As filed with Securities and Exchange Commission on April 15, 2016
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, 2015
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)
_______________
Yu Dehui
No. 62 North Xizhimen Street, Haidian District, Beijing
People's Republic of China (100082)
(86) 10 8229 8560
(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
American Depositary Shares*
Class H Ordinary Shares**
Name of each exchange on which registered
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, 2015:
Domestic Shares, par value RMB1.00 per share
H Shares, par value RMB1.00 per share
10,959,832,268
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.
Yes [X] No [ ]
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 [ ] 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.
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 [X] No [ ]
Yes [X] 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
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.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
PART III
ITEM 17.
ITEM 18.
ITEM 19.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
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 SHARE CAPITAL
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
AUDIT COMMITTEE FINANCIAL EXPERT
CODE OF ETHICS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
CORPORATE GOVERNANCE
MINE SAFETY DISCLOSURE
3
FORWARD-LOOKING STATEMENTS
4
5
9
9
9
9
27
61
61
90
101
106
107
108
121
124
125
125
125
125
126
126
126
127
127
127
127
129
129
129
129
129
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 and primary aluminum;
sales of our products;
the extent and nature of, and potential for, future development;
production, consumption and demand forecasts of bauxite, coal, alumina and primary aluminum;
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 the 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;
"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;
"Board" refers to our board of directors;
"CBEX" refers to China Beijing Equity Exchange, an approved equity exchange for the transfer of state-owned assets;
"Chalco Energy" refers to Chalco Energy Co., Ltd., our wholly-owned subsidiary established under the 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, our subsidiary until December 2013 when we disposed of 65% of its equity interest to
Chinalco;
"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 the PRC law;
"Chalco Nanhai" refers to Chalco Nanhai Alloy Company, a wholly-owned subsidiary of our Group established under the PRC law;
"Chalco Ruimin" refers to Chalco Ruimin Company Limited, our subsidiary until June 2013 when we disposed of 93.30% of its equity interest to Chinalco;
"Chalco Shandong" refers to Chalco Shandong Co., Ltd., 100% of the equity interest of which is owned by us;
"Chalco Southwest Aluminum" refers to Chalco Southwest Aluminum Company Limited, our subsidiary until June 2013 when we disposed of 60% of its
equity interest to Chinalco;
"Chalco Southwest Aluminum Cold Rolling" refers to Chalco Southwest Aluminum Cold Rolling Company Limited, our wholly-owned subsidiary until June
2013 when we disposed of its entire equity interest to Chinalco;
5
"Chalco Trading" or "CIT" refers to China Aluminum International Trading Co., Ltd., our wholly owned subsidiary established under the PRC law;
"Chalco Xing County Alumina Project" refers to the Bayer process production system and ancillary facilities at Xing County, Lvliang City of Shanxi
Province with production capacity of 800,000 tonnes of metallurgical grade alumina per year;
"Chalco Zhongzhou" refers to Chalco Zhongzhou Aluminum Co., Ltd., 100% of the equity interest of which is owned by us;
"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;
"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 to Chinalco Finance Co., Ltd.;
"CSRC" refers to China Securities Regulatory Commission;
"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" refers 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 the 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 Huajin" refers to Guizhou Huajin Aluminum Co., Ltd., 60% of the equity interest of which is owned by us;
"Guizhou Yuneng" refers to Guizhou Yuneng Mining Co., Ltd., 25% of the equity interest of which is owned by us;
6
"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 Chalco Henan Aluminum Company Limited, our subsidiary until June 2013 when we disposed of 90.03% of its equity interest to
Chinalco;
"HK$" and "HK dollars" refer 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;
"Huaxi Aluminum" refers to Huaxi Aluminum Company Limited, our subsidiary until June 2013 when we disposed of 56.86% of its equity interest to
Chinalco;
"Japanese Yen" refers to the lawful currency of Japan;
"Jiaozuo Wanfang" refers to Jiaozuo Wanfang Aluminum Manufacturing Co. Ltd., 2.46% of the equity interest of which was owned by us as of December 31,
2015;
"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" refer 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;
"MIIT" refers to Ministry of Industry and Information Technology of the PRC;
"Nanchu Price" refers to the independent reference price for aluminum published on ENanchu (http://www.enanchu.com/), an nonferrous metal related portal
site in PRC;
"NDRC" refers to China National Development and Reform Commission;
"Ningxia Energy" refers to Chalco Ningxia Energy Group Co., Ltd. (formerly Ningxia Electric Power Group Co., Ltd.) and we acquired 70.82% of its equity
interest in January 2013;
"Northwest Aluminum" refers to Northwest Aluminum Fabrication Branch, our wholly-owned branch until June 2013 when we disposed of all its assets to a
subsidiary of Chinalco;
"NYSE" or "New York Stock Exchange" refers to the New York Stock Exchange Inc.;
7
"ore-dressing Bayer process" refers to a refining process we developed to increase the alumina-to-silica ratio of bauxite;
"Qingdao Light Metal" refers to Chalco Qingdao Light Metal Company Limited, our wholly-owned subsidiary until June 2013 when we disposed of its entire
equity interest to Chinalco;
"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;
"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 Alloy Material Co., Ltd, 55% of the equity interest of which is owned by us;
"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., formerly a wholly-owned subsidiary of our Group. We disposed 50% of equity interest in
Shanxi Huaxing in 2015, and as a result Shanxi Huaxing has become our joint venture in accordance with relevant accounting standards;
"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 mines, in which we entrusted other party to conduct mining activities, 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;
"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;
"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;
8
"Zhangze Electric Power" refers to Shanxi Zhangze Electric Power Co., Ltd.;
"Zhengzhou Institute" refers to Chalco Zhengzhou Research Institute of Non-ferrous Metal, our wholly-owned subsidiary mainly providing research and
development services;
"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 RMB6.4778 to US$1.00, the
exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board for December 31, 2015. 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.
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
Our consolidated financial statements as of December 31, 2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015 included in this
annual report on Form 20-F have been prepared in accordance with International Financial Reporting Standards, or IFRSs, which includes all
International Accounting Standards and Interpretations, as issued by the International Accounting Standards Board, or the IASB. We disposed of
substantially all of our aluminum fabrication operations to Chinalco in June 2013. As a result, the operating results of our aluminum fabrication
segment were presented as a discontinued operation in our consolidated statement of comprehensive income for the year ended December 31, 2013.
We make an explicit and unreserved statement of compliance with IFRSs with respect to our consolidated financial statements as of December 31,
2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015 included in this annual report. Ernst & Young, our independent registered
public accounting firm, has issued an unqualified auditor's report on our consolidated statements of financial position as of December 31, 2014, and
the related consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for the years ended
December 31, 2013 and 2014. Ernst & Young Hua Ming LLP, which has been appointed as our independent registered public accounting firm for the
year 2015, has issued an unqualified auditor's report on our consolidated statements of financial position as of December 31, 2015, and the related
consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for the year ended December 31,
2015. Details of the change in our certifying accountant is disclosed in ITEM 16F.
The following tables present selected comprehensive income data and cash flows data for the years ended December 31, 2011, 2012, 2013, 2014 and
2015 and selected statements of financial position data as of December 31, 2011, 2012, 2013, 2014 and 2015 that were prepared under IFRSs. As the
operating results of the aluminum fabrication segment have been presented as a discontinued operation in our consolidated statement of
comprehensive income for the year ended December 31, 2013, the comparative figures for our consolidated statements of comprehensive income for
the years ended December 31, 2011 and 2012 are revised to reflect the reclassification between continuing operations and discontinued operation
accordingly. The selected financial information for the years ended and as of December 2013, 2014 and 2015 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. As the business
combination under common control incurred in the year ended December 31, 2015, the comparative figures for our consolidated statements of
comprehensive income for the years ended December 31, 2011, 2012, 2013 and 2014 are revised to reflect the business combination under common
control.
9
Year Ended December 31,
2011
RMB
2012
RMB
2013
RMB
2014
RMB
2015
RMB
(in thousands, except per share and per ADS data)
2015
US$
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME DATA
Continuing Operations
Revenue
Cost of sales
138,474,717
(131,066,801)
143,692,381
(143,646,145)
169,693,800
(166,895,282)
141,999,830
(141,328,954)
123,445,872
(120,927,088)
19,056,759
(18,667,926)
Gross profit
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property, plant and equipment
Government grants
Other gains/(losses), net
Operating profit/(loss) from continuing operations
Finance costs, net
7,407,916
(1,500,213)
(2,559,710)
(206,430)
(279,756)
159,774
502,462
3,524,043
(2,935,642)
46,236
(1,846,424)
(2,756,539)
(184,683)
(19,903)
734,852
(16,989)
(4,043,450)
(4,076,475)
2,798,518
(1,873,180)
(2,953,232)
(193,620)
(501,159)
805,882
7,399,252
5,482,461
(5,247,905)
670,876
(1,763,031)
(4,838,387)
(293,766)
(5,679,521)
823,986
356,935
(10,722,908)
(5,682,990)
2,518,784
(1,775,254)
(2,334,071)
(168,869)
(10,011)
1,768,926
5,023,600
5,023,105
(5,137,581)
388,833
(274,052)
(360,318)
(26,069)
(1,545)
273,075
775,510
775,434
(793,106)
Operating profit/(loss) from continuing operations
less finance costs
Share of profits of joint ventures
Share of profits of associates
588,401
122,262
400,706
(8,119,925)
37,040
256,081
234,556
148,749
511,869
(16,405,898)
89,510
350,575
(114,476)
23,238
284,531
(17,672)
3,587
43,924
Profit/(loss) before income tax
from continuing operations
Income tax (expense)/benefit
from continuing operations
1,111,369
(7,826,804)
895,174
(15,965,813)
193,293
(121,175)
371,092
(339,551)
(1,074,910)
230,420
Profit/(loss) for the year from continuing operations
Profit/(loss) per share from continuing operations
Discontinued operation (Loss) /profit for the year
from discontinued operation
990,194
0.04
(7,455,712)
(0.52)
555,623
0.05
(17,040,723)
(1.20)
423,713
0.01
(299,048)
(1,187,299)
207,144
-
-
29,839
35,571
65,410
0.00
-
Profit/(loss) for the year
691,146
(8,643,011)
762,767
(17,040,723)
423,713
65,410
Profit/(loss) Attributable to:
Owners of the parent
Non-controlling interests
Dividends
Basic and diluted earnings/(loss) per share
Earnings/(loss) per ADS
Dividends (expressed in RMB and US$ per share
and per ADS)
Final dividends per share
Final dividends per ADS
Proposed dividends per share
Proposed dividends per ADS
238,616
452,530
(8,233,182)
(409,829)
987,179
(224,412)
(16,208,170)
(832,553)
206,319
217,394
31,850
33,560
-
0.02
0.44
0.0114
0.2850
-
-
-
(0.61)
(15.22)
-
-
-
-
-
0.07
1.82
-
-
-
-
-
(1.20)
(29.96)
-
-
-
-
-
0.01
0.35
-
-
-
-
Year Ended December 31,
2011
RMB
2012
RMB
2013
RMB
2014
RMB
2015
RMB
(in thousands, except per share and per ADS data)
-
0.00
0.06
-
-
-
-
2015
US$
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA
Total current assets
50,162,135
49,217,613
63,174,496
63,596,271
64,169,178
9,906,014
Total non-current assets
107,291,135
126,115,770
136,544,756
129,247,336
125,100,073
19,312,123
Total assets
157,453,270
175,333,383
199,719,252
192,843,607
189,269,251
29,218,137
Total current liabilities
62,675,723
84,165,552
96,933,485
104,422,198
80,937,331
12,494,570
Total non-current liabilities
36,619,073
37,392,321
49,067,354
48,767,563
58,034,484
8,958,981
Total liabilities
99,294,796
121,557,873
146,000,839
153,189,761
138,971,815
21,453,551
Net assets
58,158,474
53,775,510
53,718,413
39,653,846
50,297,436
7,764,586
Long-term interest bearing loans and borrowings
(excluding current portion)
35,968,526
36,635,652
46,294,828
44,769,211
53,725,670
8,293,814
Capital stock
13,524,488
13,524,488
13,524,488
13,524,488
14,903,798
2,300,750
Year Ended December 31,
2011
RMB
2012
RMB
2013
RMB
(in thousands)
2014
RMB
2015
RMB
2015
US$
OTHER FINANCIAL DATA
Net cash flows generated from operating activities
Net cash flows (used in)/generated from investing
activities
Net cash flows generated from/(used in)
financing activities
2,489,756
(9,714,547)
1,122,352
(23,153,090)
8,281,407
(7,686,069)
13,818,759
(4,921,338)
7,231,450
2,952,550
1,116,344
455,794
8,842,453
20,428,953
1,728,340
(4,016,451)
(5,814,230)
(897,562)
Net increase/(decrease) in cash and cash equivalents
1,617,662
(1,601,785)
2,323,678
4,880,970
4,369,770
674,576
10
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 H.10 Statistical
Release. On April 8, 2016, the exchange rate for Renminbi was US$1.00 = RMB6.4628.
Period
2011
2013
2014
2015
September
October
November
December
2016
January
February
March
April (through April 8, 2016)
Period End
Average (1)
(RMB per US$1.00)
High
Low
6.2939
6.0537
6.2046
6.3556
6.3180
6.3883
6.4778
6.5752
6.5525
6.4480
6.4628
6.4475
6.1412
6.1704
6.3676
6.3488
6.3636
6.4477
6.5726
6.5501
6.5027
6.4720
6.6364
6.2438
6.2591
6.3836
6.3591
6.3945
6.4896
6.5932
6.5785
6.5500
6.4780
6.2939
6.0537
6.0402
6.3630
6.3180
6.3180
6.3883
6.5219
6.5154
6.4480
6.4599
(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.
Our business is vulnerable to downturns in the general economy and industries in which we operate or which we serve. A reduction in demand
could materially and adversely affect our business, financial condition and results of operations.
Demand for our products depends on the general economy and level of activity and growth in the industries where we operate or serve. Development
of the relevant industries is subject to various factors, including but not limited to market fluctuations of prices of commodities, general political or
economic conditions, technology development, government investment plans and regulations, fluctuation in global production capacity and global
and regional weather conditions, many of which are beyond our control. Unfavorable and volatile financial or economic conditions, such as those
caused by the global financial and economic crisis since 2008, including the sovereign-debt crisis in the European Union in 2011 to 2012 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 a global recession recurs, demand for our products may continue to decline. In addition,
concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, unemployment, consumer confidence, declining asset
values, capital market volatility and liquidity issues have created difficult operating conditions for us in the past and may continue to do so in the
future. Furthermore, the PRC Government has, from time to time, adjusted its monetary, fiscal and other policies and measures to manage the rate of
growth of the economy or the overheating and overcapacity in certain industries or markets. As a result, the general economy in the PRC or the world
or any particular industry in which we operate or which we serve may grow at a lower-than-expected rate or even experience a downturn. 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.
11
Volatility in the prices of alumina, primary aluminum, other non-ferrous metal and other commodities may adversely affect our business,
financial condition and results of operations.
The prices of the products we produce and trade, including alumina, primary aluminum, other non-ferrous metal and coal products, have historically
fluctuated and are expected to continue fluctuating in response to general economic conditions, supply and demand and the level of global
inventories, which are beyond our control.
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 2013, demand for alumina and primary aluminum fluctuated. The Australian FOB spot price of
alumina reached a high of US$351.5 and a low of US$312.5 per tonne and the international spot price of primary aluminum on the LME reached a
high of US$2,123.0 per tonne and a low of US$1,694.5 per tonne in 2013. In 2014, the Australian FOB spot price of alumina and the international
cash price of primary aluminum on the LME reached a high of US$357 per tonne and a low of US$307 per tonne and a high of US$2,089 per tonne
and a low of US$1,634 per tonne, respectively. As a result of general slowdown of the global economy and overcapacity of global aluminum
industry, the market prices for aluminum products were facing downward pressure in 2015. The Australian FOB spot price of alumina and the
international cash price of primary aluminum on the LME reached a high of US$354.5 per tonne and a low of US$200 per tonne and a high of
US$1,959.1 per tonne and a low of US$1,423.5 per tonne, respectively in 2015. Our average external selling prices of self-produced alumina and
primary aluminum were RMB2,377 per tonne and RMB12,075 per tonne respectively in 2015, which decreased by approximately 3.8% and 10.9%,
respectively, from 2014 to 2015. 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. There is no assurance that there will be no further falls in prices of our key products, including alumina and primary
aluminum, which may materially and adversely affect our business, financial condition and results of operations.
In addition, 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
RMB9 billion in 2016. 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.
12
We incurred losses in the past and may not achieve sustained profitability in the future.
Although we were profitable in 2013 and 2015, we incurred a net loss of approximately RMB17.0 billion in 2014. We may incur losses in the future
and we cannot assure you that we will sustain profitability in the future.
In addition, we expect that we will continue relying on, in addition to our cash flows generated from operating activities, bank and other loans as well
as proceeds from bond offerings, to fund our business operations and expansions. 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.
Our historical results may not be indicative of our future prospects.
We acquired an aggregate of 70.82% of the equity interest in Ningxia Energy on January 23, 2013. Ningxia Energy 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. After the acquisition of Ningxia Energy, we have established an energy segment in January 2013 to include (i)
operations of Ningxia Energy and (ii) our other energy related operations that were formerly included in our corporate and other operating segment.
In November 2015, we acquired relevant assets and liabilities of High-Purity Aluminum and Light Metal of Baotou Aluminum Group. Baotou
Aluminum Group is a subsidiary of Chinalco. In addition, in line with our development strategy to focus on the development of our core business of
alumina and primary aluminum operations, where we have established leading market positions, and to reduce future capital expenditures on iron ore
development, improve asset-to-debt ratio and generate expected cash flows, we disposed of 65% of the equity interest in Chalco Iron Ore to a wholly-
owned subsidiary of Chinalco on December 26, 2013 pursuant to the approval of shareholders at the 2013 second extraordinary general meeting held
on November 29, 2013. In December 2015, we entered into Equity Transfer Agreement with Shenzhen CR Yuanda, a state-owned entity, to transfer
50% equity interests in Shanxi Huaxing, a wholly owned subsidiary of our Company, through the Shanghai United Assets and Equity Exchange at a
price of RMB2,351 million. For details of the disposal of Chalco Iron Ore and Shanxi Huaxing, please see "Item 4. Information on the Company - A.
History and Development of the Company - Overseas Development."
As a result, our historical results may not be indicative of our future prospects and result of operations.
Our failure to successfully manage our business expansion, including our expansion into new areas of business, would have a material adverse
effect on our results of operations and prospects.
We have invested in business expansion in line with our development strategy through organic growth, acquisitions and joint ventures. In addition to
continuing to expand our existing business lines, we may, from time to time and when we deem appropriate, expand into new industries which we
believe have synergies with our existing operations. For example, we have successfully enhanced our energy-related operations through the
acquisition of Ningxia Energy in 2013 and participation in joint ventures and strategic investments in coal mining since 2010.
13
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, including obtaining timely approval for the
construction or expansion of production and mining facilities as required under the PRC law;
maintain adequate control on our business expansion to prevent, among other things, project delays or cost overruns;
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;
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 qualified workforce to support successful business expansion;
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.
Failure to obtain the intended economic benefits from the business expansion could adversely affect our business, financial condition, results of
operations and prospects. In addition, we may also experience mixed results from our expansion plans in the short term.
Furthermore, there is no assurance that we will be able to identify attractive acquisition targets, negotiate acquisitions on favorable terms, obtain
necessary governmental approvals on investments, if applicable, accurately estimate the mineral resources and reserves of these acquisition targets or
obtain the necessary funding to complete such acquisitions on commercially acceptable terms or at all. Acquisitions may result in the incurrence and
inheritance of debts and other liabilities, assumption of potential legal liabilities in respect of the acquired businesses, and incurrence of impairment
charges related to goodwill and other intangible assets, any of which could harm our businesses, financial condition and results of operations. In
particular, if any of the acquired businesses fails to perform as we expect, we may be required to recognize a significant impairment charge, which
may materially and adversely affect our businesses, financial condition and results of operations. As a result, there can be no assurance that we will be
able to achieve the strategic purpose of any acquisition, the desired level of operational integration or our investment return target.
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, since 2010, we have participated
in joint ventures and strategic investment in coal mining, in line with our development strategy 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. In addition, we acquired 70.82% of the equity interest in
Ningxia Energy in January 2013, which had joint ventures or held minority interests in a number of power generation companies.
14
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
joint 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 joint venture 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.
In addition, the business of our joint ventures which operate coal mines were facing increasing risks in recent years. Due to the pressure of
environmental protection, imbalances between supply and demand of coal market and durable high inventory, the coal price continued to decrease in
2015. If the coal price continues to decrease, the operation results of our joint ventures which operates coal mines may be adversely affected.
Failure to maintain optimal utilization of our production facilities will adversely affect our gross and operating margins.
During the past few years, we expanded the production capacity by completing the construction, upgrading or remoulding of some of our alumina and
primary aluminum production facilities. 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. In addition, considering the sustained weak primary aluminum pricing
environment and deterioration in primary aluminum prices which could not be offset through decreases in our costs, we implemented flexible
production arrangements for certain alumina and primary aluminum production facilities since 2013. In addition, we abandoned certain primary
aluminum and alumina production facilities with an aggregate annual designed production capacity of 157,500 and 30,000 tonnes, respectively, in
2014. We also increased our external purchases of alumina and primary aluminum for trading purposes to capitalize on fluctuating market prices 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.
Furthermore, 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."
15
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, 2013, 2014 and 2015. In 2014, we recorded a impairment loss for land use rights of RMB141 million for our Chongqing
branch, impairment loss of property, plant and equipment of RMB5,680 million, impairment loss of mining rights of RMB35 million and impairment
loss of computer software and other intangible assets of RMB73 million. In 2015, we recorded impairment loss of property, plant and equipment of
RMB10 million. We cannot guarantee that we will not incur increased impairment loss in the future, for 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. Although our average electricity cost per kilowatt-hour, or
kWh, of our primary aluminum smelters decreased by approximately 18.8% from 2014 to 2015, there is no assurance that demand for and prices of
electricity will not increase in the future. 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.
In addition, 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. In the past, various regions across China 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 operations. 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 per
unit tonne of thermal coal used in our alumina production decreased from 2014 to 2015, there is no assurance that the price of coal will not increase in
the future. 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.
16
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 the draft of China's 13th 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, from 2016 to
2020. 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.
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. 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.
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 couple of overseas projects, including the bauxite mining projects in Laos and Indonesia. 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.
In addition, operations in the overseas markets also expose us to a number of risks including expropriation and nationalization of our assets in foreign
countries, civil unrest, acts of terrorism, war, or other armed conflict; natural disasters; inflation; currency fluctuations, devaluations and conversion
restrictions; confiscatory taxation or other adverse tax policies, governmental activities that limit or disrupt markets, restrict payments or limit the
movement of funds, governmental activities that may result in the deprivation of contractual rights; lack of a well-developed legal system that makes
it difficult to enforce our contractual rights; and governmental activities that may result in the inability to obtain or retain licenses required for
operations.
17
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 our own mines 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. The supply of bauxite could be
affected by various factors, including geographic conditions of bauxite mines, government policies, market prices and competition, many of which
are beyond our control. We rely on overseas suppliers to obtain a portion of bauxite we use for production. Indonesia used to be a major source of our
imported bauxite. As a result of the ban imposed by the Government of Indonesia on the exportation of unprocessed bauxite and nickel, since January
2014, we were not able to export the bauxite produced by our bauxite mines in Indonesia for the use of our alumina refineries in China, and our
operation of bauxite mining in Indonesia has been suspended since September 2014. If we exhaust our stockpiles or our procurement of bauxite from
Australia are interrupted for any reasons, and cannot find an alternative source of imported bauxite at competitive prices, our financial condition,
results of operations and profitability could be adversely affected.
In addition, our results of operations can be 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.
Any transportation interruption or any material increase in our transportation costs could have a material and adverse effect on our business,
financial condition and results of operations.
Our operations require the reliable transportation of raw materials and supplies to our refining and smelting sites and finished products to our
customers. Our alumina products are mainly transported by rail or trucks and our primary aluminum products are delivered to our customers primarily
by rail. There is no assurance that we can always enjoy sufficient transportation capacity or we will not experience transportation interruption in the
future. Furthermore, natural disasters may cause interruption to the transportation system, which could in turn affect the transportation of our
products. In addition, any changes in fuel prices or fuel supply may be unpredictable and beyond our control. There is no assurance that shortage of
fuel will not occur in the future. Any surge in fuel prices or shortage of fuel supply may lead to increases in our operation and transportation costs. If
we are unable to make timely deliveries due to logistical and transportation disruptions, or transfer the increased costs to our customers, 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.
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 and qualities 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.
18
Our mining operations have limited mine lives and eventual closure of these operations will entail costs and risks regarding ongoing monitoring,
rehabilitation and compliance with environmental standards.
Our existing mining operations in the PRC and overseas have limited mine lives and will eventually be depleted. We need to perform certain
procedures to remedy and rehabilitate the environmental and social impact that our mining operations have had on local communities and the
environment. Remediation, rehabilitation, closure and removal of our facilities will incur various costs and are subject to various risks. The key costs
and risks for mine closures include, but are not limited to, (i) long-term management of permanent engineered structures and acid rock drainage; (ii)
closure in accordance with local or international environmental standards; (iii) orderly retrenchment of employees and the third-party contractors; and
(iv) relinquishment of the site with associated permanent structures and community development infrastructure and programmes to new owners.
There is no assurance that such closure of mines will be successful and without delays or additional costs, in which case we may be subject to
increased costs, penalties or other administrative actions, damages to reputation, even suspension and cancellation of mining permits, the occurrence
of which would cause a material and adverse effect to our business, financial condition and results of operations.
Failure to discover new reserves or resources, maintain or enhance existing reserves or resources, develop new mining operations or expand our
current mining operations could negatively affect our business, financial condition and results of operations.
Mining exploration is unpredictable in nature. The success of any mining exploration programme depends on various factors, many of which are
beyond our control. Due to the unpredictable and speculative nature of the mining industry, there is no assurance that any exploration programme that
we are currently undertaking or may undertake in the future will result in the discovery of valuable reserves or resources. There is no assurance that
reported resources can be converted into reserves. Furthermore, actual results upon production may differ from those anticipated at the time of
discovery. To access additional reserves in explored areas, we will need to successfully complete development projects, including but not limited to
extending existing mines and developing new mines. There are a number of uncertainties inherent in the development and construction of any new
mine or an extension of an existing mine, including but not limited to (i) the availability and timing of necessary governmental approvals; (ii) the
timing and cost necessary to construct mining and processing facilities; (iii) the availability and cost of labor, utilities, auxiliary materials and other
supplies and the accessibility of transportation and other infrastructure; and (iv) the availability of funds to finance construction and production
activities. There is no assurance that any future exploration activities or development projects will extend the life of our existing mining operations or
result in any new economic mining operations and such failure may have a material adverse effect on our business, financial condition and results of
operations.
19
Our significant indebtedness could adversely affect our business, financial condition and results of operations.
We are subject to a high degree of financial leverage. We have relied, and expect to continue to rely, on both short-term and long-term borrowings to
fund a significant portion of our capital requirements. As of December 31, 2015, we had approximately RMB54.4 billion in outstanding short-term
bonds and short-term bank borrowings (including the current portion of long-term bank and other borrowings) and RMB53.7 billion in outstanding
long and medium-term bonds and long-term bank and other borrowings (excluding the current portion of these borrowings). Please see Note 20 to our
audited consolidated financial statements for more detailed information about our borrowings. Primarily as a result of this, we had net current
liabilities of RMB16.8 billion as of December 31, 2015. This level of debt could have significant consequences on our operations, including:
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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. Please see "Item 5 -
Operating and Financial Review and Prospects - B. Liquidity and Capital Resources" for maturities of our outstanding long-term
borrowings;
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.
The instruments governing our senior debt contain certain financial and other covenants that restrict our ability to pay dividends, raise further
debt and take other corporate actions which may adversely affect our business.
We completed the issuance of US$350 million in aggregate principal amount of 6.625% senior perpetual capital securities and US$400 million in
aggregate principal amount of 6.25% senior perpetual capital securities (together, the "Securities") in October 2013 and April 2014, respectively,
through Chalco Hong Kong Investment Company Limited (the "Issuer") with guarantees to the repayment obligations of the Securities provided by
seven of our subsidiaries including Chalco Hong Kong Limited (the "Subsidiary Guarantors"). The indentures governing the Securities contain a
number of significant financial and other covenants. Such covenants restrict, subject to certain exceptions, among other things, our and our
subsidiaries' ability to create, or have outstanding, any security interest upon our or our subsidiaries' present or future undertaking, assets or revenues
to secure any indebtedness which is in the form of bonds, notes, debentures, loan stock or other securities which for the time being are, or are
intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market ("Relevant
Indebtedness") which is issued outside the PRC, our ability to create or have any Relevant Indebtedness which is issued outside the PRC, our ability
to create or have outstanding any guarantee or indemnity in respect of any Relevant Indebtedness which is issued outside the PRC and the Issuer's,
Subsidiary Guarantors' and their respective subsidiaries' ability to create, or have outstanding, any security interest upon their present or future
undertaking, assets or revenues to secure any Relevant Indebtedness or any guarantee or indemnity in respect of any Relevant Indebtedness or to sell
or otherwise dispose of capital stock held or controlled by it in any direct or indirect subsidiary of Chalco Hong Kong Limited which is not a
Subsidiary Guarantor. In addition to the Securities, our Company issued RMB2,000 million in aggregate principal amount of 5.50% perpetual
medium-term notes (the "2015 Perpetual Medium-term Notes") in China. Pursuant to the terms of the 2015 Perpetual Medium-term Notes, while any
coupon distribution payments are unpaid or deferred, the headquarters of the Company cannot declare or pay dividends to shareholders or decrease
the share capital, or make material fixed asset investments of the headquarters of the Company.
As a result of the covenants, our ability to pay dividends or other distributions on our ordinary shares and the ADSs may be limited. These covenants
also restrict our ability to raise additional fund in the future through issuing Relevant Indebtedness which is issued outside the PRC or creating or
having any guarantee or indemnity in respect of any Relevant Indebtedness which is issued outside the PRC and may restrict our ability to engage in
some transactions that we expect to be of benefit to us.
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The Securities are guaranteed by certain of our subsidiaries. A breach of any of the covenants in the indenture governing the Securities could result in
a redemption of the Securities at our discretion or an increase of coupon rate if we do not redeem the Securities upon a breach of such covenants. If
we default under the Securities in the future, the holders may enforce their claims against the guarantors to satisfy our obligations to them. In
addition, such default may result in a default and acceleration of our senior debt and the holders of our senior debt could gain ownership of the capital
stock of certain of our wholly owned subsidiaries (if such capital stock is pledged for such senior debt) and/or enforce their claims against the assets
of the guarantors (if guarantee is provided for such senior debt). We conduct substantially all of our operations in China and substantially all of our
assets are located in China and, if we default under our senior debt, we would lose control or ownership of our assets and operations in China and
there may be few or no assets remaining with which we could conduct our business or from which the claims of our other creditors could be satisfied.
The interests of our controlling shareholder who exerts significant influence over us may conflict with ours.
As of December 31, 2015, our largest shareholder, Chinalco, directly owned 32.81% of our issued share capital and indirectly owned an additional
2.00% 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 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 and aluminum
smelters, we are subject to, and incur costs to comply with, environmental laws and regulations.
Given the magnitude, complexity and continuous amendments to these laws and regulations, compliance therewith may be onerous or may involve
substantial financial resources and other resources to establish efficient compliance and monitoring systems. The liabilities, costs, obligations and
requirements associated with these laws and regulations may therefore be substantial and may delay the commencement of, or cause interruptions to,
our operations. Non-compliance with the relevant laws and regulations applicable to our operations may even result in substantial penalties or fines,
suspension or revocation of our relevant licenses or permits, termination of government contracts or suspension of our operations. Such events could
impact our operating results, financial condition and reputation, all of which could adversely impact the Group's ability to be profitable and attract
new customers. We were fined for breaches of environmental laws and regulations and there is no assurance that there will not be any further
breaches in the future.
In addition, the environmental laws and regulations in the PRC and other jurisdictions in which we operate continue to evolve. As a result, we may
incur significant additional costs if relevant laws and regulations change or enforcement of existing laws and regulations becomes more rigorous. For
instance, to comply with the requirement of desulphurization and denitration in China, we were requested to invest in upgrading or remoulding
certain production facilities. Further, our overseas expansion 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.
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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. On July 18, 2013, the Ministry of Industry and Information Technology of
the PRC ("MIIT") issued the Standard Conditions for Aluminum Industry, which sets forth various standards for existing and new projects, including
standards for environment protection, energy consumption, and utilization of resources. In order to meet these standards, we may be required to
update our equipment and improve our technology, which could delay our production or result in additional costs and expenses. The occurrence of
any of the foregoing could have an adverse effect on our business, results of operations and financial condition.
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. 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 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 and
daily operations management. As of December 31, 2015, the book value of our properties with defective titles is RMB5,105.2 million, which
represented approximately 3.0% 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, 2015, the book value of these land parcels is RMB384.1 million, represented approximately
0.2 % 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.
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Our business involves inherent risks and occupational hazards, which could damage our reputation, subject us to liability claims and cause
substantial costs to us.
Our business involves inherent risks and occupational hazards. Under our mining operations, we engage or may engage in certain inherently risky and
hazardous activities, including, among others, operations at height or on dangerous terrains, underground excavation and construction, use of heavy
machinery, mining and handling of flammable and explosive materials, and we are therefore subject to risks associated with these activities,
including, among others, geological catastrophes, toxic gas and liquid leakages, equipment failures, industrial accidents, fire, explosions and
underground water leakages. 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. Additionally, we are exposed to operational risks associated with industrial or engineering activities,
such as maintenance problems or equipment failures. These risks and hazards may result in personal injury and fatal casualties, damage to or
destruction of properties or production facilities, and pollution and other environmental damage. Any of these consequences, to the extent they are
significant, could result in business interruption, possible legal liability and damage to our business reputation and corporate image.
Our mines and operating facilities may be damaged by water, gas, fire or cave-ins due to unstable geological structures. 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.
We are subject to risks normally associated with cross-border transactions, and our export products have been and may become subject to anti-
dumping or countervailing duty proceedings.
We generate revenue from exports of certain alumina chemical products and certain non-ferrous metals and minerals products to foreign jurisdictions.
Such foreign jurisdictions may take restrictive measures, including, among others, anti-dumping duties and other non-tariff barriers, to protect their
own markets. Our sales in major overseas markets may be adversely affected by increases in or new impositions of anti-dumping duties,
countervailing duties, quotas or tariffs imposed on our exports. Further increases in or new imposition of anti-dumping duties, countervailing duties,
quotas or tariffs on our sales in these markets could adversely affect the exports to these regions in the future. By virtue of our transactions with
parties outside the PRC, we will be subject to the risks normally associated with cross-border business transactions and activities. We will also be
exposed to the risk of changes in social, legal, political and economic conditions in the foreign jurisdictions to which we export. In particular,
unexpected changes in regulatory requirements, tariffs and other trade barriers and price or exchange controls could limit our operations and make the
repatriation of profits difficult.
We are subject to litigation risks.
In the ordinary course of business, claims involving project owners, customers, suppliers and subcontractors may be brought against us and by us in
connection with our contracts. If we were found to be liable on any of the claims, we would have to incur a charge against earnings to the extent a
reserve had not been established for the matter in our accounts, or to the extent the claims were not sufficiently covered by our insurance coverage.
Both claims brought against us and by us, if not resolved through negotiations, are often subject to lengthy and expensive litigation or arbitration
proceedings. Charges associated with claims brought against us and write-downs associated with claims brought by us could have a material adverse
impact on our business, financial condition, results of operations and cash flow. Moreover, legal proceedings resulting in judgments or findings
against us may harm our reputation and damage our prospects for future contract awards.
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We face counterparty risks.
While we generally sell goods and provide services to reputable customers and evaluate the customers' credit in accordance with our internal risk
management criteria, such as their credit history and likelihood of default, we have limited access to information about our customers and we may
encounter difficulties in the collection of receivables in certain countries that we have less experience in our dealings. Therefore, we cannot guarantee
that all of our customers will fully perform their obligations under their respective contracts with us, and the deterioration of any customers' credit or
payment conditions may result in those customers defaulting on their contractual obligations, which could materially and adversely affect our
business, financial condition and results of operations. In addition, disputes with governmental entities and other public organizations could
potentially lead to contract termination if these remain unresolved or may take a considerably longer period of time to resolve than disputes with
counterparties in the private sector, and payments from these entities and organizations may be delayed as a result.
We may be exposed to claims in relation to the unsatisfactory performance of third-party service providers, and disputes with business partners
may also adversely affect our business.
We rely on third-party service providers for certain services, including but not limited to mining infrastructure construction, logistics services or
warehouse management. Therefore, we are exposed to the risk that our third-party service providers may fail to perform their obligations, which may
adversely affect our business operations. In addition, from time to time, we co-operate with business partners to develop our business, including
acquiring strategic mining resources or businesses that complement our own business line. Furthermore, we operate certain mining projects through
joint venture arrangements and may enter into further joint ventures in the future along with the expansion of our operations. We may have disputes
with these business partners or joint venture partners over various aspects, such as performance of each party's obligations, scope of each party's
responsibilities, product quality and logistics services. If such disputes cannot be settled in a timely manner, our financial condition and business may
be adversely affected.
Failure to hire and retain management executives, technicians and other qualified personnel could adversely affect our business and prospects.
The growth of our business operations depends on the continued services of our senior management team. The industry experience, expertise and
contributions of our executives and other members of our senior management are essential to our continued success. We will require an increasing
number of experienced and competent executives in the future to implement our growth plans. If we were to lose the services of any of our key
management members and were unable to recruit and retain personnel with equivalent qualifications at any time, the management and growth of our
business could be adversely affected.
Competition for qualified personnel in general is intense in the PRC and other markets where we operate. We cannot guarantee that we will be able to
maintain an adequate skilled labor force necessary for us to execute our projects or to perform other corporate activities, nor can we guarantee that
staff costs will not increase as a result of a shortage in the supply of skilled personnel. If we fail to attract and retain personnel with suitable
managerial, technical or marketing expertise or maintain an adequate labor force on a continuous basis, our business operations could be adversely
affected and our future growth and expansions may be inhibited.
24
We may not be able to detect and prevent fraud or other misconduct committed by our employees, representatives, agents, customers or other third
parties.
We may be exposed to fraud or other misconduct committed by our employees, representatives, agents, customers or other third parties that could
subject us to litigation, financial losses and sanctions imposed by governmental authorities, as well as affect our reputation. These misconduct could
include:
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hiding unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses;
intentionally concealing material facts, or failing to perform necessary due diligence procedures designed to identify potential risks, which
are material to us in deciding whether to make investments or dispose of assets;
improperly using or disclosing confidential information;
engaging in improper activities such as offering bribes to counterparties in return for any type of benefits or gains;
misappropriation of funds;
conducting transactions that exceed authorized limits;
engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities;
engaging in unauthorized or excessive transactions to the detriment of our customers; or
otherwise not complying with applicable laws or our internal policies and procedures.
Our internal control procedures are designed to monitor our operations and ensure overall compliance. However, such internal control procedures
may be unable to identify all incidents of non-compliance or suspicious transactions in a timely manner if at all. Furthermore, it is not always possible
to detect and prevent fraud and other misconduct, and the precautions we take to prevent and detect such activities may not be effective.
There is no assurance that fraud or other misconduct will not occur in the future. If such fraud or other misconduct does occur, it may cause negative
publicity as a result, and could have a material and adverse effect on our business, financial condition and results of operations.
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:
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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 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.
The PRC government exercises 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 further allows the Renminbi to rise or fall 2% from a mid-point every day, effective on March 17, 2014, compared with its previous
1% limit. In recent months the RMB has depreciated significantly against the U.S. dollar. It is difficult to predict how market forces or PRC
or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. Any appreciation or
depreciation of the Renminbi will affect the value of our US dollar-denominated borrowings and overseas investments, the prices of our
export sales denominated in foreign currencies and the Renminbi equivalent value of our trade and notes receivable denominated in foreign
currencies, which may 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.
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The PRC legal system is developing. Laws are enacted and amended and new regulations are issued relatively constantly. In addition, the
PRC legal system is very different from common law system and precedents have limited effects in the PRC legal system. As such, it may
involve uncertainties to enforce or obtain a remedy under any of our present or future agreements which could result in a significant loss of
business, business opportunities or capital.
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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.
Proceedings instituted recently by the SEC against five PRC-based accounting firms could result in our financial statements being determined to
not be in compliance with the requirements of the Exchange Act.
In December 2012, the SEC brought administrative proceedings against five accounting firms in China, alleging that they had refused to produce
audit work papers and other documents related to certain other China-based companies under investigation by the SEC for potential accounting fraud.
On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from
practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the
SEC. The four firms which are subject to the six month suspension from practicing before the SEC have recently appealed the initial administrative
law decision to the SEC. The sanction will not become effective until after a full appeal process is concluded and a final decision is issued by the
SEC. The accounting firm can also further appeal the final decision of the SEC through the federal appellate courts. 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 firms that issue the audit reports included in our annual reports filed with the SEC is affiliated to one of the four
accounting firms above.
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On May 24, 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and
the Ministry of Finance of the PRC (the "MOF"), which establishes a cooperative framework between the parties for the production and exchange of
audit documents relevant to investigations in the United States and China. In February 2015, each of the four accounting firms agreed to a censure
and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The firms' ability to continue to
serve all their respective clients is not affected by the settlement. The settlement requires the firms to follow detailed procedures to seek to provide the
SEC with access to Chinese firms' audit documents via the CSRC. If the firms do not follow these procedures, the SEC could impose penalties such
as suspensions, or it could restart the administrative proceedings. The settlement did not require the firms to admit to any violation of law and
preserves the firms' legal defenses in the event the administrative proceeding is restarted.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major
PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial
statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative
news about the proceedings against these audit firms may cause investor uncertainty regarding China-based, United States-listed companies and the
market price of our ADSs may be adversely affected.
If our independent registered public accounting firms were denied, temporarily, the ability to practice before the SEC and we were unable to timely
find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined
to not be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting from the NYSE or
deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.
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 8560.
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 and coal mining, alumina refining and primary aluminum smelting. 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 2013, we have expanded our operations into power generation.
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 six subsidiaries mainly engaged in bauxite mining; one integrated alumina and primary aluminum production
plant; nine stand-alone alumina refineries, including our Zhengzhou Institute; 11 stand-alone primary aluminum smelters; one carbon production
plant and one integrated power generation company with coal mining operations. All of our principal alumina and primary aluminum production
facilities are operated in accordance with ISO14001 standards.
Disposal of Aluminum Fabrication Business
In line with our development strategy to focus on the upstream sectors of the aluminum industry chain and the production of high value added
products, we disposed of substantially all of our aluminum fabrication operations to Chinalco pursuant to the approval of shareholders at the 2012
annual general meeting on June 27, 2013.
On May 13, 2013, we submitted the tender notice to CBEX to dispose of the equity interest we held in eight aluminum fabrication enterprises,
including Henan Aluminum, Chalco Southwest Aluminum, Chalco Southwest Aluminum Cold Rolling, Huaxi Aluminum, Qingdao Light Metal,
Chalco Ruimin, Chalco Sapa Aluminum Products (Chongqing) Co., Ltd. and Guizhou Chalco Aluminum Co., Ltd. (collectively, "Aluminum
Fabrication Interests") through open tender. Chinalco participated in and won the bid for the Aluminum Fabrication Interests on June 7, 2013. We
entered into an agreement (the "Aluminum Fabrication Interests Transfer Agreement") with Chinalco on June 9, 2013 for the disposal of Aluminum
Fabrication Interests for a consideration of RMB3,242.2 million. Such consideration was the initial bidding price, which was determined with
reference to the appraised value of the Aluminum Fabrication Interests. Pursuant to the Aluminum Fabrication Interests Transfer Agreement,
Chinalco agreed to pay the consideration in cash in two installments, namely, 30% of the consideration to be paid within five business days after the
effective date of the agreement and 70% of the consideration to be paid by June 30, 2014. Chinalco must pay interest for the second installment for
the period starting from the date immediately after the effective date until the payment date at the one-year lending rate set by the PBOC. The
disposal was approved at the 2012 annual general meeting held on June 27, 2013 and we completed the disposal on June 27, 2013. As of the date of
this annual report, Chinalco had paid the consideration in full.
As a condition of the disposal of the Aluminum Fabrication Interests, on June 9, 2013, we entered into an agreement with Chinalco to transfer the
outstanding entrusted loans we provided to Henan Aluminum and Qingdao Light Metal as of December 31, 2012 to Chinalco for a consideration of
RMB1,756.0 million. Such consideration was determined based on negotiations between the parties, with reference to the appraised total value of the
loans. Pursuant to the agreement, Chinalco agreed to pay the consideration in cash in five equal instalments of RMB351.2 million, with the last
installment, together with the relevant interests at the one-year lending rate set by the PBOC, to be paid by June 30, 2017. The transfer was approved
at the 2012 annual general meeting held on June 27, 2013 and we completed the transfer on June 27, 2013. As of the date of this annual report,
Chinalco had paid the first three installments had been paid in accordance with the agreement.
In addition, we entered into an agreement with Northwest Aluminum Fabrication Plant, a subsidiary of Chinalco, on June 6, 2013 to dispose of all the
assets of Northwest Aluminum for RMB1,659.6 million. Such consideration was determined based on negotiations between the parties, with
reference to the appraised net asset value of Northwest Aluminum. Pursuant to the agreement, Northwest Aluminum Fabrication Plant agreed to pay
the consideration in cash in five equal instalments of RMB331.9 million, with the last installment, together with the relevant interests at the one-year
lending rate set by the PBOC, to be paid by June 30, 2017. The disposal was approved at the 2012 annual general meeting held on June 27, 2013 and
we completed the disposal on June 27, 2013. As of the date of this annual report, Northwest Aluminum Fabrication Plant had paid the first three
installments in accordance with the agreement.
Disposal of Assets of Alumina Production Line of Guizhou Branch
On June 6, 2013, we entered into an agreement with Guizhou Aluminum Plant, a subsidiary of Chinalco, to dispose of the assets of alumina
production line of our Guizhou branch for a consideration of RMB4,429.0 million. Such consideration was determined based on negotiations between
the parties, with reference to the appraised net asset value of such alumina assets of our Guizhou branch. Pursuant to the agreement, Guizhou
Aluminum Plant agreed to pay the consideration in cash in five equal instalments of RMB885.8 million, with the last installment, together with the
relevant interests at the one-year lending rate set by the PBOC, to be paid by June 30, 2017. The disposal was approved at the 2012 annual general
meeting held on June 27, 2013 and we completed the disposal on June 27, 2013. As of the date of this annual report, the first three installments had
been paid in accordance with the agreement.
We decided to dispose of the assets of alumina production line of Guizhou branch because the district in which they were located had been changed
from an industrial district to a commercial district based on the local urban plan, which will significantly increase Guizhou branch's environmental
compliance costs. We built a new alumina refinery in an area relatively close to major bauxite and coal mines in Guizhou Province, which
commenced production with an annual capacity of 1.6 million tons of alumina in 2015.
