation, deputy general manager and general manager of
Beijing Xinquan Tech-trading Corporation, assistant to 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, general manager of the Operations and Sales Division, vice president and senior vice president of us.
Liu Caiming, aged 50, currently serves as a non-executive director on our Board. On March 8, 2013, Mr. Liu resigned as the senior vice president, chief
financial officer and a member of the executive committee of the Company and was re-designated from an executive director to a non-executive director
with the same term of the current session of the Board. 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. He had served as deputy head and head of the
Finance Department of China Non-ferrous Metals Foreign-Engineering Corporation, deputy general manager of China Non-ferrous Metals Construction
Group Limited, deputy general manager of China Non-ferrous Construction Group Limited, 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. Mr. Liu also has acted
as the titular deputy head of Department of Finance of Yunnan Province, a director of State-owned Assets Supervision and Administration Commission
of Yunnan Provincial People's Government and an assistant to the governor of Yunnan Province.
Liu Xiangmin, aged 50, serves as an executive director on our Board and our senior vice president and has been employed by us since 2001. Mr. Liu
holds a doctorate degree from Central South University of Industry where he studied non-ferrous metal science and is a professor-grade senior engineer.
Mr. Liu previously served as deputy head and head of the Alumina branch of Zhongzhou Aluminum Plant, deputy head of Zhongzhou Aluminum Plant,
general manager of our Zhongzhou branch and president of the Company.
75
Non-Executive Directors
Lv Youqing, age 49, serves as a non-executive director on our Board and the deputy general manager of Chinalco. He has been with us since June
2010. He graduated as a postgraduate from the Political Studies Institute, Social Science Faculty of Sichuan Province in 1989. He then obtained a Ph.D.
degree from School of Economics, Sichuan University and is a professor-grade senior engineer. Mr. Lv accumulated substantial experience in
management from his long-term research of national policies and involvement in enterprise management. He previously served as deputy mayor of
Nanchong Municipal Government, a member of standing committee and deputy party secretary of Luzhou's Municipal Party Committee. He also served
as a member of the party group and deputy general manager of Chinalco.
Shi Chungui, aged 72, serves as a non-executive director on our Board and has been with us since 2005. He holds a bachelor's degree in accounting
from Northeast University of Finance and Economics. Mr. Shi is a senior economist with extensive experience in finance, government and corporate
management. Mr. Shi was previously the vice director of Commerce Bureau of Qinhuangdao City, Hebei Province, deputy mayor and the standing
deputy mayor of Qinhuangdao City, Hebei Province, president of Hebei Branch of China Construction Bank, president of Beijing Branch of China
Construction Bank, deputy president of the head office of China Construction Bank and deputy president of China Cinda Asset Management
Corporation, vice chairman of Tianjin Pipe Co. , Ltd. 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.
Independent Non-Executive Directors
Zhang Zhuoyuan, aged 79, has served as an independent non-executive director on the Board since 2007. Mr. Zhang graduated from the Faculty of
Economics of Zhongnan University of Economics. Mr. Zhang previously served as the director and researcher of the Institute of Finance, Trade and
Economics of Chinese Academy of Social Sciences, chief editor of the Finance & Trade Economics, a director, researcher and Ph.D tutor at the Institute
of Industrial Economics of Chinese Academy of Social Sciences and a director, researcher and Ph.D tutor of the Institute of Economics of the Chinese
Academy of Social Sciences, and chief editor of Economics Research Journal. Mr. Zhang is a member of the ninth and tenth sessions of the National
Committee of the Chinese People's Political Consultative Conference, a consultant of each of China Price Association and the Chinese Society for
Urban Studies and a director of Chinese Society for Cost Studies and honorary director of Foundation of Sun Ye Fang Economics and Science. Mr.
Zhang is also a committee member of the academic section of the Chinese Academy of Social Sciences and a researcher at the Institute of Economics of
the Chinese Academy of Social Sciences.
Wang Mengkui, aged 74, has served as an independent non-executive director on the Board since 2008. Mr. Wang graduated from the School of
Economics, Peking University. He is an economist engaged in long-term analysis of economic theory and policy and is currently a professor and advisor
of doctor candidates of Peking University. He has published many articles on economic theory and related topics and served in the "Red Flag" magazine
and the First Ministry of Machine Building Industry. Mr. Wang previously served as a vice head and researcher of the economic team of the research
office of the Secretariat of the Communist Party of China Central Committee, a commission member of the State Development and Planning
Commission, executive vice director of economic research center of the State Development and Planning Commission, the vice director and director of
the research office of the State Council of China and the center director of the Development Research Center of the State Council of China. Mr. Wang
also served as a member of the Tenth Standing Committee of National People's Congress and vice director of Financial and Economic Affairs
Committee of National People's Congress. He is also a professor and Ph.D tutor of Peking University. He is currently the chairman of the China
Development Research Foundation and a committee member of the National Social Security Fund of the PRC.
Zhu Demiao, aged 48, has served as an independent non-executive director and Chairman of the audit committee of the Board since 2008. Mr. Zhu
holds a MBA degree from the University of Chicago Graduate School of Business, a master's degree in economics from the Research Institute for Fiscal
Science at the Ministry of Finance of the PRC and a bachelor's degree in economics from Hebei Geological Institute. Mr. Zhu is one of the early
Certified Public Accountants in the PRC. Mr. Zhu previously worked in the Ministry of Finance and in the investment analysis department of FMC
Corporation. He also served as the head of China Business in the Equity Capital Market Department and Investment Bank Department of Credit Suisse
First Boston, a managing director and member of the executive committee of the Asia-Pacific region of JP Morgan Chase & Co. and chairman of
operating committee of the Greater China Region of JP Morgan Chase & Co. Mr. Zhu once served as the managing director and senior consultant of
Oaktree Capital (Hong Kong) Ltd. Mr. Zhu is currently an independent director of WSP Holding Limited and a member of the Advisory Board of
Business School at the University of Chicago.
Supervisors
Our supervisors are elected to represent our employees and shareholders and serve a term of three years or until the election of their respective
successors, whichever is earlier. Our supervisors are Mr. Ao Hong, Mr. Yuan Li and Mr. Zhang Zhankui who were elected at the 2009 annual general
meeting held on June 22, 2010 with a term of office expiring at the conclusion of the annual general meeting for the year 2012.
76
The table and discussion below set forth certain information concerning our supervisors.
Name
Ao Hong
Yuan Li
Zhang Zhankui
Age
Positions with the Company
51
54
54
Chairman of Supervisor Committee
Supervisor (employee representative), General Manager of Corporate Culture Department of the
Company
Supervisor
Ao Hong, aged 51, is currently a vice president of Chinalco and has served as a supervisor of us since 2006. Mr. Ao holds a bachelor's degree from
Kunming University of Science and Technology where he studied metallurgy. He also holds a master's degree from Central South University and is a
professor-grade senior engineer. Mr. Ao previously worked as an engineer, senior engineer and served as head of general office and vice chairman at the
Beijing General Research Institute for Non-ferrous Metals ("GRINM"), the 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.
Yuan Li, aged 54, serves as our employee representative supervisor and a general manager of our Corporate Culture Department. Mr. Yuan has been
employed by us since 2001. He is an engineer with extensive administrative and management experience. He previously served as a manager of the
General Management Office and the deputy head of the Department of Research and Investigation of China Non-ferrous Metals Industry Corporation,
the head of the Department of Research and Investigation, the head of the Secretariat, an assistant inspector of the State Bureau of Non-ferrous Metals
Industry, the deputy head of the Department of Political Affairs and the head of the community union working department of Chinalco.
Zhang Zhankui, aged 54, is the head of the Finance Department of Chinalco and has served us since 2001. Mr. Zhang is a postgraduate researcher in
economic management and a senior accountant. Mr. Zhang had formerly served as head of the finance division and then the audit division of China
General Design Institute for Non-ferrous Metals, a deputy general manager of Beijing Enfei Tech-industry Group, the head of the accounting division of
the finance department and the deputy head of the finance department of China Copper Lead & Zinc Group Corporation, the officer-in-charge of asset
and finance at our listing office and the head of the capital division of our finance department and the manager of the general division of our finance
department and the deputy head of the finance department of Chinalco.
Senior Management
The table and discussion below set forth certain information concerning other member of senior management.
Name
Age
Positions with the Company
Ding Haiyan(1)
Xie Weizhi(2)
Jiang Yinggang
Xie Hong
Qiao Guiling
Liu Qiang
54
48
49
54
44
49
Vice President
Vice President and Chief Financial Officer
Vice President
Vice President
Vice President
Secretary to the Board
(1)
(2)
On March 8, 2013, Mr. Ding Haiyan resigned as the vice president and member of the executive committee of the Company.
On March 8, 2013, Mr. Liu Caiming resigned as the senior vice president, chief financial officer and a member of the executive committee of the Company and the Board, as
recommended by the our nomination committee, appointed Mr. Xie Weizhi as the vice president, chief financial officer and member of the executive committee of the
Company.
Ding Haiyan, aged 54, served as vice president of us until March 8, 2013. Mr. Ding had been employed by us since 2001. Mr. Ding holds a master's
degree from Beijing Economics University where he studied labor economics and he is a senior economist with extensive experience in labor, wages,
insurance, enterprise mergers and acquisitions and capital operation. He has served as head of the labor wage division of the human resource department
of China Non-ferrous Metals Industry Corporation, the 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, the head manager of the department of asset operation of Chinalco, deputy head
of our Listing Office and an assistant to general manager of Chinalco. He also served as an executive director and the secretary on our Board.
Xie Weizhi, aged 48, has served as our vice president and chief financial officer since March 8, 2013. Mr. Xie served as a non-executive director of
Chinalco Mining Corporation International and a director of Chinalco Finance Co., Ltd. Mr. Xie is a senior accountant, graduated from the Guanghua
School of Management, Peking University with a master's degree in business administration. Mr. Xie joined us in February 2011. He previously served
as the deputy chief and chief of the accounting division of the finance department and the deputy manager of the finance department of China Offshore
Oil Nanhai West Corporation, deputy general manager and general manager of the finance department, and general manager of the treasury department
of China National Offshore Oil Corporation, general manager of CNOOC Finance Corporation Limited, and the president of China National Association
of Finance Companies. Mr. Xie has been engaged in financial management of large state-owned enterprises for many years and has substantial
experience in finance and business management.
77
Jiang Yinggang, aged 49, has served as a vice president of us since 2007 and has been employed by us since 2001. Mr. Jiang holds a master's degree
from the Central South University of Industry where he studied metallurgy of non-ferrous metals. Mr. Jiang is a professor-grade senior engineer. He has
served as deputy head and then the head of the corporate management department of Qinghai Aluminum Plant, head of the Qinghai aluminum smelter,
deputy general manager and general manager of Qinghai Aluminum Company Limited and general manager of our Qinghai branch.
Xie Hong, aged 54, serves as vice president of us and has been employed by us since 2001. Mr. Xie is an outstanding senior engineer who graduated
from Central South University of Technology with a major in ore dressing. He has long engaged in strategic planning and project construction
management, and has extensive experience in strategic planning, project management and investment management. Mr. Xie has previously served as the
cadre, director of the Design Division at Infrastructure Department, deputy division head and division head of the Project Division at Investment and
Operation Department of China Nonferrous Metals Industry Corporation, the deputy director-general of the Planning and Development Department of
the State Bureau of Non-ferrous Metals Industry, person-in-charge of the (Coordinated) Planning and Development Department of Aluminum
Corporation of China, director of the Planning and Development Department of Aluminum Corporation of China and the general manager of Investment
Management Department, member of the Executive Committee and assistant to President of the Company.
Qiao Guiling, aged 44, serves as vice president of us. Ms. Qiao holds a master's degree in engineering from Jiaozuo Mining Institute where she studied
mechanical engineering and she is a senior engineer with extensive experience in management. Ms. Qiao has served as the deputy director of Jiaozuo
City Cryolite Factory, deputy director of the Economic and Trade Commission of Jiaozuo City Zhongzhan District, general manager of Zhongzhan
Taishun Co., Ltd., factory director of a Kaolinite plant in Jiaozuo City, general manager of Henan Zhongzhou Holding Group Co., Ltd., vice mayor of
the People's Government of Wen County, chairman and general manager of Jiaozuo Wanfang Aluminum Manufacturing Co., Ltd., chairman of Jiaozuo
Wanfang Group Co., Ltd. and the general manager of Henan Branch of the Company.
Liu Qiang, aged 49, is the secretary to the Board and has been employed by us since 2001. Ms. Liu holds a master's degree in English literature (minor
in translation) from Beijing International Studies University. Ms. Liu studied finance, financial management and business administration at the
University of Foreign Business and Economics in Beijing and received trainings on finance and financial management in Hong Kong. She previously
worked in the finance department of Hong Kong Oriental Xinyuan (Holdings) Company Limited and served as the manager of the finance department of
the Australian branch of China National Non-Ferrous Metals Import and Export Corporation. She has 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 the deputy manager of the import
and export division of China Aluminum International Trading Corporation Limited.
B.
COMPENSATION
Executive Compensation
Executive directors are entitled to a director's fee, performance bonuses and welfare benefits provided under the relevant PRC laws and regulations.
Non-executive directors are entitled only to a director's fees. The aggregate amount of cash compensation paid by us to our directors in 2012 for services
performed in connection with their respective capacities above was approximately RMB2.9 million. The aggregate amount of cash compensation paid
by us to our senior management who are not members of our Board in 2012 was approximately RMB2.4 million, respectively. Our executive directors
and supervisors who are employees also receive compensation in the form of housing allowances, other allowances and benefits and contributions to
their pension plans. Directors receive fees for their services. None of the service contracts of our directors provide benefits to our directors upon their
termination.
Details of the emoluments paid to our directors and supervisors during the year ended December 31, 2012 are as follows:
78
Name of Director or Supervisor
Executive Directors
Xiong Weiping
Luo Jianchuan
Liu Caiming(1)
Liu Xiangmin
Non-Executive Directors
Shi Chungui
Lv Youqing
Independent Non-Executive Directors
Zhang Zhuoyuan
Wang Mengkui
Zhu Demiao
Supervisors
Ao Hong
Yuan Li
Zhang Zhankui
Salary
RMB
Discretionary
Bonus
RMB
Pension
RMB
(in thousands)
Fees
RMB
-
-
-
-
150.0
-
194.0
194.0
194.0
545.0
496.0
493.0
493.0
-
-
-
-
-
732.0
2,027.0
-
-
-
-
-
383.0
-
383.0
Total
RMB
578.0
529.0
526.0
526.0
150.0
-
194.0
194.0
194.0
33.0
33.0
33.0
33.0
-
-
-
-
-
132.0
2,891.0
-
33.0
-
33.0
-
416.0
-
416.0
165.0
3,307.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
732.0
2,410.0
(1)
On March 8, 2013, Mr. Liu Caiming resigned as the senior vice president, chief financial officer and a member of the executive committee of the Company. As Mr. Liu
Caiming no longer assumed any administrative function with the Company, he has been re-designated from an executive director to a non-executive director with the same
term of the current session of the Board.
Senior Management Incentive System
In order to better provide incentives for our senior management and improve our shareholders' value, we adopted a special compensation system for our
senior management designed to align our senior management's financial interests with our operating performance. Under this system, the senior
management's compensation consists of the following components:
*
*
*
*
basic salaries;
performance bonuses;
welfare benefits; and
incentive bonuses.
C.
BOARD PRACTICES
Board of Directors
All of our directors and supervisors serve a term of three years or until such later date as their successors are elected or appointed. Directors and
supervisors may serve consecutive terms. Each of our directors and supervisors has entered into a service contract with us, none of which can be
terminated by us within one year without payment of compensation (other than statutory compensation). There were no arrangements providing for
benefits upon termination of our directors, supervisors or other senior management personnel. One of the supervisors is an employee representative
appointed by our employees and the rest are appointed by the shareholders. The following table sets forth the number of years our directors and
supervisors have held their positions and the expiration of their current term.
79
Name
Held Position Since
Expiration of Term
Xiong Weiping
Luo Jianchuan
Liu Caiming
Liu Xiangmin
Lv Youqing
May 26, 2009
June 7, 2004
May 31, 2011
May 18, 2007
June 22, 2010
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
Shi Chungui
Zhang Zhuoyuan
Wang Mengkui
Zhu Demiao
Ao Hong
Yuan Li
Zhang Zhankui
Audit Committee
June 9, 2005
May 18, 2007
May 9, 2008
May 9, 2008
October 13, 2006
August 16, 2001
October 13, 2006
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
June 30, 2013
Our audit committee consists of three independent non-executive directors, namely, Mr. Zhu Demiao, Mr. Zhang Zhuoyuan and Mr. Wang Mengkui.
Mr. Zhu Demiao is chairman of the audit committee.
Our audit committee satisfies the requirements of Rule 10A-3 of the Exchange Act and NYSE Rule 303A.06 relating to audit committees, including the
requirements relating to independence of the audit committee members. The primary duties of our audit committee as set out in the committee charter
are to review our annual and interim financial reports, review and approve the selection of and remuneration paid to our independent auditors, approve
audit and audit-related services, approve related party transactions, supervise our internal financial reporting, including our internal controls and
disclosure controls and procedures, supervise our internal and external auditors and review management policies.
Remuneration Committee
Our remuneration committee consists of 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 serves as the chairman of the remuneration committee.
The primary duties of our remuneration committee as set out in the committee charter include reviewing compensation policies and performance
appraisals with respect to the directors and senior management. In 2012, the remuneration committee convened at one meeting, to consider and approve
remuneration and performance appraisal standards for 2012 and the renewal of directors and officers liability insurance for years 2012 to 2013 for our
directors, supervisors and other senior management members.
We follow our home country practice in relation to the composition of our remuneration committee in reliance on the exemption provided under NYSE
Corporate Governance Rule 303A.00 available to foreign private issuers. Our home country practice does not require us to establish a remuneration
committee which must be composed entirely of independent directors.
Nomination Committee
Our nomination committee consists of two executive directors, namely Mr. Xiong Weiping and Mr. Luo Jianchuan and three independent non-executive
directors, namely Mr. Zhang Zhuoyuan, Mr. Wang Mengkui and Mr. Zhu Demiao. Mr. Xiong Weiping serves as the chairman of the nomination
committee.
The primary duties of our nomination committee as set out in the committee charter include reviewing and recommending candidates for independent
directors and members of the Board committees, approving the terms of the directors' service contracts and overseeing the appointment and removal of
senior executives.
We follow our home country practice in relation to the composition of our nomination committee in reliance on the exemption provided under NYSE
Corporate Governance Rule 303A.00 available to foreign private issuers. Our home country practice does not require us to establish a nomination
committee which must be composed entirely of independent directors.
Development and Planning Committee
Our development and planning committee consists of two executive directors, namely Mr. Luo Jianchuan, and Mr. Liu Xiangmin with Mr. Luo
Jianchuan serving as chairman of the committee. In accordance with the committee charter, the committee reviews and assesses our strategic plans for
development, fiscal budgeting, investment, business operations and investments returns.
80
Disclosure Committee
Our disclosure committee consists of the chief executive officer, the chief financial officer and other senior management members with the chief
executive officer serving as the chairman of the committee. This committee implements our disclosure controls and procedures and reviews information
disclosed to ensure accurate, open and timely disclosure. All information (including annual and interim results) to be disclosed is subject to the approval
of the disclosure committee. For the disclosure of financial statements and related information, the chief financial officer will ensure that our results and
financial position will be reflected on a true and fair basis in accordance with the relevant accounting principles and requirements.
Occupational Health and Safety and Environmental Committee
Our occupational health and safety and environmental committee consists of one executive director, namely Mr. Liu Xiangmin and one non-executive
director, namely Mr. Lv Youqing. Mr. Lv Youqing serves as the chairman of the committee. This committee considers our annual planning on health,
environmental protection and safety, supervises our implementation of the planning on health, environmental protection and safety initiatives, inquires
into serious incidents and inspecting and supervising over the handling of such incidents and makes recommendations to the Board on major decisions
on health, environmental protection and safety.
Supervisory Committee
Our supervisory committee consists of three supervisors, with one supervisor being elected from the staff as a representative of the employees. Our
current supervisory committee was appointed at the annual general meeting held on June 22, 2010, and Mr. Ao Hong and Mr. Zhang Zhankui have been
re-elected as chairman of the supervisory committee and a supervisor, respectively. In the election of employee representatives held in the same month,
Mr. Yuan Li was re- elected as the employee representative supervisor of the fourth session of the supervisory committee.
Supervisors attend board meetings as non-voting members. The supervisory committee is responsible to the shareholders' general meeting and has the
following duties and responsibilities:
*
*
*
*
*
*
supervise our handling of our financial matters;
supervise any acts of directors, the general manager, deputy general manager and other senior officers that are in violation of laws,
administrative regulations or our Articles of Association;
request directors, the general manager, deputy general manager and other senior officers to rectify their acts that are detrimental to our interests;
verify such financial information as financial reports, business reports and profit distribution plans submitted by the Board to the shareholders'
general meeting, and arrange certified public accountants and auditors to verify issues;
propose to convene interim shareholders' general meetings; and
bring lawsuits against directors on behalf of us.
D.
EMPLOYEES
As of December 31, 2010, 2011 and 2012, we had approximately 108,256, 101,259 and 97,990 employees, respectively. The table below sets forth the
number of our employees by function as of the periods indicated:
As of December 31,
2010
2011
2012
Function:
Alumina production
Primary aluminum production
Aluminum fabrication
Mining
Research and development
Sales and marketing
46,117
45,869
5,737
4,926
650
735
(%)
44.8
37.6
6.1
4.1
0.6
0.7
42,382
38,437
6,306
4,018
771
706
(%)
43.3
39.2
6.4
4.1
0.8
0.7
45,364
38,111
6,210
4,152
636
730
(%)
42.5
42.4
5.3
4.6
0.6
0.7
81
Management and others(1)
4,222
3.9
6,056
6.1
5,370
5.5
Total
108,256
100.0
101,259
100.0
97,990
100.0
(1)
Excluding our management personnel for alumina production, primary aluminum production and aluminum fabrication.
The table below sets forth the number of our employees as of December 31, 2012:
Location
Shandong
Shandong branch
Shandong Huayu
Chalco Qingdao
Henan
Henan branch
Zhongzhou branch
Research Institute
Jiaozuo Wanfang
Henan Aluminum
Guizhou
Guizhou branch
Zunyi Aluminum
Zunyi Alumina
Guangxi
Guangxi branch
Shanxi
Shanxi branch
Shanxi Huasheng
Shanxi Huaze
Employees
% of Total
9,758
2,011
143
10,732
6,521
771
3,911
1,684
10,178
1,388
1,157
5,084
10,640
2,114
2,456
10.0
2.0
0.1
11.0
6.7
0.8
4.0
1.7
10.4
1.4
1.2
5.2
10.9
2.2
2.5
Gansu
Lanzhou branch
Northwest Aluminum
Gansu Hualu
Liancheng branch
Liaoning
Fushun Aluminum
Qinghai
Qinghai branch
Sichuan
Huaxi Aluminum
Chongqing
Chongqing branch
Chalco Southwest Aluminum Cold Rolling
Chalco Southwest Aluminum
Fujian
Chalco Ruimin
Inner Mongolia
Baotou Aluminum
Others (including employees of subsidiaries under construction)
Headquarters
Total
4,153
2,768
1,569
3,438
2,012
4,784
463
1,184
298
258
692
6,316
1,219
288
4.2
2.8
1.6
3.5
2.0
4.9
0.5
1.2
0.3
0.3
0.7
6.4
1.2
0.3
97,990
100.0
82
We have workers' unions at the plant level that protect employees' rights and welfare benefits, organize educational programs, encourage employee
participation in management decisions and mediate disputes between individual employees and us. All employees are union members. We have not
experienced any strikes or other labor disturbances that have interfered with our operations, and we believe that we maintain good relationships with our
employees.
The remuneration package of our employees includes salary, bonuses and allowances. Employees also receive welfare benefits including medical care,
housing subsidies, childcare and education, retirement and other miscellaneous items.
In accordance with applicable PRC regulations, we participate in pension contribution plans organized by provincial and municipal governments, under
which each of our plants is required to contribute an amount equal to a specified percentage of its employees' salaries, bonuses and various allowances.
The amount of contribution as a percentage of the employees' salary is, on average, approximately 20.0% depending in part on the location of the plant.
We have made all required pension contributions up to December 31, 2012. Retirees who retired prior to the date of the reorganization will have their
pensions paid out of the pension plans established by the PRC government. We provide to our employees various social welfare benefits through various
institutions owned by Chinalco and its other affiliates or through third parties.
E.
SHARE OWNERSHIP
As of the date of this annual report, none of our directors, supervisors or senior management owns any interest in any shares or options to purchase our
shares.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
We are a joint stock limited company organized under the laws of the PRC. Our parent company, Chinalco, a state-owned enterprise, beneficially owns
41.68% of our outstanding common shares directly and indirectly through its controlled entities. Chinalco holds a significant portion of our domestic
shares in the form of state legal person shares, which do not have voting rights different from our other shares. Chinalco has substantial influence over
our management, policies and corporate actions and can exercise all rights as our controlling shareholder subject to the relevant laws, rules and
regulations. Approximately 58.32% of our total outstanding common shares are held by public shareholders, of which 29.16% and 29.16 % are owned
by holders of H Shares and A Shares, respectively.
The following table sets forth information regarding ownership of our issued and outstanding capital stock as of December 31, 2012. The table includes
all persons who are known by us to own, either as beneficial owners or holders of record, five percent or more of any class of shares.
Holders of A Shares and H Shares
Holders of A Shares
As of December 31, 2012
Number of shares
(in millions)
% of issued total
share capital
% of respective
share class
Chinalco(1)
China Cinda Asset Management Corporation Limited
China Construction Bank Corporation Limited
Other public holders of A Shares
Total A Shares
Holders of H Shares
Templeton Asset Management Ltd.
Morgan Stanley(2)
Other H shares holders
Total H Shares
Total
(1)
5,636.36
800.76
609.15
2,534.25
9,580.52
1,028.83
394.96
2,520.18
3,943.97
41.68
5.92
4.50
18.74
70.84
7.61
2.92
18.63
29.16
58.83
8.36
6.36
26.45
100.00
26.09
10.02
63.89
100.00
13,524.49
100.00
Including 5,214,407,195 A Shares held directly by Chinalco, 331,217,795 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.
Baotou Aluminum (Group) Co., Ltd., Lanzhou Aluminum Factory, Guiyang Aluminum Magnesium Design and Research Institute and Shanxi Aluminum Plant are controlled
by Chinalco.
(2)
Including 394,957,582 shares held by various corporations controlled by Morgan Stanley.
83
We are not aware of any arrangement that may at a subsequent date result in a change of control of Chalco.
On April 24, 2007, we issued 1,236,731,739 A Shares by way of share exchange with the other shareholders of Shandong Aluminum and Lanzhou
Aluminum, including a subsidiary of Chinalco, to acquire the existing issued shares not held by us. On the same date, China Orient Asset Management
Corporation, a PRC state-owned financial enterprise, transferred all of its equity interest in us to Chinalco and ceased to be our shareholder. On
December 28, 2007, we issued 637,880,000 A Shares to a subsidiary of Chinalco in exchange for 100% equity in Baotou Aluminum.
To the best of our knowledge, as of December 31, 2012, all of the outstanding ADSs were held by 82 United States holders of record.
As an owner of at least 30% of our issued and outstanding shares, the parent company is deemed a controlling shareholder and therefore may not
exercise its voting rights with respect to various matters related to our shares in a manner prejudicial to the interests of our other shareholders. See "Item
10. Additional Information - B. Memorandum and Articles of Association." In accordance with our Articles of Association, each share of our capital
stock has one vote and the shares of the same class have the same rights. Other than the foregoing restrictions, the voting rights of our major holders of
domestic and H Shares are identical to those of any other holders of the same class of shares. Holders of domestic shares and H Shares are deemed to be
shareholders of different classes for some matters, which may affect their respective interests. Other than the foregoing, holders of H Shares and
domestic shares are entitled to the same voting rights.
B.
RELATED PARTY TRANSACTIONS
Connected Transactions under Hong Kong Listing Rules
Under the Listing Rules, transactions between connected persons and us, or connected transactions, generally must be reported to the Hong Kong Stock
Exchange, announced to the public and/or approved by shareholders unless the foregoing requirement are waived by the Hong Kong Stock Exchange or
exempted under the Listing Rules. Each year our independent non-executive directors must review our non-exempt continuing transactions and confirm
that these transactions have been entered into:
(i)
in the ordinary and usual course of our business;
(ii)
the terms of the transactions are fair and reasonable as far as our shareholders are concerned;
(iii)
either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms,
on terms no less favorable to us than terms available to or from (as appropriate) independent third parties; and
(iv)
in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of our shareholders as a whole.
Although the definition of connected transactions is not synonymous with the definition of related party transactions, the concepts are sufficiently
similar that the description of our connected transactions would satisfy disclosure requirements under U.S. securities laws.
The following table sets forth the details of our material connected transaction for the year ended December 31, 2012:
Agreement
Nature
Term of the Agreement
Continuing Connected Transactions
Transaction
Amount
in 2012
(RMB
Annul
Cap
for 2012
(RMB
in millions)
in millions)
Comprehensive Social and Logistics Services Agreement
(Counterparty: Chinalco)
Chinalco provides us with a broad range of social and
logistics services including education and schooling, public
transportation and property management.
The original agreement was entered into on November 5,
2001 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
305
970
84
General Agreement on Mutual Provision of Production
Supplies and Ancillary Services (Counterparty: Chinalco)
We purchase from Chinalco ancillary production supplies
and services which include, among other things, various
raw materials required in alumina and primary aluminum
production, transportation and loading services and
production supporting services.
The original agreement was entered into on November 5,
2001 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
Chinalco purchases from us alumina, primary aluminum,
scrap materials, pitch and other similar supplies and
supporting services and ancillary services such as electricity
supply, gas, heat and water, repair, measurement, quality
testing, spare parts, production transportation, steam and
other similar services.
Xinan Aluminum Mutual Provision of Products and
Services Framework Agreement (Counterparty: Xinan
Aluminum)
We purchase from Xinan Aluminum products and services
including among other things, aluminum fabrication
products, equipment, water, electricity and gas, maintenance
and repair services, unloading, transportation and storage
services.
The original agreement was entered into on October 20,
2008 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
Xinan Aluminum purchases from us products including
among other things, aluminum alloy sheets or rolls,
aluminum fabrication scraps and primary aluminum and
aluminum alloy ingots.
Mineral Supply Agreement (Counterparty: Chinalco)
Chinalco provides us with bauxite and limestone from
several mines that it operates. Chinalco must not provide
bauxite and limestone to any third parties before meeting
our bauxite and limestone requirements.
The original agreement was entered into on November 5,
2001 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
Provision of Engineering, Construction and Supervisory
Services Agreement (Counterparty: Chinalco)
Chinalco provides us with certain engineering, construction
and supervisory services at the state guidance price and,
where there is no state guidance price, at market price. Such
services are mainly provided by subsidiaries of Chinalco
including China Aluminum International Engineering
Corporation Limited.
The original agreement was entered into on November 5,
2001 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
Land Use Rights Leasing Agreement (Counterparty:
Chinalco)
Chinalco leases 470 parcels of land covering an aggregate
area of approximately 61.2 million square meters and
spanning across eight provinces in the PRC to us.
The original agreement was entered into on November 5,
2001 for a term of 50 years, expiring on June 30, 2051.
Buildings and Office Buildings Leases (Counterparty:
Chinalco)
We lease 59 buildings with an aggregate gross floor area of
62,189 square meters to Chinalco. Chinalco leases 100
buildings with an aggregate gross floor area of 273,637
square meters to us.
The original agreement was entered into on November 5,
2001 for a term of 20 years, expiring on June 30, 2020
85
2,331
5,200
3,429
11,550
3,242
6,300
5,012
9,000
35
1,100
2,321
16,400
633
64
1,300
110
China Aluminum Development Company Limited, a
wholly-owned subsidiary of Chinalco, leases to us an office
building with an area of 23,551.43 square meters located at
Xizhimen, Beijing, as our headquarters.
The original agreement was entered into on October 15,
2011 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
Framework Agreement for Aluminum Products Fabrication
Services (Counterparty: Chinalco)
Shandong Aluminum Company and Qinghai Aluminum
Company, wholly-owned subsidiaries of Chinalco, provide
alumina fabrication and production services to us.
The original agreement was entered into on February 28,
2011 and expired on December 31, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from January 1, 2013 for a term of three years.
142
240
Financial Services Agreement (Counterparty: Chinalco
Finance)
The original agreement was entered into on August 26,
2011 and expired on August 25, 2012. Pursuant to the
supplementary agreement entered into in 2012, the term was
renewed from August 26, 2012 for a term of three years,
expiring on August 25, 2015.
Chinalco Finance has agreed to provide us with deposit
services, credit services and miscellaneous financial
services. We have the right to choose the financial
institution for financial services and the financial institution
for deposit services and loan services as well as the amounts
of loans and deposits with reference to our own needs.
Chinalco Finance undertakes that the terms for the provision
of financial services to us at any time would be no less
favorable than those of the same type of financial services
provided by Chinalco Finance to Chinalco and other
subsidiaries of Chinalco or those of the same type of
financial services that may be provided to us by other
financial institutions.
2,583 (largest amount of
daily deposit balance during
the period from January 1,
2012 to August 25, 2012)
2,800 (daily cap of deposit
balance during the period
from January 1, 2012 to
August 25, 2012)
1,747 (largest amount of
daily deposit balance during
the period from August 26,
2012 to December 31, 2012)
5,000 (daily cap of deposit
balance during the period
from August 26, 2012 to
December 31, 2012)
2 (other financial services
fees for the period from
August 26, 2012 to
December 31, 2012)
50 (for the period from
August 26, 2012 to
December 31, 2012)
One-off Connected Transaction
Asset Transfer Agreement (Counterparty: Huatong
Charcoal)
We acquired certain fixed assets owned by Huatong
Charcoal.
N/A
146
N/A
We provide the following additional information on material related party transactions during the periods indicated:
(a)
significant related party transactions
For the year ended December 31
2010
2011
2012
(RMB in thousands)
Sales of goods and services rendered:
Sales of materials and finished goods to:
Chinalco and its subsidiaries
Associates of Chinalco
6,069,774
31,869
5,607,258
11,024
6,805,794
53,599
86
Jointly controlled entities
Associates
Non-controlling shareholder of a subsidiary and its subsidiaries
-
-
4,452,683
7,596
5,983
4,835,662
30,117
9,265
-
Provision of utility services to:
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entities
Non-controlling shareholder of a subsidiary and its subsidiaries
Provision of products processing services to:
Chinalco and its subsidiaries
Non-controlling shareholder of a subsidiary
Purchase of goods and services:
Purchases of engineering, construction and supervisory services from:
Chinalco and its subsidiaries
Associates of Chinalco
Non-controlling shareholder of a subsidiary and its subsidiaries
Purchases of key and auxiliary materials and finished goods from:
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entities
Associates
Non-controlling shareholder of a subsidiary and its subsidiaries
Provision of social services and logistics services by:
Chinalco and its subsidiaries
Non-controlling shareholder of a subsidiary and its subsidiaries
Provision of utilities services by:
Chinalco and its subsidiaries
Associates of Chinalco
Non-controlling shareholder of a subsidiary and its subsidiaries
87
10,554,326
10,467,523
6,898,775
332,701
8,156
-
-
334,370
13,547
-
453
341,386
21,420
1
-
340,857
348,370
362,807
-
-
-
-
13,969
7,431
-
13,969
7,431
3,503,363
-
5,894
3,259,624
-
22,681
2,321,386
11,365
-
3,509,257
3,282,305
2,332,751
4,232,369
323,835
1,321,202
1,458
2,483,173
1,644,429
140,624
1,499,136
39
2,195,191
3,839,222
17,745
976,141
2,618
-
8,362,037
5,479,419
4,835,726
264,049
475
281,956
624
306,589
-
264,524
282,580
306,589
163,708
7,663
100,952
123,243
6,869
145,778
359,599
9,918
-
272,323
275,890
369,517
Provision of products processing services by Chinalco and its subsidiaries
137,601
213,553
142,244
Rental expenses for buildings and land use
rights charged by Chinalco and its subsidiaries
Other significant related party transactions:
643,432
665,105
696,874
Acquisition of non-controlling interest from a fellow subsidiary
-
160,271
Disposal of an available-for-sale financial investment to Chinalco
164,697
Acquisition of assets from a fellow subsidiary
Borrowings from a fellow subsidiary
Interest expense on borrowings from a fellow subsidiary
Entrusted loans and other borrowings to:
Jointly controlled entities
An associate
Chinalco and its subsidiaries
A non-controlling shareholder of a subsidiary
Interest income on entrusted loans and other borrowings to:
Jointly controlled entities
Chinalco and its subsidiaries
A non-controlling shareholder of a subsidiary
(b)
balance with related parties
Cash and cash equivalents deposited in
A fellow subsidiary
Trade and notes receivables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Jointly controlled entities
Less: provision for impairment of receivables
88
Other current assets
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Jointly controlled entities
-
-
145,915
-
-
500,000
2,350,000
4,009
54,541
605,041
-
-
63,665
258,900
200,000
126,604
-
668,706
585,504
4,361
-
1,140
51,106
2,327
-
5,501
53,433
-
-
-
-
-
-
-
-
-
-
-
-
As of December 31,
2011
2012
(RMB in thousands)
260,940
1,641,180
506,775
656
3,900
-
511,331
(112,461)
410,775
4,711
4,245
5
419,736
(119,280)
398,870
300,456
122,158
166
15,813
325,545
60,687
11,440
219,305
676,246
Less: provision for impairment of other current assets
Other non-current asset
A jointly controlled entity
Borrowings
A fellow subsidiary
Trade and notes payables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Jointly controlled entities
Other payables and accrued expenses
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entity
Associates
(c)
compensation of key management personnel
Fees
Basic salaries, housing fund, other allowances and benefits in kind
Discretionary bonus
Pension cost-defined contribution schemes
463,682
(35,907)
427,775
967,678
(34,915)
932,763
300,000
200,000
500,000
900,000
115,192
11
-
26,952
142,155
1,913,309
5,746
332
4,449
213,006
107
2,335
3,192
218,640
1,788,058
26,909
332
1,043
1,923,836
1,816,342
For the year ended December 31,
2010
2011
2012
(RMB in thousands)
870
3,476
1,384
192
5,922
741
4,093
1,616
250
6,700
732
4,604
-
330
5,666
Guarantees
We provided guarantees to our related parties to guarantee their loans during the period from January 1, 2012 to March 31, 2013. The outstanding
balance of the loans we guaranteed was RMB124.9 million as of March 31, 2013 and the largest amount outstanding of the loans we guaranteed during
the period from January 1, 2012 to March 31, 2013 was RMB124.9 million. The interest rates on such loans are 6.55%.
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Our related parties also provided guarantees to us to guarantee our loans during the period from January 1, 2012 to March 31, 2013. The outstanding
balance of the loans guaranteed by our related parties was RMB1,455.7 million as of March 31, 2013 and the largest amount outstanding of the loans
guaranteed by our related parties during the period from January 1, 2012 to March 31, 2013 was RMB3,650.7 million. The interest rates on such loans
range from 2.55% to 6.345%.
In 2004, we and Shanxi Aluminum Plant Subbranch, China Construction Bank, entered into a guarantee contract, pursuant to which the Company
provided joint and several liability guarantee for the eight-year loan of RMB1.12 billion made to Shanxi Huaze, a subsidiary controlled by us. The
guarantee will expire following two years upon the expiry of the debt performance period under the principal contract. As of March 31, 2013, the
outstanding balance of the loan was RMB70.0 million.
On July 29, 2011, we entered into a joint development agreement with Rio Tinto and Rio Tinto Atlantic for the development and operation of the
Simandou Project in west Africa. Pursuant to the Joint Development Agreement, Chinalco guarantees to the joint venture the performance by us of all
our obligations under the Simandou joint development agreement. We, in consideration of Chinalco's guarantee, granted Chinalco a counter guarantee
by way of credit security and with a term of the counter guarantee contemporaneous with performance period of the joint development agreement.
Resolutions relating to the provision of counter guarantee for the guarantee provided by Chinalco in respect of the Simandou Project were approved by
our Board on October 25, 2011 and by the shareholders at the 2011 annual general meeting on May 31, 2011, respectively.
Loans
We provided several entrusted loans to our related parties mainly for the purpose of supplementing working capital during the period from January 1,
2012 to March 31, 2013. The outstanding balance of such entrusted loans was RMB500 million as of March 31, 2013 and the largest amount outstanding
of the entrusted loans during the period from January 1, 2012 to March 31, 2013 was RMB700 million. The interest rates on such entrusted loans range
from 5.04% to 10%.
Our related party also provided several loans to us mainly for the purpose of supplementing working capital during the period from January 1, 2012 to
March 31, 2013. The outstanding balance of such loans was RMB950 million as of March 31, 2013 and the largest amount outstanding of the loans
during the period from January 1, 2012 to March 31, 2013 was RMB1,350 million. The interest rates on such loans range from 5.1% to 6%.
ITEM 8.
FINANCIAL INFORMATION
A.
CONSOLIDATED FINANCIAL STATEMENTS
We have appended our consolidated financial statements filed as part of this annual report on Form 20-F.
Legal Proceedings
We are not currently a party to any pending legal proceedings which are expected to have a significant effect on our financial position or results of
operations, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position or results of
operations. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
Dividend Policy
Our Board declares dividends, if any, in Renminbi with respect to H Shares on a per share basis and pays such dividends in HK dollars. Any final
dividend for a fiscal year is subject to shareholders' approval. The Bank of New York Mellon, as depositary, converts the HK dollar dividend payments
and distributes them to holders of ADSs in U.S. dollars, less expenses of conversion. Under the Company Law of the PRC and our Articles of
Association, all of our shareholders have equal rights to dividends and distributions. The holders of the H Shares share proportionately on a per share
basis in all dividends and other distributions declared by our Board.
We believe that our dividend policy strikes a balance between two important goals providing our shareholders with a competitive return on investment
and assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives. The declaration of dividends is subject to the discretion of
our Board, which takes into account the following factors:
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*
*
*
*
*
*
*
our financial results;
capital requirements;
contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us;
our shareholders' interests;
the effect on our creditworthiness;
general business conditions; and
other factors our Board may deem relevant.
Pursuant to PRC laws and regulations, dividends may only be distributed after allowance has been made for: (1) recovery of losses, if any and (2)
allocations to the statutory surplus reserve. The allocations to the statutory surplus reserve is 10% of our net profit determined in accordance with PRC
Generally Accepted Accounting Principles. Our distributable profits for the current fiscal year will be equal to our net profits determined in accordance
with IFRS, less allocations to the statutory surplus reserve. See "Item 10. Additional Information - E. Taxation" for a discussion of the tax consequences
of receipt of dividends.
B.
SIGNIFICANT CHANGES
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial
statements which is included in this annual report.
ITEM 9.
THE OFFER AND LISTING
The Shanghai Stock Exchange is the principal trading market for our A Shares, and the Hong Kong Stock Exchange is the principal trading market for
our H Shares. The ADSs have been issued by the Bank of New York Mellon, acting as depositary bank, and are listed on the New York Stock Exchange
under the symbol "ACH" with each ADS representing 25 H Shares.
The following table sets forth, for the periods indicated, the reported high and low closing prices for our shares on the New York Stock Exchange, the
Hong Kong Stock Exchange and the Shanghai Stock Exchange:
NYSE
Hong Kong Stock Exchange
Shanghai Stock Exchange
Calendar Period
High
Low
High
Low
High
Low
(US$ per ADS)
(HK$ per H Share)
(RMB per A Share)
2008
2009
2010
2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
October
November
December
2013
First Quarter
January
February
March
April (through April 24, 2013)
52.49
32.79
34.27
25.88
25.88
24.89
22.05
15.29
13.88
13.88
12.75
11.14
11.91
11.74
11.27
11.91
13.29
13.29
12.17
10.68
9.92
7.22
9.91
18.03
10.34
22.71
19.70
10.41
10.34
9.22
10.77
9.84
9.22
10.05
10.05
10.29
10.39
9.52
11.93
10.57
9.52
8.95
16.50
10.36
10.66
7.98
7.98
7.80
6.83
4.90
4.45
4.45
3.93
3.47
3.67
3.67
3.54
3.63
4.21
4.21
3.76
3.35
3.12
1.90
3.15
5.66
3.20
7.00
6.22
3.35
3.20
2.86
3.22
3.04
2.86
3.12
3.12
3.21
3.21
2.95
3.55
3.26
2.95
2.77
44.74
20.83
15.78
12.36
12.20
12.36
11.33
8.71
7.89
7.67
7.89
6.35
5.38
5.20
5.20
5.38
5.37
5.32
5.37
4.90
4.47
5.90
6.15
8.42
6.23
9.63
9.72
8.08
6.23
4.55
6.11
6.16
4.72
4.55
4.76
4.55
4.55
4.11
5.04
4.80
4.11
4.02
Note:
Effective October 2006, our ADS ratio was changed from one ADS representing 100 H Shares to one ADS representing 25 H Shares.
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ITEM 10.
ADDITIONAL INFORMATION
A.
SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
A copy of the English translation of our Articles of Association was filed with the SEC as an exhibit to the registration statement on Form F-1
(Registration No. 333-14068) under the Securities Act in connection with a global offering of our H Shares and American depositary shares on
December 5, 2001. We filed a copy of the English translation of our Articles of Association as of December 31, 2011 as an exhibit to our annual report
on Form 20-F/A filed on October 9, 2012. Since December 31, 2011, our Articles of Association underwent the following amendments:
*
*
Our Articles of Association were amended and approved at the annual general shareholders' meeting held on June 29, 2012 to adopt the "Rules of
Procedures for the Board of Directors of Aluminum Corporation of China Limited" and "Rules of Procedures for the Supervisory Committee of
Aluminum Corporation of China Limited" as Appendix to our Articles of Association.
Our Articles of Association were amended and approved at the extraordinary general shareholders' meeting held on October 12, 2012 to revise our
profit distribution policies. The revised Articles 189, 194 and 195 and the newly added Articles 196 and 197 read:
*
Article 189
"The basic principles of profit distribution policy of the Company are as follows:
(1)
taking full account of return to investors and distributing dividend to Shareholders per annum in proportion to the distributable
dividend realized for the year concerned;
(2) maintaining the continuity and stability of the Company's dividend distribution policy, while at the same time take care of the interest
of the Company in the long term, the interest of the Shareholders as a whole, as well as the sustainable development of the Company;
(3)
giving priority to dividend distribution in cash."
*
Article 194
"Dividend distribution policies of the Company are to be specified as follows:
(1)
(2)
dividend shall be distributed in the following manner: the Company may distribute dividends in cash, in shares or in a combination of
both cash and shares. Subject to conditions, interim profit distribution may be made by the Company;
specific circumstances for and proportions of cash dividend of the Company: save in exceptional circumstances, if the Company's
profit for the year and its cumulative undistributed profit are positive, the Company may distribute dividend in cash and the profit to
be distributed in cash per annum will not be less than 10% of the distributable profit realized for that year, or that the total profit to be
distributed in cash in the past three years will not be less than 30% of the average annual distributable profit realized in the past three
years;
The exceptional circumstances refer to the following:
i.
where the auditing firm issues a non-standard unqualified audit report on the financial report of the Company for the year; and
ii.
where the Company has major investment plan or significant cash expenditure (fund raising projects excepted).
(3) Conditions for distributing dividends in shares by the Company:
where the Company's business is in a sound condition, and the Board considers that the stock price of the Company does not reflect
its share capital size and distributing dividend in shares will be favourable to all Shareholders of the Company as a whole, provided
that the above conditions of cash dividend are fully met, the Company may propose dividend distribution in shares;
92
(4) Upon occurrence of any illegal appropriation of the Company's funds by Shareholders, the Company shall deduct the cash bonus to
be paid to such Shareholders to make up for the funds appropriated by such Shareholders."
*
Article 195
"Procedures for considering the profit distribution plan of the Company:
(1) The profit distribution plan of the Company shall be drawn up by the management before being submitted to the Board and the
supervisory committee of the Company for consideration. The Board shall thoroughly discuss the rationality of the profit distribution
plan and form a specific resolution before submitting it to the general meeting for consideration. In considering the profit distribution
plan, the Company shall make Internet voting accessible to Shareholders.
(2) Where the Company does not distribute cash dividend by reason of the exceptional circumstances in Article 194 above, the Board
shall explain the specific reasons for not distributing cash dividends, the exact purpose for the retained profit and the estimated
investment return, and upon the independent Directors having expressed their opinions thereon, submit such proposal to the general
meeting for consideration, and disclose the same in the media designated by the Company."
*
Article 196
"Implementation of the profit distribution plan of the Company:
After the profit distribution plan has been resolved at a general meeting, the Board shall complete dividend (or share) distribution within
two months after the holding of such meeting."
*
Article 197
"Alteration of the Company's profit distribution policy:
In case of force majeure events such as war, natural disasters, or changes to the Company's external operational environment resulting in
material impact on its production and operation, or relatively significant changes to the Company's operational position, the Company may
adjust its profit distribution policy.
The Board shall conduct specific discussion over adjustment to the Company's profit distribution policy, provide detailed reasons for such
adjustment, form a written report to be considered by independent Directors, and then submit to the general meeting for approval by way of
a special resolution. In considering alterations to the profit distribution policy, the Company shall make Internet voting accessible to
Shareholders."
See Exhibit 1.1 for the full text of our Articles of Association.
The following are summaries of material provisions of our Articles of Association insofar as they relate to the material terms of our shares.
Our objects and purposes
Our Articles of Association as amended from time to time are filed with the Hong Kong Companies Registrar. Our business scope can be found in
Article 13 of our Articles of Association, as amended at the shareholders' general meeting held on February 28, 2011.
Directors' power to vote on matters in which he or she has an interest
Under Article 169, a director shall not vote in any resolution of the board of directors for approving any contract, transaction or arrangement in which
such director or any of his associates (as defined in the applicable rules governing the listing of securities amended from time to time) is materially
interested, and shall not be either counted into the quorum of the meeting. Unless the interested director has disclosed his or her interest to the board of
directors in accordance with the Article 169 and the contract, transaction or arrangement has been approved by the board of directors at a meeting in
which the interested director is not counted in the quorum and has refrained from voting, a contract, transaction or arrangement in which such director is
materially interested is voidable at the instance of our Company except as against a bona fide party thereto acting without notice of the breach of duty by
such director.
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Borrowing powers
Subject to compliance with applicable laws and regulations of the PRC, we have the power to raise and borrow money which power includes (without
limitation) the issuance of debentures and the charging or mortgaging of part or whole of our business or properties and other rights permitted. The
Articles of Association do not contain any specific provision in respect of the manner in which borrowing powers may be exercised by the directors nor
do they contain any specific provision in respect of the manner in which such powers may be varied, other than (a) provisions which give the directors
the power to formulate proposals for the issuance of debentures by us; (b) Article 86(2) provides that the issuance of bond must be approved by the
shareholders in a general meeting by way of a special resolution; and (c) Article 108(4) provides that the directors have the power to formulate our
annual final financial budgets and final accounts which shall be passed by over half of the directors.
Age limit for retirement
There is no provision pertaining to the retirement of directors pursuant to an age limit requirement in our Articles of Association.
Directors' qualifying shares
Under Article 103, the directors are not required to hold any qualifying shares.
Dividend rights
Article 54(1) provides that holders of our common shares have the right to receive dividends and distribution of profits in other forms, in proportion to
the number of shares held. Under Article 48, when we convoke a general shareholders' meeting, allocate dividends, liquidates or perform other activities
that require the verification of equity rights, the Board or the general meeting convener must specify a date as the equity rights determination date. The
shareholders registered in the shareholder roster after closing as at the equity rights determination date are the Company's shareholders entitled to
appropriate rights and interests.
Voting rights
Article 54(2) provides that holders of our ordinary shares have the right to lawfully request, convene, chair, attend in person or appoint a proxy to attend
and vote at general meetings of shareholders in respect of the number of shares held.
Rights to share profits
Article 60(7) provides that a plan for profit distribution and a plan for making up for losses formulated by the Board in accordance with Article 108(6)
must be approved by way of the shareholders' general meeting.
Rights to share surplus in the event of liquidation
Article 54(6) provides that the shareholders have the right to participate in the distribution of our surplus assets in proportion to the number of shares
held in the event of the termination or liquidation of us.
Redemption provisions; sinking fund provisions and liability to further capital calls
Article 29 provides that we may repurchase issued shares in accordance with the procedures provided in the Articles of Association and with the
approvals from the relevant governing authorities of PRC under the following circumstances: (1) cancellation of shares for the purpose of reducing our
capital; (2) amalgamation with other company which owns our shares; (3) granting bonus shares to our employees; (4) shareholders disagreeing with our
general meeting's resolution on merger or division and requiring us to acquire the shares in their possession; (5) other purposes permitted by law and
administrative regulations.
No securities issued by us are redeemable, entitled to a sinking fund or subject to liability for further capital calls.
Actions necessary to change the rights of holders of our shares or holders of a class of shares
Under Article 86(5), revision of any rights of class shareholders, e.g., rights to dividends, share profits or surplus in the event of liquidation or voting
rights, requires a special resolution of the shareholders' general meeting. Under Article 79, a special resolution must be passed by votes representing
more than two- thirds of the voting rights represented by the shareholders (including proxies) present at the meeting.
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The rights attached to any class of shares may be varied or abrogated only with the sanction of a special resolution passed at the shareholders' general
meeting and by holders of shares of the affected class passed at a separate general meeting of the class convened in accordance with the Article 97 to
Article 101 respectively. The circumstances which are deemed to be a variation or abrogation of the class rights are set forth under Article 96. Except for
the circumstances under Article 88 (1), (9) and (10), shareholders of the affected class, whether or not otherwise having the right to vote at shareholders'
general meetings, have the right to vote at class meetings but Interested Shareholders (as defined under Article 97) are not entitled to vote at class
meetings.
Resolutions of a class meeting shall be passed by two-thirds or more of the shares with voting rights held by the class shareholders who, according to
Article 97, are entitled to vote at that class meeting. Written notice must be given to all shareholders who are registered as holders of that class in the
register of shareholders 45 days before the date of the class meeting. Such notice must contain the matters to be considered at such meeting, the date and
the place of meeting. Those shareholders of the class who intend to attend send the written reply to us 20 days before the class meeting.
The proceedings of a class meetings shall be conducted as nearly as possible as that of a shareholders' general meetings. The provisions in the Articles of
Association relating to the proceedings of shareholders' general meetings shall apply to class meetings.
The special procedures for approval by a class of shareholders do not apply where we issue, upon the approval by special resolution of shareholders in
general meeting, either separately or concurrently once every 12 months, not more than 20% of each of our existing issued Domestic-Invested Shares
and Overseas- Listed Foreign-Invested Shares (as defined under Article 18).
Provisions discriminating against any existing or prospective shareholder as a result of owning a substantial number of shares
Chinalco, as our controlling shareholder, shall not exercise its voting rights in a manner prejudicial to the interest of all or some part of the shareholders
when making decision on the following matters:
*
*
to relieve a director or supervisor of his duty to act honestly in our best interest;
to approve the expropriation by a director or supervisor (for his own benefit or for the benefit of another), our assets, in any manner, including but
not limited to an opportunity beneficial to us; or
*
to approve the expropriation by a director or supervisor (for his own benefit or for the benefit of another ) the individual rights of other
shareholders, including but not limited to rights to distributions and voting rights save and except our restructuring, submitted for approval by the
shareholders in general meeting in accordance with the Articles of Association.
Conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are convoked
Shareholders' general meetings can be held as annual general meetings or extraordinary general meetings. Annual general meetings are held once a year
within six months after the end of the preceding fiscal year.
The Board is required to convene an extraordinary general meeting within two months of the occurrence of any of the following circumstances:
(1)
the number of directors falls below the number required by the PRC Company Law or two-thirds of the number required by the Articles of
Association;
(2)
our unrecovered losses amount to one-third of the total amount of its paid-in-capital;
(3)
upon the request of shareholder(s) holding 10 percent or more of our shares for more than ninety consecutive days (the number of shares held shall
be the figures as of the date of the written request from shareholder); and
(4) whenever the Board deems necessary or the supervisory committee proposes to convene the same.
We shall, within 45 days (inclusive of date of meeting) before the date of meeting, send written notices of the shareholders' general meeting and inform
all registered shareholders of the matters to be considered at the meeting and the date and venue of the meeting. Those shareholders who intend to attend
the meeting shall send the written reply to the Company 20 days before the meeting.
95
Motions put forward at the general meeting shall be specific and shall relate to the matters to be considered at a shareholders' general meeting. Motion
raised at a general meeting shall satisfy the following requirements:
(1)
be free of conflicts with the provision of laws, administrative regulations and Articles of Association, and fall within our business scope and the
terms of the reference of the shareholders' general meeting;
(2)
have definite topics to discuss and specific matters to resolve; and
(3)
be submitted in writing or served to the convener.
Limitations on the rights to own securities
Under Article 18, the shares issued to domestic investors and denominated in Renminbi are Domestic-Invested Shares whereas the shares issued to
overseas investors and denominated in foreign currency are Foreign-Invested Shares. Under Article 17, our Domestic-Invested Shares can be held only
by PRC shareholders and our Foreign-Invested Shares, such as H Shares and ADSs can be held only by foreign shareholders and other shareholders
from regions of Hong Kong, Macau and Taiwan.
Provisions having an effect of delaying, deferring or preventing a change in control
Under Article 111, decisions in respect of market development, merger and acquisition, and investment in a new field, where the consideration to be
paid or the assets to be acquired exceed 10% of our total assets, the Board is required to engage relevant professional consultants to provide professional
opinions, which shall serve as the key reference for the decision of the Board concerning such investment, merger or acquisition.
Under Article 86(3), division, merger, dissolution and liquidation of us and material acquisitions and disposals by us must be approved by a special
resolution at a shareholders' general meeting.
There are no provisions under the Articles of Association pertaining to the ownership threshold above which shareholder ownership must be disclosed.
Conditions governing changes in registered capital
Under Article 108(7), any proposal for the increase or decrease of our registered capital must be formulated by the Board. Article 86(1) further provides
that any increase or reduction in share capital requires adoption of a special resolution at a shareholders' general meeting.
C. MATERIAL CONTRACTS
For the two years immediately preceding the date of this annual report, we have not entered into any additional material contracts other than in the
ordinary course of business and other than those described in "Item 4. Information on the Company - History and Development of the Company" and
"Item 7. - Major Shareholders and Related Party Transactions - B. Related Party Transactions."
D.
EXCHANGE CONTROLS
The existing foreign exchange regulations have significantly reduced government foreign exchange controls for transactions under the current account,
including trade and service related foreign exchange transactions and payment of dividends. We may undertake current account foreign exchange
transactions without prior approval from the State Administration of Foreign Exchange by producing commercial documents evidencing such
transactions, provided that they are processed through Chinese banks licensed to engage in foreign exchange transactions. The PRC government has
stated publicly that it intends to make the Renminbi freely convertible in the future. However, we cannot predict whether the PRC government will
continue its existing foreign exchange policy and when the PRC government will allow free conversion of Renminbi to foreign currency.
Foreign exchange transactions under the capital account, including principal payments in respect of foreign currency-denominated obligations, continue
to be subject to significant foreign exchange controls and require the approval of the State Administration of Foreign Exchange. These limitations could
affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures.
Since 1994, the conversion of Renminbi into HK and U.S. dollars has been based on rates set by the People's Bank of China, which are set daily based
on the previous day's PRC interbank foreign exchange market rate and current exchange rates on the world financial markets. From 1994 to July 20,
2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On July 21, 2005, the PRC government introduced a
managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and
by reference to a basket of currencies. Since then, the PRC government has made, and may in the future make, further adjustments to the exchange rate
system. In April 2012, the PRC government took a milestone step in turning the Renminbi into a global currency by doubling the size of its trading band
against the U.S. dollar, pushing through a crucial reform that further liberalizes its financial markets. The PBOC allows the Renminbi to rise or fall 1%
from a mid-point every day, effective April 16, 2012, compared with its previous 0.5% limit. The People's Bank of China announces the closing price of
a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and
makes it the central parity for the trading against the Renminbi on the following working day. Fluctuations in exchange rates may adversely affect the
value, translated or converted into U.S. dollars or HK dollars, of our net assets, earnings and any declared dividends. We cannot give any assurance that
any future movements in the exchange rate of the Renminbi against the U.S. dollar and other foreign currencies will not adversely affect our results of
operations and financial condition.
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E.
TAXATION
PRC Taxation
The following summary of the material PRC and United States federal income tax provisions relating to the ownership and disposition of H Shares or
ADSs held by the investor as capital assets is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of
which are subject to change, and does not constitute legal or tax advice. This summary does not deal with all possible tax consequences relating to an
investment in our common shares, such as the tax consequences under state, local and other tax laws.
Dividends Paid to Individual Investors
According to the PRC Individual Income Tax Law, as amended, dividends paid by Chinese companies to a domestic individual are ordinarily subject to
a PRC withholding tax levied at a flat rate of 20%. For a foreign individual who is not a resident of China, the receipt of dividends from a company in
China is normally subject to a withholding tax of 20% unless specifically exempted by the tax authority of the State Council of China or reduced by an
applicable tax treaty. The PRC State Administration of Taxation issued the Notice on the Issues Concerning the Collection and Administration of
Individual Income Tax Following the Repeal of Circular 45, under which Hong Kong residents will generally be subject to a dividend withholding tax of
10% pursuant to the arrangement for the avoidance of double taxation signed between the PRC and Hong Kong.