27
Disposal of Equity Interest in Shanxi Huaxing
The proceeds from the private placement of A shares was proposed to invest in Chalco Xing County Alumina Project, the Chalco Zhongzhou Bayer
Ore-dressing Process Expansion Construction Project, and the replenishment of our working capital. The Chalco Xing County Alumina Project,
which was carried out by Shanxi Huaxing, commenced construction in May 2011 and undertook full operation in 2014. After the completion of
private placement of A shares in June 2015, the Board resolved to replace the funds which has been invested by us in advance with the proceeds
raised from the private placement of A shares. In light of our strategic blueprint for the development of Shanxi aluminum recycle industrial park, we
planned to introduce strategic investors for joint investment and cooperation to develop new model of integrated coal, electricity and aluminum
operations. In December 2015, the Group entered into an equity transfer agreement with Shenzhen CR Yuanda Asset Management Co., Ltd, a state-
owned entity, to transfer 50% equity interests in Shanxi Huaxing, a wholly owned subsidiary, through the Shanghai United Assets and Equity
Exchange at a price of RMB2,351 million. The price was determined based on the appraisal value provided by an independent qualified appraisal
company. According to the Equity Transfer Agreement, 30% of the consideration amounting to RMB705 million has been received by us in
December 2015, whereas the remaining amount of RMB1,646 million would be paid within one year from the effective date of the Equity Transfer
Agreement and the balance is interest bearing charged at prevailing lending interest rate.
Transfer of Shares of Jiaozuo Wanfang
On January 22, 2015 and January 23, 2015, we decreased our shareholding in Jiaozuo Wanfang by 4,758,858 shares through the securities exchange
system of the Shenzhen Stock Exchange. In March 2015, we transferred 100,000,000 shares of Jiaozuo Wanfang to Geo-Jade Petroleum Corporation
by way of agreement after the public solicitation for potential transferees. On June 25, 2015, we further transferred 42,550,900 shares of Jiaozuo
Wanfang by way of block trading through the securities exchange system of the Shenzhen Stock Exchange. On December 18, 21 and 22, 2015, we
reduced our shareholding in Jiaozuo Wanfang by 16,695,100 shares through centralized bidding trading system of the Shenzhen Stock Exchange.
From December 23 to 25, 2015, we reduced our shareholding in Jiaozuo Wanfang by 13,865,000 shares through centralized bidding trading system
of the Shenzhen Stock Exchange and block trading. As a result, we held 29,582,057 shares of Jiaozuo Wanfang as of December 31, 2015,
representing 2.46% of total share capital of Jiaozuo Wanfang.
Disposal of Certain Assets of Guizhou Branch
Guizhou Branch entered into a land reserve acquisition cooperation agreement with the People's Government of the Baiyun District of Guiyang,
Guiyang Land Reserve Center, and Guizhou Aluminum Plant on November 13, 2015. As the land of Guizhou Aluminum Plant occupied by the
electrolytic aluminum plant of Guizhou Branch shall be transferred to the respective land resources and reserve authorities, Guizhou Branch agreed
to sell the relevant assets, including buildings and structures located on the land occupied by the electrolytic aluminum plant of Guizhou Branch to
the Guiyang Land Reserve Center for a total consideration of RMB1.95 billion. The consideration was determined based on the asset appraisal
conducted by an independent asset appraisal firm.
28
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 the end of 2013, Chalco Iron Ore injected approximately US$561.5 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. On October 18, 2013, we entered into a share purchase agreement with Chinalco
and its wholly-owned subsidiary, Aluminum Corporation of China Overseas Holdings Limited ("Chinalco Overseas Holdings"), to dispose of 65% of
the equity interest in Chalco Iron Ore and transfer outstanding bank loans provided by China Development Bank Corporation ("CDB") to Chinalco
Overseas Holdings for a consideration of US$2,066.5 million (the "Equity Interest") and US$438.8 million (the "Loan Consideration"), respectively.
The bank loans were used for Chalco Hong Kong's capital contribution in Chalco Iron Ore. The Equity Interest was determined with reference to 65%
of the valuation of Chalco Iron Ore and the Loan Consideration was determined based on the principal amount of such outstanding bank loans as
shown in the financial statements of Chalco Hong Kong.
We believe that such disposal will enable us to focus on the development of our core business of alumina and primary aluminum operations, where
we have established leading market positions, and to reduce future capital expenditures on iron ore development and to improve asset-to-debt ratio
and generate expected cash flows. Pursuant to the agreement, in the event that we obtain the consent from CDB on the transfer of the bank loans,
Chinalco agreed to pay the consideration for the Equity Interest in five installments, namely, US$438.8 million (which will be net off by the Loan
Consideration), US$387.9 million, US$413.3 million, US$413.3 million and US$413.3 million, with the relevant interests at the London Interbank
Offered Rate plus 0.9%, with the last installment to be paid by December 31, 2017. In the event that we could not obtain the consent from CDB on
the transfer of the bank loan, Chinalco agreed to pay the consideration for the Equity Interest in five equal instalments of US$413.3 million, with the
relevant interests at the London Interbank Offered Rate plus 0.9%, with the last installment to be paid by December 31, 2017. The transactions were
approved at the 2013 second extraordinary general meeting held on November 29, 2013. We obtained the consent from Rio Tinto relating to such
disposal on December 19, 2013. We completed the transactions on December 26, 2013. As of the date of this annual report, the bank loans have been
transferred to net off the first installment and Chinalco had paid the second and third installments.
29
Private Placement 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 planned to 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 intended to 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 shall 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 intended to apply proceeds from this private placement to finance Chalco
Xing County 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 private placement of A Shares under such adjusted
issue plan, with effective period of six months after the approval date. However, the CSRC temporarily retrieved its approval in July 2013 due to its
on-going investigation on the sponsor of our proposed private placement of A Shares. The period of authorization to the Board relating to the adjusted
issue plan was extended by our shareholders at the 2013 annual general meeting, A Share class meeting held on June 27, 2014 and H Share class
meeting held on June 27, 2014, with an effective period of 12 months after the approval date. On January 4, 2015, we submitted the "Report regarding
the resumption of the approval of non-public offering of shares of Aluminum Corporation of China Limited" to CSRC. On April 24, 2015, we
received the Approval in Relation to the Non-public Issuance of Shares by Aluminum Corporation of China Limited issued by CSRC, pursuant to
which we were approved to issue no more than 1,450,000,000 new shares. We completed the non-public issuance of A shares on June 15, 2015 and
issued an additional 1,379,310,344 A Shares pursuant to the specific mandate as approved at the annual general meeting of the Company on June 27,
2014. Upon completion of this non-public issuance, the total number of Shares of the Company were increased from 13,524,487,892 to
14,903,798,236.
Proposed Issuance of H Shares
On June 25, 2015, our shareholders at the 2014 annual general meeting passed a special resolution, which is valid until the earliest of (i) the
conclusion of our next general meeting, (ii) the expiration of 12 months following the date of passage, 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
all the necessary approval by the CSRC and/or other relevant PRC government authorities.
30
Senior Perpetual Capital Securities Offering
In October 2013, we completed the issuance of US$350 million in aggregate principal amount of 6.625% senior perpetual capital securities (the
"Securities") through Chalco Hong Kong Investment Company Limited (the "Issuer"), our wholly-owned subsidiary, which was exempted from, and
not subject to, registration under the Securities Act. The Securities are guaranteed by seven of our subsidiaries including Chalco Hong Kong Limited.
The Securities also have the benefit of a keepwell deed dated October 29, 2013 entered into by the Issuer, the Company, Chalco Hong Kong Limited
and the trustee and a deed of equity interest purchase undertaking dated on October 29, 2013 entered into by the Company and the trustee, both deeds
being executed in favor of the trustee. The Securities were listed on the Hong Kong Stock Exchange on October 30, 2013. The net proceeds from the
issue of the Securities has been on-lent to the Company or any of its subsidiaries for general corporate use.
In April 2014, we completed the issuance of US$400 million in aggregate principal amount of 6.25% senior perpetual capital securities (the
"Securities") through Chalco Hong Kong Investment Company Limited (the "Issuer"), our wholly-owned subsidiary, which was exempted from, and
not subject to, registration under the Securities Act. The Securities are guaranteed by seven of our subsidiaries including Chalco Hong Kong Limited.
The Securities also have the benefit of a keepwell deed entered into by the Issuer, the Company, Chalco HongKong Limited and the trustee and a
deed of equity interest purchase undertaking entered into by the Company and the trustee, both deeds being executed in favor of the trustee. The
Securities were listed on the Hong Kong Stock Exchange on April 22, 2014. The net proceeds from the issue of the Securities have been on-lent to the
Company or any of its subsidiaries for general corporate use.
On October 27, 2015, our Company issued RMB2,000 million perpetual medium-term notes at an initial distribution rate of 5.50% (the "2015
Perpetual Medium-term Notes"). The proceeds from the issuance will be used for repayments of interest-bearing loans and borrowings. Coupon
payments of 5.50% per annum on the 2015 Perpetual Medium-term Notes are paid annually in arrears from October 29, 2015 and may be deferred at
the discretion of our Company. The 2015 Perpetual Medium-term Notes have no fixed maturity and are callable only at the Group's option on October
29, 2020 or any coupon distribution date after October 29, 2020 at their principal amounts together with any accrued, unpaid or deferred coupon
distribution payments. While any coupon distribution payments are unpaid or deferred, the headquarters of the Company cannot declare or pay
dividends to shareholders or decrease the share capital, or make material fixed asset investments of the headquarters of the Company.
B.
BUSINESS OVERVIEW
Our Principal Products
We are a leading enterprise in non-ferrous metal industry in China. In terms of comprehensive scale, we ranked among the top enterprises in global
aluminum industry. We have benefited from the strong growth of the PRC aluminum market, one of the world's fastest growing major aluminum
markets. We refine bauxite into alumina, which is then smelted into primary aluminum. In addition to alumina and primary aluminum, 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. In addition, we are engaged in coal mining and power generation. The remainder of our revenues were derived
from research and development activities and other products and services. Accordingly, we organize and manage our operations in five business
segments: alumina segment, primary aluminum segment, trading segment, energy segment and corporate and other operating segment. After
elimination of inter-segment sales, revenues attributable to our alumina segment, primary aluminum segment, trading segment, energy segment and
corporate and other operating segment accounted for approximately 5.4%, 22.8%, 68.2%, 3.4% and 0.2%, respectively, of our total revenues from
continuing operations in 2015.
31
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 91.7% of the total
production volume for this segment in 2015. Alumina chemical products are used in the production of chemical, pharmaceutical, ceramic and
construction materials. In the process of refining bauxite into alumina, we also produce 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 procurement of alumina, other raw materials, supplemental materials and electricity power, the
production and sale of primary aluminum and aluminum-related products, such as carbon products, aluminum alloy products and other electrolytic
aluminum products. Our principal primary aluminum products are ingots, molten aluminum and aluminum alloy, which, accounted for approximately
33.5%, 42.5% and 24.0%, respectively, of our total production volume of primary aluminum in 2015. Our standard 20 kilogram remelt ingots are
used for general aluminum fabrication in the construction, electricity, electronics, transportation, 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 trading segment is mainly engaged in the trading of alumina, primary aluminum, other non-ferrous metal products, and crude fuels such as coal
products, as well as supplemental materials to our internal manufacturing plants and external customers. We established our trading business as a
separate segment in July 2010 as a result of the implementation of our operational structural exercise.
Our energy segment includes coal mining and power generation, including conventional coal-fire power generation and renewable energy generation
such as wind power and photovoltaic power. We established our energy segment in January 2013 as a result of our acquisition of Ningxia Energy in
line with our development strategy to partially offset our future energy costs and secure a portion of the coal we consume in our operations. In 2015,
we supplied part of the electricity we generated for our own production use, supplied a portion of the coal output to our own electric power plant and
sold the remaining portion to external customers, including power generation enterprises and cement plants.
Our corporate and other operating segment mainly includes corporate and other aluminum-related research, development, and other activities of the
Group.
We used to be engaged in aluminum fabrication operations, where we process primary aluminum for the production and sales of various aluminum
fabrication products. As approved at our 2012 annual general meeting held on June 27, 2013, we disposed of substantially all of our aluminum
fabrication operations to Chinalco in line with our development strategy to focus on the upstream sectors of the aluminum industry chain and the
production of high value added products. As a result, we ceased to have our aluminum fabrication business as a separate segment in June 2013.
32
Our Production Capacity
As of December 31, 2015, our annual alumina and primary aluminum production capacity was approximately 16.8 million tonnes and 3.9 million
tonnes, respectively. The following table sets forth the production capacity of each of our principal plants by business segment as of the indicated
date:
As of December 31, 2015
Alumina Primary Aluminum
(in thousand tonnes) (1)
2,210.0
3,050.0
-
2,600.0
-
2,410.0
2,270.0
1,000.0
800.0
800.0
-
-
-
-
-
-
-
-
20.0
-
1,600.0
-
-
374.3
-
333.7
-
55.0
-
-
-
424.0
388.0
220.0
330.0
235.0
200.0
230.0
538.0
-
523.0
-
16,760.0
3,851.0
Plant
Guangxi branch
Chalco Zhongzhou
Qinghai branch
Shanxi branch
Guizhou branch
Henan branch
Chalco Shandong
Zunyi Alumina
Chongqing branch
Shanxi Huaxing(2)
Shanxi Huaze
Lanzhou branch
Shanxi Huasheng
Fushun Aluminum
Zunyi Aluminum
Shandong Huayu
Gansu Hualu
Baotou Aluminum
Zhengzhou Institute
Liancheng branch
Guizhou Huajin
Total
(1)
(2)
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.
We disposed 50% of equity interest in Shanxi Huaxing at the end of December 2015, and as a result Shangxi Huaxing has become our joint venture in accordance with
relevant accounting standards.
In 2015, we produced approximately 13.3 million tonnes of alumina and 3.3 million tonnes of primary aluminum. Our production of alumina and
primary aluminum represented approximately 22.8% and 10.7%, respectively, of the total output in China in 2015.
The following table sets forth a breakdown of our production volume by product segment for the periods indicated:
Production Volume by Product
2013
2014
2015
Year Ended December 31,
Alumina segment
Alumina
Alumina chemical products
(in thousand tonnes, except Gallium)
12,143.2
1,717.2
12,024.0
1,822.3
13,296.4
1,959.1
Gallium (in tonnes)
Primary aluminum segment
Primary aluminum (1)
Carbon
Aluminum fabrication (2)
Aluminum fabrication products
127.8
3,841.8
2,010.4
290.0
81.2
3,381.6
1,877.4
-
121.4
3,307.6
1,786.6
-
(1)
(2)
Including ingots, molten aluminum and other primary aluminum products.
We disposed of substantially all of our aluminum fabrication operations in June 2013. As a result, we ceased to have our aluminum fabrication business as a separate
segment.
33
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 addition, we also produce some 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 or molten
aluminum.
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.
34
Production Facilities
Alumina
We currently operate nine alumina refineries and one research institute with a total designed annual production capacity of approximately 16.8
million tonnes as of December 31, 2015. One of our refineries are integrated with primary aluminum smelters. In 2015, we produced approximately
13.3 million tonnes of alumina, approximately 2.0 million tonnes of alumina chemical products and approximately 121.4 tonnes of gallium. The
overall utilization rate for our refineries was 80.0% as of December 31, 2015. In 2015, we supplied approximately 5.3 million tonnes, or 39.8% 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 2015 were sold by alumina refineries directly to external customers or internally to Chalco Trading for subsequent external trading.
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 Zhengzhou Institute:
As of December 31, 2015
For the Year Ended December 31, 2015
Annual Production
Capacity (1) Utilization Rate (2)
Alumina
Production Output
Alumina Chemical
Products Output
Production Process
2,600.0
2,410.0
2,270.0
3,050.0
2,210.0
1,000.0
800.0
800.0
20.0
1,600.0
(in thousand tonnes, except percentages)
93%
35%
100%
72%
100%
100%
-
100%
-
100%
2,407.0
1,963.9
1,636.9
2,031.2
2,452.8
1,061.6
-
1,196.2
-
546.8
28.4
191.4
1,197.0
372.8
125.1
2.9
-
5.3
36.2
-
Bayer-sintering
Bayer-sintering
Sintering and Bayer
Sintering and Bayer
Bayer
Bayer
Bayer-sintering
Bayer
Bayer
Bayer
Shanxi branch
Henan branch
Chalco Shandong
Chalco Zhongzhou
Guangxi branch
Zunyi Alumina
Chongqing branch
Shanxi Huaxing(3)
Zhengzhou Institute(4)
Guizhou Huajin
Total
16,760.0
80.0%
13,296.4
1,959.1
(1)
(2)
(3)
(4)
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 is calculated by dividing our utilized production capacity as of the date indicated by our total designed annual production capacity.
We disposed 50% of equity interest in Shanxi Huaxing at the end of December 2015, and as a result Shangxi Huaxing has become our joint venture in accordance with
relevant accounting standards.
The alumina chemical products produced at our Zhengzhou Institute are sold commercially and such sales are included in our total revenues.
Primary Aluminum
We operate 12 primary aluminum smelters in China. Our smelters had an aggregate annual production capacity of approximately 3.9 million tonnes
as of December 31, 2015.
In 2015, we produced approximately 3.3 million tonnes of primary aluminum and the average utilization rate for our smelters was 71.0% as of
December 31, 2015. The following table sets forth the annual production capacity, aluminum output, utilization rate and smelting equipment used in
each of our aluminum smelters:
Plant
Capacity (1) Utilization Rate (2) Aluminum Output
Smelting Equipment
Annual Production
As of December 31, 2015
For the Year Ended December 31, 2015
Baotou Aluminum
Fushun Aluminum(3)
Gansu Hualu(4)
Guizhou branch
Lanzhou branch
Qinghai branch
Shandong Huayu
Chalco Shandong (5)
Shanxi Huasheng
Shanxi Huaze
Zunyi Aluminum
Liancheng branch
(in thousand tonnes, except percentages)
538.0
330.0
230.0
333.7
388.0
374.3
200.0
55.0
220.0
424.0
235.0
523.0
98.7%
-
-
77.2%
94.6%
99.7%
97.9%
-
99.6%
78.2%
41.1%
66.2%
545.7 200Ka, 240Ka and 400Ka pre-bake
200Ka and 350Ka pre-bake
181.9
160Ka and 210Ka pre-bake
192.1
160Ka and 230Ka pre-bake
306.9
200Ka and 350Ka pre-bake
403.0
160Ka and 200Ka pre-bake
399.5
240Ka pre-bake
216.8
200Ka pre-bake
-
300Ka pre-bake
222.9
263.5
300Ka pre-bake
200Ka and 350Ka pre-bake
102.7
200Ka and 500Ka pre-bake
472.6
Total
3,851.0
71.0%
3,307.6
(1)
(2)
(3)
(4)
(5)
Production capacity takes into account designed capacity, downtime for ordinary maintenance and repairs and subsequent capacity modifications.
Capacity utilization rate is calculated by dividing our utilized production capacity as of the date indicated by our total designed annual production capacity.
We suspended the operations of primary aluminum production facilities in Fushun Aluminum in 2015.
We suspended the operations of primary aluminum production facilities in Gansu Hualu in 2015.
We suspended the operations of primary aluminum production facilities in Chalco Shandong since June 2013.
35
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 in China, 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 in China 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
Except for Chalco Shandong, 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.
36
On average, our refineries consume approximately 2.2 tonnes of bauxite to produce one tonne of alumina in 2015. Our own mines supplied
approximately 17.93 million tonnes of bauxite to our refineries in 2015, all of which were from our own mines in China. We purchase bauxite from a
number of suppliers and do not depend on any supplier for our bauxite requirements. In 2015, bauxite secured from other suppliers accounted for
approximately 44.6% of our total bauxite supply, primarily because our demand for bauxite exceeded the production of our own mines.
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,
2013
2014
2015
Bauxite Supply
Bauxite Supply Bauxite Supply
Bauxite Supply Bauxite Supply
Percentage of
Percentage of
Percentage of
Bauxite Supply
%
%
(in thousand tonnes, except percentages)
Own mines
17,130.2
49.0
17,542.6
55.4
17,930.2
Jointly-operated mines(1)
-
-
-
-
-
Other suppliers
17,861.1
51.0
14,105.4
44.6
14,452.0
%
55.4
-
44.6
Total
34,991.3
100.0
31,648.0
100.0
32,382.2
100.0
(1)
As of December 31, 2015, we no longer owned any jointly-operated mines.
Own Mines. As of December 31, 2015, we owned and operated 20 mines in China that had approximately 270.6 million tonnes of aggregate bauxite
reserves and we continue to explore new bauxite reserves to replenish our reserves. We also own and operate a bauxite mine in Laos through Lao
Service Mining, in which we held 60% of the equity interest. We also hold the requisite mining permit or exploration permit for three bauxite mines
in West Kalimantan, Indonesia through our 96.28% owned subsidiary, PT Nusapati Prima. Our bauxite deposits in Indonesia are lateritic gibbsite and
were formed by weathering and leaching of aluminum-rich silicate rock in tropical climates. We used low temperature Bayer process to refine
alumina from our bauxite deposits in Indonesia, which results in relatively low energy consumption and high dissolution rate, before our operation of
bauxite mining in Indonesia was suspended in September 2014.
For the three years ended December 31, 2013, 2014 and 2015, we extracted approximately 20.0 million tonnes, 17.3 million tonnes and 17.9 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 in China, 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 in China 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, 2013, 2014 and 2015, 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.
37
The following table sets forth information for our own mines as of December 31, 2015:
Mine
Location
Nature of ownership(1)
Mining method
Permit Renewal (1)
Present Condition/Current
State of Exploration
Bauxite Production
(in thousand tonnes)
Pingguo mine
Guangxi Zhuang
Autonomous Region, China
100% owned and operated by Chalco
Open pit
October 2030 -
April 2036
Fully developed
and operational
Guizhou mine (2)
Guizhou Province, China
100% owned and operated by Chalco
Open pit/underground
Zunyi mine
Guizhou Province, China
100% owned and operated by Chalco
Open pit/underground
Xiaoyi mine
Shanxi Province, China
100% owned and operated by Chalco
Open pit
Shanxi Other Mines
Shanxi Province, China
100% owned and operated by Chalco
Open pit/underground
Mianchi mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
Luoyang mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
September 2016 -
December 2038
Fully developed
and operational
August 2017 -
May 2021
Two stopes are currently
under development
December 2015 -
September 2031
Fully developed
and operational
December 2015(3) -
July 2035
Fully developed and
operational or under
development
December 2015 (3)-
October 2031
Four stopes are currently
under development
December 2015(3)- October
2031
Two stopes are currently
under development
Xiaoguan mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
Gongyi mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
May 2017 -
October 2031
August 2016-
April 2029
Dengfeng mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
June 2016 - July 2019
Xinmi mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
July 2017 - July 2020
Sanmenxia mine
Henan Province, China
100% owned and operated by Chalco
Underground
April 2017 - October 2026
Fully developed and
operational
Fully developed and
operational
Fully developed and
operational
Three stopes are currently
under infrastructure
development
Fully developed and
operational
Xuchang mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
Jiaozuo mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
Pingdingshan mine
Henan Province, China
100% owned and operated by Chalco
Open pit/underground
Ruzhou mine(4)
Henan Province, China
100% owned and operated by Chalco
Open pit
Yangquan mine
Shanxi Province, China
100% owned and operated by Chalco
Open pit
Nanchuan mine
Chongqing Municipality, China
100% owned and operated by Chalco
Underground
Huaxing mine(5)
Shanxi Province, China
100% owned and operated by Chalco
Underground
September 2015(3) -
August 2024
Fully developed and
operational
September 2016 -
October 2024
Two stopes are currently
under development
June 2015(3) -
October 2024
Fully developed and
operational
October 2015(3) -
December 2018
One stope is current under
development
June 2016 -
November 2035
November 2016 -
December 2026
Suspended production
Suspended production
August 2018 -
September 2018
Fully developed and
operational
PT ALUSENTOSA
West Kalimantan, Indonesia
PT KALMIN
West Kalimantan, Indonesia
PT VISITAMA
West Kalimantan, Indonesia
Owned and operated by PT
NusapatiPrima, a 96.28%
subsidiary of Chalco
Owned and operated by PT
NusapatiPrima, a 96.28%
subsidiary of Chalco
Owned and operated by PT
NusapatiPrima, a 96.28%
subsidiary of Chalco
Open pit
December 2027
Suspended production
Open pit
December 2027
Suspended production
Open pit
December 2015 (3)
Under exploration
Laos bauxite mine
Attapeu Province and
Sekong Province, Laos
Owned and operated by Laos Mineral
Services Co., Ltd., a 60%
subsidiary of Chalco
Open pit
June 2017
Exploration completed
5,670
1,312
306
2,376
2,837
441
928
341
702
209
11
12
204
124
301
63.8
-
-
2,020
-
-
-
-
(1)
(2)
(3)
(4)
(5)
All conditions to retain our properties or leases have been fulfilled as of December 31, 2015. Each mine may be covered by one or more mining permits or exploration
permits and the range of permit renewal dates is set forth above.
Including Guizhou No. 1 mine and Guizhou No. 2 mine.
We are in the process of renewing these permits.
Chalco Zhongzhou established Ruzhou mine in 2015 to manage the stopes of Autou and Shengjiacun, which were originally managed by Pingdingshan mine.
The mining right in Ao Jiawan under the Huaxing mine was injected into Shanxi Huaxing as capital contribution in September 2015, and as of the date of this annual
report, the transfer of the mining right in Ao Jiawan was is in the process of filing with relevant government authorities.
38
We are required to obtain mining rights permits to conduct mining activities. Under PRC laws and regulations, a mining enterprise must prepare and
submit exploration reports for a mine to the local government to obtain a mining rights permit for a mine. A mining right owner is also permitted to
lease the mining right through a lease arrangement. The mining rights permit is subject to renewal on a regular basis. Furthermore, the mining right
owner is required to obtain land use rights on the land in order to operate the mines. We lease the land use rights relating to our own mines in China
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 in China are for 50-year terms beginning on July 1, 2001. The remaining land use rights relating to the mines we own and
operate in China 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.
For our own mines in Indonesia and Laos, neither proven nor probable reserves have been established as of the date of this annual report. The
following table sets forth certain estimated details of the reserves for our own mines in China as of December 31, 2015:
Mine
Pingguo mine
Guizhou No. 1 mine
Guizhou No. 2 mine
Zunyi mine
Xiaoyi mine
Shanxi Other Mines
Huaxing mine
Mianchi mine
Luoyang mine
Xiaoguan mine
Gongyi mine
Dengfeng mine
Xinmi mine
Sanmenxia mine
Xuchang mine
Jiaozuo mine
Pingdingshan mine
Ruzhou mine (4)
Yangquan mine
Nanchuan mine
Total (average) reserves
By reserve type
Proven reserve
Probable reserve
Reserves (1)(2)
(million tonnes)
64.32
0.81
21.97
7.32
24.52
18.59
6.26
2.77
3.54
26.27
2.70
1.39
2.26
43.10
1.46
1.68
3.27
0.70
7.46
30.17
270.56
120.68
149.88
Al2O3
54.03
65.40
62.54
57.05
62.44
64.47
62.84
63.26
61.14
63.54
64.00
62.77
68.59
63.40
62.49
58.61
62.18
59.71
58.63
60.62
60.42
60.67
60.22
SiO2
4.87
9.77
9.37
9.48
13.34
11.63
10.14
12.00
9.80
15.06
14.13
11.80
11.04
12.65
10.00
14.79
13.50
15.03
13.73
13.95
10.75
10.75
10.75
Total (average) reserves
270.56
60.42
10.75
Ratio of
Average A/S (3)
11.09
6.69
6.67
6.01
4.68
5.55
6.20
5.27
6.24
4.22
4.53
5.32
6.21
5.01
6.25
3.96
4.61
3.97
4.27
4.35
5.62
5.64
5.60
5.62
(1)
(2)
(3)
(4)
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.
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.
Chalco Zhongzhou established Ruzhou mine in 2015 to manage the stopes of Autou and Shengjiacun, which were originally managed by
Pingdingshan mine.
39
We have been in compliance with the National Mining Safety Law and related rules and regulations in China. We closely supervise and routinely
inspect mining conditions with continual implementation of safety measures and procedures at our own bauxite mines and safety training for our
mining personnel. In 2015, we extracted approximately 17.9 million tonnes of bauxite from our own mines and did not experience any mining
accidents that involved serious work injuries or death.
Jointly-operated Mines. Historically, we have procured part of our bauxite supply from our jointly-operated mines. We managed these jointly-
operated mines by contracting with local companies for their mining services to operate mines owned by us. In the years ended December 31, 2013,
2014 and 2015, our jointly-operated mines did not produce any bauxite. As of December 31, 2015, we managed all our mines by our own and no
longer have any jointly-operated mines.
Other Suppliers. In addition to our own 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 44.6% of our total bauxite supply in 2015.
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 the remaining requirements from other suppliers.
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. In 2015, the average alumina-to-silica ratio of the proven and probable reserves of our mines
ranges from approximately 3.96:1 to 11.09:1.
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. Our total bauxite cost is currently influenced by the following factors:
*
*
*
the cost of our mining operations;
the market conditions relating to purchases from small independent mines; and
the market conditions relating to purchases from overseas.
40
The average purchase price of bauxite per tonne from our joint operations and other suppliers in 2013, 2014 and 2015 was approximately RMB393.3,
RMB412 and RMB383, respectively. The average cost of bauxite per tonne from our own mines in 2013, 2014 and 2015 was approximately
RMB231.0, RMB246.9 and RMB251.6, respectively.
We purchase a substantial amount of bauxite to satisfy our alumina production needs. 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
2013, 2014 and 2015, or any other historical index to estimate our bauxite reserves.
The following table sets forth our capital expenditures for our bauxite mines for the periods indicated:
Production Volume by Product
2013
2014
2015
Year Ended December 31,
Capital Expenditures
Infrastructure construction
Facility upgrade
Total
Primary Aluminum
(RMB in thousands)
766,917.1
-
1,116,770.3
372,256.8
950,980.6
62,910.9
766,917.1
1,489,027.1
1,013,891.5
An average of approximately 1.907 tonnes of alumina and 13,526 kWh of electricity were required to produce one tonne of primary aluminum ingots
in 2015.
Alumina and electricity, the two principal components of costs in the smelting process, accounted for approximately 38.9% and 38.6%, respectively,
of our unit primary aluminum production costs in 2015. Apart from alumina and electricity, we also require carbon anodes, carbon cathodes, fluoride
salt and cryolite for our smelting operations.
Alumina is the main raw material in the production of primary aluminum. 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.
41
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
procurement 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 natural gas are the principal materials and energy 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 agreements are one to three year renewable
agreements. 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, Xuehugou Coal Industry Co.,
Ltd., Datong Coal Group Huasheng Wanjie Coal Co., Ltd., Dongdong Coal, 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. We have also acquired the mining rights for coal deposits in the Laodonghe area, Guizhou Province. In addition, we have
acquired 70.82% of the equity interest in Ningxia Energy, which holds mining rights for coal deposits in Ningxia Autonomous Region.
All of the coal mining enterprises in which we directly or indirectly have minority equity interest are currently in the extraction or trial production
stage, except:
*
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; and
Guizhou Yuneng, a joint venture company in which we hold 25% of the equity interest.
Guizhou Yuneng is under development. The production of Huozhou Coal Group Xingshengyuan Coal Co., Ltd. and one of the mines owned by
Chalco Liupanshui is currently suspended due to production technology renovation. See "- B. Property, Plants and Equipment" for details of coal
mines that we operate. 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 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.
Primary Aluminum
Smelting primary aluminum requires a substantial and continuous supply of electricity. The availability and price of electricity are key factors in our
primary aluminum production. Though the electricity prices were in a general downward trend in the recent years as a result of the reform of
electricity system, electricity costs may fluctuate from time to time due to 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 four of our smelters and purchase our remaining electric power requirement from regional power grids or directly from
power generation enterprises. As of December 31, 2015, eight of our smelters have entered into direct purchase agreements with power generation
enterprises. In 2015, Baotou Aluminum entered into a multi-sides electricity purchase agreement, pursuant to which Baotou Aluminum is able to
purchase electricity from various sellers in the electricity market with a broker or the electricity exchange center sitting in the middle to arrange and
facilitate the transaction. We purchase electricity from the regional power grids at prices set by the government for the rest of our smelters. 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 2015. The average electricity cost (including tax) of our smelters was approximately
RMB0.34/kWh in 2015, which decreased by 18.8% as compared to 2014, primarily due to our diversified electricity purchase arrangement, the
increased proportion of self-generated electricity and decreased price of coal.
42
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. Guizhou branch is able to produce carbon cathodes.
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 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
2015, we supplied approximately 5.3 million tonnes of alumina produced at our refineries to our own smelters, which represented approximately
39.8% 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 1.3 million tonnes of outsourced alumina in 2015.
The sales prices of alumina that our alumina refineries sell internally to Chalco Trading are determined based on both a percentage of the weighted
average of the three-month primary aluminum futures prices on the SHFE in the preceding calendar month and the average spot price of alumina in
the domestic market in the preceding calendar month. Chalco Trading coordinates the external sales of our alumina products. 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.
43
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 three 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 both a percentage of the weighted average of the three-month primary aluminum futures
prices on the SHFE in the calendar month before delivery and the average spot price of alumina in the domestic market in the preceding calendar
month. Our customer is normally required to pay for its procurement before each delivery. As a result, the spot price of alumina and fluctuations of
primary aluminum prices on the SHFE affect alumina prices under our long-term sales agreements.
Chalco Trading sells the rest of our self-produced and outsourced alumina products on the spot market. 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 factors:
*
*
*
*
*
international and domestic supply-demand situation;
CIF Chinese ports prices for alumina imports into China;
international and domestic transportation costs;
our short-term and mid-term projections for alumina; and
relevant import expenses.
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 smelting subsidiaries and branches sell a portion of our primary aluminum output directly to external customers. Our primary
aluminum smelting subsidiaries and branches also sell a portion of our primary aluminum output internally to Chalco Trading at prices based on the
spot prices of primary aluminum on SHFE or Nanchu. Chalco Trading then coordinates the external sales of primary aluminum. We sold the
remaining primary aluminum output to Chinalco, which now owns our previous aluminum fabrication business. Our subsidiaries and branches
including Chalco Trading sell our self-produced primary aluminum products to external customers through the following three channels:
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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 and spot market 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.
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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 2.5 million tonnes of outsourced primary aluminum in 2015.
To improve the efficiency of our distribution, we divide our China market into several regions as follows:
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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
central China.
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. 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; spot price in the regions of eastern China and southern
China; 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. The
smelter filling an order from an external customer is generally responsible for negotiating the pricing and delivery terms and must comply with the
market pricing guidelines. In general, we satisfy each purchase order with products from our nearest smelter to minimize transportation costs.
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 2013, 2014 and 2015 amounted to
approximately RMB149.8 million, RMB140.9 million and RMB27.99 million, respectively.
Coal
Ningxia Energy sells a portion of its self-produced coal directly to external customers through short-term contracts at prices determined through
negotiations with our customers, taking into consideration factors including our procurement prices and the prevailing market conditions. Ningxia
Energy consumes the rest of its self-produced coal at its own electric power plant.
In addition, we also procure and sell outsourced coal under long-term agreements or on the spot market through Chalco Trading. We sold
approximately 6.1 million tonnes of outsourced coal in 2015.
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. Please see "-
Coal." In 2015, we sold approximately 1.1 million tonnes of outsourced copper, zinc and lead. 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.
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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, and our coal products are transported both by trucks and by rail.
Principal Facilities
Our principal facilities include 23 principal production plants and our Zhengzhou Institute. Set forth below is a description of our principal production
plants.
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, 2015. In 2015, the Guangxi branch produced approximately 2,452,800 tonnes of alumina, along with
approximately 125,100 tonnes of alumina chemical products. In 2014, we abandoned primary aluminum production facilities of our Guangxi branch.
Guizhou Branch
The Guizhou branch commenced its smelting operations in 1966 and was subsequently expanded to include alumina refining operations in 1978. We
disposed of the assets of alumina production line of Guizhou branch to a subsidiary of Chinalco in June 2013. Our Guizhou branch uses 160Ka 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, 2015, our Guizhou branch had an annual
primary aluminum production capacity of approximately 333,700 tonnes. In 2015, our Guizhou branch produced approximately 306,900 tonnes of
primary aluminum.
Our Guizhou branch also contains a modern carbon production facility, which produces carbon cathodes in addition to carbon anodes.
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. Henan branch had an annual alumina production capacity of approximately 2,410,000 tonnes as of
December 31, 2015. In 2015, our Henan branch produced approximately 1,963,900 tonnes of alumina and 191,400 tonnes of alumina chemical
products. In January 2013, we ceased the operation of the obsolete primary aluminum production facilities of Henan branch.
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Chalco Shandong
Chalco Shandong was incorporated as one of our subsidiaries in the PRC in 2015. The predecessor of Chalco Shandong was our 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 Chalco Shandong 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 its alumina through the sintering process and Bayer process. The Chalco
Shandong purchases some bauxite from overseas and the rest from small third-party mines in Henan and Shanxi Provinces. Chalco Shandong had an
annual alumina production capacity of approximately 2,270,000 tonnes as of December 31, 2015. It produced approximately 1,636,900 tonnes of
alumina in 2015.
In addition, Chalco Shandong produces substantial amounts of alumina chemical products and produced approximately 1,197,000 tonnes of alumina
chemical products in 2015. 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, 2015, Chalco Shandong's annual primary aluminum production capacity was approximately 55,000 tonnes and it did not produce
any primary aluminum in 2015.
Chalco Shandong also produce aluminum fabrication products. As of December 31, 2015, our Chalco Shandong had an annual aluminum fabrication
production capacity of 10,000 tonnes and it produced a small amount of aluminum fabrication products in 2015.
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 branches and Chalco Zhongzhou, but incurs
higher transportation costs for both raw materials and its primary aluminum products than our other branches.
Our Qinghai branch had an annual primary aluminum production capacity of approximately 374,000 tonnes as of December 31, 2015. Our Qinghai
branch produced approximately 399,500 tonnes of primary aluminum in 2015.
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. Shanxi branch
had an annual alumina production capacity of approximately 2,600,000 tonnes as of December 31, 2015. Our Shanxi branch produced approximately
2,407,000 tonnes of alumina and 28,300 tonnes of alumina chemical products in 2015.
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.
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Chalco Zhongzhou
Located in Henan Province, Chalco Zhongzhou is a stand-alone alumina plant, located near abundant bauxite, coal and water supplies. Chalco
Zhongzhou was incorporated as one of our subsidiaries in the PRC in 2015. The predecessor of Chalco Zhongzhou was our Zhongzhou Branch. 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 Chalco Zhongzhou obtains bauxite supplies from external suppliers in Henan
Province and Shanxi Province and overseas.
We abandoned alumina production capacity of 30,000 tonnes in the Chalco Zhongzhou in 2014. Chalco Zhongzhou had an annual alumina
production capacity of approximately 3,050,000 tonnes as of December 31, 2015. Chalco Zhongzhou produced approximately 2,031,200 tonnes of
alumina and approximately 372,800 tonnes of alumina chemical products in 2015.
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, 2015.
Zunyi Alumina completed the construction of alumina production facilities and commenced operations in 2010. After the completion of its expansion
project in 2012, Zunyi Alumina's annual alumina production capacity reached approximately 1,000,000 tonnes as of December 31, 2015. Zunyi
Alumina produced approximately 1,061,600 tonnes of alumina and 2,900 tonnes of alumina chemical products in 2015.
Shanxi Huaxing
Located at Xing County, Lvliang City of Shanxi Province, Shanxi Huaxing is a stand-alone alumina plant which commenced trial production in
October 2013. Shanxi Huaxing obtains bauxite supplies from our own mines delivered primarily via highway and is located near abundant coal and
water supplies. At the end of December 2015, we disposed 50% of equity interest in Shanxi Huaxing, and as a result Shangxi Huaxing has become
our joint venture in accordance with relevant accounting standards.
Shanxi Huaxing had an annual alumina production capacity of approximately 800,000 tonnes as of December 31, 2015. Shanxi Huaxing produced
approximately 1,196,200 tonnes of alumina in 2015.
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, 2015. Chongqing branch did not produce any alumina or alumina
chemical products in 2015. Our Chongqing Branch suspended production in July 2014 due to the relatively significant decrease in the price of
alumina as compared with that during the construction period, large negative variation of mineral resources and the high costs of natural gas and other
energy.
Guizhou Huajin
Established in July 2014 and located in Qingzhen, Guizhou Province, Guizhou Huajin specializes in producing alumina products. Guizhou Huajin had
an annual alumina production capacity of approximately 1,600,000 tonnes as of December 31, 2015. Guizhou Huajin produced approximately
546,800 tonnes of alumina products in 2015.
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, 2015. It produced approximately 403,000 tonnes of primary
aluminum in 2015.
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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 424,000 tonnes as of December 31, 2015 and it produced approximately 263,500 tonnes of primary aluminum in 2015. 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, 2015. In 2015, Shanxi Huasheng produced
approximately 222,900 tonnes of primary aluminum. We currently hold 51% of the equity interest in Shanxi Huasheng.
Zunyi Aluminum
Zunyi Aluminum is situated in Guizhou Province. We 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, 2015 and it produced approximately 102,700 tonnes of
primary aluminum in 2015.
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. Fushun Aluminum had an annual primary
aluminum production capacity of approximately 330,000 tonnes as of December 31, 2015. Fushun Aluminum produced approximately 181,900
tonnes of primary aluminum in 2015. Fushun Aluminum suspended production in October 2015 due to the relatively significant decrease in the price
of primary aluminum and high costs of electricity.
Shandong Huayu
Shandong Huayu is situated in Shandong Province and is a stand-alone primary aluminum plant. 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, 2015.
Shandong Huayu also has supporting facilities and coal-fired generators. In 2015, Shandong Huayu produced approximately 216,800 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, 2015 and it produced approximately 192,100 tonnes of
primary aluminum in 2015. Gansu Hualu suspended production in November 2015 due to the relatively significant decrease in the price of primary
aluminum and high cost of electricity.
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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 primary aluminum production capacity of approximately 538,000 tonnes as of December 31, 2015. In 2015, it produced
approximately 545,700 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, 2015. It produced approximately 472,600 tonnes of primary aluminum in 2015.
Longmen Aluminum
Located in Shanxi Province, Longmen Aluminum was established in 1991. We hold 55% of its equity interests. It specializes in producing primary
aluminum. In March 2012, we ceased the operation of our obsolete primary aluminum production facilities of Longmen 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, 2015. It
suspended production and did not produce any aluminum fabrication products in 2015.
Ningxia Energy
We acquired 70.82% of the equity interest in Ningxia Energy in January 2013. Please see "- A. History and Development of the Company -
Significant Acquisitions and Joint Ventures." Ningxia Energy was established in June 2003. It is an integrated power generation company with total
installed capacity of 2881.5 MW, operating coal mines located in Ningxia Autonomous Region. Its principal business includes conventional coal-fire
power generation and renewable energy generation. In 2015, Ningxia Energy produced approximately 8.0 million tonnes of coal and approximately
8.7 billion kWh of electricity.
Zhengzhou Institute
Zhengzhou Institute, located in Zhengzhou, Henan Province, was incorporated as our subsidiaries in 2015. Its predecessor was established in August
1965 and had been served as the central to our research and development efforts. The Zhengzhou Institute specializes in the research and development
of technology for smelting aluminum. It is the only Zhengzhou 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 Zhengzhou Institute operates test facilities, which produce alumina
chemical products and primary aluminum. The Zhengzhou 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. In 2014, our Zhengzhou Institute abandoned its
primary aluminum production facilities. As of December 31, 2015, our Zhengzhou Institute has a limited alumina chemical products production
capacity, which it uses in connection with its research and development efforts.
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Competition
Competition from Domestic Competitors
Alumina
As the largest producer of alumina in China, although we face competition from other large domestic refineries, we have several advantages over
such competitors, including:
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*
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we have access to a substantial and stable supply of bauxite;
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; and
our substantial workforce that has extensive experience in production and management.
In order to improve the efficiency and competitiveness of the Chinese alumina industry as well as to protect the environment, MIIT published
"Standard Conditions for Aluminum Industry" (the "Standard Conditions") in July 2013, which established a high entry barrier for new alumina
producers in China and imposed stringent requirement for existing alumina companies.
Primary Aluminum
We derived all of our primary aluminum revenues from domestic sales in 2015. Our competitors include other domestic and international primary
aluminum producers that conduct sales in China. In 2015, our primary aluminum production represented approximately 10.67% of total domestic
production in China.
We are a leading enterprise in non-ferrous metal industry in China. Currently, 19 primary aluminum producers in China (including Chalco) have
annual production capacity of 500,000 tonnes or more, which represent approximately 81.6% of the total primary aluminum production capacity in
China. Among these 19 primary aluminum producers, 11 primary aluminum producers in China (including Chalco) have annual production capacities
of one million tonnes or more, which represent approximately 66.8% 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. Moreover, according to the Standard Conditions and other administrative regulations, new aluminum
projects for expanding production capacity must be approved by the relevant department of the State Council of China and must have stable supply of
alumina. 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.
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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 12 primary aluminum smelters, 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 has maintained high standards and continued improving, and has satisfied national and
industrial standards and customers' need.
The primary aluminum produced by most of our smelters satisfies the quality standards of the LME.
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 2015, China
imported approximately 4.7 million tonnes of alumina, representing approximately a 11.9% decrease from 2014. China had net import of
approximately 123,000 tonnes of primary aluminum in 2015, which represented a 28.2% decrease from 2013. We expect to continue to face
competition from international suppliers of alumina and primary aluminum which are 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.
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 2015, we completed 60 technological projects,
including 39 independent research and development projects, 15 special projects of key science and technology and six application projects of science
and technology. In addition, we filed a total of 98 patent applications in 2015.
As of December 31, 2015, we owned 1,716 patents, which were primarily related to technologies and process, equipment and new products. Once
registered, a patent in China for an invention is valid for 20 years and for a utility model or a design, 10 years from the date of the patent application.
As of December 31, 2015, we owned 25 trademarks, each of which had a term of 10 years.
We do not regard any single patent, license, or trademark to be material to our sales and operations as a whole. 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.
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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 2015, 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 740,000 tonnes of standard coal in 2015. 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 RMB556.4 million, RMB520.2 million and
RMB627.3 million for the years ended December 31, 2013, 2014 and 2015, respectively. In 2015, we did not have any major environmental pollution
incidents.
Insurance
We maintain insurance coverage for our fixed assets such as plant, machinery, equipment, office facilities and transportation vehicles against
accidents or natural disasters such as typhoons, hurricanes, floods, landslides and lightning strikes. However, there are certain types of losses, such as
losses from war, acts of terrorism and nuclear radiation, for which we cannot obtain insurance at a reasonable cost or at all.
We are covered under the work-related injury insurance required by the local government labor departments, and we have procured additional
business accidental insurance for our employees. More extensive insurance is either unavailable in China or would impose a cost on our operations
that would reduce our competitiveness.
Our insurance premiums were RMB41.0 million, RMB33.4 million and RMB33.2 million in 2013, 2014 and 2015, respectively.
Seasonality
Our business is not subject to seasonality.
Cyber Security
With respect to our internet policies on cyber-security and Internet safety, we have established an information safety management system and issued
internal regulations on cyber-security, internal hardware and data safety systems. We are gradually implementing measures relating to the office
environment information safety management, information system access control, protection from any malicious software, and internal review and
audit of information safety risks, in order to prevent loss of information due to cyber-security incidents, network outages or hardware incidents.
During the year ended December 31, 2015, we did not experience any material cyber-security incidents or related losses.