Dividends Paid to Non-PRC Enterprises
According to the Enterprise Income Tax Law and its implementation rules, which became effective on January 1, 2008, dividends derived from the
revenues accumulated from January 1, 2008 and are paid by Chinese companies to non-resident enterprises, which are established under the laws of non-
PRC jurisdictions and have no establishment or residence in China or whose dividends from China do not relate to their establishment or residence in
China, are ordinarily subject to a Chinese withholding tax levied at a flat rate of 10% unless exempted or reduced pursuant to an applicable double-
taxation treaty or other exemptions. Dividends paid by PRC companies to resident enterprises, including enterprises established under the laws of non-
PRC jurisdictions but whose "de facto management body" is located in the PRC, are not subject to any PRC withholding tax, unless the dividends are
derived from the publicly traded shares which have been held continuously by the resident enterprises for less than twelve months. Before the
effectiveness of the Enterprise Income Tax Law and its implementation rules, a foreign enterprise with no permanent establishment in China receiving
dividends paid with respect to a Chinese company's Overseas Shares was temporarily not subject to the 10% withholding tax according to the Tax
Notice. This exemption has been abolished by the Enterprise Income Tax Law and its implementation rules. However, the withholding tax rate could be
reduced under an applicable double-taxation treaty.
Tax Treaties
Non-PRC shareholders who are residents or citizens of a country that has entered into a double-taxation treaty with China may be entitled to a reduction
in the amount of tax withheld, if any, imposed on the payment of dividends. China currently has such treaties with a number of countries, including:
*
*
*
*
*
*
*
*
*
*
the United States;
Australia;
Canada;
France;
Germany;
Japan;
Malaysia;
Singapore;
the United Kingdom; and
the Netherlands.
97
Under each one of such treaties, the rate of withholding tax imposed by China's taxation authorities is generally reduced. For example, under the double
taxation treaty between China and the United States, China may tax dividends paid by us to an eligible U.S. holder up to a maximum of 10% of the gross
amount received by such person. Under the treaty, an eligible U.S. holder is a person who, by reason of domicile, residence, place or head office, place
of incorporation or any other criterion of similar nature is subject to taxation in the United States, as applicable under the treaty's "treaty shopping
provisions".
Capital Gains
According to the Enterprise Income Tax Law and its implementation rules, which became effective on January 1, 2008, capital gains realized by foreign
enterprises, which are established under the laws of non-PRC jurisdictions and have no establishment or residence in China or whose capital gains from
China do not relate to their establishment or residence in China, are ordinarily subject to capital gains tax at the rate of 10%. The capital gains realized
by resident enterprises, including enterprises established under the laws of non-PRC jurisdictions but whose "de facto management body" is located in
the PRC, upon the sales of overseas-listed shares are subject to the PRC enterprise income tax. Before the effectiveness of the Enterprise Income Tax
Law, gains realized by foreign enterprises that are holders of Overseas Shares of a PRC company excluding the shares held through their PRC domestic
establishment or residences were, temporarily, exempted from the withholding tax according to the Tax Notice. However, the effectiveness of such
exemption granted by the Tax Notice becomes uncertain in light of the provisions under the Enterprise Income Tax Law and its implementation rules.
With respect to individual holders of H Shares, the Provisions for Implementation of Individual Income Tax Law of China, as amended, or the
Provisions, stipulated that income tax on gains realized on the sale of equity shares shall be regulated in separate rules to be drafted by the Ministry of
Finance. However, no income tax on gains realized on the sale of equity shares has been collected. Gains on the sale of shares by individuals were
temporarily exempted from individual income tax pursuant to notices issued jointly by the Ministry of Finance and the PRC State Administration of
Taxation dated March 30, 1998. According to the Tax Notice, individual holders of Overseas Shares, such as H Shares, are temporarily not subject to
capital gains tax.
Additional China Tax Considerations
Under the Provisional Regulations of the PRC Concerning the Stamp Duty, a stamp duty is not imposed by China on the transfer of shares, such as the H
Shares or ADSs, of Chinese publicly traded companies that take place outside of China.
United States Federal Income Taxation
Each potential investor is strongly urged to consult its own tax advisor to determine the particular United States federal, state, local, treaty and foreign
tax consequences of acquiring, owning or disposing of the H Shares or ADSs.
The following summary describes the principal United States federal income tax consequences of purchasing, owning and disposing of the H Shares or
ADSs. This summary only applies to U.S. holders, as defined below, who hold the H Shares or ADSs as capital assets within the meaning of Section
1221 of the Internal Revenue Codeof 1986 as amended (the "Code"). This discussion does not address all of the tax consequences relating to the
purchase, ownership and disposition of the HShares or ADSs, and does not take into account U.S. holders who may be subject to special rules including:
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*
*
*
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financial institutions;
insurance companies;
tax-exempt organizations;
real estate investment trusts;
regulated investment companies;
grantor trusts;;
persons that have a functional currency other than the U.S. dollar;
persons that will own H Shares or ADSs through partnerships or other pass-through entities;
persons who own 10% or more, by vote, of our equity for U.S. federal income tax purposes;
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dealer or traders in securities or currencies;
certain former citizens or long-term residents of the United States;
persons that will hold the H Shares or ADSs as a position in a "straddle" or as part of a "hedging", or "conversion" or other risk reduction
transaction for U.S. federal income tax purposes;
persons who receive the H Shares or ADSs as compensation for services;
"dual resident" corporations;
persons that generally mark their securities to market for United States federal income tax purposes; or
persons who are residents of the People's Republic of China or who are subject to Hong Kong profits tax.
Moreover, this description does not address United States federal estate, gift or alternative minimum taxes or any state or local tax consequences of the
acquisition, ownership and disposition of the H Shares or ADSs. Each U.S. holder should consult its tax advisor with respect to the U.S. federal, state,
local and foreign tax consequences of acquiring, owning and disposing of H Shares or ADSs.
This discussion is based on the Code, its legislative history, final, temporary and proposed United States Treasury regulations promulgated thereunder,
published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with
retroactive effect. In addition, this discussion is based in part upon representations of the depositary and the assumption that each obligation in the
deposit agreement and any related agreements will be performed according to its terms.
You are a "U.S. holder" if you are a beneficial owner of H Shares or ADSs and, for U.S. federal income tax purposes are:
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*
an individual citizen or resident of the United States;
a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the
UnitedStates or any political subdivision thereof;
an entity created or organized in or under the laws of any other jurisdiction if treated as a domestic corporation pursuant to U.S. federal income tax
laws;
an estate the income of which is subject to United States federal income tax without regard to its source; or
a trust:
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*
*
subject to the primary supervision of a United States court and the control of one or more United States persons; or
that has validly elected to be treated as a United States person under applicable United States Treasury Regulations; or
a trust in existence on August 20, 1996, and treated as a domestic trust (as defined in applicable Treasury Regulations) prior to such date,
and that has elected to continue to be treated as a domestic trust.
If a partnership (including any entity treated as a partnership for United States federal tax purposes) holds H Shares or ADSs, the tax treatment of the
partnership and a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If an investor is a
partnerin a partnership that holds H Shares or ADSs, such investor should consult its tax advisor.
In general, if you hold ADRs evidencing H Shares, you will be treated as the owner of the H Shares represented by the ADSs. Exchanges of H Shares
for ADRs, and ADRs for H Shares, generally will not be subject to United States federal income tax.
INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS APPLICABLE TO
THEM RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE H SHARES OR ADSs, INCLUDING THE
APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX LAWS OR NON-U.S. TAX LAWS, ANY CHANGES IN APPLICABLE
TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
Distributions on the H Shares or ADSs
Subject to the discussions below under "- Passive Foreign Investment Company", the gross amount of any distribution (without reduction for any PRC
tax withheld) we make on the H Shares or ADSs will be includible in income as dividend income when the distribution is actually or constructively
received by you. Because we do not calculate earnings and profits in accordance with U.S. tax principles, all distributions by us to U.S. holders will
generally be treated as dividends. Any dividend will not be eligible for the dividends- received deduction allowed to certain United States corporations
in respect of dividends received from United States corporations. The amount of any distribution of property other than cash will be the fair market value
of such property on the date of such distribution.
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The U.S. dollar amount of dividends received by an individual, trust or estate will be subject to taxation at a maximum rate of 20% if the dividends are
"qualified dividends." Dividends paid on H Shares or ADSs will be treated as qualified dividends if (a) certain holding period requirements are satisfied,
(b) either (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service, or IRS, has
approved for the purposes of the qualified dividend rules, or (ii) the dividends are with respect to ADSs readily tradable on a U.S. securities market, and
(c) provided that we are not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive
foreign investment company, or PFIC. The Agreement Between the Government of the United States of America and the Government of the People's
Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income PFIC rules (the "Treaty")
has been approved for the purposes of the qualified dividend rules. We are considered a qualified foreign corporation with respect to the ADSs because
our ADSs are listed on the New York Stock Exchange. Finally, based on our audited financial statements and relevant market data, we believe that we
did not satisfy the definition for PFIC status for U.S. federal income tax purposes with respect to our 2012 taxable year. In addition, based on our audited
financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market
data, we do not anticipate becoming a PFIC for our 2013 taxable year or any future year. However, our status in the current year and future years will
depend on our income and assets (which for this purpose depends in part on the market value of the H Shares or ADSs) in those years. See the
discussion below under "- Passive Foreign Investment Company." Relevant U.S. holders should consult their tax advisors regarding whether such
dividends will qualify for the reduced rates provided by the "qualified dividend" rules.
If we make a distribution paid in HK dollars, you will be considered to receive the U.S. dollar value of the distribution determined at the spot HK
dollar/U.S. dollar rate on the date such distribution is received actually or constructively by you, regardless of whether you convert the distribution into
U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your
income to the date you convert the distribution into U.S. dollars will be treated as ordinary income or loss from U.S. sources.
Dividends paid by us generally will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be
categorized as "passive income" or, in the case of certain U.S. holders as "general category income" for U.S. foreign tax credit purposes. We may be
required to withhold PRC income tax on dividends paid to U.S. holders on the H Shares or ADSs. Subject to various limitations, any PRC tax withheld
from distributions in accordance with the Treaty will be deductible or creditable against your United States federal income tax liability.
You may not be able to claim a foreign tax credit (and instead may qualify to claim a deduction) for non-United States taxes imposed on dividends paid
on the H Shares or ADSs if you (i) have held the H Shares or ADSs for less than a specified minimum period during which you are not protected from
risk of loss with respect to such shares, or (ii) are obligated to make payments related to the dividends (for example, pursuant to a short sale). The rules
relating to the U.S. foreign tax credit are complex. U.S. holders should consult their own tax advisors regarding the effect of these rules in their
particular circumstance.
Sale, Exchange or Other Disposition
Subject to the discussions below under "- Passive Foreign Investment Company", upon a sale, exchange or other disposition of the H Shares or ADSs,
you will generally recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the U.S.
dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H Shares or ADSs. The rules relating to the U.S. foreign tax
credit are complex. U.S. holders should consult their own tax advisors regarding the effect of these rules in their particular circumstance. Any gain or
loss will generally be United States source gain or loss for foreign tax credit limitation purposes and as a result of the U.S. foreign tax credit limitation,
foreign taxes, if any, imposed upon capital gains in respect of H Shares or ADSs may not be currently creditable. Under that Treaty, if any PRC tax was
to be imposed on any gain from the disposition of H Shares or ADSs, the gain may be treated as PRC-source income. U.S. holders are urged to consult
their tax advisors regarding the tax consequences if a foreign withholding tax is imposed on a disposition of H Shares or ADSs, including the availability
of the foreign tax credit under their particular circumstances.
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If you are paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period from the date of
the payment resulting from sale, exchange or other disposition is made to the date you convert the payment into U.S. dollars will be treated as United
States source ordinary income or loss.
Passive Foreign Investment Company
A non-U.S. corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of
subsidiaries:
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75% or more of its gross income consists of passive income, such as dividends, interest, rents, royalties, and gains from the sale of assets that give
rise to such income; or
50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income.
Passive income does not include rents and royalties derived from the active conduct of a trade or business. If the stock of a non-U.S. corporation is
publicly traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation's assets.
If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate
share of the other corporation's assets and receiving our proportionate share of the other corporation's income for purposes of the PFIC income and asset
tests.
Based on the composition of our assets and income and the current expectations regarding the price of the H Shares and ADSs, we believe that we
should not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2013 taxable year and we do not intend or anticipate becoming a
PFIC for any future taxable year. However, the determination of PFIC status is a factual determination that must be made annually at the close of each
taxable year and therefore, there can be no certainty as to our status in this regard until the close of the current or any future taxable year. Changes in the
nature of our income or assets or a decrease in the trading price of the H Shares or ADSs may cause us to be considered a PFIC in the current or any
subsequent year. If we were a PFIC in any year during a U.S. holder's holding period for the H Shares or ADSs, we would ordinarily continue to be
treated as a PFIC for each subsequent year during which the U.S. holder owned the H Shares or ADSs.
If we were a PFIC in any taxable year that you held the H Shares or ADSs, you generally would be subject to special rule" with respect to "excess
distributions" made by us on the H Shares or ADSs and with respect to gain from your disposition of the H Shares or ADSs. An "excess distribution"
generally is defined as the excess of the distributions you receive with respect to the H Shares or ADSs in any taxable year over 125% of the average
annual distributions you have received from us during the shorter of the three preceding years, or your holding period for the H Shares or ADSs.
Generally, you would be required to allocate any excess distribution or gain from the disposition of the H Shares or ADSs ratably over your holding
period for the H Shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in
which we became a PFIC, would be taxed at the highest United States federal income tax rate on ordinary income in effect for such taxable year, and
you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular
taxable years. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years
prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition
and taxed as ordinary income.
These adverse tax consequences may be mitigated if the U.S. holder is eligible to and does elect to annually mark-to-market the H Shares or ADSs. If a
U.S. holder makes a mark-to-market election, such holder will generally include as ordinary income the excess, if any, of the fair market value of the H
Shares or ADSs at the end of each taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the
adjusted basis of the H Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously
included in income as a result of the mark-to-market election). Any gain recognized on the sale or other disposition of the H Shares or ADSs will be
treated as ordinary income. The mark-to-market election is available only for "marketable stock," which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable Treasury regulations.
The H Shares or ADSs may qualify as "marketable stock" because the ADSs are listed on the New York Stock Exchange.
A U.S. holder's adjusted tax basis in the H Shares or ADSs will be increased by the amount of any income inclusion and decreased by the amount of any
deductions under the mark-to-market rules. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the H Shares or ADSs are no longer regularly traded on a qualified exchange or the IRS
consents to the revocation of the election. U.S. holders are urged to consult their tax advisors about the availability of the mark-to-market election, and
whether making the election would be advisable in their particular circumstances.
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Alternatively, a timely election to treat us as a qualified electing fund could be made to avoid the foregoing rules with respect to excess distributions and
dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy the record keeping requirements that would permit
you to make a qualified electing fund election.
If you own the H Shares or ADSs during any year that we are a PFIC, you must file IRS Form 8621. The reduced tax rate for dividend income, as
discussed above under "- Distributions on the H Shares or ADSs," is not applicable to a dividend paid by us if we are a PFIC for either the taxable year
in which the dividend is paid or the preceding year. We encourage you to consult your own tax advisor concerning the United States federal income tax
consequences of holding the H Shares or ADSs that would arise if we were considered a PFIC.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in respect of the H Shares or ADSs or the proceeds of the sale, exchange, or
redemption of the H Shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt
recipients, including corporations. In addition, you may, under some circumstances, be subject to "backup withholding" with respect to dividends paid
on the H Shares or ADSs or the proceeds of any sale, exchange or transfer of the H Shares or ADSs, unless you
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are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or
provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from
backup withholding and otherwise comply with applicable requirements of the backup withholding rules.
Any amount withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided
that you furnish the required information to the IRS in a timely manner.
For taxable years beginning after March 18, 2010, legislation requires certain U.S. holders to report information relating to stock of a non- U.S. person
owned by the U.S. holder, subject to certain exceptions (including an exception for stock held in custodial accounts maintained by a U.S. financial
institution). U.S. holders are urged to consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of the H
Shares or ADSs.
3.8% Medicare Contribution Tax
For taxable years beginning after December 31, 2012, U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds
generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from
the sale or other taxable disposition of, the H Shares or ADSs, subject to certain limitations and exceptions. U.S. holders should consult their own tax
advisors regarding the effect, if any, of such tax on their ownership and disposition of our securities.
Hong Kong Taxation
The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H Shares or ADSs held by you.
Dividends
Under current Hong Kong Inland Revenue Department practice, no Hong Kong tax is payable by the recipient in respect of dividends paid by us.
Taxation of Capital Gains
Hong Kong profits tax is currently charged at the rate of 16.5% for corporations and at a maximum rate of 15% for individuals.
No Hong Kong tax is imposed on capital gains arising from the sale of property (such as H Shares) acquired and held as investment assets. However, if a
person carries on a business in Hong Kong that includes trading and dealing in securities, and derives trading gains from that or business from Hong
Kong sources, Hong Kong profits tax will be payable. Gains from sales of H Shares effected on the Hong Kong Stock Exchange are considered to be
from a Hong Kong source for this purpose. The source of gains from off exchange transactions is less clear and, generally, will depend on whether the
purchase and sale contracts were negotiated and, in substance, concluded. Tax exemption will apply for certain classes of taxpayers, including non-
residents who do not otherwise carry on business in Hong Kong, subject to compliance with various other requirements.
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The Hong Kong tax position with respect to gains from the disposal of ADSs is similar. However, no Hong Kong tax will apply on trading gains arising
from the sale of ADSs where the purchase and sale were effected on the NYSE.
Hong Kong Stamp Duty
Hong Kong stamp duty is payable by each of the seller and the purchaser for every sold note and every bought note created for every sale and purchase
of the H Shares. Stamp duty is charged at the total rate of 0.2% of the value of the H Shares transferred (the buyer and seller each paying half of such
stamp duty). In addition, a fixed duty of HK$5 is currently payable on an instrument of transfer of H Shares. If one of the parties to a sale is a non-
resident of Hong Kong and does not pay the required stamp duty, the stamp duty not paid will be assessed on the instrument of transfer (if any), and the
transferee will be liable for the full payment of such stamp duty.
If the withdrawal of H Shares when ADSs are surrendered or the issuance of ADSs when H Shares are deposited results in a change of beneficial
ownership in the H Shares under Hong Kong law, Hong Kong stamp duty at the rate described above for sale and purchase transaction will apply. The
issuance of ADSs for deposited H Shares issued directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp
duty liability. Holders of the ADSs are not liable for the Hong Kong stamp duty on transfers of ADSs outside of Hong Kong so long as the transfers do
not result in a change of beneficial interest in the H Shares under Hong Kong law.
H.
DOCUMENTS ON DISPLAY
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file
reports and other information with the SEC. Specifically, we are required to file an annual report under Form 20-F no later than four months after the
close of each of our fiscal years, which is December 31, for fiscal years ended after December 15, 2011. Copies of reports and other information, when
so filed, may be inspected without charge and may be obtained at prescribed rates at the SEC's public reference room located at 100 F Street, NE,
Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-
0330. The SEC also maintains a website at www.sec.gov that contains reports and other information regarding registrants that make electronic filings
with the SEC using its EDGAR filing system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the
furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders of ours are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various types of market risks, including credit risk relating to financial assets and changes in foreign exchange rates, interest rates and
the prices of alumina and primary aluminum, in the normal course of business.
We borrow short-term, medium-term and long-term funds, including variable rate debts, principally denominated in Renminbi. We hedge a limited
amount of our sales through the trade of futures contracts on the SHFE and LME. Our hedging activities are subject to policies approved by our senior
management. Substantially all of the financial instruments we hold are for purposes other than trading.
The following discussion, which contains "forward-looking statements" that involve risks and uncertainties, summarize our market-sensitive financial
instruments. Such discussions address markets risk only and do not present other risks, which we face in the normal course of business.
Credit Risk
Credit risk arises from bank balances, other receivables as well as credit exposures of customers, including outstanding receivables and committed
transactions. We also provide financial guarantees to certain subsidiaries. The carrying amounts of these receivables and amounts of financial guarantees
represent our maximum exposure to credit risk in relation to our financial assets and guarantees.
We maintain a significant majority of our bank balances and cash in several major state-owned banks in the PRC. The directors are of the opinion that
these assets are not exposed to significant credit risk.
With regard to receivables, the marketing department assesses the credit quality of the customers, taking into account their financial positions, past
experience and other factors. We perform periodic credit evaluations of our customers and believe that adequate provisions for impairment of
receivables have been made in the financial statements. Management does not expect any further losses from non-performance by these counterparties.
For the years ended December 31, 2011 and 2012, none of our customers individually accounted for more than 10% of our total revenue. Therefore, we
believe that we were not exposed to any significant concentration of credit risk as of December 31, 2011 and 2012.
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In 2011, we entered into an agreement with Shanxi Jiexiu to provide a three year entrusted loan to Shanxi Jiexiu totalling to RMB1,000 million with
annual interest rate of 10%. Pursuant to the agreement, the 51% equity interest of Shanxi Jiexiu held by Shanxi Province Jiexiu Luxin Coal Gas Co. Ltd,
was pledged as collateral for this entrusted loan. As of March 31, 2013, we provided RMB500 million in the form of entrusted loan to Shanxi Jiexiu. We
do not hold any other collateral as security for these receivables.
In June and July 2012, we entered into agreements with Shuicheng Panlong to provide short-term entrusted loans to Shuicheng Panlong totalling to
RMB70 million and RMB30 million, respectively. Pursuant to the agreements, the mining right for coal mines of Shuicheng Panlong is pledged as
collateral for the entrusted loans.
Foreign Exchange Rate Risk
We conduct our business primarily in Renminbi, which is our functional and reporting currency. We convert a portion of our Renminbi revenues into
other currencies to meet foreign currency obligations and to pay for imported equipment and materials.
Many foreign currency exchange transactions involving Renminbi, including foreign exchange transactions under our capital account, are subject to
foreign exchange controls and require the approval of the State Administration of Foreign Exchange. Actions taken by the PRC government could cause
future exchange rates to vary significantly from current or historical exchange rates. On July 21, 2005, the People's Bank of China announced a reform
of its exchange rate system. Under the reform, the RMB is no longer effectively linked to the U.S. dollar but instead is allowed to fluctuate within a
narrow and managed band against a basket of foreign currencies, according to market demand and supply conditions. In April 2012, the PRC
government took a milestone step in turning the Renminbi into a global currency by doubling the size of its trading band against the U.S. dollar, pushing
through a crucial reform that further liberalizes its financial markets. The People's Bank of China allows the Renminbi to rise or fall 1% from a mid-
point every day, effective on April 16, 2012, compared with its previous 0.5% limit. Any appreciation of the Renminbi will increase the prices of our
export sales denominated in foreign currencies and reduce the Renminbi equivalent value of our trade and notes receivable denominated in foreign
currencies, which may adversely affect our financial condition and results of operations. Our financial condition and operating performance may also be
affected by changes in the value of currencies other than Renminbi in which our earnings and obligations are denominated.
Our bank balances and cash on hand as of December 31, 2012 amounted to RMB9,063.6 million, including Renminbi balances and foreign currency
deposits of U.S. dollar, HK dollar, Euro, Australian dollar and Great Britain Pound, which translated into RMB185.8 million, RMB11.9 million,
RMB1.0 million, RMB5.0 million and RMB23,000, respectively. Most of our sales are domestic and as such we have a limited amount of foreign
currency denominated trade and notes receivable. As of December 31, 2012, we had foreign currency denominated loans with principal amount of
RMB40 million in Japanese Yen and RMB7,421 million in U.S. dollars.
As of December 31, 2012, if RMB had appreciated by 5% against US dollar with all other variables held constant, profit for the year would have been
approximately RMB205 million higher, mainly as a result of foreign exchange gains on translation of US dollar-denominated borrowings. Profit is more
sensitive to fluctuations in the exchange rate between RMB and US dollar in 2012 than 2010 and 2011, mainly due to the increase in US dollar-
denominated borrowings.
As the assets and liabilities denominated in foreign currencies other than US dollar are minimal relative to our total assets and liabilities, our directors
are of the opinion that we are not exposed to any significant foreign currency risk arising from such foreign currency denominated assets and liabilities
as of December 31, 2010, 2011 and 2012.
Interest Rate Risk
We are exposed to interest rate risk resulting from fluctuations in interest rates on our debts, primarily on our long-term debt obligations. Our debts
consist of fixed and variable rate debt obligations with original maturities ranging from one to ten years. We undertake debt obligations to support
general corporate purposes including capital expenditures and working capital needs. Upward fluctuations in interest rates increase the cost of new debts
and the interest cost of outstanding variable rate borrowings. We do not currently use any derivative instruments to modify the nature of our debts so as
to manage our interest rate risk. Instead, our treasury department closely monitors the market interest rates and maintains proper portfolio of variable rate
and fixed rate debts in order to reduce the exposure to any one form of interest rate risk.
As at December 31, 2012, if interest rates had been 100 basis points higher/lower with all other variables maintain constant, our net profit for the year
would have been RMB496 million lower/higher, mainly as a result of higher/lower interest expense on fixed rate borrowings.
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Our fair value interest rate risk 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 was relatively low, we are not exposed to any significant fair value interest rate risk for
our fixed interest rate borrowings held.
Commodity Price Risk
We are exposed to fluctuations in the prices of alumina, primary aluminum and aluminum fabrication products. We import a portion of our alumina
supply from suppliers outside China. Such purchases are made at market prices. In addition, all our sales of alumina, primary aluminum and aluminum
fabrication products are made at market prices. Therefore, fluctuations in the prices of alumina and primary aluminum have a significant effect on our
operating performances.
We use mainly futures contracts and option contracts traded on the Shanghai Futures Exchange and London Metal Exchange to hedge against
fluctuations in primary aluminum prices. We have policy in place which limits the total quantity of primary aluminum related to these futures and option
contracts to 30% of the our annual production or 50% of our committed purchase or sales for our trading business. As of December 31, 2012, the fair
value of outstanding future contracts amounting to RMB5.6 million and RMB12.7 million was recognized in financial assets and liabilities at fair value
through profit or loss respectively. As of December 31, 2012, there was no options contract outstanding.
The fair value of futures contracts are based on quoted market prices. As of December 31, 2011 and 2012, our position in futures contracts was as
follows:
As of December 31, 2011
As of December 31, 2012
Contract
Market
Unrealized
Contract
Market
Unrealized
Tonnes
value
value
gain/(loss)
Maturity
Tonnes
value
value
gain/(loss) Maturity
(RMB in thousands)
(RMB in thousands)
Futures Contracts:
Primary aluminum
-Short
-Long
Zinc
-Long
-Short
Copper
-Short
Lead
-Short
Liquidity risk
1,825
29,302
29,182
120
Jan 2012
13,110
200,086
198,662
1,424 Jan-Feb
2013
60,890
935,633
938,518
2,885
Jan-Jun
2012
81,235
1,221,845
1,213,709
(8,136) Jan-May
2013
3,900
58,284
57,528
(756)
Mar-Apr
-
-
-
-
-
-
-
-
-
2012
-
7,850
121,031
121,013
18 Jan-Apr
2013
2,900
160,407
160,544
(137)
Feb 2012
5,325
304,466
305,079
(613)
Jan-Apr
2013
-
-
-
-
-
2,550
38,852
38,614
238 Jan-Feb
2013
We monitor rolling forecasts of our liquidity requirements to ensure we have sufficient cash to meet operational needs while maintaining sufficient
headroom on our undrawn committed borrowing facilities at all times so that we do not breach borrowing limits or covenants (where applicable) on any
of our borrowing facilities. Such forecast takes into consideration of our debt financing plans, covenant compliance, compliance with internal balance
sheet ratio targets and, if applicable, external regulatory or legal requirements. Our management also monitors rolling forecasts of our liquidity reserve
on the basis of expected cash flows.
As of December 31, 2012, we had total banking facilities of approximately RMB161,761 million, of which RMB64,819 million had been utilized and
unutilized banking facilities amounted to RMB96,942 million as of December 31, 2012, among which, banking facilities of approximately RMB54,859
million will be subject to renewal during the next 12 months from January 1, 2013. Our directors are confident that all banking facilities could be
renewed upon their expiration based on our past experience with banks and our good credit standing. In addition, as of December 31, 2012, we had
credit facilities through our primary aluminum futures agent at LME amounting to US$94 million, of which approximately US$1 million has been
utilized. The futures agent has the right to adjust the related credit facilities.
105
The following table sets forth the maturity profile of our financial liabilities as of December 31, 2012:
Long-term bank and other loans
Long-term bonds
Medium-term notes and bonds
Bond issuance cost payable
Short-term bonds
Within 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
-
-
-
-
16,500,000
(RMB in thousands)
8,049,049
-
2,000,000
6,000
-
7,771,126
2,000,000
12,800,000
-
-
4,090,612
-
-
-
-
19,910,787
2,000,000
14,800,000
6,000
16,500,000
Short-term bank and other loans
Current portion of medium-term notes
Current portion of long-term bank and other loans
Current portion of long-term payables
Current portion of bond issuance cost payable
Interest payables for borrowings
Financial liabilities at fair value through profit or loss
Financial liabilities included in other current
payables and accrued expenses
Trade and notes payables
40,313,218
5,000,000
5,945,958
8,330
6,000
1,788,809
12,662
6,169,561
7,059,194
-
-
-
-
-
1,705,063
-
-
-
-
-
-
-
-
2,532,764
-
-
-
-
-
-
-
-
905,829
-
-
-
40,313,218
5,000,000
5,945,958
8,330
6,000
6,932,465
12,662
6,169,561
7,059,194
82,803,732
11,760,112
25,103,890
4,996,441
124,664,175
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Not applicable.
C.
OTHER SECURITIES
Not applicable.
D.
AMERICAN DEPOSITARY SHARES
The following table summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, in connection with the ownership
of Chalco's American Depositary Receipts.
Persons depositing or withdrawing shares must pay:
For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs
Issuance of ADSs, including issuances resulting from a distribution of
shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if the
deposit agreement terminates
*
*
106
$.02 (or less) per ADS
*
Any cash distribution to ADS registered holders
A fee equivalent to the fee that would be payable if securities
distributed to you had been shares and the shares had been deposited
for issuance of ADSs
Distribution of securities distributed to holders of deposited securities which are
distributed by the depositary to ADS registered holders
$.02 (or less) per ADS per calendar year
Registration or transfer fees
Expenses of the depositary
Taxes and other governmental charges the depositary or the custodian
have to pay on any ADS or share underlying an ADS, for example,
stock transfer taxes, stamp duty or withholding taxes
*
*
*
*
*
Depositary services
Transfer and registration of shares on our share register to or from the
name of the depositary or its agent when you deposit or withdraw shares
Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement)
Converting foreign currency to U.S. dollars
As necessary
Any charges incurred by the depositary or its agents for servicing the
deposited securities
*
As necessary
The Bank of New York Mellon, as depositary, has agreed to reimburse certain reasonable expenses related to our ADR program and incurred by us in
connection with the program. From January 1, 2012 to April 1, 2013, we received from the depositary reimbursements of US$246,714.3, net of
withholding tax, for our continuing annual stock exchange listing fees and our expenses incurred in connection with investor relationship programs. In
addition, the depositary has agreed to reimburse us annually for our expenses incurred in connection with investor relationship programs in the future.
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15.
CONTROLS AND PROCEDURES
Our management, with the participation of our principal executive officer and principal financial officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this
annual report, have concluded that, as of such date, our disclosure controls and procedures were effective.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of a company's assets, (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the
consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
107
Under the supervision of and with the participation of the principal executive officer and principal financial officer, our management conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the framework in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission. Based on our evaluation under the framework in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission, our management concluded
that, as of December 31, 2012, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
The effectiveness of our internal controls over financial reporting as of December 31, 2012 has been audited by Ernst & Young, an independent
registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
During 2012, there have been no changes in our internal control over financial reporting that occurred during the fiscal year covered by this annual
report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our audit committee members are Mr. Wang Mengkui, Mr. Zhu Demiao and Mr. Zhang Zhuoyuan. Our Board has determined that Mr. Zhu Demiao, the
chairman of the audit committee, qualifies as an "audit committee financial expert" as defined in Item 16A of Form 20-F and is the financial expert
serving on our audit committee. See "Item 6. Directors, Senior Management and Employees."
ITEM 16B. CODE OF ETHICS
We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, other directors, independent non-executive directors,
senior management and employees. We have posted our code of ethics on our website: www.chalco.com.cn. A hard copy of this code of ethics is
available to investors free of charge upon written request to the address on the cover of this annual report on Form 20-F.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PricewaterhouseCoopers served as our independent auditor for the fiscal year ended December 31, 2011. On June 30, 2012, we engaged Ernst & Young
as our independent auditor for the fiscal year ended December 31, 2012. A description of the fees billed to us by our principal accountants for
professional services in each of the last two fiscal years is set forth below:
Audit fee (1) and audit-related fees
Tax fees(4)
(1)
"Audit fee" represents fee obtained from annual audit work.
Year ended December 31,
2011
2012
(RMB in thousands)
16,671(2)
-
24,610(3)
150
(2)
(3)
"Audit-related fees" for the year ended December 31, 2011 represent fees charged by PricewaterhouseCoopers for assurance and related services that are reasonably related to
the performance of the audit or review of our consolidated financial statements and are not reported under "Audit fees."
"Audit-related fees" for the year ended December 31, 2012 represent aggregate fees charged by Ernst & Young for permissible professional services rendered for mergers and
acquisitions due diligence work.
(4)
"Tax fees" represent fees charged by our principal accountants for permissible tax advisory services related to planned and completed acquisitions.
Our audit committee pre-approves all audit and audit-related services and tax advisory services performed by our principal accountants, including the
services provided by PricewaterhouseCoopers and Ernst & Young for the years ended December 31, 2011 and 2012, respectively.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We do not have an equity securities repurchase program and did not repurchase any of our equity securities during the year ended December 31, 2012.
108
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Change of Principal Accountant
On March 16, 2012, our Board resolved, as recommended by our audit committee, to propose a change in our independent registered public accounting
firm, PricewaterhouseCoopers, after the completion of the audit of the consolidated financial statements for the year ended December 31, 2011, which
refers to the close of our forthcoming 2011 annual general meeting, due to the relevant regulations issued by the Ministry of Finance of the PRC and the
SASAC in December 2011. According to the relevant regulations, there are restrictions in respect of the number of years of audit services that an
accounting firm can continuously provide to a state-owned enterprise and its subsidiaries. As a result, PricewaterhouseCoopers did not offer themselves
for re-appointment at the 2011 annual general meeting held on June 29, 2012.
The reports of PricewaterhouseCoopers on our consolidated financial statements for the fiscal years ended December 31, 2010 and 2011 did not contain
any adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles.
During the two fiscal years ended December 31, 2011 and through June 29, 2012, the date of retirement, there were no disagreements with
PricewaterhouseCoopers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of PricewaterhouseCoopers, would have caused them to make reference to the subject matter of the disagreements in their
report on the consolidated financial statements for such years.
During the two fiscal years ended December 31, 2011 and through June 29, 2012, there were no "reportable events" (hereinafter defined) requiring
disclosure pursuant to Item 16F(a)(1)(v) of Form 20-F. As used herein, the term "reportable event" means any of the items listed in paragraphs (a)(1)(v)
(A)-(D) of Item 16F of Form 20-F.
We provided a copy of this disclosure to PricewaterhouseCoopers and requested that PricewaterhouseCoopers furnish a letter addressed to the SEC
stating whether they agree with the above statements, and if not, stating the respects in which they do not agree. A copy of the letter from
PricewaterhouseCoopers addressed to the SEC, dated April 25, 2013, is filed as Exhibit 15.1.
(b)
Engagement of New Principal Accountant
On March 16, 2012, our Board resolved, as recommended by our audit committee, to propose to appoint Ernst & Young as our independent registered
public accounting firm, which was approved by our shareholders at our 2011 annual general meeting held on June 29, 2012. We engaged Ernst & Young
as our independent registered public accounting firm on June 30, 2012. During the two fiscal years ended December 31, 2011 and through June 30,
2012, neither we nor anyone on our behalf consulted Ernst & Young regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that might be rendered on our consolidated financial statements, and we have not
obtained any written report or oral advice that Ernst & Young concluded was an important factor considered by us in reaching a decision as to the
accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a "disagreement", as defined in Item 16F(a)(1)(iv) of
Form 20-F and related instructions to Item 16-F of Form 20-F, with Ernst & Young or a "reportable event" as described in Item 16F(a)(1)(v) of Form
20-F.
ITEM 16G. CORPORATE GOVERNANCE
The NYSE has imposed a series of corporate governance listing standards for companies listed on the NYSE in Section 303A of its listing rules.
However, the NYSE provides that listed companies that are foreign private issuers, subject to certain limitations and conditions, are permitted to follow
"home country" practice in lieu of the provisions of Section 303A of the NYSE Listed Company Manual. As a foreign issuers listed on the NYSE, we
are required to disclose a summary of the significant differences between our domestic corporate governance rules and NYSE corporate governance
rules that apply to U.S. domestic issuers.
NYSE Listed Company Manual Requirements
on Corporate Governance
Our Practice
Majority of independent
directors
NYSE requires that the board of a listed company must
comprise a majority of independent directors. There is no
identical corporate governance requirement in the PRC.
PRC securities regulatory authorities require that the board
of a listed company shall comprise at least one-third of
independent directors.
Our Board currently comprises three independent directors
and five non-independent directors which is in compliance
with the requirement by the PRC securities regulatory
authorities.
109
Compensation Committee
NYSE requires U.S. domestic issuers to have a
compensation committee composed entirely of independent
We have a remuneration committee that consists of three
independent directors and one non-executive director.
Nominating Committee
Corporate governance
committee
directors. As a foreign private issuer, we are not subject to
such requirement.
NYSE requires U.S. domestic issuers to have only
independent directors on their nominating committees. As a
foreign private issuer, we are not subject to such
requirement.
We have a nomination committee that consists of two
executive directors and three independent directors.
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) supervising the operation of the board
and the management. The corporate governance committee
shall also be subject to evaluation annually. There is no
identical corporate governance requirement in the PRC.
Like most of the other companies incorporated in the PRC,
we believe that corporate governance measures are of
critical importance and should be implemented by the
Board. We accordingly do not separately maintain a
corporate governance committee.
ITEM 16H. MINE SAFETY DISCLOSURE
As of the date of this annual report, we did not own or operate any mine in the United States. For details of the mining safety control of our bauxite
mines in China, see "Item 4. Information on the Company - B. Business Overview - Raw Materials - Alumina - Own Mines."
PART III
ITEM 17.
FINANCIAL STATEMENTS
We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.
ITEM 18.
FINANCIAL STATEMENTS
Our consolidated financial statements are included at the end of this annual report on Form 20-F.
ITEM 19.
EXHIBITS
Exhibit Number
Description
1.1*
2.1
2.2
2.3
4.1
8.1
12.1*
12.2*
13.1*
13.2*
15.1*
English translation of Articles of Association of Aluminum Corporation of China Limited
Registrant's Specimen American Depositary Receipt (incorporated by reference to Exhibit 2.1 of our annual report on Form 20-F/A
(file No. 001-15264) filed with the Securities and Exchange Commission on October 9, 2012)
Registrant's Specimen Certificate for H Shares (incorporated by reference to Exhibit 2.2 of our annual report on Form 20-F/A (file
No. 001-15264) filed with the Securities and Exchange Commission on October 9, 2012)
Deposit Agreement among the Registrant, The Bank of New York, as depositary, and Owners and Beneficial Owners of the
American Depositary Receipts (incorporated by reference to Exhibit 2.3 of our annual report on Form 20-F/A (file No. 001-15264)
filed with the Securities and Exchange Commission on October 9, 2012)
English translation of Form of Employment Contract (incorporated by reference to Exhibit 4.1 of our annual report on Form 20-F/A
(file No. 001-15264) filed with the Securities and Exchange Commission on October 9, 2012)
List of Subsidiaries of Aluminum Corporation of China Limited as of December 31, 2012
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
110
Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Letter from PricewaterhouseCoopers
*
Filed with this annual report on Form 20-F.
111
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on this Form 20-F on its behalf.
ALUMINUM CORPORATION OF CHINA LIMITED
By: /s/XIONG Weiping
Name: XIONG Weiping
Title: Chief Executive Officer
Date: April 25, 2013
112
ALUMINUM CORPORATION OF CHINA LIMITED AND ITS SUBSIDIARIES
Consolidated Financial Statements
For the Years Ended December 31, 2010, 2011 and 2012
Together with Reports of Independent Public Accounting Firms
F-1
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
ALUMINUM CORPORATION OF CHINA LIMITED
Report of Independent Registered Public Accounting Firms
Consolidated Statements of Financial Position as of December 31, 2011 and 2012
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2010, 2011 and 2012
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2010, 2011 and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2011 and 2012
Notes to the Consolidated Financial Statements
F-2
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
To the Board of Directors and Shareholders of Aluminum Corporation of China Limited
(Incorporated in the People's Republic of China with limited liability)
Pages
F3-F5
F6-F7
F8-F9
F10-F12
F13-F14
F15-F136
We have audited the accompanying consolidated statement of financial position of Aluminum Corporation of China Limited and its subsidiaries (the "Group")
as of December 31, 2012, and the related consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows for the
year ended December 31, 2012. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on
Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group at
December 31, 2012, and the consolidated results of their operations and their cash flows for the year ended December 31, 2012, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Aluminum Corporation of China
Limited's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 25, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young
Hong Kong
April 25, 2013
F-3
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders of Aluminum Corporation of China Limited
(Incorporated in the People's Republic of China with limited liability)
We have audited Aluminum Corporation of China Limited's internal control over financial reporting as of December 31, 2012, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). Aluminum
Corporation of China Limited's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying "Management's Report on Internal Control over Financial Reporting".
Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, Aluminum Corporation of China Limited maintained, in all material respects, effective internal control over financial reporting as of December
31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on
Auditing, the consolidated statement of financial position of Aluminum Corporation of China Limited as of December 31, 2012, and the related consolidated
statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and our report dated April 25, 2013
expressed an unqualified opinion thereon.
/s/ Ernst & Young
Hong Kong
April 25, 2013
Report of Independent Registered Public Accounting Firm
To the shareholders of Aluminum Corporation of China Limited:
F-4
In our opinion, the consolidated statement of financial position as of December 31, 2011 and the related consolidated statements of comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for each of two years in the period ended December 31, 2011 present
fairly, in all material respects, the financial position of Aluminum Corporation of China Limited and its subsidiaries at December 31, 2011, and the results of
their operations and their cash flows for each of the two years in the period ended December 31, 2011, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States) and International Standards on Auditing. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
By: /s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong, April 27, 2012
F-5
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Land use rights and leasehold land
Investments in jointly controlled entities
Investments in associates
Available-for-sale financial investments
December 31, 2011
December 31, 2012
Notes
RMB'000
RMB'000
USD'000
6
7
8
9(a)
9(b)
10
4,148,770
93,775,373
2,558,312
1,457,229
2,492,586
44,878
4,260,018
96,248,091
2,594,208
1,936,950
17,211,965
64,500
683,780
15,448,884
416,399
310,902
2,762,711
10,353
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade and notes receivables
Other current assets
Financial assets at fair value through profit or loss
Restricted cash and time deposits
Cash and cash equivalents
Assets of a disposal group classified as held for sale
Total current assets
Total assets
1,517,339
1,169,962
2,116,986
1,568,148
339,800
251,704
107,164,449
126,000,866
20,224,533
24,124,379
5,631,765
7,665,985
5,807
1,053,435
10,591,306
49,072,677
897,031
25,596,476
2,615,862
9,851,418
8,983
1,128,015
9,063,593
48,264,347
751,669
4,108,518
419,875
1,581,262
1,442
181,059
1,454,807
7,746,963
120,651
49,969,708
49,016,016
7,867,614
157,134,157
175,016,882
28,092,147
11
12
14
15
16
17
17
13
F-6
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)
As of December 31, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
December 31, 2011
December 31, 2012
Notes
RMB'000
RMB'000
USD'000
EQUITY AND LIABILITIES
EQUITY
Equity attributable to owners of the parent
Share capital
Other reserves
Retained earnings
- proposed final dividend
- others
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities
Financial liabilities at fair value through profit or loss
Interest bearing loans and borrowings
Other payables and accrued expenses
Trade and notes payables
Income tax payable
Total current liabilities
Total liabilities
18
19
33
20
11
21
20
22
23
13,524,488
19,714,708
-
18,586,803
51,825,999
6,328,687
13,524,488
19,930,226
-
10,353,049
43,807,763
9,963,387
2,170,830
3,199,022
-
1,661,779
7,031,631
1,599,234
58,154,686
53,771,150
8,630,865
35,968,526
4,456
646,091
36,635,652
-
756,669
5,880,428
-
121,453
36,619,073
37,392,321
6,001,881
2,280
46,737,845
7,168,325
8,401,310
50,638
12,662
67,915,181
8,805,315
7,059,194
61,059
2,032
10,901,138
1,413,351
1,133,079
9,801
62,360,398
83,853,411
13,459,401
98,979,471
121,245,732
19,461,282
Total equity and liabilities
157,134,157
175,016,882
28,092,147
Net current liabilities
(12,390,690)
(34,837,395)
(5,591,787)
Total assets less current liabilities
94,773,759
91,163,471
14,632,746
The accompanying notes are an integral part of these consolidated financial statements.
/s/ Xiong Weiping
Director
/s/ Xie Weizhi
Chief Financial Officer
F-7
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2010
2011
2012
Notes
RMB'000
RMB'000
RMB'000
USD'000
Revenue
Cost of sales
5
25
120,994,847
(113,349,941)
145,874,433
(138,111,367)
149,478,821
(149,802,658)
23,993,005
(24,044,985)
Gross profit/(loss)
7,644,906
7,763,066
(323,837)
(51,980)
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property, plant and equipment
Other income
Other gains/(losses), net
Operating profit/(loss)
Finance income
Finance costs
Share of profits of:
Jointly controlled entities
Associates
26(a)
26(b)
7
27(a)
27(b)
28
28
9(a)
9(b)
(1,573,301)
(2,623,740)
(164,235)
(701,781)
328,853
491,024
(1,622,788)
(2,779,429)
(218,026)
(279,750)
185,501
538,033
(1,967,922)
(2,992,968)
(198,946)
(19,903)
744,490
(25,484)
(315,873)
(480,404)
(31,933)
(3,195 )
119,499
(4,090)
3,401,726
3,586,607
(4,784,570)
(767,976)
91,109
(2,586,293)
138,778
(3,432,352)
314,179
(4,913,559)
233,784
240,028
122,262
402,701
37,040
254,848
50,429
(788,681)
5,945
40,906
Profit/(loss) before income tax
1,380,354
817,996
(9,092,062)
(1,459,377)
Income tax (expense)/benefit
31
(411,216)
(127,492)
448,479
71,986
Profit/(loss) for the year
969,138
690,504
(8,643,583)
(1,387,391)
Attributable to:
Owners of the parent
Non-controlling interests
Other comprehensive (loss)/income, net of tax:
Reclassification of cumulated fair
value changes on available-for-sale
financial assets upon disposal
Exchange differences on translation
of foreign operations
Other comprehensive income/(loss)
for the year, net of tax
778,008
191,130
237,974
452,530
(8,233,754)
(409,829)
(1,321,609)
(65,782)
969,138
690,504
(8,643,583)
(1,387,391)
(1,155)
40,833
-
-
(22,041)
18,752
-
3,010
39,678
(22,041)
18,752
3,010
Total comprehensive income/(loss) for the year
1,008,816
668,463
(8,624,831)
(1,384,381)
F-8
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2010
2011
2012
Notes
RMB'000
RMB'000
RMB'000
USD'000
818,127
190,689
215,933
452,530
(8,215,002)
(409,829)
(1,318,599)
(65,782)
1,008,816
668,463
(8,624,831)
(1,384,381)
Total comprehensive income/(loss)
for the year attributable to:
Owners of the parent
Non-controlling interests
Basic and diluted earnings/(loss)
per share attributable to ordinary
equity holders of the parent
(expressed in RMB and USD per share)
32
RMB0.06
RMB0.02
RMB(0.61)
USD(0.10)
Details of the dividends payable and proposed for the years ended December 31, 2010, 2011 and 2012 are disclosed in Note 33 to the consolidated financial
statements.
The accompanying notes are an integral part of these consolidated financial statements.
F-9
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
Attributable to owners of the parent
Capital reserves
Share
capital
(Note 18)
Share
Other
capital
premium
reserves
Statutory
surplus
reserve
Exchange
Investment
Special
fluctuation
revaluation
Retained
Non-
controlling
reserve
reserve
reserve
earnings
Total
interests
Total
Equity
(Note 19)
(Note 19)
(Note 19)
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
At 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
-
778,008
778,008
191,130
969,138
Profit for the year
Other comprehensive
income/(loss) for the year:
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
Exchange differences on
translation of foreign operations
Total other comprehensive
income/(loss)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,833
(851)
137
-
-
-
-
-
(851)
(519)
(1,370)
137
40,833
78
-
215
40,833
40,119
(441)
39,678
40,833
(714)
40,833
(714)
778,008
818,127
190,689
1,008,816
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88,769
4,259
93,028
(1,366)
1,366
-
-
203,100
203,100
257,529
112,202
369,731
(68,325)
-
-
-
-
17,431
(436)
-
-
-
(2,704)
(83,268)
-
17,431
(3,140)
(83,268)
18,502,681
51,580,792
5,606,063
57,186,855
Total comprehensive
income/(loss) for the year
Release of deferred
governmental subsidies
Acquisition of
non-controlling interests
Capital injection from non-controlling
shareholders of subsidiaries
Partial disposal of
interest in a subsidiary (Note 2.4)
Appropriation of
statutory surplus reserve
Other appropriation
Share of reserve of associates
Dividends relating to 2009
-
-
-
-
-
-
-
-
-
-
-
(1,366)
-
-
-
-
-
-
-
88,769
-
-
258,335
-
-
357
-
-
-
-
-
-
68,325
-
-
-
-
-
-
-
(806)
-
17,431
(793)
-
At December 31, 2010
13,524,488
12,847,519
780,061
5,867,557
72,579
(14,093)
F-10
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
Attributable to owners of the parent
Capital reserves
Share
capital
(Note 18)
Share
Other
capital
premium
reserves
Statutory
surplus
reserve
Exchange
Special
fluctuation
Retained
Non-
controlling
reserve
reserve
earnings
Total
interests
Total
Equity
(Note 19)
(Note 19)
(Note 19)
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(791)
-
-
-
-
-
-
-
-
165,716
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,267
3,934
-
-
237,974
237,974
452,530
690,504
(22,041)
-
(22,041)
-
(22,041)
(22,041)
237,974
215,933
452,530
668,463
-
-
-
-
-
-
-
-
-
-
-
-
-
(153,852)
165,716
(791)
-
-
14,267
3,934
(153,852)
11,834
(159,480)
477,197
(659)
84
11,343
(70,225)
177,550
(160,271)
477,197
(659)
14,351
15,277
(224,077)
At January 1, 2011
Profit for the year
Other comprehensive loss for the year:
Exchange differences on
translation of foreign operations
Total comprehensive (loss)/income for the year
Release of deferred governmental subsidies
Acquisition of non-controlling interests
Acquisition of assets (Note 6)
Disposal of a subsidiary
Other appropriation
Share of reserve of associates
Dividends relating to 2010
At December 31, 2011
13,524,488
12,846,728
945,777
5,867,557
90,780
(36,134)
18,586,803
51,825,999
6,328,687
58,154,686
F-11
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
Attributable to owners of the parent
Capital reserves
Share
capital
(Note 18)
Share
Other
capital
premium
reserves
Statutory
surplus
reserve
Exchange
Special
fluctuation
Retained
Non-
controlling
reserve
reserve
earnings
Total
interests
Total
Equity
(Note 19)
(Note 19)
(Note 19)
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
At January 1, 2012
Loss for the year
13,524,488
12,846,728
945,777
5,867,557
90,780
(36,134)
18,586,803
51,825,999
6,328,687
58,154,686
-
-
-
-
-
-
(8,233,754)
(8,233,754)
(409,829)
(8,643,583)
Other comprehensive income for the year:
Exchange differences on
translation of foreign operations
Total comprehensive income/(loss)
Release of deferred governmental subsidies
Acquisition of non-controlling interests
Capital injection from
non-controlling shareholders
Other appropriation
Share of reserve of associates
Transfer from other capital
reserves to share premium
Dividends paid by subsidiaries to
non-controlling shareholders relating to 2011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,946)
203,299
-
-
-
-
-
-
-
258,335
(258,335)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(877)
2,290
-
-
18,752
-
18,752
-
18,752
18,752
(8,233,754)
(8,215,002)
(409,829)
(8,624,831)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
203,299
(7,946)
-
(877)
2,290
-
-
8,544
7,946
211,843
-
4,104,335
2,310
8,243
4,104,335
1,433
10,533
-
-
(86,849)
(86,849)
At December 31, 2012
13,524,488
13,097,117
890,741
5,867,557
92,193
(17,382)
10,353,049
43,807,763
9,963,387
53,771,150
The accompanying notes are an integral part of these consolidated financial statements.
F-12
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2010
2011
2012
Notes
RMB'000
RMB'000
RMB'000
USD'000
Net cash flows from operating activities
34
7,103,859
2,489,756
1,122,352
180,150
Investing activities
Purchases of intangible assets
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
Payments of consideration in relation to
acquisitions of subsidiaries, net of cash acquired
Payment of consideration for acquisition of
non-controlling interests
Investments in jointly controlled entities
Investments in associates
Transformation from a subsidiary to an associate
Investment in an available-for-sale financial investment
Investment income on financial products
Proceeds from disposal of
available-for-sale financial investments
Dividends received
Interest received
Decrease in time deposits
Proceeds from/(payment of) settlement
of futures, options and forward
foreign exchange contracts, net
Deposit for investment projects
Loans to related parties
Refund of deposit for an investment project
Repayments of loans from related parties
Loan to a third party
Government grants/subsidies received
Others
9(a)
9(b)
10
12,16
35
(7,099)
(8,325,947)
(2,937)
233,007
510,783
(80,244)
(8,552,718)
(107,981)
80,421
-
-
(91,460)
-
(71,325)
(748,650)
(23,601)
-
-
158,635
-
4,879
47,278
203,237
(849,809)
-
269,575
-
-
385,299
(43,642)
(85,429)
(140,000)
(816,965)
-
-
22,854
256
102,393
5,611
10,000
550,863
(536,672)
(363,665)
-
-
-
392,344
(104,155)
(55,356)
(9,148,495)
(1,528)
185,926
-
-
-
(171,564)
(13,406,845)
-
(27,400)
26,960
-
112,984
49,668
19,821
(107,616)
(300,111)
(585,504)
-
210,169
(100,000)
251,857
(106,056)
(8,885)
(1,468,435)
(245)
29,843
-
-
-
(27,538)
(2,151,947)
-
(4,398)
4,327
-
18,135
7,972
3,181
(17,274)
(48,171)
(93,980)
-
33,734
(16,051)
40,426
(17,021)
Net cash flows used in investing activities
(8,260,317)
(9,714,547)
(23,153,090)
(3,716,327)
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
F-13
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2010
2011
2012
Notes
RMB'000
RMB'000
RMB'000
USD'000
Financing activities
Instalment payment of bonds issuance expenses
Proceeds from issuance of short-term bonds and
medium-term notes, net of issuance costs
Repayments of short-term
bonds and medium-term notes
Drawdown of short-term and long-term loans
Payments of loan deposits
Repayments of short-term and long-term loans
Proceeds from government subsidies
Capital injection from non-controlling interests
Dividends paid by subsidiaries to
non-controlling shareholders
Dividends paid to the equity
holders of the Company
Interest paid
(30,000)
(21,000)
(21,000)
(3,371)
12,694,000
17,733,500
29,468,136
4,729,962
-
34,141,516
-
(41,195,138)
-
203,100
(15,700,000)
56,477,596
-
(45,378,131)
-
-
(18,000,000)
74,346,531
(365,400)
(63,925,148)
180,290
4,104,335
(2,889,199)
11,933,441
(58,651)
(10,260,694)
28,939
658,791
(109,974)
(69,780)
(52,859)
(8,484)
-
(2,985,951)
(153,852)
(4,045,880)
-
(5,305,932)
-
(851,661)
Net cash flows from financing activities
2,717,553
8,842,453
20,428,953
3,279,073
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of year
Net foreign exchange difference
Cash and cash equivalents at end of year
17
17
1,561,095
7,401,410
20,205
1,617,662
8,982,710
(9,066)
(1,601,785)
10,591,306
74,072
(257,104)
1,700,022
11,889
8,982,710
10,591,306
9,063,593
1,454,807
The accompanying notes are an integral part of these consolidated financial statements.
F-14
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
1.
GENERAL INFORMATION
Aluminum Corporation of China Limited (
) (the "Company") and its subsidiaries (together the "Group") are principally engaged
in the manufacture and distribution of alumina, primary aluminum and aluminum fabricated products. The Group is also engaged in the development of
bauxite related resources, the production, fabrication and distribution of bauxite, iron ore, carbon and relevant non-ferrous metal products and the trading
of non-ferrous metal products and coal products.
The Company is a joint stock company which is domiciled and 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 Main Board of the Stock Exchange of Hong Kong Limited and the New York Stock Exchange in 2001.
The Company also listed its A shares on the Shanghai Stock Exchange in 2007.
In the opinion of the directors, the ultimate holding company and parent of the Company is Aluminum Corporation of China (
("Chinalco"), a company incorporated and domiciled in the PRC and wholly owned by State-owned Assets Supervision and Administration Commission
of the State Council.
)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated 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
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the
International Accounting Standards Board ("IASB"). In addition, these consolidated financial statements also comply with the applicable
disclosure requirements of the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared on a historical cost
basis, except for available-for-sale financial investments and financial assets and liabilities at fair value through profit or loss, which have been
measured at fair value. Certain property, plant and equipment, intangible assets and investments in subsidiaries were stated at deemed costs.
Disposal groups held for sale are stated at the lower of their carrying amounts and fair values less costs to sell as further explained in Note 2.12.
These consolidated financial statements are presented in thousands of Chinese Renminbi ("RMB") unless otherwise stated. Solely for the
convenience of the reader, the financial statements as of and for the year ended December 31, 2012 have been translated into United States
Dollars ("USD") at the noon buying rate in New York city on December 31, 2012 for cable transfers in RMB by the Federal Reserve Bank of
New York of USD1.00 = RMB6.2301. No representation is made that the RMB amounts could have been, or could be, converted into USD at
that rate or at any other certain rates on December 31, 2012, or at any other dates.
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 consolidated financial statements are disclosed in Note
4.
F-15
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.1
Basis of preparation (Continued)
Going concern
As at December 31, 2012, the Group's current liabilities exceeded its current assets by approximately RMB34,837 million (December 31, 2011:
RMB12,391 million). The directors of the Company have considered the Group's available sources of funds as follows:
*
*
*
The Group's expected net cash inflows from operating activities in 2013;
Unutilised banking facilities of approximately RMB96,942 million as at December 31, 2012, of which amounts totaling RMB54,859
million will be subject to renewal during the next 12 months. The directors of the Company are confident that these banking facilities
could be renewed upon expiration based on the Group's past experience and good credit standing; and
Other available sources of financing from banks and other financial institutions given the Group's credit history.
The directors of the Company believe that the Group has adequate resources to continue operation for the foreseeable future of not less than 12
months from the approval date of these consolidated financial statements. The directors of the Company therefore are of the opinion that it is
appropriate to adopt the going concern basis in preparing the consolidated financial statements.
2.2
Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year
ended December 31, 2011, except for the following amendments to IFRS effective as at January 1, 2012:
*
*
*
IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinflation and Removal of Fixed
Dates for First-Time Adopters
IFRS 7 Financial Instruments: Disclosures (Amendment) - Enhanced Derecognition Disclosure Requirements
IAS 12 Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets
The major impact arising from adoption of the above amendments is described below:
F-16
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2
Changes in accounting policies and disclosures (Continued)
IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinflation and Removal of Fixed Dates
for First-Time Adopters
The IASB provided guidance on how an entity should resume presenting IFRS financial statements when its functional currency ceases to be
subject to hyperinflation. The amendments had no impact to the Group.
IFRS 7 Financial Instruments: Disclosures (Amendment) - Enhanced Derecognition Disclosure Requirements
The amendments require additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the
Group's financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In
addition, the amendments require disclosures about the entity's continuing involvement in derecognised assets to enable the users to evaluate the
nature of, and risks associated with, such involvement. Additional disclosures in respect of the Group's notes receivable endorsement
arrangement has been included in Note 15 to the consolidated financial statements.