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Regulatory Overview
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 three 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;
the Ministry of Land and Resources of China, which has the authority to grant land use licenses and mining right permits;
the MIIT, which formulates industrial policies and investment guidelines for all industries including the aluminum industry; and
the CSRC, the securities regulatory commission of China
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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 was subject to approval from 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, the People's Bank of China and/or the State Administration of Foreign
Exchange (the "SAFE"). However, since September 14, 2015, NDRC has no longer required the PRC company to obtain a prior approval for offering
overseas bonds and instead required to file a registration afterwards. 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 administrative authorities of foreign exchange. Foreign investment in the
exploring and mining of alumina and primary aluminum is permitted by the PRC government.
54
Standard Conditions for Aluminum Industry
Standard Conditions provides that bauxite mining, alumina and primary aluminum projects must comply with the state industry policies and overall
plans on the development of aluminum industry, land use, urban planning and designation of functional zones. The aluminum smelting enterprises
must be appropriately distributed according to conditions including availability of resources, energy and environment. The regulation indicates that
with guidance and plans, aluminum smelting enterprises located in regions lacking competitive production elements should be gradually moved to
more competitive region, and the amount of newly increased production capacity shall be strictly controlled to prevent excessive capacity caused by
over-investing. The regulation further sets standards for production scale and major external conditions for newly established bauxite mining,
alumina, electrolytic aluminum and recycled aluminum projects. The MIIT promulgated on April 4, 2014, January 4, 2015 and February 14, 2016,
respectively, the first, the second and the third lists of enterprises that meet the Standard Conditions for the aluminum industry. Most of our
production branches and subsidiaries have met the Standard Conditions and are included on these lists.
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.
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 a part 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 December 2007, 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. In December 2013, the NDRC and MIIT issued the "Circular on the Policies for Tiered Pricing of Electricity Used by Electrolytic
Aluminum Enterprises" (the "Electricity Tiered Pricing Circular"), which became effective on January 1, 2014, to impose tiers of electricity prices on
primary aluminum smelters. Specifically, if the alternating current consumed by any smelter is more than 13,700 kWh per tonne of molten aluminum
but no more than 13,800 kWh per tonne of molten aluminum, such smelter must pay additional RMB0.02 per kWh for the electricity used. If the
alternating current consumed by any smelter is more than 13,800 kWh per tonne of molten aluminum, such smelter must pay additional RMB0.08 for
per kWh for the electricity used.
In March 2015, new policies and reforms relating to electricity generation, retail, usage, and other related sectors were introduced. Under "Several
Opinions of the CPC Central Committee and the State Council on Further Deepening the Reform of the Electric Power System", a series of reforms
relating to electricity pricing, distribution and retail segments, electricity trading, distributed generation, and other aspects has been put forward. We
expect that these electric system reforms will bring about profound impacts on China's electricity market and aluminum industry.
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.
55
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 or relevant
local authorities. Upon approval, the relevant administrative authorities, which are responsible for supervision and inspection of mining exploitation
in their jurisdiction, will issue an 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.
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.
Energy Conservation Law
The new Energy Conservation Law came into effect on April 1, 2008. It sets out the general principles for reducing energy waste and improving
efficiency of energy consumption. It urges the adjustment of industry structure and replacement of high energy consumption projects with new energy
or renewable energy resources. In March 2014, the MIIT issued a regulation, the "Opinion on Implementing Supervision of Industrial Energy
Conservation", which lists the primary aluminum smelting as one of the high energy consumption operations that will be highly monitored. In
December 2014, the MIIT issued the Guidance for National Industrial Efficiency, which sets forth industrial efficiency standards for producers of
major products in industries that involve high energy consumption, which included electrolytic aluminum and aluminum oxide products.
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.
56
C.
ORGANIZATIONAL STRUCTURE
Below is a summary of our corporate structure and principal subsidiaries as of December 31, 2015:
Company
Baotou Aluminum Co., Limited
Chalco Hong Kong Ltd.(1)
Chalco Zunyi Alumina Co., Ltd.
China Aluminum International Trading Co., Ltd.
Chalco Mining Co., Ltd.
Percentage of
ownership interest
attribution to the
Company
Principal activities
100%
100%
73.28%
100%
100%
Manufacture and distribution of primary aluminum, aluminum
alloy and carbon products
Overseas investments, import and export activities
Manufacture and distribution of alumina
Import and export activities
Manufacture, acquisition and distribution of bauxite mines,
limestone ore, aluminum magnesium ore and related non-ferrous
metal products
Fushun Aluminum Co., Ltd.
Gansu Hualu Aluminum Co., Ltd.
Shandong Huayu Alloy Material Co., Ltd.
Shanxi Huasheng Aluminum Co., Ltd.
Shanxi Huaze Aluminum and Power Co., Ltd.
Zunyi Aluminum Co., Ltd.
Gansu Huayang Mining Development
Company Limited
Chalco Energy Co., Ltd.
Chalco Ningxia Energy Group Co., Ltd.
Chalco Hong Kong Investment Company Limited (1)
Guizhou Huajin Aluminum Co., Ltd.
Yinxing Energy (2)
100%
51%
55%
51%
60%
62.10%
70%
100%
70.82%
100%
60%
52.91%
Aluminum smelting, producing carbon-related products and
manufacture and distribution of nonferrous metals
Manufacture and distribution of primary aluminum
Manufacture and distribution of primary aluminum and
aluminum alloy
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 coal and other mineral products
Thermoelectric supply and investment management
Thermal power, wind power and solar power generation, coal
mining, and power related equipment manufacturing
Bond issuance
Manufacture and distribution of alumina
Operation of wind power, design, manufacture and distribution
of wind power and solar power equipment
Chalco Zhongzhou Research Institute of
100%
Research and development services
Non-ferrous Metal Co., Ltd
Chalco Shandong Co., Ltd.
Guangxi Investment Co., Ltd.
Chalco Zhongzhou Aluminum Co., Ltd.
Shanxi Aluminum China Resources Co., Ltd.
China Aluminum Logistics Group Corporation
Co., Ltd. (3)
100%
100%
100%
50%
100%
Manufacture and distribution of alumina
Investment management
Manufacture and distribution of alumina
Manufacture and distribution of primary aluminum
Logistic transportation
(1)
(2)
(3)
Chalco Hong Kong Ltd. is incorporated in Hong Kong and Chalco Hong Kong Investment Company Limited is incorporated in the British Virgin Islands. All other
principal subsidiaries are incorporated in the PRC.
We indirectly hold 52.91% shares of Yinxing Energy through Ningxia Energy, a subsidiary of ours in which we hold 70.82% of its shares.
We directly hold 81.87% shares and indirectly hold 18.13% shares, through China Aluminum International Trading Co., Ltd. of China Aluminum Logistics Group
Corporation Co., Ltd.
57
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.
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.
Our mines in Indonesia have access to local roads. The two mines in production are powered by diesel fuel and are equipped with washing machines.
58
Coal Mines
We acquired 70% of the equity interest in Gansu Huayang in March 2011, which holds exploration rights for certain coal deposits in Gansu Province,
namely, Luochuan mine. The exploration permit will expire in October 2016. Luochuan mine is an underground mine. We have completed the
exploration but have not commenced development of Luochuan mine. As of the date of this annual report, neither proven nor probable reserves have
been established in accordance with United States Securities and Exchange Commission Industry Guide 7 ("Industry Guide 7").
We acquired the mining rights for certain coal deposits Guizhou Province, namely Laodonghe mine, in January 2013 through Chalco Guizhou Mining
Co., Ltd. We held 80.0% of the equity interest of Laodonghe mine. The mining permit will expire in December 2018. We have completed the
exploration but have not commenced development of Laodonghe mine. Laodonghe mine is an underground mine. As of the date of this annual report,
neither proven nor probable reserves have been established in accordance with Industry Guide 7.
We completed the acquisition of 70.82% of the equity interest in Ningxia Energy in January 2013, which holds mining rights or exploration rights for
certain coal deposits in Ningxia Autonomous Region. The coal mines owned and operated by Ningxia Energy include Wangwa mine, Wangwa No.2
mine, Yindonggou mine and Yinxingyijing mine, all of which are underground thermal coal mines. The operations at these coal mines are powered
by electricity from local power grids and are accessible by public roads. As of the date of this annual report, neither proven nor probable reserves
have been established in accordance with Industry Guide 7.
Wangwa mine and Wangwa No. 2 mine are currently in extraction stage. We primarily use fully mechanized longwall mining method to extract coal
from Wangwa mine and Wangwa No. 2 mine and we use advanced coal mining equipment including hydraulic roof supports and shearers.
Yindonggou mine has completed construction for capacity expansion and technology upgrade and is currently in trial production. The mining permit
of Yindonggou mine will expire in July 2016. Ningxia Energy holds 50% of the interest in Yinxingyijing mine with the joint owner not participating
in the operation of such mine. Yinxingyijing mine is currently under development. The exploration permit of Yinxingyijing mine will expire in
August 2016 and we are in the process of applying for mining permit.
The following table sets forth detailed information on Wangwa mine and Wangwa No. 2 mine:
Nature of Ownership
Commencement of construction
Commencement of extraction
Permit renewal
Mining recovery rate (%) (2)
Depth of mine (meters underground)
Average thickness of main coal seam (meters)
Wangwa mine
Wangwa No. 2 mine
Owned and operated by
Ningxia Energy, a 70.82%
subsidiary of Chalco
Owned and operated by
Ningxia Energy, a 70.82%
subsidiary of Chalco
1984(1)
1990(1)
January 2017
78%
400
6-11
2007
2010
July 2017
76%
400
8-10
Calorific value (Kcal/kg)
Sulphur content (%)
Average ash content (%)
4,900-5,100
1.1
14.2
4,800-5,000
1.2
15.3
(1)
(2)
Wangwa mine implemented a capacity expansion and technology upgrade in 2008 and resumed its production after completion of the foregoing expansion and upgrade
in 2009. In addition, Wangwa mine is currently under construction for capacity expansion and technology upgrade and we expect to commence trial production with
annual production capacity of 3.0 million tonnes at the end of 2016.
The mining recovery rate is the rate of the amount of coal recovered from a determined amount of reserves, which is calculated by dividing the actual volume of coal
recovered in a year by the volume of reserves mined and consumed in the same year.
For the year ended December 31, 2015, Ningxia Energy incurred capital expenditures of approximately RMB367.8 million and RMB687.6 million,
respectively, on infrastructure construction and facility upgrading of its coal mines.
59
Land
Chinalco leases to us 401 pieces or parcels of land, located in eight provinces, covering an aggregate area of approximately 47.39 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:
*
*
389 pieces of allocated land with an area of approximately 46.09 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 302 buildings to Chinalco, with an aggregate gross area of approximately 301,671 square meters.
Chinalco leases 109 buildings to us, with an aggregate gross area of approximately 222,588 square meters. 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. On March 26,
2013, we renewed the tenancy agreement with its term to be expired on December 31, 2015, and we were under the process of further renewing the
tenancy agreement as of the date of this annual report.
For environmental issues in relation to the utilization of our assets, please refer to "- Environmental Protection."
60
Our Expansion
Our expansion projects in 2015 primarily include:
*
The mining project of Zhongzhou for the bauxite at Duancun-Leigou: This project is expected to commence production in December 2016,
with an estimated annual bauxite production capacity of 1.6 million tonnes. We expect to invest a total amount of RMB1,358 million, and
we had incurred RMB805 million of capital expenditure as of December 31, 2015.
*
*
*
Capacity expansion and technology upgrade of Wangwa mine: This project is expected to commence trial production by the end of 2016,
with an estimated annual production capacity of 3.0 million tonnes. The project is planned to have a total annual capacity of 6.0 million
tonnes. We expect to invest a total amount of approximately RMB3.1 billion in this project and we had invested approximately RMB673
million as of December 31, 2015.
The underground mining project of 0-24 line in Guizhou Maochang Mine: The project was ready for mining operation in December 2015,
with 1.20 million tonnes of additional production capacity of bauxite. We expect to invest a total amount of RMB787 million in this project
and we had invested RMB651 million by the end of December 31, 2015.
Qingzhen alumina project: This project commenced trial production in August 2015, with an annual alumina production capacity of 1.6
million tonnes. We expect to invest a total amount of approximately RMB3.8 billion in this project and we had invested approximately
RMB3.3 billion as of December 31, 2015.
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."
61
A.
OPERATING RESULTS
Overview
We are a leading enterprise in non-ferrous metal industry in China. We are engaged principally in alumina refining, primary aluminum smelting, and
trading of non-ferrous metal products, coal products and other products. In addition, we are engaged in coal mining and power generation. The
remainder of our revenues were derived from research and development activities and other products and services. We organize and manage our
operations according to the following key segments:
*
*
*
*
*
Our 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 91.7% of the total production volume for this segment in 2015. Alumina chemical products are used in the production of
chemical, pharmaceutical, ceramic and construction materials. In the process of refining bauxite into alumina, we also produce gallium as a
by-product. Gallium is a rare, high value metal with applications in the electronics and telecommunication industries.
Our primary aluminum segment, which consists of the procurement of alumina, other raw materials, supplemental materials and electricity
power, the production and sale of primary aluminum and aluminum-related products, such as carbon products, aluminum alloy products and
other electrolytic aluminum products. Our principal primary aluminum products are ingots and molten aluminum and aluminum alloy,
which, accounted for approximately 33.5%, 42.5% and 24.0%, respectively, of our total production volume of primary aluminum in 2015.
Our standard 20 kilogram remelt ingots are used for general aluminum fabrication in the construction, electricity, electronics, transportation,
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 trading segment, which consists of the trading of alumina, primary aluminum, other non-ferrous metal products, and crude fuels such as
coal products, as well as supplemental materials to our internal manufacturing plants and external customers. We established our trading
business as a separate segment in July 2010 as a result of the implementation of our operational structural exercise.
Our energy segment, which consists of coal mining and power generation, including conventional coal-fire power generation and renewable
energy generation such as wind power and photovoltaic power. We established our energy segment in January 2013 as a result of our
acquisition of Ningxia Energy in line with our development strategy to partially offset our future energy costs and secure a portion of the
coal we consume in our operations. In 2015, we supplied part of the electricity we generated for our own production use, supplied a portion
of the coal output to our own electric power plant and sold the remaining portion to external customers, including power generation
enterprises and cement plants.
Our corporate and other operating segment, which consists of corporate and other aluminum-related research, development, and other
activities of the Group.
We used to be engaged in aluminum fabrication operations, where we processed primary aluminum for the production and sales of various aluminum
fabrication products. As approved at our 2012 annual general meeting held on June 27, 2013, we disposed of substantially all of our aluminum
fabrication operations to Chinalco in line with our development strategy to focus on the upstream sectors of the aluminum market value, industry
chain and the production of high value added products. As a result, we ceased to have our aluminum fabrication business as a separate segment in
June 2013. In accordance with IFRSs, our aluminum fabrication segment is classified as discontinued operation and the operating results of aluminum
fabrication segment are presented as discontinued operation in the consolidated statement of comprehensive income for the year ended December 31,
2013. Our alumina, primary alumina, trading, energy and corporate and other segments are classified as continuing operations and the operating
results of such segments are presented as continuing operations in the consolidated statement of comprehensive income for the years ended December
31, 2013, 2014 and 2015.
62
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with IFRSs 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 3 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
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to us and the cost of the item
can be measured reliably. The carrying amount of any replaced parts is derecognized. All other repairs and maintenance are charged to profit or loss
during the financial period in which they are incurred.
We calculate depreciation on property, plant and equipment 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
8-45 years
3-30 years
6-10 years
3-10 years
We reviewed and adjusted the assets' depreciation method, residual values and useful lives, 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 amount of the asset 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 capitalization. CIP is transferred
to property, plant and equipment when the CIP is ready for its intended use.
Intangible assets - goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over the fair
value of the our 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 of disposal. Any
impairment is recognized immediately as an expense and is not subsequently reversed.
63
Intangible assets - mining rights and mineral exploration rights
Our mineral exploration rights and mining rights relate to coal, bauxite and other mines.
(i)
Recognition
Mineral exploration rights and mining rights are initially recorded at the cost which includes the acquisition consideration, qualifying
exploration and other direct costs. The mineral exploration rights are stated at cost less any impairment, and the mining rights are stated at
cost less any amortization and impairment.
(ii)
Reclassification
Mineral exploration rights are converted to mining rights when technical feasibility and commercial viability of extracting a mineral
resource are demonstrable. Mineral exploration rights are subject to amortization when the mineral exploration rights are converted to
mining rights and commercial production has commenced.
We assess the stage of each mine under construction to determine when a mine moves into the production stage. The criteria used to assess
the start date are determined based on the unique nature of each mine construction project. We consider various relevant criteria, such as
completion of a reasonable period of testing of the mine and equipment, ability to produce in saleable form (within specifications) and
ability to sustain ongoing production to assess when a mine is substantially complete and ready for its intended use.
(iii)
Amortization
Amortization of bauxite and other mining rights (except for coal mining rights) is provided on a straight-line basis according to the shorter
of the expiration date of the mining certificate and the mine able period of natural resources. Estimated mine able periods of the majority of
the mining rights range from 3 to 30 years.
Coal mining rights are amortized on a unit-of-production basis over the economically recoverable reserves evaluated based on the reserves
estimated in accordance with the standards in the Solid Mineral Resource/Reserve Classification of the PRC (GB/T17766-1999) of the mine
concerned.
(iv)
Impairment
An impairment review is performed when there are indicators that the carrying amount of the mineral exploration rights and mining rights
may exceed their recoverable amounts. To the extent that this occurs, the excess is fully provided as impairment loss.
Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sales
transaction rather than through continuing use. For this to be the case, the asset or disposal group must be available for immediate sale in its present
condition subject only to terms that are usual and customary for the sale of such assets or disposal groups and its sale must be highly probable. All
assets and liabilities of a subsidiary classified as a disposal group are reclassified as held for sale regardless of whether the Group retains a non-
controlling interest in its former subsidiary after the sale.
64
Non-current assets and disposal groups (other than financial assets) classified as held for sale are measured at the lower of their carrying amounts and
fair values less costs to sell. Property, plant and equipment and intangible assets classified as held for sale are not depreciated or amortized.
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 repayment 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 as indicators that a trade receivable is
impaired. The amount of 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 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 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 inventories suffered any impairment based on estimates of the net realizable value of the inventories. 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.
Coal reserve estimates and units-of-production amortization for coal mining rights
External qualified valuation professionals evaluate "economically recoverable reserves" based on reserves estimated by external qualified exploration
engineers in accordance with the PRC standards. Engineering estimates of our coal reserves are inherently imprecise and represent only approximate
amounts because of the subjective judgments involved in developing such information. Economically recoverable reserve estimates are updated on
regular basis and have taken into account recent production and technical information about each mine.
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.
65
Deferred tax assets are recognized for unused tax losses and other temporary differences, such as provision for impairment of receivables, inventories
and property, plant and equipment and accruals of expenses not yet deductible for tax purposes, to the extent that it is probable that taxable profit will
be available against which the losses can be utilized or other temporary difference could be recovered. Significant management judgment is required
to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with
future tax planning strategies. The carrying value of our deferred tax assets as of December 31, 2015 was RMB2,279 million, compared with
approximately RMB2,403 million as of December 31, 2014 without taking into consideration the offsetting of the balances within the same tax
jurisdiction. The amount of unrecognized tax losses as of December 31, 2015 was RMB22,328 million, compared with approximately RMB22,564
million as of December 31, 2014.
An entity shall recognize a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, except to the extent that both of the following conditions are satisfied: (a) the parent, investor or joint venturer is able to control the timing
of the reversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. We believe
that the taxable temporary differences associated with investments in subsidiaries, associates and joint ventures satisfy the above criteria and
therefore, relevant deferred tax liabilities was recognized as disclosed in Note 11 to our consolidated financial statements.
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 directors believe that we have adequate resources to continue operation for the
foreseeable future of not less than 12 months from the approval date of these financial statements. Our directors therefore are of the opinion that it is
appropriate to adopt the going concern basis in preparing the consolidated financial statements.
Revenue recognition
We recognize revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to us and when
specific criteria have been met for each of the our activities (see descriptions below).
(i)
Sales of goods
Revenue from the sales of goods is recognized when we have already transferred the significant risks and rewards of ownership of the goods
to the buyers, we have retained neither continuing managerial involvement nor control over the goods, it is probable that the economic
benefits related to the transaction will flow into us, and the revenue and related costs incurred can be measured reliably.
If we are 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.
(ii)
Rendering of services
We provide machinery processing, transportation and packaging services and other services to third party customers. These services are
recognized in the period when the related services are provided.
66
New IFRSs Pronouncements
For a detailed discussion of new accounting pronouncements, please see Note 2 to our audited consolidated financial statements.
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
continued to experience growth despite the negative effects of the global financial crisis beginning in the second half of 2008 and economic recession
in 2009, as well as general market volatility and changing macroeconomic conditions.
However, the growth of China's economy has shown signs of slowing down from 2014 to 2015 with the GDP growth at 6.9%, as compared to 7.5%
from 2013 to 2014.
The global output of alumina in 2015 increased to approximately 120.9 million tonnes from 2014. The global alumina consumption in 2015 increased
to approximately 117.8 million tonnes from 2014. In 2015, the domestic output of alumina products increased to approximately 58.7 million tonnes
from 2014 and the domestic consumption for alumina increased to approximately 61.8 million tonnes from 2014.
The global output of primary aluminum in 2015 increased to approximately 57.2 million tonnes from 2014. The global consumption of primary
aluminum in 2015 increased to approximately 57.8 million tonnes from 2014. In 2015, the domestic output of primary aluminum increased to
approximately 31.0 million tonnes from 2014 and the domestic consumption of primary aluminum increased to approximately 30.6 million tonnes
from 2014.
For the year ended December 31, 2015, we had cost of sales from continuing operations of RMB120,927.1 million, compared with cost of sales from
continuing operations of RMB141,329.0 million for the year ended December 31, 2014.
Mix and Pricing of Our Products
We are engaged principally in alumina refining, primary aluminum smelting and sales of these products and trading of non-ferrous metal products
and other products. In addition, we are engaged in coal mining and power generation. We sell most of our self-produced products through Chalco
Trading, taking into account the relevant LME and SHFE prices. In 2015, revenues generated from alumina, primary aluminum, trading and energy
segments (after elimination of inter-segment sales) accounted for 5.4%, 22.8%, 68.2% and 3.4%, respectively, of our consolidated total revenues from
continuing operations 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 both a percentage of the weighted average
of the three-month primary aluminum futures prices on the SHFE in the preceding calendar month and the average spot price of alumina in the
domestic market in the preceding calendar month. Chalco Trading coordinates the external sales of our alumina products. The domestic alumina
prices dropped in 2015 as a result of the suspension of certain domestic aluminum production, which affected domestic demand for alumina. In 2015,
the spot price of alumina in the international market reached a high of approximately US$354.5 per tonne and bottomed out at approximately US$200
per tonne, and the average spot price of alumina in the international market was approximately US$300 per tonne, representing an decrease of 9.1%
from 2014. The spot price of alumina in the domestic market reached a high of RMB2,830 per tonne and bottomed out at RMB1,580 per tonne, and
the average spot price of alumina in the domestic market was approximately RMB2,343 per tonne, representing an decrease of 7.8% from 2014. Our
average selling price of alumina decreased by 4.28% from RMB2,498 per tonne in 2014 to RMB2,391 per tonne in 2015.
67
Like most primary aluminum producers in China, we price our primary aluminum products by reference to the SHFE spot prices and spot market
prices. Fluctuations in the SHFE spot prices have a significant effect on our operating results. In terms of international market, the international price
of aluminum rapidly fell below USD1,800 per tonne due to the traditional slack season in the first quarter of 2015. The subsequent recovery of market
demands contributed to the increase in the international price of aluminum which raised to USD1,977 per tonne in May 2015. Since the third quarter
of 2015, the increase in supply and demand pressure in the global aluminum market, had pushed the international price of aluminum to continuously
hit new lows of recent years and even approach the lowest point recorded since the financial crisis in 2008. Such fall lasted until the end of 2015
when the price of aluminum gradually stabilized. In terms of domestic market, due to the intensified imbalance between supply and demand in the
aluminum market due to the traditional slack season, the price of aluminum rapidly fell and hit a new low of recent years at RMB12,445 per tonne in
the first quarter of 2015. With the gradual recovery of consumption after the Spring Festival as well as the production reduction of certain smelters,
the price of aluminum gradually picked up and reached RMB13,620 per tonne. In the second half of 2015, confronted with the increasing supply
pressure, the price of aluminum continuously hit new lows and fell below RMB10,000 per tonne to the lowest of RMB9,550 per tonne in November
2015. The massive production reduction of primary aluminum smelters was the important reason for the stabilization and increase of aluminum price
in December 2015. The average three- month aluminum futures prices at LME decreased by 11.1% from US$1,893 per tonne in 2014 to US$1,682
per tonne in 2015. The average three- month aluminum futures prices at SHFE decreased by 10.2% from RMB13,697 per tonne in 2014 to
RMB12,300 per tonne in 2015. Our average selling price of primary aluminum decreased by 9.9% from RMB13,546 per tonne in 2014 to
RMB12,205 per tonne in 2015.
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 2015 due to our significant trading volumes.
Our revenue generated from external sales of products purchased from external sources in 2015 was approximately RMB60,927.4 million,
representing approximately 72.3% of total revenue 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.
Our principal raw material is bauxite. For the years ended December 31, 2013, 2014 and 2015, bauxite supplied by our own mines accounted for
49.0%, 55.4% and 55.4%, respectively, 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. In 2015, as a result of decreases in power and raw material consumption per
production unit and decreases in raw materials, fuel and electricity prices during the manufacturing process, our average cost of alumina per tonne
decreased by approximately 11.9% from that in 2014.
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 2015, we continued to focus on lowering the production costs and increasing production efficiency through reducing
raw materials consumption by improving technology and internal management.
68
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 38.6% of our unit production cost for primary aluminum in 2015. 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. Our
average annual electricity price per kilowatt-hour decreased by 6.7% from 2013 to 2014 and decreased by 18.8% from 2014 to 2015.
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. In recent years, the PRC government had tightened its monetary policies to control
inflation, including increasing interest rates on bank loans and deposits and tightening the money supply. The PRC government has loosened its
monetary policy and lowered interest rates on bank loans since the end of 2014. However, any change towards stricter lending policies in the future
may, among other things, affect our ability to obtain financing and may in turn adversely affect our operating results.
Our finance costs from continuing operations decreased by 11.6% from 2014 to 2015, primarily due to a decrease in size and interest rate of interest-
bearing debts. 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 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.
69
Selected Statement of Operation Items
Revenue
Our revenue from continuing operations is primarily generated from sales of alumina, primary aluminum, other non-ferrous metal products and coal
products. In addition, we are engaged in coal mining and power generation. The remainder of our revenues were derived from research and
development activities and other products and services. 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. We disposed of the aluminum fabrication segment in June 2013. As the result, the operation results of
such segment was classified as discontinued operation in the consolidated statement of comprehensive income for the year ended December 31, 2013.
Thus, our revenue from continuing operations for the years ended December 31, 2013 does not include revenue from the aluminum fabrication
business.
Cost of Sales
Our cost of sales from continuing operations consists primarily of purchase of inventories in relation to trading activities, the cost of the raw materials
and consumables used, the electric power cost which is our principal energy cost, the fixed cost and employee benefit expenses. For the years ended
December 31, 2013, 2014 and 2015, our cost of sales from continuing operations was RMB166,895.3 million, RMB141,329.0 million and
RMB120,927.1 million, respectively, and accounted for 98.4%, 99.5% and 98.0% of the total consolidated revenues from continuing operations for
those periods.
Operating Expenses
Selling and Distribution Expenses. Our selling and distribution expenses from continuing operations 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 from continuing operations accounted for 33.9%, 14.0% and 41.4%
of our total operating expenses from continuing operations for the years ended December 31, 2013, 2014 and 2015, respectively.
General and Administrative Expenses. Our general and administrative expenses from continuing operations consist primarily of early retirement
benefit expenses, employee benefit expenses for directors and officers and employees in administrative department and, to a lesser extent, taxes other
than income tax expenses, impairment of intangible assets, depreciation of non-production property, plant and equipment, provision for impairment of
receivables, termination benefit expenses, operating lease rental expenses, travelling and entertainment, legal and other professional fees, amortization
of land use rights and leasehold land, utilities and office supplies, insurance expense, pollutants discharge fees, repairs and maintenance expenses,
auditors' remuneration, amortization of intangible assets, and others. General and administrative expenses from continuing operations accounted for
53.5%, 38.5% and 54.5% of our total operating expenses for the years ended December 31, 2013, 2014 and 2015, respectively. Employee benefit
expenses from continuing operations, including salaries and bonus, housing fund, staff welfare and other expenses, employment expense in relation to
early retirement schemes, termination benefit and retirement benefit cost-defined contribution schemes, comprise the significant component of our
general and administrative expenses from continuing operations, accounting for 33.0%, 53.3% and 43.5% of our total general and administrative
expenses from continuing operations for the years ended December 31, 2013, 2014 and 2015, respectively.
Research and Development Expenses. Our research and development expenses from continuing operations accounted for 3.5%, 2.3% and 3.9% of our
total operating expenses from continuing operations for the years ended December 31, 2013, 2014 and 2015, respectively.
Impairment loss on property, plant and equipment. Our impairment loss on property, plant and equipment from continuing operations accounted for
9.1%, 45.2% and 0.2% of our total operating expenses from continuing operations for the years ended December 31, 2013, 2014 and 2015,
respectively.
70
Government Grants
Government grants primarily were research subsidies, grants on environment protection projects and electricity price subsidies from government.
Other Gains, net
Our other net gains from continuing operations in 2015 were RMB5,023.6 million, which consisted primarily of gains on disposal of equity interest,
property, plant and equipment and land use rights and gains on financial products, partially offset by losses on future, forward and option contracts.
Finance Income
Our finance income from continuing operations consists primarily of interest income. For the years ended December 31, 2013, 2014 and 2015, our
finance income was RMB616.6 million, RMB1,047.6 million and RMB812.1 million, and accounted for 0.4%, 0.7% and 0.7% of the total
consolidated revenues from continuing operations, 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 2015, we incurred interest expense (net of capitalized interest) from continuing operations of
RMB5,569.0 million on our borrowings.
Share of Profits and Losses of Joint Ventures
Our share of profits and losses of joint ventures is the profits attributable to us from our joint ventures, based on our equity interests in such joint
ventures. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
Share of Profits and Losses of Associates
Our share of profits and losses 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.
71
Consolidated Results of Operations
The following table sets forth certain income and expense items as a percentage of our revenues from continuing operations from our consolidated
statements of comprehensive income for the periods indicated:
Continuing operations
Revenue
Cost of Sales
Gross Profit
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property,
plant and equipment
Government grants
Other gains/(losses), net
Operating profit/(loss) from
continuing operations
Finance Income
Finance cost
Share of profits and losses
of joint ventures
Share of profit of associates
Profit/(loss) before income tax
from continuing operations
Income tax (expense)/ benefit
Profit/(loss) for the year
from continuing operations
Discontinued operation profit
for the year
Year Ended December 31,
2013
2014
2015
RMB
(%)
RMB
(%)
RMB
US$
(%)
(in millions, except percentage)
169,693.8
(166,895.3)
100.0
(98.4)
141,999.9
(141,329.0)
100.0
(99.5)
123,445.9
(120,927.1)
19,056.8
(18,668.0)
100.0
(98.0)
2,798.5
(1,873.2)
(2,953.2)
(193.6)
(501.2)
805.9
7,399.3
5,482.5
616.6
(5,864.5)
148.7
511.9
1.6
(1.1)
(1.8)
(0.1)
(0.3)
0.5
4.4
3.2
0.4
(3.5)
0.1
0.3
670.9
(1,763.0)
(4,838.4)
(293.8)
(5,679.5)
824.0
356.9
(10,722.9)
1,047.6
(6,730.6)
89.5
350.6
0.5
(1.2)
(3.5)
(0.2)
(4.0)
0.6
0.3
(7.5)
0.7
(4.7)
0.1
0.2
2,518.8
(1,775.3)
(2,334.1)
(168.8)
(10.0)
1,768.9
5,023.6
5,023.1
812.1
(5,949.7)
23.2
284.6
895.2
(339.5)
0.5
(0.2)
(15,965.8)
(1,074.9)
(11.2)
(0.8)
193.3
230.4
555.7
207.1
0.3
0.1
(17,040.7)
(12.0)
423.7
-
-
-
388.8
(274.1)
(360.3)
(26.1)
(1.5)
273.1
775.5
775.4
125.4
(918.5)
3.6
43.9
29.8
35.6
65.4
-
2.0
(1.4)
(1.9)
(0.1)
<0.1
1.4
4.1
4.1
0.7
(4.8)
<0.1
0.2
0.2
0.2
0.4
-
0.4
Profit/(loss) for the year
762.8
0.4
(17,040.7)
(12.0)
423.7
65.4
Note:
Our aluminum fabrication segment is classified as discontinued operation and the operating results of aluminum fabrication segment are presented as discontinued
operation in the consolidated statement of comprehensive income for the year ended December 31, 2013.
No customer individually accounted for more than 10% of our total sales for the year ended December 31, 2015. Sales to Chinalco and its
subsidiaries, joint ventures, associates and other related parties accounted for approximately 6.1%, 6.6% and 11.4% of consolidated revenues from
continuing operations for the years ended December 31, 2013, 2014 and 2015, respectively. For information on related party transactions, see "Item 7
- Major Shareholders and Related Party Transactions - B. Related Party Transactions" and Note 36 to our audited consolidated financial statements.
Year Ended December 31, 2015 Compared with Year Ended December 31, 2014
Revenue
Our revenue from continuing operations decreased by 13.1% from RMB141,999.9 million for the year ended December 31, 2014 to RMB123,445.9,
primarily due to the decrease in selling price and sales volume during the year. Our average selling price of alumina decreased by 4.28% from
RMB2,498 per tonne in 2014 to RMB2,391 per tonne in 2015. Our average selling price of primary aluminum decreased by 9.9% from RMB13,546
per tonne in 2014 to RMB12,205 per tonne in 2015.
Cost of Sales
Our cost of sales from continuing operations decreased by 14.4% from RMB141,329.0 million for the year ended December 31, 2014 to
RMB120,927.1 million for the year ended December 31, 2015, primarily due to the decrease in production cost and sales volume of our principal
products. In 2015, due to decreases in power and raw material consumption per production unit and decreases in raw materials, fuel and electricity
prices, our average cost of alumina per tonne decreased by approximately 11.9% from that in 2014. Our production cost of primary aluminum
decreased by 8.4% from 2014 to 2015, primarily due to decreases in the prices of raw materials, fuel and electricity, and decreases in power and raw
material consumption per production unit. In particular, our average annual electricity price decreased by 18.8% from 2014 to 2015.
72
Selling and Distribution Expenses
Our selling and distribution expenses from continuing operations amounting RMB1,775.3 million for the year ended December 31, 2015, slightly
increased from RMB1,763.0 million for the year ended December 31, 2014.
General and Administrative Expenses
Our general and administrative expenses from continuing operations decreased by 51.8% from RMB4,838.4 million for the year ended December 31,
2014 to RMB2,334.1 million for the year ended December 31, 2015, primarily attributable to further control of various expenses taken in 2015, and
the costs of approximately RMB1,536.3 million relating to the provision for termination and early retirement benefits in respect of the early retired
employees and those with termination of labor relationship through negotiation made by the Group in 2014.
Research and Development Expenses
Our research and development expenses from continuing operations decreased by 42.5% from RMB293.8 million for the year ended December 31,
2014 to RMB168.8 million for the year ended December 31, 2015, primarily because we included the expenses on research and development of the
600kA-grade electrolytic aluminum technology in the research and development expenses in 2014, while we did not incur such research and
development expenses in 2015.
Impairment Loss on Property, Plant and Equipment
Our impairment loss on property, plant and equipment from continuing operations decreased from RMB5,679.5 million for the year ended December
31, 2014 to RMB10.0 million for the year ended December 31, 2015, primarily due to provisions of substantial impairment for certain property, plant
and equipment of our Company in 2014 that resulted from general market factors beyond our control, such as the continuous decrease of aluminum
prices and poor market conditions in the photovoltaic and silicon industries that we participate in, while we did not make such provisions in 2015.
Government Grants
Government grants increased from RMB824.0 million in the year ended December 31, 2014 to RMB1,768.9 million for the year ended December 31,
2015, primarily due to the increase of subsidies we received from the government for supporting the development of enterprises and implementation
of environmental protection projects.
Other Gains, Net
Our net other gains increased from RMB356.9 million for the year ended December 31, 2014 to RMB5,023.6 million, primarily due to the capital
operation, introduction of strategic investors and revitalization of stock assets carried out by us in 2015.
Finance Income
Our finance income from continuing operations decreased by 22.5% from RMB1,047.6 million for the year ended December 31, 2014 to RMB812.1
million for the year ended December 31, 2015, primarily attributable to a decrease in interest income of receivables from disposal of subsidiaries,
businesses and assets in 2013 due to a decrease in interest rate and size of the receivables.
Finance Costs
Our finance costs from continuing operations decreased by 11.6% from RMB6,730.6 million for the year ended December 31, 2014 to RMB5,949.7
million for the year ended December 31, 2015, primarily due to a decrease in interest rate and size of interest-bearing debts.
73
Share of Profits and Losses of Joint Ventures
Our share of profits and losses of joint ventures from continuing operations decreased by 74.1% from RMB89.5 million for the year ended December
31, 2014 to RMB23.2 million for the year ended December 31, 2015, primarily attributable to decrease in the profits of our joint ventures due to
general market conditions.
Share of Profits and Losses of Associates
Our share of profits and losses of associates from continuing operations decreased by 18.8% from RMB350.6 million for the year ended December
31, 2014 to RMB284.6 million for the year ended December 31, 2015, primarily attributable to the decrease of our shareholding in Jiaozuo Wanfang
resulting in the loss of control and a decrease in the profits of our associates due to general market conditions.
Income Tax
Our income tax expense from continuing operations was RMB1,074.9 million for the year ended December 31, 2014, whereas we had income tax
benefit of RMB230.4 million for the year ended December 31, 2015. This was mainly attributable to the fact that deferred tax assets from
accumulated losses and deductible temporary difference were written down during the same period of last year.
Results of Operations
As a result of the foregoing, we had net loss from continuing operations of RMB17,040.7 million for the year ended December 31, 2014, whereas we
had net profit from continuing operations of RMB423.7 million for the year ended December 31, 2014.
We had no profit/loss from discontinued operation for the year ended December 31, 2014 and 2015.
Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
Revenue
Our revenue from continuing operations decreased by 16.3% from RMB169,693.8 million for the year ended December 31, 2013 to RMB141,999.9
million for the year ended December 31, 2014, primarily due to the decrease in selling price and sales volume of our products that resulted from
overall competitive factors. Our average selling price of alumina decreased by 1.8% from RMB2,544 per tonne in 2013 to RMB2,498 per tonne in
2014. Our average selling price of primary aluminum decreased by 7.3% from RMB14,612 per tonne in 2013 to RMB13,546 per tonne in 2014.
Cost of Sales
Our cost of sales from continuing operations decreased by 15.3% from RMB166,895.3 million for the year ended December 31, 2013 to
RMB141,329.0 million for the year ended December 31, 2014, primarily due to the decrease in production cost and sales volume of our principal
products. In 2014, due to decreases in power and raw material consumption per production unit and decreases in raw materials, fuel and electricity
prices, our average cost of alumina per tonne decreased by approximately 5.2% from that in 2013. Our production cost of primary aluminum
decreased by 4% from 2013 to 2014, primarily due to decreases in the prices of raw materials, fuel and electricity, and decreases in power and raw
material consumption per production unit. In particular, our average annual electricity price decreased by 6.7% from 2013 to 2014.
Selling and Distribution Expenses
Our selling and distribution expenses from continuing operations decreased by 5.9% from RMB1,873.2 million for the year ended December 31,
2013 to RMB1,763.0 million for the year ended December 31, 2014, primarily due to the decrease in shipping and handling costs for our products, as
our sales volume decreased in 2014.
74
General and Administrative Expenses
Our general and administrative expenses from continuing operations increased by 63.8% from RMB2,953.2 million for the year ended December 31,
2013 to RMB4,838.4 million for the year ended December 31, 2014, primarily due to the costs related to the provision of termination and early
retirement benefits to early retired employees and those with termination of labor relationship through negotiation in 2014.
Research and Development Expenses
Our research and development expenses from continuing operations increased by 51.8% from RMB193.6 million for the year ended December 31,
2013 to RMB293.8 million for the year ended December 31, 2014, primarily because we included the expenses on research and development of the
600kA-grade electrolytic aluminum technology in the research and development expenses in 2014, while we did not included such expenses in the
research and development expenses in 2013.
Impairment Loss on Property, Plant and Equipment
Our impairment loss on property, plant and equipment from continuing operations increased from RMB501.2 million for the year ended December
31, 2013 to RMB5,679.5 million for the year ended December 31, 2014, primarily due to provisions of substantial impairment for certain property,
plant and equipment of our Company that resulted from general market factors beyond our control, such as the continuous decrease of aluminum
prices and poor market conditions in the photovoltaic and silicon industries that we participate in. The impairments primarily include (i) impairment
losses of RMB2,984 million for property, plant and equipment, provided for Chongqing branch with aggregate recoverable amount of RMB3,044
million and impairment loss of RMB110 million for property, plant and equipment for Henan Branch with the recoverable amount of RMB89 million
due to operating losses generated at some branches and indicators of impairment are identified for such branches as a result of continuous decrease in
the aluminum price, (ii) an aggregate impairment of RMB340 million for property, plant and equipment provided for the six subsidiaries of Ningxia
Energy related to photovoltaic industry due to depressed domestic photovoltaic market, with the aggregate recoverable amount of RMB1,382 million,
(iii) an aggregate impairment loss of RMB1,140 million for property, plant and equipment relating to silicon industry due to depressed silicon market,
with the aggregate recoverable amount of RMB466 million and (iv) an aggregate impairment loss of RMB1,106 million provided for property, plant
and equipment that were approved by our Board to be disposed in next year due to no longer being usable, with the aggregate recoverable amount of
RMB276 million.
Government Grants
Government grants amounting to RMB824.0 million in the year ended December 31, 2014, slightly increased from RMB805.9 million for the year
ended December 31, 2013.
Other Gains, Net
Our net other gains decreased from RMB7,399.3 million for the year ended December 31, 2013 to RMB356.9 million for the year ended December
31, 2014, primarily because we recognized investment gains from the acquisition of Ningxia Energy, losing control of Jiaozuo Wanfang, and disposal
of equity interest in a subsidiary in 2013, all of which were one-off in nature, which we did not recognize such gains in 2014. Our gains in 2014 were
primarily gains on future, forward and options contracts and gains on financial products, partially offset by losses on disposal of property, plant and
equipment and land use rights.
75
Finance Income
Our finance income from continuing operations increased significantly by 69.9% from RMB616.6 million for the year ended December 31, 2013 to
RMB1,047.6 million for the year ended December 31, 2014, due to an increase in interest income of receiveables from disposal of subsidiaries,
businesses and assets in 2013.
Finance Costs
Our finance costs from continuing operations increased by 14.8% from RMB5,864.5 million for the year ended December 31, 2013 to RMB6,730.6
million for the year ended December 31, 2014, primarily due to an increase in interest rate of interest-bearing debts.
Share of Profits and Losses of Joint Ventures
Our share of profits and losses of joint ventures from continuing operations decreased by 39.8% from RMB148.7 million for the year ended
December 31, 2013 to RMB89.5 million for the year ended December 31, 2014, primarily attributable to a decrease in the profits of all of our joint
ventures except for Guangxi Huayin and Ningxia Da Tang International Dam Power Co., Ltd. due to general market conditions.
Share of Profits and Losses of Associates
Our share of profits and losses of associates from continuing operations decreased by 31.5% from RMB511.9 million for the year ended December
31, 2013 to RMB350.6 million for the year ended December 31, 2014, primarily attributable to a decrease in the profits of all of our associates except
for Jiaozuo Wanfang and ABC-CA Fund Management Co., Ltd. due to general market conditions.
Income Tax
Our income tax expense from continuing operations was RMB339.5 million for the year ended December 31, 2013, whereas we had income tax
expense of RMB1,074.9 million for the year ended December 31, 2014. This was mainly attributable to the fact that deferred tax assets recognized in
previous years from accumulated losses and deductible temporary differences were written down in 2014.
Results of Operations
As a result of the foregoing, our net profit from continuing operations was RMB555.7 million for the year ended December 31, 2013, whereas we had
net loss from continuing operations of RMB17,040.7 million for the year ended December 31, 2014.
Our net profit from discontinued operations was RMB207.1 million for the year ended December 31, 2013, whereas we had no profit/loss from
discontinued operation for the year ended December 31, 2014.
As a result, we had net profit of RMB762.8 million for the year ended December 31, 2013, whereas we had net loss of RMB17,040.7 million for the
year ended December 31, 2014.
76
Discussion of Segment Operations
We account for our operations on a segmental basis, that is, separately prepare the accounting for our alumina, primary aluminum, trading, energy
and corporate and other operating segment. 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 4 to our
consolidated financial statements.
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,
2014
2015
2015
2015
2015
2013
RMB
RMB
RMB
(in millions, except percentage)
US$
Revenue from continuing operations
Alumina:
External sales
Inter-segment sales
6,703.7
27,276.2
5,853.7
24,852.3
6,632.3
26,501.5
1,023.9
4,091.1
Total
33,979.9
30,706.0
33,133.8
5,115.0
Primary aluminum:
External sales
Inter-segment sales
32,147.9
18,068.0
30,390.4
10,260.1
28,111.8
8,861.4
4,339.7
1,368.0
Total
50,215.9
40,650.5
36,973.2
5,707.7
%
%
5.4
22.8
3.9
15.7
19.6
16.7
5.2
21.9
Trading
External sales
Inter-segment sales
125,291.6
11,991.9
100,346.2
9,761.8
84,222.2
9,908.9
13,001.7
1,529.7
Total
137,283.5
110,108.0
94,131.1
14,531.4
Energy
External sales
Inter-segment sales
4,897.3
261.8
5,094.2
148.1
4,192.8
98.1
647.3
15.1
Total
5,159.1
5,242.3
4,290.9
662.4
Corporate and others
External sales
Inter-segment sales
653.3
135.2
315.4
32.5
286.8
14.9
Total
788.5
347.9
301.7
44.3
2.3
46.6
68.2
3.4
0.2
49.9
5.9
55.8
2.5
0.1
2.6
0.2
<0.1
0.2
Total Revenues from continuing operations
before inter-segment eliminations
Eliminations of inter-segment sales
Consolidated total revenues from
continuing operations
227,426.9
(57,733.1)
187,054.7
(45,054.8)
168,830.7
(45,384.8)
26,063.0
(7,006.2)
100
(26.9)
169,693.8
141,999.9
123,445.9
19,056.8
73.1
100.0
77
The following table sets forth segment results by segment for the periods indicated:
From continuing operations
Alumina:
Revenues
Cost and expenses(1)
Segment results(2)
Primary aluminum:
Revenues
Cost and expenses(1)
Segment results(2)
Trading:
Revenues
Cost and expenses(1)
Segment results(2)
Energy:
Revenues
Cost and expenses(1)
Segment results(2)
Corporate and others
Revenues
Year Ended December 31,
2013
RMB
2014
RMB
(in millions)
2015
RMB
2015
US$
33,979.9
(35,780.9)
30,706.0
(36,674.3)
33,133.8
(31,166.7)
5,115.0
(4,811.3)
(1,801.0)
(5,968.3)
1,967.1
303.7
50,215.9
(52,995.9)
40,650.5
(47,017.0)
36,973.2
(38,360.1)
5,707.7
(5,921.8)
(2,780.0)
(6,366.5)
(1,386.9)
(214.1)
137,283.5
(136,736.4)
110,108.0
(109,449.3)
94,131.1
(95,365.7)
14,531.3
(14,721.9)
547.1
658.7
(1,234.6)
(190.6)
5,159.1
(4,210.3)
5,242.3
(6,978.7)
4.290.9
(4,365.1)
662.4
(673.9)
948.8
(1,736.4)
(74.2)
(11.5)
788.5
347.9
301.7
46.6
Cost and expenses(1)
Segment results(2)
Elimination(3)
3,379.3
(2,625.4)
432.0
66.7
4,167.8
(2,277.5)
(187.5)
(275.8)
733.7
188.2
113.3
29.0
29.8
Total profit/(loss) from continuing operations
before income tax
895.2
(15,965.8)
193.3
(1)
(2)
(3)
Consist of cost of sales, operating expenses, other income, other gains, finance income, finance costs and others attributable to each segment.
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, 2015 Compared with Year Ended December 31, 2014
Alumina Segment
Revenues. Total revenue generated by the alumina segment increased by 7.9% from RMB30,706.0 million for the year ended December 31, 2014 to
RMB33,133.8 million for the year ended December 31, 2015, primarily due to increases in the sales volume of our alumina products, resulting from
general market conditions.
Revenue from external sales of alumina segment increased by 13.3% from RMB5,853.7 million for the year ended December 31, 2014 to
RMB6,632.3 million for the year ended December 31, 2015, primarily due to the increase in the sales volume of alumina.
Revenue from inter-segment sales of alumina segment increased from RMB24,852.3 million for the year ended December 31, 2014 to RMB26,501.5
million for the year ended December 31, 2015.
78
Cost and expenses. The total cost and expenses for our alumina segment decreased from RMB36,674.3 million for the year ended December 31, 2014
to RMB31,166.7 million for the year ended December 31, 2015, primarily due to a decrease in the prices of materials and energy and improvement in
energy efficiency during the manufacturing process.
Segment results. Segment loss for our alumina segment was RMB5,968.3 million for the year ended December 31, 2014, whereas we had segment
profit of RMB1,967.1 million for the year ended December 31, 2015. This was mainly attributable to the investment profit from our disposal of
Shanxi Huaxing in 2015, which was recognized at its fair value after revaluation and our control of various expenses resulting in a general decrease of
our operating costs in 2015. Meanwhile the segment results of our alumina segment in 2014 was influenced by the provision of substantial
impairment for certain long-term assets of the segment, provision of termination and early retirement benefits expenses in respect of the early retired
employees and those with termination of labor relationship through negotiation.
Primary Aluminum Segment
Revenues. Total revenue generated by the primary aluminum segment decreased from RMB40,650.5 million for the year ended December 31, 2014 to
RMB36,973.2 million for the year ended December 31, 2015, primarily due to decreases in the sales volume and the average selling price of our
primary aluminum products.
Revenue from external sales of the primary aluminum segment decreased from RMB30,390.4 million for the year ended December 31, 2014 to
RMB28,111.8 million for the year ended December 31, 2015, primarily due to decreases in the sales volume and average selling price of our primary
aluminum products.
Revenue from inter-segment sales of primary aluminum segment decreased by 13.6% from RMB10,260.1 million for the year ended December 31,
2014 to RMB8,861.4 million for the year ended December 31, 2015, primarily due to the decrease in the selling price and sales volume.
Cost and expenses. The total cost and expenses for our primary aluminum segment decreased by 18.4% from RMB47,017.0 million for the year
ended December 31, 2014 to RMB38,360.1 million for the year ended December 31, 2015, primarily due to the decreases in prices of raw materials
and electricity and sales volume of our primary aluminum products.
Segment results. Segment loss for our primary aluminum segment decreased by 78.2% from RMB6,366.5 million for the year ended December 31,
2014 to RMB1,386.9 million for the year ended December 31, 2015. This was mainly attributable to the net profit from disposal of non-current assets
in 2015 and the government subsidies. Meanwhile the segment results of our primary aluminum segment in 2014 was influenced by the provision of
substantial impairment for certain long-term assets of the segment, provision of termination and early retirement benefits costs in respect of the early
retired employees and those with termination of labor relationship through negotiation.
Trading Segment
Revenues. Total revenue generated by the trading segment decreased by 14.5% from RMB110,108.0 million for the year ended December 31, 2014 to
RMB94.131.1 million for the year ended December 31, 2015, primarily due to a decrease in volumes and the average selling price of major aluminum
products sold through our trading segment.
Revenue from external sales of the trading segment decreased by 16.1% from RMB100,346.2 million for the year ended December 31, 2014 to
RMB84,222.2 million for the year ended December 31, 2015. Revenue from external sales of trading segment for the year ended December 31, 2015
included RMB23,294.8 million of external sales of products produced by us and sold through the trading segment and RMB60,927.4 million of
external sales of commodities purchased from external sources including alumina, primary aluminum, carbon products, aluminum fabrication
products, coal products and non-ferrous metal products.
79
Revenue from internal sales of the trading segment slightly increased from RMB9,761.8 million for the year ended December 31, 2014 to
RMB9,908.9 million for the year ended December 31, 2015.
Cost and expenses. The total cost and expenses for our trading segment decreased by 12.9% from RMB109,449.3 million for the year ended
December 31, 2014 to RMB95,365.7 million for the year ended December 31, 2015, primarily due to the decrease in volumes and the average selling
price of major aluminum procured and sold through our trading segment.
Segment results. Segment profit for our trading segment was RMB658.7 million for the year ended December 31, 2014, whereas we incurred segment
loss for our trading segment of RMB1,234.6 million. This was mainly attributable to the decrease in the selling price of the products and provision of
impairment of inventory which has been made accordingly.
Energy Segment
Revenues. Total revenue generated by the energy segment decreased from RMB5,242.3 million for the year ended December 31, 2014 to
RMB4,290.9 million for the year ended December 31, 2015, primarily due to the general decrease in coal price and power production.
Revenue from external sales of the energy segment decreased from RMB5,094.2 million for the year ended December 31, 2014 to RMB4,192.8
million for the year ended December 31, 2015.
Revenue from internal sales of the energy segment decreased from RMB148.1 million for the year ended December 31, 2014 to RMB98.1 million for
the year ended December 31, 2015.
Cost and expenses. The total cost and expenses for our energy segment decreased from RMB6,978.7 million for the year ended December 31, 2014 to
RMB4,365.1 million for the year ended December 31, 2015.
Segment results. Segment loss was decreased from RMB1,736.4 million for the year ended December 31, 2014 to RMB74.2 million for the year
ended December 31, 2015. This was mainly attributable to the provision of substantial impairment loss for assets of silicon and photovoltaic industry
subsidiaries in 2014.
Corporate and other operating segment
Revenues. Revenue from the corporate and other operating segment decreased by 13.3% from RMB347.9 million for the year ended December 31,
2014 to RMB301.7 million for the year ended December 31, 2015.
Segment results. We had segment loss for the corporate and other operating segment of RMB2,277.5 million for the year ended December 31, 2014,
whereas we had segment profit of RMB733.7 million for the year ended December 31, 2015. This was mainly attributable to the investment profits
for disposal of Shanxi Huaxing and Jiaozuo Wanfang in 2015.
Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
Alumina Segment
Revenues. Total revenue generated by the alumina segment decreased by 9.6% from RMB33,979.9 million for the year ended December 31, 2013 to
RMB30,706.0 million for the year ended December 31, 2014, primarily due to decreases in the sales volume and the average selling price of our
alumina products, resulting from general market conditions.
Revenue from external sales of alumina segment decreased by 12.7% from RMB6,703.7 million for the year ended December 31, 2013 to
RMB5,853.7 million for the year ended December 31, 2014, primarily due to the decrease in the sales volume and selling price of alumina.
Revenue from inter-segment sales of alumina segment decreased from RMB27,276.2 million for the year ended December 31, 2013 to RMB24,852.3
million for the year ended December 31, 2014.
80
Cost and expenses. The total cost and expenses for our alumina segment increased slightly from RMB35,780.9 million for the year ended December
31, 2013 to RMB36,674.3 million for the year ended December 31, 2014.
Segment results. Segment loss for our alumina segment increased by 231.4% from RMB1,801.0 million for the year ended December 31, 2013 to
RMB5,968.3 million for the year ended December 31, 2014. This was mainly attributable to the provision of substantial impairment for certain long-
term assets of the segment, provision of termination and early retirement benefits expenses in respect of the early retired employees and those with
termination of labor relationship through negotiation.
Primary Aluminum Segment
Revenues. Total revenue generated by the primary aluminum segment decreased from RMB50,215.9 million for the year ended December 31, 2013 to
RMB40,650.5 million for the year ended December 31, 2014, primarily due to decreases in the sales volume and the average selling price of our
primary aluminum products.
Revenue from external sales of the primary aluminum segment decreased from RMB32,147.9 million for the year ended December 31, 2013 to
RMB30,390.4 million for the year ended December 31, 2014, primarily due to decreases in the sales volume and average selling price of our primary
aluminum products.
Revenue from inter-segment sales of primary aluminum segment decreased by 43.2% from RMB18,068.0 million for the year ended December 31,
2013 to RMB10,260.1 million for the year ended December 31, 2014. Besides the decrease in the selling price and sales volume, this was also
attributable to the change in respect of the sales to Chinalco's aluminum fabrication companies from internal trading revenue of 2013 to external
trading revenue due to the disposal of aluminum fabrication segments in 2013.
Cost and expenses. The total cost and expenses for our primary aluminum segment decreased by 11.3% from RMB52,995.9 million for the year
ended December 31, 2013 to RMB47,017.0 million for the year ended December 31, 2014, primarily due to the decreases in prices of raw materials
and electricity and sales volume of our primary aluminum products.
Segment results. Segment loss for our primary aluminum segment increased by 129.0% from RMB2,780.0 million for the year ended December 31,
2013 to RMB6,366.5 million for the year ended December 31, 2014. This was mainly attributable to the provision of substantial impairment for
certain long-term assets of the segment, provision of termination and early retirement benefits costs in respect of the early retired employees and those
with termination of labor relationship through negotiation, and the reduction in the selling price of our primary aluminum products of about 7%.
Trading Segment
Revenues. Total revenue generated by the trading segment decreased by 19.8% from RMB137,283.5 million for the year ended December 31, 2013 to
RMB110,108.0 million for the year ended December 31, 2014, primarily due to a decrease in volumes of major aluminum products sold through our
trading segment.
Revenue from external sales of the trading segment decreased by 19.9% from RMB125,291.6 million for the year ended December 31, 2013 to
RMB100,346.2 million for the year ended December 31, 2014. Revenue from external sales of trading segment for the year ended December 31,
2014 included RMB27,973.4 million of external sales of products produced by us and sold through the trading segment and RMB72,372.8 million of
external sales of commodities purchased from external sources including alumina, primary aluminum, carbon products, aluminum fabrication
products, coal products and non-ferrous metal products.
Revenue from internal sales of the trading segment decreased by 18.6% from RMB11,991.9 million for the year ended December 31, 2013 to
RMB9,761.8 million for the year ended December 31, 2014.
81
Cost and expenses. The total cost and expenses for our trading segment decreased by 20.0% from RMB136,736.4 million for the year ended
December 31, 2013 to RMB109,449.3 million for the year ended December 31, 2014, primarily due to the decrease in volumes of major aluminum
procured and sold through our trading segment.
Segment results. Segment profit for our trading segment increased by 20.4% from RMB547.1 million for the year ended December 31, 2013 to
RMB658.7 million for the year ended December 31, 2014.
Energy Segment
Revenues. Total revenue generated by the energy segment increased from RMB5,159.1 million for the year ended December 31, 2013 to RMB5,242.3
million for the year ended December 31, 2014, primarily due to an increase in the coal production by Ningxia Energy.
Revenue from external sales of the energy segment increased from RMB4,897.3 million for the year ended December 31, 2013 to RMB5,094.2
million for the year ended December 31, 2014.
Revenue from internal sales of the energy segment decreased from RMB261.8 million for the year ended December 31, 2013 to RMB148.1 million
for the year ended December 31, 2014.
Cost and expenses. The total cost and expenses for our energy segment increased from RMB4,210.3 million for the year ended December 31, 2013 to
RMB6,978.7 million for the year ended December 31, 2014, primarily due to the provision of substantial impairment loss for assets in the year of
2014.
Segment results. Segment profit for our energy segment was RMB948.8 million for the year ended December 31, 2013, whereas we had segment loss
of RMB1,736.4 million for the year ended December 31, 2014. This was mainly attributable to the provision of substantial impairment loss for assets
of silicon and photovoltaic industry subsidiaries in 2014.
Corporate and other operating segment
Revenues. Revenue from the corporate and other operating segment decreased by 55.9% from RMB788.5 million for the year ended December 31,
2013 to RMB347.9 million for the year ended December 31, 2014.
Segment loss. Segment profit for the corporate and other operating segment was RMB4,167.8 million for the year ended December 31, 2013, whereas
we had segment loss of RMB2,277.5 million for the year ended December 31, 2014, mainly because we recognized significant investment gains from
disposal and deemed disposal of subsidiaries in 2013, whereas we did not recognize such gains in 2014.
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, 2015, our current assets amounted to RMB64,169.2 million, representing a slight increase of 0.9% from RMB63,596.3 million as
of December 31, 2014. As of December 31, 2015, our trade and notes receivable amounted to RMB5,151.0 million, representing a decrease of 3.4%
from RMB5,332.5 million as of December 31, 2014. As of December 31, 2015, our restricted cash and cash and cash equivalents balance amounted
to RMB22,487.8 million, representing an increase of 25.4% from RMB17,932.2 million as of December 31, 2014, primarily due to an increase in
cash and cash equivalents. As of December 31, 2015, our other current assets amounted to RMB15,847.3 million, representing an increase of 21.6%
from RMB13,031.7 million as of December 31, 2014, primarily due to an increase in receivables from the disposal of equity interests in Shanxi
Huaxing and a property in Hong Kong to Chalco Assets Holdings in 2015, as well as our entrusted loans and loans receivables from third parties
increased in 2015.
82
As of December 31, 2015, our current liabilities amounted to RMB80,937.4 million, representing a decrease of 22.5% from RMB104,422.2 million as
of December 31, 2014. Our current liabilities decreased primarily due to the decrease of our interest-bearing loans and borrowings.
As of December 31, 2015, our net current liabilities amounted to RMB16,768.2 million, representing a decrease of 58.9% from RMB40,825.9 million
as of December 31, 2014. As of December 31, 2015, our current ratio (current assets/current liabilities) was 0.79, compared with 0.61 as of December
31, 2014. Our quick ratio ((current assets - inventories - prepayments)/current liabilities) was 0.50 as of December 31, 2015, compared with 0.36 as of
December 31, 2014.
We have considered our available sources of funds as follows:
-
-
-
Our expected net cash inflows from operating activities in 2016;
As of December 31, 2015, we had total banking facilities of approximately RMB138,392 million, of which RMB67,620 million had been
utilized and unutilized banking facilities amounted to RMB76,657 million as of December 31, 2015, among which, banking facilities of
approximately RMB63,877 million will be subject to renewal during the next 12 months from January 1, 2016. We 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.
We believe 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)/generated from investing activities
Net cash flows generated from/(used in) financing activities
Year Ended December 31,
2014
RMB
(in millions)
13,818.8
(4,921.3)
(4,016.5)
2015
RMB
7,231.5
2,952.6
(5,814.2)
2013
RMB
8,281.4
(7,686.1)
1,728.3
2015
US$
1,116.4
455.8
(897.6)
Net increase in cash and cash equivalents
2,323.6
4,881.0
4,369.9
674.6
Net Cash Flows Generated from Operating Activities
For the year ended December 31, 2015, we had cash inflows before changes in working capital but after adjustment for non-cash items and non-
operating cash outflows of RMB7,345.8 million and net cash generated from operation activities of RMB7,231.5 million. The adjustment consisted
primarily of non-cash and non-operating activities items such as interest expense of RMB5,949.7 million, gains on disposal of Shanxi Huaxing of
RMB2,588.1 million, gains on disposal of Jiaozuo Wanfang of RMB832.3 million, gains on disposal aluminum production buildings and properties
of Guizhou Branch of RMB1,364.8 million, gains on disposals of land use right of Gansu Hualu of RMB375.0 million, gains on disposal Hong Kong
property of RMB209.7 million, impairment loss of property, plant and equipment of RMB10.0 million and depreciation of property, plant and
equipment of RMB6,868.9 million and inflows of RMB162.8 million for changes in working capital and outflows of income tax of RMB277.1
million. The inflows from changes in working capital consisted primarily of (i) decrease in inventories of RMB1,954.2 million and (ii) increase in
other payables and accrued liabilities of RMB1,019.3 million, partially offset by an increase in other current assets of RMB769.2 million.
For the year ended December 31, 2014, we had cash inflows before changes in working capital but after adjustment for non-cash items and non-
operating cash outflows of RMB2,879.4 million and net cash generated from operation activities of RMB13,818.8 million. The adjustment consisted
primarily of non-cash and non-operating activities items such as interest expense of RMB6,720.1 million, impairment loss of property, plant and
equipment of 5,679.5 million and depreciation of property, plant and equipment of RMB6,967.8 million and inflows of RMB11,248.1 million for
changes in working capital and outflows of income tax of RMB308.7 million. The inflows from changes in working capital consisted primarily of (i)
increase in trade and notes payables of RMB3,296.9 million, (ii) decrease in other current assets of RMB3,158.1 million and (iii) increase in other
payables and accrued liabilities of RMB2,745.7 million, partially offset by an increase in restricted cash of RMB615.4 million.
83
For the year ended December 31, 2013, we had cash inflows before changes in working capital but after adjustment for non-cash items and non-
operating cash outflows of RMB6,554.5 million and net cash generated from operation activities of RMB8,281.4 million. The adjustment consisted
primarily of non-cash items such as interest expense of RMB6,134.5 million and depreciation of property, plant and equipment of RMB6,969.1
million and inflows of RMB2,080.0 million for changes in working capital and outflows of income tax of RMB353.1 million. The inflows from
changes in working capital consisted primarily of (i) increase in trade and notes payables of RMB5,784.1 million and (ii) increase in other payables
and accrued liabilities of RMB4,005.1 million, partially offset by increase in trade and notes receivables of RMB4,045.3 million and increase in other
current assets of RMB2,541.6 million.
Net Cash Flows Used in / Generated From Investing Activities
We had net cash flows generated from investing activities of RMB2,952.6 million for the year ended December 31, 2015, whereas the net cash flows
used in investing activities was RMB4,921.3 million for the year ended December 31, 2014. This was primarily due to the proceeds we received from
disposal of a joint venture and associate of RMB1,858.0 million and disposal of financial products of RMB4,410.8 million.
Net cash flows used in investing activities decreased from RMB7,686.1 million for the year ended December 31, 2013 to RMB4,921.3 million for the
year ended December 31, 2014, primarily due to the decrease of investment in property, plant and equipment and receipt of consideration of disposal
assets for the last year in the year. Our net cash used in investing activities for the year ended December 31, 2014 consisted primarily of purchase of
property, plant and equipment of RMB8,038.3 million and addition of financial products of RMB4,635.6 million, partially offset by proceeds
received from the disposal of subsidiaries, businesses and assets in 2013 and interest received from unpaid disposal proceeds of RMB7,095.1 million.
Net cash flows used in investing activities decreased from RMB23,153.1 million for the year ended December 31, 2012 to RMB7,686.1 million for
the year ended December 31, 2013, primarily due to the cash inflows related to disposal of discontinued operation, disposal of Alumina Production
Line of Guizhou branch and acquisition of Ningxia Energy, whereas we did not have such cash inflows in 2012. Our net cash used in investing
activities for the year ended December 31, 2013 consisted primarily of purchase of property, plant and equipment of RMB8,486.6 million, loans to
related parties of RMB1,145.3 million and investments in joint ventures and associate of RMB1,841.3 million.
84
Net Cash Flows Used in / Generated from Financing Activities
Net cash flows used in financing activities of RMB5,814.2 million for the year ended December 31, 2015, representing a increase of net cash
outflows of RMB1,797.7 million from the net outflows of RMB4,016.5 million for the year ended December 31, 2014, mainly attributable to increase
in cash outflows for repayment of short-term bonds and medium-term notes. Our net cash used in financing activities for the year ended December
31, 2015 consisted primarily of repayments of short-term and long-term loans of RMB59,196.8 million, repayments of short-term bonds and medium-
term notes of RMB32,000.0 million and interest payments of RMB6,041.8 million, partially offset by drawdown of short-term and long-term loans of
RMB55,456.2 million, issuance of A shares of RMB7,897.5 million, and issuance of senior perpetual securities of RMB2,000.0 million.
Net cash flows used in financing activities of RMB4,016.5 million for the year ended December 31, 2014, representing a decrease of cash inflows of
RMB5,744.8 million from the net inflows of RMB1,728.3 million for the year ended December 31, 2013, mainly attributable to the continuous
improvement of cash flows from operating activities and decrease in financing scale and repayment of interest-bearing loans and borrowings
accordingly. Our net cash used in financing activities for the year ended December 31, 2014 consisted primarily of repayments of short-term and
long-term loans of RMB70,276.8 million, repayments of short-term bonds and medium-term notes of RMB26,700.0 million and interest payments of
RMB6,763.2 million, partially offset by drawdown of short-term and long-term loans of RMB60,417.6 million, issuance of short-term bonds and
medium-term notes of RMB34,893.0 million, and issuance of senior perpetual securities of US$400 million, equivalent to RMB2,461.8 million.
Net cash flows generated from financing activities decreased significantly from RMB20,429.0 million for the year ended December 31, 2012 to
RMB1,728.3 million for the year ended December 31, 2013, primarily due to the increase in the repayments of short-term and long-term loans. Our
net cash generated from financing activities for the year ended December 31, 2013 consisted primarily of drawdown of short-term and long-term
loans of RMB98,315.7 million, issuance of short-term bonds and medium-term notes of RMB22,936.1 million and issuance of senior perpetual
securities of US$350 million, equivalent to RMB2,122.6 million, partially offset by repayments of short-term and long-term loans of RMB90,666.0
million and repayments of short-term bonds and medium-term notes of RMB24,500.0 million.
Loans and Borrowings
During the past years, we engaged in debt financing to fund our operations and business expansion. As of December 31, 2015, our gearing ratio (net
debts/total capital attributable to owners of the parent as defined in Note 37.3 to our audited consolidated financial statements) was approximately
75% as compared with approximately 83% as of December 31, 2014.
Short-term loans and borrowings
Short-term bank and other loans
Short-term bonds
Current portion of finance lease payable
Current portion of medium-term notes
Current portion of long-term bank and other loans
As of December 31,
2014
RMB
2015
RMB
(in millions)
40,984.4
23,536.4
269.5
3,995.8
6,572.9
34,749.3
6.663.7
1.511.2
6.896.2
4.602.5
2015
US$
5,364.4
1,028.7
233.3
1,064.6
710.5
Sub-total
75,359.0
54.422.9
8,401.5
Long-term loans and borrowings
Finance lease payable
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
Current portion of finance lease payable
Sub-total
Total borrowings
1,429.4
31,946.3
22,231.7
(3,995.8)
(6,572.9)
(269.5)
6,656.0
32,367.6
27.712.0
(6,896.2)
(4.602.5)
(1,511.2)
1,027.5
4,996.7
4,278.0
(233.3)
(1,064.6)
(710.5)
44,769.2
53,725.7
8,293.8
120,128.2
108,148.6
16,695.3
Less: Bank balances and cash
(17,932.2)
(22,487.9)
(3,471.5)
Net
102,196.0
85,660.7
13,223.8
85
Bank and Other Loans
The weighted average annual interest rate of short-term bank and other loans for the year end December 31, 2015 was 5.12%. 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, 2015 was 5.51%. The following table
sets forth the aggregate maturities of our outstanding long-term bank and other loans as of December 31, 2015:
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over five years
Total
As of December 31, 2015
RMB
US$
(in millions)
4,602.5
4,865.5
13,785.7
9,113.9
710.5
751.1
2,128.2
1,406.9
32,367.6
4,996.7
As of December 31, 2015, we had secured loans of RMB16,405 million (including long-term and short-term loans). As of December 31, 2015, long-
term loans and borrowings amounting to RMB11,266 million (current portion of RMB882 million and non-current portion of RMB10,384 million)
were secured by the contractual right to charge users for electricity generated and no short-term loans and borrowings were secured by letters of
credit.
As of December 31, 2015, we had foreign currency denominated loans with principal amount of RMB23 million in Japanese Yen and RMB3,711
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, 2015:
2007 long-term bonds
2011 medium-term notes
2015 medium-term notes
2015 medium-term notes
2012 Ningxiz Energy medium-term bonds
2012 medium-term bonds
2013 medium-term bonds
2013 medium-term bonds
2014 medium-term bonds
2015 medium-term bonds
2015 medium-term bonds
Total
Face value/
maturity
Effective
interest rate
December 31,
2015
(RMB in thousand)
2,000,000/2017
4,900,000/2016
3,000,000/2018
1,500,000/2018
400,000/2017
3,000,000/2017
3,000,000/2018
2,000,000/2016
3,000,000/2017
3,000,000/2018
2,000,000/2018
4.64%
6.03%
5.53%
5.01%
6.06%
5.77%
5.99%
5.99%
7.35%
6.11%
6.08%
1,996,270
4,898,376
2,981,028
1,487,994
400,000
2,992,788
2,987,271
1,997,805
2,988,140
2,993,630
1.988,550
27,711,852
The following table sets forth face value, maturity, effective interest rate and outstanding amount of our outstanding short-term bonds as of December
31, 2015:
Face value/
maturity
Effective
interest rate
December 31,
2015
(RMB in thousand)
3,000,000/2016
3,000,000/2016
600,000/2016
4.15%
3.85%
3.35%
3,045,981
3,017,741
600,000
6,663,722
2015 short-term bonds
2015 short-term bonds
2015 short-term bonds
Total
Senior Perpetual Capital Securities
86
On October 22, 2013, Chalco Hong Kong Investment Company Limited (the "Issuer") issued US$350 million senior perpetual securities (the "2013
Senior Perpetual Securities") at initial interest rate of 6.625%. The proceeds from issuance of the 2013 Securities after deduction of issuance costs is
RMB2,122.6 million, and has been on-lent to us and any of our subsidiaries for general corporate use. Coupon payments of 6.625% per annum on the
2013 Senior Perpetual Securities are paid semi-annually in arrears from October 29, 2013 and may be deferred at our discretion unless, during the six-
month period ending on the day before the relevant scheduled coupon payment date, we, the Issuer or Chalco Hong Kong has declared or paid a
discretionary dividend, distribution or other discretionary payment on or in respect of, or has at its discretion repurchased, redeemed or otherwise
acquired, any of its securities of lower or equal rank, subject to certain exceptions. The 2013 Senior Perpetual Securities have no fixed maturity and
are callable only at our option on or after October 29, 2018 at their principal amounts together with any accrued, unpaid or deferred coupon interest
payments. After October 29, 2018, the coupon rate will be reset every five calendar years to a rate of interest of expressed as a percentage per annum
equal to the sum of (a) the initial spread of 5.312 per cent, (b) the U.S. Treasury Rate, and (c) a margin of 5.00 per cent per annum. While any coupon
interest payments are unpaid or deferred, we, Chalco Hong Kong, and the Issuer shall not, subject to certain exceptions, declare or pay any
discretionary dividends or make distributions or similar discretionary payments in respect of, or at its discretion repurchase, redeem or otherwise
acquire for any consideration any of its securities of lower or equal rank.
On April 10, 2014, the Issuer issued US$400 million senior perpetual securities at an initial interest rate of 6.25% ("2014 Senior Perpetual
Securities"). The proceeds from issuance of 2014 Senior Perpetual Securities after deduction of issuance costs is RMB2,461.8 million. The proceeds
will be on-lent to us and any of our subsidiaries for general corporate use. Coupon payments of 6.25% per annum on the 2014 Senior Perpetual
Securities are paid semi-annually on April 29 and October 29 in arrears from April 17, 2014 and may be deferred at the discretion of the Group. The
first coupon payment date was April 29, 2014. The 2014 Senior Perpetual Securities have no fixed maturity and are callable only at our option on or
after April 17, 2017 at their principal amounts together with any accrued, unpaid or deferred coupon interest payments. After April 17, 2017, the
coupon rate will be reset to a percentage per annum equal to the sum of (a) the initial spread of 5.423 per cent, (b) the U. S. Treasury Rate, and (c) a
margin of 5.00 per cent. per annum. While any coupon interest payments are unpaid or deferred, we, the subsidiary guarantors and the Issuer cannot
declare or pay dividends or make distributions or similar discretionary payments in respect of, or repurchase, redeem or otherwise acquire any
securities of lower or equal rank.
On October 27, 2015, we issued RMB2,000 million perpetual medium-term notes at an initial distribution rate of 5.50% (the "2015 Perpetual
Medium-term Notes"). The proceeds from issuance of the 2015 Perpetual Medium-term Notes is RMB2,000 million. The proceeds will be used for
repayments of interest-bearing loans and borrowings. Coupon payments of 5.50% per annum on the 2015 Perpetual Medium-term Notes are paid
annually in arrears from October 29, 2015 and may be deferred at our discretion. The 2015 Perpetual Medium-term Notes have no fixed maturity and
are callable only at our option on October 29, 2020 or any coupon distribution date after October 29, 2020 at their principal amounts together with
any accrued, unpaid or deferred coupon distribution payments. The coupon distribution rate will be reset to a percentage per annum equal to the sum
of (a) the initial spread of 2.61 per cent, (b) the China Treasury Rate, and (c) a margin of 300 Bps every five years after October 29, 2020. While any
coupon distribution payments are unpaid or deferred, the headquarters of the Company cannot declare or pay dividends to shareholders or decrease
the share capital, or make material fixed asset investments of the headquarters of the Company.
87
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 continuing operations and discontinued operation for the years ended
2013, 2014 and 2015, and the capital expenditures of each segment as a percentage of our total capital expenditures for the periods indicated:
Continuing operations
Alumina
Primary aluminum
Trading
Energy
Corporate and others
Discontinued operation
Year Ended December 31
2013
2014
2015
RMB
%
RMB
%
RMB
%
(in millions, except percentage)
4,217.7
3,316.5
46.3
2,059.9
130.6
135.3
42.6
33.5
0.5
20.8
1.3
1.3
3,518.0
2,323.1
119.0
2,373.9
82.0
−
41.8
27.6
1.4
28.2
1.0
−
5,117.3
1,997.2
17.5
2,411.6
144.1
-
52.8
20.6
0.2
24.9
1.5
-
Total
9,906.3
100.0
8,416.0
100.0
9,687.7
100.0
88
In 2015, we spent approximately RMB9,688 million of our capital expenditures (excluding equity interest investments) primarily in construction of
mining areas, capacity expansion and technology upgrading, energy saving and consumption reduction, environmental governance, resources
acquisition and technological research and development.
Our capital expansion plan for 2016 requires a total of approximately RMB9.0 billion in capital expenditures for construction of mining areas,
capacity expansion and technology upgrading, which will be spent in Sanmenxia mining project and Wangwa mining project.
As of December 31, 2015, our Group's contractual but not provided capital commitment to fixed assets investment amounted to RMB7,771 million.
As of December 31, 2015, our commitment under operating leases amounted to RMB17,817.3 million, of which amount payable within one year was
RMB561.0 million, amount payable from one to five years was RMB2,167.7 million and amount payable after five years was RMB15,088.6 million.
As of December 31, 2015, our commitments to make capital contribution to our associates and joint ventures amounted to RMB1,737.3 million,
comprised of the capital contributions of RMB752.5 million to Guangxi Huazheng Aluminum Co., Ltd., RMB320 million to Huaneng Ningxia
Energy Co., Ltd., RMB244.8 million to Yinxing Power, RMB370 million to China rare-earth, RMB22 million to Guangxi Huazhong and RMB28
million to Shanxi Chalco Taiyue New Materials Co., Ltd., respectively.
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 Zhengzhou Institute and
technology centers at our plants. The Zhengzhou 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.
Our total expenditure for research and development for continuing operations was approximately RMB193.6 million, RMB293.8 million and
RMB168.8 million for 2013, 2014 and 2015, 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, 2015 to December 31, 2015 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.
89
F.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations and commercial commitments for the periods indicated as of December 31, 2015:
s
Finance lease payable, including current portion
Long-term bank and other loans, including
current portion
Long-term bonds
Medium-term notes and bonds, including
current portion
Short-term bonds
Short-term bank and other loans
Interest payables for borrowings
Financial liabilities at fair value through profit or loss
Financial liabilities included in other current
payables and accrued liabilities
Financial liabilities included in other
non-current liabilities
Trade and notes payables
Payment due by period
Total Within 1 year
1 to 2 years
2 to 5 years
Thereafter
(RMB in millions)
7,369.8
32,367.6
2,000.0
25,800.0
6,600.0
34,749.3
15,814.1
161.7
1,815.7
4,602.5
−
6,900.0
6,600.0
34,749.3
5,489.3
161.7
7,712.3
7,712.3
973.4
14,506.1
-
14,506.1
1,803.1
4,865.5
2,000.0
6,400.0
-
-
2,057.9
-
-
150.3
-
3,751.0
13,785.7
-
12,500.0
-
-
3,110.3
-
-
437.1
-
−
9,113.9
−
−
5,156.6
-
-
386.0
-
Subtotal
148,054.3
82,536.9
17,276.8
33,584.1
14,656.5
Capital commitments
Commitments for capital contribution
7,770.9
1,737.3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Total
157,562.5
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 fifth session of our Board currently consists of nine directors, including three executive directors, three non-executive director 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, 2015
and up to date of this Annual Report.
90
Name
Age
Positions with the Company
Executive Directors(1)
Ge Honglin(2)
Luo Jianchuan(3)
Ao Hong
Liu Xiangmin
Jiang Yinggang
Non-executive Directors(4)
Yu Dehui
Liu Caiming
Wang Jun
Independent Non-executive Directors
Ma Si-hang, Frederick(5)
Wu Zhenfang(6)
Wu Jianchang(7)
Chen Lijie
Hu Shihai
Lie-A-Cheong Tai Chong
59
52
54
53
52
56
53
50
64
64
76
61
61
56
Executive Director and Chairman of the Board (resigned)
Executive Director and President (resigned)
Executive Director and President
Executive Director and Senior Vice President
Executive Director and Vice President
Non-executive Director and Chairman of the Board
Non-executive Director
Non-executive Director
Independent Director (resigned)
Independent Director (resigned)
Independent Director (resigned)
Independent Director
Independent Director
Independent Director
(1)
(2)
(3)
(4)
(5)
(6)
Mr. Ge Honglin resigned from the positions of executive Director and Chairman of the Board on February 16, 2016. As of the date of this annual report, we had three
executive Directors.
Due to other work commitment, Mr. Ge Honglin resigned from the positions of executive Director and chairman of the Company, with effect from February 16, 2016.
On February 16, 2016, Mr. Ao Hong was elected by more than half of the Directors of the Company to perform the duties of the chairman of the Board (including but
not limited to convening and presiding over meetings of the Board, presiding over the general meetings and executing relevant documents, etc.) during the period after
the resignation of Mr. Ge until the new Chairman of the Board was elected by the Company in April 2016.
Due to other work commitment, Mr. Luo Jianchuan resigned from the positions of executive Director and president of the Company, with effect from November 20,
2015. Mr. Ao was appointed as the president of the Company at the 24th meeting of the fifth session of the Board of the Company on November 20, 2015.
Mr. Yu Dehui was elected as a non-executive Director at the 2016 First Extraordinary General Meeting on April 8 2016 , and elected as the Chairman of our Board at
the 31st meeting of the fifth session of the Board of the Company on the same day. As of the date of this annual report, we had three non-executive Directors.
Due to other business commitment, Mr. Ma Si-hang, Frederick resigned from the position of independent non-executive Director of the Company, with effect from
December 29, 2015.
Mr. Wu Zhenfang was subject to an investigation by the competent authority on April 2, 2015. Mr. Wu Zhengfang promptly resigned from the position as independent
non-executive director and member of the audit committee, member of the nomination committee, chairman of the remuneration committee and member of the
developing and planning committee of the Board on April 2, 2015.
(7)
Due to his age, Mr. Wu Jianchang resigned from the position of independent director of the Company, with effect from February 26, 2015.
Executive Directors
Ao Hong, aged 54, serves as an executive director and the president of our Company. Mr. Ao graduated from Central South University with a
doctoral degree in management science and engineering. He is a professor-grade senior engineer with over 30 years of work experience in enterprises
of non-ferrous metals industry. He successively served as the deputy dean of Beijing General Research Institute for Non-ferrous Metals and
concurrently the chairman of GRINM Semiconductor Materials Co., Ltd., the chairman of Guorui Electronics Co., Ltd., the chairman of Guowei
Silver Anticorrosive Materials Company in Hong Kong and a deputy general manager of Aluminum Corporation of China ("Chinalco"). During this
period, he also successively served as the chairman of the supervisory committee of the Company, the dean of Chinalco Research Institute of Science
and Technology and the chairman of China Rare Earth Co., Ltd.. Mr. Ao has been serving as the President of the Company since 20 November 2015,
and as an executive Director of the Company since 29 December 2015.
91
Liu Xiangmin, aged 53, serves an executive director on our Board and our senior vice president. He has been employed by us since 2001. Mr. Liu
graduated from Central South University of Industry in 1982, majoring in non-ferrous metallurgy; he has a doctorate degree from Central South
University and is a professor-grade senior engineer. He has long engaged in non-ferrous metal metallurgy and corporate management and has
accumulated extensive and professional experience. Mr. Liu had previously served as the 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 our vice president.
Jiang Yinggang, aged 52, has served as an executive director on our Board and has been our vice president since 2007. He has been employed by us
since 2001. On June 27, 2013, Mr. Jiang was elected as an executive director on our Board. Graduated in 1983 from Central South University of
Industry majoring in the metallurgy of nonferrous metals, Mr. Jiang holds a master degree in metallurgy engineering of non-ferrous metals and is a
professor-grade senior engineer. He has long engaged in production operation and corporate management of production enterprises and has extensive
professional experience. He formerly served as deputy head and then head of Corporate Management Department of Qinghai Aluminum Plant; head
of Qinghai Aluminum Smelter; deputy general manager and general manager of Qinghai Aluminum Company Limited, and general manager of our
Qinghai branch.
Non-Executive Directors
Yu Dehui, aged 56, has been serving as the chairman of our Board and a non-executive director on our Board since April 8, 2016. He graduated from
Ecole des Hautes Etudes en Sciences Sociales (EHESS) and School of Economics of Paris University Nanterre, majoring in development economics,
with a doctoral degree in economics, and he has been a professor. Mr. Yu has extensive experience in various aspects such as energy, non-ferrous
metals, economics and management. He successively served as the general director for technology of SPEIC, the general director of the department of
science, technology and standards of the State Environmental Protection Administration. And he had also served as a deputy mayor of Baotou City, a
vice governor of the government of the Inner Mongolia Autonomous Region, a vice president of China Power Investment Corporation, and a vice
president of State Power Investment Corporation. Mr. Yu currently also serves as the president, and a director of the board, of Aluminum Corporation
of China.
Liu Caiming, aged 53, serves as a non-executive Director on our Board. He has been employed by us since 2011. He resigned in 2014 and was re-
appointed in 2015. He graduated from Fudan University majoring in political economics and obtained a doctoral degree in Economics. He is a senior
accountant and engaged in the financial and accounting industry for more than 30 years. Mr. Liu has extensive experience in corporate management
and financial management. He had subsequently 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
Nonferrous Construction Group Limited, director and deputy general manager of China Non-ferrous Metal Industry's Foreign Engineering and
Construction Co., Ltd., and deputy general manager of China Nonferrous Metal Mining and Construction (Group) Co., Ltd. Mr. Liu has also acted as
titular deputy head of Department of Finance of Yunnan Province, director of SASAC of Yunnan Provincial People's Government and assistant to the
governor of Yunnan Province and director of SASAC Yunnan. From January 2007 to February 2011, Mr. Liu acted as deputy general manager of
Chinalco, during which he acted as chairman of Yunnan Copper Industry (Group) Co., Ltd., and president of China Copper Co., Ltd. He acted as our
senior vice president and chief financial officer of since February 23, 2011 and as our executive director of since May 31, 2011. Mr. Liu resigned as
our executive director, chief financial officer and senior vice president and was re-designated as non-executive Director on March 8, 2013. He
resigned as our non-executive director on March 18, 2014 and was re-appointed as non-executive director on our Board on February 26, 2015.
Wang Jun, aged 50, has been serving as a non-executive director on our Board since June 27, 2013. Mr. Wang graduated from Huazhong Institute of
Engineering with a degree of industrial and civil construction. He has extensive experience in financial and corporate management. Mr. Wang
formerly served as engineer in the engineering department of Babcock & Wilcox Beijing Company Ltd.; deputy manager of the real estate
development department of China Yanxing Company; senior deputy manager of equity management department and senior manager of business
management department, senior manager, deputy general manager, general manager of custody and settlement department in China Cinda Asset
Management Co., Ltd and general manager of the equity management department of China Cinda Asset Management Co. Ltd. Mr. Wang currently
serves as the business director of China Cinda Asset Management Co., Ltd.
92
Independent Non-Executive Directors
Chen Lijie, aged 61, has been serving as an independent non-executive Director since February 26, 2015. Ms. Chen graduated from Renmin
University of China Law School and obtained a doctoral degree in Laws. Ms. Chen Lijie has more than 30 years of experience in laws. She
successively acted as director and deputy director of Commercial Affairs of the Office of Legislative Affairs of the State Council, deputy director of
Department of Policies and Laws of the National Economic and Trade Commission, patrol officer of Bureau of Policies, Laws and Regulations of
SASAC and chief legal consultant of China Mobile Communications Corporation.
Hu Shihai, aged 61, has been serving as an independent non-executive Director since June 25, 2015. Mr. Hu was graduated from Shanghai Jiao Tong
University majoring in thermal energy engineering. He is a professor-level senior engineer with more than 40 years of working experience in power
industry. Mr. Hu has extensive experience in corporate management and technical management and successively served as the supervisor, director
and deputy head of the Huaneng Shanghai Shidongkou No. 2 Power Plant, deputy director of the preparatory office of the Shanghai Waigaoqiao No.
2 Power Plant, manager of the production department and assistant to the general manager of Huaneng Power International, Inc. and assistant to the
general manager and director of the safety production department, and chief engineer of China Huaneng Group.
Lie-A-Cheong Tai Chong, David, aged 56, has been serving as an independent non-executive Director since December 29, 2015. He is honored with
the Silver Bauhinia Star (SBS), Officier de l'Ordre National du Merite and Justice of Peace. Mr. Lie is the executive chairman of Newpower
International (Holdings) Co., Ltd. and China Concept Consulting Ltd. He was selected as a member of the National Committee of the 8th, 9th, 10th
and 11th Chinese People's Political Consultative Conference since 1993. From 2007 to 2013, he acted as a panel convener cum member of the
Financial Reporting Review Panel of Hong Kong Special Administrative Region ("HKSAR"). Mr. Lie is currently the honorary consul of the
Hashemite Kingdom of Jordan in the HKSAR, the chairman of the Hong Kong-Taiwan Economic and Cultural Cooperation and Promotion Council,
the chairman of the Hong Kong-Taiwan Business Co-operation Committee, a member of the Commission on Strategic Development of the HKSAR,
a standing committee member of the China Overseas Friendship Association, and a member of the Hong Kong General Chamber of Commerce
(HKGCC). Currently, Mr. Lie is also an independent non-executive director of Herald Holdings Limited, a listed company in Hong Kong.
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 currently comprise Mr. Zhao Zhao, Mr. Yuan Li and Mr. Wang Jun. Mr. Zhao Zhao was elected at
the 2012 annual general meeting held on June 27, 2013 with a term of office expiring at the conclusion of the annual general meeting for the year
2015. Mr. Yuan Li's terms of office was renewed on June 27, 2013. Mr. Zhang Zhankui resigned from the position of supervisor of the Company,
with effect from November 13, 2015. Mr. Zhang Zhankui was appointed as the chief financial officer of the Company on November 13, 2015. Mr.
Wang Jun was elected at the 2015 second extraordinary general meeting held on December 29, 2015.
The table and discussion below set forth certain information concerning our supervisors who served on our supervisory committee during the year
ended December 31, 2015 and up to the date of this Annual Report.
Name
Age
Positions with the Company
Zhao Zhao
Yuan Li
Zhang Zhankui(1)
Wang Jun
53
57
57
45
Chairman of Supervisor Committee
Supervisor
Supervisor (resigned)
Supervisor
(1)
Due to work commitment, Mr. Zhang Zhankui resigned from the position of supervisor of the Company, with effect from November 13, 2015. Mr. Zhang Zhankui was
appointed as the chief financial officer of the Company on November 13, 2015 and the secretary of the Board on March 17, 2016.
93
Zhao Zhao, aged 53, has been serving as the chairman of our supervisory committee since June 27, 2013. Mr. Zhao obtained a bachelor's degree
majoring in roadway engineering from Department of Civil Engineering of Nanjing Institute of Engineering and a Ph.D degree in world economics
from Beijing Normal University, School of Economics and Management. Mr. Zhao is a senior political engineer. He has extensive experience in,
among others, mass work among youth, supervision and discipline inspection, auditing and etc. He successively served as assistant editor and staff in
People's Communication Press, full-time deputy secretary of Y.L.C. (Youth League Committee) directly under Ministry of Communications, head of
publicity department of Y.L.C of Central Government institutions, head of office of Youth League Working Committee of Central Government
institutions, standing deputy head of Guoqing Productivity Center, deputy secretary (assistant inspector) of Youth League Working Committee of
Central Government institutions, deputy head of mass work department of Central Enterprises Working Committee, deputy secretary of Central
Enterprises Youth League Working Committee, deputy head of Bureau of mass work under State-owned Assets Supervision and Administration
Commission of the State Council, secretary of Central Enterprises Youth League Working Committee and president of Central Enterprises Youth
Union.
Yuan Li, aged 57, serves as a supervisor of the Company through employees' election. Mr. Yuan has been serving our Company since 2001 and has
extensive administrative and managerial experience. He had successively served as the manager of the General Management Office, deputy head of
the office and head of Department of Research and Investigation of China Non-ferrous Metals Industry Corporation, head of the Secretariat and an
assistant inspector of the State Bureau of Non-ferrous Metals Industry; and deputy head of the Department of Political and Labour Affairs and Head
of the Political Party Department of Chinalco and the general manager of our corporate culture department.
Wang Jun, aged 45, has been serving as a supervisor of Supervisory Committee of the Company since December 29, 2015. He obtained a master's
degree in business administration from Tsinghua University. He is a senior accountant, and has extensive experience in corporate financial
accounting, fund management and auditing. Mr. Wang successively served as the deputy manager and manager of treasure management division of
finance department of Aluminum Corporation of China, the general representative of the Peru office of Aluminum Corporation of China, a director
and senior auditing manager of Minera Chinalco Perú S.A., the chief financial officer and the manager of finance department of Chinalco Resources
Corporation, the chief financial officer of China Aluminum International Engineering Co., Ltd., an executive director, the chief financial officer and
the secretary to the board of directors of China Aluminum International Engineering Corporation Limited. Mr. Wang currently serves as the deputy
chief accountant, general manager of finance department and capital operating department of Aluminum Corporation of China. He is also a director of
China Aluminum International Engineering Corporation Limited and a director and the president of Aluminum Corporation of China Overseas
Holdings Limited.