IAS 12 Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets
This amendment clarifies the determination of deferred tax on investment property measured at fair value and introduces a rebuttable
presumption that that deferred tax on investment property measured using the fair value in IAS 40 should be determined on the basis that its
carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets that are measured using
the revaluation model in IAS 16 should always be measured on a sale basis. The Group does not have investment property carrying at fair value
for the year ended December 31, 2012. Therefore, the amendment has had no effect on the Group's financial position, performance or its
disclosures.
F-17
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards
The Group has not applied the following new and revised standards, amendments and interpretations that have been issued but are not yet
effective, in these consolidated financial statements:
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 1
IAS 19 Employee Benefits (Revised) 2
IAS 27 Separate Financial Statements (as revised in 2011) 2
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) 2
IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 3
IFRS 1 Government Loans - Amendments to IFRS 1 2
IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 2
IFRS 9 Financial Instruments: Classification and Measurement 4
IFRS 10 Consolidated Financial Statements 2
IFRS 10, IFRS 12 and IAS 27 (Revised) Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (Revised) 3
IFRS 10, IFRS 11 and IFRS 12 Transition Guidance - Amendments to IFRS 10, IFRS 11 and IFRS 12 2
IFRS 11 Joint Arrangements 2
IFRS 12 Disclosure of Interests in Other Entities 2
IFRS 13 Fair Value Measurement 2
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 2
Annual Improvements May 2012 2
1
2
3
4
Effective for annual periods beginning on or after 1 July 2012
Effective for annual periods beginning on or after 1 January 2013
Effective for annual periods beginning on or after 1 January 2014
Effective for annual periods beginning on or after 1 January 2015
Further information about those IFRSs that are expected to be applicable to the Group is as follows:
IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1
The amendments to IAS 1 change the grouping of items presented in other comprehensive income ("OCI"). Items that could be reclassified (or
"recycled") to profit or loss at a future point in time (for example, net gain on hedge of net investment, exchange differences on translation of
foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) would be presented separately
from items that will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings).
The amendments affect presentation only and have no impact on the Group's financial position or performance.
F-18
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards (Continued)
IAS 19 Employee Benefits (Revised)
The IASB has issued numerous amendments to IAS 19. The revised standard introduces significant changes in the accounting for defined benefit
pension plans including removing the choice to defer the recognition of actuarial gains and losses. Other changes include modifications to the
timing of recognition for termination benefits and disclosures of defined benefit plans. These amendments are not expected to have any impact
on the Group's financial position or performance.
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in
Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to
investments in joint ventures in addition to associates. These amendments are not expected to have any impact on the Group's financial position
or performance.
IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
These amendments clarify the meaning of "currently has a legally enforceable right to set-off". The amendments also clarify the application of
the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are
not simultaneous. These amendments are not expected to impact the Group's financial position or performance.
IFRS 1 Government Loans - Amendments to IFRS 1
These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure of
Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply the
requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so had been
obtained at the time of initially accounting for that loan. The exception would give first-time adopters relief from retrospective measurement of
government loans with a below-market rate of interest. The amendments have no impact on the Group.
F-19
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards (Continued)
IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7
These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The
disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position.
The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments:
Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or
similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group's financial
position or performance.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9, as issued, reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of
financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1
January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the
mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets.
The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets, but will not
have an impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other
phases, when the final standard including all phases is issued.
IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial
statements. It also addresses the issues raised in SIC 12 Consolidation - Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will
require management to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by
a parent, compared with the requirements that were in IAS 27. Management is finalizing its analysis of this new standard and our preliminary
assesment is that it is not expected to have a material impact on the Group's financial statements.
F-20
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards (Continued)
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly controlled Entities - Non-monetary Contributions by Venturers. IFRS 11
removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a
joint venture must be accounted for using the equity method. Application of this new standard will not have impact on the financial position of
the Group because the Group's jointly controlled entities are accounted for using equity method of accounting.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the
disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint
arrangements, associates and structured entities. A number of new disclosures are also required, but this standard has no impact on the Group's
financial position or performance.
IFRS 10, IFRS 12 and IAS 27 (Revised) Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (Revised)
The amendments to IFRS 10 were issued in October 2012. The amendments apply to a particular class of business that qualifies as an investment
entity. The term "investment entity" refers to an entity whose business purpose is to invest funds solely for returns from capital appreciation,
investment income or both. The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities
to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure
requirements for investment entities. The Group expects that these amendments will not have any financial impact on the Group as the Company
is not an investment entity as defined in IFRS 10.
F-21
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards (Continued)
IFRS 10, IFRS 11 and IFRS 12 Transition Guidance - Amendments to IFRS 10, IFRS 11 and IFRS 12
In June 2012, the International Accounting Standards Board issued amendments to IFRS 10, IFRS 11 and IFRS 12 which clarify the transition
guidance in IFRS 10, IFRS 11 and IFRS 12 and provide further relief from full retrospective application of these standards, limiting the
requirement to provide adjusted comparative information to only the preceding comparative period. The amendments clarify that retrospective
adjustments are only required if the consolidation conclusion as to which entities are controlled by the Group is different between IFRS 10 and
IAS 27 or SIC 12 at the beginning of the annual period in which IFRS 10 is applied for the first time. Furthermore, for disclosures related to
unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12
is first applied. These amendments will not impact the Group's financial position or performance.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required
to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is
currently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no
material impact is expected.
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The
interpretation addresses the accounting for the benefit from the stripping activity. The Group is currently assessing the impact of this
interpretation on the financial statements.
Annual Improvements May 2012
These improvements will not have an impact on the Group, but include:
IFRS 1 First-time Adoption of International Financial Reporting Standards
This improvement clarifies that an entity that ceased applying IFRS in the past and chooses, or is required, to apply IFRS, has the option to re-
apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restate its financial statements as if it had never ceased applying IFRS.
F-22
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3
Issued but not yet effective financial reporting standards (Continued)
Annual Improvements May 2012 (Continued)
IAS 1 Presentation of Financial Statements
This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative
information. Generally, the minimum required comparative information is the previous period.
IAS 16 Property Plant and Equipment
This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not
inventory.
IAS 32 Financial Instruments: Presentation
This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income
Taxes.
IAS 34 Interim Financial Reporting
The amendment aligns the disclosure requirements for total segment assets with those for total segment liabilities in interim financial statements.
This clarification also ensures that interim disclosures are aligned with annual disclosures.
F-23
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4
Consolidation
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries as at December 31, 2012.
(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 recognised 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 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 are recognised as expenses in the period in which they are incurred.
F-24
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4
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 common control
combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree 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 recognises any non-controlling interest in the acquiree
either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.
The excess of the consideration transferred, the amount recognised for 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 recognised
directly in profit or loss.
If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and
any resulting gain or loss is recognised in profit or loss.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
F-25
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4
Consolidation (Continued)
(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. The Group also assesses existence of control
where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto
control. De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of
holdings of other shareholders gives the Group the power to govern the financial and operating policies.
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.
Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses
resulting from inter-company transactions that are recognised in assets 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.
The following is a list of principle subsidiaries:
Name
Place of
establishment
and operation
Legal status
fully paid capital scope of operations
Effective equity interest held
Registered and Business nature and
2011
2012
Directly held:
Baotou Aluminum Co., Ltd.
("Baotou Aluminum")
(
(Note (i))
)
Chalco Ruimin Co., Ltd.
(
Chalco Southwest Aluminum
Co., Ltd.
(
Chalco Southwest Aluminum
Cold Rolling Co., Ltd.
(
)
)
)
Chalco Henan Aluminum Co., Ltd.
(
)
China Aluminum International
Trading Co., Ltd.
(
)
Shanxi Huasheng Aluminum
Co., Ltd. ("Shanxi Huasheng")
(
)
Shanxi Huaze Aluminum and
Power Co., Ltd.
(
)
Fushun Aluminum Co., Ltd.
(
)
Zunyi Aluminum Co., Ltd.
(
)
Chalco Zunyi Alumina Co., Ltd.
("Zunyi Alumina")
(
Mainland
of China
Limited liability
company
Registered capital Manufacture and distribution of primary
500,000 Paid-in aluminum, aluminum alloy and
100%
100%
capital 650,000 related fabricated products
and carbon products
Mainland
of China
Mainland
of China
Limited liability
company
Limited liability
company
Mainland
of China
Limited liability
company
Mainland
of China
Mainland
of China
Mainland
of China
Mainland
of China
Mainland
of China
Mainland
of China
Mainland
of China
Limited liability
company
Limited liability
company
Limited liability
company
Limited liability
company
Limited liability
company
Limited liability
company
Limited liability
company
1,593,887 Manufacture of aluminum, magnesium
93.30%
93.30%
and related alloy products,
export activities
540,000 Manufacture and distribution of
60%
60%
metal materials (excluding
precious metals), sales of general
machinery and equipment
624,190 Rolling aluminum and aluminum alloy
100%
100%
processing, development of high
precision aluminum strip production
technology, import and export
activities on goods and technology
1,132,460 Manufacture and distribution of
90.03%
90.03%
aluminum and alloy related products
1,500,000 Import and export activities
100%
100%
1,000,000 Manufacture and distribution of primary
51%
51%
aluminum, aluminum alloy and
carbon-related products
1,500,000 Manufacture and distribution of primary
60%
60%
aluminum and anode carbon
products and electricity generation
and supply
1,140,000 Aluminum smelting, manufacture and
100%
100%
distribution of nonferrous metals
802,620 Manufacture and distribution
62.10%
62.10%
of primary aluminum
1,400,000 Manufacture and distribution
67%
73.28%
of alumina
)
(Note (ii))
Shandong Huayu Aluminum and
Power Co., Ltd.
(
)
Gansu Hualu Aluminum Co., Ltd.
)
)
(
Chalco Hong Kong Ltd.
(
Chalco Mining Co., Ltd.
(
)
Jiaozuo Wanfang Aluminum
Manufacturing Co., Ltd.
("Jiaozuo Wanfang") (Note (iii))
(
)
Shanxi Huaxing Alumina Co., Ltd.
(
)
Gansu Huayang Mining
Development Co., Ltd.
("Huayang Mining")
(
)
(Note (iv))
Chalco Energy Co., Ltd.
(
)
Indirectly held:
Mainland
of China
Mainland
of China
Limited liability
company
Limited liability
company
1,627,697 Manufacture and distribution of
55%
55%
primary aluminum
529,240 Manufacture and distribution of
51%
51%
primary aluminum
Hong Kong
Limited liability
HKD849,940,471 Overseas investments and alumina
100%
100%
company
import and export activities
Mainland
of China
Limited liability
company
Mainland
of China
Limited liability
company
Mainland
of China
Mainland
of China
Limited liability
company
Limited liability
company
700,000 Manufacture, acquisition and
100%
100%
distribution of bauxite mines,
limestone ore, aluminum
magnesium ore and related
nonferrous metal products
480,176 Aluminum smelting, manufacture
24.002%
24.002%
and distribution of nonferrous
metals
947,952 Manufacture and distribution of
100%
100%
alumina
16,670 Manufacture and distribution of
70%
70%
coal and other mineral products
Mainland
of China
Limited liability
company
539,993 Thermoelectricity supply and
100%
100%
investment management
Chalco Iron Ore Holding Ltd.
Hong Kong
Limited liability
HKD2,000 Overseas investment
65%
65%
(
)
company
The English names of subsidiaries represent the best effort by the management of the Group in translating their Chinese names as they do not have any
official English names.
Notes:
(i)
(ii)
(iii)
(iv)
(v)
In June 2012, the Company injected cash amounting to RMB150 million into Baotou Aluminum.
In August 2012, the Company injected cash amounting to RMB165 million into Zunyi Alumina. Therefore, the Group's equity interest in Zunyi Alumina increased from 67% to 73.28%.
In October 2010, the Company disposed a total of 5% equity interest of Jiaozuo Wanfang in an open market at market quoted prices of the shares. As a result of the disposal, the Company's equity interest in Jiaozuo
Wanfang decreased from 29% to 24.002%, but the Company remained the single largest shareholder and its rights to nominate 5 out of the 6 non-independent directors remained unchanged as at December 31, 2011 and
2012. The equity holdings in Jiaozuo Wanfang are dispersed and other shareholders have not organised and cannot easily organised their holdings in such way that they could exercise more voting power than the minority
shareholder. In addition, all shareholders' resolutions proposed by the Company in the past 5 years were approved. Therefore the directors of the Company are of the view that the Company has de facto control over
Jiaozuo Wanfang.
In December 2012, the Company injected cash amounting to RMB358 million into Huayang Mining for the first payment of acquiring mining rights in Zhengning County in Gansu Province.
During the year ended December 31, 2012, apart from the capital injection as set out in notes (i), (ii) and (iv), the Company injected cash amounting to RMB5,275 million (2011: RMB1,979 million) to other subsidiaries of
the Company.
F-26
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4
Consolidation (Continued)
(d)
Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as
transactions with the owners in their capacity as owners. The difference between fair value of 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.
(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 are accounted for using the equity method of accounting. Under the equity method,
the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the
profit or loss of the investee after the date of acquisition. The Group's investments in jointly controlled entities/associates include
goodwill identified on acquisition.
If the ownership interest in a jointly controlled entity/associate is reduced but significant influence is retained, only a proportionate share
of the amounts previously recognised in other comprehensive income are reclassified to profit and loss where appropriate.
The Group's share of its jointly controlled entities'/associates' post-acquisition profit or loss is recognised in profit or loss , and its share
of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding
adjustment to 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 recognise
further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the jointly controlled
entity/associate.
F-27
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4
Consolidation (Continued)
(e)
Jointly controlled entities and associates (Continued)
The Group determines at each reporting date whether there is any objective evidence that the investments in the jointly controlled
entities and associates are impaired. If investment in jointly controlled entity/associate is impaired, the Group calculates the amount of
impairment as the difference between the recoverable amount of the jointly controlled entity/associate and its carrying value and
recognises the amount adjacent to "share of profits and losses of jointly controlled entities" and "share of profits and losses of associates"
in profit or loss.
Profits and losses resulting from upstream and downstream transactions between the Group and its jointly controlled entities/associates
are recognised in the Group's financial statements only to the extent of unrelated investors' interests in the jointly controlled
entities/associates. Unrealised losses are 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.
When the investment in a jointly control entity/associate is classified as held for sale, it is accounted for in accordance with IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations.
Dilution gains and losses arising in investments in jointly controlled entities/associates are recognised in profit or loss.
(f)
Disposal of subsidiaries, jointly controlled entities and associates
When the Group ceases to have control or significant influences, any retained interest in the entity is re-measured to its fair value at the
date when control or significant influence is lost, with the change in carrying amount recognised 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 recognised 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 recognised in other
comprehensive income are reclassified to profit or loss.
F-28
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.5
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.
2.6
Related parties
A party is considered to be related to the Group if:
(a)
the party is a person or a close member of that person's family and that person
(i)
has control or joint control over the Group;
(ii)
has a significant influence over the Group; or
(iii)
is a member of the key management personnel of the Group or of a parent of the Group;
or
(b)
the party is an entity where any of the following conditions applies
(i)
the entity and the Group are members of the same group;
(ii)
one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii)
the entity and the Group are joint ventures of the same third party;
(iv)
one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v)
the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi)
the entity is controlled or jointly controlled by a person identified in (a); or
(vii)
a person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the
entity (or of a parent of the entity).
F-29
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.7
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 are the Company's functional currency 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 recognised in profit or loss.
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 "other gains, net" in
profit or loss.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss.
(c)
Group companies
The results and financial positions 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)
(ii)
assets and liabilities in each statement of financial position presented are translated at the closing rates at the end of the reporting
period;
income and expenses in 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 rates at the dates of the transactions); and
(iii)
all resulting exchange differences are recognised in other comprehensive income.
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. Exchange differences arising are recognised in other comprehensive income.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F-30
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.8
Property, plant and equipment (including construction in progress)
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
recognised 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 derecognised. All other repairs and
maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation on property, plant and equipment except for the machinery used in the aluminum fabrication segment, 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 the end of each reporting period.
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.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amounts of the assets and are recognised within
"other gains, net" in profit or loss.
Construction in progress ("CIP") represents buildings under construction, and plant and equipment pending for 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 capitalisation.
CIP is transferred to property, plant and equipment when the CIP is ready for its intended use.
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
- device tools, electricity distribution line and gas
- others
Office and other equipment
Effect of useful lives
Increased 2 - 8 years
Decreased 2 - 4 years
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.
Since July 1, 2012, the Group has reassessed and adjusted the depreciation method of machinery used in the aluminum fabrication segment. The
effect of this change in accounting estimate was recognised prospectively from July 1, 2012. As a result of this change, depreciation expense for
the year ended December 31, 2012 and the net carrying value of property, plant and equipment as at December 31, 2012 is decreased and
increased by approximately RMB94.3 million and RMB94.3 million, respectively. Annual depreciation expense is expected to be decreased by
approximately RMB121.5 million in next year.
F-31
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.9
Intangible assets
(a)
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and jointly controlled entities and represents the excess of the consideration
transferred over the fair value of the Group's share of the net identifiable assets of the acquiree at the date of acquisition.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or
groups of cash-generating units, that is expected to benefit from the synergies of the combination. Each unit or group of units to which
the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management
purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value
less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b)
Mining rights and mineral exploration rights
Mining rights are initially recorded at cost which includes payments of consideration for extraction rights, exploration and other direct
costs. Amortisation 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 30 years. Mineral
exploration rights are initially recorded at the cost of the acquisition and adopt the same method as the one for the mining rights to
amortise since the exploration rights convert to the mining rights and begin to produce.
(c)
Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
These costs are amortised over their estimated useful lives, which do not exceed 10 years. Costs associated with maintaining computer
software programmes are recognised as an expense as incurred.
(d)
Periodic review of the useful life and amortisation method
For intangible assets with finite useful life, the estimated useful life and amortisation method are reviewed annually at the end of each
reporting period and adjusted when necessary.
F-32
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.10
Research and development costs
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 recognised in current period profit or loss. Development expenditures are recognised 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 or loss as incurred. Development expenditures
that have been recorded in profit or loss in previous periods will be not recognised as assets in subsequent periods. Capitalised development
expenditures are included in property, plant and equipment and intangible assets as appropriate according to their natures.
2.11
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill or intangible assets not ready to use, are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. An impairment loss is recognised 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 impairment are reviewed for possible reversal of the impairment at each reporting
date.
2.12
Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sales transaction and
the sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
F-33
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.13
Financial assets
(a)
Classification
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and
receivables and available-for-sale investments. The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial 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 also categorised as held for trading
unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled
within 12 months; otherwise, they are classified as non-current.
(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 end of reporting
period, which are classified as non-current assets. Loans and receivables are classified as trade and other receivables in the
statement of financial position (Note 2.17).
(iii)
Available-for-sale financial investments
Available-for-sale financial investments 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 the investment matures or management intends to dispose of
it within 12 months after the end of the reporting period.
F-34
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.13
Financial assets (Continued)
(b)
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase or
sell the asset. Investments are initially recognised 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 recognised at fair value and transaction
costs are expensed in profit or loss. Financial assets are derecognised 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
investments and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are
subsequently carried at amortised cost using the effective interest method.
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 profit or loss within "other gains, net", in the period in which they arise. Dividend income from financial assets at fair value through
profit or loss is recognised in profit or loss as part of other income when the Group's right to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale investments are recognised in other
comprehensive income.
When securities classified as available-for-sale investments are sold or impaired, the accumulated fair value adjustments recognised in
equity are included in profit or loss as "other gains, net".
Interest on available-for-sale securities calculated using the effective interest method is recognised in profit or loss as part of other
income. Dividends on available-for-sale equity instruments are recognised in profit or loss as "other income" when the Group's right to
receive payments is established.
F-35
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.13
Financial assets (Continued)
(c)
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
*
*
the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a "pass-through" arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a "pass-through" arrangement, it
evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's
continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be required to repay.
(d)
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial
assets are impaired. In the case of equity investments classified as available-for-sale investments, 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 investments, 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 recognised in profit or loss - is removed from equity and recognised in profit
or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss.
F-36
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.14
Financial liabilities
(a)
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and
borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction
costs.
The Group's financial liabilities include financial liabilities at fair value through profit or loss and loans and borrowings.
(b)
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Loans and borrowings
After initial recognition, loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method
unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or
loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of
the effective interest rate. The effective interest rate amortisation is included in finance costs in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near term. This category includes
derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as
defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging
instruments. Gains or losses on liabilities held for trading are recognised in profit or loss. The net fair value gain or loss recognised in
profit or loss does not include any interest charged on these financial liabilities.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the date of initial recognition
and only if the criteria of IAS 39 are satisfied.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
F-37
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.14
Financial liabilities (Continued)
(c)
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a
recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
2.15 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
2.16
Inventories
Inventories comprise raw materials, work-in-progress, finished goods, spare parts and packaging materials and others, and are stated at the lower
of cost and net realisable 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 realisable value and recorded in profit or loss. Net
realisable 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 is recognised within "cost of sales" in profit or loss.
2.17
Trade and notes receivables and other receivables
Trade and notes receivables 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.
Trade and notes receivable and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
F-38
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.18
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 as borrowings in current liabilities in 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.
2.19 Government grants
Government grants are recognised 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 asset, it is measured at the actual amount received. When the grant is provided
based on a pre-determined rate, it is measured at the fair value of the amount receivable.
Asset-related government grants are recognised as deferred income and are amortised evenly in profit or loss 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 recognised as deferred
income and recorded in profit or loss when the related expenses or losses are incurred. When the grants used to compensate expenses or losses
that were already incurred, they are directly recognised in profit or loss of the current period.
2.20
Trade and notes payables and other payables
Trade and notes payable and other payables are mainly obligations to pay for goods, equipment or services that have been acquired in the
ordinary course of business from suppliers and service providers. These payables are classified as current liabilities if they are due within one
year or less (or in the normal operating cycle of the business if longer).
2.21
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 recognises
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.
F-39
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.21
Employee benefits (Continued)
(a)
Bonus plans
The expected cost of bonus plan is recognised 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 participate in various defined contribution retirement benefit plans
organised by relevant municipal and provincial governments in the PRC. In 2012, the Group made monthly contributions at the rate of
20% (2011: 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.
(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 organisation 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 recognises
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 for more
than 12 months after the end of the reporting period are discounted to their present values.
F-40
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.22
Current and deferred income tax
The income tax expense for the period comprises current and deferred income tax. Share of income tax expense of jointly controlled entities and
associates are included in "share of profits of jointly controlled entities/associates". Income tax expense is recognised in profit or loss except to
the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised 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 at the end of the reporting period in the
countries where the Company and its subsidiaries 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. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised 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, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; 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 at the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, jointly controlled entities and associates, except
for deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and
when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
F-41
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.23
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for the sales of goods and rendering of services under contracts
in the ordinary course of the Group's activities. Revenue is shown net of returns, discounts and value-added tax.
The Group recognises 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).
(a)
Sales of goods
Revenue from the sales of goods is recognised when the Group has already transferred the 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.
If the Group is acting solely as an agent, amounts billed to customers are offset against the relevant costs, and the related revenue is
reported on a net basis.
(b)
Rendering of services
The Group provides machinery processing, transportation and packaging services to third party customers. These services are recognised
in the period when the related services are provided.
2.24
Interest income
Interest income is recognised using the effective interest method. When a loan or 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 loans and receivables is recognised using the original effective interest
rate.
2.25
Dividend income
Dividend income is recognised when the right to receive payment is established.
F-42
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.26
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The
arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement
conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
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 profit or loss on a straight-line basis over the period
of the lease.
The Group leases certain leasehold land. Leasehold land where the Group has substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased leasehold land 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 profit or loss 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 assets and the lease term.
2.27
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the borrowing of funds.
2.28
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Group's consolidated financial statements in the period in
which the dividends are approved by the Company's shareholders.
F-43
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.29
Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognised 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
recognised 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 recognised 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 recognised as interest expense.
F-44
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
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 minimise 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"), Euro ("EUR"), Japanese Yen ("JPY") and Hong Kong Dollar
("HKD"). Related exposures are disclosed in Notes 17 and 20 to the consolidated financial statements, respectively. The Group
Treasury closely monitors the international foreign currency market on the change of exchange rates and takes these into
consideration when investing in foreign currency deposits and borrowing loans. As at December 31, 2012, the Group only has
significant exposure to USD.
As at December 31, 2012, if RMB had strengthened/weakened by 5% against USD with all other variables held constant, net
profit for the year would have been approximately RMB205 million (2010: RMB42 million; 2011: RMB101 million)
higher/lower, mainly as a result of foreign exchange gains/losses arising from translation of USD-denominated borrowings.
Profit was more sensitive to the fluctuation in RMB/USD exchange rates in 2012 than 2010 and 2011, mainly due to the increase
in USD denominated borrowings.
As the assets and liabilities denominated in other foreign currencies other than USD were minimal relative to the total assets and
liabilities of the Group, the directors of the Company are of the opinion that the Group was not exposed to any significant
foreign currency risk arising from these foreign currency denominated assets and liabilities as at December 31, 2010, 2011 and
2012.
F-45
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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 17), the Group's income and operating
cash flows are substantially independent of changes in market interest rates.
Most of the bank deposits are maintained in savings and time 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 were relatively low, the directors of the Company are of the opinion that the Group was not
exposed to any significant interest rate risk for its financial assets held as at December 31, 2010, 2011 and 2012.
The interest rate risk of the Group primarily arises from interest bearing loans. Loans borrowed at floating interest rates expose
the Group to cash flow interest rate risk. The exposures to these risks are disclosed separately in Note 20. 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 at December 31, 2012, if interest rates had been 100 basis points (December 31, 2010 and 2011: 100 basis points)
higher/lower with all other variables held constant, net profit for the year would have been RMB496 million lower/higher
(December 31, 2010: RMB361 million lower/higher, December 31, 2011: RMB376 million lower/higher), respectively mainly
as a result of higher/lower interest expense on floating rate borrowings.
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 was 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
fixed interest rate borrowings held as at December 31, 2010, 2011 and 2012.
F-46
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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
The Group uses futures and option contracts to reduce its exposure to fluctuations in the price of primary aluminum. The Group
has policy in place which limits the total quantity of primary aluminum related to these futures and option contracts to 30% of
the Group's annual production or 50% of the Group's committed purchases or sales of the Group's trading business.
The Group uses mainly futures contracts and options contracts traded on the Shanghai Futures Exchange and London Metal
Exchange ("LME") to hedge against fluctuations in primary aluminum prices. As at December 31, 2012, the fair values of
outstanding future contracts amounting to RMB5.6 million (December 31, 2011: RMB3.9 million) and RMB12.7 million
(December 31, 2011: RMB1.8 million) are recognised in financial assets and financial liabilities at fair value through profit or
loss, respectively. As at December 31, 2012, there were no options contracts outstanding. As at December 31, 2011, the fair
value of outstanding options contracts amounting to RMB0.5 million were recognised in financial liabilities at fair value through
profit or loss.
F-47
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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 at December 31, 2011 and 2012 is as follows:
Primary aluminum:
- short position
- long position
Copper:
- short position
Zinc:
- long position
Primary aluminum:
- short position
- long position
Copper:
- short position
Zinc:
- short position
Lead:
- short position
As at December 31, 2011
Contract
value
Market
value
Contract
maturity
29,302
935,633
160,407
58,284
29,182
938,518
Jan 2012
Jan - Jun 2012
160,544
Feb 2012
57,528 Mar - Apr 2012
As at December 31, 2012
Contract
value
Market
value
Contract
maturity
200,086
1,221,845
304,466
121,031
38,852
198,662
1,213,709
Jan - Feb 2013
Jan - May 2013
305,079
Jan - Apr 2013
121,013
Jan - Apr 2013
38,614
Jan - Feb 2013
Quantity
(expressed
in tones)
1,825
60,890
2,900
3,900
Quantity
(expressed
in tones)
13,110
81,235
5,325
7,850
2,550
F-48
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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)
As at December 31, 2012, if the commodity futures prices had increased/decreased by 3% (December 31, 2010 and 2011: 3%)
and all other variables held constant, profit for the year would have changed by the amounts shown below:
Primary aluminum
Primary copper
Primary zinc
Primary lead
(b)
Credit risk
2010
2011
2012
Decrease/increase
202 million
Decrease/increase
39 million
Decrease/increase
23 million
N/A
Decrease/increase
87 million
Increase/decrease
4 million
Decrease/increase
21 million
Decrease/increase
3 million
Increase/decrease
167 million
Increase/decrease
12 million
Decrease/increase
11 million
Decrease/increase
0.5 million
Credit risk arises from bank balances, trade and notes receivables, 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 amounts of these receivables and amounts of respective financial guarantees included in Notes 15, 16, 17 and 20 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 receivables, 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 has been made in the consolidated financial statements. Management does not expect any further
losses from non-performance by these counterparties. Except for the collateral for some entrusted loans, the Group does not hold any
other collateral as security for these receivables.
During the years ended December 31, 2010, 2011 and 2012, no revenue derived from an individual customer exceeded 10% of the
Group's total revenue, and thus, the directors of the Company are of the opinion that the Group was not exposed to any significant
concentration of credit risk as at December 31, 2010 , 2011 and 2012.
F-49
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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
Cash flow forecast 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 forecast takes into consideration of 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 at December 31, 2012, the Group had total banking facilities of approximately RMB161,761 million (December 31, 2011:
RMB100,520 million) of which amounts totalling RMB64,819 million have been utilised as at December 31, 2012 (December 31, 2011:
RMB57,771 million). Banking facilities of approximately RMB89,942 million will be subject to renewal during the next 12 months. 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 at December 31, 2012, the Group had credit facilities through its primary aluminum futures agent at LME amounting to
USD94 million (equivalent to RMB590.84 million) (December 31, 2011: USD132.00 million (equivalent to RMB831.72 million)) of
which USD1.03 million (equivalent to RMB6.47million) (December 31, 2011: USD1.49 million (equivalent to RMB9.39 million)) has
been utilised. 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.
F-50
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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 analyses the maturity profile of the Group's financial liabilities as at the end of the reporting period. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Within 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
As at December 31, 2011
Long-term bank and other loans
Long-term bonds
Medium-term notes and bonds
Long-term payables
Short-term bonds
Short-term bank and other loans
Current portion of long-term bank
and other loans
Current portion of long-term payables
Interest payables for borrowings
-
-
-
-
10,000,000
32,322,794
4,164,474
8,380
3,389,656
6,288,818
-
5,000,000
8,330
-
-
-
-
1,669,552
11,641,562
-
9,800,000
-
-
-
-
-
1,811,723
1,335,599
2,000,000
-
-
-
-
19,265,979
2,000,000
14,800,000
8,330
10,000,000
32,322,794
-
-
197,810
4,164,474
8,380
7,068,741
Financial liabilities at fair value
through profit or loss
Financial liabilities included in other
payables and accrued expenses
Trade and notes payables
2,280
5,553,016
8,401,310
-
-
-
-
-
-
-
-
-
2,280
5,553,016
8,401,310
63,841,910
12,966,700
23,253,285
3,533,409
103,595,304
F-51
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(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)
As at December 31, 2012
Long-term bank and other loans
Long-term bonds
Medium-term notes and bonds
Bond issuance cost payable
Short-term bonds
Short-term bank and other loans
Current portion of medium-term notes
Current portion of long-term bank
and other loans
Current portion of long-term payables
Current portion of bond issuance cost payable
Interest payables for borrowings
Financial liabilities at fair value
through profit or loss
Financial liabilities included in other current
payables and accrued expenses
Trade and notes payables
Within 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
-
-
-
-
16,500,000
40,313,218
5,000,000
5,945,958
8,330
6,000
1,788,809
12,662
6,169,561
7,059,194
8,049,049
-
2,000,000
6,000
-
-
-
-
-
-
1,705,063
-
-
-
7,771,126
2,000,000
12,800,000
-
-
-
-
-
-
-
2,532,764
-
-
-
4,090,612
-
-
-
-
-
-
-
-
-
905,829
-
-
-
19,910,787
2,000,000
14,800,000
6,000
16,500,000
40,313,218
5,000,000
5,945,958
8,330
6,000
6,932,465
12,662
6,169,561
7,059,194
82,803,732
11,760,112
25,103,890
4,996,441
124,664,175
F-52
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments
(a)
Financial instruments by category
The carrying amounts of each of the categories of financial instruments of the Group as at the end of the reporting period are as follows:
Financial assets
Current
December 31, 2011
Financial assets
at fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
financial
investments
Total
Trade and notes receivables
Financial assets at fair value
through profit or loss
Restricted cash and time deposits
Cash and cash equivalents
Financial assets include in other current assets
Subtotal
Non-current
Available-for-sale financial investments
Entrusted loans
Subtotal
Total
-
5,631,765
5,807
-
-
-
-
1,053,435
10,591,306
1,192,335
5,807
18,468,841
-
-
-
-
-
-
5,631,765
5,807
1,053,435
10,591,306
1,192,335
18,474,648
-
-
-
-
300,000
44,878
-
44,878
300,000
300,000
44,878
344,878
5,807
18,768,841
44,878
18,819,526
F-53
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial liabilities
December 31, 2011
Financial liabilities
at fair value
through profit
or loss
Financial
liabilities at
amortised cost
2,280
-
-
-
-
-
46,737,845
8,380
5,553,016
8,401,310
Total
2,280
46,737,845
8,380
5,553,016
8,401,310
2,280
60,700,551
60,702,831
-
-
-
8,330
35,968,526
8,330
35,968,526
35,976,856
35,976,856
2,280
96,677,407
96,679,687
Current
Financial liabilities at fair value through profit or loss
Interest bearing loans and borrowings
Current portion of long-term payable
Financial liabilities included in other
current payables and accrued expenses
Trade and notes payables
Subtotal
Non-current
Long-term payable
Interest bearing loans and borrowings
Subtotal
Total
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F-54
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial assets
December 31, 2012
Financial assets
at fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
financial
investments
-
2,615,862
8,983
-
-
-
-
1,128,015
9,063,593
2,721,075
8,983
15,528,545
-
-
-
-
-
-
Total
2,615,862
8,983
1,128,015
9,063,593
2,721,075
15,537,528
-
-
-
-
200,000
64,500
-
64,500
200,000
200,000
64,500
264,500
8,983
15,728,545
64,500
15,802,028
Current
Trade and notes receivables
Financial assets at fair value
through profit or loss
Restricted cash and time deposits
Cash and cash equivalents
Financial assets included in other current assets
Subtotal
Non-current
Available-for-sale financial investments
Entrusted loans
Subtotal
Total
F-55
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial liabilities
December 31, 2012
Financial liabilities
at fair value
through profit
or loss
Financial
liabilities at
amortised cost
12,662
-
-
-
-
-
-
-
67,915,181
8,330
6,000
548,381
6,169,561
7,059,194
Total
12,662
67,915,181
8,330
6,000
548,381
6,169,561
7,059,194
Current
Financial liabilities at fair value through profit or loss
Interest bearing loans and borrowings
Current portion of long-term payables
Current portion of bond issuance cost payable
Interest payables for borrowings
Financial liabilities included in other
payables and accrued expenses
Trade and notes payables
Subtotal
Non-current
Bond issuance cost payable
Interest bearing loans and borrowings
Subtotal
Total
12,662
81,706,647
81,719,309
-
-
-
6,000
36,635,652
6,000
36,635,652
36,641,652
36,641,652
12,662
118,348,299
118,360,961
F-56
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy
The carrying amounts and fair values of the Group's financial instruments are as follows:
<
Carrying amounts
Fair values
December 31,
2011
December 31,
2012
December 31,
2011
December 31,
2012
5,631,765
2,615,862
5,631,765
2,615,862
5,807
1,053,435
10,591,306
8,983
1,128,015
9,063,593
5,807
1,053,435
10,591,306
8,983
1,128,015
9,063,593
1,192,335
2,721,075
1,192,335
2,721,075
18,474,648
15,537,528
18,474,648
15,537,528
Financial assets
Current
Trade and notes receivables
Financial assets at fair value
through profit or loss
Restricted cash and time deposits
Cash and cash equivalents
Financial assets included in
other current assets
Subtotal
Non-current
Available-for-sale financial investments
Entrusted loans
44,878
300,000
64,500
200,000
44,878
300,000
64,500
200,000
Subtotal
Total
Financial liabilities
Current
344,878
264,500
344,878
264,500
18,819,526
15,802,028
18,819,526
15,802,028
Financial liabilities at fair value
through profit or loss
Interest bearing loans and borrowings
Current portion of long-term payables
Current portion of bond issuance cost payable
Financial liabilities included in
other payables and accrued expenses
Trade and notes payables
2,280
46,737,845
8,380
-
5,553,016
8,401,310
12,662
67,915,181
8,330
6,000
6,717,942
7,059,194
2,280
46,737,845
8,380
-
5,553,016
8,401,310
12,662
67,915,181
8,330
6,000
6,717,942
7,059,194
Subtotal
Non-current
60,702,831
81,719,309
60,702,831
81,719,309
Bond issuance cost payable
Long-term payable
Interest bearing loans and borrowings
-
8,330
35,968,526
6,000
-
36,635,652
-
8,021
35,719,707
6,000
-
35,803,123
Subtotal
Total
35,976,856
36,641,652
35,727,728
35,809,123
96,679,687
118,360,961
96,430,559
117,528,432
F-57
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to
estimate the fair values:
The fair values of the long-term payable and long-term interest bearing loans and borrowings have been calculated by discounting the
expected future cash flows using rates currently available for instruments on similar terms, credit risk and remaining maturities.
Except for the long-term payable and long-term interest bearing loans and borrowings, the fair values of all the other financial assets and
liabilities approximate to their carrying amounts due to the short-term maturities of these instruments.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair values of financial instruments:
Level 1: Fair value measured based on quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: Fair value measured based on valuation techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly
Level 3: Fair value measured based on valuation techniques for which any inputs which have a significant effect on the recorded fair
value are not based on observable market data
Assets measured at fair value:
As at December 31, 2011
Financial assets at fair value
through profit or loss
Futures contracts
Forward foreign exchange contracts
Level 1
Level 2
Level 3
Total
3,919
-
3,919
-
1,888
1,888
-
-
-
3,919
1,888
5,807
F-58
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Assets measured at fair value: (Continued)
As at December 31, 2012
Financial assets at fair value
through profit or loss:
Futures contracts
Forward foreign exchange contracts
Liabilities measured at fair value:
As at December 31, 2011
Financial liabilities at fair value
through profit or loss:
Futures contracts
European options contracts
As at December 31, 2012
Financial liabilities at fair value
through profit or loss:
Futures contracts
Level 1
Level 2
Level 3
Total
5,593
-
5,593
-
3,390
3,390
-
-
-
5,593
3,390
8,983
Level 1
Level 2
Level 3
Total
1,807
-
1,807
-
473
473
-
-
-
1,807
473
2,280
Level 1
Level 2
Level 3
Total
12,662
12,662
-
-
-
-
12,662
12,662
During the year, the Group had no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of
Level 3 (2011: nil).
F-59
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
FINANCIAL AND CAPITAL RISKS MANAGEMENT (CONTINUED)
3.3
Capital risk management
The Group's capital management objectives 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 payables, 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.
During 2011 and 2012, 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 at December 31, 2011 and 2012 is as follows:
2011
2012
Total borrowings and other liabilities
Less: restricted cash, time deposits and cash and cash equivalents
98,924,377
(11,644,741)
121,184,673
(10,191,608)
Net debts
87,279,636
110,993,065
Total equity
Add: net debts
Less: non-controlling interests
58,154,686
87,279,636
(6,328,687)
53,771,150
110,993,065
(9,963,387)
Total capital attributable to owners of the parent
139,105,635
154,800,828
Gearing ratio
63%
72%
The increase in gearing ratio as at December 31, 2012 is mainly resulted from additional bank borrowings in order to ensure sufficient operating
cash flows.
F-60
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty
about these judgements, assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets or
liabilities affected in future periods.
Judgements
In the process of applying the Group's accounting policies and preparing the Group's consolidated financial statements, management has made the
following judgements, apart from those involving estimates, which have the most significant effect on the amounts recognised in the consolidated
financial statements.
(a)
Going concern
As set out in Note 2.1, the ability of the Group to continue operations is dependent upon obtaining the necessary borrowings and generating cash
inflows from operating activities in order to generate sufficient cash flows to meet its liabilities as they fall due. In the event the Group is unable
to obtain adequate funding, there is uncertainty as to whether the Group will be able to continue as a going concern. The consolidated financial
statements do not include any adjustments related to the carrying values and classifications of assets and liabilities that would be necessary
should the Group be unable to continue as a going concern.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
(a)
Property, plant and equipment - recoverable amount
In accordance with the Group's accounting policy, 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 is
recognised 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.
F-61
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Estimates and assumptions (Continued)
(a)
Property, plant and equipment - recoverable amount (Continued)
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.
Value in use is also generally determined as the present value of the estimated future cash flows of 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 amounts of the assets. In such circumstances, some or all of the carrying values of the assets may be impaired
and the impairment would be charged against profit or loss.
(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/amortisation 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/amortisation 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/amortisation expense in future periods.
F-62
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Estimates and assumptions (Continued)
(c)
Estimated impairment of trade and other receivables and inventories
A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade
receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to trade and other receivables are discounted if the effect
of discounting is material. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is
recognised in the consolidated statement of comprehensive income. When a trade and other receivable is uncollectible, it is written-off against
the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written-off are recognised as income in
profit or loss. The impairment is subject to management's assessment as of the end of the reporting period, and hence, the provision amount is
subject to uncertainty.
In accordance with the Group's accounting policy, the Group's management tests whether inventory suffered any impairment based on estimates
of the net realisable 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 realisable value. For inventories held for executed sales
contracts, the management estimates the net realisable value based on the contracted price; for other inventories, the management estimates
realisable future price based on the actual prices during the period from the end of the reporting period to the date that these consolidated
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 realisable value at which the inventories can be realised 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 end of the reporting period which reflect conditions that existed as of the end of the
reporting period.
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.
F-63
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Estimates and assumptions (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 recognises 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 tax assets, the Group has assessed the likelihood that the deferred tax assets could be
recovered. Major deferred tax assets relate to deductible tax losses and provision for impairment of receivables and accruals of expenses not yet
deductible for tax purposes. As at December 31, 2012, the Group has recorded deferred tax assets amounting to approximately RMB2,261
million on these temporary differences (December 31, 2011: approximately RMB1,628 million). Deferred tax assets are recognised based on the
Group's estimates and assumptions that they will be recovered from taxable income arising from continuing operations and tax planning in the
foreseeable future.
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, goodwill is allocated to the Group's operating segments 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 also apply to goodwill.
F-64
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION
(a)
Revenue
Revenue recognised during the year is as follows:
2010
2011
2012
Sales of goods (net of value-added tax)
Other revenue
118,374,341
2,620,506
142,863,166
3,011,267
146,228,138
3,250,683
120,994,847
145,874,433
149,478,821
Other revenue primarily includes revenue from the sales of scrap and other materials, the supply of electricity, gas, heat and water and the
provision of machinery processing, transportation and packaging and other services.
F-65
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(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 considers the business from a product perspective comprising alumina, primary aluminum and aluminum fabrication for
the Group's manufacturing business, which are identified as separate reportable operating segments. In addition, the Group's trading business is
identified as a separate reportable operating segment. The Group's operating segments also include corporate and other operating activities.
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 these 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.
The 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 sale of chemical alumina and metal gallium.
The 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 sale of carbon products and aluminum alloy and other aluminum products.
The 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 sale to seven main aluminum fabricated products, including casts,
planks, screens, extrusions, forges, powder and die castings.
F-66
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
The trading segment, which consists of the trading of alumina, primary aluminum, aluminum fabricated products, other non-ferrous metal
products, coal products, raw materials and supplemental materials to internal manufacturing plants and external customers in the PRC. The
products are sourced from fellow subsidiaries and international and domestic suppliers of 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 the trading segment.
Corporate and other operating activities, which mainly include management of corporate, research and development activities.
Prepaid current income tax and deferred tax assets are excluded from segment assets, and income tax payable and deferred tax liabilities are
excluded from segment liabilities. All sales among the operating segments were conducted at terms mutually agreed among group companies,
and have been eliminated at the consolidated level.
F-67
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
Year ended December 31, 2010
Primary
Aluminum
Alumina
aluminum
fabrication
Trading
(Note)
Corporate
and other
operating
activities
Inter-
segment
elimination
Total
Total revenue
Inter-segment revenue
26,837,922
53,255,011
10,466,016
90,141,373
(24,689,632)
(26,847,748)
(150,676)
(8,159,134)
190,326
(48,611)
(59,895,801)
120,994,847
59,895,801
-
Revenue from external customers
2,148,290
26,407,263
10,315,340
81,982,239
141,715
-
120,994,847
1,077,144
358,782
(323,568)
860,637
(490,258)
(102,383)
Segment profit/(loss)
Income tax expense
Profit for the year
Other items:
Finance income
Finance costs
Share of profits of jointly
controlled entities
Share of profits of associates
Amortisation of land use
rights and leasehold land
17,572
18,493
4,824
(532,291)
(1,307,058)
(309,644)
13,210
(90,976)
37,010
(346,324)
-
-
-
230,098
-
570
(27,779)
(21,123)
(7,645)
-
-
(8)
233,784
9,360
(2,190)
Depreciation and amortisation excluding the amortisation
of land use rights and leasehold land
(2,756,616)
(3,075,767)
(362,391)
(3,246)
(100,612)
Gain/(loss) on disposal of
property, plant and equipment
Impairment of property, plant and equipment
(Provision for)/reversal of
impairment of inventories
Provision for impairment of
2,473
(372,629)
26,974
(329,152)
(15,562)
(18,798)
(48)
-
86
-
-
-
(75)
-
-
1,380,354
(411,216)
969,138
91,109
(2,586,293)
233,784
240,028
(58,745)
(6,298,632)
29,324
(701,781)
(34,274)
-
-
-
-
-
-
-
-
-
receivables, net of
bad debts recovered
Additions to non-current
assets during the year:
Intangible assets
Land use rights
(20,066)
(1,157)
(1,711)
-
(4,800)
69,598
166,527
19,546
117,094
444
15,840
1,082
-
14,047
37,183
-
42,374
-
-
-
-
(27,734)
127,853
299,461
8,589,495
Property, plant and equipment
4,124,751
3,365,592
1,042,731
F-68
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
Year ended December 31, 2011
Primary
Aluminum
Alumina
aluminum
fabrication
Trading
(Note)
Corporate
and other
operating
activities
Inter-
segment
elimination
Total
31,127,030
57,979,676
11,794,808
109,172,393
(28,066,182)
(26,091,820)
(343,608)
(9,848,302)
176,078
(25,640)
(64,375,552)
145,874,433
64,375,552
-
35,916,115
63,407,976
Total revenue
Inter-segment revenue
Sales of self-produced
products
Sales of products sourced
from external suppliers
Revenue from external customers
3,060,848
31,887,856
11,451,200
99,324,091
150,438
-
145,874,433
351,903
905,474
(335,932)
670,638
(1,051,498)
277,411
Segment profit/(loss)
Income tax expense
Profit for the year
Other items:
Finance income
Finance costs
Share of profits of
jointly controlled entities
Share of profits of associates
Amortisation of land use
rights and leasehold land
Depreciation and amortisation excluding
the amortisation of land
use rights and leasehold land
Gain/(loss) on disposal of property,
plant and equipment
Impairment of property, plant and equipment
Change for impairment of inventories
(Provision for) /reversal of impairment
19,958
24,849
(720,508)
(1,322,311)
11,976
(393,680)
32,017
(119,325)
-
-
-
390,407
-
1,995
-
-
49,978
(876,528)
122,262
10,299
(30,979)
(25,042)
(7,589)
(15)
(2,222)
(2,449,016)
(2,554,844)
(354,107)
(3,565)
(95,064)
12,165
(247,997)
(82,714)
2,813
-
(132)
-
(56)
-
(2,769)
(31,753)
(116,639)
(26,565)
(40,923)
of receivables, net of bad debts recovered
41,888
(5)
(8,010)
Additions to non-current
assets during the year:
Intangible assets
Land use rights
467,426
1,397
65,034
338,680
13,862
106,504
-
-
-
Property, plant and equipment
2,150,181
4,135,453
2,760,745
9,538
109,021
F-69
-
-
787,798
-
817,996
(127,492)
690,504
138,778
(3,432,352)
122,262
402,701
(65,847)
(5,456,596)
12,021
(279,750)
(266,841)
33,873
1,334,120
446,581
9,164,938
-
-
-
-
-
-
-
-
-
-
-
-
-
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
Year ended December 31, 2012
Primary
Aluminum
Alumina
aluminum
fabrication
Trading
(Note)
Corporate
and other
operating
activities
Inter-
segment
elimination
Total
31,845,900
58,036,325
9,567,246
117,295,058
(28,168,871)
(25,581,383)
(1,259,851)
(12,521,632)
307,815
(41,786)
(67,573,523)
149,478,821
67,573,523
-
38,184,093
66,589,333
Total revenue
Inter-segment revenue
Sales of self-produced
products
Sales of products sourced
from external suppliers
Revenue from external customers
3,677,029
32,454,942
8,307,395
104,773,426
266,029
-
149,478,821
(3,744,947)
(3,084,684)
(1,385,899)
437,635
(1,449,429)
135,262
(9,092,062)
Segment (loss)/profit
Income tax benefit
Loss for the year
Other items:
Finance income
Finance costs
Share of profits of jointly
controlled entities
Share of profits/(losses) of associates
Amortisation of land use
rights and leasehold land
Depreciation and
amortisation excluding
the amortisation of land
use rights and leasehold land
Loss on disposal of
property, plant and equipment and
land use rights and leasehold land
Impairment of property, plant and equipment
Impairment for available-for-sale
financial investments
Change for impairment of
inventories
Reversal of / (provision for)
impairment of
receivables, net of bad
debts recovered
Additions to non-current
assets during the year:
Intangible assets
Land use rights
27,232
57,796
(898,656)
(1,535,959)
-
-
-
238,698
13,898
(659,278)
-
(1,233)
95,967
119,286
(285,803)
(1,533,863)
-
-
37,040
17,383
(40,063)
(26,640)
(7,748)
(101)
-
(2,527,909)
(2,668,886)
(388,663)
(4,061)
(106,749)
(231,080)
-
-
(222,879)
(19,903)
(7,778)
(789)
(1,036)
(86)
-
-
-
-
(552,875)
(289,397)
(109,396)
(80,259)
-
-
-
58,582
(120,268)
(32,139)
8,437
(1,516)
54,755
1,440
-
88
-
-
-
-
601
-
448,479
(8,643,583)
314,179
(4,913,559)
37,040
254,848
(74,552)
(5,696,268)
(455,870)
(19,903)
(7,778)
(1,031,927)
(86,904)
55,356
1,528
9,569,337
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Property, plant and equipment
4,187,114
4,604,665
483,459
48,523
245,576
Note: In connection with the significant increase of trading revenue, the Group refined its existing accounting system in order to separately capture sales of self-produced
products and products sourced from external suppliers within the trading segment in 2011 and 2012. However, similar analysis for 2010 is not available as such information
was not captured prior to 2011.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
F-70
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
Alumina
Primary Aluminum
aluminum fabrication
Trading
Corporate
and other
operating
activities
Inter-
segment
elimination
Total
As at December 31, 2011
Segment assets
61,051,299
56,843,300
15,749,941
12,219,330
13,386,026
(3,939,370) 155,310,526
Unallocated:
Deferred tax assets
Prepaid income tax
Total assets
1,517,339
306,292
157,134,157
Segment liabilities
30,771,919
31,233,582
11,953,100
9,696,315
19,568,267
(4,298,806)
98,924,377
Unallocated:
Deferred tax liabilities
Income tax payable
Total liabilities
As at December 31, 2012
4,456
50,638
98,979,471
Alumina
Primary Aluminum
aluminum fabrication
Trading
Corporate
and other
operating
activities
Inter-
segment
elimination
Total
Segment assets
73,674,402
56,052,801
14,742,449
14,170,929
23,162,073
(9,198,192) 172,604,462
Unallocated:
Deferred tax assets
Prepaid income tax
Total assets
2,116,986
295,434
175,016,882
Segment liabilities
40,217,727
30,396,514
10,795,472
11,361,833
38,277,111
(9,863,984) 121,184,673
Unallocated:
Income tax payable
Total liabilities
F-71
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
REVENUE AND SEGMENT INFORMATION (CONTINUED)
(b)
Segment information (Continued)
61,059
121,245,732
The Group mainly operates in the mainland of China. Geographical information of the operating segments is as follows:
2010
2011
2012
Segment revenue from external customers
- Domestic
- Overseas
Non-current assets (excluding available-for-sale
financial investments, entrusted loans
and deferred tax assets)
- Domestic
- Overseas
120,990,827
4,020
143,654,408
2,220,025
145,871,544
3,607,277
120,994,847
145,874,433
149,478,821
December 31,
2011
December 31,
2012
105,022,848
279,384
111,725,252
11,894,128
105,302,232
123,619,380
For the year ended December 31, 2012, revenues of approximately RMB24,921 million (2010: RMB28,945 million; 2011: RMB32,609 million)
are derived from entities directly or indirectly owned or controlled by the PRC government including Chinalco. These revenues are mainly
attributable to the alumina, primary aluminum, aluminum fabrication and trading segments. There was no other individual customer from whom
the Group has derived revenue of more than 10% of the Group's revenue during the year ended December 31, 2012.
F-72
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
6.
INTANGIBLE ASSETS
Year ended December 31, 2011
Opening net book amount
Transfer to assets of disposal group
classified as held for sale
Additions (Note)
Disposal
Amortisation
Goodwill
Mining
rights
Mineral
exploration
rights
Computer
software
and others
Total
2,362,735
530,396
-
140,744
3,033,875
-
-
-
-
(140,849)
227,680
(744)
(48,477)
-
1,081,427
-
-
-
25,013
(81)
(29,074)
(140,849)
1,334,120
(825)
(77,551)
Closing net book amount
2,362,735
568,006
1,081,427
136,602
4,148,770
As at December 31, 2011
Cost
Accumulated amortisation
2,362,735
-
822,588
(254,582)
1,081,427
-
241,447
(104,845)
4,508,197
(359,427)
Net book amount
2,362,735
568,006
1,081,427
136,602
4,148,770
Note:
Included in total additions of mineral exploration rights of RMB1,081 million during the year ended December 31, 2011 were acquisitions by way of acquiring the holding
companies of the respective rights:
(a)
(b)
), a limited company incorporated in
In March 2011, the Company entered into an investment agreement with Tangshan Jiahua Industrial Co., Ltd. (
the PRC, to acquire 70% equity interest in Gansu Huayang Mining Development Company Limited ("Huayang Mining") (
), a limited company
incorporated in the PRC. Pursuant to the agreement, the Company agreed to inject into Huayang Mining a total of RMB965 million. At the acquisition date, Huayang Mining
was still in pre-development stage and has no significant commercial operations. At the date of acquisition, except for cash and cash equivalents and mineral exploration
rights amounting to RMB55 million and RMB409 million, respectively, Huayang Mining did not have any other significant identifiable assets or liabilities. As of the December
31, 2011, the Company has injected into Huayang Mining a total of RMB50 million, and the remaining RMB915 million will be paid in two installments according to the
capital expenditure requirement within 5 years.
In March 2011, the Group, through a wholly-owned subsidiary, entered into an agreement with Laos Service Co. Limited ("Laos Service"), a limited liability company
incorporated in Laos, to acquire 60% equity interest in Laos Mineral Services Co., Limited ("Laos Mineral"), a limited liability company incorporated in Loas, at a total
consideration of USD18 million (equivalent to RMB115 million), of which, USD3 million will be injected into Laos Mneral as capital contribution. At the date of acquisition,
Laos Mineral had no significant business transactions other than the holding of the mineral exploration rights in Loas. As of December 31, 2011, the Group had paid USD15
million (equivalent to RMB96 million) to Laos Service.
Both Huayang Mining's and Laos Mineral's operation do not constitute a business as defined under IFRS 3 (Revised), "Business Combination". Accordingly, the acquisitions are
accounted for as purchase of assets.
Year ended December 31, 2012
Opening net book amount
Additions
Transfer from non-current assets
Amortisation
Reclassification
Exchange differences
Goodwill
2,362,735
-
-
-
-
-
Mining
rights
Mineral
exploration
rights
Computer
software
and others
568,006
50,405
150,811
(67,601)
129,029
-
1,081,427
194
-
-
(129,029)
(1,263)
136,602
4,757
-
(26,055)
-
-
Total
4,148,770
55,356
150,811
(93,656)
-
(1,263)
Closing net book amount
2,362,735
830,650
951,329
115,304
4,260,018
As at December 31, 2012
Cost
Accumulated amortisation
2,362,735
-
1,152,833
(322,183)
951,329
-
246,204
(130,900)
4,713,101
(453,083)
Net book amount
2,362,735
830,650
951,329
115,304
4,260,018
For the years ended December 31, 2010, 2011 and 2012, the amortisation expense of intangible assets recognised in profit or loss are analysed as
follows:
2010
52,584
14,993
67,577
2011
2012
65,189
12,362
67,842
25,814
77,551
93,656
Cost of sales (Note 25)
General and administrative expenses (Note 26(b))
F-73
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
6.
INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill
The lowest level within the Group at which goodwill is monitored for internal management purposes is the operating segment level. Therefore, goodwill
is allocated to the Group's cash-generating units ("CGUs") and groups of CGUs according to operating segments. A summary of goodwill allocated to
each segment is presented below:
Qinghai Branch
Guangxi Branch
Lanzhou Branch
Jiaozuo Wanfang Power
Co., Ltd. ("Wanfang Power")
December 31, 2011
December 31, 2012
Alumina
-
189,419
-
Primary
aluminum
217,267
-
1,924,259
Alumina
-
189,419
-
Primary
aluminum
217,267
-
1,924,259
-
31,790
-
31,790
189,419
2,173,316
189,419
2,173,316
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
rate at 2.5% not exceeding the long-term average growth rate 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 costs and related expenses. Management determined that these
key assumptions were based on past performance and their expectations on market development. Furthermore, the Group adopts a pre-tax rate of 12.62%
(2011: 11.14%) that reflects specific risks related to CGUs and groups of CGUs as discount rates. The assumptions above are used in analysing
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 at December 31, 2012 (December
31, 2011: 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 8.90% and 10.87%, respectively. A one percent increase or decrease in estimated growth, with all other variables held constant,
would result in an increase or decrease in the recoverable amount of 8.27% and 5.78%, respectively.
F-74
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT
Buildings
Machinery
Transportation
facilities
and other Construction-
in-progress
equipment
Total
Office
Year ended December 31, 2011
Opening net book amount
Currency translation differences
Transfers/reclassifications
Transfer to assets of disposal groups
classified as held for sale
Additions
Disposals
Depreciation
Write-off/impairment loss (Note (b))
24,024,955
(1,218)
3,230,599
(89,946)
72,365
(11,706)
(1,070,244)
(13,003)
47,111,664
(3)
7,174,677
(29,981)
35,030
(15,771)
(4,283,850)
(100)
1,417,979
(33)
118,193
(1,428)
13,566
(8,087)
(248,409)
-
167,265
(6)
34,662
-
7,688
(820)
(54,654)
-
18,056,809
(5,984)
(10,558,131)
90,778,672
(7,244)
-
-
9,036,289
(2,357)
-
(330,637)
(121,355)
9,164,938
(38,741)
(5,657,157)
(343,740)
Closing net book amount
26,141,802
49,991,666
1,291,781
154,135
16,195,989
93,775,373
As at December 31, 2011
Cost
Accumulated depreciation and impairment
37,326,219
(11,184,417)
89,616,972
(39,625,306)
3,248,927
(1,957,146)
595,406
(441,271)
16,847,226
(651,237)
147,634,750
(53,859,377)
Net book amount
26,141,802
49,991,666
1,291,781
154,135
16,195,989
93,775,373
Buildings
Machinery
Transportation
facilities
and other Construction-
in-progress
equipment
Total
Office
Year ended December 31, 2012
Opening net book amount
Currency translation differences
Transfers/reclassifications
Transfer to land use rights and leasehold land
Additions
Disposals
Depreciation
Impairment loss
26,141,802
74
3,588,109
(45,025)
8,202
(156,459)
(1,205,811)
(1,365)
49,991,666
-
6,840,370
-
156,531
(475,108)
(4,649,853)
(16,304)
1,291,781
(136)
323,787
-
16,190
(21,262)
(240,096)
(201)
154,135
(304)
16,714
-
5,545
(2,100)
(45,198)
(100)
16,195,989
(7,851)
(10,768,980)
(227,587)
9,382,869
-
-
(1,933)
93,775,373
(8,217)
-
(272,612)
9,569,337
(654,929)
(6,140,958)
(19,903)
Closing net book amount
28,329,527
51,847,302
1,370,063
128,692
14,572,507
96,248,091
As at December 31, 2012
Cost
Accumulated depreciation and impairment
40,422,683
(12,093,156)
94,610,756
(42,763,454)
3,474,875
(2,104,812)
548,633
(419,941)
15,220,878
(648,371)
154,277,825
(58,029,734)
Net book amount
28,329,527
51,847,302
1,370,063
128,692
14,572,507
96,248,091
F-75
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012, depreciation expenses recognised in profit or loss are analysed as follows:
2010
2011
2012
Cost of sales (Note 25)
General and administrative expenses (Note 26(b))
Selling and distribution expenses (Note 26(a))
6,014,643
207,075
9,337
5,202,402
156,190
20,453
4,767,583
162,331
31,958
6,231,055
5,379,045
4,961,872
As at December 31, 2012, the Group was in the process of applying for the ownership certificates of buildings with a net book value of RMB6,890
million (December 31, 2011: RMB4,212 million).