Senior Management
The table and discussion below set forth certain information concerning other member of senior management during the year ended December 31,
2015 and up to the date of this Annual Report.
Name
Age
Positions with the Company
Qiao Guiling(1)
Xie Weizhi(2)
Xu Bo(3)
Zhang Zhankui(4)
47
51
51
57
Vice President (resigned)
Vice President and Chief Financial Officer (resigned)
Vice President (in office) and Secretary to the Board (resigned))
Chief Financial Officer and Secretary to the Board
(1)
(2)
(3)
(4)
Due to other work commitment, Ms. Qiao Guilin resigned from the position of vice president of the Company, with effect from February 16, 2016.
Due to other work commitment, Mr. Xie Weizhi resigned from the position of vice president and chief financial officer of the Company, with effect from November 13,
2015.
Due to other work commitment, Mr. Xu Bo resigned from the positions of the secretary of the Board, with effect from March 17, 2016. Mr. Xu Bo still serves as a vice
president of the Company.
Due to work commitment, Mr. Zhang Zhankui resigned from the position of supervisor of the Company, with effect from November 13, 2015. Mr. Zhang Zhankui was
appointed as the chief financial officer of the Company on November 13, 2015 and the secretary of the Board on March 17, 2016.
94
Xu Bo, aged 51, vice president of the Company, serving the Company since March 2011. Mr. Xu graduated from North China University of Water
Resources and Electric Power, majoring in hydraulic structure engineering, and obtained a master's degree in engineering. He also obtained a Ph.D.
degree in economics from Renmin University of China. He is a senior engineer. Mr. Xu has extensive experience in mergers and acquisitions, capital
operation, corporation management, and enjoys a high reputation in energy sectors such as coal and electric power. He formerly served as deputy
head of hydropower and operations department and office manager of Power and Machinery Bureau; general manager and assistant to the head of the
bureau in Steel Structure Department of China Huadian Power Station Equipment Engineering Group Corporation; deputy general manager of China
Huadian Power Station Equipment Engineering Group Corporation, standing deputy general manager and general manager of China Huadian
Engineering Co., Ltd.; deputy general manager of Huadian Coal Industry Group Company Limited; head of China Huadian Corporation Shaanxi
Office; general manager of China Huadian Corporation Shaanxi Branch; executive director and general manager of Huadian Shaanxi Energy
Company, the assistant to the president of the Company and executive-director and general manager of Chalco Energy Co., Ltd. Mr. Xu has served as
the Company Secretary (Secretary to the Board) since 9 May 2013, and resigned on 17 March 2016.
Zhang Zhankui, aged 57, has been working as the chief financial officer of the Company since November 13, 2015, and the Company Secretary
(Secretary to the Board) since 17 March 2016. Mr. Zhang is a postgraduate in economic management and a senior accountant. He has extensive
experience in corporate financial accounting, fund management and auditing. Mr. Zhang had formerly served as the head of the Finance Division and
then the head of the Audit Division of China General Design Institute for Non-ferrous Metals; deputy general manager of Beijing Enfei Techindustry
Group; the head of the Accounting Division of the Finance Department and deputy head of the Finance Department of China Copper Lead & Zinc
Group Corporation; officer-in-charge of the Company's assets and finance in the Listing Office of the Company; head of the Capital Division of the
Finance Department of Company and manager of the General Division of the Finance Department of the Company as well as deputy head and head
of the Finance Department of Aluminum Corporation of China. Mr. Zhang had been serving as a Supervisor of the Company since 2006 and resigned
on 13 November 2015.
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 2015 for
services performed in connection with their respective capacities above was approximately RMB1.4 million. The aggregate amount of cash
compensation paid by us to our senior management who are not members of our Board in 2015 was approximately RMB2.1 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.
95
Details of the emoluments paid to our directors and supervisors during the year ended December 31, 2015 are as follows:
Name of Directors and Supervisors
Fees
Salary
Bonus
Pension
Total
RMB('000)
RMB('000)
RMB('000)
RMB('000)
RMB('000)
Executive Directors
Ge Honglin (resigned)
Ao Hong
Luo Jianchuan (resigned)
Liu Xiangmin
Jiang Yinggang
Non-Executive Directors
Liu Caiming
Wang Jun
Independent Non-Executive Directors
Ma Si-hang, Frederick (resigned)
Wu Zhenfang (resigned)
Chen Lijie
Hu Shihai
Lie-A-Cheong Tai Chong, David
Wu Jianchang (resigned)
Supervisors
Zhao Zhao
Yuan Li
Zhang Zhankui (resigned)
Wang Jun
Total
Senior Management Incentive System
-
-
-
-
-
-
150.0
192.0
47.0
162.0
102.0
-
-
-
-
-
-
643.0
-
-
-
-
-
-
-
-
653.0
643.0
-
-
-
-
-
500.0
-
500.0
653.0
1,143.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70.0
-
-
-
-
-
-
-
-
-
-
-
713.0
-
150.0
192.0
47.0
162.0
102.0
-
-
70.0
1,366.0
-
70.0
-
70.0
-
570.0
-
570.0
140.0
1,936.0
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.
96
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 current directors
have held their positions and the expiration of their current term.
Name
Held Position Since
Expiration of Term
Ao Hong
Liu Xiangmin
Jiang Yinggang
Yu Dehui
Liu Caiming
Wang Jun
Chen Lijie
Hu Shihai
Lie-A-Cheong Tai Chong, David
Audit Committee
December 29, 2015
June 27, 2013
June 27, 2013
April 8, 2016
February 26, 2015
June 27, 2013
February 26, 2015
June 25, 2015
December 29, 2015
June 2016
June 2016
June 2016
June 2016
June 2016
June 2016
June 2016
June 2016
June 2016
As at the date of this Annual Report, our audit committee consists of three independent non-executive directors, namely, Mr. Lie-A-Cheong Tai
Chong, David, Mr. Hu Shihai and Ms. Chen Lijie. Mr. Lie-A-Cheong Tai Chong, David is the chairman of the audit committee. Mr. Ma Si-hang,
Frederick served as the chairman of our audit committee before he resigned from the position as independent non-executive director on December 29,
2015. Mr. Wu Zhenfang served as a member of our audit committee before he resigned from this position on April 2, 2015 when he became subject
to an investigation by the competent authority.
The primary duties of our audit committee as set out in the committee charter include proposing to engage or replace the auditor, supervising our
internal audit and its implementation, being responsible for the communication between the internal audit and external audit, auditing our financial
information and its disclosure, reviewing the Company's financial control, internal control and risk management systems, studying on our other
relevant professional matters, and putting forward suggestions for the decisions of the Board for reference.
Remuneration Committee
As at the date of this Annual Report, our remuneration committee consists of two independent non-executive directors, Mr. Hu Shihai, Mr. Lie-A-
Cheong Tai Chong, David and a non-executive director, Mr. Liu Caiming. Mr. Hu Shihai is the chairman of the remuneration committee. Mr. Ma Si-
hang, Frederick served as a member of our remuneration committee before he resigned from the position as a independent non-executive director on
December 29, 2015. Mr. Wu Zhenfang served as the chairman of our remuneration committee before he resigned from this position on April 2, 2015.
97
The primary duties of our remuneration committee as set out in the committee charter include preparing the remuneration management scheme and
remuneration proposal for directors, employee-representative supervisors and senior management, and providing suggestions to the Board; preparing
measures on performance evaluation of senior management, performance assessment procedures and relevant rewards and punishments, and
providing suggestions to the Board; monitoring the implementation of the remuneration system of our Company; and reviewing senior management's
fulfilment of duties and conduct performance assessment; and other functions and authorities delegated by the Board. In 2015, the remuneration
committee convened at one meeting, to consider and approve remuneration standards for 2015 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
As at the date of this Annual Report, our nomination committee consists of one executive director, namely Mr. Ao Hong, and three independent non-
executive directors, namely Mr. Lie-A-Cheong Tai Chong, David. Mr. Hu Shihai and Ms. Chen Lijie. Mr. Ge Honglin served as the chairman of our
nomination committee before he resigned as executive director on February 16, 2016. Mr. Luo Jianchuan served as a member of our nomination
committee before he resigned as executive director on November 20, 2015. The position of the chairman of the committee is temporarily vacant.
The primary duties of our nomination committee as set out in the committee charter include studying the selection standards and procedures for
directors, senior management and members of special committees under the Board and providing suggestions to the Board; reviewing the
qualification of candidates for directors, senior management and members of special committees under the Board and provide advices on inspection
and appointment; to assess the independence of independent non-executive directors; and other functions and authorities delegated by the Board.
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
As at the date of this Annual Report, our development and planning committee consists of two executive directors, namely Mr. Ao Hong, Mr. Jiang
Yinggang, and one independent non-executive directors, namely Mr. Hu Shihai. The position of the chairman of the committee is temporarily vacant.
Mr. Ge Honglin served as the chairman of our development and planning committee before he resigned as executive director on February 16, 2016.
Mr. Luo Jianchuan served as a member of our development and planning committee before he resigned on November 20, 2015. In accordance with
the committee charter, the committee reviews and assesses our strategic plans for development, fiscal budgeting, investment, business operations and
investments returns.
Occupational Health and Safety and Environmental Committee
Our occupational health and safety and environmental committee consists of two executive directors Mr. Liu Xiangmin and Mr. Jiang Yinggang and
one non-executive director, Mr. Wang Jun, with Mr. Liu Xiangmin as the chairman. 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,
inquiries 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.
98
Supervisory Committee
Our supervisory committee consists of three supervisors, namely Mr. Zhao Zhao, as our shareholder representative supervisor and chairman of our
supervisory committee, Mr. Zhang Zhankui (Mr. Zhang Zhankui resigned on November 13, 2015 and Mr. Wang Jun was appointed as a member of
the Supervisory Committee of the fifth session of the Board by the Company at the 2015 second extraordinary general meeting held on December 29,
2015) and Mr. Yuan Li, as the employee representative supervisor. The term of all member of the supervisory committee of our Company will expire
upon conclusion of the 2015 annual general meeting. Following are the primary duties of our supervisory committee:
*
*
*
*
*
*
*
inspection of implementation of resolutions of the general meetings;
inspection of legal compliance of our operations;
inspection of our financial activities;
inspection of the utilization of proceeds raised by us;
inspection of the acquisitions and disposals of our assets;
inspection of our connected transactions; and
review of self-assessment report on internal control.
D.
EMPLOYEES
As of December 31, 2013, 2014 and 2015, we had 90,207, 75,749 and 70,368 employees, respectively. The number of our employees decreased from
2014 to 2015, which was mainly due to the termination of labor relationship through negotiation, retirement and personnel reposition. The table
below sets forth the number of our employees by function as of the periods indicated:
Function
Alumina production
Primary aluminum production
Mining
Research and development
Sales and marketing
Energy
Management and others(1)
As of December 31,
2013
2014
2015
(%)
56.5
32.3
4.1
0.9
0.7
-
5.5
31,456
28,010
3,106
680
561
7,755
4,181
(%)
41.53
36.98
4.1
0.90
0.74
10.24
5.51
29,347
26,224
2,885
1,056
521
6,543
3,792
(%)
41.71
37.27
4.1
1.5
0.74
9.30
5.38
50,970
29,158
3,698
779
659
-
4,943
Total
90,207
100.0
75,749
100.0
70,368
100
(1)
Excluding our management personnel for alumina production, primary aluminum production and aluminum fabrication.
Location
Shandong
Chalco Shandong
Employees
% of Total
9,102
7,249
12.95
10.32
Shandong Huayu
Henan
Henan branch
Chalco Zhongzhou
Zhengzhou Institute
Guizhou
Guizhou branch
Zunyi Aluminum
Zunyi Alumina
Guangxi
Guangxi branch
Shanxi
Shanxi branch
Shanxi Huasheng
Shanxi Huaze
Shanxi Huaxing
Gansu
Lanzhou branch
Gansu Hualu
Liancheng branch
Liaoning
Fushun Aluminum
Qinghai
Qinghai branch
Chongqing
Chongqing branch
Inner Mongolia
Baotou Aluminum
Ningxia
Ningxia Energy
Others (including employees of subsidiaries under construction)
Headquarters
Total
99
1,853
11,873
6,558
4,662
653
6,786
4,704
974
1,108
3,879
3,879
12,610
8,443
1,717
1,662
788
6,676
2,890
1,381
2,405
1,493
1,493
3,577
3,577
873
873
5,266
5.266
6,451
6,451
1,528
254
70,368
2.63
16.87
9.32
6.63
0.92
9.64
6.68
1.38
1.58
5.51
5.51
17.92
12.00
2.44
2.36
1.12
9.49
4.11
1.96
3.42
2.12
2.12
5.08
5.08
1.24
1.24
7.48
7.48
9.17
9.17
2.17
0.36
100.0
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% depending in part on the location
of the plant. We have made all required pension contributions up to December 31, 2015. 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, the following directors, supervisors or senior management owns interest in shares of our Company:
Name
Position
Share class
Number of shares
% of respective share class
Zhao Zhao
Jiang Yinggang
supervisor
executive director
Domestic Shares
Domestic Shares
5,100
10,000
<0.1%
<0.1%
100
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
MAJOR SHAREHOLDERS
Directors
We are a joint stock limited company organized under the laws of the PRC. Our parent company, Chinalco, a state-owned enterprise, beneficially
owns 34.81% of our outstanding ordinary 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 65.19% of our total outstanding ordinary Shares are held by public shareholders, of which 26.11% and 39.08%
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, 2015. 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
Chinalco(1)
A Shares
H Shares
As of December 31, 2015
Number of shares
(in millions)
% of respective
share class(3)
% of
issued total
share capital(4)
5,135.38(L)(2)
46.86(L)
34.46(L)
52.60 (L)
1.33(L)
0.35(L)
Templeton Asset Management Ltd.
H Shares
975.03(L)
24.72(L)
6.54(L)
(1)
(2)
(3)
(4)
Including 4,889,864,006 A shares directly held by Chinalco, and an aggregate interest of 245,518,049 A shares and 52,598,000 H shares held by various controlled
subsidiaries of Chinalco, comprising 238,377,795 A shares held by Baotou Aluminum (Group) Co., Ltd., 7,140,254 A shares held by Shanxi Aluminum Plant and
52,598,000 H shares held by Aluminum Corporation of China Overseas Holdings Limited.
The letter "L" denotes a long position.
The total number of our A shares is 10,959,832,268 and the total number of our H shares is 3,943,965,968.
The number of our total issued shares is 14,903,798,236 shares.
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.
In June 2015, the Company non-publicly issued additional 1,379,310,344 A shares to qualified investors with issue price of RMB5.8 per share.
To the best of our knowledge, as of December 31, 2015, all of the outstanding ADSs were held by 69 United States holders of record.
101
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)
(ii)
(iii)
(iv)
in the ordinary and usual course of our business;
the terms of the transactions are fair and reasonable as far as our shareholders are concerned;
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
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.
102
The following table sets forth the details of our material connected transaction for the year ended December 31, 2015:
Agreement
Nature
Term of the Agreement
Continuing Connected Transactions
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.
General Agreement on Mutual
Provision of Production Supplies
and Ancillary Services
(Counterparty: Chinalco)
Xinan Aluminum Mutual Provision
of Products and Services
Framework Agreement
(Counterparty: Xinan Aluminum)*
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.
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
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.
The original agreement was entered
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.
The original agreement was entered
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.
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
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.
Transaction
Amount in 2015
(RMB in millions)
Annual Cap
for 2015
(RMB in millions)
325
600
2,202
4,500
−
8,700
152
360
1,610
15,000
Provision of Engineering,
Construction and Supervisory
Services Agreement (Counterparty:
Chinalco)
Land Use Rights Leasing
Agreement (Counterparty:
Chinalco)
Buildings and Office Buildings
Leases Agreements (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.
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.
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
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.
The original agreement was entered
on November 5, 2001 for a term of
50 years, expiring on June 30, 2051.
539
1,200
The original agreement was entered
on November 5, 2001 for a term of
20 years, expiring on June 30, 2020.
52
110
Framework Agreement for
Aluminum Products Fabrication
Services (Counterparty: Chinalco)*
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
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.
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
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.
63
360
Financial Services Agreement
(Counterparty: Chinalco Finance)
Chinalco Finance has agreed to
provide us with deposit services,
credit services and miscellaneous
financial services. We have the right
The original agreement expired on
August 25, 2012 for a term of 1
year. Pursuant to the financial
services agreement renewed on
(a) 4,456 (largest
amount of daily
deposit balance
during the period
(a) 5,000 (daily
cap of deposit
balance during
the period from
August 24, 2012, the term was
extended and expired on August 25,
2015. Pursuant to the financial
services agreement renewed on
April 28, 2015, the term was
renewed for a term of 3 years from
August 26, 2015 and will expire on
August 25, 2018.
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.
from January 1,
2015 to August 25,
2015)
January 1, 2015
to August 2,
2014)
(b) 7,586 (largest
amount of daily
deposit balance
during the period
from August 26,
2015 to
December 31,
2015)
(c) 3 (other
financial services
fees for the period
from January 1,
2015 to
December 31,
2015)
(b) 8,000 (daily
cap of deposit
balance during
the period
from August
26, 2015 to
December 31,
2015)
(c) 50
(other financial
services fees
for the period
from January 1,
2015 to
December 31,
2015)
1,206
1,400
8,763
10,000
2,625
8,000
Finance Lease Agreement
(Counterparty Chinalco Finance
Lease Co., Ltd.)
Chinalco Lease provides finance
lease services to the Group.
General Agreement on Mutual
Provision of Production Supplies
And Ancillary Services
(Counterparty: Chinalco)
Supplies and ancillary services
The finance lease framework
agreement was entered into between
the Company and Chinalco Lease
on August 27, 2015, with a term
from August 27, 2015 to December
31, 2016. A new finance lease
framework agreement was entered
into between the Company and
Chinalco Lease on November 13,
2015 with a term of 3 years from
January 1, 2016 to December 31,
2018.
The original agreement expired on
December 31, 2012 for a term of 3
years. Pursuant to the
supplementary agreement entered
into in 2012, the term was renewed
from January 1, 2013, expiring on
December 31, 2015.
Xinan Aluminum Mutual Provision
of Products and Services
Framework Agreement*
(Counterparty: Xinan Aluminum)
The original agreement expired on
December 31, 2012 for a term of 3
years. Pursuant to the
supplementary agreement entered
into in 2012, the term was renewed
from January 1, 2013, expiring on
December 31, 2015.
Sales of products by the Company
and its branches and relevant
subsidiaries to Xinan Aluminum:
primary aluminum, aluminum alloy
ingots, aluminum fabrication
products and aluminum fabrication
scraps Sales of products or services
by Xinan Aluminum to the
Company: aluminum alloy ingots,
aluminum fabrication products;
ancillary materials, spare parts,
relevant equipment and provision of
water, electricity and gas;
construction and repair services;
loading and unloading,
transportation and storage services;
and social and logistics services.
Labor Services and Engineering
Services Agreement (Counterparty:
Chinalco)
Services provided by the Company
to Chinalco: engineering design
services, equipment repairs,
logistics management services, etc.
January 1, 2015 to December 31,
2015
62
80
Note:
*
The Company entered into the equity interest transfer agreement with Chinalco on June 9, 2013. As such, the Company transferred its equity interest of the eight
aluminum fabrication enterprises to Chinalco. The aluminum fabrication enterprises would no longer be consolidated into the financial statements of the Company from
June 27, 2013. For details in relation to the transfer of such equity interest, please refer to the Company's announcement dated June 9, 2013 and circular dated June 7,
2013. Certain of the abovementioned aluminum fabrication enterprises were actual counterparties of Xinan Aluminum Mutual Provision of Products and Services
Framework Agreement and Framework Agreement for Aluminum Products Fabrication Services, acting as a member party of the Group to carry out continuing
connected transactions with Chinalco in accordance with the abovementioned framework agreements during the period from January 1, 2013 to June 27, 2013. Such
aluminum fabrication enterprises ceased to be members of the Group, and would not carry out transactions with Chinalco in accordance with the abovementioned
framework agreement from June 27, 2013 onwards.
103
All transactions with related parties are conducted at prices and terms mutually agreed by the parties involved, which are determined as follows:
(a)
Sales of materials and finished goods comprised sales of alumina, primary aluminum, copper and scrap materials. Transactions entered are
covered by general agreements on mutual provision of production supplies and ancillary services. The pricing policy is summarized below:
(1)
(2)
(3)
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
(4)
If none of the above is available, then adoption of a contractual price.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Utility services, including electricity, gas, heat and water, are supplied at Stated-prescribed price.
Engineering, project construction and supervisory services were provided for our construction projects. The state-guidance price or
prevailing market price is adopted for pricing purpose.
The pricing policy for purchases of key and auxiliary materials (including bauxite, limestone, carbon, cement and coal) is: For the supplies
of bauxite and limestone from Chinalco's own mining operations, at reasonable costs incurred in providing the same, plus not more than 5%
of such reasonable costs (a buffer for surges in the price level and labor costs); and for the supplies of bauxite and limestone from jointly
operated mines, at contractual price paid by Chinalco to such third parties.
The pricing policy of the comprehensive social and logistics services agreement between us and Chinalco is the same as that set out in (a)
above.
Pursuant to the land use rights lease agreements entered into between the us and Chinalco Group, operating leases for industrial or
commercial land are charged at a rate not higher than prevailing market rent as confirmed by an independent valuer, and shall be reviewed
every three years. We also entered into building rental agreement with Chinalco Group and pay rent for our lease of buildings owned by
Chinalco, the rent is not higher than prevailing market rent as confirmed by an independent valuer, and shall be reviewed every two years.
The pricing policy for products processing service is the same as that set out in (a) above.
The terms for the financial services agreement provision between Chinalco Finance and us are no less favorable 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 us by other financial institutions.
104
During the years ended December 31, 2013, 2014 and 2015, our significant transactions with other state-owned enterprises (excluding Chinalco and
its subsidiaries) constituted a large portion of our sales of goods and purchases of raw materials, electricity, property, plant and equipment and
services. In addition, substantially all restricted cash, time deposits, cash and cash equivalents and borrowings as of December 31, 2013, 2014 and
2015 and the relevant interest earned or paid during the year are transacted with banks and other financial institutions which are controlled by the
PRC government.
We provide the following additional information on material related party transactions during the periods indicated:
(a)
Significant related party transactions
Sales of goods and services rendered:
Sales of materials and finished goods to:
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures of Chinalco
Joint ventures
Associates
Provision of utility services to:
Chinalco and its subsidiaries
Associates of Chinalco
Joint Ventures
Associates
For the year ended December 31
2013
2014
2015
(RMB in thousands)
8,844,205
102,723
-
52,318
1,400,098
7,040,457
170,338
142
48,903
2,146,870
11,085,064
703,628
-
79,034
2,165,445
10,399,344
9,406,710
14,033,171
390,368
18,233
11,628
10,014
390,046
17,750
113
1,977
302,571
14,803
-
553
430,243
409,886
317,927
Provision of engineering, construction and supervisory services to:
Chinalco and its subsidiaries
40,259
68,634
62,375
An associate
19
-
-
Provision of products processing services to:
Chinalco and its subsidiaries
Rental revenue of land use rights and buildings to:
Chinalco and its subsidiaries
Associates of Chinalco
Purchase of goods and services:
Purchases of engineering, construction and
supervisory services from:
Chinalco and its subsidiaries
Associates of Chinalco
Purchases of key and auxiliary materials and
finished goods from:
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures
Associates
40,278
68,634
62,375
1,357
3,169
-
5,524
124
5,648
34,887
-
34,281
249
34,887
34,530
1,842,045
140
987,706
-
1,610,428
-
1,842,185
987,706
1,610,428
3,799,542
254
1,076,867
380,255
3,009,894
386,609
1,268,123
762,003
1,710,841
-
1,276,078
414,539
5,256,918
5,426,629
3,401,458
Provision of social services and logistics services by:
Chinalco and its subsidiaries
243,865
312,626
324,872
Provision of utilities services by:
Chinalco and its subsidiaries
Joint Ventures
Provision of products processing services by
Chinalco and its subsidiaries
186,007
27
414,745
-
643,597
-
186,034
414,745
643,597
64,377
76,075
62,623
Rental expenses for buildings and land use rights charged
by Chinalco and its subsidiaries
600,892
561,528
590,657
Other significant related party transactions:
Borrowing from a subsidiary of Chinalco
1,000,000
1,429,000
5,929,000
Interest expense on borrowing from a subsidiary of Chinalco
40,922
38,772
137,777
Entrusted Loan from a subsidiary of Chinalco
70,000
70,000
-
Entrusted loan and other borrowings to:
Joint ventures
An associate
Chinalco and its subsidiaries
726,235
26,106
393,000
764,000
-
-
140,000
-
-
1,145,341
764,000
140,000
Interest income on entrusted loan and other borrowings to:
Joint ventures
An associate
Chinalco and its subsidiaries
69,462
2,518
34,923
60,459
88
2,027
14,061
-
-
106,903
62,574
14,061
Disposal of the Aluminum Fabrication Segment
and transferred loan to Chinalco and its subsidiaries
10,614,000
Disposal of investments in a joint venture and an associate to Chinalco
264,714
Disposal of a subsidiary to a subsidiary of Chinalco
12,953,368
-
-
-
-
-
-
Interest income from the unpaid disposal proceeds from:
Chinalco and its subsidiaries
250,124
542,811
326,217
Disposal assets under sale and leaseback contract
to a subsidiary of Chinalco
Finance lease under sale and leaseback contract to
a subsidiary of Chinalco
Provision of financial guarantees to:
Joint ventures
An associate
Financial guarantees provided by:
Subsidiaries of Chinalco
Discounted notes receivables to a subsidiary of Chinalco
(b)
Balances with related parties
Cash and cash equivalents deposited with
A subsidiary of Chinalco
Trade and notes receivables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Joint ventures
Provision for impairment of receivables
Other current assets
Chinalco and its subsidiaries
Associates
Joint ventures
Provision for impairment of other current assets
Other non-current assets
Chinalco and its subsidiaries
An associate
Joint ventures
-
-
300,000
1,150,000
304,239
1,150,164
381,800
-
345,760
23,710
340,900
17,470
381,800
369,470
358,370
20,000
1,278,907
138,000
118,757
12,000
122,000
December 31, 2014
December 31, 2015
4,889,705
7,585,515
886,532
1,922
229
8,213
857,742
23
-
28,268
896,896
886,033
(167,799)
(125,694)
729,097
760,339
4,841,266
90,977
1,310,499
4,852,181
-
1,438,938
6,242,742
6,291,119
(54,516)
(49,014)
6,188,226
6,242,105
8,195,904
111,846
-
4,252,776
111,846
409,251
8,307,750
4,773,873
Borrowings and finance lease payable
Subsidiaries of Chinalco
Trade and notes payables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Joint ventures
Other payables and accrued liabilities
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures
Associates
Guarantees
1,402,639
6,070,364
429,809
4
15,520
81,988
481,006
-
-
160,215
527,321
641,221
1,426,842
880
91,207
472
1,281,120
171
1,019
62,613
1,519,401
1,344,923
We provided guarantees to our related parties to guarantee their loans during the period from January 1, 2015 to February 29, 2016. The
outstanding balance of the loans we guaranteed was RMB358.4 million as of February 29, 2016 and the largest amount outstanding of the
loans we guaranteed during the period from January 1, 2015 to February 29, 2016 was RMB132.6 million. The interest rates on such loans
are from 6.55% to 6.765%.
Our related parties also provided guarantees to us to guarantee our loans during the period from January 1, 2015 to February 29, 2016. The
outstanding balance of the loans guaranteed by our related parties was RMB12 million as of February 29, 2016 and the largest amount
outstanding of the loans guaranteed by our related parties during the period from January 1, 2015 to February 29, 2016 was RMB122
million. The interest rate on such loan is 2.3%.
105
Loans
We provided several entrusted loans to our related parties mainly for the purpose of supplementing working capital during the period from
January 1, 2015 to February 29, 2016. The outstanding balance of such entrusted loans was mainly RMB729 million as of February 29,
2016 and the largest amount outstanding of the entrusted loans during the period from January 1, 2015 to February 29, 2016 was RMB200
million. The interest rates on such entrusted loans range from 6% 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, 2015 to February 29, 2016. The outstanding balance of such loans was RMB6.24 billion as of February 29, 2016 and the largest amount
outstanding of the loans during the period from January 1, 2015 to February 29, 2016 was RMB1 billion. The interest rates on such loans
range from 4.13% to 6%.
C.
INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A.
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
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:
*
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, unless the accumulated statutory surplus reserve exceeds 50% of our registered share capital, in
which case the surplus reserve is discretional. Our distributable profits for the current fiscal year will be equal to our net profits determined in
accordance with IFRSs, 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.
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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 market prices for our shares on the New York Stock Exchange, the
Hong Kong Stock Exchange and the Shanghai Stock Exchange:
Calendar Period
High
Low
High
Low
High
Low
NYSE
Hong Kong Stock Exchange
Shanghai Stock Exchange
(US$ per ADS)
(%)
(HK$ per H Share)
(%)
(RMB per A Share)
(%)
2011
2012
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
September
October
November
December
2016
January
February
March
April (through April 4, 2016)
25.88
13.88
13.29
13.29
10.73
9.59
9.92
12.6
9.53
10.31
12.6
11.8
13.51
17.44
12.46
9.32
8.79
9.32
8.41
8.50
7.95
9.40
9.50
8.34
10.34
9.22
7.25
9.52
7.25
7.35
8.42
8.25
8.25
8.62
8.99
9.73
10.75
12.32
7.20
7.01
7.53
7.73
7.73
7.01
6.87
7.32
7.93
8.10
107
7.98
4.45
4.21
4.21
3.32
3.00
3.15
3.85
2.99
3.23
3.85
3.73
4.28
5.62
3.92
2.94
2.76
2.94
2.61
2.65
2.57
3.05
3.00
2.67
3.20
2.86
2.20
2.95
2.20
2.28
2.63
2.54
2.54
2.64
2.77
3.1
3.33
3.70
2.26
2.13
2.3
2.41
2.40
2.13
2.16
2.29
2.45
2.45
12.36
7.89
5.37
5.37
4.47
4.55
4.76
6.66
3.6
3.5
4.27
6.66
6.97
10.8
9.21
5.77
5.63
5.54
5.77
5.38
5.00
4.68
4.95
4.64
6.23
4.55
3.01
4.11
3.01
3.03
3.30
2.97
3.11
2.97
3.03
3.46
4.73
6.25
4.53
4.67
4.60
4.67
4.77
4.76
3.49
3.55
4.25
4.37
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, 2015 as an exhibit to this annual
report on Form 20-F.
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.
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.
108
Dividend rights
Article 54(1) provides that holders of our ordinary 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 record date. The
shareholders registered in the shareholder roster after closing as at the record 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 holders of ordinary shares 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.
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 96 (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.
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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 (inclusive of date of meeting) 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 shall send the written reply to us
20 days before the class meeting according to Article.
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)
(2)
(3)
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;
our unrecovered losses amount to one-third of the total amount of its paid-in-capital;
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.
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)
(2)
(3)
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;
have definite topics to discuss and specific matters to resolve; and
be submitted in writing or served to the board of directors.
110
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 SAFE 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 SAFE. These limitations could affect our ability to
obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures.
111
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 PBOC further allows
the Renminbi to rise or fall 2% from a mid-point every day, effective March 17, 2014. The PBOC 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.
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 ordinary 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 ("IIT") Law, as amended, dividends and bonus-dividends paid by Chinese listed companies to a
domestic individual are ordinarily subject to PRC IIT levied at a flat rate of 20%. According to the "Circular on Issues concerning the Implementation
of the Individual Income Tax Policies Pertaining to Dividend Differentiation of Listed Company" issued by the PRC State Administration of Taxation
(the "SAT"), the MOF and the CSRC, which becomes effective on January 1, 2013, for shares of listed company acquired through public placement
of offerings or on Stock Exchanges that held by any person for one month or less, the full amount of dividend proceeds shall be deemed as taxable
income subject to IIT; for shares held for more than one month but less than one year (including one year), only 50% of the dividend proceeds will be
accounted into taxable income subject to IIT; and for shares held for more than one year, only 25% of the dividend proceeds will be taxable income
subject to IIT. Effective from September 8, 2015, the dividend for shares held for more than one year will not be taxable as long as the record date
(i.e., a date on which a listed company determines the stockholders who are entitled to receive a dividend or distribution) is on or after 8 September
2015. For individuals who derive dividends and bonus-dividends from listed companies held for one year or less, listed companies are not required to
withhold their IIT when distributing dividends and bonus-dividends on a provisional basis. The IIT shall be withheld when the stocks are alienated by
the individuals.
For a foreign individual who is not a resident of China, the receipt of dividends from a foreign-invested company in China is normally not subject to
individual income tax, unless otherwise stipulated by tax law or regulations. In 2011, the SAT issued the "Circular on the Issues Concerning the
Collection and Administration of Individual Income Tax Following the Repeal of Circular 45 (No. 348)", under which dividend paid by a non-
foreign-invested and PRC incorporated company listed in Hong Kong will generally be subject to a withholding tax of 20%, and to be adjusted
pursuant to the arrangement for the avoidance of double taxation signed between the PRC and the country where a foreign individual is a resident.
112
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 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.
However, the withholding tax rate could be reduced under an applicable double-taxation treaty.
Tax Treaties
China currently has such treaties with more than one hundred countries and regions, including the following countries:
*
*
*
*
*
*
*
*
*
*
the United States;
Australia;
Canada;
France;
Germany;
Japan;
Malaysia;
Singapore;
the United Kingdom; and
the Netherlands.
Under most treaties, the rate of withholding tax imposed by China's taxation authorities remains 10%. The double taxation treaty between China and
the United States provides that China may tax dividends paid by us to an eligible U.S. holder up to 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.
113
With respect to individual holders of H Shares, the Provisions for Implementation of Individual Income Tax Law of China, as amended, stipulated
that income tax on gains realized on the sale of equity shares shall be regulated in separate rules to be drafted by the MOF. On March 30, 1998, the
MOF and the SAT jointly issued the "Circular of Taxation Regarding the Continued Exemption of Individual Income Taxes Levied on Income
Obtained from the Transfer of Shares", which provided that income derived from the transfer of shares issued by listed companies shall not be taxed
as income for the purposes of levying individual income taxes after July 1, 1997.
On October 31, 2014, the SAT issued "Circular on Tax Policies Relating to the Pilot Program of Shanghai-Hong Kong Stock Connect", which
provides that any capital gain from transferring stocks listed on the SEHK by a PRC mainland investors will not be subject to tax during the period
from November 17, 2014 to November 16, 2017. For mainland enterprises, such capital gains will be included in its income and subject to income
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 U.S. 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 Code of 1986 as amended (the "Code"). This discussion does not address all of the tax consequences relating to the purchase,
ownership and disposition of the H Shares or ADSs, and does not take into account U.S. holders who may be subject to special rules including:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 that own 10% or more, by vote, of our equity for U.S. federal income tax purposes;
dealers 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.
114
Moreover, this description does not address United States federal estate, gift or alternative minimum taxes, the U.S. federal unearned income
Medicare contribution tax, or any foreign 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 U.S. 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:
-
-
-
-
an individual citizen or resident of the United States;
a corporation created or organized under the laws of the United States or any political subdivision thereof;
an estate the income of which is subject to United States federal income tax without regard to its source; or
a trust: (i) subject to the primary supervision of a United States court and one or more U.S. persons (within the meaning of the Code) have
the authority to control all substantial decisions of the trust; or (ii) that has validly elected to be treated as a United States person under
applicable United States Treasury Regulations.
If a partnership (including any entity treated as a partnership for U.S. 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 partner in 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 U.S. 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.
115
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 were 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 (the "Treaty") has been approved for the purposes of the qualified dividend rules. We should be 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 2015
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 2016 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. If dividends
received in HK dollars are converted into U.S. dollars on the day they are received, the U.S. holder generally will not be required to recognize foreign
currency gain or loss in respect of the dividend income.
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 U.S. 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-U.S. 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 and U.S. holders may be subject to various limitations on the amount of foreign tax credits that are
available. In addition, if the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for
purposes of calculating a U.S. holder's foreign tax credit limitation will generally be limited to the gross amount of the taxable dividend, multiplied by
the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. U.S. holders should
consult their own tax advisors regarding the effect of these rules in their particular circumstance.
116
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 U.S. 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. Generally, gain or loss recognized upon the
sale or other disposition of H Shares or ADSs will be capital gain or loss, will be long-term capital gain or loss if the U.S. holder's holding period for
such H Shares or ADSs exceeds one year, and will be income or loss from sources within the United States for foreign tax credit limitation purposes.
For non-corporate U.S. holders, the United States income tax rate applicable to net long-term capital gain currently will not exceed 20.0%. The
deductibility of capital losses is subject to significant limitations.
With respect to the sale or exchange of H Shares or ADSs, the amount realized generally will be the U.S. dollar value of the payment received
determined on (i) the date of receipt of payment in the case of a cash basis U.S. holder and (ii) the date of disposition in the case of an accrual basis
U.S. holder. If H Shares or ADSs are traded on an "established securities market", a cash basis taxpayer or, if it so elects, an accrual basis taxpayer,
will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of
the sale. A U.S. holder will have a tax basis in the foreign currency received equal to the U.S. dollar amount realized. Any currency exchange gain or
loss realized on a subsequent conversion of the foreign currency into U.S. dollars for a different amount generally will be treated as ordinary income
or loss from sources within the United States. However, if such foreign currency is converted into U.S. dollars on the date received by the U.S.
holder, a cash basis or electing accrual basis U.S. holder should not recognize any gain or loss on such conversion.
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 the Treaty, however, if any PRC tax were to be imposed on any gain from the disposition of H Shares or ADSs, the gain could 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.
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:
-
-
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 gross 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.
117
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
were not a PFIC for U.S. federal income tax purposes with respect to our 2015 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 rules 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 U.S. federal income tax rate 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 its 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
income 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. However, the stock of any of our subsidiaries that were PFICs
would not be eligible for the mark-to-market election.
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.
118
If we were regarded as a PFIC, a U.S. holder of H Shares or ADSs generally would be required to file an information return on IRS Form 8621 for
any year in which the holder received a direct or indirect distribution with respect to the H Shares or ADSs, recognized gain on a direct or indirect
disposition of the H Shares or ADSs, or made an election with respect to the H Shares or ADSs, reporting distributions received and gains realized
with respect to the H Shares or ADSs. In addition, pursuant to recently enacted legislation, if we were regarded as a PFIC, a U.S. holder would be
required to file an annual information return (also on IRS Form 8621) relating to the holder's ownership of the shares or ADSs. This requirement
would be in addition to other reporting requirements applicable to ownership in a PFIC.
U.S. holders should consult their tax advisors concerning the U.S. federal income tax consequences of holding the H Shares or ADSs if we were
considered to be 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
-
-
-
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; or
provide a properly completed IRS Form W-8BEN, certifying your status as a non-US holder.
Any amount withheld under the backup withholding rules generally will be creditable against your U.S. federal income tax liability or may be
refunded to the extent they exceed such liability provided that you furnish the required information to the IRS in a timely manner.
Certain U.S. Holders may be required to report information with respect to such holder's interest in "specified foreign financial assets" (as defined in
Section 6038D of the Code), including stock of a non-U.S. corporation that is not held in an account maintained by certain financial institutions, if the
aggregate value of all such assets exceeds certain dollar thresholds. Persons who are required to report specified foreign financial assets and fail to do
so may be subject to substantial penalties. U.S. Holders are urged to consult their own tax advisers regarding the foreign financial asset reporting
obligations and their possible application to the holding of H Shares or ADSs.
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.
119
Taxation of Capital Gains
Hong Kong profits tax is currently charged at a flat rate of 16.5% for corporations and 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 a capital investment.
However, if a person carries on a business in Hong Kong that includes trading and dealing in securities, and derives trading gains from such activities
or from other 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 in Hong Kong. In addition, exemption from profits
tax is available for certain classes of taxpayers, notably non-Hong Kong residents who do not otherwise carry on business in Hong Kong, subject to
compliance with various other requirements.
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 unpaid stamp duty will be assessed on the instrument of transfer (if
any), and the transferee will be liable for the full payment of such amount.
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.
F.
DIVIDENDS AND PAYING AGENTS
Not applicable
G.
STATEMENT BY EXPERTS
Not applicable
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.
120
I.
SUBSIDIARY INFORMATION
Not applicable
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SHARE CAPITAL
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 balances with banks and financial institutions, short-term investments, trade and notes receivables, other current and non-
current receivables as well as credit exposures of customers, including outstanding receivables and committed transactions. We also provide financial
guarantees to certain subsidiaries, a joint venture and a third party entity. 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 and short-term investments 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 and related parties, 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 year ended December 31, 2015, revenues of approximately RMB31,818 million are derived from entities directly or indirectly owned or
controlled by the PRC government including Chinalco. There were no other individual customers from whom we have derived revenue of more than
10% of our revenue during the year ended December 31, 2013, 2014 and 2015. Thus, the Directors are of the opinion that we were not exposed to any
significant concentration of credit risk as at December 31, 2013, 2014 and 2015.
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.
121
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 SAFE. 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. The People's Bank of China allows the Renminbi to rise or fall 2% from a mid-point every
day, effective on March 17, 2014, compared with its previous 1% 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, 2015 amounted to RMB22,487.9 million, including Renminbi balances and foreign currency
deposits of U.S. dollar, HK dollar, Euro, Australian dollar and Indonesian Rupiah, which translated into RMB1,492.8 million, RMB3.0 million,
RMB0.8 million, RMB2.5 million and RMB1.8 million, 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, 2015, we had foreign currency denominated loans with principal amount of
RMB23 million in Japanese Yen and RMB3,711 million in U.S. dollars. In addition, as of December 31, 2015, our trade and notes receivables
denominated in U.S. dollars amounted to RMB1,451 million.
As at December 31, 2015, if RMB had appreciated/weakened by 5% against USD with all other variables held constant, the comprehensive income
for the year would have been approximately RMB177 million lower/higher, mainly as a result of foreign exchange gains and losses arising from
translation of USD-denominated borrowings and receivables. Profit was less sensitive to the fluctuation in the RMB/USD exchange rates in 2015 than
in 2014 and 2013, mainly due to the decrease in the USD denominated cash and receivables.
As the assets and liabilities denominated in other foreign currencies other than USD were minimal relative to our total assets and liabilities, our
directors are of the opinion that our Group was not exposed to any significant foreign currency risk arising from these foreign currency denominated
assets and liabilities as of December 31, 2014 and 2015.
Interest Rate Risk
As of December 31, 2015, as our Group had no significant interest-bearing assets except for bank deposits, entrusted loans, receivables arising from
disposal of subsidiaries, business and assets and a prepayment paid to a supplier, our Group's income and operating cash flows are substantially
independent of changes in market interest rates.
Most of our 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. The interest rates of entrusted loans and a deposit paid to a
supplier are fixed, the interest rate of the receivables from disposal of subsidiaries, business and assets to Chinalco is at the rate of one-year bank loan
determined by People's Bank of China at the payment date and the interest rate of the receivables from disposal of an entity to a subsidiary of
Chinalco is LIBOR plus 0.9%. As the interest rates applied to the deposits and receivables from disposal of subsidiaries, business and assets were
relatively low and the interest rates applied to the entrusted loans and a prepayment paid to a supplier were fixed, our directors are of the opinion that
our Group was not exposed to any significant interest rate risk for its financial assets held as of December 31, 2014 and 2015.
The interest rate risk for our Group's financial liabilities primarily arises from interest-bearing loans. Loans borrowed at floating interest rates expose
us to cash flow interest rate risk. We enter into debt obligations to support general corporate purposes including capital expenditures and working
capital needs. Our 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.
122
As of December 31, 2015, if interest rates had been 100 basis points higher/lower for bank and other loans borrowed at floating interest rates with all
other variables held constant, net profit for the year would have been RMB503 million lower/higher, respectively, mainly as a result of the
higher/lower interest expense on floating rate borrowings.
Commodity Price Risk
We are exposed to fluctuations in the prices of alumina, primary aluminum and other 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 other 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 use the futures contract for hedging other than speculation. As of December 31, 2015, the fair value of
outstanding future contracts amounting to RMB2 million and RMB11 million was recognized in financial assets and liabilities at fair value through
profit or loss, respectively. As of December 31, 2015, the fair value of outstanding option contracts in the amount of RMB151 million was recognized
in financial liabilities at fair value through profit or loss.
The fair value of futures contracts are based on quoted market prices. As of December 31, 2014 and 2015, our position in futures contracts was as
follows:
As of December 31, 2014
As of December 31, 2015
Tonnes
Contract
Value
Market
Value Maturity
Tonnes
Contract
Value
Market
Value Maturity
(RMB in thousands)
(RMB in thousands)
Futures Contracts:
Primary aluminum
- Short
- Long
Zinc
- Short
- Long
Copper
- Short
- Long
Lead
- Short
Coal
- Short
- Long
Liquidity risk
121,860
1,703,565
1,571,999
February-March
2015
229,535
2,470,025
2,513,938
44,535
600,762
591,871 January-May 2015
51,850
532,285
568,353
January to June
2016
January to March
2016
460
7,700
7,672 January-May 2015
800
9,884
10.732 February 2016
1,000
16,444
16,723 January-May 2015
1,275
16.863
17.116
February to May
2016
-
8,900
-
384,072
25
-
52,000
340
-
51,148
90,000
68,568
- -
379,780 January-March 2015
2,525
425
92,433
15,513
January to Febuary
92,756
2016
15.615 January 2016
308 January 2015
- -
51,996 September 2015
January to May
2015
67,140
123
-
-
-
-
-
-
- -
- -
- -
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, 2015, we had total banking facilities of approximately RMB138,392 million, of which RMB67,620 million had been utilized and
unutilized banking facilities amounted to RMB70,772 million as of December 31, 2015, among which, banking facilities of approximately
RMB63,877 million will be subject to renewal during the next 12 months from January 1, 2016. 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, 2015,
we had credit facilities through our futures agent at LME amounting to US$120 million, of which approximately US$58 million has been utilized.
The futures agent has the right to adjust the related credit facilities.
The following table sets forth the maturity profile of our financial liabilities as of December 31, 2015:
Finance lease payable, including current portion
Long-term bank and other loans,
including current portion
Long-term bonds
Medium-term notes and bonds, including
current portion
Short-term bonds
Short-term bank and other loans
Interest payables for borrowings
Financial liabilities at fair value through profit or loss
Financial liabilities included in other payables
and accrued liabilities, excluding accrued interest
Financial liabilities included in other
non-current liabilities
Within 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
(RMB in millions)
1,815,657
1,803,103
3,751,049
-
7,369,809
4,602,511
-
6,900,000
6,600,000
34,749,287
5,489,314
161,700
7,712,263
4,865,485
2,000,000
6,400,000
-
-
2,057,931
-
13,785,703
-
12,500,000
-
-
3,110,273
-
9,113,934
-
-
-
-
5,156,622
-
32,367,633
2,000,000
25,800,000
6,600,000
34,749,287
15,814,140
161,700
-
-
-
7,712,263
-
150,251
437,129
385,975
973,355
Trade and notes payables
14,506,138
-
-
-
14,506,138
82,536,870
17,276,770
33,584,154
14,656,531
148,054,325
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
124
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:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs$.02
(or less) per ADS
*
*
*
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
Any cash distribution to ADS registered holders
A fee equivalent to the fee that would be payable if securities distributed to you had Distribution of securities distributed to holders of deposited
securities
$.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
Any charges incurred by the depositary or
its agents for servicing the deposited securities
*
*
*
*
*
*
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
As necessary
The Bank of New York Mellon, as depositary, has agreed to reimburse certain expenses related to the administration and maintenance of our ADR
program and incurred by us in connection with the program. From January 1, 2015 to December 31, 2015, we received from the depositary
reimbursements of USD73,606.6 for our continuing annual stock exchange listing fees and our expenses incurred in connection with investor
relationship programs. The depositary has also agreed to waive certain standard out-of-pocket administrative, maintenance and shareholder services
expenses related to our ADR program. From January 1, 2015 to December 31, 2015, the total amount of the fees that were waived was
USD130,036.1.