As at December 31, 2012, buildings with a net book value of RMB5 million (December 31, 2011: RMB5 million) is situated in Hong Kong.
For the year ended December 31, 2012, interest expenses of RMB635 million (2010: RMB645 million; 2011: RMB731 million) arising from borrowings
attributable to the construction of property, plant and equipment during the year were capitalised at an annual rate of 4.74% to 7.17% (2010: 4.10% to
5.15%; 2011: 4.16% to 6.02%) (Note 28) and were included in "additions" to property, plant and equipment.
As at December 31, 2012, the Group has pledged property, plant and equipment at a net book value amounting to RMB2,243 million (December 31,
2011: RMB1,307 million) for bank and other borrowings as set out in Note 24 to the consolidated financial statements.
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 CGU is an
individual plant or entity. The carrying value of these individual plants or entities was compared to the recoverable amount of the CGUs, which was
based predominantly on value-in-use. 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 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 that these key assumptions were based on past performance and
their expectations on market development. Further, the Group adopts a pre-tax rate of 10.19% (2011: 11.14%) that reflects specific risks related to CGUs
and groups of CGUs as discount rates. The assumptions above are used in analysing recoverable amounts of CGUs and groups of CGUs within
operating segments.
F-76
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
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 to be completed is based on the estimated net disposal value of the CGU less cost to disposal rather than by reference
to its value-in-use.
For the year ended December 31, 2012, impairment loss for property, plant and equipment of RMB20 million (2010: RMB702 million; 2011: RMB280
million) was recognised in profit or loss, which was determined based on the fair value less costs to sell of the relevant property, plant and equipment.
A one percentage point increase or decrease in the discount rate, with all other variables held constant, would result in a 4.11% and 4.41% 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 0.84% and 0.81% increase or decrease in the recoverable amount of property, plant and
equipment, respectively.
(a)
As a result of the Group's operational structural adjustments exercise 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 represented the difference between the carrying value of these
property, plant and equipment of RMB370 million and their estimated recoverable amounts (estimated fair value less costs to sell). There was no
such matter for the year ended December 31, 2011.
(b)
For the year end December 31, 2011, impairment loss of RMB280 million was principally related to the exploration and development of bauxite
resource in Aurukun, Queensland, Australia (the "Aurukun Project").
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 was automatically terminated upon its
expiration date. After the expiration of the Development Agreement, the Company and Queensland State Government agreed to discuss for
development of the Aurukun Project. In December 2010, Queensland State Government had offered to the Company a revised development
agreement allowing the Company to change the AuruKun Project from a mining plus refinery plant integrated project to a mining plus
replacement project (the "December 2010 Offer"). In June 2011, the Queensland State Government withdrew the aforementioned offer and
informed the Company that a public bidding process on the Aurukun Project will be commenced (the "June 2011 Withdrawal").
F-77
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Impairment test for property, plant and equipment (Continued)
In December 2010, as a result of the aforementioned December 2010 Offer, full provision for impairment of RMB373 million was made against the
carrying value of the capitalised development costs attributable to the refinery plant of the Aurukun Project. In June 2011, in connection with the
aforementioned June 2011 Withdrawal of the offer by the Queensland State Government, a government subsidy amounting to RMB64 million (2010:
nil) was released from deferred government subsidies and net off against the carrying value of related assets as there is no further performance
obligations required. Thereafter, the remaining carrying value of the expenditure pertaining to the Aurukun Project is fully provided for at December 31,
2011. As a result, an additional impairment charge of RMB278 million was recognized in the statement of comprehensive income for the year ended
December 31, 2011 and the carrying value of the Aurukun Project is reduced to nil.
F-78
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
8.
LAND USE RIGHTS AND LEASEHOLD LAND
Details of land use rights and leasehold land are as follows:
Finance leases (a):
In Hong Kong, held on:
Leases between 10 to 50 years
Operating leases (b):
In the mainland of the PRC, held on:
Leases less than 10 years
Leases between 10 to 50 years
Leases over 50 years
(a)
Finance leases
As at January 1,
Cost
Accumulated amortisation
Net book amount
Year ended December 31,
Opening net book amount
Reclassification from property,
plant and equipment (Note 7)
Currency translation differences
Amortisation
Closing net book amount
As at December 31,
Cost
December 31,
2011
December 31,
2012
81,691
97,261
-
2,469,604
7,017
27,017
2,463,185
6,745
2,558,312
2,594,208
2011
2012
95,407
(8,126)
87,281
87,281
-
(3,368)
(2,222)
81,691
91,677
(9,986)
81,691
81,691
18,273
(32)
(2,671)
97,261
91,677
109,845
Accumulated amortisation
Net book amount
(9,986)
81,691
(12,584)
97,261
As at December 31, 2012, finance leases represented leasehold land situated in Hong Kong held under leases of 34 years (December 31, 2011: 35
years).
For the year ended December 31, 2010, 2011 and 2012, the amortisation expense of leasehold land was recognised in "general and administrative
expenses" in profit or loss.
F-79
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
8.
LAND USE RIGHTS AND LEASEHOLD LAND (CONTINUED)
(b) Operating leases prepayments
As at January 1,
Additions
Reclassification from property, plant and equipment (Note7)
Transfer to held-for-sale assets (Note 13)
Transfer to non-current assets
Disposals
Amortisation
2011
2012
2,093,665
446,581
-
-
-
-
(63,625)
2,476,621
1,528
254,339
(129,964)
(27,946)
(5,750)
(71,881)
As at December 31,
2,476,621
2,496,947
As at December 31, 2012, the Group was in the process of applying for the certificates of land use rights with carrying amount of RMB416
million (December 31, 2011: RMB484 million).
For the year ended December 31, 2010, 2011 and 2012, the amortisation expense of land use right was recognised in "general and administrative
expenses" in profit or loss.
As at December 31, 2012, the Group has pledged land use right at a net book value amounting to RMB69 million (December 31, 2011: RMB123
million) for bank and other borrowings as set out in Note 24 to the consolidated financial statements.
F-80
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES
(a)
Investments in jointly controlled entities
Movements in investments in jointly controlled entities are as follows:
As at January 1
Capital injections/acquisitions (Note)
Share of profits for the year
Cash dividends declared
2011
2012
990,568
445,041
122,262
(100,642)
1,457,229
509,152
37,040
(66,471)
As at December 31
1,457,229
1,936,950
Note: During the year ended December 31, 2012, the capital injections/acquisitions in the jointly controlled entities of the Group amounting to
RMB172 million, were paid in cash.
As at December 31, 2011 and 2012, particulars of the jointly controlled entities of the Group, all of which are unlisted, are as follows:
Name
Place of
establishment
and
operation
Registered
and fully
Business nature and
Legal status
paid capital
scope of operations
Effective equity
interest held
2011
2012
Shanxi Jinxin Aluminum
Mainland of China
Limited liability
20,000
Manufacture and distribution
50%
50%
Co., Ltd. ("Jinxin Aluminum")
company
of primary aluminum
(
(Note (i))
)
Guangxi Huayin Aluminum
Mainland of China
Limited liability
2,441,987
Manufacture and distribution
33%
33%
Co. Ltd. ("Guangxi Huayin")
(
)
company
of alumina
Shanxi Jiexiu Xinyugou
Mainland of China
Limited liability
200,000
Coal production
34%
34%
Coal Co., Ltd. ("Xinyugou Coal")
company
(
)
(Note (ii))
Chalco Sapa Aluminum Products
Mainland of China
Limited liability
Registered capital
Manufacture and distribution of
50%
50%
(Chongqing) Co., Ltd.
("Chalco Sapa")
(
)
company
280,000
aluminum fabricated products
Paid-in-capital
226,032
Chalco Liupanshui Hengtaihe Mining
Mainland of China
Limited liability
Registered capital
Coal production
-
49%
Co., Ltd. ("Hengtaihe Mining")
company
420,000
(
)
(Note(iii)
Paid-in-capital
149,370
F-81
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(a)
Investments in jointly controlled entities (Continued)
As at December 31, 2011 and 2012, particulars of the jointly controlled entities of the Group, all of which are unlisted, are as follows: (Continued)
Name
Place of
establishment
and
operation
Registered
and fully
Business nature and
Legal status
paid capital
scope of operations
Jiaozuo Wanfang Water Company
Mainland of China
Limited liability
9,000
Sewage disposal and
( "Wanfang Water")
(
(Note(iv))
)
company
recycling
Shanxi Chengcheng Dongdong
Mainland of China
Limited liability
95,000
Coal production
Coal Co., Ltd.
("Dongdong Coal")
(
)
(Note(v))
company
Datong Coal Group Huasheng
Mainland of China
Limited liability
10,000
Coal production
Wanjie Coal Co.,Ltd.
("Huasheng Wanjie")
(
(Note(vi))
)
company
Henan Chalco Lichuang Mining
Mainland of China
Limited liability
10,000
Sales of bauxite
Co.,Ltd. ("Chalco Lichuang")
company
Effective equity
interest held
2011
2012
-
-
-
-
12%
45%
49%
49%
(
)
(Note(vii))
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)
(ii)
As at December 31, 2012, 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.
In the first half of 2012, the Company injected additional cash amounting to RMB82 million as capital contribution to Xinyugou Coal. Xinyugou Coal is a company
established in the PRC with limited liability and its principal activity is coal production in Shanxi Province of the PRC. As at December 31, 2012, the Company held
34% equity interest in Xinyugou Coal.
F-82
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(a)
Investments in jointly controlled entities (Continued)
Notes: (Continued)
(iii)
(iv)
(v)
(vi)
(vii)
In March 2012, the Company, through a wholly owned subsidiary, Guizhou Mining Co., Ltd., and Liupanshui Hengtaihe Mining Investment Co., Ltd.
(
principal activity is coal production in Guizhou Province of the PRC. As at December 31, 2012, the Group has injected cash amounting to RMB75 million as capital
contribution and held 49% equity interest in Hengtaihe Mining.
), jointly established Hengtaihe Mining. Hengtaihe Mining is a company incorporated in the PRC with limited liability and its
), jointly established (Wanfang
In June 2012, the Company, through a 24% owned subsidiary, Jiaozuo Wanfang, and Junzheng Trading Co., Ltd. (
Water). Wanfang Water is a company established in the PRC with limited liability and its principal activity is sewage disposal and recycling in Henan Province of the
PRC. As at December 31, 2012, the Group has injected cash amounting to RMB4.5 million and held 50% equity interest in Wanfang Water.
In May 2012, the Company, through a wholly owned subsidiary, Shanxi Huayu Energy Investment Co., Ltd., acquired 45% equity interest in Dongdong Coal from
Shaanxi Sanqin Energy Co., Ltd. (
consideration amounting to RMB200 million. Dongdong Coal is a company incorporated in the PRC with limited liability and its principal activity is coal production
in Shanxi Province of the PRC.
) at a total consideration of RMB200 million. As at December 31, 2012, the Group has paid cash
In October 2012, the Company, through a wholly owned subsidiary, Shanxi Huayu Energy Investment Co., Ltd., and another investor, Datong Coal Group Hejin
Xuanmei Huasheng Investing Co., Ltd. (
injected cash amounting to RMB4.9 million and held 49% equity interest in Huasheng Wanjie.
), established Huasheng Wanjie. As at December 31, 2012, the Group have
In July 2012, the Company, through a wholly-owned subsidiary, Chalco Mining Co., Ltd., and Henan Jinfeng Coal Group Co., Ltd. (
jointly established Chalco Lichuang. Chalco Lichuang is a company established in the PRC with limited liability and its principal activity is sales of bauxite in Henan
Province of the PRC. As at December 31, 2012, the Group has injected cash amounting to RMB4.9 million and held 49% equity interest in Chalco Lichuang.
),
F-83
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(a)
Investments in jointly controlled entities (Continued)
As at December 31, 2011 and 2012, the Group's share of interests in its jointly controlled entities, based on their management accounts or
financial statements, are as follows:
December 31, 2011
Jinxin Aluminum
Guangxi Huayin
Xinyugou Coal
Chalco Sapa
December 31, 2012
Jinxin Aluminum
Guangxi Huayin
Assets
Liabilities
Revenue
for the year
Profit/(loss)
for the year
20,324
2,646,228
1,059,713
115,070
(20,846)
(1,629,451)
(660,753)
(6,643)
-
1,507,908
-
-
-
126,851
-
(4,589)
20,324
2,697,045
(20,846)
(1,728,251)
-
1,104,868
-
21,849
Xinyugou Coal
Chalco Sapa
Hengtaihe Mining
Wanfang Water
Dongdong Coal
Huasheng Wanjie
Chalco Lichuang
1,277,494
171,860
156,113
4,555
238,728
301,811
4,895
(875,604)
(67,924)
(62,549)
(54)
(201,179)
(157,709)
-
-
-
35,263
-
-
-
-
-
(4,454)
14,048
-
-
(1)
(5)
As at December 31, 2012, the proportionate interests of the Group in jointly controlled entities' capital commitments was RMB335 million
(December 31, 2011: RMB180 million).
There were no material contingent liabilities relating to the Group's interests in the jointly controlled entities and the jointly controlled entities
themselves.
F-84
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(b)
Investments in associates
Movements in investments in associates are as follows:
As at January 1
Capital injection/acquisitions (Note)
Share of profits for the year
Cash dividends declared
Exchange difference
Share of change in reserves
2011
2012
1,212,608
862,000
402,701
-
-
15,277
2,492,586
14,734,767
254,848
(236,152)
(44,617)
10,533
As at December 31
2,492,586
17,211,965
Note:
During the year ended December 31, 2012, the capital injections/acquisitions in the associates of the Group amounting to RMB13,407 million, were paid in cash.
F-85
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(b)
Investments in associates (Continued)
As at December 31, 2011 and 2012, particulars of the associates of the Group, all of which are unlisted, are follows:
Name
Place of
establishment
and
operation
Registered
and fully
Business nature and
Legal status
paid capital
scope of operations
Effective equity
interest held
2011
2012
ABC-CA Fund Management Co., Ltd.
Mainland of China
Limited liability
200,000
Investments
15%
15%
("ABC Fund")
(
(Note (i))
)
company
Jiaozuo Coal Group Xinxiang
Mainland of China
Limited liability
800,000
Coal production
7.2%
7.2%
(Zhaogu) Energy Corporation
Co., Ltd. ("Zhaogu Coal")
(
(Note (ii))
)
)
company
Jiaozuo Wanfang Industry Co., Ltd.
Mainland of China
Limited liability
10,000
Sales of construction materials
7.2%
7.2%
("Wanfang Industry")
(
(Note (ii))
)
company
and other goods
Duofuduo (Fushun)
Mainland of China
Limited liability
126,660
Manufacture and distribution
45%
45%
Technology Development
Co., Ltd. ("Duofuduo")
(
)
Henan Zhongfu Special
Aluminum Co., Ltd.
("Henan Zhongfu")
(
)
Qinghai Province Energy
Development (Group)
Co., Ltd. ("Qinghai Energy")
(
)
) (Note (iii))
company
of fluoride products
Mainland of China
Limited liability
769,000
Manufacture and distribution
23.41%
23.41%
company
of aluminum fabricated products
Mainland of China
Limited liability
Registered Capital
Coal production
21%
21%
company
3,555,000
Paid-in-capital
2,725,000
Guizhou Chalco Aluminum Co., Ltd.
Mainland of China
Limited liability
Registered Capital
Manufacture and distribution
40%
40%
("Guizhou Chalco")
(
(Note(iv))
)
company
320,000
of aluminum fabricated products
Paid-in-capital
200,000
Guizhou Yuneng Mining Co., Ltd.
Mainland of China
Limited liability
209,721
Coal production
("Yuneng Mining")
(
(Note(v))
)
company
Simfer Jersey Limited (Note(vi))
Jersey Island
Limited liability
USD2,938,107,783
Iron ore development in
company
Guinea, West Africa
Huozhou Coal Group Xingshengyuan
Mainland of China
Limited liability
50,000
Coal production
Coal Co., Ltd.
(
)
("Xingshengyuan Coal")
(Note(vii))
company
Shanxi Huatuo Alumina Co., Ltd.
Mainland of China
Limited liability
30,000
Manufacture of aluminum
("Huatuo Alumina")
(
(Note(viii))
)
company
fabricated products
Ningxia Electric Power Group
Mainland of China
Limited liability
5,028,800
Thermal power, wind power and
Co., Ltd. ("Ningfa")
(
)
(Note(ix))
company
solar power generation,
coal mining, and power
related equipment
manufacturing
-
-
-
-
-
25%
30.55%
21.95%
10.6%
35.54%
F-86
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(b)
Investments in associates (Continued)
Except for Simfer Jersey Limited, 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)
(ii)
(iii)
The Company exercises significant influence over ABC Fund through its appointment of a director into the board of directors of ABC Fund.
Zhaogu Coal and Wanfang Industry are associated companies of the Group's 24.002% (2011: 24.002%) subsidiary, Jiaozuo Wanfang, in which Jiaozuo Wanfang
holds a 30% (2011: 30%) direct equity interest.
In March 2011, the Company, Qinghai Province Investment Group Co., Ltd. (
), a PRC limited liability company, and other six investors
jointly established Qinghai Energy. Qinghai Energy is a PRC limited liability company and its principal activity is coal production in Qinghai Province of the PRC.
As of December 31, 2011, the Company has injected cash amounting to RMB755 million and holds 21% equity interest in Qinghai Energy.
(iv)
In June 2011, the Company, Guiyang Industrial Investment (Group) Co., Ltd (
) and Shanghai Enyuan Industry Co., Ltd. (
), two other PRC limited liability companies, jointly established Guizhou Chalco. Guizhou Chalco is a PRC limited liability company and its
principal activity is aluminum fabrication. As of December 31, 2011, the Company has injected cash amounting to RMB35 million and property, plant and equipment
amounting to RMB45 million and holds 40% equity interest in Guizhou Chalco.
In 2012, the Group injected additional capital in cash to Guizhou Chalco amounting to RMB48 million and maintained its 40% equity interest in GuizhouChalco.
(v)
(vi)
(vii)
In May 2012, the Company, through a wholly owned subsidiary, Zunyi Mining Co., Ltd., acquired 25% equity interest in Yuneng Mining from Chongqing Wujiang
Shiye (Group) Co., Ltd. (
consideration amounting to RMB473 million. Yuneng Mining is a company established in the PRC with limited liability and its principal activity is coal production in
Guizhou Province of the PRC.
) at a total consideration of RMB473 million. As at December 31, 2012, the Group has paid cash
On July 29, 2010, the Company, Rio Tinto plc ("Rio Tinto") and Rio Tinto Iron Ore Atlantic Limited, two limited liability companies incorporated in England, entered
into a Joint Development Agreement (the "Agreement") for the development and operation of an open-pit iron ore mine located in Guinea, West Africa (the
"Simandou Project"). Pursuant to the Agreement, subject to the approval by the relevant Chinese government authorities, the Company agreed to acquire by stages
up to 47% equity interests in a newly set up company, Simfer Jersey Limited, which owns a 95% equity interest of Simandou Project, at a total consideration of
USD1.35 billion. On November 28, 2011, the Company, through a wholly owned subsidiary, Chalco Hong Kong Limited, and other three external investors entered
into a framework agreement to jointly incorporate a company, namely Chalco Iron Ore Holdings Limited, to invest in the 47% interest in Simfer Jersey Limited.
Pursuant to this framework agreement, Chalco Hong Kong Limited holds a 65% equity interest in Chalco Iron Ore Holdings Limited. During the year, the relevant
Chinese government authorities had approved the Group's investment in Simfer Jersey Limited. On April 24, 2012, Chalco Iron Ore Holdings Limited paid a total
cash consideration of USD1.35 billion (equivalent to approximately RMB8.57 billion) to Simfer Jersey Limited and acquired a 47% equity interest.
As at December 31, 2012, Chalco Iron Ore Holdings Limited have injected additional USD480 million (equivalent to approximately RMB3,075 million) to Simfer
Jersey Limited for the development and operation of Simandou Project.
In July 2012, the Company, through a 51% owned subsidiary, Shanxi Huasheng, together with Huozhou Coal Power Group Co., Ltd. (
Shanxi Dibao Energy Co., Ltd. (
RMB21.5 million and held 43.03% equity interest in Xingshengyuan Coal.
) established Xingshengyuan Coal. As at December 31, 2012, the Group have injected cash amounting to
) and
F-87
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(b)
Investments in associates (Continued)
Notes: (Continued)
(viii)
(ix)
In November 2012, the Company, through a 51% owned subsidiary, Shanxi Huasheng, together with other two investors, established Huatuo Alumina. The registered
capital of Huatuo Alumina is RMB30 million. As at December 31, 2012, Shanxi Huasheng have completed the capital injection by a land use right of land with square
of 94.56 mu (63,040 square meters, equivalently) at the cost of RMB6.2 million and held 20.78% equity interest in Huatuo Alumina.
In August 2012, the Company entered into the Equity Transfer Agreement with China Zhongtou Trust Co., Ltd. (
acquire an 11.88% equity interest in Ningfa at a total consideration of RMB674.9 million. This initial investment in Ningfa was accounted for at cost. In December
) ("Huadian Power") to
2012, the Company entered into the Equity Transfer Agreement with Huadian Power International Co., Ltd. (
acquire an additional 23.66% equity interest in Ningfa at a total consideration of RMB1,362 million. As at December 31, 2012, the Company has paid cash
amounting to RMB674.9 million to Zhongtou Trust and RMB544.6 million to Huadian Power, respectively, and held a total of 35.54% equity interest in Ningfa. This
additional interest resulted in the Company gaining significant influence over Ningfa. The excess of the fair value of identifiable net assets as at the acquisition date
over the consideration transferred amounting to RMB505 million was recognised in other gains in profit or loss for the year ended December 31, 2012 and the
investment in associate balance was adjusted correspondingly.
) ("Zhongtou Trust") to
F-88
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES/ASSOCIATES (CONTINUED)
(b)
Investments in associates (Continued)
As at December 31, 2011 and 2012, the Group's share of interests in its associates, based on their management accounts or financial statements,
are as follows:
December 31, 2011
ABC Fund
Zhaogu Coal
Wanfang Industry
Duofuduo
Henan Zhongfu
Qinghai Energy
Guizhou Chalco
Assets
Liabilities
Revenue
for the year
Profit/(loss)
for the year
52,146
1,936,620
3,348
60,197
233,352
785,081
80,832
(9,148)
(587,575)
(1,634)
(2,904)
(30,847)
(198,679)
(364)
33,696
1,112,594
12
-
434,101
153,685
14,928
6,536
391,004
(575)
(4)
2,513
4,362
468
December 31, 2012
ABC Fund
Zhaogu Coal
Wanfang Industry
Duofuduo
Henan Zhongfu
Qinghai Energy
Guizhou Chalco
Yuneng Mining
Simfer Jersey Limited
Xingshengyuan Coal
Huatuo Alumina
Ningfa
55,371
2,054,815
3,036
59,541
283,412
1,146,873
161,662
820,777
12,369,542
256,676
6,284
9,315,254
(10,239)
(684,961)
(1,863)
(1,958)
(82,080)
(382,724)
(22,889)
(546,407)
(772,381)
(235,161)
(50)
(7,908,147)
31,417
848,007
169
-
414,916
213,419
274
8,848
-
-
-
1,456,011
4,510
243,067
(541)
289
174
5,972
10,278
(98)
(2,926)
-
-
(3,738)
As at December 31, 2012, the proportionate interests of the Group in associates' capital commitments was RMB1,388 million (December 31,
2011: RMB114 million).
F-89
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
10. AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS
As at January 1
Addition (Note(i))
Impairment (Note(ii))
As at December 31
2011
44,878
-
-
44,878
2012
44,878
27,400
(7,778)
64,500
As at December 31, 2011 and 2012, all available-for-sale financial investments are unlisted securities in the PRC, which are denominated in RMB
(December 31, 2011: all in RMB). The directors of the Company are of their opinion that as these available-for-sale financial investments do not have a
quoted market price in an active market and their fair value cannot be reliably measured, therefore, the available-for-sale financial instruments are stated
as cost.
Notes:
(i)
In October 2012, the Company through a wholly owned subsidiary, Inner Mongolia International Trade Co. Ltd. ("IMIT") entered into the Equity Transfer Agreement with
Wutelazhong County State-owned Assets Bureau (
(
equity interest in Ganqimaodu.
) ("Ganqimaodu") at a total consideration of RMB20 million. As at December 31, 2012, IMIT has fully paid the consideration and the Company held 10%
) to acquire 10% equity interest in Inner Mongolia Ganqimaodu Port Service Co. Ltd.
In November 2012, the Company through a wholly owned subsidiary, Baotou Aluminum Co. Ltd., together with Inner Mongolia Yilong Holding Co., Ltd. (
and Baotou Hedong District Assets Operation Center (
As at December 31, 2012, the registered capital and paid-in capital of Jinxi Logistics was RMB200 million and RMB40.8 million. As at December 31, 2012, the Group has
injected cash amounting to RMB7.4 million and holds 18.5% equity interest in Jinxi Logistics.
) to established Baotou Aluminum Jinxi Logistics Co. Ltd. (
) ("Jinxi Logistics").
)
(ii)
Full impairment was made for the Group's investment in Zunyi Alumina Tuoguan Carbon Co, Ltd. (
the year ended December 31, 2012.
)("Tuoguan"), as Tuoguan suspended operations for
F-90
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
11. DEFERRED TAX
Deferred 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 taxes relate to the same tax authority. The analysis of deferred tax assets and deferred tax liabilities is as follows as at
December 31, 2011 and 2012:
December 31,
2011
December 31,
2012
Deferred tax assets:
- Deferred tax assets to be recovered after 12 months or more
1,104,776
1,706,069
- Deferred tax assets to be recovered within 12 months
412,563
410,917
Deferred tax liabilities:
- Deferred tax liabilities to be settled after 12 months or more
- Deferred tax liabilities to be settled within 12 months
F-91
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
11. DEFERRED TAX (CONTINUED)
The movements in deferred tax are as follows:
As at January 1
Disposal of a subsidiary
Exchange realignment
Write-off of deferred tax assets previously recognised (Note 31)
Recognition in profit or loss (Note 31)
1,517,339
2,116,986
4,216
240
4,456
-
-
-
1,512,883
2,116,986
2011
2012
1,410,781
(821)
-
-
102,923
1,512,883
-
(5)
(1,004,272)
1,608,380
As at December 31
1,512,883
2,116,986
The movements in deferred tax assets and liabilities during the year ended December 31, 2011 and 2012, without taking into consideration the offsetting
of balances within the same tax jurisdiction, are as follows:
Movements in deferred tax assets:
Provision for
Impairment of
receivables,
inventories and
property, plant
and equipment
162,926
(821)
53,892
Accrued
expenses
140,571
-
(31,478)
Tax deduction
on purchases
of qualified
Unrealised
Reversal of
profit at
asset
equipment
Tax losses
consolidation
revaluation
Others
Total
60,092
-
6,800
1,013,513
-
38,226
71,577
-
(48,669)
26,192
-
(1,101)
61,393
1,536,264
-
(821)
75,071
92,741
As at January 1, 2011
Disposal of a subsidiary
Credited/(charged) to profit or loss
As at December 31, 2011
Exchange realignment
Write-off of deferred tax assets previously recognised
Credited/(charged) to profit or loss
215,997
109,093
66,892
1,051,739
22,908
25,091
136,464
1,628,184
-
(18,236)
208,661
-
(1,707)
(11,884)
-
-
(2,700)
(5)
(984,329)
1,417,259
-
-
-
-
-
(5)
- (1,004,272)
23,318
(25,091)
27,036
1,636,599
As at December 31, 2012
406,422
95,502
64,192
1,484,664
46,226
-
163,500
2,260,506
F-92
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
11. DEFERRED TAX (CONTINUED)
Movements in deferred tax liabilities:
As at January 1, 2011
Charged/(credited) to profit or loss
As at December 31, 2011
Charged/(credited) to profit or loss
Fair value
changes of
capitalisation financial assets
Interest
Depreciation
of property,
plant and
equipment
121,355
(20,827)
2,576
169
100,528
(10,576)
2,745
(1,255)
-
6,185
6,185
(338)
Others
Total
1,552
4,291
125,483
(10,182)
5,843
40,388
115,301
28,219
As at December 31, 2012
89,952
1,490
5,847
46,231
143,520
As at December 31, 2012, the Group did not recognize the deferred tax liabilities related to the aggregate amount of temporary differences associated
with investments in subsidiaries, associates and jointly controlled entities, because the Group can control the reversal timing of these temporary
differences, and these temporary differences will not be reversed in the foreseeable future. As at December 31, 2012, the above temporary differences
for which deferred tax liabilities have not been recognized were RMB 651 million.
As at December 31, 2012, the Group has not recognised deferred tax assets of RMB2,422 million (December 31, 2011: RMB633 million) in respect of
accumulated tax losses amounting to RMB9,686 million (2011: RMB2,532 million) that can be carried forward against future taxable income as it was
not considered probable that those assets would be realised. As at December 31, 2011and 2012, the expiry profile of these tax losses is analysed as
follows:
Expiring in
2012
2013
2014
2015
2016
2017
Total
December 31,
2011
December 31,
2012
279,094
397,956
971,634
451,856
431,209
N/A
N/A
522,489
4,555,850
703,696
726,875
3,177,095
2,531,749
9,686,005
As at December 31, 2012, deferred tax assets amounting to RMB1,485 million (December 31, 2011: RMB1,052 million) were recognised for tax loss
carried forward to the extent that the realisation of the related tax benefit is probable. The recognition of these deferred tax assets are supported by
forecast of future taxable profits and also analysis of tax planning opportunities available to the Group.
F-93
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
12. OTHER NON-CURRENT ASSETS
Advances and deposits paid
to suppliers
Entrusted loans to a related party (Note (a) and Note 35)
Prepayment for investment projects
Other prepayments (Note (b))
Others
December 31,
2011
December 31,
2012
139,866
300,000
200,000
524,229
5,867
111,946
200,000
342,000
770,581
143,621
1,169,962
1,568,148
Notes:
(a)
In 2011, the Company entered into an agreement ("Agreement") with Xinyugou Coal (Note 9(a)(ii)) to provide three year entrusted loans to Xinyugou Coal totalling RMB1,000
million with annual interest rate of 10%. Pursuant to the Agreement, the 51% equity interest of Xinyugou Coal held by Shanxi Province Jiexiu Luxin Coals Gas Co. Ltd. is
pledged as collateral for these entrusted loans. As at December 31, 2012, RMB500 million (December 31, 2011: RMB300 million) was provided to Xinyugou Coal. As at
December 31, 2012, RMB300 million (December 31, 2011: nil) of these entrusted loans to be repaid in 2013 was included in other current assets.
(b)
As at December 31, 2011 and 2012, other prepayments mainly represented prepayment for certain mine development costs and related leases.
F-94
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
13. ASSETS OF A DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
Details of assets of a disposal group classified as held for sale are as follows:
Property, plant and equipment
Intangible assets
Land use rights
Inventories
December 31,
2011
December 31,
2012
743,060
140,849
-
13,122
621,705
-
129,964
-
897,031
751,669
In December 2010, the Company through a 90% owned subsidiary, Chalco Henan Aluminum Co., Limited, signed an investment agreement with an
independent investor to establish Henan Zhongfu. Chalco Henan Aluminum Co., Limited completed the capital injection in cash amounting to RMB200
million for a 26% equity interest in Henan Zhongfu in 2010. In addition, the investment agreement stipulated that Chalco Henan Aluminum Co., Limited
would transfer certain assets to Henan Zhongfu, and Henan Zhongfu would assume an equivalent amount of liabilities from Chalco Henan Aluminum
Co., Limited. Included in December 31, 2011 were certain property, plant and equipment amounting to RMB622 million which were attributable to
certain production lines that were intended to be disposed to Henan Zhongfu. In 2012, certain land use rights amounting to RMB130 million were
intended to be disposed to Henan Zhongfu. The transfer of above property, plant and equipment and land use rights is expected to be completed in 2013.
Chalco Henan Aluminum Co., Limited is part of the aluminum fabrication segment.
As of December 31, 2011, the remaining assets included in " assets of disposal group classified as held for sale" were certain intangibles, property, plant
and equipment and inventories amounting to RMB141 million, RMB121 million and RMB13 million, respectively, which will be injected into new joint
venture companies that will be established with certain independent investors for the development of certain coal mining business. Pursuant to the
relevant agreements, the Company will contribute into these new joint venture companies for an equity interest of 49% in the new joint venture
companies. As of December 31, 2012, the above intangibles, property, plant and equipment and inventories had been fully injected into new joint
venture companies.
In accordance with the requirements under IFRS 5 Non-current assets held for sales and discontinued operations, the above assets are being classified to
as "assets of disposal groups classified as held for sale" on the consolidated statement of financial position.
F-95
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
14.
INVENTORIES
Raw materials
Work-in-progress
Finished goods
Spare parts
Packaging materials and others
Less: provision for impairment of inventories
Movements in the provision for impairment of inventories are as follows:
December 31,
2011
December 31,
2012
9,123,295
7,267,916
6,942,236
1,125,293
41,076
24,499,816
(375,437)
9,056,254
7,666,925
9,053,349
1,178,117
49,195
27,003,840
(1,407,364)
24,124,379
25,596,476
2011
2012
As at January 1
Provision for impairment of inventories
Reversal arising from increase in net realisable value
Reversal upon sales of inventories
108,596
321,279
(203)
(54,235)
375,437
1,454,237
(58,019)
(364,291)
As at December 31
375,437
1,407,364
As at December 31, 2012, the Group has pledged inventories at a net book value amounting to RMB50 million (December 31, 2011: RMB556 million)
for bank and other borrowings as set out in Note 24 to the consolidated financial statements.
F-96
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
15. TRADE AND NOTES RECEIVABLES
Trade receivables
Less: provision for impairment of receivables
Notes receivable
December 31,
2011
December 31,
2012
1,866,554
(371,357)
1,495,197
4,136,568
1,833,475
(408,256)
1,425,219
1,190,643
5,631,765
2,615,862
As at December 31, 2012, except for trade and notes receivables of the Group amounting to RMB548 million (December 31, 2011: RMB335 million)
and RMB8 million (December 31, 2011: RMB4 million) which were denominated in USD and EUR, respectively, all other trade and notes receivables
were denominated in RMB.
Trade receivables are non-interest bearing and are generally on terms of 3 to 12 months. Certain of the Group's sales were on advanced payments or
documents against payment. The credit terms for sales to certain subsidiaries of Chinalco are receivable on demand. In some cases, these terms are
extended for qualifying long term customers that have met specific credit requirements. As at December 31, 2011 and 2012, the ageing analysis of trade
and notes receivables was as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
Less: provision for impairment of receivables
December 31,
2011
December 31,
2012
5,383,058
180,604
26,537
412,923
6,003,122
(371,357)
2,209,725
286,111
128,071
400,211
3,024,118
(408,256)
5,631,765
2,615,862
The credit quality of trade and notes receivables that are neither past due nor impaired is assessed by reference to the counterparties' default history. As
at December 31, 2011 and 2012, there was no history of default for these customers.
F-97
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
15. TRADE AND NOTES RECEIVABLES (CONTINUED)
The balances of trade and notes receivables that were past due but not impaired relate to a number of individual customers for whom there is no recent
history of default. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of
these balances as there has not been a significant change in credit quality and the balances are still considered recoverable within 12 months as at
December 31, 2012. As of December 31, 2011, trade and notes receivable of RMB117 million were past due but not impaired and of which RMB41
million, RMB36 million, RMB15 million and RMB25 million were aged within one year, between one and two years, between two and three years and
over three years, respectively.
As at December 31, 2012, trade and notes receivables of RMB463 million (December 31, 2011: RMB400 million) of the Group were substantially
impaired and provision of RMB408 million (December 31, 2011: RMB371 million) was made. The individually impaired receivables mainly relate to
customers which are in unexpected difficult economic situations and it was expected that a small portion of these receivables would be recovered. The
ageing analysis of these receivables is as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
F-98
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
15. TRADE AND NOTES RECEIVABLES (CONTINUED)
Movements in the provision for impairment of trade and notes receivables are as follows:
As at January 1
Provision for impairment
Write off
Reversal
As at December 31
December 31,
2011
December 31,
2012
-
-
11,798
388,353
28,715
33,743
20,450
380,342
400,151
463,250
2011
2012
401,066
8,966
(472)
(38,203)
371,357
47,225
(779)
(9,547)
371,357
408,256
As at 31 December 2012, the Group endorsed certain notes receivables accepted by banks in the PRC (the "Derecognised Notes"), to certain of its
suppliers in order to settle the trade payables due to such suppliers with a carrying amount in aggregate of RMB7,811 million. The Derecognised Notes
have a maturity from one to six months at the end of the reporting period. In accordance with the Law of Negotiable Instruments in the PRC, the holders
of the Derecognised Notes have a right of recourse against the Group if the PRC banks default (the "Continuing Involvement"). In the opinion of the
directors of the Company, the Group has transferred substantially all risks and rewards relating to the Derecognised Notes. Accordingly, it has
derecognised the full carrying amounts of the Derecognised Notes and the associated trade payables. The maximum exposure to loss from the Group's
Continuing Involvement in the Derecognised Notes and the undiscounted cash flows to repurchase these Derecognised Notes equal to their carrying
amounts. In the opinion of the directors of the Company, the fair values of the Group's Continuing Involvement in the Derecognised Notes are not
significant.
For the years ended December 31, 2010, 2011 and 2012, the Group has not recognised any gain or loss on the date of transfer of the Derecognised
Notes. No gains or losses were recognised from the continuing involvement, both during the year or cumulatively.
F-99
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
16. OTHER CURRENT ASSETS
Advances and deposits paid to suppliers
Advances to employees
Value-added tax recoverable
Receivable of value-added tax refund
Dividends receivable
Receivables from sales of non-core businesses
December 31,
2011
December 31,
2012
258,836
43,663
2,021,201
20,310
-
125,340
603,370
74,555
2,182,549
18,226
189,638
192,576
Deposits for investments projects (Note)
Entrusted loans and loans receivables from third parties
Entrusted loans and loans receivables from related parties (Note 35)
Electricity subsidy
Others
Less: provision for impairment of other receivables
Prepaid income tax
Prepayments to suppliers for purchases
190,372
345,653
305,041
-
169,153
3,479,569
(182,286)
3,297,283
306,292
4,062,410
3,447
396,472
844,041
250,580
520,656
5,276,110
(229,131)
5,046,979
295,434
4,509,005
Total other current assets
7,665,985
9,851,418
Note: Deposits for investments projects mainly represent deposits paid for the proposed acquisition of certain business and assets related to coal and bauxite mines.
F-100
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
16. OTHER CURRENT ASSETS (CONTINUED)
As at December 31, 2012, except for other current assets of the Group amounting to RMB39 million (December 31, 2011: RMB71 million), RMB0.8
million (December 31, 2011: RMB0.6 million) and RMB0.2 million (December 31, 2011: RMB0.2 million) which were denominated in USD, HKD and
AUD, respectively, all other current assets were denominated in RMB.
As at December 31, 2011 and 2012, the ageing analysis of other current assets is as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
December 31,
2011
December 31,
2012
3,138,246
39,939
93,576
207,808
4,519,845
421,576
33,711
300,978
3,479,569
5,276,110
The credit quality of other receivables that are neither past due nor impaired is assessed by reference to the counterparties' default history.
The credit quality of other receivables that were past due but not impaired is assessed by reference to the counterparties' default history. Based on past
experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not
been a significant change in credit quality and the balances are still considered recoverable within one year. As of December 31, 2011, other receivables
of RMB43 million were past due but not impaired and of which RMB5 million, RMB9 million, RMB6 million and RMB23 million were aged within
one year, between one and two years, between two and three years and over three years, respectively.
F-101
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
16. OTHER CURRENT ASSETS (CONTINUED)
As at December 31, 2012, other receivables of RMB265 million (December 31, 2011: RMB185 million) of the Group were impaired and provisions of
RMB229 million (December 31, 2011: RMB182 million) were made. The ageing analysis of these receivables is as follows:
Within 1 year
Between 1 and 2 years
December 31,
2011
December 31,
2012
-
-
71,112
6,242
Between 2 and 3 years
Over 3 years
Movements in the provision for impairment of other receivables are as follows:
As at January 1
Provision for impairment
Write off
Reversal
As at December 31
F-102
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
17. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND TIME DEPOSITS
Restricted cash
Time deposits
Restricted cash and time deposits
Cash and cash equivalents
17
185,118
7,914
179,318
185,135
264,586
2011
2012
186,553
1,536
-
(5,803)
182,286
50,298
(2,381)
(1,072)
182,286
229,131
December 31,
2011
December 31,
2012
1,013,435
40,000
1,053,435
10,591,306
1,107,836
20,179
1,128,015
9,063,593
11,644,741
10,191,608
As at December 31, 2012, restricted cash mainly represented deposits held for use in environmental restoration or issued letters of credit and notes
payable.
As at December 31, 2012, the annual effective interest rate of the above time deposits was 2.86% (December 31, 2011: 1.58%) with average maturity of
one year (December 31, 2011: one year).
As at December 31, 2011 and 2012, bank balances and cash on hand of the Group are denominated in the following currencies:
December 31,
2011
December 31,
2012
11,316,826
296,886
18,250
6,383
6,396
-
9,987,902
185,819
11,908
999
4,957
23
11,644,741
10,191,608
RMB
USD
HKD
EUR
AUD
GBP
F-103
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
18.
SHARE CAPITAL
A shares
H shares
December 31,
2011
December 31,
2012
9,580,522
3,943,966
9,580,522
3,943,966
13,524,488
13,524,488
On January 4, 2011, the Trading Moratorium of 5,649,217,045 A shares was uplifted and as of December 31, 2011 and 2012, all shares of the Company
were listed tradable shares.
As at December 31, 2011 and 2012, all issued shares are registered and fully paid. Both A shares and H shares rank pari passu to each other.
The Company's authorised ordinary share capital was 13,524,487,892 shares at par value of RMB1.00 per share as at December 31, 2011 and 2012,
respectively. There were 13,524,487,892 ordinary shares issued and outstanding as at December 31, 2011 and 2012, respectively.
F-104
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
19. RESERVES
(i)
Other capital reserves
Other capital reserves mainly represent national debt fund reserve and other government subsidies 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 (Note 21(ii)). 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 share's 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 and other relevant regulatory bodies, 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 are not available for distribution to shareholders.
F-105
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS
Long-term loans and borrowings
Bank and other loans (Note (a))
- Secured (Note 24)
- Guaranteed (Note (e))
- Unsecured
Medium-term notes and bonds and long-term bonds (Note (b))
- Guaranteed (Note (e))
- Unsecured
December 31,
2011
December 31,
2012
447,163
3,723,744
19,259,546
-
6,286,261
19,570,484
23,430,453
25,856,745
1,987,107
14,715,440
1,989,245
19,721,657
Total long-term loans and borrowings
Current portion of medium-term notes
Current portion of banks and other loans
16,702,547
21,710,902
40,133,000
47,567,647
-
(4,164,474)
(4,986,037)
(5,945,958)
Non-current portion of long-term loans and borrowings
35,968,526
36,635,652
Estimated fair value of total long-term loans and borrowings
39,884,181
46,735,118
F-106
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Short-term loans and borrowings
Bank and other loans (Note (c))
- Secured (Note 24)
- Guaranteed (Note (e))
- Unsecured
Short-term bonds, unsecured (Note (d))
Current portion of medium-term notes
Current portion of bank and other loans
Total short-term borrowings and
current portion of long-term loans and borrowings
December 31,
2011
December 31,
2012
613,000
1,645,045
30,064,749
32,322,794
10,250,577
-
4,164,474
900,500
600,000
38,812,718
40,313,218
16,669,968
4,986,037
5,945,958
46,737,845
67,915,181
As at December 31, 2012, except for loans and borrowings of the Group amounting to RMB40 million (December 31, 2011: RMB47 million), nil
(December 31, 2011: RMB6 million) and RMB7,421 million (December 31, 2011: RMB2,628 million) which were denominated in JPY, EUR and USD,
respectively, all other loans and borrowings were denominated in RMB.
As at December 31, 2012, interest bearing loans and borrowings of RMB900 million (December 31, 2011: RMB500 million) were due to a subsidiary of
Chinalco (Note 35).
F-107
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Notes:
(a)
Long-term bank and other loans
(i)
The maturity of long-term bank and other loans of the Group is set out below
Loans from banks and other
financial institutions
Other loans
December 31,
2011
December 31,
2012
December 31, December 31,
2012
2011
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
4,152,354
6,276,588
11,604,870
1,296,000
5,939,679
8,037,242
7,735,704
4,069,980
12,120
12,230
36,692
39,599
6,279
11,807
35,422
20,632
23,329,812
25,782,605
100,641
74,140
Wholly repayable within 5 years
19,951,812
21,617,626
21,877
24,877
(ii) Other loans were provided by local bureaus of the Ministry of Finance to the Group. The weighted average annual interest rate of long-term
bank and other loans for the years ended December 31, 2011 and 2012 was 5.62% and 5.54%.
F-108
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Notes: (Continued)
(b) Medium-term notes and bonds and long-term bonds
Outstanding long-term bonds and medium-term notes of the Group as at December 31, 2011 and 2012 are summarised as follows:
Face value/
maturity
Effective
interest rate
December 31,
2011
December 31,
2012
2007 long-term bonds
2008 medium-term notes
2010 medium-term notes
2010 medium-term notes
2011 medium-term notes (Note)
2011 Jiaozuo Wanfang medium-term notes
2011 medium-term bonds
2012 medium-term bonds
2012 medium-term bonds
2,000,000/2017
5,000,000/2013
1,000,000/2015
1,000,000/2015
5,000,000/2016
800,000/2016
2,000,000/2014
2,000,000/2015
3,000,000/2017
4.64%
4.92%
4.34%
4.20%
6.03%
6.85%
6.36%
5.13%
5.77%
1,987,107
4,970,489
989,079
988,900
4,979,707
795,694
1,991,571
-
-
1,989,245
4,986,037
992,007
991,822
4,984,110
797,361
1,994,435
1,993,350
2,982,535
16,702,547
21,710,902
Note:
The medium-term notes were issued at a fixed annual coupon rate of 5.86% with a five year term. Pursuant to the terms of the bonds, the holders of the bonds have an
option to negotiate and adjust the fixed coupon rate according to market conditions or to request repayment of some or all outstanding balances at the end of the
third anniversary.
Long-term bonds and medium-term notes and bonds were issued for capital expenditure purposes, operating cash flows and bank loan re-
financing.
(c)
Short-term bank and other loans
Other loans were entrusted loans provided by state-owned companies to the Group.
The weighted average annual interest rate of short-term bank and other loans for the year end December 31, 2011 and 2012 was 5.59% and 5.85%.
F-109
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Notes: (Continued)
(d)
Short-term bonds
Outstanding short-term bonds as at December 31, 2011 and 2012 are summarised as follows:
2011 short-term bonds
2011 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
2012 short-term bonds
Face value/
maturity
Effective
interest rate
December 31,
2011
December 31,
2012
5,000,000/2012
5,000,000/2012
5,000,000/2013
2,000,000/2013
4,000,000/2013
2,000,000/2013
1,500,000/2013
2,000,000/2013
4.63%
5.36%
3.89%
4.60%
4.28%
4.56%
4.60%
4.76%
5,137,435
5,113,142
-
-
-
-
-
-
-
-
5,074,762
2,013,115
4,050,486
2,022,444
1,507,956
2,001,205
10,250,577
16,669,968
All the above short-term bonds were issued for working capital.
(e)
Guaranteed interest bearing loans and borrowings
Details of the interest bearing loans and borrowings in which the Group received guarantees are set out as follows:
December 31,
2011
December 31,
2012
1,987,107
1,989,245
1,419,038
90,241
31,600
41,822
26,469
-
2,114,574
971,988
44,140
27,000
24,443
15,468
500,000
4,703,222
3,723,744
6,286,261
1,330,000
315,045
-
600,000
-
-
1,645,045
600,000
Guarantors
Long-term bonds
Bank of Communications (
)
) (Note (ii))
Long-term loans
Chinalco
Luoyang Economic Investment Co., Ltd.
(
Lanzhou Aluminum Factory(
Yichuan Power Industrial Group Company
(
China Nonferrous Metals Processing Technology Co., Ltd.
(
) (Note (iii))
Jiaozuo Wanfang
The Company
) (Note (ii))
) (Note (i))
Short-term loans
Chinalco
The Company
Lanzhou Aluminum Factory (
) (Note (i))
F-110
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Notes: (Continued)
(e)
Guaranteed interest bearing loans and borrowings (Continued)
The English names 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)
(ii)
The guarantor is a subsidiary of Chinalco and a shareholder of the Company.
The guarantors are non-controlling shareholders of a subsidiary of the Company.
(iii)
The guarantor is a subsidiary of Chinalco.
21. OTHER NON-CURRENT LIABILITIES
Obligations in relation to early retirement schemes (Note (i))
Deferred government grants
Deferred government subsidies (Note (ii))
Others
F-111
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
21. OTHER NON-CURRENT LIABILITIES (CONTINUED)
Notes:
(i)
Obligations in relation to early retirement schemes
December 31,
2011
December 31,
2012
131,540
345,689
148,532
20,330
93,036
540,654
116,979
6,000
646,091
756,669
During the years ended December 31, 2009 and 2010, certain subsidiaries and branches implemented certain early retirement benefit schemes
which allow qualified employees to early retire on a voluntary basis. As at December 31, 2011 and 2012, obligations in relation to retirement
benefits under the Group's early retirement schemes included in "other non-current liabilities" are as follows:
As at January 1
Provision made during the year (Note 29)
Interest costs
Utilisation during the year
As at December 31
Non-current
Current (Note 22)
2011
2012
292,862
2,772
4,049
(98,499)
201,184
22,350
5,244
(78,996)
201,184
149,782
131,540
69,644
93,036
56,746
201,184
149,782
(ii) Deferred government subsidies represent certain national debt fund reserve and other subsidies granted by governmental units to support various
qualified technical projects of the Group. These subsidies are deferred at the time they were received and are released when certain pre-
determined conditions are met (Note 19 (i)).
F-112
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
22. OTHER PAYABLES AND ACCRUED EXPENSES
Payable for capital expenditures
Sales and other deposits from customers
Accrued interest
Taxes other than income taxes payable (Note)
Accrued payroll and bonus
Payables withheld as guarantees and deposits
December 31,
2011
December 31,
2012
3,989,663
1,249,198
363,995
321,311
206,886
191,925
4,329,562
1,278,746
548,381
391,704
139,645
286,006
Staff welfare payables
Dividends payable by subsidiaries to non-controlling shareholders
Current portion of obligation in relation to early
retirement schemes (Note 21)
Consideration payable for acquisition of non-controlling interest/business
Contribution payable for pension insurance
Others
161,905
89,717
69,644
50,582
28,315
445,184
178,799
123,707
56,746
885,037
25,617
561,365
7,168,325
8,805,315
Note:
Taxes other than income taxes payable mainly comprise accruals for value-added tax, resource tax, city construction tax and education surcharge.
As at December 31, 2012, except for other payables and accrued expenses of the Group amounting to RMB0.2 million (December 31, 2011: nil),
RMB0.5 million (December 31, 2011: RMB0.2 million), RMB2 million (December 31, 2011: RMB3 million) and RMB0.01 million (December 31,
2011: RMB1 million) which were denominated in HKD, EUR, USD and AUD, respectively, all other payables and accrued expenses were denominated
in RMB.
F-113
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
23. TRADE AND NOTES PAYABLES
Trade payables
Notes payable
December 31,
2011
December 31,
2012
6,511,435
1,889,875
4,883,484
2,175,710
8,401,310
7,059,194
As at December 31, 2012, except for trade and notes payables of the Group amounting to RMB188 million (December 31, 2011: RMB16 million), RMB
nil (December 31, 2011: RMB2 million), RMB0.03 million (December 31, 2011: nil), and RMB0.01 million (December 31, 2011: nil) which were
denominated in USD, EUR, AUD and HKD, respectively, all other trade and notes payable were denominated in RMB.
The ageing analysis of trade and notes payables is as follows:
December 31,
2011
December 31,
2012
7,900,950
342,504
35,426
122,430
6,644,395
106,456
170,416
137,927
8,401,310
7,059,194
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
The trade and notes payables are non-interest bearing and are normally settled within one year.
F-114
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
24.
PLEDGE OF ASSETS
The Group has pledged various assets as collateral against certain secured borrowings as set out in Note 20. As at December 31, 2011 and 2012, a
summary of these pledged assets is as follows:
December 31,
2011
December 31,
2012
Property, plant and equipment (Note 7)
1,307,190
2,242,678
Land use rights (Note 8)
Inventories (Note 14)
25. COST OF SALES
Purchase of inventories in relation to trading activities
Raw materials and consumables used
Changes in inventories of finished goods and work in progress (Note 14)
Provision for impairment of inventories (Note) (Note 14)
Power and utilities
Depreciation of property, plant and equipment (Note 7)
Employee benefit expenses
Repair and maintenance
Amortisation of intangible assets (Note 6)
Others
123,270
555,715
69,496
50,000
1,986,175
2,362,174
2010
2011
2012
50,843,072
27,042,797
502,066
161,584
19,622,054
6,014,643
4,852,699
607,059
52,584
3,651,383
63,216,474
39,424,443
(2,866,608)
321,076
22,018,365
5,202,402
5,194,556
690,007
65,189
4,845,463
65,426,274
46,587,502
(2,510,122)
1,396,218
24,802,463
4,767,583
5,143,290
1,312,561
67,842
2,809,047
113,349,941
138,111,367
149,802,658
Note: Provision for impairment of inventories includes the accrued of provision for impairment of inventories and the reversal of impairment of inventories due from the increase in
net realisable value.
F-115
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
26. OPERATING EXPENSES
(a)
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 7)
Others
F-116
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
26. OPERATING EXPENSES (CONTINUED)
(b) General and administrative expenses
2010
2011
2012
1,090,831
180,523
59,429
37,799
12,990
30,119
14,818
9,337
137,455
1,075,730
213,311
60,369
50,259
16,015
28,532
15,519
20,453
142,600
1,327,353
193,583
75,705
57,659
31,363
60,099
16,048
31,958
174,154
1,573,301
1,622,788
1,967,922
Employee benefit expenses
Taxes other than income tax expense (Note (i))
Travelling and entertainment
Depreciation of non-production property, plant and equipment (Note 7)
Provision / (reversal) for impairment of receivables, net
2010
2011
2012
840,371
614,704
141,472
207,075
29,005
815,000
665,317
201,231
156,190
(33,504)
907,145
584,301
185,946
162,331
86,904
Impairment of available for sale investment (Note 10)
Operating lease rental expenses
Legal and other professional fees
Amortisation of land use rights and leasehold land (Note 8)
Utilities and office supplies
Repairs and maintenance expenses
Insurance expense
Pollutants discharge fees
Auditors' remuneration (Note (ii))
Amortisation of intangible assets (Note 6)
Others
-
106,098
23,370
58,745
82,737
43,911
79,513
33,985
25,698
14,993
322,063
-
137,394
49,360
65,847
90,496
62,739
75,901
38,261
24,245
12,362
418,590
7,778
142,771
111,245
74,552
40,148
42,781
58,783
35,200
28,115
25,814
499,154
2,623,740
2,779,429
2,992,968
Notes:
(i)
Taxes other than income tax expense mainly comprise land use tax, property tax and stamp duty.
(ii)
During the year ended December 31, 2012, auditors' remuneration include audit services, audit-related services and tax services provided by Ernst & Young firms
including Ernst & Young and Ernst & Young Hua Ming LLP amounting to RMB24.76 million, and services provided by other auditors.
F-117
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
27. OTHER INCOME AND OTHER LOSS/ (GAIN), NET
(a) Other income
For the year ended December 31, 2012, other income represented government grants amounting to RMB744 million (2010: RMB329 million;
2011: RMB186 million), which were recognised as income for the year necessary to compensate the costs and the Group's development. There are
no unfulfilled conditions or contingencies attached to the grants.
(b) Other losses/ (gains), net
Gain on acquisition of the investment in an associate (Note (i))
Realised (gains)/losses on future, forward and
option contracts, net (Note (ii))
Unrealised (gains)/losses on future, forward and
option contracts, net (Note (ii))
(Gains)/losses on disposal of property,
plant and equipment and leasehold land, net
Gain on disposal of available-for-sale investments
Others
2010
2011
2012
-
-
(504,773)
(248,799)
(493,325)
127,476
(56,440)
(3,531)
15,858
(29,324)
(156,066)
(395)
(12,021)
(256)
(28,900)
455,870
-
(68,947)
(491,024)
(538,033)
25,484
Notes:
(i)
The excess of the fair value of identifiable net assets as at the acquisition date of Ningfa over the consideration transferred amounting to RMB505 million (Note 9(b)
(ix)) was recognised in other gains.
(ii)
None of these futures, forward and options contracts are designated for hedge accounting.
F-118
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
28.
FINANCE COSTS, NET
2010
2011
2012
Finance income-interest income from banks
(91,109)
(138,778)
(314,179)
Interest expense
Less: interest expense capitalised in property, plant and equipments (Note 7)
3,220,987
(645,326)
4,187,646
(730,642)
5,557,131
(635,384)
Interest expense, net of capitalised interest
2,575,661
3,457,004
4,921,747
Exchange losses/(gains), net
10,632
(24,652)
(8,188)
Finance costs
Finance costs, net
2,586,293
3,432,352
4,913,559
2,495,184
3,293,574
4,599,380
Capitalisation rate during the year (Note 7)
4.10% to 5.15%
4.16% to 6.02%
4.74% to 7.17%
29. EMPLOYEE BENEFIT EXPENSES
Salaries and bonus
Housing fund
Staff welfare and other expenses (Note)
Employment expense in relation to early retirement schemes (Note 21)
Retirement benefit costs-defined contribution schemes
2010
2011
2012
4,231,627
339,615
747,314
69,072
695,866
4,365,646
398,393
834,943
2,772
765,645
4,618,763
439,927
957,847
22,350
851,175
6,083,494
6,367,399
6,890,062
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 30.
F-119
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
30. 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
2010
870
2,099
929
113
2011
741
2,571
1,137
150
2012
732
2,410
-
165
4,011
4,599
3,307
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
Fees
Salary
Discretionary
Bonus
Pension
Total
Directors:
Xiong Weiping
Luo Jianchuan
Chen Jihua (resigned on October 28, 2010)
Liu Xiangmin
Shi Chungui
-
-
-
-
150
648
556
428
467
-
328
285
151
165
-
29
29
26
29
-
1,005
870
605
661
150
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
-
99
207
207
207
870
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99
207
207
207
2,099
929
113
4,011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
870
2,099
929
113
4,011
F-120
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
30. 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, 2011 is set out below:
Name of directors and supervisors
Fees
Salary
Discretionary
Bonus
Pension
Total
Directors:
Xiong Weiping
Luo Jianchuan
Liu Caiming
Liu Xiangmin
Shi Chungui
Lv Youqing
Zhang Zhuoyuan
Zhu Demiao
Wang Mengkui
Supervisors:
Ao Hong
Yuan Li
Zhang Zhankui
-
-
-
-
150
-
197
197
197
741
-
-
-
-
626
551
516
495
-
-
-
-
-
298
261
267
220
-
-
-
-
-
30
30
30
30
-
-
-
-
-
954
842
813
745
150
-
197
197
197
2,188
1,046
120
4,095
-
383
-
383
-
91
-
91
-
30
-
30
-
504
-
504
Total
741
2,571
1,137
150
4,599
F-121
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
30. 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, 2012 is set out below:
Name of directors and supervisors
Fees
Salary
Discretionary
Bonus
Pension
Total
Directors:
Xiong Weiping
Luo Jianchuan
Liu Caiming (Note)
Liu Xiangmin
Shi Chungui
Lv Youqing
Zhang Zhuoyuan
Zhu Demiao
Wang Mengkui
Supervisors:
Ao Hong
Yuan Li
Zhang Zhankui
-
-
-
-
150
-
194
194
194
732
-
-
-
-
545
496
493
493
-
-
-
-
-
2,027
-
383
-
383
Total
732
2,410
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33
33
33
33
-
-
-
-
-
578
529
526
526
150
-
194
194
194
132
2,891
-
33
-
33
-
416
-
416
165
3,307
Note:
As at March 8, 2013, Mr. Liu Caiming resigned as the senior vice president, Chief Financial Officer and member of the Executive Committee of the Company.
Meanwhile Mr. Liu Caiming has been re-designated from an Executive Director to a Non-executive Director.
F-122
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
30. 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
2011
2012
12
1
12
-
12
-
During the year, no options were granted to the directors or the supervisors of the Company (2010 and 2011: nil).
During the year, no emoluments were paid to the directors or the supervisors of the Company (among which included the five highest paid
employees) as an inducement to join or upon joining the Company or as compensation for loss of office (2010 and 2011: 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, 2012, the five highest paid employees of the Group include 4 (2010: 3; 2011: 4) directors whose
remunerations are reflected in the analysis presented above. The remuneration payable to the remaining 1 (2010: 2; 2011: 1) individual during the
year is as follows:
2010
2011
2012
Basic salaries, housing fund, other allowances and benefits in kind
Discretionary bonus
Retirement benefit cost-defined contribution plans
935
330
52
465
154
30
440
-
33
The number of the remaining 1 (2010: 2; 2011: 1) individual whose remuneration fell within the following bands is as follows:
1,317
649
473
Number of employees
2010
2011
2012
Nil to 1,000
2
1
1
F-123
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
INCOME TAX EXPENSE/(BENEFIT)
Current income tax expense:
- PRC enterprise income tax
2010
2011
2012
319,479
230,415
155,629
Deferred income tax expense/(benefit) (Note 11)
91,737
(102,923)
(604,108)
411,216
127,492
(448,479)
The current PRC enterprise income tax of the Group has been provided at the applicable corporate income tax rate of 25% (2010 and 2011: 25%) on the
estimated assessable profit for the year. Certain branches and subsidiaries of the Company located in western regions of the PRC are granted tax
concessions including a preferential tax rate of 15% (2010 and 2011: 15%).
In addition, in accordance with the relevant tax rules, the Company and its branches are subject to the applicable effective tax rate, which were changes
depending on the profitability and tax rate applicable to each branch and the Company on a combined basis. For the year ended December 31, 2012, the
effective tax rate applicable to the Company and its branches on a combined basis was 22.16% (2010: 22.14%; 2011: 22.58%).
The reconciliation between the tax on the Group's profit or loss before tax and the theoretical tax amount that would arise using the weighted average tax
rate applicable to profit or loss of the consolidated entities is as follows:
2010
2011
2012
Profit/(loss) before income tax
1,380,354
817,996
(9,092,062)
Tax expense/(benefit) calculated at standard income tax rate of 25%
(2010 and 2011: 25%)
Tax effects of:
Preferential income tax rates applicable to certain branches and subsidiaries
Impact of change in income tax rate
Tax losses for which no deferred income tax assets were recognised
Deductible temporary differences for which
no deferred income tax assets were recognised
Utilisation of previously unrecognised tax losses and expenses
Tax credit for purchases of qualified equipment
Tax incentive in relation to deduction limits of certain expenses
Income not subject to tax
Expenses not deductible for tax purposes
Write-off of deferred tax assets previously recognised (Note 11)
345,089
204,499
(2,273,015)
(37,288)
54,252
110,015
62,017
(48,606)
-
(13,267)
(147,484)
86,488
-
(2,449)
(115,496)
107,802
44,640
(8,493)
(6,799)
(12,459)
(131,484)
47,731
-
191,732
15,267
794,274
38,360
(2,028)
-
(18,759)
(218,581)
39,942
984,329
Income tax expense/(benefit)
411,216
127,492
(448,479)
Weighted average effective tax rate
29.79%
15.59%
4.93%
F-124
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
INCOME TAX EXPENSE/(BENEFIT) (CONTINUED)
The decrease in the weighted average effective rate in 2011 compared with 2010 is mainly due to fluctuation in profitability of certain subsidiaries and
branches and increase in deferred tax assets due to change in tax rate of expiration of preferential tax rate period for certain branches.
The decrease in the weighted average effective rate in 2012 compared with 2011 is mainly due to fluctuation in profitability of certain subsidiaries and
branches, the existence of tax losses for which no deferred tax assets were recognised and write-off of deferred tax assets previously recognised in
current year.
Share of income tax expense of associates and jointly controlled entities of RMB99 million (2010: RMB77 million; 2011: RMB143 million) and RMB3
million (2010: RMB23 million; 2011: RMB35 million) was included in "share of profits of associates" and "share of profits of jointly controlled
entities", respectively.
32. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
(a)
Basic
Basic earnings/(loss) per share were calculated by dividing the profit/(loss) attributable to owners of the parent by the weighted average number
of shares in issue during the year.
2010
2011
2012
Profit/(loss) attributable to owners of the parent (RMB)
778,008,000
237,974,000
(8,233,754,000)
Weighted average number of ordinary shares in issue
13,524,487,892
13,524,487,892
13,524,487,892
Basic earnings/(loss) per share (RMB)
0.06
0.02
(0.61)
(b)
Diluted
Diluted earnings/(loss) per share for the years ended December 31, 2010, 2011 and 2012 are the same as the basic earnings/(loss) per share as
there were no dilutive potential shares during those years.
33. DIVIDENDS
According to the articles of association of the Company, the Company considers the maximum limit of profit appropriation to its shareholders is the
lowest of:
(i)
(ii)
the sum of current period net profit and opening retained earnings in accordance with IFRS,
the sum of current period net profit and opening retained earnings in accordance with the PRC Accounting Standards for Business Enterprises,
and
(iii)
the amount limited by the Company Law of the PRC.
According to the resolution of annual shareholders' meeting dated June 29, 2012, no dividend would be distributed for the year ended December 31,
2011. Thus, no dividend was paid in 2012 (2010: nil; 2011: RMB 154 million or RMB0.0114 per share).
According to the resolution of the Board of Directors dated March 27, 2013, the directors did not propose any final dividend for the year ended
December 31, 2012 (2010: RMB154million, 2011: nil), which is to be approved by the shareholders.
F-125
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
34. CASH FLOWS GENERATED FROM OPERATING ACTIVITIES
Cash flows generated from operating activities
Profit/(loss) before income tax
Adjustments for:
Share of profits of jointly controlled entities
Share of profits of associates
Depreciation of property, plant and equipment
Notes
2010
2011
2012
1,380,354
817,996
(9,092,062)
9(a)
9(b)
7
(233,784)
(240,028)
5,889,393
(122,262)
(402,701)
5,657,157
(37,040)
(254,848)
6,140,958
(Gain)/loss on disposal of property,
plant and equipment and leasehold land
Gain on disposals of available-for-sale financial investments
Impairment loss of property, plant and equipment
Impairment loss of available-for-sale financial investments
Amortisation of intangible assets
Amortisation of land use rights and leasehold land
Amortisation of prepaid expenses
Realised and unrealised (gains)/ losses on futures,
options and forward contracts
Gain on acquisition of the investment in an associate
Interest income
Interest expense
Others
27(b)
27(b)
7
10
6
8
27(b)
27(b)
28
Changes in working capital:
Increase in inventories
(Increase)/decrease in trade and notes receivables
Increase in other current assets
(Increase)/decrease in restricted cash
Decrease/(increase) in other non-current assets
Increase/(decrease) in trade and notes payables
(Decrease)/increase in other payables and accrued expenses
Decrease in other non-current liabilities
Cash generated from operations
PRC enterprise income taxes paid
(29,324)
(156,066)
701,781
-
67,577
58,745
68,385
(305,239)
-
(4,879)
2,586,293
(19,967)
(12,021)
(256)
279,750
-
77,551
65,847
59,604
(496,856)
-
(5,611)
3,432,352
(24,539)
455,870
-
19,903
7,778
93,656
74,552
75,987
143,334
(504,773)
(49,668)
4,913,559
(124,409)
9,763,241
9,326,011
1,862,797
(1,356,821)
(237,764)
(515,519)
(97,526)
72,809
53,100
(252,088)
(25,102)
(2,353,204)
(3,474,223)
(2,089,769)
(550,500)
161,584
2,024,968
(18,405)
(259,168)
(1,472,097)
3,015,903
(921,413)
270,999
(555,039)
(1,342,116)
479,154
(44,505)
7,404,330
2,767,294
1,293,683
(300,471)
(277,538)
(171,331)
Net cash generated from operating activities
7,103,859
2,489,756
1,122,352
F-126
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
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 over 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.
Certain related party transaction disclosed here also constitute continuing connected transactions (as defined in Chapter 14A of the Hong Kong Listing
Rules) pursuant to the Hong Kong Listing Rules.
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.
(a)
Significant related party transactions
Notes
2010
2011
2012
Sales of goods and services rendered:
Sales of materials and finished goods to:
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entities
Associates
Non-controlling shareholder of a subsidiary and its subsidiaries
(i)
6,069,774
31,869
-
-
4,452,683
5,607,258
11,024
7,596
5,983
4,835,662
6,805,794
53,599
30,117
9,265
-
10,554,326
10,467,523
6,898,775
Provision of utility services to:
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entities
Non-controlling shareholder of a subsidiary and its subsidiaries
(ii)
332,701
8,156
-
-
334,370
13,547
-
453
341,386
21,420
1
-
340,857
348,370
362,807
F-127
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(a)
Significant related party transactions (Continued)
Sales of goods and services rendered: (Continued)
Provision of products processing services to:
Chinalco and its subsidiaries
Non-controlling shareholder of a subsidiary
Notes
2010
2011
2012
-
-
-
-
13,969
13,969
7,431
-
7,431
Purchase of goods and services:
Purchases of engineering, construction and supervisory services from:
Chinalco and its subsidiaries
Associates of Chinalco
Non-controlling shareholder of a subsidiary and its subsidiaries
(iii)
3,503,363
-
5,894
3,259,624
-
22,681
2,321,386
11,365
-
Purchases of key and auxiliary materials and finished goods from:
Chinalco and its subsidiaries
Associates of Chinalco
Jointly controlled entities
Associates
Non-controlling shareholder of a subsidiary and its subsidiaries
Provision of social services and logistics services by:
Chinalco and its subsidiaries
Non-controlling shareholder of a subsidiary and its subsidiaries
Provision of utilities services by:
Chinalco and its subsidiaries
Associates of Chinalco
Non-controlling shareholder of a subsidiary and its subsidiaries
(iv)
(v)
(ii)
F-128
3,509,257
3,282,305
2,332,751
4,232,369
323,835
1,321,202
1,458
2,483,173
1,644,429
140,624
1,499,136
39
2,195,191
3,839,222
17,745
976,141
2,618
-
8,362,037
5,479,419
4,835,726
264,049
475
281,956
624
306,589
-
264,524
282,580
306,589
163,708
7,663
100,952
123,243
6,869
145,778
359,599
9,918
-
272,323
275,890
369,517
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(a)
Significant related party transactions (Continued)
Purchase of goods and services: (Continued)
Provision of products processing services
by Chinalco and its subsidiaries
Rental expenses for buildings and
land use rights charged by Chinalco and its subsidiaries
Other significant related party transactions:
Notes
2010
2011
2012
(i)
(vi)
137,601
213,553
142,244
643,432
665,105
696,874
Acquisition of non-controlling interest from a fellow subsidiary
-
160,271
Disposal of an available-for-sale financial investment to Chinalco
164,697
Acquisition of assets from a fellow subsidiary
Borrowing from a fellow subsidiary
Interest expense on borrowing from a fellow subsidiary
Entrusted loans and other borrowings to:
Jointly controlled entities
An associate
Chinalco and its subsidiaries
A non-controlling shareholder of a subsidiary
Interest income on entrusted loans and other borrowings to:
Jointly controlled entities
Chinalco and its subsidiaries
A non-controlling shareholder of a subsidiary
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145,915
-
-
500,000
2,350,000
4,009
54,541
605,041
-
-
63,665
258,900
200,000
126,604
-
668,706
585,504
4,361
-
1,140
51,106
2,327
-
5,501
53,433
During the years ended December 31, 2010, 2011 and 2012, the Group's significant transactions with other state-owned enterprises (excluding
Chinalco and its subsidiaries) constituted 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 at December 31,
2010, 2011 and 2012 and the relevant interest earned or paid during the year were transacted with banks and other financial institutions which
are controlled by the PRC government.
F-129
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(a)
Significant related party transactions (Continued)
All transactions with related parties are conducted at prices and terms mutually agreed by the parties involved, which are determined as follows:
(i)
Sales of materials and finished goods comprised sales of alumina, primary aluminium, copper and scrap materials. Transactions entered
are covered by general agreements on mutual provision of production supplies and ancillary services. The pricing policy is summarised
below:
(1)
(2)
(3)
(4)
The price prescribed by the PRC government ("State-prescribed price") is adopted;
If there is no State-prescribed price, state-guidance price is adopted;
If there is neither State-prescribed price nor state-guidance price, then market price (being price charged to and from independent
third parties) is adopted; and
If none of the above is available, then adoption of a contractual price (being reasonable costs incurred in providing the relevant
services plus not more than 5% of such costs is adopted).
(ii)
Utility services, including electricity, gas, heat and water, are supplied at Stated-prescribed price.
(iii)
(iv)
(v)
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.
The pricing policy for purchases of key and auxiliary materials (including bauxite, limestone, carbon, cement, coal, etc) is the same as
that set out in (i) above.
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.
F-130
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(a)
Significant related party transactions (Continued)
All transactions with related parties are conducted at prices and terms mutually agreed by the parties involved, which are determined as follows:
(Continued)
(vii)
The pricing policy for products processing service is the same as that set out in (i) above.
(viii) Chinalco Finance Company Limited ("Chinalco Finance") (
), a wholly-owned subsidiary of Chinalco and a non-
bank financial institution incorporated in the PRC), provide deposit services, credit services and miscellaneous financial services to the
Group. The terms for the provision of financial services to the Group is no less favourable than those of the same type of financial
services provided by Chinalco Finance to Chinalco and other members of its group or those of the same type of financial services that
may be provided to the Group by other financial institutions.
(ix)
Pursuant to Trademark License Agreement, the Company granted to Chinalco a non-exclusive right to use two trademarks for a period
of ten years from July 1, 2001 to June 30, 2011 at zero cost. The Company will be responsible for the payment of a total annual fee of no
more than RMB1,000 to maintain effective registration. This Trademark License Agreement has already expired on June 30, 2011 and
terminated naturally.
(b)
Balances with related parties
Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at the year end are as
follows:
Cash and cash equivalents deposited with
A fellow subsidiary (Note (i))
Trade and notes receivables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Jointly controlled entities
Less: provision for impairment of receivables
December 31,
2011
December 31,
2012
260,940
1,641,180
506,775
656
3,900
-
511,331
(112,461)
410,775
4,711
4,245
5
419,736
(119,280)
398,870
300,456
F-131
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
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 the year end are as
follows: (Continued)
Other current assets
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Jointly controlled entities
Less: provision for impairment of other current assets
Other non-current asset
A jointly controlled entity
Borrowing
A fellow subsidiary
Trade and notes payables
Chinalco and its subsidiaries (Note(ii))
Associates of Chinalco
Associates
Jointly controlled entities
December 31,
2011
December 31,
2012
122,158
166
15,813
325,545
463,682
(35,907)
60,687
11,440
219,305
676,246
967,678
(34,915)
427,775
932,763
300,000
200,000
500,000
900,000
115,192
11
-
26,952
213,006
107
2,335
3,192
142,155
218,640
F-132
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
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 the year end are as
follows: (Continued)
Other payables and accrued expenses
Chinalco and its subsidiaries (Note(ii))
Associates of Chinalco
December 31,
2011
December 31,
2012
1,913,309
5,746
1,788,058
26,909
Jointly controlled entity
Associates
332
4,449
332
1,043
1,923,836
1,816,342
Notes:
(i)
(ii)
On August 26, 2011, the Company entered into an agreement with Chinalco Finance effective from August 26, 2011 to August 25, 2012. Pursuant to the agreement,
Chinalco Finance agreed to provide deposit services, credit services and other financial services to the Group. On August 24, 2012, the Company renewed the
financial services agreement with Chinalco Finance with a validation term of three years ended August 25, 2015.
The other payables to Chinalco and its subsidiaries included an amount payable to Xinan Aluminum (Group) Company Limited ("Xinan Aluminum")
(
acquired 32.15% equity interest of Xinan Aluminum. Thereafter, Chinalco's effective equity interest in Xinan Aluminum increased from 17.81% to 49.96% and it
exercises de-facto control over Xinan Aluminum. Accordingly, the balances with Xinan Aluminum as of December 31, 2011 and 2012 were included in "Chinalco
and its subsidiaries".
) which was a non-controlling interest of a subsidiary of the Company prior to December 23, 2011. On December 30, 2011, Chinalco
As at December 31, 2012, included in long-term loans and borrowings and short-term loans and borrowings are borrowings payable to other
state-owned enterprises amounting to RMB23,960 million (December 31, 2011: RMB21,669 million) and RMB36,938 million (December 31,
2011: RMB29,823 million) .
The terms of all balances with the exception of the entrusted loans were unsecured and were in accordance with terms as set out in the respective
agreements or as mutually agreed between the parties concerned.
F-133
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
(c)
Compensation of key management personnel of the Group
Fees
Basic salaries, housing fund, other allowances and benefits in kind
Discretionary bonus
Pension cost-defined contribution schemes
2010
2011
2012
870
3,476
1,384
192
741
4,093
1,616
250
732
4,604
-
330
5,922
6,700
5,666
(d)
Commitments with related parties
As at December 31, 2012, except for the other capital commitments disclosed in Note 37(c) of the consolidated financial statements, the Group
had no significant commitments with other related parties.
36. CONTINGENT LIABILITIES
As at December 31, 2011 and 2012, the Group had no significant contingent liabilities.
37. COMMITMENTS
(a)
Capital commitments of property, plant and equipment
Contracted but not provided for
Authorised but not contracted for
(b)
Commitments under operating leases
December 31,
2011
December 31,
2012
6,450,714
33,525,464
8,415,513
32,560,108
39,976,178
40,975,621
The future aggregate minimum lease payments as at December 31, 2011 and 2012 pursuant to non-cancellable lease agreements entered into by
the Group are summarised as follows:
December 31,
2011
December 31,
2012
Within one year
In the second to fifth years, inclusive
After five years
666,963
2,655,916
18,905,447
705,338
2,784,132
19,120,917
22,228,326
22,610,387
F-134
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
37. COMMITMENTS (CONTINUED)
(c)
Other capital commitments
As at December 31, 2011 and 2012, commitments to make capital contribution to the Group's jointly controlled entities and associates were as
follows:
Associates
Jointly controlled entities
Available-for-sale financial investment
December 31,
2011
December 31,
2012
69,613
-
-
3,435,715
130,800
29,600
69,613
3,596,115
38. EVENTS AFTER THE REPORTING PRERIOD
(i)
On January 18, 2013, the Company completed a private issuance of long-term bonds with a total face value of RMB3 billion at par value of
RMB100.00 per unit with a maturity date of January 18, 2018 for working capital needs and repayment of bank borrowings. The fixed annual
coupon interest rate of these bonds is 5.76%.
On March 14, 2013, the Company completed a private issuance of short-term bonds with a total face value of RMB3 billion at par value of
RMB100.00 per unit with a maturity date of March 14, 2014 for working capital needs and repayment of bank borrowings. The fixed annual
coupon interest rate of these bonds is 4.03%.
F-135
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the years ended December 31, 2010, 2011 and 2012
(Amounts expressed in thousands of RMB unless otherwise stated)
38. EVENTS AFTER THE REPORTING PRERIOD (CONTINUED)
(ii)
On August 13, 2012, the Company signed an agreement with Bank of China Group Investment Limited (
23.42% equity interest in Ningfa for a purchase price of RMB1,347.7 million. On December 31, 2012, the Company signed an agreement with
the other shareholders of Ningfa to increase its equity interest in Ningfa to 70.82% for a capital injection of RMB2 billion. Both of the
transactions were completed in the form of cash payment on January 23, 2013, and the Company took effective control of Ningfa from January
23, 2013. Ningfa was renamed as China Aluminum Ningxia Energy Group Co., Ltd. since February 8, 2013.
) to acquire
The acquisition of Ningfa supports the Company's long-term strategy of integrating electricity supply with its aluminum business, especially in
the primary aluminum segment.
As the acquisition of Ningfa was completed shortly before the date of approval of these financial statements and the initial accounting for this
acquisition is not completed on the date of approval of these financial statements, it is not practicable to disclose further details about the
acquisition.
According to the resolution of Board of Directors held on March 27, 2013, the Board did not propose any payment of final dividend for the year
ended December 31, 2012.
On March 14, 2013, the Company received the "Approval Concerning the Non-public Issue of Shares by Aluminum Corporation of China
) from China
Limited" (Zheng Jian Xu Ke No. [2013]185) (
Securities Regulatory Commission, pursuant to which the Company's proposed non-public issue of not more than 1,450 million new A shares
has been approved. The approval shall be valid for six months from the date of such grant.
) (
(iii)
(iv)
39. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the audit committee of the Board of Directors on April 25, 2013.
F-136
EXHIBIT 1.1
Important Note: The following is an English translation of the Chinese version of the Articles of Association of Aluminum Corporation of China Limited(
). In case of any discrepancies or inconsistencies, the Chinese version shall always prevail.
ARTICLES OF ASSOCIATION
OF
Aluminum Corporation of China Limited
(Adopted at the Extraordinary Shareholders' General Meeting of the Company on September 24, 2001)
(Approved by the State Economic and Trade Commission on September 26, 2001)
(Amended with the Approval of the Shareholders' General Meeting of the Company on June 12, 2002)
(Amended with the Approval of the State Economic and Trade Commission on July 5, 2002)
(Amended with the Approval of the Shareholders' General Meeting of the Company on June 7, 2004)
(Amended with the Approval of the State-owned Assets Supervision and Administration Commission of the State Council on July 30, 2004)
(Amended with the Approval of the Shareholders' General Meeting of the Company on June 9, 2005)
(Amended with the Approval of the Shareholders' General Meeting of the Company on October 14, 2005)
(Amended with the Approval of the Shareholders' General Meeting of the Company on May 10, 2006)
(Amended with the Approval of the Shareholders' General Meeting of the Company on February 27, 2007)
(Amended with the Approval of the Shareholders' General Meeting of the Company on October 12, 2007)
(Amended with the Approval of the Shareholders' General Meeting of the Company on May 9, 2008)
(Amended with the Approval of the Shareholders' General Meeting of the Company on October 28, 2008)
(Amended with the Approval of the Shareholders' General Meeting of the Company on May 26, 2009)
(Amended with the Approval of the State-owned Assets Supervision and Administration Commission of the State Council on September 11, 2009)
(Amended with the Approval of the Shareholders' General Meeting of the Company on June 22, 2010)
(Amended with the Approval of the Shareholders' General Meeting of the Company on February 28, 2011)
(Amended with the Approval of the Shareholders' General Meeting of the Company on June 29, 2012)
(Amended with the Approval of the Shareholders' General Meeting of the Company on October 12, 2012)
Chapter
Title
Table of Contents
CHAPTER 1
CHAPTER 2
CHAPTER 3
CHAPTER 4
CHAPTER 5
CHAPTER 6
CHAPTER 7
CHAPTER 8
CHAPTER 9
CHAPTER 10
CHAPTER 11
CHAPTER 12
CHAPTER 13
CHAPTER 14
CHAPTER 15
CHAPTER 16
CHAPTER 17
CHAPTER 18
CHAPTER 19
CHAPTER 20
CHAPTER 21
CHAPTER 22
CHAPTER 23
General Provisions
Purpose and Scope of Business
Shares and Registered Capital
Reduction of Capital and Buyback of Shares
Financial Assistance for the Purchase of Company Shares
Share Certificates and Register of Shareholders
Rights and Obligations of the Shareholders
Shareholders' General Meeting
Special Voting Procedures for Class Shareholders
Board of Directors
Independent Directors
Secretary to the Board of Directors
Manager
Board of Supervisors
Qualifications and Obligations of the Directors, Supervisors, Manager and
Other Senior Management Staff of the Company
Financial and Accounting Systems, Distribution of Profits, Auditing
Engagement of Accounting Firms
Merger and Division of the Company
Dissolution and Liquidation of the Company
Procedures for Amending the Company's Articles of Association
Notices and Announcements
Dispute Resolution
Supplementary Provisions
Page
1
4
5
12
15
17
23
27
41
45
55
61
64
66
70
79
84
88
89
92
93
94
96
Note: In the remarks column of these Articles of Association, "Company Law" means the revised Company Law of the People's Republic of China that comes into effect on January 1, 2006;
"Securities Act" means the revised Securities Law of the People's Republic of China that comes into effect on January 1, 2006; "MP" means the Mandatory Provisions of Articles of
Association of Companies That List Overseas jointly issued by the former Securities Office of the State Council and the former State Commission for the Restructuring of the Economy; "LR"
means the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited; "Zheng Jian Hai Han" means the Letter of Opinion on Supplementing and Amending the
Articles of Association of Companies That List in Hong Kong (ref. Zheng Jian Hai Han [1995] No. 1) jointly issued by the China Securities Regulatory Commission and the former State
Commission for the Restructuring of the Economy; "Opinions" means the Opinions on Further Regulating the Operation and Intensifying the Reform of Companies Listed Overseas (ref. Guo
Jing Mao Qi Gai [1999] No. 230) jointly issued by the China Securities Regulatory Commission and the State Economic and Trade Commission; "BSG" means the Guidelines on the Work of
Board Secretaries of Overseas Listed Companies issued by the China Securities Regulatory Commission. "Guide", "Governance Code", "Rules", "Protection of Public Shareholders",
"Opinions on Independent Director", "Notice on Guarantee", "No. 15 Document" respectively refer to the Guidelines for the Articles of Association of Listed Companies (as Amended in 2006)
issued by the China Securities Regulatory Commission, Code of Corporate Governance for Listed Companies in China, Rules for the General Assemblies of Shareholders of Listed
Companies, Several Provisions on Strengthening the Protection of the Rights and Interests of Public Shareholders, Guiding Opinions on the Establishment of Independent Director Systems by
Listed Companies, Notice on External Guarantee by Listed Companies, Notice on Urging the Listed Companies to Amend the Articles of Association.
ARTICLES OF ASSOCIATION
OF
Aluminum Corporation of China Limited
CHAPTER 1 General Provisions
Article 1.
Aluminum Corporation of China Limited (the "Company") is a joint stock limited company established in accordance with the Company
Law of the People's Republic of China (the "Company Law"), the Special Regulations of the State Council for the Share Offerings and
Listings Overseas of Joint Stock Limited Companies (the "Special Regulations"), other relevant State laws and administrative regulations.
Following approval by the State Economic and Trade Commission by virtue of the GJMQG [2001] No. 818, the Company was registered
with the State Administration for Industry and Commerce (the "SAIC") on September 10, 2001, and obtained a business license of an
enterprise with legal personality. The registration number of the Company's business license of an enterprise with legal personality is
1000001003573(2-1).
The Company's sponsors include Aluminum Corporation of China Limited, Guangxi Investment Group Co., Ltd., Guizhou Materials
Development and Investment Co., Ltd.
Article 2.
The Company's registered name:
Full name in Chinese:
Abbreviated name in Chinese: "
Full name in English:Aluminum Corporation of China Limited
Abbreviated name in English: Chalco
"
Article 3.
The Company's domicile: No. 62, North Xizhimen Street, Beijing, China
Postal code: 100082
Tel: (010)82298080
Fax:(010)82298081
Article 4.
The legal representative of the Company shall be the chairman of its Board of Directors.
Article 5.
The Company is a joint stock limited company existing in perpetuity.
Each shareholder shall enjoy rights and assume liabilities to the extent of his shareholding in the Company. The Company shall assume
liabilities for its debt to the extent of its entire assets.
The Company is an independent legal person, which shall be governed and protected by China laws, administrative rules and other
regulations issued by the Government.
Article 6.
The Company hereby formulated these Articles of Association (the "Company's Articles of Association" or the "Articles") at the
Shareholders' General Meeting on February 27, 2007 through amending the Company's original Articles of Association (the "Original
Articles") in accordance with the Company Law, the Special Regulations, the Mandatory Provisions of Articles of Association of
Companies That List Overseas (the "MP"), the Guidelines for the Articles of Association of Listed Companies (the "Guide"), the Code of
Corporate Governance for Listed Companies in China (the "Governance Code") and relevant provisions of other national laws and
administrative regulations.
Article 7.
The Original Articles of Association have entered into effect on the date that the Company is registered.
These Articles of Association shall enter into effect if they are adopted by the special resolutions at the Shareholders' General Meeting of
the Company and approved by the approving department authorized by the State Council. After the Company's Articles of Association
have entered into effect, the Company's Original Articles of Association shall be replaced.
Article 8.
These Articles of Association shall become a legally binding document that regulates the organization and acts of the Company and the
rights and obligations between the Company and the shareholders and between shareholders inter se from the date on which they become
effective.
Article 9.
These Articles of Association shall be binding upon the Company and its shareholders, directors, supervisors, managers and other senior
management staff. All the above persons may make claims related to Company matters in accordance with these Articles of Association.
Subject to CHAPTER 22 of these Articles of Association, shareholders may sue the Company; the Company may sue shareholders,
directors, supervisors, the Manager and other senior management staff; shareholders may sue shareholders; and shareholders may sue
directors, supervisors, the Manager and other senior management staff of the Company in accordance with these Articles of Association.
For the purposes of the preceding paragraph, the term "sue" shall include the institution of proceedings in a court or the application to an
arbitration institution for arbitration.
Article 10.
The Company may invest in other enterprises. However, except as otherwise provided by laws, the Company shall not become an investor
that is jointly and severally liable for the debt of the invested enterprises.
The Company shall not be an unlimited liability shareholder of any other for-profit organizations.
Article 11.
Under the premise of obeying the laws and administrative regulations of China, the Company has the right of financing or borrowing. The
right of financing of the Company includes (but is not limited to) the right to issue the corporate bonds, to mortgage or pledge the right of
ownership.
CHAPTER 2 Purpose and Scope of Business
Article 12.
The business purpose of the Company is: to maximize the shareholders' interests, establish the management system and operational
mechanism that are in line with international standards, strengthen the management, improve the efficiency; improve the technological
content of products guided by the market and via product upgrades and technical innovations, continue reducing the costs, expanding the
market share, thus, to improve the Company's overall competitiveness.
Article 13.
The business scope of the Company shall be in accordance with the items approved by the agency with which the Company is registered.
The business scope of the Company shall include: exploration and mining of bauxite and other metal mines, limestone mines and coal
mines; production and sale of bauxite and magnesite products, and other metal mines, smelted products and processed products;
production and sales of coal; production and sale of carbon products, relevant non-ferrous products, water and electricity, industrial
oxygen and nitrogen; production, sales, loading, unloading and transportation of autoclaved fly ash brick; production and sales of
sulphuric acid(or hazardous chemical); electricity generation and sales; research and development, production and sales of comprehensive
product utilization of ore tailings (including red mud); exploration design, construction and installation; manufacture, installation and
maintenance of mechanical equipment, spare parts, non-standard equipment; repair of automobile and engineering machinery,
manufacture and sale of automobile of special process; road transportation for cargo; installation, repair, inspection and sales of
telecommunication and testing instruments; automatic measurement control, network, software system design and installation debugging;
material inspection and analysis; operation of office automation and instruments; relevant technological development and technical
service.
Article 14.
The Company may, based on business development demand, establish wholly owned subsidiaries and holding companies, branches,
offices and other branches. The subsidiary name should begin with "Chalco", the abbreviation for Aluminum Corporation of China
Limited. The branch name should begin with the full name of "Aluminum Corporation of China Limited".
Subject to the approval by relevant government agencies, the Company may adjust its form and scope of business timely, and may
establish branches (no matter whether or not it is wholly owned) and offices inside and outside the People's Republic of China as well as
in Hong Kong, Macao or Taiwan according to the business development demand.
CHAPTER 3 Shares and Registered Capital
Article 15.
The Company shall have ordinary shares at all times. The ordinary shares issued by the Company include domestic shares and foreign
shares. It may have other kinds of shares according to the need, upon approval by the authorities that are authorized by the State Council
to examine and approve companies.
Article 16.
All the shares issued by the Company shall have a par value which shall be RMB1 Yuan for each share.
For the purposes of the above paragraph, the term "RMB" shall refer to the legal tender of the People's Republic of China.
Article 17.
The Company may issue shares to domestic investors and foreign investors following approval from the State Council authorities in
charge of securities.
For the purposes of the preceding paragraph, the term "foreign investors" shall mean investors from foreign countries or from the Hong
Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan that subscribe for shares issued by the
Company; and the term "domestic investors" shall mean investors inside the PRC, excluding the above-mentioned regions, that subscribe
for shares issued by the Company.
Article 18.
Shares issued by the Company to domestic investors and to be subscribed for in Renminbi shall be referred to as "domestic investment
shares". Shares issued by the Company to foreign investors and to be subscribed in a foreign currency shall be referred to as "foreign
investment shares". Foreign investment shares listed outside the People's Republic of China shall be referred to as "foreign investment
shares listed outside the People's Republic of China". Both holders of domestic investment shares and overseas listed foreign investment
shares are holders of common shares and shall enjoy identical rights and bear identical obligations.
For the purposes of the preceding paragraph, the term "foreign currency" means the legal tender, other than the Renminbi, of another
country or region that can be used to pay subscription moneys to the Company and which is recognized by the competent state foreign
exchange control authority.
The domestic investment shares issued by the Company shall be centrally deposited with Shanghai Branch of China Securities Depository
and Clearing Corporation Limited; the overseas listed foreign investment shares issued by the Company shall be centrally deposited with
Hong Kong Securities Clearing Company Limited.
Article 19.
Article 20.
Foreign investment shares issued by the Company and listed in Hong Kong shall be referred to as "H shares". H shares shall refer to the
shares which have been approved to be listed on the Stock Exchange of Hong Kong Limited (the "Stock Exchange"), the par value of
which is denominated in Renminbi, and which are subscribed for and traded in Hong Kong dollars.
Upon approval by the authority that is authorized by the State Council to approve companies, the Company can issue 11.45 billion shares
of ordinary shares; the Company issued a total 8 billion common shares (domestic shares) to its sponsors at the time of its establishment.
Upon the approval of the State Council and the national authorities in charge of securities, one of the sponsors, Aluminum Corporation of
China Limited has transferred part of shares to China Cinda Asset Management Corporation, China Orient Asset Management
Corporation and China Development Bank, in which, 1662.28 million shares are transferred to China Cinda Asset Management
Corporation; 621.67 million shares are transferred to China Orient Asset Management Corporation; 572.84 million shares are transferred
to China Development Bank.
The investment made by the sponsors at the time of the establishment of the Company is as follows:
Sponsor's name
Number of shares subscribed Investment method
Investment time
Aluminum Corporation of China Limited
Guangxi Investment Group Co., Ltd.
Guizhou Materials Development and Investment Co., Ltd.
Total
7,673,770,000
196,800,000
129,430,000
Net assets
Net assets
Net assets
8,000,000,000
June 28, 2001
June 28, 2001
June 28, 2001
Article 21.
The Company publicly issued 2,749,889,968 shares of overseas listed foreign investment shares (H shares) after the establishment of the
Company, in which, there are 2,499,900,153 shares of new shares and 249,989,815 shares of stock shares sold by part of shareholders.
After completion of the aforementioned issues of H shares, the Company has total share capital of 10,499,900,153 shares. The
composition of the share capital is as follows: there are 7,750,010,185 domestic shares, accounting for 73.81 percent of the Company's
total shares, in which, the sponsor, Aluminum Corporation of China Limited holds 4,656,261,060 shares, accounting for 44.35 percent of
the Company's total shares; the sponsor, Guangxi Investment Group Co., Ltd. holds 196,800,000 shares, accounting for 1.87 percent of the
Company's total shares; the sponsor, Guizhou Materials Development and Investment Co., Ltd. holds 129,430,000 shares, accounting for
1.23 percent of the Company's total shares; China Cinda Asset Management Corporation holds 1,610,332,210 shares, accounting for 15.43
percent of the Company's total shares; China Orient Asset Management Corporation holds 602,246,135 shares, accounting for 5.73
percent of the Company's total shares; China Development Bank holds 554,940,780 shares, accounting for 5.29 percent of the Company's
total shares; the holders of the overseas listed foreign investment shares (H shares) hold 2,749,889,968 shares, accounting for 26.19
percent of the Company's total shares.
Following approval by the approval authority authorized by the State Council, the Company issued additional 549,976,000 shares of
overseas listed foreign investment shares (H shares) in 2004.
After completion of the aforementioned issues of H shares, the Company has total share capital of 11,049,876,153 shares. The
composition of the share capital is as follows: there are 7,750,010,185 domestic shares, accounting for 70.13 percent of the Company's
total shares, in which, the sponsor, Aluminum Corporation of China Limited holds 4,656,261,060 shares, accounting for 42.14 percent of
the Company's total shares; the sponsor, Guangxi Investment Group Co., Ltd. holds 196,800,000 shares, accounting for 1.78 percent of the
Company's total shares; the sponsor, Guizhou Materials Development and Investment Co., Ltd. holds 129,430,000 shares, accounting for
1.17 percent of the Company's total shares; China Cinda Asset Management Corporation holds 1,610,332,210 shares, accounting for 14.57
percent of the Company's total shares; China Orient Asset Management Corporation holds 602,246,135 shares, accounting for 5.45
percent of the Company's total shares; China Development Bank holds 554,940,780 shares, accounting for 5.02 percent of the Company's
total shares; the holders of the overseas listed foreign investment shares (H shares) hold 3,299,865,968 shares, accounting for 29.87
percent of the Company's total shares.
Following the approval of the State Council, China Construction Bank Corporation has recovered the Company's 6.42% shares managed
by China Cinda Asset Management Corporation and held the shares by itself in 2005, thus becoming the Company's shareholder. The
Company's total number of shares has not been changed, but the number of shares held by China Cinda Asset Management Corporation is
reduced accordingly.
After completion of the aforementioned shareholder change, the Company has total share capital of 11,049,876,153 shares. The
composition of the share capital is as follows: there are 7,750,010,185 domestic shares, accounting for 70.13 percent of the Company's
total shares, in which, the sponsor, Aluminum Corporation of China Limited holds 4,656,261,060 shares, accounting for 42.14 percent of
the Company's total shares; the sponsor, Guangxi Investment Group Co., Ltd. holds 196,800,000 shares, accounting for 1.78 percent of the
Company's total shares; the sponsor, Guizhou Materials Development and Investment Co., Ltd. holds 129,430,000 shares, accounting for
1.17 percent of the Company's total shares; China Cinda Asset Management Corporation holds 900,559,074 shares, accounting for 8.15
percent of the Company's total shares; China Construction Bank Corporation holds 709,773,136 shares, accounting for 6.42 percent of the
Company's total shares; China Orient Asset Management Corporation holds 602,246,135 shares, accounting for 5.45 percent of the
Company's total shares; China Development Bank holds 554,940,780 shares, accounting for 5.02 percent of the Company's total shares;
the holders of the overseas listed foreign investment shares (H shares) hold 3,299,865,968 shares, accounting for 29.87 percent of the
Company's total shares.
Following approval by the approval authority authorized by the State Council, the Company issued additional 644,100,000 shares of
overseas listed foreign investment shares (H shares) in 2006, in which, there are 600,000,000 shares of new shares and 44,100,000 shares
of stock shares sold by part of shareholders.
After completion of the aforementioned issues of H shares, the Company has total share capital of 11,649,876,153 shares. The
composition of the share capital is as follows: there are 7,705,910,185 domestic shares, accounting for 66.15 percent of the Company's
total shares, in which, the sponsor, Aluminum Corporation of China Limited holds 4,612,161,060 shares, accounting for 39.59 percent of
the Company's total shares; the sponsor, Guangxi Investment Group Co., Ltd. holds 196,800,000 shares, accounting for 1.69 percent of the
Company's total shares; the sponsor, Guizhou Materials Development and Investment Co., Ltd. holds 129,430,000 shares, accounting for
1.11 percent of the Company's total shares; China Cinda Asset Management Corporation holds 900,559,074 shares, accounting for 7.73
percent of the Company's total shares; China Construction Bank Corporation holds 709,773,136 shares, accounting for 6.09 percent of the
Company's total shares; China Orient Asset Management Corporation holds 602,246,135 shares, accounting for 5.17 percent of the
Company's total shares; China Development Bank holds 554,940,780 shares, accounting for 4.76 percent of the Company's total shares;
the holders of the overseas listed foreign investment shares (H shares) hold 3,943,965,968 shares, accounting for 33.85 percent of the
Company's total shares.
Following the approval of the special resolution by the Shareholders' General Meeting of the Company and following the approval by the
approval authority authorized by the State Council, the Company issued 1,236,731,739 A shares and 637,880,000 shares.
The current composition of the share capital is as follows: there are 13,524,487,892 ordinary shares, in which, the holders of A shares
holds 9,580,521,924 shares, accounting for 70.84 percent of the Company's total ordinary shares; the holders of overseas listed foreign
investment shares hold 3,943,965,968 shares, accounting for 29.16 percent of the Company's total ordinary shares.
Article 22.
After the Company's plan for the offering of domestic investment shares and overseas listed foreign investment shares has been approved
by the CSRC, the Board of Directors of the Company may arrange for implementation of such plan by means of separate issues.
The Company's plans for the offerings of domestic investment shares and overseas listed foreign investment shares in accordance with the
preceding paragraph may be implemented separately within 15 months from the date of approval by the China Securities Regulatory
Commission (the "CSRC").
Article 23.
If the Company offers domestic investment shares and overseas listed foreign investment shares separately within the total number of
shares specified in the offer plan, each such offering shall be fully subscribed for in one time. If special circumstances make it impossible
for each such offering to be fully subscribed for in one time, the shares may be offered in installments, subject to the approval of the
CSRC.
Article 24.
The registered capital of the Company is RMB 13,524,487,892 Yuan.
Article 25.
The Company may approve capital increases depending on its business and development requirements in accordance with the relevant
provisions of the Articles of Association of the Company.
The Company may increase its capital by the following methods:
(1)
(2)
(3)
(4)
(5)
raising of new shares from non-specific investors;
placing of new shares to existing shareholders;
allotment of new shares to existing shareholders;
conversion of funds in the capital common reserve to share capital;
other methods permitted by laws and administrative regulations.
If the Company is to increase its capital by an offering of new shares, it shall do so by the procedure provided for in relevant state laws
after such increase has been approved in accordance with these Articles of Association.
Article 26.
Except as otherwise provided by laws and administrative regulations, shares in the Company may be transferred freely with no lien
attached.
CHAPTER 4 Reduction of Capital and Buyback of Shares
Article 27.
In accordance with the provisions of the Articles of Association, the Company may reduce its registered capital.
Article 28.
If the Company is to reduce its capital, it must prepare a balance sheet and a list of its property.
The Company shall notify its creditors within 10 days from the date of adoption of the resolution to reduce its registered capital and
publish a public announcement of the resolution in newspapers within 30 days. Creditors shall, within 30 days of receiving written notice,
or within 45 days of the date of the public announcement for those who have not received written notice, be entitled to require the
Company to pay its debts in full or to provide a corresponding security for repayment.
The reduced registered capital of the Company may not be less than the statutory minimum.
Article 29.
The Company may, in the following circumstances, buy back its own outstanding shares by the procedure provided for in laws and these
Articles of Association, after approval by relevant State authorities:
(1)
(2)
(3)
(4)
cancellation of shares in order to reduce its capital;
merger with another company holding shares of the Company;
grant of shares as an incentive to its employees;
a shareholder opposes a resolution on the merger or division of the Company adopted at a Shareholders' General Meeting and
requests that the Company purchase his or her shares;
(5)
other circumstances approved in laws or administrative regulations.
If the Company buys back its own outstanding shares, it shall do by the provisions set forth from Article 30 to Article 33 of these Articles
of Association.
Article 30.
After the Company is approved by relevant State authorities to buy back its own shares, it may proceed in any of the following manners:
(1)
(2)
(3)
(4)
issuance to all of the shareholders of a buyback offer on a pro rata basis;
buyback through open transactions on a stock exchange;
buyback by agreement outside a stock exchange;
other manners as permitted by laws and administrative regulations or the State Council's authorities in charge of securities.
Article 31.
If the Company is to buy back shares by agreement outside a stock exchange, prior approval shall be obtained from the Shareholders'
General Meeting in accordance with these Articles of Association. Upon prior approval by the Shareholders' General Meeting obtained in
the same manner, the Company may terminate or vary a contract concluded in the manner set forth above or waive any of its rights under
such contract.
For the purposes of the preceding paragraph, "contracts for the buyback of shares" shall include (but not be limited to) agreements
whereby buyback obligations are undertaken and buyback rights are acquired.
The Company may not transfer a contract for the buyback of its own shares or any of its rights thereunder.
Article 32.
After the Company has bought back its shares according to laws, it shall transfer or cancel such shares within the period prescribed in the
laws and administrative regulations. If the Company cancels shares, it shall carry out the registration of the change in its registered capital
with its original registrar.
The amount of the Company's registered capital shall be reduced by the total par value of the shares canceled.
Article 33.
Unless the Company has already entered the liquidation stage, it must comply with the following provisions in buying back its outstanding
shares:
(1)
(2)
if the Company buys back shares at their par value, the amount thereof shall be deducted from the book balance of distributable
profit and/or from the proceeds of a fresh share offer made to buy back the old shares;
if the Company buys back shares at a price higher than their par value, the portion corresponding to their par value shall be
deducted from the book balance of the Company's distributable profit and/or from the proceeds of a fresh share offer made to buy
back the old shares; and the portion in excess of the par value shall be handled according to the following methods:
(i)
(ii)
if the shares being bought back were issued at their par value, the amount shall be deducted from the book balance of the
Company's distributable profit;
if the shares being bought back were issued at a price higher than their par value, the amount shall be deducted from the
book balance of distributable profit and/or the proceeds of a fresh share offer made to repurchase the old shares; however,
the amount deducted from the proceeds of the fresh share offer may not exceed the total premium obtained at the time of
issuance of the old shares nor may it exceed the amount in the Company's premium account (or capital common reserve
account) (including the premiums from the fresh share offer) at the time of the buyback;
(3)
the sums paid by the Company for the purposes set forth below shall be paid out of the Company's distributable profit:
(i)
acquisition of the right to buy back its own shares;
(ii)
amendment of any contract for the buyback of its own shares;
(iii)
release from any of its obligations under a buyback contract;
(4)
after the par value of the cancelled shares has been deducted from the registered capital of the Company in accordance with
relevant regulations, that portion of the amount deducted from the distributable profit and used to buy back shares which
corresponds to the par value of the shares bought back shall be credited to the Company's capital common reserve account.
CHAPTER 5 Financial Assistance for the Purchase of Company Shares
Article 34.
Neither the Company nor its subsidiaries shall at any time provide any financial assistance in any form to purchasers or prospective
purchasers of shares of the Company. Purchasers of shares of the Company as referred to above shall include persons that directly or
indirectly assume obligations as a result of purchasing shares of the Company.
Neither the Company nor its subsidiaries shall at any time provide any financial assistance in any form to the above obligors in order to
reduce or release them from their obligations.
The provisions of this Article shall not apply to the circumstances described in Article 36 of this Chapter.
Article 35.
For the purposes of this Chapter, the term "financial assistance" shall include (but not be limited to) financial assistance in the forms set
forth below:
(1)
(2)
(3)
(4)
gift;
security (including the undertaking of liability or provision of property by the guarantor in order to secure the performance of the
obligation by the obligor), indemnity (not including, however, indemnity arising from the Company's own fault), release or waiver
of rights;
provision of a loan or conclusion of a contract under which the obligations of the Company are to be fulfilled before the
obligations of the other party to the contract, or the amendment of, or the transfer of rights under, such loan or contract;
financial assistance in any other form if the Company is insolvent or has no net assets or if such assistance would lead to a major
reduction in the Company's net assets.
For the purposes of this Chapter, the term "assume obligations" shall include the assumption of an obligation by the obligor by reason of
concluding a contract or making an arrangement (whether or not such contract or arrangement is enforceable, and whether or not such
obligation is undertaken by the obligor individually or jointly with any other person) or by changing its financial position in any other
way.
Article 36.
The acts listed below shall not be regarded as acts prohibited under Article 34 of these Articles of Association:
(1)
(2)
(3)
(4)
(5)
(6)
where the Company provides the relevant financial assistance genuinely for the benefit of the Company and the main purpose of
the financial assistance is not the purchase of shares of the Company, or the financial assistance is an incidental part of some
overall plan of the Company;
lawful distribution of the Company's property in the form of dividends;
distribution of dividends in the form of shares;
reduction of registered capital, buyback of shares, adjustment of the equity structure, etc. in accordance with these Articles of
Association;
provision of a loan by the Company within its scope of business and in the ordinary course of its business (provided that the same
does not lead to a reduction in the net assets of the Company or that if the same constitutes a reduction, the financial assistance
was paid out of the Company's distributable profit);
the provision of money by the Company for an employee shareholding scheme (provided that the same does not lead to a
reduction in the net assets of the Company or that if the same constitutes a reduction, the financial assistance was paid out of the
Company's distributable profit).
CHAPTER 6 Share Certificates and Register of Shareholders
Article 37.
The Company's shares shall be registered shares.
The Company's share certificates shall clearly state the following main particulars:
(1)
(2)
(3)
(4)
(5)
the Company's name;
the date of incorporation of the Company;
the class of shares, par value and the number of shares represented thereby;
the serial number of the share certificate;
other matters as required by the Company Law, Special Provisions and the securities exchange(s) on which the shares of the
Company are listed.
Article 38.
Shares of the Company may be transferred, gifted, succeeded to and mortgaged in accordance with relevant laws, administrative
regulations and these Articles of Association.
When shares are transferred and assigned, registration shall be carried out with the share registrar appointed by the Company.
Article 39.
The share certificates shall be signed by the legal representative of the Company. If the signatures of other senior management staff of the
Company are required by the stock exchange on which Company shares are listed, the share certificates shall also be signed by such other
senior management staff. The share certificates shall become effective after the Company's seal (including the corporation securities' seal)
is affixed thereto or printed thereon. The affixing of the Company's seal (including the corporation securities' seal) on the share certificates
shall require the authorization of the Board of Directors. The signature of the Chairman of the Board of Directors or of other relevant
senior management staff on the share certificates may also be in printed form.
Article 40.
The Company shall not accept its own share certificates as the subject matter of a pledge.
Article 41.
Article 42.
The directors, supervisors, the Managers and other senior management staff of the Company shall report to the Company the shares of the
Company that they hold and the changes in their shareholdings during their term of office. A director, supervisor, the Manager or senior
officer shall transfer the shares of the Company in accordance with the provisions in laws, regulations and/or the listing rules.
If a director, supervisor, the Manager, senior deputy manager, deputy manager or other senior management staff of the Company, or a
holder of at least 5 percent of the domestic investment shares of the Company, sells the shares of the Company that he or she holds within
six months after acquiring the same, or buys such shares back within six months after selling the same, the gains obtained therefrom shall
belong to the Company and the Board of Directors of the Company shall recover such gains from him or her. However, a securities
company that underwrote shares on a firm commitment basis and which, after purchasing the shares remaining after the sale, holds at least
5 percent of the shares shall not be subject to the six-month time limit when selling such shares.
If the Board of Directors of the Company fails to act in accordance with the preceding paragraph, shareholders shall have the right to
demand that the Board of Directors act within 30 days. If the Board of Directors of the Company fails to act within such time period,
shareholders shall have the right, in the interests of the Company, to directly institute a legal action in a court in their own name.
If the Board of Directors of the Company fails to act in accordance with the first paragraph, the responsible directors shall be jointly and
severally liable in accordance with the laws.
Article 43.
The Company shall keep a register of shareholders, in which the following particulars shall be recorded:
(1)
(2)
(3)
(4)
(5)
(6)
the name, address (domicile), profession or nature of each shareholder;
the class and quantity of shares held by each shareholder;
the amount paid or payable for the shares held by each shareholder;
the serial numbers of the shares held by each shareholder;
the date on which each shareholder is registered as such;
the date on which each shareholder ceases to be a shareholder.
The register of shareholders shall be sufficient evidence of the holding of Company shares by a shareholder, unless there is evidence to the
contrary.
Article 44.
The Company may, pursuant to an understanding or agreement reached between the CSRC and the foreign securities regulator, keep its
register of holders of overseas listed foreign investment shares outside the PRC, and appoint an overseas agent to administer the same. The
original register of shareholders of holders of H shares shall be maintained in Hong Kong.
The Company shall keep at its domicile a duplicate of the register of holders of overseas listed foreign investment shares. The appointed
overseas agent shall ensure that the register of holders of overseas listed foreign investment shares and its duplicate are consistent at all
times.
If the original and duplicate of the register of holders of overseas listed foreign investment shares and its duplicate are inconsistent, the
original shall prevail.
Article 45.
The Company shall keep a complete register of shareholders.
The register of shareholders shall include the following parts:
(1)
(2)
(3)
a register kept at the Company's domicile other than those provided for under items (2) and (3) of this paragraph;
the register of holders of overseas listed foreign investment shares kept in the place of the overseas stock exchange on which the
shares are listed;
registers of shareholders kept in such other places as the Board of Directors may decide necessary for listing of the Company's
shares.
Article 46.
The various parts of the register of shareholders shall not overlap. The transfer of shares registered in a certain part of the register of
shareholders shall not, during the continuance of the registration of such shares, be registered in any other part of the register.
All overseas listed foreign investment shares listed in Hong Kong for which the share capital has been paid in full may be transferred
freely in accordance with the Articles of Association. The Board of Directors may refuse to recognize any instrument of transfer without
giving any reason unless such transfer is carried out in compliance with the following conditions:
(1)
payment of HK$2.50 per instrument of transfer or higher charge as agreed at such time by the SEHK has been made to the
Article 47.
Article 48.
Article 49.
Article 50.
Company for the purpose of registering the instrument of transfer and other documents relating to or which may affect the title to
the shares;
the instrument of transfer only involves overseas listed foreign investment shares listed in Hong Kong;
the stamp duty payable on the instrument of transfer as required by Hong Kong laws has been paid;
relevant share certificates and evidence that the transferor has the right to transfer such shares as reasonably required by the Board
of Directors have been provided;
if the shares are to be transferred to joint holders, the number of registered joint holders may not exceed four;
the relevant shares are not encumbered by any Company lien.
(2)
(3)
(4)
(5)
(6)
All transfers of overseas listed foreign investment shares shall be effective with a written instrument of transfer in general or ordinary
form or such other form as acceptable to the Board of Directors. And the instrument of transfer shall become effective after being
manually signed or the Company seal (if the transferor or the transferee is a company) is affixed thereto or printed thereon. If the
transferor or transferee of the Company's shares is a recognized clearing house or an agent thereof, the signature on the written instrument
of transfer may be manually signed or mechanically printed. All instruments of transfer must be kept at the legal address of the Company
or other place as may be designated by the Board of Directors from time to time.
Changes to and corrections of each part of the register of shareholders shall be carried out in accordance with the laws of its situs.
No changes resulting from share transfers may be made to the register of shareholders within 30 days prior to a Shareholders' General
Meeting or 5 days prior to the date of record set by the Company for the purpose of distribution of dividends.
When the Company is to convene a Shareholders' General Meeting, to distribute dividends, to be liquidated or to carry out other acts
requiring confirmation of equity interests, the Board of Directors or the convener of the Shareholders' General Meeting shall decide upon
a date as the date of record. Shareholders whose names appear on the register at closing on the date of record shall be the shareholders
entitled to the relevant rights and interests.
Any person that challenges the register of shareholders and requests that his or her name be entered into or removed from the register may
apply to the competent court for rectification of the register.
Any shareholder who is registered in the register of shareholders or any person who requests that his or her name be entered into the
register of shareholders may, if his or her share certificate (the "original share certificate") is lost, apply to the Company for issuance of a
replacement certificate in respect of such shares (the "relevant shares").
Applications for the replacement of share certificates from holders of domestic investment shares who have had their certificates stolen or
damaged, or who have lost the same shall be handled in accordance with Article 144 of the Company Law.
Applications for the replacement of share certificates from holders of overseas listed foreign investment shares who have had their
certificates stolen or damaged, or who have lost the same may be handled in accordance with the laws, stock exchange rules or other
relevant regulations of the place where the original of the register of holders of overseas listed foreign investment shares is kept.
Applications for the replacement of share certificates from holders of H shares shall comply with the following requirements:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
the applicant shall submit the application in the standard form prescribed by the Company accompanied by a notarial certificate or
statutory declaration. The notarial certificate or statutory declaration shall include the applicant's reason for the application, the
circumstances and evidence of the loss of the share certificate and a declaration that no other person may request registration as a
shareholder in respect of the relevant shares;
the Company shall not have received any declaration requesting registration as a shareholder in respect of the shares from any
person other than the applicant before it decides to issue a replacement share certificate;
if the Company decides to issue a replacement share certificate to the applicant, it shall publish a public announcement of its
intention to do so in the newspapers or periodicals designated by the Board of Directors; the period of the public announcement
shall be 90 days, during which its publication shall be repeated at least once every 30 days;
before publishing the public announcement of its intention to issue a replacement share certificate, the Company shall submit a
copy of the announcement to be published to the stock exchange where it is listed and may proceed with publication after having
received a reply from the stock exchange confirming that the announcement has been displayed in the stock exchange; the
announcement shall be displayed in the stock exchange for a period of 90 days;
if the application for issuance of a replacement share certificate was made without the consent of the registered holder of the
relevant shares, the Company shall mail to such shareholder a photocopy of the public announcement that it intends to publish;
if, at the expiration of the 90-day periods provided for in items (3) and (4) hereof, the Company has not received any objection to
the issuance of a replacement share certificate from any person, it may issue a replacement share certificate in accordance with the
application of the applicant;
when the Company issues a replacement share certificate under this Article, it shall immediately cancel the original share
certificate and record such cancellation and the issuance of the replacement share certificate in the register of shareholders;
all expenses of the Company for the cancellation of the original share certificate and the issuance of a replacement share certificate
shall be borne by the applicant. The Company shall be entitled to refuse to take any action until the applicant has provided
reasonable security.
Article 51.
After the Company has issued a replacement share certificate in accordance with these Articles of Association, it may not delete from the
register of shareholders the name of a bona fide purchaser of the replacement share certificate mentioned above or of a shareholder that is
subsequently registered as the owner of the shares (provided that he or she is a bona fide purchaser).
Article 52.
The Company shall not be held liable for damages in respect of any damage suffered by any person from the cancellation of the original
share certificate or the issuance of the replacement share certificate, unless the claimant can prove fraud on the part of the Company.
Article 53.
The Company's shareholders are persons that lawfully hold shares of the Company and whose names are entered in the register of
shareholders.
CHAPTER 7 Rights and Obligations of the Shareholders
Shareholders shall enjoy rights and bear obligations according to the class and quantity of shares held by them. Holders of shares of the
same class shall enjoy equal rights and bear equal obligations.
For the joint shareholders, if one of the joint shareholders has passed away, the surviving shareholders shall be deemed by the Company to
have the ownership of the related shares, but the Board of Directors is entitled to ask for the provision of the suitable death certificate for
the purpose of revision of the register of shareholders. For the joint shareholders of any classes of shares, only the first named shareholder
in the register of shareholders has the right to receive the share certificates of the related shares, receive the notice of the Company, attend
the Shareholders' General Meeting and exercise his or her voting right; while, any notice delivered to the said shareholder shall be deemed
as the notice has been delivered to all of the joint shareholders of the related shares.
The Company may not exercise any power to freeze or otherwise impair any of the rights attached to any share by reason only that the
person who is interested directly or indirectly therein has failed to disclose his or her interests to the Company.
Article 54.
Holders of ordinary shares of the Company shall enjoy the following rights:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
collect dividends and other profit distributions on the basis of the number of shares held by them;
demand, convene, preside over, participate or appoint their proxies to participate in shareholders' meetings in accordance with
laws, and exercise voting rights pursuant to their shareholdings.
supervise and control the Company's business activities, and raise suggestions or inquiries;
transfer, donate, or pledge shares in accordance with laws, administrative regulations and the Company's Articles of Association;
obtain relevant information in accordance with the Articles of Association of the Company, which shall include;
i.
ii.
obtaining the Articles of Association of the Company after payment of a charge to cover costs;
being entitled to browse and make a copy after payment of reasonable charges, including:
(i)
(ii)
all parts of the register of shareholders;
personal information on the directors, supervisors, managers and other senior management staff of the Company,
including:
(a)
(b)
(c)
(d)
(e)
current and previous names and aliases;
main addresses (domiciles);
nationalities;
full-time and other part-time occupations and duties;
identification documents and their numbers.
(iii)
the status of the Company' share capital;
(iv)
(v)
reports of the aggregate par value, number of shares, and highest and lowest prices of each category of shares
bought back by the Company since the last fiscal year as well as all the expenses paid by the Company therefore;
meeting minutes of the shareholders' meeting, resolution of the meeting of the Board of Directors, and resolution
of the meeting of the Board of Supervisors;
(vi)
stub copy of corporate bond and financial reports.
participate in the distribution of the surplus assets of the Company according to their shareholding when the Company is
terminated or liquidated;
with respect to any shareholder, who objects to the resolution of the Shareholders' General Meeting on the merger or division of
the Company, requires the Company to buy back his or her shares;
institute a legal action in a People's Court and claim relevant rights, in accordance with the Company Law, other laws,
administrative rules and regulations against the acts that damage the Company's interests or infringe the legitimate rights of the
shareholders;
(9)
other rights conferred by laws, administrative rules and regulations and the Company's Articles of Association.
Article 55.
Holders of common shares of the Company bear the following obligations:
(1)
(2)
to comply with the Articles of Association of the Company;
to pay subscription moneys according to the shares subscribed for by them and the method of acquiring such shares;
(3)
(4)
not to return their shares except in circumstances specified in laws and regulations;
not to abuse their shareholders' rights to harm the interests of the Company or those of other shareholders; not to abuse the
Company's independent legal person status or shareholders' limited liability to harm the interests of the Company's creditors; if a
shareholder abuses his or her shareholder rights, thereby causing the Company or another shareholder to sustain a loss, he or she
shall be held liable for damages in accordance with laws; if a shareholder abuses the Company's independent legal person status or
shareholders' limited liability to evade a debt, thereby materially harming the interests of a creditor of the Company, he or she
shall bear joint and several liability for the debt of the Company;
(5)
other obligations imposed by laws, administrative rules and regulations and these Articles of Association.