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.
125
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.
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 31,2015 based on the framework in Internal Control.
Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission in May 2013. Based
on our evaluation under the framework in Internal Control-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, our management concluded that, as of December 31, 2015, 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 IFRSs.
The effectiveness of our internal controls over financial reporting as of December 31, 2015 has been audited by Ernst & Young Hua Ming LLP, an
independent registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
During 2015, there have been no material 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 Ms. Chen Lijie, Mr. Hu Shihai and Mr. Lie-A-Cheong Tai Chong, David.. Our Board has determined that Mr. Lie-
A-Cheong Tai Chong, David, 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
126
Ernst & Young and Ernst & Young Hua Ming LLP served as our independent auditor for the fiscal year ended December 31, 2014 and 2015,
respectively. A description of the fees billed to us by Ernst & Young and Young and Ernst & Young Hua Ming LLP for professional services in each
of the last two fiscal years is set forth below:
Audit fee (1) and audit-related fees (2)
Year ended December 31
2014
2015
(RMB in thousands)
22,210
22,944
(1)
(2)
"Audit fee" represents fee obtained from annual audit work charged by Ernst & Young and Ernst & Young Hua Ming LLP for year ended December 31, 2014 and 2015,
respectively.
"Audit-related fees" represent aggregate fees charged by Ernst & Young and Ernst & Young Hua Ming LLP for permissible professional services rendered in
connection with assisting the Company to transition from COSO 1992 Internal Control Framework to COSO 2013 Internal Control Framework, issuance of USD senior
perpetual securities for year ended December 31, 2014, and issuance of subsequent letter for additional issuance of A Shares according to the requirement of CSRC, as
well as auditors' letter for calculation accuracy of profit forecast of Shanxi Huaxing used in its circular for disposal.
Our audit committees pre-approves all audit and audit-related services and tax advisory services performed by our principal accountants, Ernst &
Young and Ernst & Young Hua Ming LLP, for the years ended December 31, 2014 and 2015, 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,
2015.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
Effective from December 29, 2015, we have engaged Ernst & Young Hua Ming LLP as the Company's independent registered public accounting
firm, and dismiss Ernst & Young. The change of the Company's independent registered public accounting firm was resolved by our Board of
Directors as recommended by our audit committee on November 13, 2015, and approved by our shareholders at the annual general meeting on
December 29, 2015. The decision was not made due to any disagreements with Ernst & Young.
Ernst & Young's audit reports on our consolidated financial statements as of December 31, 2014 and 2013 and for each of the two years ended
December 31, 2014 and 2013 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit
scope or accounting principles. The audit report of Ernst & Young on the effectiveness of the Company's internal control over financial reporting as
of December 31, 2014 did not contain an adverse opinion, nor was it qualified or modified.
During each of the years ended December 31, 2014 and 2013 and the subsequent interim period through December 28, 2015, there were (i) no
disagreements between the Company and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, any of which, if not resolved to Ernst & Young's satisfaction, would have caused Ernst & Young to make reference
thereto in their reports, and (ii) no "reportable events" requiring disclosure pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F in
connection with the Company's annual report on Form 20-F.
The Company provided Ernst & Young with a copy of the disclosures it is making in this annual report on Form 20-F and requested from Ernst &
Young a letter addressed to the Securities and Exchange Commission indicating whether it agrees with such disclosures. A copy of Ernst & Young's
letter dated April 15, 2016 is attached as Exhibit 15.1.
During each of the two years ended December 31, 2014 and 2013 and the subsequent interim period through December 28, 2015, we have not
consulted with Ernst & Young Hua Ming LLP regarding (i) the application of accounting principles to a specific transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, and neither a written report nor oral
advice was provided to the Company that Ernst & Young Hua Ming LLP concluded was an important factor considered by the Company in reaching
a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)
(iv) of the instructions to Form 20-F, or (iii) any "reportable event" as described in pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.
ITEM 16G. CORPORATE GOVERNANCE
127
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.
Majority of independent
directors
Compensation Committee
Nominating Committee
NYSE Listed Company Manual Requirements on
Corporate Governance
Our Practice
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.
NYSE requires U.S. domestic issuers to have a
compensation committee composed entirely of
independent directors. As a foreign private issuer,
we are not subject to such requirement.
Our Board currently comprises three independent
directors and six non-independent directors which is in
compliance with the requirement by the PRC securities
regulatory authorities.
We have a remuneration committee that consists of two
independent directors and a non- independent director.
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 nominating committee that consists of a
non-independent director and three independent
directors.
Corporate governance committee NYSE requires a listed company to establish a corporate
governance committee which comprises entirely of
independent directors. The corporate governance
committee shall be co-established with the nomination
committee and have a written charter. The corporate
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.
governance committee is responsible (i) for
recommending to the board a accordingly do not
separately maintain 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.
128
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
The audited Consolidated Financial Statements as required under Item 18 are attached hereto starting on page F-1 of this 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, 2015
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
Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Letter from Ernst & Young
*
Filed with this annual report on Form 20-F
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/YU Dehui
Name: YU Dehui
Title: Chairman of the Board
Date: April 15, 2016
129
ALUMINUM CORPORATION OF CHINA LIMITED AND ITS SUBSIDIARIES
Consolidated Financial Statements
For the Years Ended December 31, 2013, 2014 and 2015
Together with Reports of Independent Public Accounting Firm
F-1
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
ALUMINUM CORPORATION OF CHINA LIMITED
Reports of the Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position as of December 31, 2014 and 2015
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 2013, 2014 and 2015
Consolidated Statements of Changes in Equity for the Years Ended
December 31, 2013, 2014 and 2015
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2013, 2014 and 2015
Notes to the Consolidated Financial Statements
F-2
Pages
F3-F6
F7-F9
F10-F11
F12-F14
F15-F16
F17-F197
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
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 the accompanying consolidated statements of financial position of Aluminum Corporation of China Limited and its subsidiaries (the "Group")
as of December 31, 2015, and the related consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for
the year ended December 31, 2015. 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, 2015, and the consolidated results of their operations and their cash flows for the year ended December 31, 2015, 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, 2015, based on criteria established in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 15, 2016 expressed an unqualified
opinion thereon.
/s/Ernst & Young Hua Ming LLP
Beijing, People's Republic of China
April 15, 2016
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, 2015, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (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, 2015, based on the COSO criteria.
F-4
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting (Continued)
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 statements of financial position of Aluminum Corporation of China Limited as of December 31, 2015, and the related consolidated
statements of comprehensive income, changes in equity and cash flows for the year ended December 31, 2015 of Aluminum Corporation of China Limited and
our report dated April 15, 2016 expressed an unqualified opinion thereon.
/s/Ernst & Young Hua Ming LLP
Beijing, People's Republic of China
April 15, 2016
F-5
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
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 the accompanying consolidated statements of financial position of Aluminum Corporation of China Limited and its subsidiaries (the "Group")
as of December 31, 2014, and the consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for the two
years ended December 31, 2014. 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 audits.
We conducted our audits 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 audits provide 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, 2014, and the consolidated results of their operations and their cash flows for the two years ended December 31, 2014, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/Ernst & Young
Hong Kong
April 15, 2015, except for the effects of business combination under common control as discussed in Note 2, as to which the date is April 15, 2016.
F-6
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2014 and 2015
(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 joint ventures
Investments in associates
Available-for-sale financial investments
Deferred tax assets
Other non-current assets
December 31, 2014
December 31, 2015
Notes
RMB'000
RMB'000
USD'000
6
7
8
9(a)
9(b)
10
11
12
10,980,098
94,119,984
3,274,428
2,525,747
4,840,968
74,850
952,057
12,479,204
10,439,015
89,874,746
2,707,584
5,150,887
5,602,701
130,440
1,362,995
9,831,705
1,611,506
13,874,270
417,979
795,160
864,908
20,136
210,410
1,517,754
Total non-current assets
129,247,336
125,100,073
19,312,123
Current assets
Inventories
Trade and notes receivables
Other current assets
Financial assets at fair value through profit or loss
Available-for-sale financial investments
Restricted cash and time deposits
Cash and cash equivalents
13
14
15
37.1/37.2
10
16
16
22,543,346
5,332,534
13,031,700
120,901
4,635,600
1,663,590
16,268,600
20,177,028
5,151,039
15,847,333
2,058
224,820
1,734,739
20,753,136
3,114,796
795,183
2,446,407
318
34,706
267,798
3,203,732
63,596,271
63,890,153
9,862,940
Assets of a disposal group classified as held for sale
Non-current assets held for sale
17
17
-
-
200,187
78,838
30,904
12,170
Total current assets
Total assets
63,596,271
64,169,178
9,906,014
192,843,607
189,269,251
29,218,137
F-7
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)
As of December 31, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
December 31, 2014
December 31, 2015
EQUITY AND LIABILITIES
EQUITY
Equity attributable to owners of the parent
Share capital
Other reserves
Accumulated losses
- proposed final dividend for the year
- others
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Other non-current liabilities
Deferred tax liabilities
Notes
RMB'000
RMB'000
USD'000
18
19
34
20
22
11
13,524,488
19,640,292
-
(4,864,089)
14,903,798
28,613,357
-
(4,677,058)
2,300,750
4,417,141
-
(722,013)
28,300,691
38,840,097
5,995,878
11,353,155
11,457,339
1,768,708
39,653,846
50,297,436
7,764,586
44,769,211
2,937,087
1,061,265
53,725,670
3,302,659
1,006,155
8,293,814
509,843
155,324
Total non-current liabilities
48,767,563
58,034,484
8,958,981
F-8
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)
As of December 31, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
December 31, 2014
December 31, 2015
Notes
RMB'000
RMB'000
USD'000
EQUITY AND LIABILITIES
LIABILITIES
Current liabilities
Trade and notes payables
Other payables and accrued liabilities
Financial liabilities at fair value through profit or loss
Income tax payable
Interest-bearing loans and borrowings
Liabilities of a disposal group classified as held for sale
24
23
37.1/37.2
20
17
Total current liabilities
Total liabilities
Total equity and liabilities
Net current liabilities
15,751,262
13,203,174
29,384
79,420
75,358,958
14,506,138
11,779,410
161,700
43,356
54,422,862
2,239,362
1,818,428
24,962
6,693
8,401,442
104,422,198
80,913,466
12,490,887
-
23,865
3,683
104,422,198
80,937,331
12,494,570
153,189,761
138,971,815
21,453,551
192,843,607
189,269,251
29,218,137
40,825,927
16,768,153
2,588,556
Total assets less current liabilities
88,421,409
108,331,920
16,723,567
The accompanying notes are an integral part of these financial statements.
Yu De Hui
Director
Zhang Zhan Kui
Chief Financial Officer
F-9
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
Continuing Operations
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Impairment loss on property, plant and equipment
Government grants
Other gains, net
Finance income
Finance costs
Share of profits and losses of:
Joint ventures
Associates
2013
2014
2015
Notes
RMB'000
RMB'000
RMB'000
USD'000
4
169,693,800
(166,895,282)
141,999,830
(141,328,954)
123,445,872
(120,927,088)
19,056,759
(18,667,926)
2,798,518
670,876
2,518,784
388,833
27(a)
27(b)
7
28(a)
28(b)
29
29
9(a)
9(b)
(1,873,180)
(2,953,232)
(193,620)
(501,159)
805,882
7,399,252
616,576
(5,864,481)
(1,763,031)
(4,838,387)
(293,766)
(5,679,521)
823,986
356,935
1,047,607
(6,730,597)
(1,775,254)
(2,334,071)
(168,869)
(10,011)
1,768,926
5,023,600
812,084
(5,949,665)
148,749
511,869
89,510
350,575
23,238
284,531
(274,052)
(360,318)
(26,069)
(1,545)
273,075
775,510
125,364
(918,470)
3,587
43,924
29,839
35,571
Profit/(loss) before income tax from continuing operations
895,174
(15,965,813)
193,293
Income tax (expense)/benefit from continuing operations
32
(339,551)
(1,074,910)
230,420
Profit/(loss) for the year from continuing operations
555,623
(17,040,723)
423,713
65,410
Discontinued Operation
Profit/(loss) for the year from discontinued operation
207,144
-
-
-
Profit/(loss) for the year
762,767
(17,040,723)
423,713
65,410
F-10
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
Profit/(loss) attributable to:
Owners of the parent
Non-controlling interests
Profit/(loss) attributable to owners of the parent arising from
Continuing Operations
Discontinued Operation
Other comprehensive income, net of tax:
Other comprehensive income to be reclassified to
profit or loss in subsequent periods:
Gain on available-for-sale financial assets
2013
2014
2015
Notes
RMB'000
RMB'000
RMB'000
USD'000
987,179
(224,412)
(16,208,170)
(832,553)
206,319
217,394
31,850
33,560
762,767
(17,040,723)
423,713
65,410
751,266
235,913
(16,208,170)
-
206,319
-
31,850
-
987,179
(16,208,170)
206,319
31,850
-
-
57,940
8,944
Share of other comprehensive income of an associate
Exchange differences on translation of foreign operations
-
(234,019)
-
64,102
4,658
499,837
719
77,162
Net other comprehensive income to be reclassified
to profit or loss in subsequent periods
(234,019)
64,102
562,435
86,825
Total other comprehensive income, net of tax
(234,019)
64,102
562,435
86,825
Total comprehensive income/(loss) for the year
528,748
(16,976,621)
986,148
152,235
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 per share)
From continuing operation
From discontinued operation
33
33
753,160
(224,412)
(16,144,068)
(832,553)
768,754
217,394
118,675
33,560
528,748
(16,976,621)
986,148
152,235
0.05
0.02
0.07
(1.20)
-
(1.20)
0.01
-
0.01
-
-
-
Details of the dividends payable and proposed for the year are disclosed in note 34 to the consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
F-11
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
Attributable to owners of the parent
Capital reserves
Share
capital
RMB'000
Share
premium
RMB'000
Other
capital
reserves
RMB'000
Statutory
surplus
reserve
RMB'000
At January 1, 2013
Add: Retained earnings adjustment due to business
combinations under common control
At January 1, 2013
Profit/(loss) for the year
13,524,488
13,097,117
890,741
5,867,557
-
13,524,488
-
-
13,097,117
-
-
890,741
-
-
5,867,557
-
Other comprehensive loss for the year:
Exchange differences on translation of
foreign operations
Total comprehensive (loss)/income for the year
Release of deferred government subsidies
Acquisition of subsidiaries
Disposal of discontinued operation
Disposal and deemed disposal of subsidiaries
Issuance of senior perpetual securities,
net of issuance costs
Capital injection from non-controlling shareholders
Other appropriation
Share of reserves of a joint venture and associates
Dividends paid by subsidiaries to non-controlling shareholders
relating to 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
965
-
-
-
-
-
-
-
11,800
-
-
(257,529)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign
currency
translation
reserve
RMB'000
Retained
earnings
RMB'000
Total
RMB'000
Non-
controlling
interests
RMB'000
Total
Equity
RMB'000
(17,382)
10,353,049
43,807,763
9,963,387
53,771,150
-
(17,382)
-
4,361
10,357,410
987,179
4,361
43,812,124
987,179
-
9,963,387
(224,412)
4,361
53,775,511
762,767
(234,019)
-
(234,019)
-
(234,019)
(234,019)
987,179
753,160
(224,412)
528,748
-
-
-
-
-
-
-
-
-
-
-
-
(508)
-
-
-
-
-
11,800
-
-
(257,121)
-
-
38,220
15,836
-
3,801,887
(324,539)
(6,170,474)
2,122,605
193,908
(732)
9,084
11,800
3,801,887
(324,539)
(6,427,595)
2,122,605
193,908
37,488
24,920
-
(26,320)
(26,320)
Special
reserve
RMB'000
92,193
-
92,193
-
-
-
-
-
-
(49)
-
-
38,220
15,836
-
At December 31, 2013
13,524,488
13,098,082
645,012
5,867,557
146,200
(251,401)
11,344,081
44,374,019
9,344,394
53,718,413
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
F-12
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
Attributable to owners of the parent
Capital reserves
Share
capital
RMB'000
Share
premium
RMB'000
Other
capital
reserves
RMB'000
Statutory
surplus
reserve
RMB'000
Special
reserve
RMB'000
Foreign currency
translation
reserve
RMB'000
Retained
earnings/
(accumulated
losses)
RMB'000
Non-
controlling
interests
RMB'000
Total
Equity
RMB'000
Total
RMB'000
At January 1, 2014
Add: Retained earnings adjustment due to
business combinations under common control
13,524,488
13,098,082
645,012
5,867,557
146,200
(251,401)
11,327,787
44,357,725
9,344,394
53,702,119
-
-
-
-
-
-
16,294
16,294
-
16,294
At January 1, 2014
Loss for the year
13,524,488
-
13,098,082
-
645,012
-
5,867,557
-
146,200
-
(251,401)
-
11,344,081
(16,208,170)
44,374,019
(16,208,170)
9,344,394
(832,553)
53,718,413
(17,040,723)
Other comprehensive income for the year
Exchange differences on translation of foreign operations
Total comprehensive loss for the year
Release of deferred government subsidies
Disposal of a subsidiary
Issuance of senior perpetual securities, net
of issuance costs
Capital injection from non-controlling shareholders
Increase of equity interest in a subsidiary
Other appropriation
Share of reserves of a joint venture and associates
Share of change in an associate due to
passive equity dilution
Senior perpetual securities' distribution
Dividends paid to non-controlling shareholders
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
-
-
-
24,061
-
-
(14,979)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,404
8,254
-
-
-
64,102
-
64,102
-
64,102
64,102
-
-
(16,208,170)
-
-
(16,144,068)
20,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,061
33,404
8,254
(14,979)
-
-
(832,553)
-
(950)
2,461,813
694,957
(24,061)
32,046
-
-
(224,241)
(98,250)
(16,976,621)
20,000
(950)
2,461,813
694,957
-
65,450
8,254
(14,979)
(224,241)
(98,250)
At December 31, 2014
13,524,488
13,098,082
674,094
5,867,557
187,858
(187,299)
(4,864,089)
28,300,691
11,353,155
39,653,846
F-13
Attributable to owners of the parent
Capital reserves
Share
capital
Share
premium
Other
capital
reserves
Statutory
surplus
reserve
Special
reserve
Gain on
available-for-
sale
financial
assets
Other
equity
instruments
Foreign
currency
translation
reserve
Accumulated
losses
Total
Non-
controlling
interests
Total
equity
At January 1, 2015
Add: Retained earnings adjustment due to business
combination under common control
13,524,488
13,098,082
674,094
5,867,557
187,858
-
-
-
-
-
At January 1, 2015
Profit for the year
13,524,488
-
13,098,082
-
674,094
-
5,867,557
-
187,858
-
Other comprehensive income for the year
Gain on available-for-sale financial assets
Share of other comprehensive income of an
associate
Exchange differences on translation
of foreign operations
-
-
-
-
-
-
Total comprehensive income for the year
Issuance of A shares (note 18)
Business combination under common control (note
39)
Disposal of subsidiaries (note 40)
Issuance of perpetual medium-term notes (note 41)
Capital injection from non-controlling shareholders
Other appropriation
Share of reserves of joint ventures and associates
Partial disposal of Jiaozuo Wangfang
Dividends paid by subsidiaries to
non-controlling shareholders
Other equity instruments' distribution
-
1,379,310
-
6,518,162
-
-
-
-
-
-
-
-
-
(37,662)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,405)
-
-
(81,682)
11,878
(13,949)
-
-
-
-
-
-
57,940
4,658
-
62,598
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(187,299)
(4,889,093)
28,275,687
11,353,15539,628,842
-
25,004
25,004
-
25,004
(187,299)
-
(4,864,089)
206,319
28,300,691
206,319
11,353,15539,653,846
423,713
217,394
-
-
499,837
-
-
-
499,837
-
206,319
-
57,940
4,658
499,837
768,754
7,897,472
(37,662)
(5,405)
2,000,000
-
(81,682)
11,878
(13,949)
-
-
-
57,940
4,658
499,837
217,394
986,148
- 7,897,472
-
5,686
261,000
(16,277)
-
-
(37,662)
281
- 2,000,000
261,000
(97,959)
11,878
(13,949)
-
-
-
-
-
-
-
-
(19,288)
-
-
(65,853)
(65,853)
(297,766) (297,766)
-
-
2,000,000
-
-
-
-
-
19,288
-
-
-
-
-
-
-
-
-
At December 31, 2015
14,903,798
19,578,582
674,094
5,867,557
98,700
62,598
2,019,288
312,538
(4,677,058)
38,840,097
11,457,33950,297,436
The accompanying notes are an integral part of these consolidated financial statements.
F-14
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2013
2014
2015
Net cash flows from operating activities
35
8,281,407
13,818,759
7,231,450
1,116,344
Notes
RMB'000
RMB'000
RMB'000
USD'000
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 disposal of intangible assets
Proceeds from disposal of a joint venture and associates
Proceeds from disposal of land use rights
Acquisitions of subsidiaries, net of cash acquired
Disposal of Jiaozuo Wanfang, net of cash disposed of
Proceeds from disposal of subsidiaries and Alumina
Production Line of Guizhou Branch of the Company
Interest received from unpaid disposal proceeds
Proceeds from disposal of Chalco Iron Ore, net of
cash disposed of
Disposal of Shanxi Huaxing, net of cash disposed of
Disposal of Ningxia Photovoltaic subsidiaries,
net of cash disposed of
Investments in joint ventures
Investments in associates
Prepaid equity investment
Proceeds from disposal of available-for-sale equity
investments, net
Proceeds from (purchases)/disposal of financial products
Investment income from short-term investments
Dividends received
Interest received from loans and borrowings and others
Decrease/(increase) in restricted cash
Proceeds/(Payment) from settlement of futures,
options and forward foreign exchange contracts, net
Payment for acquisition of a subsidiary acquired in prior year
Loans to related parties
Loans repaid by related parties
Loan to a third party
Deposit for investment projects
Assets related government grants received
Others
8
9(a)
9(b)
28(b)
36
(527,409)
(8,486,568)
(32,546)
489,893
-
264,474
-
392,678
(190,786)
1,931,770
(106,077)
(8,038,327)
(295,506)
219,490
11,637
7,993
-
-
-
3,639,193
(34,610)
(8,689,820)
(139,624)
805,764
-
1,857,993
554,554
(30,000)
-
1,568,950
-
(8,545)
654,028
2,801,901
389,758
2,680,288
-
-
-
-
590,650
(189)
(180,800)
(1,660,485)
-
5,500
-
18,746
38,390
54,742
15,679
176,106
-
(1,145,341)
1,217,780
(196,000)
(79,961)
295,254
(78,640)
-
(67,358)
-
6,899
(10,263)
(1,365,230)
(150,000)
-
(4,635,600)
71,023
58,929
155,922
(4,000)
181,768
(36,958)
(764,000)
972,139
(68,439)
-
392,499
(78,494)
4,410,780
38,469
320,857
14,639
8,500
(680,685)
-
(140,000)
111,000
-
-
840,769
-
(5,343)
(1,341,477)
(21,554)
124,389
-
286,825
85,608
(4,631)
-
242,204
60,168
413,765
91,181
(29)
(1,584)
(210,755)
(23,156)
-
680,907
5,939
49,532
2,260
1,312
(105,080)
-
(21,612)
17,135
-
-
129,790
-
Net cash flows (used in)/from investing activities
(7,686,069)
(4,921,338)
2,952,550
455,794
F-15
ALUMINUM CORPORATION OF CHINA LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
Financing activities
Instalment payment of bonds issuance expenses
Proceeds from issuance of short-term bonds and
medium-term notes, net of issuance costs
Proceeds from issuance of senior perpetual securities,
net of issuance costs
Repayments of short-term bonds and medium-term notes
Senior perpetual securities' distribution paid
Drawdown of short-term and long-term loans
Receipt from loan deposits
Repayments of short-term and long-term loans
Proceeds from government subsidies
Proceeds from finance lease, net of deposit and transaction costs
Finance lease instalment paid
Proceeds from issuance of A shares, net of issuance cost
Capital injection from non-controlling interests
Dividends paid by subsidiaries to non-controlling shareholders
Interest paid
Others
2013
2014
2015
Notes
RMB'000
RMB'000
RMB'000
USD'000
(34,500)
-
-
-
22,936,141
2,122,605
34,892,986
2,461,813
20,988,166
2,000,000
3,240,015
308,747
(24,500,000)
-
98,315,684
365,400
(90,666,022)
14,001
-
-
-
193,908
(70,363)
(6,951,442)
2,928
(26,700,000)
(224,241)
60,417,625
-
(70,276,842)
25,000
1,768,840
(390,433)
-
694,957
(19,273)
(6,763,197)
96,314
(32,000,000)
(297,766)
55,456,234
-
(59,196,790)
-
5,607,694
(468,381)
7,897,472
261,000
(20,045)
(6,041,814)
-
(4,939,949)
(45,967)
8,560,967
-
(9,138,410)
-
865,679
(72,306)
1,219,160
40,291
(3,094)
(932,695)
-
Net cash flows from/(used in) financing activities
1,728,340
(4,016,451)
(5,814,230)
(897,562)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes, net
2,323,678
9,063,593
(5,576)
4,880,970
11,381,695
5,935
4,369,770
16,268,600
114,766
674,576
2,511,439
17,717
Cash and cash equivalents at December 31
16
11,381,695
16,268,600
20,753,136
3,203,732
The accompanying notes are an integral part of these consolidated financial statements.
F-16
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
1.
GENERAL INFORMATION
) and its subsidiaries (together the "Group") are principally
Aluminum Corporation of China Limited (the "Company") (
engaged in the manufacture and distribution of alumina, primary aluminum and energy products. The Group is also engaged in the development of
bauxite related resources, the production, fabrication and distribution of bauxite, carbon and relevant non-ferrous metal products and the trading and
logistics and transport services of non-ferrous metal products and coal products.
The Company is a joint stock company which is domiciled and was established 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 Hong Kong Stock Exchange and the New York Stock Exchange since 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 the State-owned Assets Supervision and Administration
Commission of the State Council.
Information about subsidiaries
As at December 31, 2015, particulars of the Company's principal subsidiaries are as follows:
Name
Place of registration
and business
Registered
capital Principal activities
Percentage of equity
attributable to the
Company
Direct
Indirect
Baotou Aluminum Co., Ltd.
("Baotou Aluminum")
(
)
PRC/Mainland
of China
China Aluminum International
Trading Co., Ltd. ("Chalco
International Trading")
)
(
Shanxi Huasheng Aluminum
Co., Ltd.
(
)
Shanxi Huaze Aluminum and
Power Co., Ltd.
(
)
PRC/Mainland
of China
PRC/Mainland
of China
PRC/Mainland
of China
1,668,980 Manufacture and distribution of primary
100%
aluminum, aluminum alloy and
related fabricated products and
carbon products
1,731,111 Import and export activities
100%
1,000,000 Manufacture and distribution of primary
51%
aluminum, aluminum alloy and
carbon-related products
1,500,000 Manufacture and distribution of primary
aluminum and anode carbon
products and electricity
generation and supply
60%
-
-
-
-
F-17
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
1.
GENERAL INFORMATION (Continued)
Information about subsidiaries (Continued)
Name
Place of registration
and business
Registered
capital Principal activities
Percentage of equity
attributable to the
Company
Direct
Indirect
Fushun Aluminum Co., Ltd.
(
)
PRC/Mainland
of China
1,430,000 Aluminum smelting, manufacture and
100%
distribution of nonferrous metals
Zunyi Aluminum Co., Ltd.
(
)
PRC/Mainland
of China
802,620 Manufacture and distribution of primary
62.10%
aluminum
Chalco Zunyi Alumina Co., Ltd.
)
(
PRC/Mainland
of China
1,400,000 Manufacture and distribution of alumina
73.28%
Shandong Huayu Alloy Materials
Co., Ltd.
("Shandong Huayu")
(
)
Gansu Hualu Aluminum
Co., Ltd. ("Gansu Hualu")
(
)
Chalco Hong Kong Ltd.
("Chalco Hong Kong")
(
)
PRC/Mainland
of China
1,627,697 Manufacture and distribution of primary
55%
aluminum and aluminum alloy
PRC/Mainland
of China
Hong Kong
529,240 Manufacture and distribution of
51%
primary aluminum
HKD849,940
in thousand
Overseas investments and alumina
import and export activities
100%
Chalco Mining Co., Ltd.
(
)
PRC/Mainland
of China
760,000 Manufacture, acquisition and
100%
distribution of bauxite mines,
limestone ore, aluminum magnesium
ore and related non-ferrous
metal products
Gansu Huayang Mining
Development Co., Ltd.
PRC/Mainland
.of China
16,670 Manufacture and distribution of coal
and other mineral products
70%
(
)
Chalco Energy Co., Ltd.
)
(
China Aluminum Ningxia
Energy Group
Co.,Ltd. ("Ningxia Energy")
(
)
PRC/Mainland
of China
PRC/Mainland
of China
819,993 Thermoelectric supply and investment
100%
management
5,025,800 Thermal power, wind power and solar
power generation, coal mining, and
power related equipment
manufacturing
70.82%
-
-
-
-
-
-
-
-
-
-
F-18
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
1.
GENERAL INFORMATION (Continued)
Information about subsidiaries (Continued)
Name
Place of registration
and business
Registered
capital Principal activities
Percentage of equity
attributable to the
Company
Direct
Indirect
Guizhou Huajin Aluminum
Co., Ltd.
(
)
Chalco Hong Kong Investment
Company Limited
Yinxing Energy
PRC/Mainland of
China
1,000,000 Manufacture and distribution
60%
-
of alumina
Hong Kong
USD1 Bond issue
PRC/Mainland of
China
541,633 Operation of wind power, Design,
manufacture and distribution
-
-
100%
52.91%
Chalco Zhengzhou Research
Institute of
Non-ferrous Metal Co., Ltd.
(
)
Chalco Shandong Co., Ltd.
("Chalco Shandong")
)
(
Guangxi Investment Co., Ltd.
("Guangxi Investment")
(
)
Chalco Zhongzhou Aluminum
Co., Ltd.
(
)
PRC/Mainland of
China
PRC/Mainland of
China
PRC/Mainland of
China
PRC/Mainland of
China
of wind power and solar
power equipment
200,000 Research and development services
100.00%
2,500,000 Manufacture and distribution
100.00%
of alumina
10,000 Investment management
100.00%
3,200,000 Manufacture and distribution
100.00%
of alumina
Shanxi Aluminum China Resources
Co., Ltd.(
)
PRC/Mainland of
China
200,000 Manufacture and distribution of
50.00%
primary aluminum
-
-
-
-
-
China Aluminum Logistics Group
Corporation Co., Ltd.
(
)
PRC/Mainland of
China
50,000 Logistic transportation
81.87%
18.13%
F-19
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
2.1
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") issued
by the International Accounting Standards Board (the "IASB"). They 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.
Disposal groups held for sale are stated at the lower of their carrying amounts and fair values less costs to sell.
These financial statements are presented in thousands of Chinese Renminbi ("RMB") unless otherwise stated.
F-20
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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, 2015, the Group's current liabilities exceeded its current assets by approximately RMB16,768 million (December 31,
2014: RMB40,826 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 2016;
Unutilized banking facilities of approximately RMB70,772 million as at December 31, 2015, of which amounts totaling
RMB63,877 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 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.
Consolidation
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries for the year ended
December 31, 2015. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
*
*
*
Power over the investee (i.e.existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
F-21
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Consolidation (Continued)
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less
than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it
has power over an investee, including:
*
*
*
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the
three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are
included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income ("OCI") are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-
group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated
in full on consolidation.
F-22
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Consolidation (Continued)
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses
control over a subsidiary, it:
*
*
*
*
*
*
Derecognizes the assets (including goodwill) and liabilities of the subsidiary;
Derecognizes the carrying amount of any non-controlling interests;
Derecognizes the cumulative translation differences recorded in equity;
Recognizes the fair value of the consideration received;
Recognizes the fair value of any investment retained;
Recognizes any surplus or deficit in profit or loss; and
*
Reclassifies the parent's share of components previously recognized in OCI to profit or loss or retained earnings, as appropriate, as
would be required if the Group had directly disposed of the related assets or liabilities.
(a)
Merger accounting for business combinations under common control
The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the
common control combination occurs as if they had been combined from the date when the combining entities or businesses first
came under the control of the controlling party.
The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties'
perspective. No amount is recognized in consideration for goodwill or excess of the acquirers' interest in the net fair value of the
acquiree's identifiable assets, liabilities and contingent liabilities over cost at the time of the common control combination, to the
extent of the continuation of the controlling party's interest.
F-23
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Consolidation (Continued)
(a)
Merger accounting for business combinations under common control (Continued)
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
a shorter period, regardless of the date of the common control combination.
The comparative financial data have been revised to reflect the business combination under common control incurred during the
year as disclosed in note 39.
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 recognized as expenses in the period in which they are
incurred.
(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
recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of
the recognized amounts of the acquiree's identifiable net assets. The excess of the consideration transferred, the amount recognized
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 recognized directly in profit or loss.
F-24
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Consolidation (Continued)
(b)
Acquisition method of accounting for other business combinations (Continued)
If the business combination is achieved in stages through multiple transactions, the previously held equity interest is remeasured at
its acquisition date fair value and any resulting gain or loss is recognized in profit or loss.
(c)
Subsidiaries
A subsidiary is an entity, directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over
the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).
When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
(a)
(b)
(c)
the contractual arrangement with the other vote holders of the investee;
rights arising from other contractual arrangements; and
the Group's voting rights and potential voting rights.
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 recognized 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.
F-25
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Consolidation (Continued)
(c)
Subsidiaries (Continued)
In the Company's statement of financial position, as permitted under IFRS 1, the investments in subsidiaries acquired prior to
January 1, 2008, being the date of transition to IFRS, are stated at deemed cost as required under the previously adopted
accounting standards. Subsidiaries acquired after that date that are not classified as held for sale in accordance with IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations are stated at cost less provision for impairment losses. The results of
subsidiaries are accounted for by the Company on the basis of dividends received and receivable.
When the Company loses control of a subsidiary in multiple arrangements (transactions), which indicate that the multiple
arrangements is a single transaction, the multiple arrangements are accounted for as a single transaction.
F-26
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1
Basis of preparation (Continued)
Discontinued operation
A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from
the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single
coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively
with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be
classified as held for sale, if earlier. It also occurs when the operation is abandoned.
in Chalco Ruimin Co., Ltd. (
); (4) 56.86% equity interest in Huaxi Aluminum Co., Ltd. (
On June 27, 2013, the Company disposed of all of its equity interests in the following subsidiaries to Chinalco, including (1) 90.03% equity
) ("Henan Aluminum"); (2) 60% equity interest in Chalco Southwest
interest in Chalco Henan Aluminum Co., Ltd. (
); (3) 100% equity interest in Chalco Southwest Aluminum Cold Rolling Co., Ltd. (
Aluminum Co., Ltd. (
); (5) 93.30% equity interest
); (6) 100% equity interest in Chalco Qingdao Light Metal Co., Ltd. (
) ("Qingdao Light Metal") (collectively as "Aluminum Fabrication Subsidiaries"). Meanwhile, the Company
disposed of Northwest Aluminum Fabrication Branch of the Company ("Aluminum Fabrication Branch") to Northwest Aluminum
Fabrication Plant, a subsidiary of Chinalco, on June 27, 2013. The above transactions shall be settled in cash. In addition, as an adherent
condition of the transfer of the equity interest in Henan Aluminum and Qingdao Light Metal, the Company also transferred the entrusted
loans due from Henan Aluminum and Qingdao Light Metal to Chinalco (collectively as "Transferred Loan to Chinalco"), which were
completed on June 27, 2013.
The above disposed Aluminum Fabrication Subsidiaries and Aluminum Fabrication Branch form the "Aluminum Fabrication Segment" of
the Group. In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the Aluminum Fabrication Segment
was classified as a discontinued operation and the operating results of the Aluminum Fabrication Segment has been presented as a
discontinued operation in the consolidated statement of comprehensive income for the year ended December 31, 2013.
Details on the discontinued operation are disclosed in Note 5 to the financial statements.
F-27
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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
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, 2014, except the adoption of the following revised International Financial Reporting Standards ("IFRSs") (which
include International Financial Reporting Standards, International Accounting Standards, and Interpretations and amendments) that are
effective from January 1, 2015:
*
*
*
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
F-28
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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)
The principal effects of adopting these new and revised IFRSs are as follows:
IAS 19 Contributions from employees or third parties to defined benefit plans
The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example,
employee contributions that are calculated according to a fixed percentage of salary. If the amount of the contributions is independent of the
number of years of service, an entity is permitted to recognize such contributions as a reduction of service cost in the period in which the
related service is rendered. The amendments have had no impact on the Group as the Group does not have defined benefit plans.
Annual Improvements to IFRSs 2010-2012 Cycle
IFRS 8 Operating Segments: Clarifies that an entity must disclose the judgements made by management in applying the aggregation criteria
in IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics used to assess
whether the segments are similar. The amendments also clarify that a reconciliation of segment assets to total assets is only required to be
disclosed if the reconciliation is reported to the chief operating decision maker. The amendments have had no impact on the Group.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets: Clarifies the treatment of gross carrying amount and accumulated
depreciation or amortisation of revalued items of property, plant and equipment and intangible assets. The amendments have had no impact
on the Group as the Group does not apply the revaluation model for the measurement of these assets.
F-29
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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)
Annual Improvements to IFRSs 2010-2012 (Continued)
IAS 24 Related Party Disclosures: Clarifies that a management entity (i.e., an entity that provides key management personnel services) is a
related party subject to related party disclosure requirements. In addition, an entity that uses a management entity is required to disclose the
expenses incurred for management services. The amendment has had no impact on the Group as the Group does not receive any
management services from other entities.
Annual Improvements to IFRSs 2011-2013 Cycle
IFRS 3 Business Combinations: Clarifies that joint arrangements but not joint ventures are outside the scope of IFRS 3 and the scope
exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is applied prospectively.
The amendment has had no impact on the Group as the Company is not a joint arrangement and the Group did not form any joint
arrangement during the year.
IFRS 13 Fair Value Measurement: Clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial
liabilities, but also to other contracts within the scope of IFRS 9 or IAS 39 as applicable. The amendment is applied prospectively from the
beginning of the annual period in which IFRS 13 was initially applied. The amendment has had no impact on the Group as the Group does
not apply the portfolio exception in IFRS 13.
IAS 40 Investment Property: Clarifies that IFRS 3, instead of the description of ancillary services in IAS 40 which differentiates between
investment property and owner-occupied property, is used to determine if the transaction is a purchase of an asset or a business
combination. The amendment is applied prospectively for acquisitions of investment properties. The amendment has had no impact on the
Group as it does not own any investment properties.
In addition, the Company has adopted the amendments to the Listing Rules issued by the Hong Kong Stock Exchange relating to the
disclosure of financial information with reference to the Hong Kong Companies Ordinance (Cap. 622) during the current financial year. The
main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements.
F-30
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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 IFRSs that have been issued but are not yet effective, in these financial
statements:
IFRS 9
Amendments to IFRS 10 and IAS 28 (2011)
Amendments to IFRS 10 IFRS 12 and IAS 28(2011)
Amendments to IFRS 11
IFRS 14
Amendments to IAS 16 and IAS 38
IFRS 15
Amendments to IAS 1
Amendments to IAS 16 and IAS 41
Amendments to IAS 27 (2011)
Annual Improvements 2012-2014 Cycle
Financial Instruments2
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture1
Investment Entities: Applying the Consolidation Exception1
Accounting for Acquisitions of Interests in Joint Operations1
Regulatory Deferral Accounts3
Clarification of Acceptable Methods of Depreciation and Amortisation1
Revenue from Contracts with Customers2
Disclosure Initiative1
Agriculture: Bearer Plants1
Equity Method in Separate Financial Statements1
Amendments to a number of IFRSs1
1
2
3
Effective for annual periods beginning on or after January 1, 2016
Effective for annual periods beginning on or after January 1, 2018
Effective for an entity that first adopts IFRSs for its annual financial statements beginning on or after January 1, 2016 and therefore is not applicable to the
Group
Further information about those IFRSs that are expected to be applicable to the Group is as follows:
IFRS 9 Financial Instruments
In September 2014, the IASB issued the final version of IFRS 9, bringing together all phases of the financial instruments project to replace
IAS 39 and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and
hedge accounting. The Group expects to adopt IFRS 9 from January 1, 2018. The Group is currently assessing the impact of the standard.
F-31
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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)
Amendments to IFRS 10 and IAS 28 (2011)
The amendments to IFRS 10 and IAS 28 (2011) address an inconsistency between the requirements in IFRS 10 and in IAS 28 (2011) in
dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full
recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a
business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognized in the
investor's profit or loss only to the extent of the unrelated investor's interest in that associate or joint venture. The amendments are to be
applied prospectively. The Group expects to adopt the amendments from January 1, 2016.
Amendments to IFRS 11
The amendments to IFRS 11 require that an acquirer of an interest in a joint operation in which the activity of the joint operation constitutes
a business must apply the relevant principles for business combinations in IFRS 3. The amendments also clarify that a previously held
interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is
retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing
joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to
both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation. The
amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on January 1, 2016.
Amendments to IAS 16 and IAS 38
Amendments to IAS 16 and IAS 38 clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are
generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through the use of the
asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited
circumstances to amortize intangible assets. The amendments are to be applied prospectively. The amendments are not expected to have any
impact on the financial position or performance of the Group upon adoption on January 1, 2016 as the Group has not used a revenue-based
method for the calculation of depreciation of its non-current assets.
F-32
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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)
Amendments to IFRS 15
IFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is
recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or
services to a customer. The principles in IFRS 15 provide a more structured approach for measuring and recognising revenue. The standard
also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about
performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The
standard will supersede all current revenue recognition requirements under IFRSs. In September 2015, the IASB issued an amendment to
IFRS 15 regarding a one-year deferral of the mandatory effective date of IFRS 15 to January 1, 2018. The Group expects to adopt IFRS 15
on January 1, 2018 and is currently assessing the impact of IFRS 15 upon adoption.
Amendments to IAS 1
Amendments to IAS 1 include narrow-focus improvements in respect of the presentation and disclosure in financial statements. The
amendments clarify:
(i)
(ii)
(iii)
(iv)
the materiality requirements in IAS 1;
that specific line items in the statement of comprehensive income and the statement of financial position may be disaggregated;
that entities have flexibility as to the order in which they present the notes to financial statements; and
that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be
presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to
profit or loss.
Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial
position and the statement of comprehensive income. The Group expects to adopt the amendments from January 1, 2016. The amendments
are not expected to have any significant impact on the Group's financial statements.
F-33
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.4
Investments in joint ventures and associates
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and
operating policy decisions of the investee, but is not control or joint control over those policies.
The Group's investments in associates and joint ventures are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the
investment is adjusted to recognize changes in the Group's share of net assets of the associate or joint venture since the acquisition date.
Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortized nor
individually tested for impairment.
The statement of comprehensive income reflects the Group's share of the results of operations of the associate or joint venture. Any change
in OCI of those investees is presented as part of the Group's OCI. In addition, when there has been a change recognized directly in the
equity of the associate or joint venture, the Group recognizes its share of any changes, when applicable, in the statement of changes in
equity. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the
extent of the interest in the associate or joint venture.
The aggregate of the Group's share of profit or loss of an associate and a joint venture is shown on the face of the statement of
comprehensive income outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the
associate or joint venture.
F-34
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.4
Investments in joint ventures and associates (Continued)
The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its
associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the
associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the
recoverable amount of the associate or joint venture and its carrying value, then recognizes the loss as "Share of profit of an associate and a
joint venture" in the statement of comprehensive income.
If an investment in an associate becomes an investment in a joint venture or vice versa, the retained interest is not remeasured. Instead, the
investment continues to be accounted for under the equity method. In all other cases, upon loss of significant influence over the associate or
joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the
carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained
investment and the proceeds from disposal is recognized in profit or loss.
The Company's investments in associates and joint ventures are classified as non-current assets and are stated at cost less any impairment
losses.The results of associates and joint ventures are included in the Company's statement of comprehensive income to the extent of
dividends received and receivable.
When an investment in an associate or a joint venture is classified as held for sale, it is accounted for in accordance with IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations.
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-makers, who are responsible for allocating resources and assessing performance of the operating segments, have been
identified as the presidents of the Company that make strategic decisions.
F-35
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
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)
(ii)
has control or joint control over the Group;
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)
(ii)
(iii)
(iv)
(v)
the entity and the Group are members of the same group;
one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other
entity);
the entity and the Group are joint ventures of the same third party;
one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
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);
(vii)
(viii)
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); and
the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or
to the parent of the Group.
2.7
Fair value measurement
The Group measures its derivative financial instruments and available-for-sale financial investments at fair value at the end of each
reporting period. Also, the fair values of financial instruments measured at amortized cost are disclosed in note 37.
F-36
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.7
Fair value measurement (Continued)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer
the liability takes place either:
*
*
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using
the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using
the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair
value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1
-
Based on quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2
Level 3
-
-
Based on valuation techniques for which the lowest level input that is significant to the fair value measurement is directly
or indirectly observable
Based on valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
F-37
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.8
Foreign currency translation
(a)
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in RMB,
which is the Company's functional currency and the Group's presentation currency.
(b)
Currency Translation for Financial Statements Presentation
Translations of amounts from RMB into US$ for the convenience of the reader have been calculated at the exchange rate of
RMB6.4778 per US$1.00 on December 31, 2015, the last business day in fiscal year 2015, as published on the website of the
United States Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted
into U.S. dollars at such rate.
(c)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in 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". 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
recognized in profit or loss as part of the fair value gain or loss.
(d)
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)
(iii)
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
all resulting exchange differences are recognized in other comprehensive income. Upon disposal of a foreign operation,
the other comprehensive income related to the foreign operation is reclassified to profit or loss.
F-38
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.8
Foreign currency translation (Continued)
(d)
Group companies (Continued)
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item
measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation
difference on the item whose fair value gain or loss is recognized in other comprehensive income or profit or loss is also
recognized in other comprehensive income or profit or loss, respectively).
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 recognized in other comprehensive income.
2.9
Property, plant and equipment
Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any
impairment losses. When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal
group classified as held for sale, it is not depreciated and is accounted for in accordance with IFRS 5. The cost of an item of
property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working
condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance,
is normally charged to the statement of comprehensive income in the period in which it is incurred. In situations where the
recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the asset as a
replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group
recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its
residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:
Buildings
Machinery
Transportation facilities
Office and other equipment
F-39
8-45 years
3-30 years
6-10 years
3-10 years
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.9
Property, plant and equipment (Continued)
The assets' depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting
period. An item of property, plant and equipment including any significant part initially recognized is derecognized upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognized in the statement of
comprehensive income in the year the asset is derecognized is the difference between the net sales proceeds and the carrying amount of the
relevant asset.