Shareholders shall not bear any liability for further contributions to share capital other than the conditions agreed to by the subscribers for
the shares at the time of subscription.
Article 56.
The controlling shareholders and actual controllers of the Company may not take advantage of their connected relationships to harm the
interests of the Company, and they shall be held liable for damages if they violate regulations which causes the Company to sustain a loss.
The controlling shareholders and the actual controllers of the Company bear a fiduciary duty toward the Company and retail shareholders.
The controlling shareholder shall exercise its rights as an investor in strict accordance with laws. It may not use such means as a profit
distribution, asset restructuring, investment in a third party, appropriation of funds, loan security, etc. or use its controlling position to
harm the lawful rights and interests of the Company and the retail shareholders.
Article 57.
In addition to the obligations imposed by laws, administrative rules and regulations and the listing rules of the stock exchange on which
Company shares are listed, the controlling shareholder of the Company may not, in exercising its shareholder powers, make decisions
prejudicial to the interests of all or some of the shareholders due to the exercise of its voting rights on the issues set forth below:
(1)
(2)
(3)
relieving a director or supervisor of the responsibility to act honestly in the best interests of the Company;
approving that a director or supervisor (for his or her own or another person's benefit) deprive the Company of its property in any
way, including (but not limited to) any opportunities that are advantageous to the Company;
approving that a director or supervisor (for his or her own or another persons benefit) deprive other shareholders of their
individual rights or interests, including (but not limited to) rights to distributions and voting rights, but excluding a restructuring of
the Company submitted to the Shareholders' General Meeting for adoption in accordance with these Articles of Association.
Article 58.
For the purposes of the preceding Article, the term "controlling shareholder" shall refer to a person that satisfies any of the following
conditions:
(1)
(2)
(3)
a person who, acting alone or in concert with others, has the power to elect not less than one half of the directors;
a person who, acting alone or in concert with others, has the power to exercise or control 30 percent or more of the Company's
voting rights;
a person who, acting alone or in concert with others, holds 30 percent or more of the issued and outstanding shares of the
Company;
(4)
a person who, acting alone or in concert with others, has de facto control of the Company in any other manner.
CHAPTER 8 Shareholders' General Meeting
Article 59.
The Shareholders' General Meeting shall be the organ of authority of the Company and shall exercise its functions and powers in
accordance with the laws.
Article 60.
The Shareholders' General Meeting shall exercise the following functions and powers:
(1)
(2)
(3)
to decide on the business policies and investment plans of the Company;
to elect and replace directors and decide on matters concerning the remuneration of directors;
to elect and replace the supervisors who are to be appointed from among the shareholders' representatives and decide on matters
concerning the remuneration of supervisors;
(4)
to consider and approve reports of the Board of Directors;
(5)
to consider and approve reports of the Board of Supervisors;
(6)
(7)
(8)
(9)
to consider and approve the Company's annual financial budget plans and final accounting plans;
to consider and approve the Company's profit distribution plans and plans for making up losses;
to pass resolutions concerning the increase or reduction of the Company's registered capital;
to pass resolutions on the merger, division, dissolution or liquidation of the Company;
(10)
to pass resolutions on the issuance of corporate bonds;
(11)
to pass resolutions on the engagement, dismissal or non-renewal of the engagement of a ccounting firms by the Company;
(12)
to amend the Articles of Association of the Company;
(13)
(14)
(15)
to pass resolutions on matters relating to the share-related remuneration (such as placement of shares or stock option, etc.) of the
employees;
to consider and approve matters relating to the purchase and/or sale by the Company within one year of material assets valued at
more than 25 percent of the Company's total assets;
to pass resolutions on matters relating to the security for third parties that laws, administrative regulations and the Company's
Articles of Association require to be resolved by the Shareholders' General Meeting;
(16)
to consider and approve changes in the use of raising funds;
(17)
other matters that laws, administrative regulations and the Company's Articles of Association require to be resolved by the
Shareholders' General Meeting.
The Shareholders' General Meeting may delegate or entrust its matters to be handled by the Board of Directors.
Article 61.
Any external guarantee matters of the Company shall be passed by through deliberation by the Board of Directors. The following
guarantee matters after the deliberation by the Board of Directors shall be submitted to the Shareholders' General Meeting for approval:
(1)
(2)
(3)
(4)
(5)
(6)
any guarantee provided after the total guarantee amount of the Company and its holding subsidiaries reaches or exceeds 50
percent of the latest audited net assets;
any guarantee provided for those whose asset to liability ratio exceeds 70 percent;
any guarantee with a single amount guaranteed exceeding 10 percent of the latest audited net assets;
security to be provided for a shareholder, the actual controller or a connected person thereof;
any guarantee provided after the total guaranteed amount of the Company reaches or exceeds 25 percent of the latest audited net
assets;
other provisions of security that laws, administrative rules and regulations, as well as these Articles of Association specify to be
submitted to the Shareholders' General Meeting for approval.
If a director, the Manager, senior assistant manager, assistant manager or other senior officer violates a provision on the approval authority
or consideration procedure for the provision of security to third parties as specified in laws or these Articles of Association, thereby
causing the Company to sustain a loss, he or she shall be held liable for damages and the Company may institute a legal action against him
or her in accordance with the laws.
Article 62.
The matters that shall be decided by the Shareholders' General Meeting in accordance with the laws, the administrative regulations and
rules, as well as the Articles of Association must be reviewed by the Shareholders' General Meeting, in order to protect the decision-
making power of the Company's shareholders on such matters. When necessary and reasonable, the Shareholders' General Meeting may
authorize the Board of Directors to decide to the extent authorized on specific matters that relate to the matters to be resolved and that
cannot be promptly decided on at the Shareholders' General Meeting.
As for the authorization of the Board of Directors by the Shareholders' General Meeting, the ordinary resolutions of the Shareholders'
General Meeting shall be adopted by shareholders in attendance (including proxies) holding at least half of the voting rights; the special
resolutions of the Shareholders' General Meeting shall be adopted by shareholders in attendance (including proxies) holding at least two-
thirds of the voting rights. The content of authorization should be clear and specific.
Article 63.
Without the prior approval of the Shareholders' General Meeting, the Company may not conclude any contract with any person other than
a director, a supervisor, a manager or other senior management staff of the Company for the delegation of the whole business management
or important business management of the Company to that person.
Article 64.
Shareholders' general meetings can be divided into annual shareholders' general meetings and extraordinary shareholders' general
meetings. Annual meetings shall be convened once a year and shall be held within six months following the preceding fiscal year.
The Board of Directors shall convene an extraordinary shareholders' general meeting within two months after the occurrence of any of the
following circumstances:
(1)
(2)
(3)
the number of directors is less than the number provided for in the Company Law or less than two-thirds prescribed in the Articles
of Association of the Company;
the losses of the Company that have not been made up reach one-third of the total share capital of the Company;
upon the request of a shareholder who alone has held or shareholders who together have held at least 10 percent (including 10
percent) of the shares of the Company for at least 90 days in succession (the shareholding referred to above shall be calculated as
of the day on which the written request is made);
(4)
The Board of Directors considers that there is a need or the Board of Supervisors proposes a meeting;
The amount of the shareholding shall be based on the date of the written proposal in the case of preceding paragraph (3).
Article 65.
When the Company is to hold a general shareholders' meeting, it shall issue a written notice 45 days (including the meeting day) prior to
the meeting informing all the registered shareholders of the matters to be considered at and the date and place of the meeting. Shareholders
that intend to attend the meeting shall, within 20 days prior the day on which the meeting is to be held, serve a written reply on the
Company stating that they will attend the meeting.
Based on the written replies received 20 days before the Shareholders' General Meeting is to be held, the Company shall calculate the
number of voting shares represented by the shareholders intending to attend the meeting. If the number of voting shares represented by the
shareholders intending to attend the meeting is not less than half of the total number of the Company's voting shares, the Company may
hold the Shareholders' General Meeting. If not, the Company shall, within five days, inform the shareholders once again of the matters to
be considered at and the date and place of the meeting in the form of a public announcement. After such notification by public
announcement, the Company may hold the Shareholders' General Meeting.
Article 66.
The motion of the Shareholders' General Meeting shall be the specific motion raised for the matters to be discussed at the Shareholders'
General Meeting. The motion of the Shareholders' General Meeting shall meet the following requirements:
(1)
(2)
(3)
its content does not contravene laws, administrative regulations and these Articles of Association and falls within the scope of
business and duties of the Shareholders' General Meeting;
it has specific subject and detailed matters to be examined at the meeting;
it shall be submitted or sent to the Board of Directors in writing.
Article 67.
When the Company is to hold an annual Shareholders' General Meeting, the Board of Directors, the Board of Supervisors and a
shareholder alone or shareholders together holding at least 3 percent of the Company's shares shall be entitled to propose motions to the
Company.
A shareholder alone or shareholders together holding at least 3 percent of the shares of the Company may submit extempore motions in
writing to the convener 10 days prior to the date of such meeting. The convener shall issue a supplementary notice of the Shareholders'
General Meeting and make a public announcement of the contents of such extempore motion within two days after receipt of the motion.
Except as provided in the preceding paragraph, the convener may not make any changes to the motions set forth in the notice of the
Shareholders' General Meeting or add any new motions once the notice and announcement of the Shareholders' General Meeting have
been issued.
Article 68.
The matters to be discussed at or decided by the Shareholders' General Meeting shall be determined in accordance with the Company Law
and these Articles of Association. The Shareholders' General Meeting shall make decision on any matters prescribed by these Articles of
Association.
The Shareholders' General Meeting may not vote and pass resolution on motions that are not set forth in the Article 65 and Article 67 or
that are not consistent with Article 66 of these Articles of Association.
Article 69.
The notice of a Shareholders' General Meeting shall:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
be made in writing;
specify the place, date and time of the meeting;
describe the matters to be discussed at the meeting;
provide to the shareholders the information and explanations necessary to make informed decisions on the matters to be discussed;
without limiting the generality of the foregoing, when the Company proposes a merger, buyback of shares, restructuring of share
capital or other reorganization, it shall provide the specific conditions and contract (if any) of the transaction contemplated and
earnestly explain the cause and effect of the transaction;
contain a disclosure of the nature and extent of the material interests, if any, of any director, supervisor, the Manager or other
senior management staff in any matter to be discussed; and an explanation of the difference, if any, between the way in which the
matter to be discussed would affect such director, supervisor, the Manager or other senior management staff in his or her capacity
as shareholder and the way in which such matter would affect other shareholders of the same class;
contain the full text of any special resolution proposed to be moved at the meeting;
contain conspicuously a statement that all shareholders are entitled to attend and vote, that they may appoint one or more proxies
in writing to attend and vote at such meeting on their behalves and that such proxies need not be shareholders of the Company;
(8)
state the time and place for serving the instruments of appointment for voting at the meeting.
Article 70.
Notice of a Shareholders' General Meeting shall be delivered to the shareholders (whether or not entitled to vote thereat) by hand or
prepaid mail at the recipient's address shown in the register of shareholders, or given by way of a public announcement.
The "public announcement" referred to in the preceding paragraph shall, for holders of domestic investment shares, be published in one or
more newspapers or periodicals designated by the CSRC during the period between 45 and 50 days before the meeting is to be held. Once
the announcement is made, all holders of domestic investment shares shall be deemed to have received notice of the relevant Shareholders'
General Meeting.
Subject to the laws, regulations and listing rules of the place where Company shares are listed, the notice of a Shareholders' General
Meeting for holders of H shares may be given or provided by other means as specified in Article 229 of these Articles of Association.
Article 71.
Any shareholder entitled to attend and vote at a shareholders' meeting shall have the right to appoint one or more persons (who need not
be shareholders) as his or her proxies to attend and vote on his or her behalf. Such proxy may exercise the following rights in accordance
with his or her appointment by the shareholder:
(1)
(2)
(3)
the shareholders right to be heard at the Shareholders' General Meeting;
the right to demand or join in the demand for a ballot;
unless otherwise provided in accordance with the applicable Listing Rules or other securities laws and regulations, the voting
rights shall be exercised by show of hands or by ballot, except that if a shareholder has appointed more than one proxy, such
proxies may only exercise their voting rights by ballot.
Article 72.
Article 73.
Article 74.
Article 75.
Article 76.
Article 77.
Shareholders shall appoint their proxies by written instruments, which shall be signed by the principals or their agents appointed in
writing. If the principal is a legal person, the instrument shall be under the seal of the legal person or signed by its director(s) or duly
authorized agent(s). The instrument of appointment shall specify the number of shares of the principal that the proxy represents. In case
more than one person are appointed to be the proxies of shareholders, the instrument of appointment shall specify the number of voting
shares which each proxy represents.
The instrument appointing a voting proxy shall be deposited at the domicile of the Company or at such other place as specified in the
notice of the meeting within 24 hours prior to the meeting at which the proxy is authorized to vote or 24 hours prior to the specified time
of the vote. If the instrument is signed by another person authorized by the principal, the power of attorney or other document authorizing
the signature shall be notarized. The notarized power of attorney or other authorizing document shall be deposited together with the
instrument appointing the voting proxy at the domicile of the Company or at such other place as specified in the notice of the meeting.
If the principal is a legal person, its legal representative or the person authorized by a resolution of its Board of Directors or other
decision-making body shall attend the Shareholders' General Meeting of the Company as the representative of such legal person.
Any form issued by the Board of Directors of the Company to the shareholders for the appointment of proxies shall give the shareholders
free choice to instruct their proxies to cast an affirmative or negative vote and enable the shareholders to give separate instructions on each
matter to be voted on in connection with each point of discussion of the meeting. The instrument of appointment shall specify that in the
absence of instructions from the shareholder, the proxy may vote as he or she thinks fit.
A vote made in accordance with the terms of an instrument of appointment shall be valid notwithstanding the previous death or loss of
capacity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the relevant
shares, as long as the Company did not receive written notice of the event before the relevant meeting commenced.
When the Shareholders' General Meeting considers matters relating to a connected transaction, the connected shareholders shall not
participate in the vote, and the number of voting shares represented by them shall not count toward the total number of valid voting shares.
The announcement of the resolutions of the Shareholders' General Meeting shall fully disclose the way the unconnected shareholders
voted.
Any proxy who represents an individual shareholder to attend the Shareholders' General Meeting shall provide his or her identification
document as well as the power of attorney signed by the principal or the representative authorized by the principal. In the case of the legal
representative of a corporate shareholder appoints a proxy to attend the meeting, the proxy shall provide his or her identification document
as well as the power of attorney signed by the legal representative. Any proxy authorized by way of a resolution of its Board of Directors
or other decision making body who attend the Shareholders' General Meeting shall provide his or her identification document as well as
the power of attorney signed by the Board of Directors or other decision making body and under the seal of the legal person. The
instrument of appointment shall specify the date of issuance.
Article 78.
The Board of Directors, the independent directors and qualified shareholders have the right to solicit voting rights (in accordance with the
standard issued by the authorized supervising department from time to time) from shareholders at the Shareholders' General Meeting. The
public solicitation of voting rights shall be done in compliance with the provisions of the relevant regulatory authorities and the stock
exchange where the Company's shares are listed and traded.
Article 79.
Resolutions of the Shareholders' General Meeting are divided into ordinary resolutions and special resolutions.
Ordinary resolutions of the Shareholders' General Meeting shall be adopted by shareholders in attendance (including proxies) holding at
least half of the voting rights.
Special resolutions of the Shareholders' General Meeting shall be adopted by shareholders in attendance (including proxies) holding at
least two-thirds of the voting rights.
The shareholders (including their proxies) attending the meeting shall clearly show approval or objection to every matter to be voted on.
As for the unpolled vote or abstention, the Company will not treat it as the vote with voting right when calculating the voting result of this
matter.
Article 80.
When shareholders (including proxies) vote at the Shareholders' General Meeting, they shall exercise their voting rights according to the
number of voting shares that they represent. Except for the cumulative voting system adopted by the directors or supervisors provided in
Article 106 of these Articles of Association, each share shall have one vote. No voting rights shall be attached to the Company shares held
by the Company, and such shares shall not be counted among the total number of voting shares present at the Shareholders' General
Meeting.
Subject to the applicable Listing Rules as amended from time to time, where any shareholder is required to abstain from voting on any
particular matter being considered or restricted to voting only for or only against any particular matter being considered, any votes cast by
or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.
Article 81.
Votes at a Shareholders' General Meeting shall be taken by a show of hands, unless otherwise provided in rules governing the listing of
securities or other securities laws and regulations or unless a vote by ballot is demanded before or after any vote by show of hands by:
(1)
(2)
(3)
the chairman of the meeting;
at least two shareholders with voting rights or proxies with voting rights;
one or several shareholders (including proxies) holding, alone or together, at least 10 percent of the shares carrying the right to
vote at the Shareholders' General Meeting.
Unless otherwise provided in rules governing the listing of securities or other securities laws and regulations or unless a vote by ballot is
demanded, the chairman of the meeting shall announce whether the motion has been carried in accordance with the results of the vote by
show of hands, and shall record the same in the minutes of the meeting (without need to evidence the number of votes for or against the
resolutions adopted at the meeting, or the percentages thereof), which shall be conclusive evidence.
The demand for a vote by ballot may be withdrawn by the person who made it.
Article 82.
Article 83.
Article 84.
If the matter demanded to be voted upon by ballot is the election of the chairman or the adjournment of the meeting, a ballot shall be taken
immediately. If a ballot is demanded for any other matter, such ballot shall be taken at the time decided upon by the chairman and the
meeting may proceed with the discussion of other matters; the result of the ballot shall still be regarded as a resolution passed at that
meeting.
When a ballot is held, shareholders (including proxies) having the right to two or more votes need not use all of their voting rights in the
same way.
When the numbers of votes for and against are equal, regardless of whether the vote is taken by show of hands or by ballot, the chairman
of the meeting shall be entitled to one additional vote.
Article 85.
Decisions of the Shareholders' General Meeting on any of the following matters shall be adopted by ordinary resolution:
(1)
(2)
(3)
(4)
(5)
(6)
work reports of the Board of Directors and the Board of Supervisors;
the profit distribution plans and plans for making up losses drafted by the Board of Directors;
the appointment, dismissal and remuneration of the members of the Board of Directors and the Board of Supervisors and the
method of payment of the remuneration;
the Company's annual budget and final accounts, balance sheet, profit statement and other financial statements;
the engagement, dismissal or non-renewal of an accounting firm;
the matters other than those which laws, administrative rules and regulations or these Articles of Association require to be adopted
by special resolution.
Article 86.
Decisions of the Shareholders' General Meeting on any of the following matters shall be adopted by special resolution:
Article 87.
Article 88.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
the increase or reduction of the registered capital and issuance of any class of shares, warrants or other similar securities of the
Company;
the issuance of corporate bonds;
division, merger, dissolution and liquidation, as well as major acquisitions or disposals of the Company;
the amendment of these Articles of Association;
the amendment of the rights of any class shareholders;
in the event of the purchase or sale of (a) material asset(s) of the Company or the provision of security within one year, the amount
(s) of which exceeds 25 percent of the audited total assets of the Company as at the most recent period;
other matters which laws, administrative rules and regulations or these Articles of Association require to be adopted by special
resolution or which the Shareholders' General Meeting considers will have a material impact on the Company and therefore
require, by an ordinary resolution, to be adopted by special resolution.
Any resolution adopted at the Shareholders' General Meeting shall be consistent with the relevant provisions of Chinese laws,
administrative regulations and rules, as well as these Articles of Association.
In case that the independent directors, board of supervisors or shareholders alone or together holding at least 10 percent of the Company's
shares request to call an extraordinary Shareholders' General Meeting or classified shareholders' meeting, the following procedures shall
be followed:
(1)
(2)
(3)
(4)
(5)
The proponent(s) may sign one or more written requests of identical form and substance requesting that the Board of Directors
convene an Extraordinary Shareholders' General Meeting. The Board of Directors shall give a written response on whether or not
it agrees to call such extraordinary shareholders' general meeting within 10 days after receipt of the proposal to call such meeting.
If the Board of Directors agrees to call an Extraordinary Shareholders' General Meeting, it shall issue a notice calling such
meeting within 5 days after it has so resolved. The consent of the relevant original proponent(s) shall be secured if any change is
to be made in the notice to the original request.
If the Board of Directors does not agree to call an Extraordinary Shareholders' General Meeting, the reasons shall be stated and
announced.
If the Board of Directors does not agree the proposal of the Board of Supervisors to call an Extraordinary Shareholders' General
Meeting or fails to give a response within 10 days after receipt of the request, it shall be deemed to be unable to or have failed to
perform its duty of convening the Shareholders' General Meeting, and the Board of Supervisors may itself convene and preside
over such meeting. The procedure according to which they convene such meeting shall, to the extent possible, be identical to the
procedure according to which shareholders' meetings are to be convened by the Board of Directors.
If the Board of Directors does not agree the proposal of the shareholders to call an Extraordinary Shareholders' General Meeting,
the shareholders shall have the right to propose to the Board of Supervisors in writing that it calls the Extraordinary Shareholders'
General Meeting.
If the Board of Supervisors agrees to call the Extraordinary Shareholders' General Meeting, it shall issue a notice calling such meeting
within 5 days after receipt of the request. The consent of the relevant original proponent(s) shall be secured if any change is to be made in
the notice to the original request.
If the Board of Supervisors fails to issue a notice calling the Shareholders' General Meeting by the prescribed deadline, it shall be deemed
to have failed to convene and preside over such meeting, and a shareholder or shareholders of the Company may himself/themselves
convene and preside over such meeting (Until the resolution(s) of the Shareholders' General Meeting is/are announced, the shareholding
percentages of the convening shareholders may be not less than 10 percent). The procedure according to which they convene such meeting
shall, to the extent possible, be identical to the procedure according to which shareholders' meetings are to be convened by the Board of
Directors.
When the Board of Supervisors or shareholders itself/themselves convene a Shareholders' General Meeting, the Board of Directors shall
be informed in written notice; the filing procedures shall be handled at relevant department in charge in accordance with the applicable
requirements. The Board of Directors and the Secretary to the Board of Directors shall give their cooperation. The Board of Directors shall
provide the register of shareholders as of the date of record. The reasonable expenses incurred by such meetings shall be borne by the
Company and shall be deducted from the sums owed by the Company to the negligent directors.
Article 89.
Shareholders' general meetings shall be convened and presided over by the Chairman of the Board. If the Chairman of the Board fails or is
unable to perform his or her duties, the meeting shall be presided over by the Vice Chairman of the Board. If the Vice Chairman of the
Board fails or is unable to perform his or her duties, the meeting shall be presided over by the director jointly elected by at least one half
of the directors. Where no chairman is designated, the shareholders attending the meeting may elect one person to preside over the
meeting. If for any reason the shareholders are unable to elect a chairman, the shareholder holding the largest number of voting shares and
attending the meeting (whether in person or by proxy) shall preside over the meeting.
At a Shareholders' General Meeting convened by the Board of Supervisors, the Chairman of the Board of Supervisors shall preside. If the
Chairman of the Board of Supervisors fails or is unable to perform his or her duties, the meeting shall be presided over by the supervisor
jointly elected by at least one half of the supervisors.
If a Shareholders' General Meeting is convened by a shareholder himself or shareholders themselves, the meeting shall be presided over
by the representative selected by the convener(s).
While a Shareholders' General Meeting is holding, if the chairman of the meeting violates the rules of procedure, making continuance of
the Shareholders' General Meeting impossible, with the consent of shareholders holding more than one half of the voting rights present at
the meeting, the Shareholders' General Meeting may elect a person to serve as chairman of the meeting and the meeting shall continue.
The chairman of the meeting shall decide, based on the voting results, whether or not a resolution of the Shareholders' General Meeting
has been adopted. His decision shall be final and shall be announced at the meeting and recorded in the minutes of the meeting. The
resolutions adopted at the Shareholders' General Meeting shall be announced in accordance with the relevant provisions of the applicable
laws and stock exchange where the Company's stock is traded.
If the chairman of the meeting has any doubt concerning the result of the vote on any resolution, he or she may organize a recount of the
number of votes cast. If the chairman of the meeting does not conduct a recount of the votes and an attending shareholder or proxy
challenges the result of a vote announced by the chairman of the meeting, he or she has the right to demand a vote recount immediately
following the announcement of the result, in which case the chairman of the meeting shall promptly organize a recount of the votes.
Article 90.
Article 91.
Article 92.
If a vote recount is conducted at a Shareholders' General Meeting, the result thereof shall be recorded in the minutes of the meeting.
The minutes of Shareholders' General Meeting shall be prepared by the secretary and be signed by directors, supervisors, secretary of the
Board, the convener or their representatives and the host (chairman of the meeting) present at the meeting.
The adopted resolutions of Shareholders' General Meeting shall be kept as the Company's minutes of meetings. The records and minutes
of meetings shall be written in Chinese. The minutes of meetings together with the sign-in register of attending shareholders and the
instruments of appointment of proxies shall be kept at the Company's domicile for at least 10 years.
Article 93.
Shareholders may examine photocopies of the minutes of meetings during the Company's office hours without charge. If any shareholder
demands from the Company a photocopy of relevant minutes of meetings, the Company shall send such photocopies within seven days
after receiving payment of reasonable charges.
CHAPTER 9 Special Voting Procedures for Class Shareholders
Article 94.
Shareholders that hold different classes of shares shall be class shareholders.
Class shareholders shall enjoy rights and bear obligations in accordance with laws, administrative rules and regulations and these Articles
of Association.
Article 95.
In case that the Company intends to alter or abolish the rights of classified shareholders, the Stockholders' General Meeting shall pass it
through a special resolution and respective meetings of stockholders convened by the affected classified shareholders shall pass it on
pursuant to the Article 97 to Article 101 of these Articles of Association.
Article 96.
The following situations shall be regarded as alternation or abolishment of the rights of a certain classified shareholder:
(1)
(2)
(3)
(4)
the increase or decrease of the number of shares of such class, or increase or decrease of the number of shares of a class having
voting rights, distribution rights or other privileges equal or superior to those of the shares of such class;
the conversion of all or part of the shares of such class into shares of another class, or the conversion of all or part of the shares of
another class into shares of such class or the grant of the right to such change;
the removal or reduction of rights to accrued dividends or cumulative dividends attached to shares of such class;
the reduction or removal of a dividend preference, or a property distribution preference during liquidation of the Company,
attached to shares of such class;
(5)
(6)
(7)
(8)
(9)
the addition, removal or reduction of share conversion rights, options, voting rights, transfer rights, preemptive rights to rights
issues or rights to acquire securities of the Company attached to shares of such class;
the removal or reduction of rights to receive amounts payable by the Company in particular currencies attached to shares of such
class;
the creation of a new class of shares with voting rights, distribution rights or other privileges equal or superior to those of the
shares of that class;
the imposition of restrictions or additional restrictions on the transfer or ownership of shares of such class;
the issuance of rights to subscribe for, or convert into, shares of such class or another class;
(10)
the increase of the rights and privileges of shares of another class;
(11)
such restructuring of the Company as would cause shareholders of different classes to bear disproportionate liabilities under the
restructuring;
(12)
the amendment or deletion of the provisions of this Chapter.
Article 97.
Shareholders of the affected class, whether or not otherwise having the right to vote at Shareholders' General Meeting, shall have right to
vote at class shareholders' meetings in respect of any of the matters referred to in items (2) to (8) and items (11) to (12) of Article 96,
except that interested shareholders shall not have the right to vote at class shareholders' meetings.
For the purposes of the preceding paragraph, the term "interested shareholders" shall have the following meaning:
(1)
(2)
(3)
if the Company is to issue a buyback offer to all of the shareholders in the same proportion or is to buy back its own shares
through open transactions on a stock exchange in accordance with Article 30 of these Articles of Association, the controlling
shareholder as defined in Article 57 of these Articles of Association shall be an "interested shareholder";
if the Company is to buy back its own shares by agreements outside a stock exchange in accordance with Article 30 of these
Articles of Association, holders of shares to which such agreements relate shall be "interested shareholders";
shareholders that, under a proposed restructuring of the Company, would bear liabilities in a proportion smaller than that of the
liabilities borne by other shareholders of the same class, and shareholders that have an interest in a proposed restructuring of the
Company that is different from the interest in such proposed restructuring of other shareholders of the same class, shall be
"interested shareholders".
Article 98.
Resolutions of a class shareholders' meeting may be passed only by two-thirds or more of the equity interests carrying voting rights that
are represented at the meeting in accordance with Article 97.
Subject to the applicable Listing Rules as amended from time to time, where any shareholder is required to abstain from voting on any
resolution being considered at the class shareholders' meeting or restricted to voting only for or only against any resolution being
considered at the class shareholders' meeting, any votes cast by or on behalf of such shareholder in contravention of such requirement or
restriction shall not be counted.
Article 99.
When the Company is to hold a class shareholders' meeting, it shall issue a written notice 45 days prior to the meeting informing all the
registered shareholders of that class of the matters to be considered at and the date and place of the meeting. Shareholders that intend to
attend the meeting shall, within 20 days prior the day on which the meeting is to be held, serve a written reply on the Company stating that
they will attend the meeting.
If the number of shares carrying the right to vote at the meeting represented by the shareholders intending to attend the meeting is not less
than half of the total number of shares of that class carrying the right to vote at the meeting, the Company may hold the class shareholders'
meeting. If not, the Company shall, within five days, inform the shareholders once again of the matters to be considered at and the date
and place of the meeting in the form of a public announcement. After such notification by public announcement, the Company may hold
the class shareholders' meeting.
Article 100.
If a class shareholders' meeting is to be called by issuance of a meeting notice, notice of such meeting need be delivered only to the
shareholders entitled to vote thereat.
The procedure according to which class shareholders' meetings are held shall, to the extent possible, be identical to the procedure
according to which Shareholders' General Meeting is held. Provisions of these Articles of Association relevant to procedures for the
holding of Shareholders' General Meeting shall be applicable to class shareholders' meetings.
Article 101.
Apart from other class shareholders, shareholders with domestic shares and shareholders with overseas listed foreign investment shares
are regarded as different classified shareholders.
The special voting procedures for class shareholders shall not apply in the following circumstances:
(1)
(2)
where, as approved by way of a special resolution of the Shareholders' General Meeting, the Company issues, either separately or
concurrently, domestic investment shares and overseas listed foreign investment shares every 12 months, and the quantity of
domestic investment shares and overseas listed foreign investment shares intended to be issued does not exceed 20 percent of the
outstanding shares of the respective classes;
where the plan for the issuance of domestic investment shares and overseas listed foreign investment shares upon the
establishment of the Company is completed within 15 months from the date of approval by the State Council's securities authority.
CHAPTER 10 Board of Directors
Article 102.
The Company shall establish a Board of Directors. The Board of Directors shall be composed of 9 directors. The outside directors (herein
meaning those directors who do not hold office in the Company) shall represent not less than 50 percent of the members of the Board of
Directors, of which at least 3 directors shall be independent directors (herein meaning those directors who are independent to the
shareholders and do not hold office in the Company).
The Board of Directors shall include one chairman and one vice chairman.
As needed, under the Board of Directors there shall be such special committees as a Development Planning Committee, an Audit
Committee, a Remuneration and Consummation Committee and other special committees. The Audit Committee shall be composed
entirely of independent directors, of whom at least one shall be a financial or accounting professional. The Remuneration and
Consummation Committee shall consist of a majority of independent directors.
Article 103.
The directors of the Company shall be natural persons. Directors need not hold shares of the Company.
Article 104.
Directors shall be elected by the Shareholders' General Meeting and serve terms of three years (from the date of being elected to the date
that the new Board of Directors is elected by the Shareholders' General Meeting). At the expiration of their terms, directors may continue
to serve as such if reelected, but independent directors may not serve more than six years in succession.
The list of candidates for directors shall be submitted as a motion to the Shareholders' General Meeting. Other candidates for directors
except for independent directors shall be nominated by the Board of Directors, the Board of Supervisors and a shareholder alone or
shareholders together holding at least 3 percent of the Company's shares, and shall be elected by the Shareholders' General Meeting of the
Company.
No written notice of an intent to nominate a director candidate and the willingness of such candidate to accept such nomination shall be
sent prior to the date immediately following the date when the notice of the meeting for election of relevant director is sent or later than 7
days before the convening of the Shareholders' General Meeting for considering the election of such director.
The outside directors shall have sufficient time and the necessary knowledge and ability to perform their duties. The Company must
provide necessary information to outside directors for performing their duties. Among them, the independent non-executive directors may
directly report to the Shareholders' General Meeting, the State Council authorities in charge of securities and other relevant departments.
Executive directors shall deal with matters authorized by the Board of Directors.
Article 105.
The procedure prior to electing the Company's non-independent directors shall be as follows:
(1)
(2)
(3)
the consent of the nominee shall be obtained before the nominator nominates him or her for the position of non-independent
director; the nominator(s) shall be fully aware of such details of the nominee as his or her occupation, educational background,
title, career details, all of his or her concurrent positions, etc. and provide the written documents about the above-mentioned
information to the Company. The candidates shall make a written commitment to the Company that they agree to accept the
nomination and promise that the publicly disclosed information about candidates is true and complete, and to guarantee that they
will earnestly perform their duties if being selected.
In case the candidates for non-independent directors are nominated before the convening of the board meeting, if there are relevant
provisions in the applicable laws, administrative regulations and rules and/or the relevant Listing Rules, the written materials
about the nominees described in item (1) of this Article shall be announced together with the resolution of the Board of Directors
in accordance with such provisions.
if a shareholder alone or shareholders together holding at least 3 percent of the voting rights in the Company put(s) forth an
extempore motion for the election of an independent non-executive director, the written notice of the intention to nominate a
candidate for the position of independent non-executive director and of the nominee indicating his or her willingness to accept the
nomination as well as relevant written materials on the nominee and his or her commitment as mentioned above in item (1) shall
be delivered to the Company 10 days before the date of the Shareholders' General Meeting. No such written notice shall be sent
prior to the date immediately following the date when the notice of the meeting for election of relevant director is sent or later than
7 days before the convening of the Shareholders' General Meeting for considering the election of such director.
Article 106.
In case the Company's controlling shareholders' shareholding percentage is more than 30 percent, the cumulative voting system may be
implemented for the election of directors and supervisors at a Shareholders' General Meeting, namely when more than two directors or
supervisors shall be elected at the Shareholders' General Meeting , each share held by the shareholder who participates in the voting
carries a number of voting rights equivalent to the number of directors or supervisors to be elected, and a shareholder may cluster or
disperse his or her voting rights.
Article 107.
The Chairman of the Board and the Vice Chairman of the Board shall be elected and removed by more than half of all the directors. The
Chairman of the Board and the Vice Chairman of the Board shall serve terms of three years and may serve consecutive terms if reelected.
Article 108.
The Board of Directors shall be accountable to the Shareholders' General Meeting and exercise the following functions and powers:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
to convene Shareholders' General Meetings and to report on its work to the Shareholders' General Meeting;
to implement the resolutions of the Shareholders' General Meeting;
to decide on the business plans and investment plans of the Company;
to formulate the annual financial budgets plans and final accounts plans of the Company;
to determine the Company's annual loan financing plan;
to formulate the profit distribution plans and plans for making up losses of the Company;
to formulate plans for the Company's debt and financial policies, the increase or reduction of the registered capital of the Company
and plans for the issuance of bonds or other securities;
to draft plans for major acquisitions or disposals of the Company and the buyback of the Company's own shares, as well as the
merger, division or dissolution of the Company;
(9)
to make decision on the security for third parties not subject to the approval of the Shareholders' General Meeting, in accordance
with the laws, the administrative regulations and rules, as well as these Articles of Association;
(10)
to decide on such matters as the Company's investments in third parties, purchase and sales of assets, asset mortgages, the
provision of security for third parties, entrustment of financial services, connected transactions, etc., to the extent authorized by
the Shareholders' General Meeting;
(11)
to decide on the establishment of the Company's internal management organization;
(12)
to engage or dismiss the Company's Manager; to engage or dismiss such senior management staff as the Senior Deputy Manager,
the Deputy Manager, the Chief Accountant, as proposed by the Manager, and deciding on matters relating to their remuneration;
to appoint or replace the members of the Board of Directors and the Board of Supervisors of the wholly-owned subsidiary; to
appoint, replace or recommend the shareholder representatives, directors and supervisors of the subsidiaries controlled by it or
equity affiliates;
(13)
to decide on the establishment of the Company's internal management organization;
(14)
to formulate amendments to these Articles of Association;
(15)
to formulate the basic management systems of the Company;
(16)
to make decision on the Company's other major affairs and administrative affairs, and to sign other important agreements, except
for the matters to be considered at the Shareholders' General Meeting in accordance with the provisions of the Company Law and
these Articles of Association;
(17)
other functions and powers provided for in these Articles of Association or granted by the Shareholders' General Meeting.
Resolutions by the Board of Directors on the matters referred to in the preceding paragraph shall be passed by the affirmative vote of not
less than one half of all of the directors with the exception of resolutions on the matters referred to in items (7), (8), (9) and (14), which
shall require the affirmative vote of at least two-thirds of all of the directors for adoption.
If a director has a connected relationship with an enterprise involved in a matter on which a resolution is to be made at a meeting of the
Board of Directors, he or she may not exercise his or her right to vote regarding such resolution, nor may he or she exercise the voting
right of another director as such director's proxy thereon. Under circumstance set forth above, such a Board meeting may be held only if
more than one half of the directors without a connected relationship are present, and the resolutions made at such a Board meeting shall
require adoption by more than one half of the directors without a connected relationship. As for the aforementioned items, which shall
require the affirmative vote of at least two-thirds of all of the directors for adoption, and shall require adoption by at least two-thirds of the
directors without a connected relationship. If the Board meeting is attended by less than three directors without a connected relationship,
the matter shall be submitted to the Shareholders' General Meeting for consideration.
A resolution by the Board of Directors on a connected transaction shall enter into effect only once the independent non-executive directors
have signed the same.
With the authorization made by the Board of Directors, the Chairman of the Board may exercise part of functions and powers of the Board
when the Board is not in session. The content of the authorization made by the Board of Directors shall be clear and specific.
When the Board of Directors intends to dispose of fixed assets and the sum of the expected value of the consideration for the proposed
disposal and the value of the consideration for disposal of fixed assets made in the four months immediately preceding the proposed
disposal exceeds 33 percent of the value of the fixed assets shown in the last balance sheet placed before the Shareholders' General
Meeting, the Board of Directors may not dispose of or agree to the disposal of the fixed assets without the approval of the Shareholders'
General Meeting.
For the purposes of this Article, the term "disposal of fixed assets" shall include the assignment of certain interests in assets but exclude
the provision of fixed assets as security.
The validity of transactions whereby the Company disposes of fixed assets shall not be affected by the breach of the first paragraph of this
Article.
Article 109.
Article 110.
Article 111.
The investments (including venture capital) or the acquisition made by the Company valued at no more than 25 percent of the Company's
audited total assets (or total market value) as at the most recent period shall be decided upon by the Board of Directors. The investments or
acquisitions beyond the approval authority of the Board of Directors shall be reviewed by relevant experts and professionals organized by
the Board of Directors and be reported to the Shareholders' General Meeting for approval.
In case the market development, M & A, the investment in new areas shall be decided by the Board of Directors, the projects whose
investment or M & A of assets amounted to more than 10% of the total assets shall be provided with the professional advices from the
social counseling agencies, as the important basis for the decisions made by the Board of Directors.
Article 112.
The Chairman of the Board of the Company shall exercise the following functions and powers:
(1)
(2)
(3)
(4)
to preside over Shareholders' General Meetings and to convene and preside over meetings of the Board of Directors;
to organize the implementation of the duties of the Board of Directors; to examine the implementation of resolutions of the Board
of Directors;
to sign bond certificates issued by the Company;
other functions and powers granted by the Board of Directors.
The Vice Chairman of the Board of the Company shall assist the Chairman of the Board in his or her work. If the Chairman of the Board
is unable to perform his or her duties or fails to perform his or her duties, his or her duties shall be performed by the Vice Chairman of the
Board; if the Vice Chairman of the Board is unable or fails to perform these duties, a director elected by at least one half of the directors
shall perform such duties.
Article 113.
Meetings of the Board of Directors shall be held at least four times a year. Meetings of the Board of Directors shall be convened by the
Chairman of the Board by giving a notice to all directors and supervisors 14 days before the meetings are held.
The Chairman of the Board shall convene an interim meeting of the Board of Directors within 10 days without being limited by the
aforementioned meeting notice period if:
(1)
(2)
(3)
(4)
(5)
it is proposed by shareholders representing at least 10 percent of the voting rights;
it is proposed by at least one-third of the directors;
it is proposed by at least one-half of the independent directors;
it is proposed by the Board of Supervisors;
it is proposed by the Manager of the Company.
The meeting of the Board of Directors in principle shall be held at the Company's domicile.
The meeting of the Board of Directors shall be held in Chinese; an interpreter may be required to bilingual impromptu translation if
necessary.
The Company's outside directors shall meet with other directors annually on a regular basis without the presence of the Company's
management, in order to understand the Company's operation.
Article 114.
The meetings of the Board of Directors shall be noticed by way as follows:
(1)
(2)
If the Board of Directors has specified the time and place of the regular board meeting in advance, no service of notice is required.
If the Board of Directors has not specified the time and place of the regular board meeting in advance, the Chairman of the Board
shall, at least 14 days in advance, inform the directors and supervisors the time and the place of the board meeting by way of
telegraph, telex, fax, courier, registered mail or by specially designated person, except as otherwise provided in Article 113 of
these Articles of Association.
(3)
The notice shall be written in Chinese, if necessary, the English version can be attached, including the agenda for the meeting.
Any director may waive the right of receiving the notice of board meeting.
Article 115.
The Board of Directors shall give a prior notice to all the excutive and outside directors of any material matter to be resolved by the Board
of Directors within a period required by Article 114 of theses Articles of Association and provide sufficient materials with respect to such
matter in strict accordance with relevant procedures. The directors may require additional materials with respect thereto. If at least one-
quarter of the directors or at least two outside directors believe that the motion before the Board of Directors is unclear or unspecific, the
meeting materials are insufficient or other such reason, they may jointly propose that the holding of the meeting of the Board of Directors
or discussion of the motion in question be postponed to a later time. In such circumstances the Board of Directors shall accept the
proposal.
Notice of a meeting shall be deemed to have been given to any director who attends the meeting without protest against, before or at its
commencement, any lack of notice.
Any regular or extraordinary meeting of the Board of Directors may be held by way of telephone conference or similar communication
equipment so long as all directors participating in the meeting can clearly hear and communicate with each other. All such directors shall
be deemed to be present in person at the meeting.
Article 116.
Meetings of the Board of Directors may be held only if not less than half of the directors (including any alternate director appointed
pursuant to Article 117 of the Company's Articles of Association) attend. Each director shall be entitled to one vote. Resolutions of the
Board of Directors must be adopted by the affirmative vote of the majority of all the directors. When the numbers of votes for and against
are equal, the chairman of the meeting shall be entitled to one additional vote.
Article 117.
Meetings of the Board of Directors shall be attended by the directors in person. If a director is unable to attend a meeting for any reason,
he or she shall appoint another director in writing to attend the meeting on his or her behalf. Such instrument of appointment shall specify
the names of the proxy, the matters, and the scope of authorization and the term of validity.
If a director fails to personally attend a meeting of the Board of Directors and to appoint another director to attend the meetings on his or
her behalf on two consecutive occasions, he or she shall be deemed unable to perform his or her duties and the Board of Directors shall
propose to the Shareholders' General Meeting that he or she be replaced.
The director attending the meeting on behalf of the absent director shall exercise the director's right to the extent authorized. If a director
fails to attend a meeting of the Board of Directors and has not appointed a proxy to attend the meeting on his or her behalf, he or she shall
be deemed to have waived his or her right to vote at such meeting.
The reasonable expenses incurred by the directors who attend meetings of the board shall be borne by the Company. These expenses
include the traffic expenses covering the distance between the place where a director is located and the place where a meeting is held (in
the event that these two places are not the same), the fees of room and board during the term of the meeting, the rent of the place of the
meeting and the local traffic expenses.
Article 118.
The Board of Directors may agree to accept a written motion instead of convening the meeting of the Board of Directors. The draft of the
motion shall be served in person, by mail, telegram and fax to each director. In case that the Board of Directors has distributed the motion
to all directors, the number of directors who sign on the motion reaches the quorum required by laws and the motion has been submitted to
the Secretary of the Board by the abovementioned ways, the resolution shall become the resolution adopted by the Board of Directors,
without convening the meeting of the Board of Directors.
Article 119.
The Board of Directors shall keep minutes of the meeting of the Board of Directors and its decisions on the matters examined without the
convening of a meeting in Chinese. The directors attending the meeting shall have the right to make descriptive records of their speeches
at the meeting. The opinions of the independent (non-executive) directors shall be clearly listed in the resolutions of the board of directors.
The minute of each meeting of the Board of Directors shall be provided to all directors for review as soon as possible. Any director who
wants to make amendment of supplement to the minute shall report the amendment to the Chairman of the Board in written form within
one week upon the receipt of the minute. The directors and recorder attending the meeting shall sign on the finalized minute of the
meeting. The minutes of meetings of the Board of Directors shall be kept at the Company's domicile and sent to each director in full
copies as soon as possible. The minutes of meetings shall be kept for at least 10 years.
The directors shall be liable for the resolutions of the Board of Directors. If a resolution of the Board of Directors is in violation of laws,
administrative regulations or these Articles of Association, thereby causing the Company to sustain a material loss, the directors who took
part in the resolution shall be liable to the Company for damages. However, if a director is proved to have expressed his or her opposition
to such resolution when it was put to the vote, and such opposition is recorded in the minutes of the meeting, such director may be
released from such liability.
Article 120.
Any written resolution not formed and signed by directors in line with the statutory procedures shall not have the legal effect of the
resolution of the Board, even if every director has expressed his or her opinion in different ways.
Article 121.
Article 122.
Where a resolution of the Board of Directors is in violation of laws, administrative regulations and rules, the Company's Articles of
Association or the resolution of the Shareholders' General Meeting, thereby causing serious losses to the Company, the directors who cast
an affirmative vote shall be directly liable to the Company for damages. However, where a director can prove that he or she expressed his
or her opposition to such resolution when it was put to be voted, and that such opposition was recorded in the minutes of the meeting, the
director may be relieved from such liability; where a director abstains from voting, or is absent and does not appoint others to attend, the
director may not be relieved from such liability; where a director has expressed his opposition to such resolution but does not cast a
negative vote, the director also may not be relieved from such liability.
Subject to relevant laws and administrative regulations, the Shareholders' General Meeting may remove any director by an ordinary
resolution (without prejudice to any claim for damages that such director may have under any contract) before the end of his or her term of
office.
Directors may tender their resignations before the expiration of their terms of office. To resign, a director shall submit a written
resignation to the Board of Directors. The independent director provide information on any circumstances related to his or her resignation
or any circumstances to which he or she believes the attention of the Company and its creditors must be drawn.
If the resignation of a director causes the number of occupied seats on the Board of Directors to fall below the statutory minimum, his or
her written resignation shall enter into effect only upon the new director taking up the vacancy left by his or her resignation. The
remaining directors shall convene an extraordinary Shareholders' General Meeting as soon as possible to elect a director to fill the vacancy
left by the resignation of the director. Until the Shareholders' General Meeting has passed a resolution on electing a director, the powers of
the resigning director and the remaining directors shall be subject to reasonable restrictions.
If the resignation of an independent director causes the number of independent directors or the number of occupied seats on the Board of
Directors to fall below the statutory minimum, the incumbent director shall continue to perform his or her duties as an independent
director in accordance with laws, administrative regulations and these Articles of Association until the incoming director assumes his or
her position. The Board of Directors shall convene a Shareholders' General Meeting within two months to re-elect the independent
directors; if the Board of Directors fails to convene a shareholders' general meeting, the independent directors may not perform their
duties.
Except in the circumstance specified in the preceding paragraphs, a director's resignation shall be effective upon his or her written
resignation being served on the Board of Directors.
CHAPTER 11 Independent Directors
Article 123.
The independent director shall loyally perform his or her duties, safeguard the interests of the Company and especially pay attention that
the lawful rights and interests of the Company's shareholders of public shares are not harmed.
The independent director shall perform his or her duties and responsibilities independently, without interference from the major
shareholder(s) or the actual controller of the Company, or other entities or individuals that have a material interest with the Company and
its major shareholder(s) or the actual controller.
Article 124.
The candidates for the Company's independent director shall be nominated by the Company's Board of Directors, Board of Supervisors
and shareholders who alone or together hold at least 1 percent of the outstanding shares of the Company and shall be decided through
election by the Shareholders' General Meeting.
(1)
(2)
(3)
(4)
The consent of the nominee shall be obtained before the nominator nominates him or her for the position of independent non-
executive director; the nominator(s) shall be fully aware of such details of the nominee as his or her occupation, educational
background, title, career details, all of his or her concurrent positions, etc., and shall be liable to provide such written materials to
the Company. The candidate shall make a written commitment to the Company, agree to accept the nomination, promise that the
publicly disclosed information about candidates is true and complete, and to guarantee that they will earnestly perform their duties
if being selected.
The nominator(s) shall express his/her/their opinions on the nominee's qualifications for holding the position of independent non-
executive director and his or her independence; if otherwise provided in accordance with the applicable Listing Rules or other
securities laws and regulations, the nominee shall make a public statement to the effect that no relationship exists between himself
or herself and the Company that could affect his or her making independent and objective judgments.
If the candidate for the independent director is nominated before the board meeting is convened, if otherwise provided in
accordance with provisions in the applicable laws and regulations and/or the Listing Rules or other securities laws and regulations,
the written materials of the nominee described in item (1) and (2) of this Article shall be announced together with the resolution of
the Board of Directors in accordance with such provisions.
If a shareholder alone or shareholders together holding at least 3 percent of the voting rights in the Company or the Board of
Supervisors put(s) forth an extempore motion for the election of an independent director, the written notice of the intention to
nominate a candidate for the position of independent director and of the nominee indicating his or her willingness to accept the
nomination as well as relevant written materials and commitment on the nominee as mentioned in above in item (1) and (2) of this
Article shall be delivered to the Company 16 days before the date of the Shareholders' General Meeting.
(5)
Prior to the holding of a Shareholders' General Meeting at which an independent director is to be elected, if otherwise provided in
the applicable laws and regulations and/or relevant Listing Rules, the Company shall simultaneously submit the relevant materials
on all the nominees to the State Council authorities in charge of securities, where the Company is located and/or the agency of the
CSRC and the stock exchange on which Company shares are listed. If the Board of Directors of the Company has objections
concerning the relevant details of a nominee, the Company shall additionally submit the written opinion of the Board of Directors.
The nominees against whom the CSRC has objections shall not be the candidate for the independent director. At the time the
Shareholders' General Meeting to elect an independent non-executive director is held, the Board of Directors of the Company shall
elaborate on whether the CSRC had any objections against the candidates for the post of independent non-executive director.
Article 125.
A person holding the position of independent non-executive director shall satisfy the basic conditions set forth below:
(1)
(2)
(3)
(4)
having the qualifications to hold the position of directors of the Company in accordance with laws, administrative regulations and
these Articles of Association;
having the independence required by relevant laws, administrative regulations, departmental rules and the Listing Rules;
having a basic knowledge of the operation of listed companies and being familiar with relevant laws, administrative rules,
regulations and rules (including but not limited to the applicable accounting standards);
having at least five years of experience in law, economics or other work experience required for performing the duties and
responsibilities of an independent director;
(5)
other conditions stipulated in these Articles of Association.
Article 126.
The independent director must be independent. Unless otherwise provided in the applicable laws, regulations and/or the relevant Listing
Rules, the following persons may not serve as independent directors:
(1)
(2)
(3)
(4)
(5)
(6)
persons holding a position in the Company or a subsidiary thereof and their lineal relatives and major social relations (the lineal
relatives refer to the spouse, parents and children; the major social relations refer to the brothers and sisters, father-in-law and
mother-in-law, daughter-in-law, son-in-law, the spouses of brothers and sisters, as well as the spouse's brothers and sisters);
natural person shareholders who directly or indirectly hold at least 1 percent of the outstanding shares of the Company or who
rank among the top ten shareholders of the Company, and their lineal relatives;
persons who hold positions in entities that directly or indirectly hold at least 5 percent of the outstanding shares of the Company or
that rank among the top five shareholders of the Company, and their lineal relatives;
persons who, at any time during the immediately preceding period of one year, have fallen into any of the three categories listed
above;
persons who provide financial, legal, consultancy or other such services to the Company or its subsidiaries;
other persons that the State Council authorities in charge of securities specify may not serve as an independent non-executive
director.
Article 127.
If an independent director fails on three consecutive occasions to personally attend a meeting of the Board of Directors, the Board of
Directors shall request that the Shareholders' General Meeting replace him or her. An independent director may not be removed without
cause before the expiration of his or her term, unless any of the circumstances set forth in Article 117, Clause 2, or the circumstance
mentioned in the preceding paragraph or a circumstance under which a person may not hold the position of director specified in the laws,
administrative regulations and rules, as well as these Articles of Association, arises. If an independent director is removed before the
expiration of his or her term, the Company shall disclose his or her removal as a matter for special disclosure. If the removed independent
director is of the opinion that the Company's grounds for removing him or her are not justified, he or she may make a public statement to
that effect.
Article 128.
In addition to the functions and powers granted to directors under the Company Law, other laws, administrative regulations and rules, as
well as these Articles of Association, independent directors shall have the following special functions and powers:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
the material connected transactions (as determined based on the criteria issued by the competent regulator from time to time) shall
be reviewed by the Board of Directors or the Shareholders' General Meeting in accordance with laws, regulations and/or the
relevant Listing Rules; the engagement or dismissal of an accounting firm; in case there are relevant provisions in the applicable
laws, regulations and/or the relevant Listing Rules, it shall be submitted to the Board of Directors for discussion after being
approved by not less than 50 percent of the independent directors in accordance with such provisions. A resolution by the Board
of Directors on a connected transaction shall enter into effect only once the independent non-executive directors have signed the
same. Before rendering their judgment, independent non-executive directors may engage an intermediary organization to issue an
independent financial consultant report for use as a basis for rendering their judgment;
proposing the engagement or dismissal of an accounting firm to the Board of Directors;
proposing to the Board of Directors the calling of an extraordinary Shareholders' General Meeting;
proposing the calling of meetings of the Board of Directors;
independently engaging external auditors and consultants;
openly soliciting shareholders' voting rights before the holding of a Shareholders' General Meeting;
directly reporting to the Shareholders' General Meeting, the State Council authorities in charge of securities and other relevant
departments.
An independent director shall obtain the consent of at least half of the independent directors before exercising the aforementioned
functions and powers in items (2), (3), (4), (6), and (7) and shall obtain the consent of all independent directors before exercising the
aforementioned functions and powers in item (5).
The expenses incurred by independent directors in independently engaging external auditors and consultants, and carrying out audit and
consulting for the specific matters of the Company shall be borne by the Company.
Article 129.
In addition to performing the duties and responsibilities mentioned above, independent directors shall express their independent opinions
to the Board of Directors or the Shareholders' General Meeting on the following matters:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
the nomination or removal of directors;
the engagement or dismissal of senior management staff;
the remuneration of the Company's directors and senior management staff;
matters which may, in an independent non-executive director's opinion, harm the rights and interests of small and medium
shareholders;
major financial transactions that occur between the Company and the shareholders or its affiliates;
the failure by the Board of Directors to prepare a plan for the distribution of profits in cash;
other matters specified in the applicable laws and regulations, as well as these Articles of Association.
Concerning the aforementioned matters, independent non-executive directors shall express one of the following opinions: consenting
opinions; qualified opinions, and the reasons therefor; opposing opinions, and the reasons therefor; disclaimer of opinion, and an
explanation of the impediments.
The independent director shall attend the meeting of the Board of Directors on time, understand the Company's production and operation,
and actively investigate and obtain the conditions and information required by making decisions. The independent director shall submit
the annual report of all independent directors to the Shareholders' General Meeting of the Company and to elaborate on the performance
by the independent directors of their duties and responsibilities.
The Company shall establish the work system of independent directors; the Secretary to the Board of Directors shall actively cooperate
with the independent directors to perform their duties and responsibilities. The Company shall ensure that the independent directors enjoy
the same right to know as other directors, timely provide relevant materials and information to the independent directors, regularly report
the Company's operation and organize the independent directors to make field survey if necessary.
CHAPTER 12 Secretary to the Board of Directors
The Company shall have a Secretary to the Board of Directors. The Secretary to the Board of Directors shall be a member of the senior
management staff of the Company and the Board of Directors shall establish the working office of the Board Secretary, if necessary.
The Secretary to the Board of Directors shall be a natural person with the necessary professional knowledge and experience. He or she
shall be appointed by the Board of Directors.
Article 130.
Article 131.
Article 132.
Article 133.
His or her main duties shall be as set forth below:
(1)
(2)
(3)
(4)
(5)
to assist the directors with their handling of the day-to-day business of the Board of Directors; to provide the directors with,
remind the directors of, and ensure that the directors are aware of, the domestic and foreign regulators' regulations, policies and
requirements in respect of the operation of companies; and to assist the directors and the Manager in their compliance with
domestic and foreign laws, these Articles of Association and other relevant regulations when they are exercising their functions
and powers;
to be responsible for organizing and preparing the documents of the Board of Directors and the Shareholders' General Meeting; to
duly keep meeting minutes; to ensure that decisions made at meetings are made in accordance with statutory procedure and to
keep abreast of the implementation of the resolutions of the Board of Directors;
to be responsible for arranging and coordinating the disclosure of information, coordinating the relationship with investors and
enhancing the transparency of the Company;
to participate in arranging capital market financing;
to handle relations with intermediary organizations, regulators and the media, and to coordinate public relations.
The scope of the duties and responsibilities of the Secretary to the Board of Directors shall be as set forth below:
(1)
(2)
(3)
to arrange and make preparations for meetings of the Board of Directors and Shareholders' General Meeting, to prepare meeting
materials, to arrange relevant meeting affairs, to be responsible for meeting minutes, to ensure the accuracy of such minutes, to
keep meeting documents and minutes, to actively keep abreast of the implementation of relevant resolutions; to report major
issues encountered in the course of implementation to the Board of Directors and to provide recommendations in respect thereof;
to ensure that the material matters on which the Board of Directors of the Company has reached decisions are carried out in strict
accordance with the prescribed procedure; at the request of the Board of Directors, to participate in and arrange for advice and
analysis of matters on which the Board of Directors is to make decisions and put forward pertinent opinions and
recommendations; to handle, upon appointment, the day to day work of the Board of Directors and its relevant committees;
as the contact person between the Company and the securities regulator, to be responsible for arranging for the preparation and
timely delivery of the documents requested by the regulator and to be responsible for accepting the relevant tasks assigned by the
regulator and arranging for their completion;
(4)
to be responsible for coordinating and arranging information disclosures by the Company and the establishment of a sound
information disclosure system, to attend all Company meetings relating to information disclosure and to be aware at all times of
the Company's material business decisions and relevant information and data;
to be responsible for the work associated with maintaining the confidentiality of the Company's price sensitive information and to
formulate a practical and effective confidentiality system and measures; where Company price sensitive information is leaked for
any reason, to take the necessary remedial measures, to timely explain and clarify the same and inform the regulator of the place
where Company shares are listed abraod and the CSRC;
to be responsible for the coordination and organization of the market promotion, coordinating the visiting reception, dealing with
the investor relations, maintaining the relationship with the investors, intermediaries and the media, coordinating to answer the
public's questions, ensuring that the investors may obtain the information disclosure matters of the Company in time; to be
responsible for the promotion and propaganda activities of the Company inside and outside China, preparing summary reports on
the market promotion and activities such as major inviting, and organizing the relevant matters of report to the CSRC;
to be responsible for the management and conservation of the Company's register of shareholders, register of directors, the
materials about the number of shares held by major shareholders and director equity records, as well as the list of creditors of the
Company's outstanding debentures;
to assist the directors and the Manager in their compliance with domestic and foreign laws, these Articles of Association and other
relevant regulations when they are exercising their functions and powers; when he or she becomes aware that the Company has
adopted or could adopt a resolution that violates relevant regulations, he or she is under obligation to timely make the same known
and has the right to truthfully report the same to the CSRC and other regulators;
to coordinate the provision of necessary information and data to the Company's Board of Supervisors and other review
organizations when they are performing their monitoring functions and to assist in the investigations on the performance by the
Company's Financial Controller, the Company's directors and the Manager of their fiduciary duties;
(5)
(6)
(7)
(8)
(9)
(10)
to perform other functions and powers granted by the Board of Directors and other functions and powers required by laws of the
place where Company shares are listed or by relevant rules of the Stock Exchange.
Article 134.
Directors or other senior management staff of the Company (except for the manager and chief financial officer) may concurrently hold the
office of Secretary to the Board of Directors. No accountant of an accounting firm engaged by the Company may concurrently hold the
office of Secretary to the Board of Directors.
If the office of Secretary to the Board of Directors is held by a director of the Company and a certain act is to be done by a director and the
Secretary to the Board of Directors separately, the person who concurrently holds the offices of director and Secretary to the Board of
Directors may not perform the act in both capacities.
Article 135.
The Secretary to the Board of Directors shall comply with the relevant provisions of these Articles of Association to perform his or her
duties diligently.
The Secretary to the Board of Directors shall assist the Company in compliance with China's relevant laws and the rules of the Stock
Exchange where the Company's shares are listed.
Article 136.
The Company has a manager, who shall be engaged or dismissed by the Board of Directors.
CHAPTER 13 Manager
The Company shall have one Senior Deputy Manager, several Deputy Managers and one Chief Financial Officer to assist the Manager's
work. The Senior Deputy Manager, Deputy Manager and Chief Financial Officer shall be nominated by the Manager and engaged or
dismissed by the Board of Directors.
A director can be engaged as the part-time Manager, Senior Deputy Manager, Deputy Manager or other senior management staff;
however, the number of the directors serving as the part-time Manager, Senior Deputy Manager, Deputy Manager or other senior
management staff shall not exceed one half of the Company's total number of directors.
Article 137.
The Manager shall serve terms of three years and may serve consecutive terms if reappointed.
Article 138.
The Manager shall be accountable to the Board of Directors and exercise the following functions and powers:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
to be in charge of the production, operation and management of the Company, to organize the implementation of the resolutions of
the Board of Directors;
to arrange for the implementation of the Company's annual business plans and investment plans;
to draft the plan for establishment of the Company's internal management organization;
to draft the plan for establishment of management organization of the Company's branch offices ;
to draft the Company's basic management system;
to formulate the basic rules and regulations of the Company;
to request the Board of Directors to engage or dismiss the Company's Senior Deputy Manager, Deputy Manager, Chief Financial
Officer;
to engage or dismiss management personnel other than those to be engaged or dismissed by the Board of Directors;
to propose the holding of interim meetings of the Board of Directors;
(10)
other functions and powers granted by the Company's Articles of Association or the Board of Directors.
Article 139.
Article 140.
Article 141.
Article 142.
Article 143.
Article 144.
The Manager shall timely report on the execution and performance of material contracts of the Company, on the application of funds and
on profits and losses to the Board of Directors or at the request of the Board of Supervisors. The Manager shall ensure the truthfulness of
such reports
The Manager who is not a director has the right to attend the meetings of the Board of Directors and to receive notice of or other
information concerning any meetings; the manager who is not a director has no voting right.
In the exercise of his or her functions and powers, the Manager, Senior Deputy Manager, Deputy Manager, Chief Financial Officer shall
not change the resolutions of the Shareholders' General Meeting and the Board of Directors or exceed the scope of authorization.
In the exercise of his or her functions and powers, the Manager, Senior Deputy Manager, Deputy Manager, Chief Financial Officer shall
perform a fiduciary duty and an obligation of diligence in accordance with the laws, administrative regulations and rules, as well as these
Articles of Association.
The Manager, Senior Deputy Manager, Deputy Manager, Chief Financial Officer or other senior officer may tender his or her resignation
to the Board of Directors in written form three months in advance; the department manager may tender his or her resignation to the
Manager in written form two months in advance.
CHAPTER 14 Board of Supervisors
The Company shall have a Board of Supervisors. The Board of Supervisors is a regular supervisory department established by the
Company. It is responsible for supervising the Board of Directors and its members, as well as the Manager, senior deputy manager, deputy
manager, chief financial officer and other senior management staff to prevent them from abusing their powers, or infringing the legal
interests of shareholders, the Company, and employees of the Company.
Article 145.
The Board of Supervisors shall consist of three supervisors. The external supervisors (refer to those supervisors who do not hold office in
the Company, the same below) shall represent not less than 50 percent of the members of the Board of Supervisors. The number of the
supervisors who represent the employees shall be not less than one-third of the number of supervisors.
The Board of Supervisors shall have a Chairman of the Board of Supervisors. The term of office of a supervisor shall be 3 years. A
supervisor may serve consecutive terms if reelected upon the expiration of his or her term.
The Board of Supervisors shall have one chairman, whose appointment and dismissal shall be subject to the affirmative vote of at least
two-thirds of the members of the Board of Supervisors.
The chairman of the Board of Supervisors shall organize the performance of the duties of the Board of Supervisors.
Article 146.
The members of the Board of Supervisors include two shareholder representatives (including qualified as outside supervisors, the same
below) and one employee representative who represents the employees. The shareholder representative shall be elected and removed by
the Shareholders' General Meeting; the employee representative shall be elected and removed by the employees' democratic election.
Article 147.
Article 148.
Article 149.
Article 150.
Article 151.
Article 152.
As needed, the Board of Supervisors shall establish an office to be responsible for the daily affairs of the Board of Supervisors.
The list of candidates for the position of supervisors who represent the shareholders shall be put in the form of a motion before the
Shareholders' General Meeting for resolution. The candidates for the supervisors who represent the shareholders shall be nominated by the
Board of Directors, the Board of Supervisors and a shareholder alone or shareholders together holding at least 3 percent of the Company's
shares, and shall be elected and removed by the Shareholders' General Meeting of the Company. The procedures for electing supervisors
shall refer to the procedures for electing non-independent directors in Article 105 of these Articles of Association and the provision of
adopting the cumulative voting system for electing supervisors in Article 106 of these Articles of Association.
The Company's Directors, Manager, Senior Deputy Manager, Deputy Manager, Chief Financial Officer and other senior management staff
may not concurrently serve as supervisors.
The meeting of the Board of Supervisors shall be convened at least once every six months. The chairman of the Board of Supervisors shall
convene and preside over meetings of the Supervisory Board. If the chairman of the Supervisory Board is unable or fails to perform his or
her duties, a supervisor jointly selected by at least one half of the supervisors shall convene and preside over a meeting. The notice for
convening a meeting of the Board of Supervisors shall be served to all supervisors 10 days before the meeting in written form. A notice of
a meeting of the Board of Supervisors shall include the following particulars:
(1)
(2)
(3)
the date, venue and duration of the meeting;
the reasons for holding the meeting and the topics to be discussed thereat;
the date of issuance of the notice.
If a supervisor fails to personally attend a meeting of the Board of Supervisors and to appoint another supervisor to attend the meetings on
his or her behalf on two consecutive occasions, he or she shall be deemed unable to perform his or her duties and shall be replaced by the
Shareholders' General Meeting and the employee representative congress.
The supervisor may tender his or her resignation before the end of his or her term. The provisions concerning the duration and resignation
of the directors in CHAPTER 10 of these Articles of Association are applicable to the supervisors.
The Board of Supervisors shall be accountable to the Shareholders' General Meeting and exercise the following functions and powers in
accordance with laws:
(1)
(2)
to examine the Company's financial affairs; to review the report prepared by the Board of Directors periodically and submit the
audit opinions in written form;
to supervise the directors, the Manager and other senior management staff in the performance of their Company duties and to
propose the removal of directors or senior management staff who violate laws, administrative regulations or breach these Articles
of Association or resolutions of the Shareholders' General Meeting;
(3)
(4)
(5)
(6)
(7)
(8)
(9)
if an act of a director or of the Manager or another senior officer is detrimental to the Company's interests, to require him or her to
correct such act;
to verify financial information such as financial reports, business reports, profit distribution plans, etc. that the Board of Directors
intends to submit to the shareholders' general meeting and, if in doubt, to be able to appoint, in the name of the Company, a
registered accountant or practicing auditor to assist in reviewing such information;
to conduct an investigation and, if necessary, engage professional organizations, such as accounting firms and law firms, to assist
it in its work in the event that it discovers any irregularities in the Company's operations, the expenses shall be borne by the
Company;
to propose the holding of Extraordinary Shareholders' General Meetings and, in the event that the Board of Directors fails to
perform its duty of convening and presiding over a Shareholders' General Meeting, to convene and preside over such a meeting in
accordance with the law;
to propose the interim meeting of the Board of Directors;
to negotiate with or to file a suit against any director or other senior management staff on behalf of the Company;
other duties as prescribed in the laws, administrative regulations and rules, as well as the Articles of Association and authorized by
the Shareholders' General Meeting.
The Board of Supervisors shall give advice for the accounting firm engaged by the Company. It may appoint a separate accounting firm in
the Company's name to independently review the Company's finances if necessary and directly report to the State Council authorities in
charge of securities and other relevant departments.
The outside supervisors shall independently report the integrity and diligence performance of the Company's senior management staff to
the Shareholders' General Meeting.
Supervisors may attend meetings of the Board of Directors in a non-voting capacity and raise questions and make suggestions in respect of
matters that are the subject of resolutions of the Board of Directors.
The Board of Supervisors may require the Company's directors, the Manager, chief financial officer, the secretary to the Board of
Directors, the internal and external auditors to attend the meetings of the Board of Supervisors and answer the issues concerned by Board
of Supervisors.
Resolutions of the Board of Supervisors shall require the affirmative vote of at least two-thirds of the members of the Board of
Supervisors for adoption.
The minutes of the meeting shall be kept as the Company's records of meetings by the Board of Supervisors. The supervisors and recorder
attending the meeting shall sign on the finalized minute of the meeting. The minutes of meetings of the Board of Supervisors shall be kept
as the Company's important files. The minutes of meetings shall be kept for at least 10 years.
When the Board of Supervisors exercises its functions and powers with the engagement of the lawyers, certified public accountants,
practicing auditors and other professionals, the reasonable expenses incurred shall be borne by the Company.
The supervisors shall faithfully fulfill its oversight responsibilities in accordance with the laws and administrative regulations and rules, as
well as these Articles of Association.
Article 153.
Article 154.
Article 155.
Article 156.
Article 157.
CHAPTER 15 Qualifications and Obligations of the Directors, Supervisors, Manager and Other Senior Management Staff of the Company
Article 158.
None of the following persons may serve as a director, supervisor, manager or other senior management staff of the Company:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
persons without capacity or with limited capacity for civil acts;
persons who were sentenced to criminal punishment for the crime of corruption, bribery, misappropriation of property or diversion
of property or for disrupting the order of the socialist market economy, where not more than five years have elapsed since the
expiration of the period of punishment; or persons who were deprived of their political rights for committing a crime, where not
more than five years have elapsed since the expiration of the period of deprivation;
persons who served as directors, or factory directors or managers, who bear personal liability for the bankruptcy liquidation of
their companies or enterprises, where not more than three years have elapsed since the date of completion of the bankruptcy
liquidation;
persons who served as the legal representatives of companies or enterprises that had their business licenses revoked for breaking
the law, where such representatives bear individual liability therefor and not more than three years have elapsed since the date of
revocation of the business license;
persons with comparatively large debts that have fallen due but have not been settled;
persons whose cases have been placed on the docket and are being investigated by the judicial authorities because they violated
the criminal law, and such cases are still pending;
national civil servants;
persons who may not serve as leaders of enterprises by virtue of laws;
persons who are non-natural persons;
(10)
persons ruled by a competent authority to have violated securities-related regulations, where such violation involved fraudulent or
dishonest acts and not more than five years have elapsed since the date of the ruling;
(11)
persons who are determined to be banned from entering the securities market by the State Council authorities in charge of
securities and whose ban has not been lifted.
As for the current directors, under the above circumstance set forth above, the Board of Directors shall immediately stop relevant directors
from performing their duties since the date of knowing the situation occurred, and advice the Shareholders' General Meeting to replace
such directors. As for the Manager, the Board of Directors shall immediately stop relevant Manager from performing his or her duties
since the date of knowing the situation occurred, and convene the meeting of the Board of Directors to dismiss such Manager. As for the
current supervisors, under the above circumstance set forth, the Board of Directors shall immediately stop relevant supervisors from
performing their duties since the date of knowing the situation occurred, and advice the Shareholders' General Meeting or the employee
representative congress to replace such supervisors.
Article 159.
Article 160.
Article 161.
No director may act on behalf of the Company or the Board of Directors in his or her own name unless these Articles of Association
specify that he or she may do so or he or she is lawfully authorized to do so by the Board of Directors. A director shall declare his or her
position and capacity in advance if, when such director is acting in his or her private capacity, a third party would reasonably assume him
or her to be acting on behalf of the Company or the Board of Directors.
The validity of an act of a director, the Manager or other senior management staff of the Company on behalf of the Company shall not,
vis-a-vis a bona fide third party, be affected by any non-compliance in his or her holding of such office, election or qualification.
In addition to obligations imposed by laws, the administrative rules and regulations as well as the Listing Rules of the stock exchanges on
which shares of the Company are listed, the Company's directors, supervisors, Manager and other senior management staff shall owe each
shareholder the following obligations in the exercise of the functions and powers granted to them by the Company:
(1)
(2)
(3)
(4)
not to cause the Company to exceed the scope of business stipulated in its business license;
to act honestly in the best interest of the Company;
not to deprive the Company of its property in any way, including (but not limited to) any opportunities that are advantageous to
the Company;
not to deprive shareholders of their individual rights and interests, including (but not limited to) rights to distributions and voting
rights, unless pursuant to a restructuring of the Company submitted to and adopted by the Shareholders' General Meeting in
accordance with these Articles of Association of the Company;
(5)
the obligations required by the laws of the place where Company shares are listed and relevant provisions of the stock exchange.
Article 162.
The Company's directors, supervisors, Manager and other senior management staff shall have an obligation, in the exercise of their rights
or discharge of their obligations, to perform their acts with the care, diligence and skill that a reasonably prudent person should exercise in
comparable circumstances, including but not limited to the relevant Professional Moralities and Code of Conduct for employees
developed by the Company.
Article 163.
The Company's directors, supervisors, Manager and other senior management staff must, in the performance of their duties and
responsibilities, abide by the fiduciary principle and shall not place themselves in a position where their personal interests and their duties
may conflict. This principle shall include but not be limited to the fulfillment of the following obligations:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
to act honestly in the best interest of the Company;
to exercise powers within the scope of their functions and powers and not to exceed such powers;
to personally exercise the discretion vested in him or her and not allow himself or herself to be manipulated by another person
and, unless permitted by laws, administrative regulations or with the informed consent of the Shareholders' General Meeting, not
to delegate the exercise of his or her discretion;
to accord equal treatment to shareholders of the same class and fair treatment to shareholders of different classes;
not to conclude a contract or enter into a transaction or arrangement with the Company except as otherwise provided in these
Articles of Association or with the informed consent of the Shareholders' General Meeting;
not to use Company property for his or her own benefit in any way without the informed consent of the Shareholders' General
Meeting;
not to use his or her functions and powers as a means to accept bribes or other forms of illegal income, and not to illegally
appropriate Company property in any way, including (but not limited to) any opportunities that are advantageous to the Company;
not to accept commissions in connection with Company transactions without the informed consent of the Shareholders' General
Meeting;
to abide by these Articles of Association, to perform his or her duties faithfully, to protect the interests of the Company, and not to
use his or her position, functions and powers in the Company to seek personal gain;
(10)
not to compete with the Company in any way without the informed consent of the Shareholders' General Meeting;
(11)
(12)
not to divert Company funds, not to deposit Company assets or funds in accounts opened in his or her own or in another name; not
to lend Company funds to others, and not to use Company property as security for the debts of other individuals without the
consent of the Shareholders' General Meeting or Board of Directors;
without the informed consent of the Shareholders' General Meeting, not to disclose confidential information relating to the
Company that was acquired by him or her during his or her tenure; and not to use such information except in the furtherance of the
interests of the Company; however, such information may be disclosed to a court or other competent government authorities if:
i.
ii.
provided for by laws;
required in the public interest;
iii.
required in the personal interest of such director, supervisor, Manager or other senior management staff of the Company.
Income derived by the directors, Manager and other senior management staff in breach of this Article shall belong to the Company; and
they shall be held liable for damages if, as a result of violating a regulation, they cause the Company to sustain a loss.
Article 164.
In case the Shareholders' General Meeting requires the directors, supervisors, Manager and senior management staff to attend the meeting,
the directors, supervisors, Manager and senior management staff shall provide explanations in response to the queries and suggestions
made by shareholders at a Shareholders' General Meeting, unless a matter involves trade secrets of the Company that cannot be disclosed
at a Shareholders' General Meeting.
The directors, Manager and senior management staff shall provide true information and data to the Board of Supervisors and not
interfering with the Board of Supervisors or supervisors in the exercise of their functions and powers.
Article 165.
A director, a supervisor, the Manager or other senior management staff of the Company may not incite the following persons or
organizations ("connected persons") to do what such director, supervisor, manager or other senior management staff may not do:
Article 166.
Article 167.
Article 168.
Article 169.
(1)
(2)
(3)
(4)
(5)
the spouse or a minor child of such director, supervisor, Manager or other senior management staff of the Company;
a trustee of such director, supervisor, Manager or other senior management staff of the Company or of any person referred to in
item (1) hereof;
a partner of such director, supervisor, Manager or other senior management staff of the Company or of any person referred to in
items (1) and (2) hereof;
a company over which such director, supervisor, Manager or other senior management staff of the Company, alone or jointly with
any person referred to in items (1), (2) and (3) hereof or any other director, supervisor, Manager or other senior management staff
of the Company, has de facto control;
a director, a supervisor, the Manager or other senior management staff of a company being controlled as referred to in item (4)
hereof.
If a director, a supervisor, the Manager and other senior officer tender his or her resignations or his or her term of office expires, the
fiduciary obligation of the Company's directors, supervisors, Manager and other senior management staff do not necessarily cease with the
termination of their tenure. A director, the supervisor, the Manager and other senior officer's obligation to maintain the confidentiality of
the Company's trade secrets shall survive the end of his or her term, until such secrets enter the public domain. The term of survival of his
or her other obligations shall be decided upon according to the principle of fairness, the time elapsed between the director's departure from
office and the occurrence of the event, and the circumstances and conditions of the termination of his or her relationship with the
Company.
A director, a supervisor, the Manager or other senior officer who causes the Company to sustain a loss as a result of a violation of a law,
administrative regulations and rules, department rules or a breach of these Articles of Association by him or her during the performance of
his or her Company duties shall be liable for damages.
A director, a supervisor, the Manager or other senior management staff of the Company may, by informed decision of the Shareholders'
General Meeting, be relieved from liability for a specific breach of his or her obligations, except in circumstances as specified in Article
56 of the Articles of Association.
If a director, a supervisor, the Manager or other senior management staff of the Company is, directly or indirectly, materially interested in
a contract, transaction or arrangement concluded or planned by the Company (excluding his or her engagement contract with the
Company), he or she shall disclose the nature and extent of his or her interest to the Board of Directors at the earliest opportunity, whether
or not the matter is normally subject to the approval of the Board of Directors.
A director may not vote on any contract, transaction or arrangement in which he or she or any person connected to him or her (as defined
in the applicable securities listing rules ammended from time to time) has a material interest and which is to be approved by the Board of
Directors or any other proposals related thereto. Additionally, he or she may not count in the quorum for the meeting.
Unless the interested director, supervisor, Manager or other senior management staff of the Company has disclosed such interest to the
Board of Directors as required under the first paragraph hereof and the matter has been approved by the Board of Directors at a meeting in
which he or she was not counted in the quorum and had refrained from voting, the Company shall have the right to void the contract,
transaction or arrangement, unless the other party is a bona fide party acting without knowledge of the breach of obligation by the director,
supervisor, Manager or other senior management staff concerned.
A director, a supervisor, the Manager or other senior management staff of the Company shall be deemed to be interested in any contract,
transaction or arrangement in which a connected person of that director, supervisor, Manager or other senior management staff is
interested.
Article 170.
If a director, a supervisor, the Manager or other senior management staff of the Company gives a written notice to the Board of Directors
before the conclusion of the contract, transaction or arrangement is first considered by the Company stating that, by reason of the contents
of the notice, he or her is interested in the contract, transaction or arrangement that may subsequently be made by the Company, such
director, supervisor, Manager or other senior management staff of the Company shall be deemed for the purposes of the preceding Articles
of this Chapter to have declared his interest, to the extent stated in the notice.
Article 171.
The Company may not in any manner pay tax on behalf of its directors, supervisors, Manager or other senior management staff.
Article 172.
The Company may not directly or indirectly provide a loan to, or loan guarantees for, its directors, supervisors, Manager and other senior
management staff or those of its parent company, or provide loans to or loan guarantees for connected persons of the above-mentioned
persons.
The provisions of the preceding paragraph shall not apply to the following circumstances:
(1)
(2)
(3)
the provision by the Company of a loan to or a loan guarantee for a subsidiary of the Company;
the provision by the Company of a loan, loan guarantee or other moneys to a director, a supervisor, the Manager or other senior
management staff of the Company under an engagement contract approved by the Shareholders' General Meeting, so as to enable
him to meet the expenses incurred for the purposes of the Company or for the performance of his or her Company duties;
the provision by the Company of a loan or a loan guarantee to a relevant director, a supervisor, the Manager or other senior
management staff of the Company or to a connected person thereof on normal commercial terms, if the ordinary scope of business
of the Company includes the lending of money or the provision of loan guarantees.
A loan provided by the Company in breach of the preceding Article shall be immediately repaid to the Company by the recipient of the
loan, regardless of the terms of the loan.
A loan guarantee provided by the Company in breach of the first paragraph of Article 172 shall be unenforceable against the Company,
unless:
(1)
the loan was provided to a connected person of a director, a supervisor, the Manager or other senior management staff of the
Company or of its parent company, and at the time the loan was advanced the lender did not know the relevant circumstances;
(2)
the collateral provided by the Company has been lawfully sold by the lender to a bona fide purchaser.
For the purposes of the preceding Articles of this Chapter, the term "guarantee" shall include an act whereby the guarantor assumes
liability or provides property to guarantee or secure the performance of obligations by the obligor.
Following the approval of the Shareholders' General Meeting, the Company may purchase liability insurances for the directors,
supervisors, Manager and other senior management staff, unless the liability is caused by the violation of the laws, administrative
regulations and rules, as well as these articles of association by the Company's directors, supervisors, the Manager or other senior
management staff.
Article 173.
Article 174.
Article 175.
Article 176.
Article 177.
If a director, a supervisor, the Manager or other senior management staff of the Company breaches his or her obligations to the Company,
the Company shall, in addition to any rights and remedies provided by laws or administrative rules and regulations, have the right to:
(1)
(2)
(3)
(4)
(5)
require the relevant director, supervisor, Manager or other senior management staff to compensate for the losses sustained by the
Company as a consequence of his or her dereliction of duty;
rescind any contract or transaction concluded by the Company with the relevant director, supervisor, Manager or other senior
management staff and contracts or transactions with a third party (where such third party is well aware or should know that the
director, supervisor, Manager or other senior management staff representing the Company was in breach of his or her obligations
to the Company);
require the relevant director, supervisor, Manager or other senior management staff to surrender the gains derived from the breach
of his or her obligations;
recover any moneys received by the relevant director, supervisor, Manager or other senior management staff that should have been
received by the Company, including (but not limited to) commissions;
require the relevant director, supervisor, Manager or other senior management staff to return the interest earned or possibly earned
on the moneys that should have been given to the Company.
Article 178.
The Company shall conclude written contracts with each director and supervisor of the Company concerning his or her remuneration.
Such contracts shall be approved by the Shareholders' General Meeting before they are entered into. The aforementioned remuneration
shall include:
(1)
(2)
(3)
(4)
remuneration in respect of his or her service as a director, supervisor or senior management staff of the Company;
remuneration in respect of his service as a director, supervisor or senior management staff of a subsidiary of the Company;
remuneration for other services provided toward the management of the Company or a subsidiary thereof;
the payment by way of compensation for his or hr loss of office or retirement to the aforementioned directors and supervisors in
respect of redundancy or retirement.
A director or supervisor may not sue the Company for benefits due to him or her on the basis of the aforementioned matters, except under
a contract as mentioned above.
Article 179.
The Company shall specify in the contract concluded with a director or supervisor of the Company concerning his or her remuneration
that in the event of a takeover of the Company, a director or supervisor of the Company shall, subject to prior approval of the
Shareholders' General Meeting, have the right to receive the compensation or other moneys obtainable for loss of office or retirement. For
the purposes of the preceding paragraph, the term "a takeover of the Company" shall mean either of the following:
(1)
(2)
anyone making a purchase offer to all of the shareholders;
anyone making a purchase offer with a view to the offeror becoming a controlling shareholder as defined in the Article 54 of these
Articles of Association.
If the relevant directors or supervisors have failed to comply with this Article, any sums received by themselves shall belong to those
persons that have sold their shares as a result of their acceptance of the aforementioned offer, and the expenses incurred in the pro rata
distribution of such sums shall be borne by the relevant directors or supervisors and may not be paid out of such sums.
CHAPTER 16 Financial and Accounting Systems, Distribution of Profits, Auditing
Article 180.
Article 181.
The Company shall formulate its own financial and accounting systems in accordance with laws, administrative regulations and China's
accounting standards formulated by the State Council's department in charge of finance.
The Company shall adopt the Gregorian calendar year as its fiscal year, which shall commence on January 1 and end on December 31 of
the same Gregorian calendar year.
The Company shall adopt the Renminbi as its bookkeeping base currency and its account books shall be kept in Chinese.
The Company shall prepare financial reports at the end of each fiscal year. Such reports shall be audited by an accounting firm in
accordance with the laws.
Article 182.
The Board of Directors of the Company shall place before the shareholders at each annual Shareholders' General Meeting such financial
reports as relevant laws, administrative regulations and normative documents promulgated by the local government and the authorities-in-
charge require the Company to prepare. Such reports shall be subject to verification.
Article 183.
The financial reports of the Company shall be made available for inspection by shareholders 20 days prior to an annual Shareholders'
General Meeting. Each shareholder of the Company shall have the right to obtain a copy of the financial reports referred to in this Chapter.
The Company will send the aforementioned financial reports to each holder of H shares by prepaid mail at the recipient's address shown in
the register of shareholders at least 21 days prior to an annual Shareholders' General Meeting.
Subject to the laws, regulations and listing rules of the place where Company shares are listed, the aforementioned financial reports may
be provided to shareholders by other means as specified in Article 229 of these Articles of Association.
The financial statements of the Company shall be prepared not only in accordance with PRC accounting standards and regulations but also
in accordance with international accounting standards or the accounting standards of the place outside the PRC where shares of the
Company are listed. If there are material differences in the financial statements prepared in accordance with these two sets of accounting
standards, such differences shall be stated in the notes to such financial statements. For purposes of the Company's distribution of after-tax
profits of a given fiscal year, the lesser of the amounts of after-tax profits shown in the aforementioned two kinds of financial statements
shall govern.
Interim results or financial information published or disclosed by the Company shall be prepared in accordance with PRC accounting
standards and regulations as well as international standards or the accounting standards of the place outside the PRC where shares of the
Company are listed.
The Company shall publish four financial reports every fiscal year, namely an Q1 financial report within 30 days after the end of the first
three months of the fiscal year, an interim financial report within 60 days after the end of the first six months of the fiscal year, an Q3
financial report within 30 days after the end of the first nine months of the fiscal year and an annual financial report within 120 days after
the end of the fiscal year.
Article 184.
Article 185.
Article 186.
Article 187.
The Company's financial and accounting reports shall be prepared in accordance with relevant laws, administrative regulations and
departmental rules.
Article 188.
The Company may not keep account books other than the statutory account books.
Article 189.
The basic principles of profit distribution policy of the Company are as follows:
(1)
(2)
taking full account of return to investors and distributing dividend to Shareholders per annum in proportion to the distributable
dividend realized for the year concerned;
maintaining the continuity and stability of the Company's dividend distribution policy, while at the same time take care of the
interest of the Company in the long term, the interest of the Shareholders as a whole, as well as the sustainable development of the
Company;
(3)
giving priority to dividend distribution in cash.
Article 190.
When the Company distributes its after-tax profits for a given year, it shall allocate 10 percent of profits to its statutory common reserve.
The Company shall no longer be required to make allocations to its statutory common reserve once the aggregate amount of such reserve
reaches at least 50 percent of its registered capital.
If the Company's statutory common reserve is insufficient to make up losses from previous years, the Company shall use its profits from
the current year to make up such losses before making the allocation to its statutory common reserve in accordance with the preceding
paragraph.
After making the allocation from its after-tax profits to its statutory common reserve as well as statutory public welfare fund, the
Company may, subject to a resolution of the Shareholders' General Meeting, make an allocation from its after-tax profits to the
discretionary common reserve.
After the Company has made up its losses and made allocations to its common reserves, the remaining profits of the Company shall be
distributed in proportion to the shareholdings of its shareholders. Shares of the Company that are held by the Company itself shall not
participate in the distribution of profits.
Article 191.
Before making up its losses and made allocations to the statutory common reserve, the Company shall not distribute dividends or
distribute profits to shareholders. The Company's dividend does not bear any interest, unless the Company fails to distribute relevant
dividends to the shareholders.
Any amount paid up in advance of calls on any share may carry interest but shall not entitle the holder of the share to participate in respect
thereof in a dividend subsequently declared.
Article 192.
The capital common reserve shall include the following funds:
(1)
(2)
the premiums obtained from the issue of shares above par;
other revenue required by the State Council's finance authority to be included in the capital common reserve.
Article 193.
The Company's common reserves (referring to the statutory reserve fund, any fund and capital fund) shall be used to make up the
Company's losses, to expand the Company's production and operations or, through conversion into capital, to increase the Company's
capital. However, the capital common reserve will not be used to make up the Company's losses.
When funds in the statutory common reserve are converted into capital by the Company through the resolution at the Shareholders'
General Meeting, the new shares shall be issued according to the original proportion of shares held by the shareholders, or the par value of
shares shall be increased. However, in case that the statutory common reserve are converted into capital, the remaining of the reserve shall
not be less than 25 percent of the registered capital of the Company before the conversion.
Article 194.
Dividend distribution policies of the Company are to be specified as follows:
(1)
(2)
dividend shall be distributed in the following manner: the Company may distribute dividends in cash, in shares or in a
combination of both cash and shares. Subject to conditions, interim profit distribution may be made by the Company;
specific circumstances for and proportions of cash dividend of the Company: save in exceptional circumstances, if the Company's
profit for the year and its cumulative undistributed profit are positive, the Company may distribute dividend in cash and the profit
to be distributed in cash per annum will not be less than 10% of the distributable profit realized for that year, or that the total profit
to be distributed in cash in the past three years will not be less than 30% of the average annual distributable profit realized in the
past three years;
The exceptional circumstances refer to the following:
i.
where the auditing firm issues a non-standard unqualified audit report on the financial report of the Company for the year;
and
ii.
where the Company has major investment plan or significant cash expenditure (fund raising projects excepted).
(3)
Conditions for distributing dividends in shares by the Company:
where the Company's business is in a sound condition, and the Board considers that the stock price of the Company does not
reflect its share capital size and distributing dividend in shares will be favourable to all Shareholders of the Company as a whole,
provided that the above conditions of cash dividend are fully met, the Company may propose dividend distribution in shares;
(4)
Upon occurrence of any illegal appropriation of the Company's funds by Shareholders, the Company shall deduct the cash bonus
to be paid to such Shareholders to make up for the funds appropriated by such Shareholders.
Article 195.
Procedures for considering the profit distribution plan of the Company:
(1)
(2)
The profit distribution plan of the Company shall be drawn up by the management before being submitted to the Board and the
supervisory committee of the Company for consideration. The Board shall thoroughly discuss the rationality of the profit
distribution plan and form a specific resolution before submitting it to the general meeting for consideration. In considering the
profit distribution plan, the Company shall make Internet voting accessible to Shareholders.
Where the Company does not distribute cash dividend by reason of the exceptional circumstances in Article 194 above, the Board
shall explain the specific reasons for not distributing cash dividends, the exact purpose for the retained profit and the estimated
investment return, and upon the independent Directors having expressed their opinions thereon, submit such proposal to the
general meeting for consideration, and disclose the same in the media designated by the Company.
Article 196.
Implementation of the profit distribution plan of the Company:
After the profit distribution plan has been resolved at a general meeting, the Board shall complete dividend (or share) distribution within
two months after the holding of such meeting.
Article 197.
Alteration of the Company's profit distribution policy:
In case of force majeure events such as war, natural disasters, or changes to the Company's external operational environment resulting in
material impact on its production and operation, or relatively significant changes to the Company's operational position, the Company may
adjust its profit distribution policy.
The Board shall conduct specific discussion over adjustment to the Company's profit distribution policy, provide detailed reasons for such
adjustment, form a written report to be considered by independent Directors, and then submit to the general meeting for approval by way
of a special resolution. In considering alterations to the profit distribution policy, the Company shall make Internet voting accessible to
Shareholders.
Article 198.
Dividends and other payments by the Company to holders of domestic investment shares shall be distributed and paid in Renminbi,
whereas those to holders of overseas listed foreign investment shares shall be denominated and declared in Renminbi and paid in HK
Dollars. The foreign currency for the cash dividends and other payments by the Company to holders of overseas listed foreign investment
shares and other holders of foreign investment shares shall be handled in accordance with state regulations on foreign exchange control.
Article 199.
Unless otherwise provided in relevant laws and Administrative regulations, where cash dividends and other amounts are paid in HK
Dollars, the average selling price of the relevant foreign exchange posted by the People's Bank of China for the Gregorian calendar week
immediately preceding the date of declaration of the dividends or other payment shall be used as the exchange rate.
Article 200.
Subject to the item (2), Article 60 and the item (17), Article 108 of these Articles of Association, the Board of Directors may decide to
distribute the interim dividend or special dividend.
Article 201.
When distributing dividends to shareholders, the Company shall withhold and turn over the tax payable on the dividend income of
shareholders based on the amount distributed and in accordance with PRC tax laws.
Article 202.
The Company shall appoint receiving agents for holders of overseas listed foreign investment shares to collect on behalf of the relevant
shareholders the dividends distributed and other moneys payable in respect of overseas listed foreign investment shares.
The receiving agents appointed by the Company shall meet the requirements of the laws of the place, or the relevant regulations of the
stock exchange, where shares are listed.
The receiving agents appointed by the Company for the holders of overseas listed foreign investment shares listed on the SEHK shall be
trust companies registered under the Trustee Ordinance of Hong Kong.
The Company shall implement an internal auditing system and appoint dedicated auditing personnel to carry out internal auditing and
supervision of the Company's financial revenues and expenditures, and economic activities
The Company's internal auditing system and the responsibilities of its auditing personnel shall be implemented after the approval thereof
by the Board of Directors. The person in charge of auditing shall be accountable and report to the Board of Directors.
Article 203.
Article 204.
CHAPTER 17 Engagement of Accounting Firms
Article 205.
The Company shall engage an independent accounting firm that complies with relevant provisions of PRC laws to audit the annual
financial reports and review other financial reports of the Company, make verification of net assets and provide other consulting-related
services.
The Company's engagement of accounting firm shall be decided by the Shareholders' General Meeting following the approval of the Audit
Committee.
Article 206.
The term of engagement of an accounting firm engaged by the Company is one year, which shall commence upon the adjournment of the
annual Shareholders' General Meeting of the Company and end upon the adjournment of the next annual Shareholders' General Meeting.
The accounting firm could be re-appointed if the term is expired.
Article 207.
An accounting firm engaged by the Company shall have the following rights:
Article 208.
Article 209.
Article 210.
Article 211.
Article 212.
(1)
(2)
(3)
the right of access to the account books, records or vouchers of the Company and the right to require directors, the Manager and
other senior management staff of the Company to provide relevant information and explanations at any time;
the right to require the Company to take all reasonable measures to obtain from its subsidiaries the information and explanations
necessary for the accounting firm to perform its duties;
the right to attend shareholders' meetings in a non-voting capacity, to receive notice of or other information concerning any
meetings of or concerning which shareholders have a right to receive notice or other information, and to be heard at any
shareholders' meetings on any matter which relates to it as the accounting firm of the Company.
If the position of accounting firm becomes vacant, the Board of Directors may following the approval of the Audit Committee appoint an
accounting firm to fill such vacancy before a Shareholders' General Meeting is held. However, if there are other accounting firms holding
the position of accounting firm of the Company while such vacancy persists, such accounting firms may continue to act.
The Shareholders' General Meeting may by ordinary resolution decide to dismiss any accounting firm prior to the expiration of its term of
engagement, notwithstanding anything in the contract between the accounting firm and the Company, but without prejudice to such
accounting firm's right, if any, to claim damages from the Company in respect of such dismissal.
The remuneration or method of determining the remuneration of an accounting firm shall be decided upon by the Shareholders' General
Meeting. The remuneration of an accounting firm engaged by the Board of Directors shall be determined by the Board of Directors after
being approved by the Audit Committee and shall be reported to the Shareholders' General Meeting for approval.
The engagement, dismissal or non-renewal of engagement of an accounting firm shall be decided upon by the Shareholders' General
Meeting. If there are relevant provisions in the applicable laws, administrative regulations and rules and/or the relevant Listing Rules, the
Company shall disclose such provisions of the Shareholders' General Meeting on relevant newspapers or periodicals, and describe the
reasons for replacement if necessary, as well as report them to the State Council authorities in charge of securities and Chinese Institute of
Certified Public Accountants for record.
Where a resolution at a Shareholders' General Meeting is to be passed to appoint as accounting firm an accounting firm other than an
incumbent accounting firm, to fill a casual vacancy in the office of accounting firm, or to reappoint an accounting firm engaged by the
Board of Directors to fill the vacancy in the office of accounting firms or to remove an accounting firm before the expiration of its term of
office, matters shall be handled in accordance with the following provisions:
(1)
(2)
the motion of engagement or dismissal shall be sent, before issuance of the notice of the Shareholders' General Meeting, to the
accounting firm proposed to be appointed or the accounting firm proposing to leave its post or the accounting firm that has left its
post in the relevant fiscal year; leaving includes leaving by removal, resignation and retirement;
if the accounting firm leaving its post makes representations in writing and requests their notification to the shareholders, the
Company shall (unless the representations are received too late):
i.
ii.
in any notice of the resolution given to shareholders, state the fact of the representations having been made by the
accounting firm that is leaving its post;
serve a copy of the representations as an attachment to the notice on the shareholders by the method specified in these
Articles of Association;
(3)
if the accounting firm's representations are not sent under item (2) of this Article, the relevant accounting firm may, in addition to
its right to be heard, require that the representations be read out at the Shareholders' General Meeting;
(4)
an accounting firm that is leaving its post shall be entitled to attend:
i.
ii.
the Shareholders' General Meeting at which its term of office would otherwise have expired;
any Shareholders' General Meeting at which it is proposed to fill the vacancy caused by its removal;
iii.
any Shareholders' General Meeting convened on its resignation.
The resigned accounting firm shall make a statement on the matters of his work as a former accountant at the above meeting and receive
all notices of, and other information relating to, any such meeting, and to be heard at any such meeting which it attends on matters which
concern it as former accounting firm of the Company.
Article 213.
When the Company dismisses or does not renew the engagement of an accounting firm, it shall give notice to the accounting firm 10 days
in advance. The accounting firm shall have the right to present its views before the Shareholders' General Meeting. If the accounting firm
believes that the Company's grounds for the dismissal or non-renewal of engagement of it are not justified, it shall appeal to the State
Council authorities in charge of securities and Chinese Institute of Certified Public Accountants. In case the accounting firm tenders the
resignation, it shall describe to the Shareholders' General Meeting whether there is any improper matter.
The accounting firm shall place the resignation notice at the Company's domicile to resign its position. The notice shall be effective on the
date placing the notice at the Company's domicile and the date specified in the notice, whichever is later. The notice shall include the
following statements:
(1)
(2)
believing that the resignation does not involve any statement that shall be described to the Company's shareholders or creditors;
any such conditions that shall be described.
Where a notice is deposited under the preceding paragraph, the Company must within 14 days send a copy of the notice to the competent
authority. If the notice contained a statement as mentioned in the two items of the preceding paragraph, the Company shall make a copy of
such statement available at its offices for inspection by shareholders. The Company shall additionally send a copy of the aforementioned
statement to each holder of overseas listed foreign investment shares by prepaid mail at the recipient's address shown in the register of
shareholders. Subject to the laws, regulations and listing rules of the place where Company shares are listed, a copy of the aforementioned
statement may alternatively be provided to shareholders by other means as specified in Article 229 of these Articles of Association.
If there is any statement that shall be described in the resignation notice submitted by the accounting firm, the accounting firm may require
the Board of Directors to convene an extraordinary Shareholders' General Meeting and listen to its explanations about the resignation.
Article 214.
The Company may carry out mergers or divisions in accordance with the laws.
CHAPTER 18 Merger and Division of the Company
Upon The merger or division of the Company, the Company's Board of Directors shall take necessary measures to protect the lawful rights
and interests of the shareholders who oppose the proposal for the merger or division of the Company.
Shareholders that oppose the proposal for the merger or division of the Company shall have the right to require the Company or
shareholders that are in favor of such proposal to purchase their shares at a fair price.
The contents of resolutions approving the merger or division of the Company shall be compiled in a special document for inspection by
shareholders. Holders of overseas listed foreign investment shares shall additionally be served copies of the aforementioned document by
mail.
Article 215.
A merger involving the Company may take either the form of a merger by absorption or the form of a merger by new establishment.
If the Company is involved in a merger, the parties to the merger shall enter into a merger agreement. The parties to the merger shall
prepare a balance sheet and a property list. Within 10 days from the date of adoption of the merger resolution, the Company shall notify its
creditors and within 30 days it shall make an announcement in the newspapers. A creditor may, within 30 days from the date of receipt of
the written notice or, if he did not receive a written notice, within 45 days from the date of the announcement, require the Company to pay
its debt to him in full or to provide commensurate security.
When the Company is merged, the claims and debts of each party to the merger shall be succeeded to by the Company surviving the
merger or the new company established subsequent to the merger.
Article 216.
If the Company is divided, its property shall be divided accordingly.
When the Company is divided, a division agreement shall be signed by all parties involved in the division and it shall prepare a balance
sheet and a property list. Within 10 days from the date of adoption of the resolution on the division, the Company shall notify its creditors
and within 30 days it shall make an announcement in the newspapers.
The post-division companies shall be jointly and severally liable for the pre-division debts of the Company, unless provided otherwise in a
written agreement on debt repayment reached between the Company and a creditor prior to the division.
Article 217.
If a change occurs in the Company's registered particulars due to its merger or division, the change shall be registered with the Company's
registrar in accordance with the laws. If the Company is dissolved, de-registration of the Company shall be carried out in accordance with
the law. If a new company is established, registration of the establishment of such company shall be carried out in accordance with the
laws.
Article 218.
The Company shall be dissolved in accordance with the laws if:
CHAPTER 19 Dissolution and Liquidation of the Company
(1)
the Shareholders' General Meeting resolves to dissolve the Company;
(2)
dissolution is necessary as a result of the merger or dissolution of the Company;
Article 219.
Article 220.
(3)
(4)
(5)
the Company is legally declared bankrupt because it is unable to pay its debts as they fall due;
the Company has its business license revoked, is ordered to close down or is shut down in accordance with the law;
serious difficulties arise in the operation and management of the Company and its continued existence would cause material loss
to the interests of the shareholders and such difficulties cannot be resolved through other means, in which case shareholders
holding at least 10 percent of all shareholders' voting rights may petition a People's Court to dissolve the Company.
If the Company is dissolved pursuant to item (1), (3), (4) or (5) of the preceding Article, it shall establish a liquidation committee and
liquidation shall commence within 15 days from the date on which the cause for dissolution arose. The liquidation committee shall be
composed of persons determined by the Board of Directors or the Shareholders' General Meeting by ordinary resolution. If the Company
fails to establish the liquidation committee and carry out the liquidation within the time limit, its creditors may petition a People's Court to
designate relevant persons to form a liquidation committee and carry out the liquidation.
If the Board of Directors decides that the Company should be liquidated (otherwise than because of a declaration of bankruptcy), the
notice of the Shareholders' General Meeting convened for such purpose shall include a statement to the effect that the Board of Directors
has made full inquiry into the position of the Company and that the Board is of the opinion that the Company can pay its debts in full
within 12 months after the commencement of liquidation.
The functions and powers of the Board of Directors shall terminate immediately upon the adoption by the Shareholders' General Meeting
of a resolution to carry out liquidation.
The liquidation committee shall take instructions from the Shareholders' General Meeting, and not less than once a year make a report to
the Shareholders' General Meeting on the committee's receipts and expenditures, the business of the Company and the progress of the
liquidation. It shall make a final report to the Shareholders' General Meeting when the liquidation is completed.
Article 221.
The liquidation committee shall notify creditors within a period of 10 days from the date of its establishment and make announcements of
the liquidation in the newspapers within 60 days. Claims shall be registered by the liquidation committee. During the claim declaration
period, the liquidation committee may not pay any debts to creditors.
Article 222.
The liquidation committee shall exercise the following functions and powers during liquidation:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
to inventory the Company's property, and to prepare a balance sheet and property list;
to notify creditors by notice and public announcement;
to dispose of unfinished business of the Company relating to the liquidation;
to make full payment of taxes owed and of taxes incurred during the liquidation process;
to liquidate claims and debts;
to dispose of the Company's property remaining after the debts are paid in full;
to represent the Company in civil actions.
Article 223.
After the liquidation committee has inventoried the Company's property and prepared a balance sheet and property list, it shall formulate a
liquidation plan and submit such plan to the Shareholders' General Meeting or the competent authority for confirmation.
After payment of the liquidation expenses, the Company's property remaining shall pay in the following order: (i) the wages of the
employees; (ii) social insurance premiums and statutory compensation; (iii) the taxes owed; (iv) bank loans, Company bonds and other
Company debts.
The remaining assets after the disposal of the Company's property in accordance with the preceding provision, the shareholders shall
distribute them according to the type and proportion of shares held by them:
(1)
in case of preferred shares, they shall be distributed to the shareholders of the preferred shares according to the par value of the
preferred shares; in case the shares fail to repay for the preference shares, they shall be distributed according to the proportion of
shares held by the shareholders of the preference shares;
(2)
be distributed by the Company to the shareholders in proportion to the shares they hold.
During liquidation, the Company shall not engage in any business activities unrelated to the liquidation.
Article 224.
If the Company is liquidated due to dissolution and the liquidation committee, having inventoried the Company's property and prepared a
balance sheet and property list, discovers that the Company's property is insufficient to pay its debts in full, it shall apply to the Peoples
Court for a declaration of bankruptcy.
After the People's Court has ruled to declare the Company bankrupt, the liquidation committee shall turn over the liquidation matters to
the People's Court.
Article 225.
Following completion of the liquidation of the Company, the liquidation committee shall prepare a liquidation report, as well as revenue
and expenditure statement and financial account books in respect of the liquidation period, and, after verification thereof by a PRC
certified public accountant, submit the same to the Shareholders' General Meeting or the competent authority for confirmation.
Within 30 days from the date of confirmation of the aforementioned documents by the Shareholders' General Meeting or the People's
Court, the liquidation committee shall submit the same to the company registrar, apply for cancellation of the Company's registration and
publicly announce the Company's termination.
CHAPTER 20 Procedures for Amending the Company's Articles of Association
Article 226.
The Company may amend its Articles of Association in accordance with laws, administrative regulations and its Articles of Association.
Article 227.
The Company's Articles of Association shall be amended in the following manner:
(1)
(2)
(3)
the Board of Directors shall pass a resolution to draw up a proposal on amendment of the Company's Articles of Association by
Shareholders' General Meeting in accordance with these Articles of Association;
the foregoing proposal shall be furnished to the shareholders in writing and a Shareholders' General Meeting shall be convened to
examine the contents of the proposal;
the contents of the amendments sumitted to the Shareholders' General Meeting for resolution shall be approved by a special
resolution.
Article 228.
The Company shall amend the Articles of Association if:
(1)
(2)
(3)
provisions of the Articles of Association conflict with the Company Law or related laws after such laws are amended;
a change occurs in the Company's situation and such change is inconsistent with the matters stated herein;
the Shareholders' General Meeting decides to amend the Articles of Association.
Article 229.
If an amendment to these Articles of Association involves matters provided for in the Mandatory Provisions of Articles of Association of
Companies That List Overseas, it shall become effective upon approval by the authority that is authorized by the State Council to examine
and approve companies.
Article 230.
If an amendment to these Articles of Association involves a registered particular of the Company, registration of the change shall be
carried out in accordance with the laws.
If an amendment to the Articles of Association involves a matter which is required by the laws, the administrative rules and regulations to
be disclosed, an announcement shall be made in accordance with regulations.
CHAPTER 21 Notices and Announcements
Article 231.
Notices (for the purposes of this Chapter, the term "notice" includes the notice of the meetings issued by the Company to its shareholders,
Company communications and other written materials) of the Company shall be given or provided by one or more of the following means:
(1) by hand; (2) by mail; (3) by way of a public announcement; (4) other means recognized by the securities regulator of the place where
Company shares are listed and by the stock exchange or specified in these Articles of Association.
As for the Company's notice sent by way of a public announcement; such announcements must be published in the newspapers (if any)
designated by the CSRC, on other designated media (including website) of the stock exchange where Company shares are listed or in
other designated media.
As for the Company's methods to send or provide notice to the shareholders of H shares in accordance with the Hong Kong Listing Rules,
subject to other documents specified in the laws, regulations and listing rules of the place where Company shares are listed, the Company
may issue or give corporate communications to holders of H shares by electronic means or publication of information on a website.
The term "corporate communication" means any document issued or to be issued by the Company for the information or action of holders
of any Company securities. Such communications include but are not limited to:
(1)
(2)
(3)
(4)
(5)
(6)
annual reports, including reports of the Board of Directors, the Company's annual accounts together with the auditor's reports and
(where applicable) summary financial reports;
interim reports and (where applicable) summary interim reports;
notices of meetings;
listing documents;
circulars;
proxy forms.
Article 232.
For a Company notice given by hand, the person on whom it is served shall sign (of affix his or her seal to) the acknowledgement slip, and
the date on which he or she signed in receipt shall be the date of service.
For a Company notice given by way of a public announcement, the first day of publication shall be the date of service.
When the notice is served by post, the notice shall be deemed as served 48 hours after the clearly stating the address, prepaying the
postage, placing the notice in the envelope and inserting the envelope containing the notice in the mailbox.
Article 233.
A meeting and the resolutions adopted thereat shall not be invalidated due to the accidental omission to give notice of the meeting to, or
the non-receipt of notice of the meeting by, a person entitled to receive notice.
Article 234.
The Company shall comply with the following rules for dispute resolution:
CHAPTER 22 Dispute Resolution
(1)
If any dispute or claim that concerns Company affairs and is based on rights or obligations provided for in these Articles of
Association, the Company Law or other relevant laws arises between a holder of overseas listed foreign investment shares and the
Company, between a holder of overseas listed foreign investment shares and a director, a supervisor, the Manager or other senior
management staff of the Company or between a holder of overseas listed foreign investment shares and a holder of domestic
investment shares, the parties concerned shall submit the dispute or claim to arbitration.
When a dispute or claim as described above is submitted to arbitration, the dispute or claim shall be submitted in its entirety, and
all persons (being the Company or shareholders, directors, supervisors, the Manager or other senior management staff of the
Company) that have a cause of action due to the same facts or whose participation is necessary for the resolution of such dispute
or claim shall submit to arbitration. Disputes regarding the definition of shareholders and the register of shareholders may be
resolved by means other than arbitration.
(2)
A dispute or claim submitted to arbitration may be arbitrated, at the option of the arbitration applicant, by either the China
International Economic and Trade Arbitration Commission in accordance with its arbitration rules or the Hong Kong International
Arbitration Centre in accordance with its securities arbitration rules. After the arbitration applicant has submitted the dispute or
claim to arbitration, the other party must submit to the arbitration institution selected by the applicant.
If the arbitration applicant opts for arbitration by the Hong Kong International Arbitration Centre, either party may request
arbitration to be conducted in Shenzhen in accordance with the securities arbitration rules of the Hong Kong International
Arbitration Centre.
(3)
Unless otherwise provided by laws or administrative regulations, PRC laws shall apply to the resolution by arbitration of disputes
or claims referred to in item (1).
(4)
The award of the arbitration institution shall be final and binding upon each party.
CHAPTER 23 Supplementary Provisions
Article 235.
Article 236.
The Company's Articles of Association are written in Chinese and English. If there is any discrepancy between the two versions, the
Chinese version of the Articles of Association shall prevail.
The power to interpret these Articles of Association shall vest in the Board of Directors of the Company. The power to amend these
Articles of Association shall vest in the Shareholders' General Meeting.
Article 237.
For the purposes of these Articles of Association, the term "accounting firm" shall have the same meaning as the term "auditor".
The "Manager", "Senior Deputy Manager" and "Deputy Manager" in these Articles of Association refer to the Company's "President",
"Senior Deputy President" and "Deputy President".
The "Executive Director" in these Articles of Association refers to the director working in the Company.
Important Note: The following is an English translation of the Chinese version of the Rule of Procedures for the Board of Directors of Aluminum
Corporation of China Limited(
prevail.
). In case of any discrepancies or inconsistencies, the Chinese version shall always
Appendix
ALUMINUM CORPORATION OF CHINA LIMITED
RULES OF PROCEDURES FOR THE BOARD OF DIRECTORS
CHAPTER I GENERAL PROVISIONS
Article 1
These rules are hereby formulated in accordance with the Company Law of the People's Republic of China, Securities Law of People's
Republic of China, Mandatory Provisions of Articles of Association of Companies Listed Overseas, CSRC Guidelines for Articles of
Association of Chinese Listed Companies, Code of Corporate Governance for Listed Companies in China, Rules of Shanghai Stock
Exchange on Listing Stocks (hereinafter referred to as "SSE Listing Rules"), Rules Governing the Listing of Securities on the Stock
Exchange of Hong Kong Limited (hereinafter referred to as "Exchange Listing Rules"), (SSE Listing Rules and Exchange Listing Rules
are collectively referred to as "listing rules of the place where Company shares are listed"), Articles of Association of Aluminum
Corporation of China Limited and other relative provisions (hereinafter referred to as the "Articles of Association"), with the purpose of
improving the corporate governance structure of Aluminum Corporation of China Limited (hereinafter referred to as the "Company"),
ensuring that the Board of Directors can make the effective demonstration, scientific and prudent decisions, and standardizing the working
procedures of the Board of Directors.
Article 2
The Board of Directors is the standing power authority and the business decision-making body. The Board of Directors shall be
responsible for and report to the Shareholders' General Meeting.
Article 3
The Board of Directors of the Company shall be subject to the supervision of the Board of Supervisors and all shareholders.
CHAPTER II DIRECTORS
Article 4
The Board of Directors shall be composed of 9 directors. The outside directors (herein meaning those directors who do not hold office in
the Company) shall represent more than 50 percent of the members of the Board of Directors; the independent directors (herein meaning
those directors who are independent to the shareholders and do not hold office in the Company) shall represent one third or more of the
members of the Board of Directors. A director can be engaged as the part-time senior management staff of the Company; however, the
number of the directors serving as the part-time senior management staff shall not exceed one half of the Company's total number of
directors.
Article 5
The Board of Directors shall include one chairman and one vice chairman, who shall be elected and removed by more than half of all the
directors. The Chairman of the Board and the Vice Chairman of the Board shall serve terms of three years and may serve consecutive
terms if reelected.
Article 6
The chairman of its Board of Directors shall be the legal representative of the Company.
Article 7
The directors of the Company shall be natural persons. Directors need not hold shares of the Company.
Article 8
Article 9
Directors shall be elected or changed by the Shareholders' General Meeting. At the expiration of their terms, directors may continue to
serve as such if reelected, but independent directors may not serve more than six years in succession. A director may not be removed by
the Shareholders' General Meeting without cause before the expiration of his or her term.
The tenure of directors shall be calculated from the date when the resolution of the Shareholders' General Meeting is adopted to the date
when the new Board of Directors is elected by the Shareholders' General Meeting.
Article 10
Directors shall possess the following qualifications:
(1)
bachelor degree or above;
(2)
relatively high professional level, relatively comprehensive and abundant operational experience and business management
capabilities;
(3)
be familiar with the governance of listed companies and understand the operating mechanism of the listed companies;
(4)
relatively strong communication and coordination skills.
Article 11
None of the following persons may serve as a director of the Company:
(1)
persons without capacity or with limited capacity for civil acts;
(2)
(3)
(4)
persons who were sentenced to criminal punishment for the crime of corruption, bribery, misappropriation of property or diversion
of property or for disrupting the order of the socialist market economy, where not more than five years have elapsed since the
expiration of the period of punishment; or persons who were deprived of their political rights for committing a crime, where not
more than five years have elapsed since the expiration of the period of deprivation;
persons who served as directors, or factory directors or managers, who bear personal liability for the bankruptcy liquidation of their
companies or enterprises, where not more than three years have elapsed since the date of completion of the bankruptcy liquidation;
persons who served as the legal representatives of companies or enterprises that had their business licenses revoked for breaking the
law, where such representatives bear individual liability therefor and not more than three years have elapsed since the date of
revocation of the business license;
(5)
persons with comparatively large debts that have fallen due but have not been settled;
(6)
persons whose cases have been placed on the docket and are being investigated by the judicial authorities because they violated the
criminal law, and such cases are still pending;
(7)
national civil servants and the public institutions' staff that are subject to the similar management of the national civil servants;
(8)
persons who may not serve as leaders of enterprises by virtue of laws or administrative regulations and rules;
(9)
persons ruled by a competent authority to have violated securities-related regulations, where such violation involved fraudulent or
dishonest acts and not more than five years have elapsed since the date of the ruling;
(10) persons who are determined to be banned from entering the securities market by the State Council authorities in charge of securities
and whose bans have not been lifted;
(11)
any circumstance under which a person may not hold the position of director specified in the laws, administrative regulations and
rules, as well as these Articles of Association.
Article 12
Directors shall fulfill the duty of loyalty to the Company and comply with the laws, administrative regulations and rules, as well as these
Articles of Association of the Company, and shall faithfully perform their duties based on and maintain the interests of the Company.
Directors shall not damage the interests of the Company for the sake of the interests of the actual controller, shareholders and employees
of the listed companies, him or her self, or other third party. Where their own interests are in contradiction with the interests of the
shareholders, then their action principle shall be the maximum benefit of the Company and the shareholders. Directors shall:
(1)
exercise powers within the scope of their functions and powers and not to exceed such powers;
(2)
not conclude a contract or enter into a transaction or arrangement with the Company except as otherwise provided in these Articles
of Association or with the informed consent of the Shareholders' General Meeting;
(3)
not take advantage of insider information to seek personal gains or the interests for other individuals;
(4)
(5)
not operate on their own, or operate for others, the same category of business as the Company they are serving, or to engage in
activities which damage the interests of the Company;
not use his or her functions and powers as a means to accept bribes or other forms of illegal income, and not to illegally appropriate
Company property in any way, including but not limited to any opportunities that are advantageous to the Company;
(6)
not divert Company funds;
(7)
(8)
not take advantage of their functions and powers to seek commercial opportunities for themselves or other individuals which should
belong to the Company;
not accept commissions in connection with Company transactions without the informed consent of the Shareholders' General
Meeting;
(9)
not deposit Company funds in their own personal accounts or in the personal accounts of other individuals;
(10) not lend Company funds to others, and not use Company property as security for the debts of Company's shareholders or other
individuals without the consent of the Shareholders' General Meeting or the Board of Directors;
(11) without the informed consent of the Shareholders' General Meeting, not disclose confidential information which is material or
share-price sensitive relating to the Company that was acquired by him or her during his or her tenure; and not use such information
except in the furtherance of the interests of the Company; however, such information may be disclosed to a court or other
competent government authorities if:
i.
ii.
provided for by law;
required in the public interest;
iii.
required in the personal legitimate interest of such director.
(12)
fulfill other obligations imposed by laws, administrative regulations and rules, as well as these Articles of Association.
Article 13
Directors shall actively fulfill their obligation of diligence, consider the judgments made by people of the equal status under the similar
circumstances on the basis of the Company's best interests, make prudent decisions about the interests and risks of the matters to be
decided of the listed companies and shall not be released from such liability by the reason that they are not familiar with the Company's
business or do not understand the related matters, so as to confirm:
(1)
that the commercial activities of the Company are in accordance with laws, administrative regulations and the requirements of
various national economic policies;
(2)
that all shareholders are treated equally;
(3)
(4)
that they read the various commercial and financial reports of listed companies carefully so as to find out the business and
operations of the Company in a timely manner;
that they exercise the management and decision rights entrusted by the Company to them in person and not let them be handled by
others; that they do not transfer the disposition of these rights to others without the permission of laws and administrative rules and
Articles of Association or the informed resolutions of the Shareholders' General Meeting;
(5)
that they accept the legitimate supervision and reasonable recommendations of the Supervisory Board on their performance of
duties.
No director may act on behalf of the Company or the Board of Directors in his or her own name unless these Articles of Association
specify that he or she may do so or he or she is lawfully authorized to do so by the Board of Directors.
Directors shall ensure enough time and energy to participate in the affairs of listed companies, fulfill their duties and make careful
judgments and decisions for the matters submitted to the Board of Directors for deliberation. If a director fails to personally attend more
than one third of the meetings of the Board of Directors in the current year, the Board of Supervisors shall review his or her performance
of duties and make resolution and announcement about his or her diligence. If a director fails to personally attend more than 50 percent of
the meetings of the Board of Directors in the current year without any reasonable ground such as disease, working or studying abroad, or
if a director fails to personally attend a meeting of the Board of Directors and to appoint another director to attend the meetings on his or
her behalf on two consecutive occasions, he or she shall be deemed as unable to perform duties and the Board of Directors shall propose
to the Shareholders' General Meeting that he or she be replaced.