Construction in progress ("CIP") represents buildings under construction, and plant and equipment pending for installation, and is stated at
cost less any 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 asset is ready for its intended use that is eligible for capitalisation.
CIP is transferred to property, plant and equipment when the CIP is ready for its intended use.
2.10
Intangible assets
(a)
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures 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 of disposal. Any impairment is recognized immediately as an expense and is not subsequently
reversed.
(b)
Mining rights and mineral exploration rights
The Group's mineral exploration rights and mining rights relate to coal, bauxite and other mines.
F-40
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.10
Intangible assets (Continued)
(b)
Mining rights and mineral exploration rights (Continued)
(i)
Recognition
Mineral exploration rights and mining rights are initially recorded at the cost which includes the acquisition
consideration, qualifying exploration and other direct costs. The mineral exploration rights are stated at cost less any
impairment, and the mining rights are stated at cost less any amortisation and impairment.
(ii)
Reclassification
Mineral exploration rights are converted to mining rights when technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. Mineral exploration rights are subject to amortisation when the mineral
exploration rights are converted to mining rights and commercial production has commenced.
The Group assesses the stage of each mine under construction to determine when a mine moves into the production
stage. The criteria used to assess the start date are determined based on the unique nature of each mine construction
project. The Group considers various relevant criteria, such as completion of a reasonable period of testing of the mine
and equipment, ability to produce in saleable form (within specifications) and ability to sustain ongoing production to
assess when a mine is substantially complete and ready for its intended use.
(iii)
Amortisation
Amortisation of bauxite and other mining rights (except for coal mining rights) is provided on a straight-line basis
according to the shorter of the expiration date of the mining certificate and the mineable period of natural resources.
Estimated mineable periods of the majority of the mining rights range from 3 to 30 years.
Coal mining rights are amortized on a unit-of-production basis over the economically recoverable reserves evaluated
based on the reserves estimated in accordance with the standards in the Solid Mineral Resource/Reserve Classification of
the PRC (GB/T17766-1999) of the mine concerned.
(iv)
Impairment
An impairment review is performed when there are indicators that the carrying amount of the mineral exploration rights
and mining rights may exceed their recoverable amounts. To the extent that this occurs, the excess is fully provided as an
impairment loss.
F-41
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.10
Intangible assets (Continued)
(c)
Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortized over their estimated useful lives, which do not exceed 10 years. Costs associated with
maintaining computer software programmes are recognized as an expense as incurred.
(d)
Periodic review of the useful lives and amortisation method
For intangible assets with finite useful lives, the estimated useful lives and amortisation method are reviewed annually at the end
of each reporting period and adjusted when necessary.
2.11
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 recognized in profit or loss for the current period. Development expenditures are recognized as assets when all of
the following criteria are met:
(i)
(ii)
(iii)
(iv)
it is technically feasible to complete the asset so that it will be available for use or sale;
management intends to complete the asset and intends and has the ability to use or sell it;
it can be demonstrated that the asset will generate probable future economic benefits;
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 profit or loss for the current period as incurred. Development
expenditures that have been recorded in profit or loss in previous periods will be not recognized as assets in subsequent periods. Capitalized
development expenditures are included in property, plant and equipment and intangible assets as appropriate according to their natures.
F-42
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.12
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (for example goodwill or intangible
assets not ready to use), the asset's recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash-
generating unit's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. An impairment loss is charged to the statement of comprehensive income in the
period in which it arises in those expense categories consistent with the function of the impaired asset.
An assessment is made at the end of each reporting period as to whether there is an indication that previously recognized impairment losses
may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognized
impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the
recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any
depreciation/amortisation) had no impairment loss been recognized for the asset in prior years. A reversal of such an impairment loss is
credited to profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the
impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.
2.13
Non-current assets and disposal groups held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sales
transaction rather than through continuing use. For this to be the case, the asset or disposal group must be available for immediate sale in its
present condition subject only to terms that are usual and customary for the sale of such assets or disposal groups and its sale must be highly
probable. All assets and liabilities of a subsidiary classified as a disposal group are reclassified as held for sale regardless of whether the
Group retains a non-controlling interest in its former subsidiary after the sale.
Non-current assets and disposal groups (other than financial assets) classified as held for sale are measured at the lower of their carrying
amounts and fair values less costs to sell. Property, plant and equipment and intangible assets classified as held for sale are not depreciated
or amortized.
F-43
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets
(a)
Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and
available-for-sale financial 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 include financial assets held for trading and financial assets designated
upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are
acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also
classified as held for trading unless they are designated as effective hedging instruments as defined by IAS 39.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
positive net changes in fair value presented as other income and gains and negative net changes in fair value presented as
finance costs in the statement of profit or loss. These net fair value changes do not include any dividends or interest
earned on these financial assets, which are recognized in accordance with the policies set out for "Revenue recognition"
below.
Financial assets designated upon initial recognition as at fair value through profit or loss are designated at the date of
initial recognition and only if the criteria in IAS 39 are satisfied.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held
for trading or designated as at fair value through profit or loss. These embedded derivatives are measured at fair value
with changes in fair value recognized in the statement of profit or loss. Reassessment only occurs if there is either a
change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a
reclassification of a financial asset out of the fair value through profit or loss category.
F-44
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(a)
Classification (Continued)
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. After initial measurement, such assets are subsequently measured at amortized cost using the effective
interest rate method less any allowance for impairment. Amortized cost is calculated by taking into account any discount
or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective
interest rate amortisation is included in other income and gains in the statement of profit or loss. The loss arising from
impairment is recognized in the statement of profit or loss in finance costs for loans and in other expenses for
receivables.
(iii)
Available-for-sale financial investments
Available-for-sale financial investments are non-derivative financial assets in listed and unlisted equity investments and
debt securities. Equity investments classified as available for sale are those which are neither classified as held for
trading nor designated as at fair value through profit or loss. Debt securities in this category are those which are intended
to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to
changes in market conditions.
After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealized
gains or losses recognized as other comprehensive income in the available-for-sale investment revaluation reserve until
the investment is derecognized, at which time the cumulative gain or loss is recognized in the statement of profit or loss
in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified
from the available-for-sale investment revaluation reserve to the statement of profit or loss in other gains or losses.
Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income
and dividend income, respectively and are recognized in the statement of profit or loss as other income in accordance
with the policies set out for "Revenue recognition" below.
F-45
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(a)
Classification (Continued)
(iii)
Available-for-sale financial investments (Continued)
When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of
reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within
the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any
impairment losses.
The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are
still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets,
the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for
the foreseeable future or until maturity.
For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of
reclassification becomes its new amortized cost and any previous gain or loss on that asset that has been recognized in
equity is amortized to profit or loss over the remaining life of the investment using the effective interest rate. Any
difference between the new amortized cost and the maturity amount is also amortized over the remaining life of the asset
using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in
equity is reclassified to the statement of profit or loss.
F-46
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(b)
Recognition and measurement
All regular purchases and sales of financial assets are recognized on the trade date, that is the date that the Group commits to
purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets
within the period generally established by regulation or convention in the marketplace. Investments are initially recognized at fair
value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Financial assets
carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in profit or loss.
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred
and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial investments and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently
carried at amortized cost using the effective interest method.
F-47
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
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 primarily
derecognized (i.e. removed from the Group's consolidated statement of financial position) 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 Group continues to recognize the
transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognizes 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.
F-48
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(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 is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have
an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial
reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortized cost
For financial assets carried at amortized cost, the Group first assesses whether impairment exists individually for financial assets
that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines
that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included
in a collective assessment of impairment.
F-49
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(d)
Impairment of financial assets (Continued)
Financial assets carried at amortized cost (Continued)
The amount of any impairment loss identified is measured as the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial asset's original effective interest rate (i.e., the effective interest rate
computed at initial recognition).
The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in the statement of
profit or loss. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated
allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been
transferred to the Group.
If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after
the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance
account. If a write-off is later recovered, the recovery is credited to other expenses in the statement of profit or loss.
Available-for-sale financial investments
For available-for-sale financial investments, the Group assesses at the end of each reporting period whether there is objective
evidence that an investment or a group of investments is impaired.
If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and
amortisation) and its current fair value, less any impairment loss previously recognized in the statement of profit or loss, is
removed from other comprehensive income and recognized in the statement of profit or loss.
In the case of equity investments classified as available-for-sale financial 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 financial 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 recognized in the statement of comprehensive income
- is removed from other comprehensive income and recognized in profit or loss. Impairment losses recognized in profit or loss on
equity instruments are not reversed through profit or loss.
F-50
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.14
Financial assets (Continued)
(d)
Impairment of financial assets (Continued)
Available-for-sale financial investments (Continued)
The determination of what is "significant" or "prolonged" requires judgement. In making this judgement, the Group evaluates,
among other factors, the duration or extent to which the fair value of an investment is less than its cost.
In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets
carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between
the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss.
Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of
interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as
part of finance income. Impairment losses on debt instruments are reversed through profit or loss if the subsequent increase in fair
value of the instruments can be objectively related to an event occurring after the impairment loss was recognized in profit or loss.
F-51
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.15
Financial liabilities
(a)
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, 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.
All financial liabilities are recognized 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 amortized 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 recognized
in profit or loss when the liabilities are derecognized as well as through the effective interest rate amortisation process.
Amortized 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 repurchasing 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 recognized in profit or loss. The net
fair value gain or loss recognized 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.
F-52
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.15
Financial liabilities (Continued)
(c)
Derecognition of financial liabilities
A financial liability is derecognized 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 recognized in profit or loss.
2.16
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 recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability
simultaneously.
2.17
Derivative financial instruments
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency
risk and interest rate risk, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is
positive and as liabilities when the fair value is negative.
The fair value of commodity purchase contracts that meet the definition of a derivative as defined by IAS 39 is recognized in the statement
of profit or loss as cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery
of a non-financial item in accordance with the Group's expected purchase, sale or usage requirements are held at cost.
Any gains or losses arising from changes in fair value of derivatives are taken directly to the statement of profit or loss, except for the
effective portion of cash flow hedges, which is recognized in other comprehensive income and later reclassified to profit or loss when the
hedged item affects profit or loss.
F-53
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.18
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 recoverable amount. Cost is determined using the weighted average method. Work-in-progress and finished goods
comprise materials, direct labour and an appropriate proportion of all production overhead expenditure (based on the normal operating
capacity). Borrowing costs are excluded.
Provision for impairment of inventories is usually determined by the excess of cost over net recoverable amount and recorded in profit or
loss. Net recoverable amounts 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 provision for impairment of inventories is recognized within
"cost of sales" in profit or loss.
2.19
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 receivables and other receivables are recognized initially at fair value and subsequently measured at amortized cost using
the effective interest method, less provision for impairment.
F-54
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.20
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and
short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes
in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand
and form an integral part of the Group's cash management.
For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including
term deposits, and assets similar in nature to cash, which are not restricted as to use.
2.21
Government grants
Government grants are recognized when the Group fulfils the conditions attached to them and there is reasonable assurance that the grant
will be received. When the government grant is in the form of monetary assets, 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 recognized when the government document designates that the government grants are used for
constructing or forming long-term assets. If the government document is inexplicit, the Group should make a judgement based on the basic
conditions to obtain the government grants, and recognizes them as asset-related government grants if the conditions are to construct or to
form long-term assets. Otherwise, the government grants should be income-related.
Asset-related government grants are recognized as deferred income and are amortized 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 recognized as
deferred income and recorded in profit or loss when the related expenses or losses are incurred. When the grant used to compensate
expenses or losses that were already incurred, they are directly recognized in profit or loss for the current period.
2.22
Trade and notes payables and other payables
Trade and notes payables 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).
F-55
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.23
Employee benefits
Employee benefits mainly include salaries, bonuses, allowances and subsidies, pension insurance, social insurance and housing funds,
labour union fees, employees' education fees and other expenses related to the employees for their services. The Group recognizes employee
benefits as liabilities during the accounting period when employees rendered the services and allocates the related cost of assets and
expenses based on different beneficiaries.
(a)
Bonus plans
The expected cost of bonus plans is recognized as a liability when the Group has a present legal or constructive obligation as a
result of services rendered by employees and a reliable estimate of the obligation can be made.
(b)
Retirement benefit obligations
The Group primarily pays contributions on a monthly basis to participate in a pension plan organized by the relevant municipal
and provincial governments in the PRC. In 2015, the Group made monthly contributions at the rate of 20% (2013: 20%, 2014:
20%) of the qualified employees' 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 the Ministry of Human
Resources and Social Security of the PRC. These benefits are paid to social security organisations 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.
F-56
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.23
Employee benefits (Continued)
(d)
Termination benefit obligations and early retirement benefit obligations
Termination and early retirement benefit obligations are payable when employment is terminated by the Group before the normal
retirement date, or whenever an employee accepts voluntary redundancy and/or early retirement in exchange for these benefits.
The Group recognizes termination and early retirement benefit obligations 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 employees concerned. Benefits falling due for more than 12 months after the end of the reporting period
are discounted to their present values.
ALUMINUM CORPORATION OF CHINA LIMITED
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.24
Current and deferred income tax
The income tax expense for the period comprises current and deferred tax. Share of income tax expense of joint ventures and associates are
included in "share of profits and loss of joint ventures and associates". Income tax expense is recognized in profit or loss except to the extent
that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other
comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted 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 provided using the liability method on all temporary differences at the end of reporting period between tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized
if they arise from the initial recognition of goodwill; the deferred tax is not accounted for if it arises from the 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 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 tax asset is realized or the deferred tax liability is settled.
Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the
temporary differences and the carry forward of unused tax losses can be utilized.
Deferred tax liability is provided for all taxable temporary differences arising on investments in subsidiaries, joint ventures and associates,
except 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 tax 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-58
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.25
Perpetual securities
Perpetual securities are classified as equity if they are non-redeemable, or redeemable only at the issuer's option, and any interests and
distributions are discretionary. Interests and distributions on perpetual securities classified as equity are recognized as distributions within
equity.
2.26
Revenue recognition
The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow
to the Group and when specific criteria have been met for each of the Group's activities (see descriptions below).
(a)
Sales of goods
Revenue from the sales of goods is recognized 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 and other services to third party customers.
These services are recognized in the period when the related services are provided.
2.27
Interest income
Interest income is recognized 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 flows 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 recognized using the original
effective interest rate.
2.28
Dividend income
Dividend income is recognized when the right to receive payment is established.
F-59
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.29
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 lands and property, plant and equipment. Leasehold lands and property, plant and equipment where the
Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease's
commencement at the lower of the fair value of the leased 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 costs 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 asset and the lease term.
Regarding to the sale and lease back agreements, the Group treats the transactions of sale and lease back as finance leases, the difference
between the carrying amount and consideration will be deferred and recognized with the depreciation during the useful lives of relevant
assets as an adjustment of depreciation expense.
2.30
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 recognized 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.
F-60
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
2.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.31
Dividend distribution
Dividend distribution to the Company's shareholders is recognized as a liability in the Group's and Company's financial statements in the
period in which the dividends are approved by the Company's shareholders.
2.32
Provisions
A provision is recognized when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a
future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the
obligation.
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
the passage of time is recognized as interest expense.
F-61
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, 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 recognized 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 that the
Group are unable to obtain adequate funding, there is uncertainty as to whether the Group will be able to continue as a going concern. These
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.
F-62
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Judgements (Continued)
(b)
Significant influence over an entity in which the Group holds less than 20% of voting rights
As at December 31, 2014 and 2015, the Group owned a 17.246% and 2.46% equity interest of Jiaozuo Wanfang Aluminum Co., Ltd.
), respectively. The Company considers that it has significant influence over Jiaozuo
("Jiaozuo Wanfang") (
Wanfang even though it owns less than 20% of the voting rights, on the grounds that the Company can nominate five out of the eleven
directors of the board of directors of Jiaozuo Wanfang.
At December 31, 2015, the Group owned a 15% equity interest of Chalco Mineral Resources Co. Ltd. ("Chalco Resources") (
). The Company considers that it has significant influence over Chalco Resources even though it owns less than
20% of the voting rights, on the grounds that the Company can nominate one out of the five directors of the board of directors of Chalco
Resources.
At December 31, 2015, the Group owned a 14.62% equity interest of China Rare Earth Co., Ltd. ("China Rare Earth") (
). The Company considers that it has significant influence over China Rare Earth even though it owns less than
20% of the voting rights, on the grounds that the Company can nominate one out of the seven directors of the board of directors of China
Rare Earth.
Prior to December 31, 2015, the Group owned a 15% equity interest of ABC-CA Fund Management Co., Ltd. ("ABC-CA") (
). The Company considers that it has significant influence over ABC-CA even though it owns less than 20%
of the voting rights, on the grounds that the Company can nominate one out of the nine directors of the board of directors of ABC-CA.
F-63
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Judgements (Continued)
(c)
Entity in which the Group holds more than a majority of voting rights that is not subject to consolidation
In April 2015, Ningxia Energy and Zhejiang Power Group Co., Ltd. ("Zhejiang Power") (
) jointly established
). The registered capital of Yinxing Power is RMB800
Ningxia Yinxing Power Co., Ltd. ("Yinxing Power") (
million, of which Ningxia Energy and Zhejiang Power contributed 51% and 49%, respectively. Ningxia Energy can nominate four out of the
seven directors of the board of directors. According to the articles of association of Yinxing Power, it requires more than two-thirds of the
votes for passing most of the resolutions of both shareholders' meeting and board of directors. Accordingly, the directors of the Company
consider that Ningxia Energy and Zhejiang Energy have joint control over Yinxing Power, which is accounted for as a joint venture.
(d)
Lease classification
As disclosed in note 21, the Group has entered into several sales and lease back agreements with third party lease companies and related
party lease companies. The Group assessed the terms in the agreements and considered the Group had substantially all the risks and rewards
of ownership and treated them as finance leases.
F-64
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
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's assumptions
and estimates are based 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 and intangible assets - recoverable amount
In accordance with the Group's accounting policy, each asset or cash-generating unit is evaluated in 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 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 of disposal 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.
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 on 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.
F-65
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Estimates and assumptions (Continued)
(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 the 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 change in depreciable lives and residual values and therefore change in depreciation/amortisation expense in future
periods.
(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 repayment 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 as
indicators that a trade receivable is impaired. The amount of 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 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 recognized as income in profit or loss. The impairment is subject to management's assessment at the end of the reporting
period, and hence, the provision amount is subject to uncertainty.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-66
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Estimates and assumptions (Continued)
(c)
Estimated impairment of trade and other receivables and inventories (Continued)
In accordance with the Group's accounting policy, the Group's management tests whether inventories suffered any impairment based on
estimates of the net recoverable amount of the inventories. For different types of inventories, it requires the estimation on selling prices,
costs of conversion, selling expenses and related tax expense to calculate the net recoverable amount of inventories. For inventories held for
executed sales contracts, management estimates the net recoverable amount based on the contracted price; for other inventories,
management estimates the realisable future price based on the actual prices during the period from the end of the reporting period to the date
that these financial statements were approved for issue by the board of directors of the Company and takes into account the nature and
balance of inventories and future estimated price trends. For raw materials and work-in-progress, management has established a model in
estimating the net recoverable amount at which the inventories can be realized in the normal course of business after considering the
Group's manufacturing cycles, production capacity and forecasts, estimated future conversion costs and selling prices. 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 at 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.
(d)
Coal reserve estimates and units-of-production depreciation for coal mining rights
External qualified valuation professionals evaluate "economically recoverable reserves" based on the reserves estimated by external
qualified exploration engineers in accordance with the PRC standards. The estimates of coal reserves are inherently imprecise and represent
only approximate amounts because of the subjective judgements involved in developing such information. Economically recoverable
reserve estimates are evaluated on a regular basis and have taken into account recent production and technical information about each mine.
F-67
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Estimates and assumptions (Continued)
(e)
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 the relevant tax authorities and any preferential tax treatment to which it is entitled
in each location or jurisdiction in which the Group operates. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, the differences will impact on the income tax and deferred income tax provisions in the period in which the determination
is made.
Deferred tax assets are recognized for unused tax losses and deductible temporary differences, such as provision for impairment of
receivables, inventories and property, plant and equipment and accruals of expenses not yet deductible for tax purposes, to the extent that it
is probable that taxable profit will be available against which the losses deductible temporary difference can be utilized. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and
level of future taxable profits together with future tax planning strategies. The carrying value of the Group's deferred tax assets at December
31, 2015 was RMB2,279 million (December 31, 2014: RMB2,403 million), without taking into consideration the offsetting of balances
within the same tax jurisdiction. The amount of unrecognized tax losses at December 31, 2015 was RMB22,328 million (December 31,
2014: RMB22,564 million). Further details are contained in note 11 to the financial statements.
An entity shall recognize a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates
and joint ventures, except to the extent that both of the following conditions are satisfied:
*
*
the parent, investor or joint venturer is able to control the timing of the reversal of the temporary difference; and
it is probable that the temporary difference will not reverse in the foreseeable future.
F-68
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Estimates and assumptions (Continued)
(e)
Income tax (Continued)
As at December 31, 2014 and 2015, the Group recognized the deferred tax liabilities for the taxable temporary differences associated with
investments in an overseas subsidiary and a domestic associate. Apart from that, the Group believes that the taxable temporary differences
associated with investments in all other subsidiaries, associates and joint ventures satisfy the above criteria and therefore, relevant deferred
tax liabilities were not recognized as disclosed in note 11 to the financial statements.
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 on the Group's results or financial position.
(f)
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-69
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION
(a)
Revenue
Revenue from continuing operations recognized during the years are as follows:
2013
2014
2015
Sales of goods (net of value-added tax)
Other revenue
167,058,228
2,635,572
139,708,748
2,291,082
121,036,548
2,409,324
169,693,800
141,999,830
123,445,872
Other revenue primarily includes revenue from the sale of scrap and other materials, the supply of heat and water and the provision of
machinery processing, transportation and packaging and other services.
F-70
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information
The presidents of the Company have been identified as the chief operating decision-makers. They are responsible for the review of internal
reports in order to allocate resources to operating segments and assess their performance.
The presidents monitor the business from a product perspective comprising alumina, primary aluminum and energy products 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.
However, as disclosed in Notes 2.1 and 5 to the financial statements, the Group has disposed of its equity interests and assets in the
aluminum fabrication segment on June 27, 2013. Accordingly, the aluminum fabrication segment has been classified as a discontinued
operation and was excluded from the segment information for the year ended December 31, 2013.
In addition, the Company acquired an aggregate of 70.82% equity interest in Ningxia Energy on January 23, 2013. Ningxia Energy is
principally engaged in research and development, production and operation of energy products. Its activities mainly include coal mining,
electricity generation by thermal power, wind power and solar power, new energy related equipment manufacturing business, and
construction and operation of coal aluminum integration. After the acquisition of Ningxia Energy, the presidents have identified Ningxia
Energy and other energy related operations, formerly included in corporate and other operating segments, as the energy segment in
accordance with IFRS 8 Operating Segments.
The presidents assess 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 presidents is consistent with that applied in these financial statements. Management has
determined the operating segments based on the reports reviewed by the presidents that are used to make strategic decisions.
F-71
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
*
*
*
*
*
The alumina segment, which consists of the mining and purchasing of bauxite and other raw materials, the refining of bauxite into
alumina, and the sale of 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 the procurement of alumina and other raw materials, supplemental materials
and electricity power, and the smelting of alumina to produce primary aluminum which is sold to external customers, including
Chinalco and its subsidiaries. This segment also includes the production and sale of carbon products and aluminum alloy and other
aluminum products.
The energy segment, which consists of the research and development, production and operation of energy products, mainly
includes coal mining, electricity generation by thermal power, wind power and solar power, and new energy related equipment
manufacturing business. Sales of coals are mainly to the Group's internal and external coal consuming customers; electricity is
sold to regional power grid corporations.
The trading segment, which consists of the trading of alumina, primary aluminum, aluminum fabrication products, other non-
ferrous metal products, coal products, raw materials and supplemental materials and logistics and transport services to internal
manufacturing plants and external customers in the PRC. The products are sourced from fellow subsidiaries of the Group 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 with the segment revenue of the respective segments which
supplied the products to the trading segment.
Corporate and other operating segments, which mainly includes corporate management, research and development activities and
others.
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 on terms mutually agreed among group
companies, and have been eliminated upon consolidation.
F-72
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Year ended December 31, 2013
Alumina
Primary
aluminum
Energy
Trading
Corporate
and other
operating
segments
Inter-
segment
elimination
Total
Total revenue from continuing operations
Inter-segment revenue
33,979,913
50,215,957
(27,276,190) (18,068,029)
5,159,137 137,283,480
(261,865) (11,991,918)
788,549 (57,733,236)169,693,800
-
57,733,236
(135,234)
Sales of self-produced products (Note(i))
Sales of products sourced from
external suppliers
Revenue from external customers
from continuing operations
Segment (loss)/profit before income tax
from continuing operations
Income tax expense from continuing
operations
31,514,827
93,776,735
6,703,723
32,147,928
4,897,272 125,291,562
653,315
-169,693,800
(1,800,990)
(2,780,041)
948,840
547,086
4,167,769
(187,490)
895,174
(339,551)
555,623
Profit for the year from continuing
operations
Other items for continuing operations:
Finance income
Finance costs
Share of profits of joint ventures
Share of (losses)/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
Gain on disposal of Alumina
Production Line
Gain on acquisition of a subsidiary
Gain on disposal and deemed disposal
of subsidiaries
Gain on previously held equity interest
remeasured
at acquisition-date fair value
Impairment of property, plant and equipment
Change for impairment of inventories
(Note (ii))
Provision for impairment of receivables, net
28,132
(1,095,328)
-
(2,129)
63,594
(1,342,708)
-
70,039
68,595
(1,066,896)
126,326
377,312
142,705
(286,968)
-
-
313,550
(2,072,581)
22,423
66,647
-
616,576
- (5,864,481)
148,749
-
511,869
-
(36,089)
(26,548)
(12,138)
(875)
(1,344)
-
(76,994)
(3,169,703)
(2,791,640)
(1,080,293)
(5,748)
(113,642)
- (7,161,026)
134,409
75,384
(699)
33,247
-
-
-
-
-
-
651,185
-
-
(68,340)
-
(284,403)
53,953
(118,453)
-
-
-
-
-
-
(44,359)
(9,611)
128,962
(38,705)
(206,725)
(44,211)
42,714
(203,997)
(37)
-
-
6,218,010
-
(29,963)
-
(813)
-
-
-
-
-
-
-
-
209,057
33,247
651,185
6,218,010
53,953
(501,159)
(79,408)
(297,337)
F-73
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Year ended December 31, 2013
Alumina
Primary
aluminum
Energy
Trading
Corporate
and other
operating
segments
Inter-
segment
elimination
Total
Capital expenditure of continuing
operations in:
Intangible assets
Land use rights and leasehold land
Property, plant and equipment
363,258
-
3,854,419
1,167
15,341
3,300,022
162,741
3,264
1,893,885
243
-
46,047
-
-
130,599
- 527,409
18,605
-
-9,224,972
Notes:
(i)
The sales of self-produced products include sales of self-produced alumina amounting to RMB10,696 million, sales of self-produced primary aluminum
amounting RMB15,218 million, and sales of self-produced other products amounting to RMB5,601 million.
(ii)
Change for impairment of inventories do not include change for impairment due to disposal of subsidiaries.
F-74
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Year ended December 31, 2014
Alumina
Energy
Trading
Total
Primary
aluminum
Corporate
and other
operating
segments
Inter-
segment
elimination
Total revenue
Inter-segment revenue
30,705,972
40,650,480
(24,852,245) (10,260,057)
5,242,329 110,107,996
(9,761,841)
(148,158)
347,935 (45,054,882) 141,999,830
-
45,054,882
(32,581)
Sales of self-produced products (Note (i))
Sales of products sourced
from external suppliers
27,973,346
72,372,809
Revenue from external customers
5,853,727
30,390,423
5,094,171 100,346,155
315,354
- 141,999,830
Segment (loss)/profit before income tax
(5,968,306)
(6,366,489)
(1,736,365)
658,678 (2,277,457)
(275,874)(15,965,813)
Income tax expense
Loss for the year
Other items
Finance income
Finance costs
Share of profits and losses of joint ventures
Share of profits and losses 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
Government grants
Impairment of intangible assets
Impairment of property, plant and equipment
Impairment of land use rights and
leasehold land
Change for impairment of inventories
Reversal/(provision) for impairment of
receivables, net
Investment in associates
Investment in joint venture
221,413
(1,277,390)
-
-
42,034
(1,396,930)
-
(1,446)
69,419
(1,256,195)
78,392
281,932
265,428
(449,456)
-
(7)
449,313
(2,350,626)
11,118
70,096
(1,074,910)
(17,040,723)
-
1,047,607
- (6,730,597)
89,510
-
350,575
-
(39,034)
(30,239)
(13,976)
(15)
(1,344)
-
(84,608)
(3,376,746)
(2,744,872)
(1,196,038)
(6,715)
(73,823)
- (7,398,194)
2,537
112,301
(23,744)
(3,292,425)
(48,434)
565,790
-
(859,866)
437
91,843
(84,680)
(1,479,574)
(140,804)
(43,251)
-
(590,357)
-
(87,423)
11
34,382
-
-
-
54,305
1,305
19,670
-
(47,656)
-
330
4,321
-
4,900
(2,860)
314,313
-
(61,970)
2,389,395
1,165,149
(81,755)
-
-
-
2,137,260
1,355,698
Capital expenditure in:
Intangible assets
Land use rights and leasehold land
Property, plant and equipment (Note (ii))
54,165
8,340
3,455,491
12
284,514
2,038,608
49,325
2,652
2,321,906
1,231
-
117,814
1,344
-
80,702
(44,144)
-
823,986
-
-
(108,424)
- (5,679,521)
-
-
-
-
-
-
-
-
(140,804)
(666,396)
(142,264)
4,840,968
2,525,747
106,077
295,506
8,014,521
Notes:
(i)
(ii)
The sales of self-produced products include sales of self-produced alumina amounting to RMB13,231 million, sales of self-produced primary aluminum
amounting RMB9,979 million, and sales of self-produced other products amounting to RMB4,763 million.
The additions in property, plant and equipment under sale and leaseback contracts (note 21) are not included in capital expenditure in property, plant and
equipment.
F-75
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Year ended December 31, 2015
Alumina
Primary
aluminum
Energy
Trading
Corporate
and other
operating
segments
Inter-
segment
elimination
Total
Total revenue
Inter-segment revenue
33,133,812
(26,501,470)
36,973,230
(8,861,390)
4,290,915
(98,124)
94,131,114
(9,908,906)
301,626 (45,384,825)123,445,872
-
45,384,825
(14,935)
Sales of self-produced products (Note (i))
Sales of products sourced from
external suppliers
23,294,776
60,927,432
Revenue from external customers
6,632,342
28,111,840
4,192,791
84,222,208
286,691
-123,445,872
Segment profit/(loss) before income tax
1,967,072 (1,386,922)
(74,153)
(1,234,554)
733,746
188,104
193,293
Income tax benefit
Profit for the year
Other items
Finance income
Finance costs
Share of profits and losses of joint ventures
Share of profits and losses 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 and land use rights
Government grants
Gain on disposal of Shanxi Huaxing
Partial disposal of Jiaozuo Wanfang
Impairment of property, plant and equipment
Change for impairment of inventories
(Note (ii))
Reversal for impairment of receivables, net
Investment in associates
Investment in joint venture
230,420
423,713
204,206
(1,051,557)
-
-
20,820
(1,347,593)
-
(2,027)
39,231
(1,016,869)
6,979
270,963
265,372
(562,645)
-
-
282,455
(1,971,001)
16,259
15,595
-
812,084
- (5,949,665)
23,238
-
284,531
-
(44,064)
(28,989)
(12,557)
(15)
(1,344)
-
(86,969)
(2,990,799)
(2,871,447)
(1,203,659)
(27,526)
(114,588)
- (7,208,019)
218,401
297,688
1,035,254
-
-
(219,997)
5,389
21,000
1,886,083
1,747,796
1,369,644
-
-
-
(611)
79,611
-
-
(10,011)
56,120
12,816
-
-
-
55,288
40,603
312,286
-
7,417
64,417
2,323,968
1,412,223
(459,575)
121,741
118,352
-
296,168
9,167
1,552,880
832,369
-
-
-
2,827,095
1,852,581
Capital expenditure in:
Intangible assets
Land use rights and leasehold land
Property, plant and equipment (Note (iii))
5,167
-
5,112,086
872
133,686
1,862,662
27,991
5,938
2,377,708
580
-
16,930
-
-
144,097
-
-
-
-
-
-
-
-
-
-
-
-
2,317,874
1,768,926
2,588,134
832,369
(10,011)
(616,867)
232,150
5,602,701
5,150,887
34,610
139,624
9,513,483
.
Notes:
(i)
(ii)
(iii)
The sales of self-produced products include sales of self-produced alumina amounting to RMB12,699 million, sales of self-produced primary aluminum
amounting RMB8,099 million, and sales of self-produced other products amounting to RMB2,497 million.
Change for impairment of inventories do not include change for impairment due to disposal of subsidiaries and transferred to non-current assets held for
sale.
The additions in property, plant and equipment under sale and leaseback contracts (note 21) are not included in capital expenditure in property, plant and
equipment.
F-76
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Alumina
Primary
aluminum
Energy
Trading
Corporate and
other
operating
segments
Total
As at December 31, 2014
Segment assets
Reconciliation:
Elimination of inter-segment receivables
Other elimination
Corporate and other unallocated assets:
Deferred tax assets
Prepaid income tax
Total assets
Segment liabilities
Reconciliation:
Elimination of inter-segment payables
Corporate and other
unallocated liabilities:
Deferred tax liabilities
Income tax payable
Total liabilities
As at December 31, 2015
Segment assets
Reconciliation:
Elimination of inter-segment receivables
Other elimination
Corporate and other unallocated assets:
Deferred tax assets
Prepaid income tax
Total assets
Segment liabilities
Reconciliation:
Elimination of inter-segment payables
Corporate and other
unallocated liabilities:
Deferred tax liabilities
Income tax payable
Total liabilities
72,961,013
48,198,781
36,855,105
20,890,288
25,990,507 204,895,694
(12,883,041)
(370,006)
952,057
248,903
192,843,607
43,956,572
33,262,847
24,686,868
17,126,630
45,899,200 164,932,117
(12,883,041)
1,061,265
79,420
153,189,761
Alumina
Primary
aluminum
Energy
Trading
Corporate and
other
operating
segments
Total
68,597,170
46,330,865
37,020,858
19,158,171
35,873,305 206,980,369
(19,131,592)
(181,437)
1,362,995
238,916
189,269,251
42,769,848
31,480,143
25,051,030
14,047,128
43,705,747 157,053,896
(19,131,592)
1,006,155
43,356
138,971,815
F-77
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
The Group mainly operates in the mainland of China. Geographical information of the operating segments is as follows:
2013
2014
2015
Segment revenue from external
customers from continuing operations
- Mainland China
- Outside of Mainland China
163,845,061
5,848,739
138,745,983
3,253,847
121,199,583
2,246,289
169,693,800
141,999,830
123,445,872
Non-current assets (excluding financial assets and deferred tax assets)
- Mainland China
- Outside of Mainland China
December 31, 2014
December 31,2015
119,378,945
448,362
117,189,869
359,308
119,827,307
117,549,177
For the year ended December 31, 2015, revenues of approximately RMB31,818 million (2013 from continuing operations: RMB30,255
million, 2014: RMB24,986 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, energy 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 years ended December
31, 2013, 2014 and 2015.
F-78
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
DISCONTINUED OPERATIONS
On June 9, 2013, the Company entered into an equity interest transfer agreement ("Aluminum Fabrication Interests Transfer Agreement") with
Chinalco, pursuant to which the Company transferred to Chinalco its equity interests in (a) six subsidiaries: (1) 90.03% equity interest in Henan
Aluminum; (2) 60% equity interest in Chalco Southwest Aluminum Co., Ltd.; (3) 100% equity interest in Chalco Southwest Aluminum Cold Rolling
Co., Ltd.; (4) 56.86% equity interest in Huaxi Aluminum Co., Ltd.; (5) 93.30% equity interest in Chalco Ruimin Co., Ltd.; and (6) 100% equity
interest in Qingdao Light Metal (collectively known as "Aluminum Fabrication Subsidiaries"), (b) a joint venture: 50% equity interest in Chalco Sapa
) ("Chalco Sapa"); and (c) an associate: 40% equity interest in
Aluminum Products (Chongqing) Co., Ltd. (
) ("Guizhou Chalco"). In addition, the Company entered into the Aluminum
Guizhou Chalco Aluminum Co., Ltd. (
Fabrication Assets Transfer Agreement with Northwest Aluminum Fabrication Plant, a subsidiary of Chinalco, on June 6, 2013, pursuant to which the
Company transferred the net assets in Aluminum Fabrication Branch to Northwest Aluminum Fabrication Plant. The above transactions were
completed on June 27, 2013.
The Aluminum Fabrication Subsidiaries and the Aluminum Fabrication Branch form the Aluminum Fabrication Segment of the Group. Pursuant to
the Aluminum Fabrication Interests Transfer Agreement and the Aluminum Fabrication Assets Transfer Agreement, the consideration thereof was
determined with reference to independent valuation undertaken by professional valuers recognized in the PRC of the net asset of the respective
entities/branch as at December 31, 2012, adjusted to give effect to the changes in net assets value from the valuation date (December 31, 2012) to the
disposal date.
As an adherent condition to disposal of certain of the Aluminum Fabrication Subsidiaries, as at December 31, 2012, the Company's entrusted loans to
Henan Aluminum and Qingdao Light Metal were transferred to Chinalco with a nominal principal amount up to RMB3 billion ("Transferred Loan to
Chinalco"), and the appraisal value of such loans was taken as the basis for the consideration.
F-79
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
DISCONTINUED OPERATIONS (Continued)
After giving adjustment to the change in the net assets value from the valuation date (December 31, 2012) to the disposal date regarding the
Aluminum Fabrication Subsidiaries and the Aluminum Fabrication Branch, the aggregate consideration for the disposal of the Aluminum Fabrication
Segment and the Transferred Loan to Chinalco was finalized at RMB6,314.5 million. The disposal of the Aluminum Fabrication Segment and the
Transferred Loan to Chinalco shall be considered in their totality.
The disposal of the Aluminum Fabrication Segment can optimise the asset structure, lower the debt to asset ratio, improve the debt portfolio of the
Group, increase the operating cash flows of the Group and strengthen the re-financing ability of the Group, which is beneficial for the Group to focus
on the development of quality resources and develop its business relating to the quality resources, so as to move towards the forefront of the industry
chain and the high-end of the value chain.
Since the Aluminum Fabrication Segment was a component of the Group's business, representing a separate major line of business with separately
identifiable operations and cash flows, it was classified as a discontinued operation. Accordingly, the results of the Aluminum Fabrication Segment
were separately reported as a "discontinued operation" in the consolidated statement of comprehensive income for the year ended December 31, 2013.
In addition, the gain recognized on the disposal of the Aluminum Fabrication Segment was also included in the results of the discontinued operation.
F-80
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
DISCONTINUED OPERATIONS (Continued)
The details of the net assets of the discontinued operation as at June 27, 2013 are as follows:
Net assets disposed of:
Cash and cash equivalents
Trade and notes receivables
Inventories
Other current assets
Deferred tax assets
Property, plant and equipment
Land use rights
Intangible assets
Investment in an associate
Other non-current assets
Trade and notes payables
Income tax payable
Other payables and accrued expenses
Interest bearing loans and borrowings
Other non-current liabilities
Net assets
Non-controlling interests
Net assets disposed of
Transferred Loan to Chinalco
Total net assets disposed of
Gain on disposal of the discontinued operation and the
Transferred Loan to Chinalco
Satisfied by:
Cash received in 2013
Receivable from Chinalco and its subsidiaries as at December 31, 2013
An analysis of the cash flows of cash and cash equivalents in respect of the disposal of the discontinued operation is as
follows:
Cash consideration received in 2013
Less: cash and cash equivalents disposed of
Net cash inflows from the disposal of the discontinued operation
F-81
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
DISCONTINUED OPERATIONS (Continued)
The results of the discontinued operation are presented below:
June 27, 2013
345,351
1,563,462
2,254,990
1,427,870
105,716
9,354,169
267,104
11,210
202,210
39,472
(2,016,152)
(583)
(598,000)
(9,808,339)
(55,435)
3,093,045
(324,539)
2,768,506
2,925,500
5,694,006
620,494
6,314,500
2013
1,391,327
4,923,173
6,314,500
1,391,327
(345,351)
1,045,976
Revenue
Less: elimination**
Expenses
Less: elimination**
Operating loss
Finance costs, net
Share of profits of associates
Loss before tax from the discontinued operation
Income tax benefit
Loss for the year from the discontinued operation
Gain on disposal of the discontinued operation
Profit after tax for the year from the discontinued operation
2013*
5,527,808
(1,654,896)
3,872,912
(5,684,116)
1,654,896
(4,029,220)
(156,308)
(259,187)
877
(414,618)
1,268
(413,350)
620,494
207,144
The net cash flows incurred by the discontinued operation, excluding the cash consideration received from disposal of the discontinued operation, are
as follows:
Operating activities
Investing activities
Financing activities
Net foreign Exchange differences
Net cash (outflows)
2013*
(10,253)
(134,499)
117,868
124
(26,760)
*
**
These numbers represent the activities prior to the disposal on June 27, 2013.
Since the transactions between the discontinued operation and the continuing operations are expected to continue after the disposal of discontinued operation, the
transactions between the two operations were eliminated in the results of the discontinued operation.
F-82
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
5.
DISCONTINUED OPERATIONS (Continued)
Basic and diluted earnings per share from the discontinued operation (in RMB per share)
The calculations of basic and diluted earnings per share from the discontinued operation are based on:
2013
0.02
2013
Profit attributable to owners of the parent from the discontinued operation (in RMB)
235,913,000
Weighted average number of ordinary shares in issue during the year used in the basic
and diluted earnings or loss or earnings per share calculations (note 33)
13,524,487,892
F-83
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
6.
INTANGIBLE ASSETS
Goodwill Mining rights
Mineral
exploration
rights
Computer
software and
others
Year ended December 31, 2014
Opening net carrying amount
Additions
Transfer from property, plant and equipment (note 7)
Reclassification
Disposals
Amortisation
Impairment loss
Currency translation differences
2,344,953
-
-
-
-
-
-
104
6,924,801
42,150
385,840
48,222
-
(245,194)
(35,420)
735
1,317,163
42,171
-
(48,222)
-
-
-
1,110
268,570
21,756
38,395
-
(10,977)
(43,055)
(73,004)
-
Total
10,855,487
106,077
424,235
-
(10,977)
(288,249)
(108,424)
1,949
Closing net carrying amount
2,345,057
7,121,134
1,312,222
201,685
10,980,098
As at December 31, 2014
Cost
Accumulated amortisation
and impairment
2,345,057
7,964,402
1,312,222
476,947
12,098,628
-
(843,268)
-
(275,262)
(1,118,530)
Net carrying amount
2,345,057
7,121,134
1,312,222
201,685
10,980,098
Year ended December 31, 2015
Opening net carrying amount
Additions
Transfer from property, plant and equipment
Reclassify to operating lease
prepayments (note 8(b))
Disposal of subsidiaries (note 40)
Amortisation
Currency translation differences
Goodwill Mining rights
Mineral
exploration
rights
Computer
software and
others
2,345,057
-
-
-
-
-
780
7,121,134
32,309
23,009
(3,767)
(183,267)
(223,068)
4,673
1,312,222
716
6,559
-
(186,114)
-
10,099
201,685
1,585
7,433
-
-
(32,030)
-
Total
10,980,098
34,610
37,001
(3,767)
(369,381)
(255,098)
15,552
Closing net carrying amount
2,345,837
6,771,023
1,143,482
178,673
10,439,015
As at December 31, 2015
Cost
2,345,837
7,799,213
1,143,482
405,093
11,693,625
Accumulated amortisation and impairment
-
(1,028,190)
-
(226,420)
(1,254,610)
Net carrying amount
2,345,837
6,771,023
1,143,482
178,673
10,439,015
F-84
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
6.
INTANGIBLE ASSETS (Continued)
For the years ended December 31, 2013, 2014 and 2015, the amortisation expenses of intangible assets recognized in profit or loss from continuing
operations are analysed as follows:
Cost of sales
General and administrative expenses (note 27(b))
2013
247,320
30,372
277,692
2014
246,144
42,105
288,249
2015
223,068
32,030
255,098
As at December 31, 2015, the Group has pledged intangible assets with a net carrying value amounting to RMB1,241 million (December 31, 2014:
RMB1,125 million) for bank and other borrowings as set out in note 25 to the financial statements.
As at December 31, 2015, the Group was in the process of applying for the certificates of mining rights with a carrying value amounting to
RMB1,582 million (December 31, 2014: RMB4,569 million). There have been no litigation, claims or assessments against the Group for
compensation with respect to the use of these rights to date. As at December 31, 2015, the carrying value of these rights only represented
approximately 1% of the total asset value of the Group (December 31, 2014: 2%). Management believes that it is probable that the Group can obtain
the relevant ownership certificates from the appropriate authorities. The directors of the Company are of the opinion that the Group legally owns and
has the rights to use the above mining rights, and that there is no material adverse impact on the overall financial position of the Group.
F-85
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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
PT. Nusapati Prima ("PTNP")
December 31, 2014
December 31, 2015
Alumina
Primary
aluminium
Alumina
Primary
aluminium
-
189,419
-
14,112
217,267
-
1,924,259
-
-
189,419
-
14,892
217,267
-
1,924,259
-
203,531
2,141,526
204,311
2,141,526
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 of 2% (2014: 2%) 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% (2014: 12.62%) that reflects specific risks related to CGUs and groups of CGUs as the discount rate. 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, 2015 (December
31, 2014: no impairment).
F-86
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT
Buildings
Machinery Transportation
facilities
Office
and other
equipment
Construction
In progress
Total
Year ended December 31, 2014
Opening net carrying amount
Currency translation differences
Reclassifications and internal transfers
Transfer to intangible assets (note 6)
Transfer to land use rights and
leasehold land (note 8(b))
Additions
Disposals
Depreciation
Impairment losses
27,281,141
(241)
4,182,675
-
-
56,641,136
25
6,485,681
-
-
209,306
(83,637)
(1,361,507)
(1,481,329)
1,961,933
(2,300,081)
(5,346,095)
(3,520,705)
1,175,664
20
29,590
-
-
4,266
(35,467)
(219,339)
(28,468)
147,522
(1)
35,270
-
-
8,685
(3,973)
(40,878)
(1,940)
15,460,542 100,706,005
(187)
-
(424,235)
(460,421)
10
(10,733,216)
(424,235)
(460,421)
7,624,680
(439,550)
-
(647,079)
9,808,870
(2,862,708)
(6,967,819)
(5,679,521)
Closing net carrying amount
28,746,408
53,921,894
926,266
144,685
10,380,731
94,119,984
As at December 31, 2014
Cost
Accumulated depreciation and impairment
42,537,307
(13,790,899)
99,110,829
(45,188,935)
2,933,497
(2,007,231)
512,894
(368,209)
11,658,141 156,752,668
(1,277,410) (62,632,684)
Net carrying amount
28,746,408
53,921,894
926,266
144,685
10,380,731
94,119,984
F-87
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (Continued)
Buildings
Machinery
Transportation
facilities
Office
and other
equipment
Construction
In progress
Total
Year ended December 31, 2015
Opening net carrying amount
Currency translation differences
Reclassifications and internal transfers
Transfer to intangible assets (note 6)
Transfer to land use rights (note 8(b))
Additions
Additions from sales and lease back
Transfer to an associate as capital injection
Transfer to assets of a disposal group
classified as held for sale
Disposal of subsidiaries
Disposals (Note(i)(ii))
Disposals for sales and lease back
Depreciation
Impairment loss
28,746,408
319
2,331,561
-
-
238,260
-
(162,514)
(40,661)
(2,472,604)
(473,362)
-
(1,576,682)
-
53,921,894
209
4,021,603
-
-
93,679
4,796,220
(10,209)
(25,840)
(1,464,038)
(102,735)
(5,693,039)
(5,026,216)
(10,011)
926,266
143
108,344
-
-
16,020
-
-
(112)
(7,032)
(5,661)
-
(224,616)
-
144,685
31
18,414
-
-
3,504
-
(1,898)
(2)
(1,288)
(838)
-
(41,415)
-
10,380,731
-
(6,479,922)
(37,001)
(5,284)
9,162,020
887,814
-
-
94,119,984
702
-
(37,001)
(5,284)
9,513,483
5,684,034
(174,621)
(66,615)
(937,381)
(157,838)
(965,180)
-
-
(4,882,343)
(740,434)
(6,658,219)
(6,868,929)
(10,011)
Closing net carrying amount
26,590,725
50,501,517
813,352
121,193
11,847,959
89,874,746
As at December 31, 2015
Cost
Accumulated depreciation and impairment
41,277,291
(14,686,566)
95,872,034
(45,370,517)
3,029,036
(2,215,684)
532,386
(411,193)
12,444,423 153,155,170
(596,464) (63,280,424)
Net carrying amount
26,590,725
50,501,517
813,352
121,193
11,847,959
89,874,746
F-88
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (Continued)
Note:
(i)
(ii)
*
Aluminum Plant entered
In November 2015, the Government of Baiyun District of Guiyang (
), Guiyang Land and Mineral Resources Reserve Centre (
) ("Guiyang Land Reserve Centre"), a government-related entity, Guizhou Branch of the Company ("Guizhou Branch") and Guizhou
into a Land Reserve Acquisition Cooperation Agreement of Electrolytic Aluminum Plant Area of Baiyun District(
)(the "Land Reserve Acquisition Cooperation Agreement"). According to the Land Reserve Acquisition Cooperation Agreement,
Guizhou Branch sold the aluminum plant and buildings to the Guiyang Land Reserve Centre at a consideration of RMB1,950 million which was determined based on
the appraised value. Pursuant to the Land Reserve Acquisition Cooperation Agreement, Guizhou Branch will receive the consideration by instalments of RMB600
million, RMB200 million, RMB1,000 million and RMB150 million by the end of December 2015, by the end of December 2017, by the end of June 2018 and by the end
of December 2018, respectively. The disposed aluminium plant and buildings' carrying value was RMB438.4 million and the Group recognized a gain of RMB1,364.8
million which was the difference between the discounted value of the consideration and the carrying value of the assets disposed of. Guizhou Branch received RMB600
million in December 2015 in accordance with the aforementioned instalment terms. As at December 31, 2015, the receivable from Guiyang Land Reserve Center was
RMB1,350 million, which was discounted to the present value of RMB1,203.3 million.
The Group disposed of its Hong Kong properties, including properties with carrying amount of RMB12.4 million and land use right with carrying amount of RMB89.4
million, to Chinalco assets holdings limited ("Chinalco assets holdings"), a subsidiary of Chinalco, in 2015, details of which is disclosed in note 36(a)(xiii).
The English names represent the best effort by the management of the Group in translating its Chinese name as it does not have an official English name.
F-89
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (Continued)
For the years ended December 31, 2013, 2014 and 2015, depreciation expenses recognized in profit or loss from continuing operations are analysed
as follows:
2013
2014
2015
Cost of sales
General and administrative expenses (note 27(b))
Selling and distribution expenses (note 27 (a))
6,630,711
159,030
33,457
6,756,110
179,813
31,896
6,673,861
172,337
22,731
6,823,198
6,967,819
6,868,929
As at December 31, 2015, the Group was in the process of applying for the ownership certificates of buildings with a net carrying value of RMB5,105
million (December 31, 2014: RMB5,898 million). There has been no litigation, claims or assessments against the Group for compensation with
respect to the use of these buildings to the date of approval of these financial statements. As at December 31, 2015, the carrying value of these
buildings only represented approximately 3% of our total asset value (December 31, 2014: 3%). Management believes that it is probable that the
Group can obtain the relevant ownership certificates from the appropriate authorities. The directors of the Company are of the opinion that the Group
legally owns and has the rights to use the above property, plant and equipment, and that there is no material adverse impact on the overall financial
position of the Group.
For the year ended December 31, 2015, interest expenses of RMB476 million (2013 from continuing operations: RMB635 million, 2014: RMB533
million) arising from borrowings attributable to the construction of property, plant and equipment during the year were capitalized at an annual rate of
4.90% to 6.55% (2013: 4.05% to 6.25%, 2014: 5.80% to 7.10%) (note 29), and were included in "additions" to property, plant and equipment.
As at December 31, 2015, the Group has pledged property, plant and equipment at a net carrying value amounting to RMB6,103 million (December
31, 2014: RMB9,249 million) for bank and other borrowings as set out in note 25 to the financial statements.
As at December 31, 2015, the carrying value of temporarily idle property, plant and equipment of the Group is RMB6,257 million (December 31,
2014: RMB4,139 million).
The net carrying amounting of the Group's fixed assets held under finance lease included in the total amounts of the machinery and construction in
progress at December 31, 2015 were RMB6,097 million (2014: RMB1,675 million) and RMB888 million (2014: nil), respectively. The accumulated
depreciation of the Group's fixed assets held under finance lease was RMB494 million (2014: RMB119 million).
F-90
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
7.
PROPERTY, PLANT AND EQUIPMENT (Continued)
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 same cash flow projections of the fifth year.
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 10.16% (2014: 10.16%) that reflects specific risks related to CGUs as discount rates. The assumptions
above are used in analysing the recoverable amounts of CGUs within operating segments.
For the CGUs with indicators of impairment identified there was no impaired losses were provided based on the impairment tests.
F-91
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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 carrying amount
Year ended December 31
Opening net carrying amount
Currency translation differences
Disposal (Note)
Amortisation
Closing net carrying amount
As at December 31
Cost
Accumulated amortisation
Net carrying amount
December 31,
2014
December 31,
2015
89,555
-
71,312
3,053,158
60,403
142,429
2,351,478
213,677
3,184,873
2,707,584
3,274,428
2,707,584
2014
2015
108,498
(16,964)
91,534
91,534
607
-
(2,586)
89,555
109,227
(19,672)
89,555
109,227
(19,672)
89,555
89,555
2,475
(89,364)
(2,666)
-
-
-
-
.
Note:
The Group disposed of its Hong Kong properties, including properties with carrying amount of RMB12.4 million and land use right with carrying amount of RMB89.4
million, to Chinalco assets holdings in 2015, details of which is disclosed in note 36(a)(xiii).
F-92
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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 (note 6)
Transfer from property, plant and equipment (note 7)
Disposal of Gansu Aluminum land use right to Gansu Government (Note)
Other disposal
Disposal of subsidiaries (note 40)
Capital injection in an associate (note 9(b))
Amortisation
Impairment loss
As at December 31
Note:
2014
2015
2,652,432
295,506
-
460,421
-
(660)
-
-
(82,022)
(140,804)
3,184,873
139,624
3,767
5,284
(81,284)
(53,964)
(365,625)
(40,788)
(84,303)
-
3,184,873
2,707,584
In November 2015, the Company and Gansu Hualu and Baiyin Land and Mineral Resources Reserve Centre (
) (the "Baiyin Land
Reserve Centre") entered into the Land Use Right Acquisition Agreement (the "Land Acquisition Agreement"), pursuant to which Baiyin Land Reserve Centre acquired
the land use right of 588 mu (equivalent to 392,000 square metres) at a consideration of RMB456 million based on the appraised value. The consideration was received
before 2015 year end. The carrying amount of the disposed land use right is RMB81 million and the disposal gain is RMB375 million.
As at December 31, 2015, the Group was in the process of applying for the certificates of land use rights with a carrying amount of
RMB384 million (December 31, 2014: RMB399 million). There has been no litigation, claims or assessments against the Group for
compensation with respect to the use of land parcels to date. As at December 31, 2015, the carrying value of these land parcels only
represented approximately 0.2% of the total asset value of the Group (December 31, 2014: 0.2%). Management believes that it is probable
that the Group can obtain the relevant ownership certificates from the appropriate authorities. The directors of the Company are of the
opinion that the Group legally owns and has the rights to use the above land use rights, and that there is no material adverse impact on the
overall financial position of the Group.
For the year ended December 31, 2015, the amortisation expenses of land use rights and leasehold land were recognized in "general and
administrative expenses" in profit or loss amounting to RMB87 million (2013 from continuing operations: RMB77 million, 2014: RMB85
million).
As at December 31, 2015, the Group has pledged land use rights at a net carrying value amounting to RMB258 million (December 31, 2014:
RMB409 million) for bank and other borrowings as set out in note 25 to the financial statements.
F-93
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
(a)
Investments in joint ventures
Movements in investments in joint ventures are as follows:
As at January 1
Capital injections (Note (i)/(ii)/(iii))
Disposal of Shanxi Huaxing (Note (iv))
Share of profits and losses for the year
Share of change in reserves
As at December 31
Note:
2014
2015
2,314,841
121,200
-
89,510
196
2,525,747
238,000
2,351,479
23,238
12,423
2,525,747
5,150,887
(i)
(ii)
(iii)
(iv)
*
In June 2014, Chalco Guizhou Mining Co., Ltd.*(
to Guizhou Chalco Hengtaihe Mining Co., Ltd. ("Hengtaihe Mining") *(
proportion to its 49% equity interest in Hengtaihe Mining, which was a major non-cash transaction.
), a wholly-owned subsidiary of the Company, made additional capital injection
) of RMB121 million by converting debt to equity in
In December 2015, Guizhou Mining Company Co., Ltd. ("
million due from Hengtaihe Mining Corporation Co., Ltd. ("
"), a subsidiary of the Company converted its receivables amounting to RMB74.8
") into capital injection.
) jointly established Ningxia
In April 2015, Ningxia Energy, a subsidiary of the Company, and Zhejiang Energy Group Co., Ltd. *(
Yinxing Power Co., Ltd. with registered capital of RMB800 million. Ningxia Energy holds 51% of equity interest in Yinxing Power. As at December 31,
2015, Ningxia Energy has made a capital contribution to Yinxing Power by way of injecting certain assets, cash and notes receivables amounting to
RMB113.94 million, RMB10.26 million and RMB39 million, respectively, and has the capital injection commitment amounting to RMB244.8 million.
As disclosed in note 40 (a), the Company disposed of 50% equity investment in Shanxi Huaxing, formerly its wholly-owned subsidiary, to Shenzhen CR
Yuanta Asset Management Ltd.,
("CR Yuanta"). As a result of the transaction, the Company lost control of Shanxi Huaxing
and accounts for the remaining 50% equity investment as a joint venture at its fair value as at the date of loss of control. Details of the transaction are
disclosed in note 40 (a).
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.
F-94
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(a)
Investments in joint ventures (Continued)
As at December 31, 2015, particulars of the joint ventures of the Group, all of which are unlisted, are as follows:
Name
Place of establishment
and operation
Registered and
paid-in capital Principal activities
Percentage of
Ownership
interest
Voting
power
Profit
sharing
Guangxi Huayin Aluminum
Co., Ltd.
("Guangxi Huayin")
(
)
PRC/Mainland
of China
2,441,987 Manufacture and
33%
33%
33%
distribution
of alumina
The above investment is directly held by the Company.
F-95
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(a)
Investments in joint ventures (Continued)
Guangxi Huayin, which is considered a material joint venture of the Group, is accounted for using the equity method.
The following table illustrates the summarized financial information in respect of Guangxi Huayin:
Cash and cash equivalents
Other current assets
Current assets
Non-current assets
Financial liabilities
Other current liabilities
2014
2015
344,929
1,543,471
1,888,400
6,621,599
2,421,125
68,596
206,090
1,424,496
1,630,586
6,356,342
4,504,192
114,718
Current liabilities
Non-current liabilities
Net assets
Non-controlling interests
Reconciliation to the Group's interest in the joint venture:
Proportion of the Group's ownership
Group's share of net assets of the joint venture
Carrying amount of the investment
2,489,721
2,851,650
4,618,910
27,416
3,168,628
3,340,602
-
-
33%
1,045,647
1,045,647
33%
1,102,399
1,102,399
Revenue
Gross profit
Interest income
Depreciation and amortisation
Interest expenses
Profit before income tax
Income tax
2013
2014
2015
3,454,700
739,365
11,743
448,325
274,438
86,822
1,040
4,239,789
1,022,772
5,670
437,254
276,995
169,350
32,432
4,234,157
706,818
5,004
524,436
227,592
189,720
47,914
Profit and total comprehensive income for the year
85,782
136,918
141,806
Other comprehensive income
Dividend received
-
-
-
-
-
-
F-96
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(a)
Investments in joint ventures (Continued)
The following table illustrates the aggregate financial information of the Group's joint ventures that are not individually material:
Share of the joint ventures' profits and losses for the year
Share of the joint ventures' total comprehensive income
2014
44,327
44,327
2015
(23,558)
(23,558)
Aggregate carrying amount of the Group's investments in joint ventures
1,480,100
4,048,488
As at December 31, 2015, the proportionate interests of the Group in the joint ventures' capital commitments amounted to RMB11 million
(December 31, 2014: RMB75 million).
There were no material contingent liabilities relating to the Group's interests in the joint ventures and the joint ventures themselves.
F-97
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates
Movements in investments in associates are as follows:
As at January 1
Capital injections (Note(i),(v),(vi),(vii),(viii),(ix),(x))
Partial disposal of Jiaozuo Wanfang (Note (xi))
Disposal of investments in an associate (Note (ii))
Share of profits and losses for the year
Cash dividends declared (Note(ix),(xii),(xiii))
Share of change in an associate due to passive equity dilution (Note (iv))
Share of change in reserves
Other comprehensive income
Reclassified as held for sale (note 17(b))
Other decrease of investment in an associate
2014
2015
4,587,818
88,288
-
(7,993)
350,575
(58,953)
(14,979)
8,058
-
-
(111,846)
4,840,968
2,087,180
(1,039,573)
-
284,531
(384,357)
-
(545)
4,658
(78,838)
(111,323)
As at December 31
4,840,968
5,602,701
Note:
(i)
During the years ended December 31, 2014, the capital injections in the associates of the Group amounting to RMB67 million, were made in cash. In July
2014, the capital injection in an associate of the Group amounting to RMB21 million was made in machineries.
(ii)
In February 2013, Chalco Trading, a wholly-owned subsidiary of the Company, set up Jinpingguo Investment with two third parties of the Group, Pingguo
).
Asia Aluminum Co., Ltd.*(
Chalco Trading held a 40% equity interest in Jinpingguo Investment. In May 2014, the board of directors of Jinpingguo Investment approved to liquidate
Jinpingguo Investment because the aluminium scrap recycle project development did not produce positive results. As at December 31, 2014, the liquidation
has been completed.
) and Guangxi Jinpingguo Aluminum Co., Ltd. ("Jinpingguo Investment")*(
(iii)
(iv)
(v)
(vi)
In 2014, Ning Dong Power declared cash dividends of RMB59 million to Ningxia Energy. As at December 31, 2014, Ningxia Energy has received the
dividends in cash.
In February and August 2014, Jiaozuo Wanfang issued restricted shares of 32,130,000 and 1,840,000 to the incentive object, respectively, which led to the
passive dilution of equity interest of the Company in Jiaozuo Wanfang from 17.75% to 17.246%.
In August 2015, the Company entered into an agreement with Chalco Resource, a subsidiary of Chinalco, pursuant to which the Company shall make a
capital injection to Chalco Resource of RMB616.58 million in proportion to its 15% equity interest in Chalco Resource. As at December 31, 2015, the
Company has made a capital injection of RMB246.63 million in cash, and still has the capital injection commitment amounting to RMB369.95 million.
In August 2015, the Company signed a capital injection agreement with China Rare Earth pursuant to which the Company has made a capital injection of
RMB400 million in cash in return for 14.62% equity interest in China Rare Earth.
F-98
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates (Continued)
Note: (Continued)
In November 2015, the Company together with its two subsidiaries, Chalco International Trading and Chalco Shanghai Kelin Co., Ltd. (
injection agreement with Chinalco Asset Management Co., Ltd.*(
("Shanghai Kelin") signed a capital
)
)
) ("Chinalco Asset Management") to inject capital to Chinalco Property Development Co., Ltd.* (
("Chinalco Property Development") by way of injecting certain urban property assets and land use rights with appraised value amounting to RMB676.95
million and cash amounting to RMB696 million. Subsequent to the capital injection, the Group held a 24.12% equity interest in Chinalco Investment
Development. The investment in Chinalco Property Development has been adjusted the impact of downstream transaction amounting to RMB111.3 million.
The transaction generated disposal gain amounting to RMB350.22 million.
In November 2015, Chinalco Property Development changed its name to Chinalco Investment Development Co., Ltd.*(
).
In January 2015, Guangxi Investment signed an agreement with Fusheng Freight Co., Ltd.* (
) ("Fusheng Freight") and Pinghai
)
Industrial Trading Co., Ltd.* (
("Guangxi Huazhong"). Pursuant to the agreement, Guangxi Investment, Fusheng Freight and Pinghai Trading shall make capital injection amounting to
RMB42.9 million,RMB63.7 million and RMB15.9 million, respectively. As at December 31, 2015, Guangxi Investment has made a capital injection
amounting to RMB21 million in return for 35% equity interest in Guangxi Huazhong and has the capital injection commitment amounting to RMB21.9
million.
) ("Pinghai Trading") to set up Guangxi Huazhong Cement Co., Ltd.* (
In April 2015, an associate of Ningxia Energy, Ningxia Ling Wu Power Co., Ltd*. (
) ("Lingwu Power") declared cash
dividends of RMB290 million to Ningxia Energy, among which RMB45 million has been used to make additional capital injection to Lingwu Power and the
remaining amount of RMB245 million has been received in 2015.michelle
(vii)
(viii)
(ix)
(x)
In November 2015, the Company has made a capital injection of RMB1.6 million in cash to Chalco Taiyue New Material Co. Ltd.* (
).
On January 5, 2015, the proposal regarding the transfer of 207,451,915 tradable shares in Jiaozuo Wanfang (represents 17.246% of all of the shares of
Jiaozuo Wanfang) held by the Group was approved by the board of directors of the Company. During 2015, the Group disposed of 177,869,858 shares or
14.786% of Jiaozuo Wanfang and recognized the realized gain of RMB832 million. As of December 31, 2015, the Group held 2.46% of equity interest in
Jiaozuo Wanfang.
In August 2015, an associate of Ningxia Energy, Ningxia Ning Dong Power Co., Ltd*. (
dividends of RMB88 million to Ningxia Energy which received the amount of RMB70 million before December 31, 2015.
) ("Ning Dong Power") declared cash
(xi)
(xii)
(xiii)
In August 2015, an associate of the Company, ABC-CA declared and paid cash dividends of RMB6 million to the Company.
*
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.
As at December 31, 2015, the investment in an associate of the Company at a net carrying value amounting to RMB421 million (December
31, 2014: RMB451 million) was pledged for bank and other borrowings as set out in note 25 to the financial statements.
F-99
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates (Continued)
As at December 31, 2015, except for Jiaozuo Wanfang, which is a listed company, all associates of the Group are unlisted.
As at December 31, 2015, particulars of the Group's material associates are as follows:
Name
Place of establishment
and operation
Registered and
paid-in capital
Principal activities
Effective equity interest held
Ownership
interest
Voting
power
Profit
sharing
Ling Wu Power
PRC/Mainland of China Registered Capital
Thermal power generation
35%
35%
35%
1,300,000
Paid-in capital
2,050,239
Ning Dong Power PRC/Mainland of China
900,000
Thermal power generation
35%
35%
35%
F-100
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates (Continued)
Ling Wu Power, which is considered a material associate of the Group, is accounted for using the equity method.
The following table illustrates the summarized financial information in respect of Ling Wu Power:
Cash and cash equivalents
Other current assets
Current assets
Non-current assets
Financial liabilities
Other current liabilities
2014
59,718
1,536,117
1,595,835
9,472,756
1,784,353
19,553
2015
73,001
1,278,209
1,351,210
9,669,618
2,359,825
10,556
Current liabilities
Non-current liabilities
Net assets
Non-controlling interests
Reconciliation to the Group's interest in the associate:
Proportion of the Group's ownership
Group's share of net assets of the associate
1,803,906
5,513,160
2,370,381
5,043,634
3,751,525
3,606,813
-
-
35%
1,313,034
35%
1,262,385
Carrying amount of the investment
1,313,034
1,262,385
Revenue
Gross profit
Interest income
Depreciation and amortisation
Interest expenses
Profit before income tax
Income tax
2013*
2014
2015
4,607,886
1,483,638
2,822
511,499
419,839
811,031
(11,085)
4,938,969
1,395,909
2,240
599,728
387,620
704,363
106,440
4,319,345
1,190,966
2,140
610,910
312,128
629,564
75,404
Profit and total comprehensive income for the year
822,116
597,923
554,160
Other comprehensive income
Dividend received
-
-
-
-
-
289,605
*
Ningxia Energy became a subsidiary of the Company on January 23, 2013. Ling Wu Power, an associate of Ningxia Energy, became an associate of the
Group upon the completion of its acquisition of Ningxia Energy on January 23, 2013 accordingly. The above summarized financial information represents
the operating performance of Ling Wu Power since its becoming an associate of the Group.
F-101
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates (Continued)
Ning Dong Power, which is considered a material associate of the Group, is accounted for using the equity method.
The following table illustrates the summarized financial information in respect of Ning Dong Power:
Cash and cash equivalents
Other current assets
Current assets
Non-current assets
Financial liabilities
Other current liabilities
Current liabilities
Non-current liabilities
Net assets
2014
2015
88,301
394,069
482,370
4,002,002
842,324
153,723
996,047
2,032,785
132,881
303,979
436,860
3,781,254
794,007
163,571
957,578
1,809,171
1,455,540
1,451,365
Non-controlling interests
-
-
Reconciliation to the Group's interest in the joint venture:
Proportion of the Group's ownership
Group's share of net assets of the associate
Carrying amount of the investment
35%
509,439
509,439
35%
507,978
507,978
Revenue
Gross profit
Interest income
Depreciation and amortisation
Interest expenses
Profit before income tax
Income tax
2013*
2014
2015
1,922,391
664,880
22,429
250,618
206,125
331,403
-
1,848,982
619,062
1,560
258,407
170,366
301,122
-
1,741,041
554,860
585
264,634
139,161
265,123
17,213
Profit and total comprehensive income for the year
331,403
301,122
247,910
Other comprehensive income
Dividend received
-
8,611
-
-
58,953
88,230
*
Ningxia Energy became a subsidiary of the Company on January 23, 2013. Ning Dong Power, an associate of Ningxia Energy, became an associate of the
Group upon the completion of its acquisition of Ningxia Energy on January 23, 2013 accordingly. The above summarized financial information represents
the operating performance of Ning Dong Power since its becoming an associate of the Group.
F-102
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (Continued)
(b)
Investments in associates (Continued)
The following table illustrates the aggregate financial information of the Group's associates that are not individually material:
Share of the associates' profits and losses
Share of the associates' other comprehensive income
Share of the associates' total comprehensive income
2014
35,909
-
35,909
2015
3,806
4,658
8,464
Aggregate carrying amount of the Group's investments in the associates
3,018,495
3,832,338
As at December 31, 2015, the proportionate interests of the Group in the associates' capital commitments amounted to RMB2 million
(December 31, 2014: RMB18 million).
There were no material contingent liabilities relating to the Group's interests in the associates and the associates themselves.
F-103
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
10.
AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS
Current portion
Stated at fair value
Short-term investments, at fair value (Note (i))
Non current portion
Stated at fair value
Listed equity investments (Note (ii))
Stated at cost
Unlisted equity investments (Note (iii) (iv))
Less: provision for impairment (Note (iv))
December 31,
2014
December 31,
2015
4,635,600
224,820
-
75,211
361
74,850
74,850
59,940
73,211
2,711
70,500
130,440
Note:
(i)
The short-term investments stated at fair value as at December 31,2014 and 2015 represented financial products issued by banks. The fair values of the short-term
investments have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and
remaining maturities.
(ii)
The long-term investment stated at fair value as at December 31, 2015 represented the Group's investment in Dongxing Securities Corporation Limited
, which was an unlisted company in 2014 and got listed on the Shanghai Stock Exchange in February 2015.
(iii)
As at December 31, 2015, unlisted equity investments with a carrying amount of RMB71 million (December 31, 2014: RMB75 million) were stated at cost less
impairment. The directors of the Company are of the 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, and therefore, the available-for-sale financial investments are stated as cost.
(iv)
As at December 31, 2015, Ningxia Energy has made a full impairment provision amounting to RMB2 million of the equity investment in Western Electric Commercial
Co., Ltd.
.
F-104
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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 movements in deferred tax assets and liabilities during the year ended December 31, 2014 and 2015, without taking into consideration the
offsetting of balances within the same tax jurisdiction, are as follows:
Movements in deferred tax assets:
Provision for
impairment
Accrued
expenses
Tax losses
Unrealized
profit at
consolidation
Others
Total
As at January 1, 2014
Credited/(charged) to profit or loss
504,281
548,001
76,923
280,678
1,008,091
(299,417)
74,821
63,209
227,514
(81,007)
1,891,630
511,464
As at December 31, 2014
1,052,282
357,601
708,674
138,030
146,507
2,403,094
As at January 1, 2015
Disposal of a subsidiary (note 40(a))
Credited/(charged) to profit or loss
Other Changes
1,052,282
-
(62,759)
-
357,601
(3,057)
(139,047)
-
708,674
-
94,466
-
138,030
-
(36,571)
-
146,507
-
73,588
(51,167)
2,403,094
(3,057)
(70,323)
(51,167)
As at December 31, 2015
989,523
215,497
803,140
101,459
168,928
2,278,547
F-105
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
11.
DEFERRED TAX (Continued)
Movements in deferred tax liabilities:
Fair value
changes of
financial
assets
Depreciation
and
amortisation
Unrealized
losses of
consolidation
Assets of
rehabilitation
obligation
Interest
capitalisation
Fair value
adjustments
arising from
acquisition
of
subsidiaries
Investment
in a
subsidiary
Investment
in an
associate
Total
As at January 1, 2014
Exchange realignment
(Credited)/charged
to profit or loss
82,283
-
(3,272)
56
-
29,533
6,952
-
369
9,085
-
(9,085)
5,080
-
9,773
1,083,014
179
(23,070)
-
-
1,086,686
-1,186,470
179
-
234,7191,325,653
As at December 31, 2014
79,011
29,589
7,321
As at January 1, 2015
Exchange realignment
Disposal of Subsidiaries
79,011
-
-
29,589
-
-
7,321
-
-
-
-
-
-
14,853
1,060,123
1,086,686
234,7192,512,302
14,853
-
-
1,060,123
1,836
(36,389)
1,086,686
-
-
234,7192,512,302
-
1,836
- (36,389)
(note 40(b))
(Credited)/charged
to profit or loss
(8,002)
(28,678)
333
4,889
(14,853)
(24,903)
(286,046)
(198,782)(556,042)
71,009
911
7,654
4,889
-
1,000,667
800,640
35,9371,921,707
F-106
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
11.
DEFERRED TAX (Continued)
For presentation purposes, certain deferred tax assets and liabilities have been offset in the statement of financial position. The following is an
analysis of the deferred tax balances of the Group for financial reporting purposes:
Net deferred tax assets
Net deferred tax liabilities
December 31,
2014
December 31,
2015
952,057
1,362,995
1,061,265
1,006,155
As at December 31, 2015, no deferred tax liability was recognized for taxable temporary differences amounting to RMB1,407 million (December 31,
2014: Nil). The taxable temporary differences are associated with investments in subsidiaries, joint ventures and associates. The Group can control
the reversal of such taxable temporary differences and expect they will not reverse in the foreseeable future.
As at December 31, 2015, the Group has not recognized deferred tax assets of RMB5,582 million (December 31, 2014: RMB5,641 million) in respect
of accumulated tax losses amounting to RMB22,328 million (December 31, 2014: RMB22,564 million) arising in Mainland China that can be carried
forward for offsetting against future taxable income, and deferred tax assets of RMB2,057 million (December 31, 2014: RMB1,922 million) in
respect of deductible temporary differences amounting to RMB8,227 million (December 31, 2014: RMB7,686 million) as it was not considered
probable that those assets would be realized. The above tax losses will expire in one to five years if unused.
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
F-107
(Amounts expressed in thousands of RMB unless otherwise stated)
11.
DEFERRED TAX (Continued)
As at December 31, 2015, the expiry profile of these tax losses was analysed as follows:
Expiring in
2015
2016
2017
2018
2019
2020
December 31,
2014
December 31,
2015
106,146
369,627
4,840,206
9,066,562
8,181,448
N/A
-
63,812
3,812,061
8,463,049
8,299,794
1,688,920
22,563,989
22,327,636
As at December 31, 2015, deferred tax assets amounting to RMB1,363 million (December 31, 2014: RMB952 million) were recognized for tax losses
and deductible temporary differences carried forward to the extent that the realisation of the related tax benefit is probable. The recognition of these
deferred tax assets is supported by forecast of future taxable profits available to the Group.
F-108
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
12.
OTHER NON-CURRENT ASSETS
Financial assets
- Receivables from disposal of subsidiaries, business and assets
- Receivables from disposal of Guizhou Branch's aluminum
plant and properties
- Other long-term receivables
Advances and deposits paid to suppliers
Prepayment for mining rights
Long-term prepaid expenses
Deferred losses for sales and lease back transactions (Note)
Others
December 31,
2014
December 31,
2015
8,195,904
-
197,218
4,252,776
1,203,239
601,446
8,393,122
6,057,461
2,463,700
811,184
317,275
90,019
403,904
1,153,948
773,113
313,000
1,131,018
403,165
4,086,082
3,774,244
12,479,204
9,831,705
(i)
Note: As disclosed in note 21, the Group entered into several sales and lease back agreements which constitute finance leases during the year of 2014 and 2015. The
deferred losses resulted from the sale are classified as other non-current assets and were amortized over the useful lives of the assets leased back.
As at December 31, 2015, except for an amount included in receivables from disposal of subsidiaries, business and assets amounting to RMB2,684
million (December 31, 2014: RMB5,058 million), an amount included in advances and deposits paid to suppliers amounting to RMB1,115 million
(December 31, 2014: RMB1,836 million) which were denominated in USD, all amounts in other non-current assets were denominated in RMB
(December 31, 2014: all in RMB).
As at December 31, 2015 and December 31, 2014, except for receivables from disposal of subsidiaries, business and assets, a prepayment paid to a
supplier and a loan to Shanxi Huaxing which were interest-bearing assets, all amounts in other non-current assets were non-interest-bearing
(December 31, 2014: all non-interest-bearing).
F-109
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
13.
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:
As at January 1
Provision for impairment of inventories
Reversal arising from increase in net realisable value
Reversal upon sales of inventories
Disposal of subsidiaries
Transfer to assets of a disposal group classified as held for sale
December 31,
2014
December 31,
2015
9,575,425
6,624,732
7,461,754
879,755
45,977
24,587,643
(2,044,297)
8,719,067
5,675,679
7,274,774
836,102
41,490
22,547,112
(2,370,084)
22,543,346
20,177,028
December 31,
2014
December 31,
2015
1,377,901
1,746,351
(358,750)
(721,205)
-
-
2,044,297
1,997,719
(228,673)
(1,152,179)
(270,741)
(20,339)
As at December 31
2,044,297
2,370,084
As at December 31, 2015, the Group had no pledged inventories (December 31, 2014: RMB50 million) for bank and other borrowings as set out in
note 25 to the financial statements.
F-110
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
14.
TRADE AND NOTES RECEIVABLES
Trade receivables
Less: provision for impairment of receivables
Notes receivable
December 31,
2014
December 31,
2015
3,702,007
(719,992)
2,982,015
2,350,519
4,394,814
(510,336)
3,884,478
1,266,561
5,332,534
5,151,039
As at December 31, 2015, except for trade and notes receivables of the Group amounting to RMB1,451 million which were denominated in USD
(December 31, 2014: RMB901 million in USD), all trade and notes receivables were denominated in RMB (December 31, 2014: all 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. In some cases, these terms are extended for qualifying long term customers that have met specific credit requirements.
As at December 31, 2015, 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,
2014
December 31,
2015
4,425,910
678,508
120,418
827,690
6,052,526
(719,992)
3,881,858
326,631
667,601
785,285
5,661,375
(510,336)
5,332,534
5,151,039
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, 2015, there was no history of default for these customers.
F-111
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
14.
TRADE AND NOTES RECEIVABLES (Continued)
As at December 31, 2014, the ageing analysis of past due but not impaired trade and notes receivables was as follows:
Past due for 1 year
Past due for 1 to 2 years
Past due for over 2 years
Not past due
December 31,
2014
December 31,
2015
668,467
55,029
346,851
1,070,347
4,262,187
172,597
651,928
445,587
1,270,112
3,880,927
5,332,534
5,151,039
The balances of trade and notes receivables that were past due but not impaired relate to a number of individual customers for whom there was 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, 2015.
Included in the Group's trade receivables are amounts due from the Group's joint ventures of RMB28 million (December 31, 2014: RMB8 million),
which are repayable on credit terms similar to those offered to the major customers of the Group.
F-112
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
14.
TRADE AND NOTES RECEIVABLES (Continued)
As at December 31, 2015, the Group had pledged trade receivables amounting to RMB360 million (December 31, 2014: RMB270 million) and notes
receivable amounting to RMB27 million (December 31, 2014: RMB98 million) for bank and other borrowings as set out in note 25 to the financial
statements.
As at December 31, 2015, trade and notes receivables of RMB695 million (December 31, 2014: RMB988 million) of the Group were impaired and
provisions of RMB510 million (December 31, 2014: RMB720 million) were made. The individually impaired receivables mainly relate to customers
which are in unexpected difficult economic situations and it was expected that only a portion of these receivables would be recovered. The ageing
analysis of these trade receivables is as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
Less: provision for impairment
Movements in the provision for impairment of trade and notes receivables are as follows:
As at January 1
Provision for impairment
Written off
Reversal
Disposal of subsidiaries (Note)
Transfer to assets of a disposal group classified as held for sale
Others
As at December 31
December 31,
2014
December 31,
2015
2,815
242,846
97,317
645,002
987,980
(719,992)
1,348
22,052
275,330
396,088
694,818
(510,336)
267,988
184,482
2014
611,510
135,682
(3,625)
(23,575)
-
-
-
719,992
2015
719,992
6,847
(11,452)
(179,193)
15,644
(1,980)
(39,522)
510,336
Note:
As set out in note 40 (b), the Group lost control of Ningxia photovoltaic subsidiaries and the trade receivables due form these companies eliminated previously become
receivables due from third parties, which have been fully impaired.
F-113
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
14.
TRADE AND NOTES RECEIVABLES (Continued)
As at December 31, 2015, the Group derecognized discounted notes receivables accepted by banks in the PRC to financial institutions with a carrying
amount in aggregate of RMB1,021 million (December 31, 2014：RMB1,374 million), and endorsed notes receivables accepted by banks in the PRC
to certain of its suppliers in order to settle the trade payables due to such suppliers with a carrying amount in aggregate of RMB13,052 million
(December 31, 2014: RMB12,741 million). The above discounted notes and endorsed notes are collectively referred to as the "Derecognized Notes".
The Derecognized Notes have a maturity from one to twelve months at the end of the reporting period. In accordance with the Law of Negotiable
Instruments in the PRC, the holders of the Derecognized Notes, including the financial institutions and the suppliers, 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 Derecognized Notes. Accordingly, it has derecognized the full carrying amounts of the Derecognized
Notes and has derecognized the associated trade payables for the endorsed notes or has not recognized any short-term loans for the discounted notes.
The maximum exposure to loss from the Group's Continuing Involvement in the Derecognized Notes and the undiscounted cash flows to repurchase
these Derecognized Notes is 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 Derecognized Notes are not significant.
For the years ended December 31, 2014 and 2015, the Group has not recognized any gain or loss on the date of transfer of the Derecognized Notes.
No gains or losses were recognized from the Continuing Involvement, both during the year or cumulatively.
As at December 31, 2015, the Group has not derecognized notes receivable accepted by banks in the PRC endorsed to certain of its suppliers in order
to settle the trade payables due to such suppliers with a carrying amount of RMB937 million (December 31, 2014: RMB1,074 million). In the opinion
of the directors, the Group has retained the substantial risks and rewards, which include default risks relating to such endorsed notes, and accordingly,
it continued to recognize the full carrying amounts of the endorsed notes and recognized the associated trade payables settled for the endorsed notes.
Subsequent to the endorsement, the Group did not retain any rights on the use of the endorsed notes, including the sale, transfer or pledge of the
endorsed notes to any other third parties. None of the endorsed notes settled during the year has been recoursed as at December 31, 2015 (December
31, 2014: nil).
F-114
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
15.
OTHER CURRENT ASSETS
Financial assets
- Advances and deposits paid to suppliers
- Dividends receivable
- Receivables from sales of non-core businesses
- Entrusted loans and loans receivable from third parties
- Entrusted loans and loans receivable from related parties
- Receivables from disposals of subsidiaries, business and assets
- Receivable from disposal of Shanxi Huaxing (note 40(a))
- Receivable from disposal of Hong Kong property (note 8, note 36(a)(xiii))
- Interest receivable
- Recoverable reimbursement for freight charges
- Other financial assets
Less: provision for impairment
Receivable of value-added tax refund
Advances to employees
Value-added tax recoverable
Deposits for investment projects
Prepaid income tax
Prepayments to related parties for purchases
Prepayments to suppliers for purchases and others
Others
Less: provision for impairment
Total other current assets
F-115
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
15.
OTHER CURRENT ASSETS (Continued)
December 31,
2014
December 31,
2015
248,070
125,159
152,753
275,091
1,152,022
4,307,951
-
-
103,060
203,649
660,435
7,228,190
(407,198)
6,820,992
18,891
94,364
2,355,758
40,136
248,903
157,988
3,306,921
-
6,222,961
(12,253)
6,210,708
13,031,700
504,179
118,061
286,415
1,657,849
1,111,954
4,321,024
1,646,035
218,130
95,304
147,420
752,110
10,858,481
(1,666,394)
9,192,087
53,458
107,857
2,079,039
27,515
238,916
113,319
3,633,301
413,813
6,667,218
(11,972)
6,655,246
15,847,333
As at December 31, 2015, except for an amount included in receivables from disposal of subsidiaries, business and assets amounting to RMB2,683
million, an amount included in advances and deposits paid to suppliers amounting to RMB540 million and an amount included in other items
amounting to RMB280 million, which were denominated in USD, and a receivable from disposal of Hong Kong Properties amounting to RMB218
million in HKD (December 31, 2014: RMB4,091 million in USD, RMB0.1 million in HKD, RMB0.2 million in AUD), all amounts in other current
assets were denominated in RMB (December 31, 2014: all in RMB).
As at December 31, 2015 and December 31, 2014, except for entrusted loans and loans receivable and receivables from disposal of subsidiaries,
business and assets which were interest-bearing assets, all amounts in other current assets were non-interest-bearing (December 31, 2014: all non-
interest-bearing).
Included in the Group's other current assets are amounts due from the Group's joint ventures and associates of RMB1,439 million (December 31,
2014: RMB1,310 million) and RMB0 million (December 31, 2014: RMB91 million) (note 36(b)), respectively, which are repayable according to the
loan agreement.
As at December 31, 2015, the ageing analysis of financial assets included in other current assets was as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
Less: provision for impairment
December 31,
2014
December 31,
2015
2,041,011
4,433,345
94,759
659,075
7,228,190
(407,198)
3,610,577
970,569
4,748,951
1,528,384
10,858,481
(1,666,394)
6,820,992
9,192,087
F-116
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
15.
OTHER CURRENT ASSETS (Continued)
As at December 31, 2015, the ageing analysis of past due but not impaired financial assets included in other current assets was as follows:
Past due for 1 year
Past due for 1 to 2 years
Past due for over 2 years
Not past due
December 31,
2014
December 31,
2015
334,976
75,159
279,301
689,436
6,131,556
848,338
53,745
345,172
1,247,255
7,944,832
6,820,992
9,192,087
The credit quality of other current assets that were 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.
F-117
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
15.
OTHER CURRENT ASSETS (Continued)
As at December 31, 2015, other current assets of RMB2,133 million (December 31, 2014: RMB436 million) of the Group were impaired and
provisions of RMB1,678 million (December 31, 2014: RMB419 million) were made. The ageing analysis of these current assets is as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
Less: provision for impairment
December 31,
2014
December 31,
2015
22,059
5,729
24,802
383,755
436,345
(419,451)
278,094
265,415
378,985
1,210,774
2,133,268
(1,678,366)
Movements in the provision for impairment of other current assets are as follows:
As at January 1
Provision for impairment
Reversal
Disposal of subsidiaries (Note)
Transfer to non-current assets held for sale
Others
16,894
454,902
2014
467,491
43,133
(12,976)
-
-
(78,197)
2015
419,451
-
(59,804)
1,321,712
(21)
(2,972)
As at December 31
419,451
1,678,366
Note:
As set out in note 40 (b), the Group lost control of Ningxia photovoltaic subsidiaries and the trade receivables due form these companies eliminated previously become
receivables due from third parties, which have been fully impaired.
F-118
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
16.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND TIME DEPOSITS
Restricted cash
Time deposits
Restricted cash and time deposits
Cash and cash equivalents
December 31,
2014
December 31,
2015
1,655,090
8,500
1,663,590
16,268,600
1,734,739
-
1,734,739
20,753,136
17,932,190
22,487,875
Restricted cash mainly represented deposits held for use in issued notes payable and letters of credit.
As at December 31, 2015, the Group had no time deposits. (December 31, 2014: the Group had RMB8.5 million time deposits, of which the annual
effective interest rate was 3.06% with average maturity of three months to one year).
As at December 31, 2015, bank balances and cash on hand of the Group were denominated in the following currencies:
RMB
USD
HKD
EUR
AUD
IDR
December 31,
2014
December 31,
2015
14,862,816
3,055,287
4,889
6,387
2,751
60
20,987,018
1,492,849
2,968
753
2,476
1,811
17,932,190
22,487,875
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances, time deposit and restricted cash are deposited with
creditworthy banks with no recent history of default.
ALUMINUM CORPORATION OF CHINA LIMITED
F-119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
17.
ASSETS AND LIABILITIES OF A DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND NON-CURRENT ASSETS HELD FOR
SALE
(a)
Assets and liabilities of a disposal group classified as held for sale
) ("Chalco Shandong") have been presented as held for sale
Certain assets and liabilities of Chalco Shandong Co., Ltd.* (
following the assets exchange agreement signed on June 25, 2015 to exchange certain assets and liabilities with Shandong Aluminum
) ("Shandong Aluminum"), a subsidiary of Chinalco. In accordance with IFRS 5 Non-current Assets Held for
Corporation* (
Sale and Discontinued Operations, the assets and liabilities of Chalco Shandong to be exchanged under the assets exchange agreement are
classified as assets and liabilities of a disposal group held for sale, respectively.
The major classes of assets and liabilities of Chalco Shandong classified as held for sale as at December 31, 2015 are as follows:
Property, plant and equipment (note 7)
Other assets
Assets of a disposal group classified as held for sale
Trade payables
Other liabilities
Liabilities of a disposal group classified as held for sale
Net carrying amount of a disposal group
Carrying amount after classification
as held for sale
66,615
133,572
200,187
22,522
1,343
23,865
176,322
*
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.
F-120
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
17.
ASSETS AND LIABILITIES OF A DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND NON-CURRENT ASSETS HELD FOR
SALE (Continued)
(b)
Non-current assets held for sale
)("Chinalco Capital") which
In November 2015, the Company, Chinalco and Chinalco Capital Holdings Co., Ltd.* (
was wholly-owned subsidiary of Chinalco, entered into the Capital Contribution Agreement (the "Chinalco Capital Capital Increase
Agreement"), pursuant to which, the Company made a capital injection to Chinalco Capital by way of 15% equity interest held by the
Company in ABC-CA and cash of RMB150 million in return for equity interest in Chinalco Capital. The appraised value of equity interest
in ABC-CA is RMB1,888 million, 15% of which is valued at RMB283 million.
As of December 31, 2015, the directors of the Company consider the capital injection will be completed during 2016. Hence, the Company
reclassified 15% equity interest in ABC-CA as held-for-sale non-current assets based on its carrying value as of December 31, 2015.
F-121
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
18.
SHARE CAPITAL
At January 1, 2014
9,580,522
3,943,966
13,524,488
13,098,082
Number of shares in issue
A shares
H shares
Share capital
Share premium
At December 31, 2014 and
January 1, 2015
Issuance of A shares (Note)
Business combination under
common control (note 39)
9,580,522
3,943,966
13,524,488
13,098,082
1,379,310
-
-
-
1,379,310
-
6,518,162
(37,662)
At December 31, 2015
10,959,832
3,943,966
14,903,798
19,578,582
Note:
As at December 31, 2014 and 2015, all issued shares are registered and fully paid. Both A shares and H shares rank pari passu with each other.
The Company completed the non-public issuance of 1,379,310,344 A shares on June 15, 2015 pursuant to the specific mandate as approved at the annual general meeting of the
Company on June 27, 2014. Upon completion of the non-public issuance, the total number of shares of the Company increased from 13,524,487,892 shares to 14,903,798,236
shares. According to the "Capital Verification Report of Ernst & Young Hua Ming LLP (2015)Yan Zi No. 60968352-A02" (the "Capital Verification Report") issued by Ernst &
Young Hua Ming LLP on the receipt of proceeds raised under the non-public issuance of the Company, as of May 21, 2015, total proceeds of RMB8,000 million and net proceeds
of RMB7,897 million after deducting all relevant expenses in respect of this non-public issuance of RMB103 million were transferred to the designated account of the Company.
The Company had completed the relevant procedures of registration and custody for the non-public issuance at Shanghai Branch of China Securities Depository and Clearing
Corporation Limited on June 15, 2015. As a result of the non-public issuance, the Company's share capital increased by RMB1,379 million, and the share premium increased by
RMB6,518 million.
19.
RESERVES
The amounts of the Group's reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes
in equity on pages F12 to F14 of the financial statements.
F-122
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS
Long-term loans and borrowings
Finance lease payables (note 21)
Bank and other loans (Note (a))
- Secured (Note (f))
- Guaranteed (Note (e))
- Unsecured
Medium-term notes and bonds and
long-term bonds (Note (b))
- Guaranteed (Note (e))
- Unsecured
Total long-term loans and borrowings
Current portion of finance lease payables (note 21)
Current portion of medium-term notes
Current portion of
long-term bank and other loans
December 31,
2014
December 31,
2015
1,429,446
6,656,038
15,301,820
1,652,