Directors shall attend the meetings of the Board of Directors with the serious and responsible attitude, and express the clear opinions on
the matters under discussion. A director shall attend the Board meetings and make decisions personally in principle. If he or she is unable
to attend a meeting in person, he or she may appoint in writing another director to attend the meetings and vote on his or her behalf; the
principal shall independently assume the legal responsibilities. Any director shall not be appointed as the proxy to attend the same board
meeting by more than two directors. When examining and discussing a related transaction, the non-associated directors shall not appoint
the associated directors to attend the meetings on behalf of them; the independent directors shall not appoint the non-independent directors
to attend the meetings on behalf of them.
Directors may tender their resignations before the expiration of their term of office. To resign, a director shall submit a written resignation
to the Board of Directors and describe the reasons for his/her resignation in the written resignation. In case the reasons for the resignation
are involved in illegal or non-standard operation, the related matters shall be specifically specified and reported to the Securities Exchange
where the Company's stock is listed and other relevant regulatory bodies.
If the resignation of a director causes the number of occupied seats on the Board of Directors to fall below the statutory minimum, his or
her written resignation shall enter into effect only upon the new director taking up the vacancy left by his or her resignation. The
remaining directors shall convene an extraordinary Shareholders' General Meeting as soon as possible to elect a director to fill the vacancy
left by the resignation of the director.
If a director tenders his or her resignations or his or her term of office expires, the fiduciary obligation of the Company's directors do not
necessarily cease under the circumstances that the resignation report has not become effect or it is within the appropriate period after the
report came into force or after the termination of their tenure.
A director who causes the Company to sustain a loss due to his or her unauthorized departure from office prior to the end of his or her
term shall be liable for damages.
Directors shall comply with relevant laws, administrative regulations and the Articles of Association and strictly comply with the public
commitments they have made.
Directors shall actively participate in relevant trainings, in order to understand the rights, obligations and responsibilities as a director, get
familiar with relevant laws and administrative regulations, and master relevant knowledge required as a director.
Article 14
Article 15
Article 16
Article 17
Article 18
Article 19
Article 20
Article 21
Article 22
Article 23
If a resolution of the Board of Directors is in violation of laws, administrative regulations or these Articles of Association, thereby causing
the Company to sustain a loss, the directors who took part in the resolution shall be liable to the Company for damages. However, if a
director is proved to have expressed his opposition to such resolution when it was put to the vote, and such opposition is recorded in the
minutes of the meeting, such director may be released from such liability.
Article 24
The Company shall provide ongoing training for directors, enabling the directors understand, master and get familiar with the laws,
administrative regulations and relevant regulatory rules applicable to the corporate supervision and governance.
CHAPTER III SELECTION AND APPOINTMENT OF NON-INDEPENDENT DIRECTORS
Article 25
The Company shall establish the standardized and transparent directors' selection and appointment procedures, in order to ensure that the
selection and appointment are open, fair, impartial and independent.
The list of candidates for directors shall be submitted as a motion to the Shareholders' General Meeting. The candidates for non-
independent directors shall be nominated by the Board of Directors, the Board of Supervisors and a shareholder alone or shareholders
together holding at least 3 percent of the Company's shares, and shall be elected by the Shareholders' General Meeting of the Company.
In case the Company's controlling shareholders' shareholding percentage is more than 30 percent, the cumulative voting system may be
implemented for the election of directors and supervisors at a Shareholders' General Meeting, namely when more than two directors or
supervisors shall be elected at the Shareholders' General Meeting , each share held by the shareholder who participates in the voting
carries a number of voting rights equivalent to the number of directors or supervisors to be elected, and a shareholder may cluster or
disperse his or her voting rights.
The outside directors shall have sufficient time and the necessary knowledge and ability to perform their duties. The Company must
provide necessary information to outside directors for performing their duties. Among them, the independent directors may directly report
to the Shareholders' General Meeting, the China Securities Regulatory Commission (CSRC) and other relevant departments.
Article 26
The candidates for directors shall not only comply with the relevant provisions of the Company Law, but also meet the following
requirements:
(1)
(2)
(3)
having not been subject to any administrative penalty by China Securities Regulatory Commission during the most recent three
years;
having not been subject to the decry in public or more than two times of notice of criticism by the stock exchange during the most
recent three years;
having not been during the period that is publicly identified as not suitable to serve as directors of listed companies by the stock
exchange.
The above periods shall be calculated from the date on which the Shareholders' General Meeting for selecting and appointing the directors
is held.
Article 27
The following procedures shall be followed for selecting the non-independent directors:
(1)
The consent of the nominee shall be obtained before the nominator nominates him or her for the position of non-independent
director; the nominator(s) shall be fully aware of the basic information of the nominee, including but not limited to his or her
occupation, educational background, title, career details, listed companies once served, all of his or her concurrent positions, etc.,
and shall be liable to provide such written materials to the Shareholders' General Meeting. The candidate shall make a written
commitment to the Company, agree to accept the nomination, promise that the publicly disclosed information about candidates is
true and complete, and guarantee that they will earnestly perform their duties if being selected.
(2) The candidates for directors shall answer the shareholders' questions at the Shareholders' General Meeting discussing the election
and appointment matters, comprehensively disclose whether themselves and their close relatives are involved in or conflicted with
the interests of the Company, make commitment to fulfill their duties and submit "Directors' Declaration and Undertaking" or other
similar documents to the Stock Exchange after they are appointed.
(3)
(4)
If the candidate for the non-independent director is nominated before the board meeting is convened, if otherwise provided in
accordance with provisions in the applicable laws and regulations and/or the Listing Rules or other securities laws and
administrative regulations, the written materials of the nominee described in item (1) of this Article shall be announced together
with the resolution of the Board of Directors in accordance with such provisions.
If a shareholder or the Board of Supervisors, who is consistent with the conditions stipulated in the Articles of Association, put(s)
forth an extempore motion for the election of a non-independent director to the Shareholders' General Meeting, the written notice of
the intention to nominate a candidate for the position of non-independent director and of the nominee indicating his or her
willingness to accept the nomination as well as relevant written materials on the nominee as mentioned in above in item (1) of this
Article shall be delivered to the Company to enable it having enough time to deliver the relevant notice and materials to
shareholders in at least 14 days before the date of the Shareholders' General Meeting.
Article 28
An employment contract shall be signed between the Company and the directors, specifying the rights and obligations of the Company
and the directors, the term of office of directors, the responsibilities to be assumed by directors for violating the laws, administrative
regulations and Articles of Association, the compensation to be made because of the early termination of contract by the Company.
CHAPTER IV INDEPENDENT DIRECTORS
Article 29
The Company's Board of Directors shall have the independent directors. The members of the Company's Board of Directors shall include
one third or more independent directors, of which, one shall be served by the person with experience in accounting or financial
management as required by the Listing Rules.
Article 30
A person holding the position of independent non-executive director shall satisfy the basic conditions set forth below:
(1)
having the qualifications to hold the position of director of the listed Company in accordance with laws and administrative
regulations and rules;
(2)
having the independence required by relevant laws, administrative regulations and the Listing Rules;
(3)
(4)
having a basic knowledge of the operation of listed companies and being familiar with relevant laws, administrative rules,
regulations and rules (including but not limited to the applicable accounting standards);
having at least five years of experience in law, economics or other work experience required for performing the duties and
responsibilities of an independent director;
(5)
other conditions stipulated in these Articles of Association.
Article 31
The independent director must have the independence provided in the applicable laws, administrative regulations and rules, regulations or
the Articles of Association and / or the relevant Listing Rules, the following persons may not serve as independent directors:
(1)
(2)
(3)
(4)
persons holding a position in the Company or a subsidiary thereof and their lineal relatives and major social relations (the lineal
relatives refer to the spouse, parents and children; the major social relations refer to the brothers and sisters, father-in-law and
mother-in-law, daughter-in-law, son-in-law, the spouses of brothers and sisters, as well as the spouse's brothers and sisters);
natural person shareholders who directly or indirectly hold at least 1 percent of the outstanding shares of the Company or who rank
among the top ten shareholders of the Company, and their lineal relatives;
persons who hold positions of senior management in entities that directly or indirectly hold at least 5 percent of the outstanding
shares of the Company or that rank among the top five shareholders of the Company, and their lineal relatives;
persons who, at any time during the immediately preceding period of one year, have fallen into any of the three categories listed
above;
(5)
persons who provide financial, legal, consultancy or other such services to the Company or its subsidiaries;
(6)
other persons that the authorities in charge of securities specify may not serve as an independent non-executive director;
(7)
other personnel stipulated in the Articles of Association.
Article 32
The nomination, election and replacement of independent directors shall be carried out in accordance with the laws and norms:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
The candidates for the Company's independent director shall be nominated by the Company's Board of Directors, Board of
Supervisors and shareholders who alone or together hold at least 1 percent of the outstanding shares of the Company and shall be
decided through election by the Shareholders' General Meeting.
The consent of the nominee shall be obtained before the nominator nominates him or her for the position of independent director;
the nominator(s) shall be fully aware of such details of the nominee as his or her occupation, educational background, title, career
details, all of his or her concurrent positions, etc. and provide the written documents about the above-mentioned information to the
Company. The candidates shall make a written commitment to the Company that they agree to accept the nomination and promise
that the publicly disclosed information about candidates is true and complete, and to guarantee that they will earnestly perform their
duties if being selected;
The nominator(s) shall express his/its/their opinions on the nominee's qualifications for holding the position of independent director
and his or her independence; if otherwise provided in accordance with the applicable Listing Rules or other securities laws and
regulations, the nominee shall make a public statement to the effect that no relationship exists between himself or herself and the
Company that could affect his or her making independent and objective judgments;
If the candidate for the independent director is nominated before the board meeting is convened, if otherwise provided in
accordance with provisions in the applicable laws and regulations and/or the Listing Rules or other securities laws and regulations,
the written materials of the nominee described in item (1) and (2) of this Article shall be announced together with the resolution of
the Board of Directors in accordance with such provisions.
If a shareholder alone or shareholders together holding at least 3 percent of the voting rights in the Company or the Board of
Supervisors put(s) forth an extempore motion for the election of an independent director, the written notice of the intention to
nominate a candidate for the position of independent director and of the nominee indicating his or her willingness to accept the
nomination as well as relevant written materials on the nominee as mentioned in above in item (1) and (2) of this Article shall be
delivered to the Company to enable it having enough time to deliver the relevant notice and materials to shareholders in at least 14
days before the date of the Shareholders' General Meeting.
Prior to the holding of a Shareholders' General Meeting at which an independent director is to be elected, if otherwise provided in
accordance with the applicable Listing Rules or other securities laws and regulations, the Company shall simultaneously submit the
relevant materials on all the nominees to the State Council authorities in charge of securities, the State Council authorities in charge
of securities where the Company is located and/or the agency of the CSRC and the stock exchange on which Company shares are
listed. If the Board of Directors of the Company has objections concerning the relevant details of a nominee, the Company shall
additionally submit the written opinion of the Board of Directors. The nominees against whom the CSRC has objections may not
serve as candidates for independent non-executive director. At the time the Shareholders' General Meeting to elect an independent
non-executive director is held, the Board of Directors of the Company shall elaborate on whether the CSRC had any objections
against the candidates for the post of independent non-executive director;
The term of office of the independent directors is the same as that of other directors. At the expiration of their terms, independent
directors may continue to serve as such if reelected, but they may not serve more than six years in succession.
If an independent director fails on three consecutive occasions to personally attend a meeting of the Board of Directors, the Board
of Directors shall request that the Shareholders' General Meeting replace him or her. An independent director may not be removed
without cause before the expiration of his or her term, unless any of the circumstance mentioned in the preceding paragraph or a
circumstance, under which a person may not hold the position of director specified in the laws, administrative regulations and rules,
as well as these Articles of Association, arises. If an independent director is removed before the expiration of his or her term, the
Company shall disclose his or her removal as a matter for special disclosure. If the removed independent director is of the opinion
that the Company's grounds for removing him or her are not justified, he or she may make a public statement to that effect.
(9) Directors may tender their resignations before the expiration of their term of office. To resign, a director shall submit a written
resignation to the Board of Directors. The independent director shall provide information on any circumstances related to his or her
resignation or any circumstances to which he or she believes the attention of the Company and its creditors must be drawn. If the
resignation of a director causes the number of occupied seats on the Board of Directors to fall below the statutory minimum, his or
her written resignation shall enter into effect only upon the new director taking up the vacancy left by his or her resignation.
Article 33
The independent directors shall faithfully perform their fiduciary duties and duties of diligence to the Company and all shareholders. The
independent directors shall, in accordance with relevant laws, administrative regulations and the Articles of Association, earnestly perform
their duties, safeguard the overall interests of the Company and prevent the legitimate rights and interests of minority shareholders from
being infringed. The independent directors shall independently perform their duties, without being affected by the Company's major
shareholders, actual controller, or other units or individuals that have material interests in the Company.
Article 34
In addition to the functions and powers granted to directors under the Company Law, other the laws, administrative regulations and rules,
as well as these Articles of Association, independent directors shall have the following special functions and powers:
(1)
the material connected transactions (as determined based on the criteria issued by the stock exchange or the competent regulator
from time to time) shall be reviewed by the Board of Directors or the Shareholders' General Meeting in accordance with laws,
regulations and / or the relevant Listing Rules; it shall be submitted to the Board of Directors for discussion after being approved by
more than 50 percent of the independent directors in accordance with such provisions. A resolution by the Board of Directors on a
connected transaction shall enter into effect only once the independent non-executive directors have signed the same. Before
rendering their judgment, independent non-executive directors may engage an intermediary organization to issue an independent
financial consultant report for use as a basis for rendering their judgment;
(2)
proposing the engagement or dismissal of an accounting firm to the Board of Directors;
(3)
proposing to the Board of Directors the calling of an extraordinary Shareholders' General Meeting;
(4)
proposing the calling of meetings of the Board of Directors;
(5)
independently engaging external auditors and consultants;
(6)
openly soliciting shareholders' voting rights before the holding of a Shareholders' General Meeting;
(7)
directly reporting to the Shareholders' General Meeting, the China Securities Regulatory Commission and other relevant
departments.
An independent director shall obtain the consent of at least half of the independent directors before exercising the aforementioned
functions and powers in items (2), (3), (4), (6), and (7) and shall obtain the consent of all independent directors before exercising the
aforementioned functions and powers in item (5).
Article 35
In addition to performing the duties and responsibilities mentioned above, independent directors shall express their independent opinions
to the Board of Directors or the Shareholders' General Meeting on the following matters:
(1)
the nomination or removal of directors;
(2)
the engagement or dismissal of senior management staff;
(3)
the remuneration of the Company's directors and senior management staff;
(4) matters which may, in an independent non-executive director's opinion, harm the rights and interests of small and medium
shareholders;
(5) major financial transactions that occur between the Company (including its subsidiaries) and the related parties (including the
shareholders and associated companies), or the connected transactions to be reviewed and approved in accordance with relevant
Listing Rules by the shareholders;
(6)
the failure by the Board of Directors to prepare a plan for the distribution of profits in cash;
(7)
other matters specified in the applicable laws and regulations, as well as these Articles of Association.
Concerning the aforementioned matters, independent non-executive directors shall express one of the following opinions: consenting
opinions; qualified opinions, and the reasons therefor; opposing opinions and the reasons therefor; disclaimer of opinion and the reasons
therefor, and an explanation of the impediments.
Article 36
In order to ensure that the independent directors effectively exercise their powers, the Company shall provide the necessary conditions for
the independent directors:
(1)
(2)
The Company shall ensure that the independent directors enjoy the same right to know as other directors. As for any matters to be
decided by the Company's Board of Directors, the Company must notify the independent directors in advance according to the
statutory time and provide sufficient information; if the independent directors believe that the information is insufficient, they may
request for supplementation;
The Company shall provide the working conditions necessary for the independent directors to perform their duties. The Secretary to
the Company's Board of Directors shall actively provide assistance for the independent directors to perform their duties, such as
briefing and providing materials. In case the independent advices, proposals and written instructions made by the independent
directors shall be announced, the Secretary to the Company's Board of Directors shall promptly handle with the announcement
matter;
(3) When the independent directors exercise their powers, the Company's related personnel shall actively cooperate with them and shall
not refuse, obstruct or conceal, or interfere with the independent exercise of powers;
(4)
The costs incurred by employing the intermediaries and exercising other powers shall be borne by the Company;
(5)
(6)
In case the independent directors must express their views about the connected transactions to be reviewed and approved by the
Shareholders' General Meeting, the Company shall employ an independent financial adviser to issue the opinions of independent
financial adviser as the basis for the opinions of the independent directors in accordance with relevant Listing Rules;
The Company shall give appropriate allowance to the independent directors. The allowance standard shall be decided by the
Company's Board of Directors, adopted by the Shareholders' General Meeting through deliberation and disclosed in the Company's
annual report. In addition to the above allowances, the independent directors shall not obtain other additional and undisclosed
interests from the Company and its major shareholders or interested agencies and persons.
CHAPTER V RESPONSIBILITIES OF THE COMPANY'S BOARD OF DIRECTORS
Article 37
The Board of Directors shall be accountable to the Shareholders' General Meeting and exercise the following functions and powers:
(1)
to convene Shareholders' General Meetings and to report on its work to the Shareholders' General Meeting;
(2)
to implement the resolutions of the Shareholders' General Meeting;
(3)
to decide on the business plans and investment plans of the Company;
(4)
to formulate the annual financial budgets and final accounts of the Company;
(5)
to determine the Company's annual loan financing plan;
(6)
to formulate the profit distribution plans and plans for making up losses of the Company;
(7)
(8)
(9)
to formulate plans for the Company's debt and financial policies, the increase or reduction of the registered capital of the Company
and plans for the issue of bonds;
to draft plans for major acquisitions of the Company and the buyback of the Company's own shares, as well as the merger, division
or dissolution of the Company;
to make decision on the security for third parties not subject to the approval of the Shareholders' General Meeting, in accordance
with the laws, the administrative regulations and rules, as well as these articles of association;
(10)
to decide on such matters as the Company's investments in third parties, purchase and sale of assets, asset mortgages, the provision
of security for third parties, entrustment of financial services, connected transactions, etc., to the extent authorized by the
Shareholders' General Meeting;
(11)
to decide on the establishment of the Company's internal management organization;
(12)
to engage or dismiss the Company's Manager; to engage or dismiss such senior management staff as the Senior Deputy Manager,
the Deputy Manager, the Chief Accountant, as proposed by the Manager, and deciding on matters relating to their remuneration;
(13)
to decide on the establishment of the Company's branches' organization;
(14)
to formulate amendments to these Articles of Association;
(15)
to formulate the basic management systems of the Company;
(16)
to make decision on the Company's other major affairs and administrative affairs, other important agreements signed, other
functions and powers provided for in laws or these Articles of Association or granted by the Shareholders' General Meeting, except
for the matters to be considered at the Shareholders' General Meeting in accordance with the provisions of the Company Law and
these Articles of Association;
(17) other functions and powers provided for in these Articles of Association or granted by the Shareholders' General Meeting.
Resolutions by the Board of Directors on the matters referred to in the preceding paragraph shall, unless otherwise provided in laws or
these Articles of Association, be passed by the affirmative vote of more than one half of all of the directors with the exception of
resolutions on the matters referred to in items (7), (8), (9) and (14), which shall require the affirmative vote of at least two-thirds of all of
the directors for adoption.
If a director has a connected relationship with an enterprise involved in a matter on which a resolution is to be made at a meeting of the
Board of Directors, he or she may not exercise his or her right to vote regarding such resolution, nor may he or she the voting right of
another director as such director's proxy thereon. Under circumstance set forth above, such a Board meeting may be held only if more than
one half of the directors without a connected relationship are present, and the resolutions made at such a Board meeting shall require
adoption by more than one half of the directors without a connected relationship. If the Board meeting is attended by less than three
directors without a connected relationship, the matter shall be submitted to the Shareholders' General Meeting for consideration.
Article 38
With the authorization made by the Board of Directors, the Chairman of the Board may exercise part of functions and powers of the Board
when the board is not in session. The content of the authorization made by the Board of Directors shall be clear and specific.
Article 39
The Company's Board of Directors shall review and approve the following transactions:
(1)
(2)
the investment (including venture capital) or the acquisition valued at less than 25 percent of the Company's audited total assets (or
total market value) as at the most recent period;
any testing carried out in accordance with the relevant assets ratio, revenue ratio, profitability ratio, consideration ratio and equity
ratio; the sold project whose any testing ratio is less than 25%;
(3)
(4)
any testing carried out in accordance with the assets ratio, revenue ratio, consideration ratio and equity ratio stipulated in the Listing
Rules; the connected transactions whose any ratio is less than 5%;
the sum of the expected value of the fixed assets proposed to be disposed and the value obtained from the fixed assets that have
been disposed four months in advance shall not exceed 33% of the value of fixed assets shown in the audited balance sheet as at the
most recent period.
In case certain transaction is one of the above item (1) to item (4) resulting in the purchase and/or sale by the Company within one year of
material assets valued at more than 25 percent of the Company's audited total assets as at the most recent period, such transaction shall be
submitted to the Shareholders' General Meeting for deliberation and approval.
Article 40
In case the market development, M & A, the investment in new areas shall be decided by the Board of Directors, the projects whose
investment or M & A of assets amounted to more than 10% of the total assets shall be provided with the professional advices from the
social counseling agencies, as the important basis for the decisions made by the Board of Directors.
Article 41
The Company's Board of Directors authorizes the Company's management to decide the following transactions and matters:
(1)
the Company's wholly owned or holding construction projects with the construction investment of less than RMB 1.5 billion Yuan;
(2)
(3)
the abandon and leasing of the assets of the Company and the subsidiaries with the net book value of less than RMB 1 billion Yuan;
the transfer and replacement of the assets of the Company and the subsidiaries with the transaction amount of less than RMB 1
billion Yuan;
calculated in accordance with the equity ratio, the M & A and joint venture with the currency capital contribution of less than RMB
500million Yuan, or the total assets and currency contribution of less than RMB 1 billion Yuan (including the currency contribution
of no more than RMB 500 million Yuan);
(4)
the investment in finance, securities and its derivatives with the investment amount of less than RMB 100 million Yuan;
(5)
the connected transaction with the trading volume of less than 0.1% of the total assets disclosed as at the most recent period.
The Board of Directors shall formulate and review the Company's corporate governance policies and practices, review whether the
Company complies with the App. 14 "Corporate Governance Code" in the "Stock Exchange Listing Rules" and the disclosure in the
corporate governance report, and make recommendations.
The Board of Directors shall review and supervise the training and continuing professional development of the directors and senior
management personnel.
The Board of Directors shall review and supervise the Company's compliance with laws, regulations, policies and practices, formulate,
review and supervise the codes of conduct and compliance manuals, and make amendment according to the actual situation from time to
time, in order to ensure that the Company's operation and management is complying with the laws, regulations and the requirements of
Code of Conduct.
Article 42
Article 43
Article 44
Article 45
The Board of Directors shall strengthen the anti-fraud monitoring, specify the anti-fraud agencies and their responsibilities and establish
the anti-fraud monitoring system.
Article 46
Article 47
Article 48
Article 49
Article 50
Article 51
Article 52
CHAPTER VI SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
The Company's Board of Directors shall establish the Audit Committee, Nomination Committee, Remuneration Committee, Development
and Planning Committee, Occupational Health & Safety and Environment Committee and other committees to be responsible for the
Board of Directors as required. The special committees will make study on the professional matters and give comments and suggestions
for the Board of Directors to make decisions.
The Nomination Committee and Remuneration Committee are composed of directors, of which, the majority is independent directors. See
the main responsibilities and discussion procedures of the Nomination Committee and Remuneration Committee in the "Working Rules of
the Nomination Committee" and "Working Rules of the Remuneration Committee".
The Audit Committee is composed entirely of independent directors, of which, there is at least one personnel with accounting or financial
management experience required in the Listing Rules. See the main responsibilities and discussion procedures of the Audit Committee in
the "Working Rules of the Audit Committee".
The Development and Planning Committee is responsible for the deliberation of the Company's strategic development plan, making
advices on the major investment activities, and supervising, promoting and monitoring the implementation of the development strategies.
See the main responsibilities and discussion procedures of the Development and Planning Committee in the "Working Rules of the
Development and Planning Committee".
The Occupational Health & Safety and Environment Committee is responsible for supervising the effective implementation of the
Company's health & safety and environmental protection plans, raising questions about the major incidents, inspecting and supervising the
handling of major incidents. See the main responsibilities and discussion procedures of the Occupational Health & Safety and
Environment Committee in the "Working Rules of the Occupational Health & Safety and Environment Committee".
The special committees may employ intermediary agencies to provide professional advices; the relevant costs shall be borne by the
Company.
The special committees shall be responsible for the Company's Board of Directors, make advices to the Board of Directors on the matters
within their own scope of duties, and report to the Board of Directors.
CHAPTER VII THE COMPANY'S MEETINGS OF BOARD OF DIRECTORS
Article 53
The Board of Directors has a Board Secretary's Office to be responsible for dealing with the daily affairs of the Board and keeping the seal
of the Board of Directors.
Article 54
The meetings of the Board of Directors are divided into the regular meeting and extraordinary meeting.
Meetings of the Board of Directors shall be held at least four times a year. Meetings of the BD shall be convened by the Chairman of the
Board. For convening the meetings of the Board of Directors, the Board Secretary's Office shall give the written notice attached with the
seal of the Board Secretary's Office to all directors, supervisors, senior management staff and Secretary to the Board of Directors directly,
via fax, email and other methods 14 days in advance. In case the written notice is not served directly, it shall be confirmed via telephone
and be recorded appropriately.
Article 55
Before giving the notice convening the meetings of the Board of Directors, the Board Secretary's Office shall collect the motions
submitted to the Board of Directors from various departments of the Company, and shall fully solicit the views of all directors and initially
form the meeting proposal for the Chairman of the Board to make decision.
The Chairman of the Board, before developing the proposals, shall make discussion with the Manager and other senior management staff
and seek their views.
Article 56
In case of one of the following circumstances, the Chairman of the Board shall convene and preside over the extraordinary meeting within
10 working days after the Chairman of the Board personally receive the proposal or the requirements of the securities regulatory
authorities; the extraordinary meeting is not limited to the aforementioned meeting notice period in Article 54, if:
(1)
it is proposed by shareholders representing at least 10 percent of the voting rights;
(2)
it is proposed by at least one-third of the directors;
(3)
it is proposed by at least one-half of the independent directors;
(4)
it is proposed by the Board of Supervisors;
(5)
the Chairman of the Board believes that it is necessary;
(6)
it is proposed by the Manager of the Company;
(7)
it is required to be convened by the securities regulatory department under the State Council;
(8)
other circumstances stipulated in the Articles of Association.
In case of particularly urgent situation that the extraordinary Shareholder' General Meeting shall be convened as soon as possible, the
notice may be made via telephone or orally, but the convener shall make statements at the meeting.
Article 57
To convene the extraordinary meeting of the board in accordance with the provisions in the preceding article, a written proposal signed
(attached seal) by the relevant shareholder(s) shall be submitted to the Chairman of the Board through the Board Secretary's Office or
directly.
(1)
the name(s) of the relevant shareholder(s);
(2)
the reasons for proposal and the objective causes that the proposal is based on;
(3)
the proposed time or time limit, place and manner to convene the meeting;
(4)
the clear and specific proposal;
(5)
the contact information of the relevant shareholder(s) and proposed date.
The contents of proposal shall be classified as the matters within the terms of reference of the Board of Directors stipulated in the Articles
of Association and shall be submitted together with the materials related with the proposal.
The Board Secretary's Office shall forward the abovementioned written proposal and related materials to the Chairman of the Board on
the same date when they are received. If the Chairman of the Board believes that the proposal is not clear, specific or the related materials
are not sufficient, the relevant shareholder(s) may be required to make supplementation.
Article 58
The meeting of the Board of Directors in principle shall be held at the Company's domicile.
Article 59
The notice for the meeting of the Board of Directors shall be written in Chinese, if necessary, the English version can be attached,
including at least the following information:
(1)
the date and place of meeting;
(2)
the manner to convene the meeting;
(3)
the matters (proposals) proposed to be reviewed;
(4)
the convener and host of the meeting, the relevant shareholder(s) who propose the extraordinary meeting and the written proposal;
(5)
the meeting materials required by the directors to vote;
(6)
the requirements that the directors shall personally attend the meeting or appoint other directors to attend the meeting on behalf of
them;
(7)
the receipt and the letter of authorization;
(8)
the agenda for the meeting;
(9)
the date to issue the notice;
(10)
the contact and the contact information.
The oral notice for meeting shall at least include the above item (1) and (2), as well as the description for convening the extraordinary
meeting in case of the urgent situation.
Any director may waive the right to require the notice for the meetings of the Board of Directors.
Article 60
After the written notice for the regular meeting of the Board of Directors is issued, if the time and place to convene the meeting shall be
changed or the meeting proposal shall be added, changed and cancelled, the written change notice shall be issued three days before the
originally scheduled meeting date, specifying the situation and relevant contents and materials about the new proposal. If failed to issue
the written notice three days in advance, the meeting shall be postponed accordingly or held on the originally scheduled meeting date with
the recognition of all the participating directors.
Article 61
Article 62
Article 63
Article 64
Article 65
Article 66
Article 67
After the written notice for the extraordinary meeting of the Board of Directors is issued, if the time and place to convene the meeting
shall be changed or the meeting proposal shall be added, changed and cancelled, the recognition of all the participating directors shall be
obtained and the record shall be made accordingly.
The directors shall fill in the receipt or the letter of authorization after the receipt of the notice and fax the receipt or the letter of
authorization two days before the meeting of the Board of Directors; the original receipt or the letter of authorization shall be served
before the meeting.
Notice of a meeting shall be deemed to have been given to any director who attends the meeting without protest against, before or at its
commencement, any lack of notice.
Any regular or extraordinary meeting of the Board of Directors may be held by way of telephone conference or similar communication
equipment so long as all directors participating in the meeting can clearly hear and communicate with each other. All such directors shall
be deemed to be present in person at the meeting.
The Board Secretary's Office shall be responsible for preparing the materials about the meeting of the Board of Directors and must sent
the meeting materials to all directors via fax, mail, email or by hand 14 days before the regular meeting of the Board of Directors or 7
days before the extraordinary meeting of the Board of Directors for review. In case of special circumstances that the meeting materials can
not be provided timely, it shall be explained in advance.
If the directors believe that the materials can not meet the requirements, they may request supplementary materials. Where 25 percent of
the directors or more than two outside directors believe that the materials are not sufficient or the argumentation is not clear, they may
jointly propose to delay the convening of the BD or delay some of the issues under deliberation and the Board of Directors may adopt
their proposal.
The directors who propose to suspend the voting shall put forward the explicit requirements for submitting the proposal for deliberation
again.
The supervisors, senior management staff and Secretary to the Board may attend meetings of the Board of Directors in a non-voting
capacity. The personnel that deemed to be necessary by the Chairman of the Board (or the chairman of the meeting) may attend the
meeting of the Board of Directors.
The meetings of the Board of Directors shall be convened and presided over by the Chairman of the Board. Where the Chairman of the
Board cannot attend such a meeting for any reason, the meeting shall be convened and presided over by the (a) vice Chairman of the
Board. If there is no Vice Chairman of the Board or the Vice Chairman of the Board is unable or fails to perform these duties, a director
elected by at least one half of the directors shall convene and presided over the meetings of the Board of Directors.
Meetings of the Board of Directors may be held only if more than half of the directors (including any alternate director appointed pursuant
to the Company's Articles of Association) attend. If the number of occupied seats on the Board of Directors falls below the statutory
minimum because relevant directors are refused or lazy to attend the meeting, the Chairman of the Board and the secretary to the Board of
Directors may timely report to the regulatory authorities.
Each director shall be entitled to one vote. Resolutions of the Board of Directors must be adopted by the affirmative vote of the majority
of all the directors (the special motion must be adopted by the affirmative vote of the more than two thirds of all the directors). When the
numbers of votes for and against are equal, the chairman of the meeting shall be entitled to one additional vote.
Article 68
The following matters shall be shall be subject to the affirmative vote of at least two-thirds of the members of the Board of Supervisors:
(1)
(2)
to formulate plans for the Company's debt and financial policies, the increase or reduction of the registered capital of the Company
and plans for the issue of bonds;
to draft plans for major acquisitions of the Company and the buyback of the Company's own shares, as well as the merger, division
or dissolution of the Company;
(3)
the Company's matters relating to the security for third parties decided by the Board of Directors;
(4)
to formulate amendments to these Articles of Association.
Article 69
Article 70
Votes at a meeting of the Board of Directors shall be taken by a show of hands; if there are more than two directors proposing to adopt the
ballot, votes for special resolution shall be taken by a ballot.
The meetings of the Board of Directors shall be convened on site as soon as possible. When necessary, under the premise of guaranteeing
that the directors may fully express their views, the meeting may be convened by video, telephone, fax or email with the consent of the
convener (the chairman of the meeting) and the relevant shareholder(s) who propose(s) the meeting. The meetings of the board of director
may also be convened on site and by means of other methods.
If the meeting of Board of Directors is convened off-site, the number of directors who have attended the meeting shall be calculated
according to the number of directors displayed in the video, the number of directors who express their views in a conference call, the
number of valid votes in terms of fax or email actually received within the stipulated period, or the written confirmation submitted by the
directors afterwards.
The Board of Directors may agree to accept a written motion instead of convening the meeting of the Board of Directors. The draft of the
motion shall be served in person, by mail, telegram and fax to each director. In case that the Board of Directors has distributed the motion
to all directors, the number of directors who sign on the motion reaches the quorum required by law and the motion has been submitted to
the Secretary of the Board by the abovementioned ways, the resolution shall become the resolution adopted by the Board of Directors,
without convening the meeting of the Board of Directors.
Article 71
Meetings of the Board of Directors shall be attended by the directors in person in principle. If a director is unable to attend a meeting for
any reason, he or she shall firstly review the meeting materials, express his or her opinions in written form and appoint another director in
writing to attend the meeting on his or her behalf. Such instrument of appointment shall specify the names of the principals or their agents,
the principal's brief comments on each proposal, the principal's scope of authorization, the tips on the intention of voting on proposals, the
signature or seal of the principal and the date of entrustment. The director attending the meeting on behalf of the absent director shall
exercise the director's rights to the extent authorized.
If the written confirmation is signed by any alternate director appointed, the director shall be specifically authorized in the power of
attorney.
A written power of attorney shall be submitted to the chairman of the meeting to appoint the alternate director; the information about the
alternate director shall be stated in the attendance book of the meeting.
If a director fails to attend a meeting of the Board of Directors and has not appointed a proxy to attend the meeting on his or her behalf, he
or she shall be deemed to have waived his or her right to vote at such meeting.
Article 72
The following principles shall be followed to appoint directors or accept the appointment to attend the meetings of the Board of Directors:
(1)
In consideration of the connected transactions, the non-associated directors shall not appoint the associated directors to attend the
meetings on behalf of them; the associated directors shall not accept the non-associated directors' appointment.
(2) The independent directors shall not appoint the non-independent directors to attend the meetings on behalf of them; the non-
independent directors shall not accept the independent directors' appointment.
(3) Directors shall not fully appoint other directors to attend the meetings under the condition that their personal opinions and voting
intentions on the proposals are not described; relevant directors shall not accept the appointment with full powers and the
appointment with unclear authorization; otherwise, the appointment is invalid;
(4) Any director shall not be appointed as the proxy to attend the same board meeting by more than two directors; any director shall not
appoint the directors who have been appointed by more than two directors to attend the meeting.
Article 73
After each proposal is fully discussed, the chairman of the meeting shall request the participating directors to vote.
The voting intentions of the directors are divided into affirmative voting, negative voting and waiver. The participating directors shall
choose one of the above three intentions; failing to make choice or choosing more than two intentions simultaneously, the chairman of the
meeting shall have the right to ask relevant directors to make choice again; if the directors refuse to make choice, it shall be regarded as a
waiver; if the directors leave the meeting venue halfway without making a choice, it shall be regarded as a waiver.
The chairman of the meeting shall request the directors who participate in the meeting of the Board of Directors to express explicit
opinions on each proposal.
Article 74
Article 75
Article 76
As for the proposals required to be recognized by the independent director in advance in accordance with the provisions, the chairman of
the meeting shall specify an independent director to read out the written recognition reached by the independent directors before
discussing relevant proposals.
If any director hinders the meeting or affects the speech of other directors, the chairman of the meeting shall promptly stop his or her
behavior.
In addition to obtaining the unanimous consent of all participating directors, the meetings of the Board of Directors shall not vote for the
proposals not covered in the meeting notice. The directors, who accept the appointment of other directors to attend the meetings of the
Board of Directors, shall not vote on the proposals covered in the meeting notice on behalf of other directors.
Article 77
The directors shall carefully read relevant meeting materials and express their views independently and carefully on the basis of fully
understanding the situation.
The directors may obtain the necessary information from the Board Secretary's Office, the convener of meeting, the senior management
staff, various special committees, accounting firms, law firms and other institutions, and also may advice the chairman of the meeting to
request the representatives of the above personnel and institutions to explain relevant information.
Article 78
If the meeting of Board of Directors is convened on site, the chairman of the meeting shall announce the statistical results on the spot; if
the meeting of Board of Directors is convened by means of other methods, the chairman of the meeting shall request the secretary to the
Board of Directors to notify the directors about the voting results before the next working day after the end of the prescribed time limit for
voting.
The directors' voting made after the voting results are announced by the chairman of the meeting or after the prescribed time limit for
voting, the voting shall not be included in the statistics.
Article 79
In case of the contradiction between the content and meaning of the different resolutions formed at the meeting of the Board of Directors,
the resolution that is formed later shall prevail.
Article 80
In case of the following circumstances, the directors shall withdraw from the voting on the relevant proposals:
(1)
the circumstance, stipulated in the listing rules of the place where Company shares are listed inside and outside China, that the
directors shall withdraw from the voting;
(2)
the circumstance that any director believes that he or she shall withdraw from the voting;
(3)
other circumstance stipulated in the Article of Association of the Company that the directors shall withdraw from the voting
because of the relationship with the enterprises covered by the meeting proposals.
In case that the directors withdraw from the voting, relevant meetings of the Board of Directors may be held if more then 50 percent of the
non-associated directors can attend; the formed resolutions shall be adopted by the affirmative voting of more than 50 percent of all non-
associated directors (the special resolutions shall be adopted by the affirmative voting of more than two thirds of all non-associated
directors). If the number of the non-associated directors that attend the meeting is less than three, they shall not vote for relevant
proposals; the related matters shall be submitted to the Shareholders' General Meeting for deliberation.
The Board of Directors shall exercise powers in accordance with the Shareholders' General Meeting and the Articles of Association and
powers and not to exceed such powers.
As for the proposals submitted to the Board of Directors for deliberation, under the condition that there is no significant change in relevant
conditions and factors, the meetings of the Board of Directors shall not review the same proposals within one month.
The meetings of the Board of Directors held on site or by means of video, telephone and other methods, the recording during the whole
process may be required as needed.
The secretary to the Board of Directors shall arrange the officers from the Board Secretary's Office to make minutes for the meetings of
the Board of Directors. The minutes shall include the following contents:
Article 81
Article 82
Article 83
Article 84
(1)
the session of the meeting; the time, place and method to convene the meeting;
(2)
the issuance of meeting notice;
(3)
the convener and chairman of the meeting;
(4)
the circumstances that the directors shall attend the meetings in person or on behalf of other directors;
(5)
(6)
the proposals under the deliberation of the meeting; each director's main points and opinions in the speech about relevant matters;
the voting intention on the proposals;
the voting methods and results of each proposal (specifying the specific number of the affirmative voting, negative voting and
negative voting and waive);
(7)
other matters that the participating directors believed to be recorded.
In addition to the minutes, the secretary to the Board of Directors also may arrange the officers from the Board Secretary's Office to make
a clear and concise minutes of the meeting and prepare a separate resolution record according to the statistical voting results.
The records and minutes of meetings shall be written in Chinese and may be written in English if necessary.
Article 85
The directors (the directors who attend the meeting in person or on behalf of other directors) attended the meeting, the secretary to the
Board of Directors and the person who makes record shall sign on the minute. In case any director has different opinions on the meeting
minute or the resolution record, he or she may make a written explanation at the time of signing on it. When necessary, the director may
report to the regulatory authorities or make a public statement.
The directors attending the meeting shall have the right to make descriptive records of their speeches at the meeting. The opinions of the
independent (non-executive) directors shall be clearly listed in the resolutions of the Board of Directors.
The minute of each meeting of the Board of Directors shall be provided to all directors for review as soon as possible. Any director who
wants to make amendment of supplement to the minute shall report the amendment to the Chairman of the Board in written form within
one week upon the receipt of the minute.
If any director fails to make confirmation by signing in accordance with the provisions in the preceding paragraph, fails to make written
description, or fails to report to the regulatory agencies or make a public statement, it shall be regarded as that the director is fully
agreeing with the contents of the meeting minute.
After the meeting minute is finalized and signed, the secretary to the Board of Directors shall send a complete copy to each director as
soon as possible.
Article 86
The directors shall be liable for the resolutions of the Board of Directors. If a resolution of the Board of Directors is in violation of laws,
administrative regulations or these Articles of Association, thereby causing the Company to sustain a material loss, the directors who took
part in the resolution shall be liable to the Company for damages. However, if a director is proved to have expressed his opposition to
such resolution when it was put to the vote, and such opposition is recorded in the minutes of the meeting, such director may be released
from such liability.
Article 87
Any written resolution not formed in line with the statutory procedures shall not have the legal effect of the resolution of the Board, even
if every director has expressed his or her opinion in different way.
Where a resolution of the Board of Directors is in violation of laws, administrative regulations and rules, the Company's Articles of
Association or the resolution of the Shareholders' General Meeting, thereby causing serious losses to the Company, the directors who cast
an affirmative vote shall be directly liable to the Company for damages. However, where a director can prove that he expressed his
opposition to such resolution when it was put to be voted, and that such opposition was recorded in the minutes of the meeting, the
Article 88
Article 89
Article 90
Article 91
Article 92
director may be relieved from such liability; where a director does not abstain from voting, or is absent and does not appoint others to
attend, the director may not be relieved from such liability; where a director has expressed his opposition to such resolution but does not
cast a negative vote, the director also may not be relieved from such liability.
The announcement of the resolutions of the Board of Directors shall be handled by the secretary to the Board of Directors in accordance
with relevant provision in the listing rules of the place where the Company's stock is listed. Before the announcement of the resolution is
disclosed, the participating directors, people who attend the meeting, people who makes record and serves for the meeting shall bear the
duty of confidentiality on the contents of the resolution.
The Chairman of the Board shall urge relevant personnel to implement the resolution of the Board of Directors, check the implementation
of the resolution and report the implementation of the formed resolution at the meetings of the Board of Directors.
The meeting files of the Board of Directors, including the meeting notice, meeting materials, attendance book, power of attorney for
directors who attend the meeting on behalf of others, meeting recording materials, voting and the meeting records, minutes, resolution
record and resolution announcement signed by the participating directors, shall be kept by the secretary to the Board of Directors.
The records of the meetings of the Board of Directors shall be kept at the Company's domicile for at least 10 years.
CHAPTER VIII SUPPLEMENTARY PROVISIONS
These rules shall be formulated by the Board of Directors and be effective after being approved by the Shareholders' General Meeting
through deliberation.
The matters not covered in these rules shall be handled in accordance with the currently effective laws, administrative regulations,
normative documents, the regulatory rules of the place where the Company's stock is listed and the Articles of Association. In case that
these rules are conflicted with the laws, administrative regulations, relevant normative documents and the supervisory rules of the place
where the Company's stock is listed that are promulgated from time to time, the provisions in the laws, administrative regulations, relevant
normative documents and the supervisory rules of the place where the Company's stock is listed shall prevail.
Article 93
These rules shall be interpreted by the Company's Board of Directors.
Important Note: The following is an English translation of the Chinese version of the Rule of Procedures for the Board of Supervisors of Aluminum
Corporation of China Limited (
prevail.
). In case of any discrepancies or inconsistencies, the Chinese version shall always
ALUMINUM CORPORATION OF CHINA LIMITED
RULES OF PROCEDURES FOR THE BOARD OF SUPERVISORS
(Revised Draft)
CHAPTER I GENERAL PROVISIONS
Article 1
Article 2
Article 3
Article 4
These rules are hereby formulated in accordance with the Company Law of the People's Republic of China, Mandatory Provisions of
Articles of Association of Companies Listed Overseas, CSRC Guidelines for Articles of Association of Chinese Listed Companies, Code of
Corporate Governance for Listed Companies in China, Rules of Shanghai Stock Exchange on Listing Stocks, Rules Governing the Listing
of Securities on the Stock Exchange of Hong Kong Limited, other regulatory rules of the place where the Company's stock is listed inside
and outside China and the Articles of Association of Aluminum Corporation of China Limited and other relative provisions (hereinafter
referred to as the "Articles of Association"), with the purpose of further standardizing the discussing and voting procedures of the
Company's Board of Supervisors, promoting the supervisors and the Board of Supervisors to effectively fulfill their supervisory
responsibilities and improving the Company's corporate governance structure.
The Board of Supervisors is Company's standing supervisory body, responsible for supervising the Board of Directors and its members,
President, Senior Vice President, Vice President, Financial Controller and other senior management staff and preventing them from
infringing the legitimate rights and interests of the shareholders, the Company and the employees.
Supervisors shall faithfully perform their supervisory duties in accordance with laws, administrative regulations and the Articles of
Association.
The reasonable expenses incurred by the Board of Supervisors in the employment of professionals such as lawyers, registered
accountants, practicing auditors, etc. in the exercise of its functions and powers and expenses caused by the supervisors attending the
meeting of the Board of Supervisors shall be borne by the Company.
CHAPTER II THE POWERS OF THE BOARD OF SUPERVISORS
Article 5
The Board of Supervisors shall be responsible for the Shareholders' General Meeting and exercise the following duties in accordance with
laws:
(1)
(2)
to check Company finance; to examine and submit written opinions on the periodical Company reports prepared by the Board of
Directors;
to supervise directors, presidents and senior management personnel when carrying out their duties; to suggest the removal of
directors or senior management personnel who contravene the laws, administrative regulations, the Articles or resolutions of
shareholders' general meetings;
(3) when an action of a director, a president or senior management personnel damages the Company interests, it requests that director,
presidents or senior management personnel to make corrections;
(4)
to verify financial information such as financial reports, business reports, profit distribution plans, etc. that the Board of Directors
intents to submit to the Shareholders' General Meeting and, if in doubt, to be able to appoint, in the name of the Company, a
registered accountant or practicing auditor to assist in reviewing such information;
(5)
to conduct an investigation in case of abnormal situation of the Company' s operation; to hire the accounting firms, law firms and
Article 6
Article 7
Article 8
Article 9
Article 10
Article 11
Article 12
Article 13
Article 14
Article 15
other professional organizations to facilitate their work if necessary;
(6)
to suggest the holding of extraordinary shareholders' general meetings, and, when the Board of Directors does not convene or hold
shareholders' general meetings as required by the Company Law, to convene or hold shareholders' general meetings;
(7)
to suggest the holding of extraordinary meetings of the Board of Directors;
(8)
(9)
to negotiate with the directors and senior management staff on behalf of the Company and to bring lawsuits against the directors
and senior management staff;
other functions and powers provided for in the laws, regulations and rules, as well as the Articles of Association or granted by the
Shareholders' General Meeting.
The Board of Supervisors shall fulfill the supervision functions granted by the Shareholders' General Meeting in accordance with the laws,
but shall not participate in the Company's decision-making and operational management activities.
The outside supervisors shall independently report the integrity and diligence performance of the Company's senior management staff to
the Shareholders' General Meeting.
Supervisors may attend meetings of the Board of Directors in a non-voting capacity and raise questions and make suggestions in respect
of matters that are the subject of resolutions of the Board of Directors.
The Board of Supervisors shall give advice for the accounting firm engaged by the Company, commission other accounting firms to
review the Company's financial condition in the name of the Company if necessary and directly report to the State Council authorities in
charge of securities and other relevant departments.
CHAPTER III THE COMPOSITION OF THE BOARD OF SUPERVISORS
The Board of Supervisors shall consist of three supervisors. The external supervisors (refer to those supervisors who do not hold office in the
Company, the same below) shall represent more than 50 percent of the members of the Board of Supervisors. The number of the supervisors
who represent the employees shall be not less than one-third of the number of supervisors. The Board of Supervisors shall have one
chairman, whose appointment and dismissal shall be subject to the affirmative vote of at least two-thirds of the members of the Board of
Supervisors. The term of office of a supervisor shall be 3 years. A supervisor may serve consecutive terms if reelected upon the expiration of
his or her term.
The supervisors who represent the shareholders shall be elected and removed by the Shareholders' General Meeting; the employee
representative of the supervisors shall be elected and removed by the employees' democratic election. The list of candidates for the
supervisors who represent the shareholders shall be subject to the resolutions of the Shareholders' General Meeting. The candidates for the
supervisors who represent the shareholders shall be nominated by the Board of Directors, the Board of Supervisors and a shareholder alone
or shareholders together holding at least 3 percent of the Company's shares, and shall be elected and removed by the Shareholders' General
Meeting of the Company.
Supervisors shall also have the professional knowledge and work experience in terms of the laws and accounting, in addition to the
qualifications stipulated in the Articles of Association and relevant laws and regulations.
The Company's Directors, Manager, Senior Deputy Manager, Deputy Manager, Chief Financial Officer and other senior management staff
may not concurrently serve as supervisors.
The Company's Audit Department is the administrative body of the Board of Supervisors that is responsible for handling the daily affairs of
the Board of Supervisors.
CHAPTER IV PREPARATION OF THE MEETINGS OF THE BOARD OF SUPERVISORS
The meetings of the Board of Supervisors are divided into the regular meeting and extraordinary meeting. The regular meetings of the
Board of Supervisors shall be held at least once every six months. In case of one of the following circumstances, the Board of Supervisors
shall convene the extraordinary meeting within 10 days:
(1)
it is proposed by any supervisor;
(2)
the accounting reports, business reports, profit distribution and other financial information proposed to be submitted to the
Shareholders' General Meeting by the Board of Directors shall be reviewed; or there is any problem about the abovementioned
information;
(3)
the Board of Supervisors has received significant reporting matters;
(4)
the Shareholders' General Meeting and the meeting of the Board of Directors have passed the resolutions that are violating the
provisions of the laws, regulations, various rules of regulatory authorities, the Articles of Association, the resolutions of the
Company's Shareholders' General Meeting and other relevant rules;
(5)
the misconduct of the directors and senior management staff of the Company may cause significant harm to or adverse impact on
the market;
(6)
the Company, directors, supervisors and senior management staff are sued by the shareholders;
(7)
the Company, directors, supervisors and senior management staff are punished by the securities regulatory authorities, or publicly
condemned by the stock exchange of the place where the Company's stock is listed;
(8)
it is proposed to negotiate with the directors on behalf of the Company or bring lawsuit against the directors;
(9)
it is proposed to be convened by the securities regulatory authorities;
(10) other circumstances stipulated in laws, administrative regulations, departmental rules and Articles of Association.
Article 16
Article 17
If the meetings of the Board of Supervisors fail to be convened on time for some reasons, the written description shall be delivered to the
dispatched office of China Securities Regulatory Commission (or the governmental regulatory agencies); the contents of the written
description shall be announced.
The materials for the meetings of the Board of Supervisors shall be prepared by the personnel designated by the administrative body. The
topics of the meetings of the Board of Supervisors include the motions to be discussed by the Board of Supervisors in accordance with the
Company's Articles of Association and the motions proposed by people who have the right to make proposals. The designated personnel
must deliver the meeting materials to the supervisors for review by fax, mail, email or by hand before the meeting of the Board of
Supervisors is convened. In case of special circumstances, it shall be explained in advance. If the supervisors believe that the information
can not meet the requirements, the supplementary materials may be requested.
Article 18
If the Board of Supervisors proposes to convene the extraordinary meeting of the Board, a written proposal signed by the relevant
supervisor(s) shall be submitted to the Chairman of the Board of supervisors through the administrative body of the board of supervisors
or directly the written proposal shall contain the following items:
(1)
the name of the relevant supervisor(s);
(2)
the reasons for proposal and the objective causes that the proposal is based on;
(3)
the proposed time or time limit, place and manner to convene the meeting;
(4)
the clear and specific proposal;
(5)
the contact information of the relevant supervisor(s) and proposed date and so on.
Article 19
Article 20
Article 21
The administrative body of the Board of Supervisors shall issue the notice to convene the extraordinary meeting of the Board of
Supervisors within three days after the administrative body of the Board of Supervisors or the Chairman of the Board of Supervisors
receives the written proposal of the supervisors. If the administrative body of the Board of Supervisors is lazy to issue the meeting notice,
the supervisors who make the proposal shall promptly report to regulatory agencies.
The meetings of the Board of Supervisors shall be convened and presided over by the Chairman of the Board of Supervisors. If the
Chairman of the Board of Supervisors is unable or fails to perform these duties, a supervisor elected by at least one half of the supervisors
shall convene and presided over the meetings of the Board of Supervisors.
Meetings of the Board of Supervisors may be held only if more than half of the supervisors attend. Under the premise of guaranteeing that
the supervisors may fully express their views, the voting may be made by fax; the resolutions shall be signed by the participating
supervisors and kept by as the records of the meetings of the Board of Supervisors.
For convening the regular meetings and extraordinary meetings of the Board of Supervisors, the administrative body of the Board of
Supervisors shall deliver the written meeting notice to all supervisors by hand, fax, email, express mail, registered mail or by other means
10 days in advance. If the meeting notice is not delivered by hand, the administrative body of the Board of Supervisors shall make
confirmation by telephone.
In case of particularly urgent situation that the extraordinary meeting of the Board of Supervisors shall be convened as soon as possible,
the notice may be made via telephone or orally (not limited by the abovementioned time limit), but the convener shall make statements at
the meeting.
Article 22
The notice for the meeting of the Board of Directors shall be written in Chinese, including at least the following information:
(1)
date, place, and period of the meeting;
(2)
the matters (proposals) proposed to be reviewed;
(3)
the convener and host of the meeting, the relevant shareholder(s) who propose(s) the extraordinary meeting and the written
proposal;
(4)
the contact and the contact information;
(5)
date of issuance of notice.
CHAPTER V CONVENING THE MEETINGS OF THE BOARD OF SUPERVISORS
Article 23
Article 24
The forms of the meetings of the Board of Supervisors may be the on-site meeting, conference call, video conference and written meeting;
the language of the meetings of the Board of Supervisors shall be Chinese.
The meetings of the Board of Supervisors shall be attended by the supervisors in person. If any supervisor is unable to attend the meeting
for some reasons, he or she may appoint the Chairman of the Board of Supervisors or other supervisor to attend the meeting on behalf of
him or her with a written authorization.
The participating supervisors must sign on the attendance book. In case of the conference call or video Conference and meetings held by
other forms of communication, if it is confirmed that the supervisors may communicate with each other, all participating supervisors shall
be deemed as participating the meeting in person.
Article 25
The Chairman of the Board of Supervisors or the chairman of the meeting may count the number of the participating supervisors. When
the number of the supervisors (including the supervisors to attend the meeting on behalf of other supervisor with a written authorization)
who attend the meeting reaches two thirds of the total supervisors, the meeting shall be announced to be started.
Article 26
The supervisors who attend the meetings on behalf of others shall exercise the rights of supervisors within the scope of authorization. If
any supervisor fails to attend the meetings of the Board of Supervisors or fails to appoint other supervisor to attend the meeting on behalf
Article 27
Article 28
Article 29
Article 30
Article 31
Article 32
Article 33
Article 34
Article 35
Article 36
Article 37
Article 38
of him or her, it shall be deemed as that he or she has abandoned the right to vote at that meeting.
If a supervisor fails to personally attend the meetings of the Board of Supervisors and to appoint another director to attend the meetings on
his or her behalf on two consecutive occasions, the Shareholders' General Meeting or the workers' representative congress shall replace
him or her.
Supervisors shall seriously review each motion, make judgments independently, express the clear opinions and assume the corresponding
responsibilities.
When necessary, the Board of Supervisors may require the Company's relevant directors, senior management staff, internal auditors and
external auditors to attend the meetings of the Board of Supervisors and answer relevant questions.
The officers from the administrative body of the Board of Supervisors shall make record for the on-site meeting. The supervisors
attending the meeting shall have the right to make descriptive records of their speeches at the meeting. The meeting records may be the
recording during the whole process of the meeting.
CHAPTER VI RESOLUTIONS OF THE BOARD OF SUPERVISORS
The meetings of the Board of Supervisors adopt the "one person, one vote" voting system. Votes at an on-site meeting of the Board of
Supervisors shall be taken by a show of hands. The voting intentions of the supervisors are divided into affirmative voting, negative
voting and waiver. The participating supervisors shall choose one of the above three intentions; failing to make choice or choosing more
than two intentions simultaneously, the chairman of the meeting shall have the right to ask relevant supervisors to make choice again; if
the supervisors refuse to make choice, it shall be regarded as a waiver; if the supervisors leave the meeting venue halfway without making
a choice, it shall be regarded as a waiver.
The resolutions made at the Board of Supervisors shall require adoption by more than two thirds of the members of the Board of
Supervisors.
If the resolutions of the Board of Supervisors violate the laws, administrative regulations and the Articles of Association of the listed
companies or result in economic losses to the Company, the supervisors who are responsible for these resolutions shall assume the
corresponding responsibilities in accordance with the laws.
The resolutions of the Board of Supervisors shall be implemented by one or several supervisors designated by the Chairman of the Board
of Supervisors or the supervisor who exercises the rights of the Chairman of the Board of Supervisors. The Chairman of the Board of
Supervisors shall report the implementation of the formed resolutions at the subsequent meetings of the Board of Supervisors.
The Board of Supervisors shall implement the provisions about the information disclosure of the regulatory authorities and stock
exchange of the place where the Company's stock is listed to timely and accurately disclose all matters or resolutions that must be
disclosed by the meetings of the Board of Supervisors.
After the motions are reviewed at the meetings of the Board of Supervisors, each supervisor must sign on the meeting minute and
resolution.
The meeting files of the Board of Supervisors, including the meeting notice, meeting materials, attendance book, meeting recording
materials, voting and the meeting records, minutes and resolution announcement signed by the participating supervisors, shall be kept by
the special person designated by the Board of Directors. The records of the meetings of the Board of Supervisors shall be kept for at least
10 years.
CHAPTER VII SUPPLEMENTARY PROVISIONS
These rules are formulated by the Board of Supervisor and shall be effective after being approved by the Shareholders' General Meeting
through deliberation.
The matters not covered in these rules shall be handled in accordance with the currently effective laws, administrative regulations,
normative documents, the regulatory rules of the place where the Company's stock is listed and the Articles of Association. In case that
these rules are conflicted with the laws, administrative regulations, relevant normative documents and the supervisory rules of the place
where the Company's stock is listed that are promulgated from time to time, the provisions in the laws, administrative regulations, relevant
normative documents and the supervisory rules of the place where the Company's stock is listed shall prevail.
Article 39
These rules shall be interpreted by the Company's Board of Supervisors.
EXHIBIT 8.1
A list of Aluminum Corporation of China Limited's principal subsidiaries is provided in Note 2.4(c) to consolidated financial statements included in this annual
report following Item 19.
EXHIBIT 12.1
I, XIONG Weiping, certify that:
Certification by the Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company");
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material
aspects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;
The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Company and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
annual report based on such evaluation; and
Disclosed in this annual report any change in the Company's internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and
5.
The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company's internal control over financial reporting.
Date: April 25, 2013
By: /s/ XIONG Weiping
Name: XIONG Weiping
Title: Chief Executive Officer
EXHIBIT 12.2
I, XIE Weizhi, certify that:
Certification by the Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company");
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material
aspects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;
The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Company and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
annual report based on such evaluation; and
Disclosed in this annual report any change in the Company's internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and
5.
The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company's internal control over financial reporting.
Date: April 25, 2013
By: /s/ XIE Weizhi
Name: XIE Weizhi
Title: Chief Financial Officer
EXHIBIT 13.1
Certification by the Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company") for the year ended December 31, 2012 as
filed with the Securities and Exchange Commission on the date hereof, I, XIONG Weiping, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
(2)
The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 25, 2013
By: /s/ XIONG Weiping
Name: XIONG Weiping
Title: Chief Executive Officer
EXHIBIT 13.2
Certification by the Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company") for the year ended December 31, 2012 as
filed with the Securities and Exchange Commission on the date hereof, I, XIE Weizhi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
(2)
The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 25, 2013
By: /s/ XIE Weizhi
Name: XIE Weizhi
Title: Chief Financial Officer
EXHIBIT 15.1
April 25, 2013
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
USA
Commissioners:
We have read the statements made by Aluminum Corporation of China Limited (copy attached), which we understand will be filed with the Securities and
Exchange Commission, pursuant to Item 16F of Form 20-F, as part of the Form 20-F of Aluminum Corporation of China Limited dated April 25, 2013. We
agree with the statements concerning our Firm in such Form 20-F.
Very truly yours,
By: /s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong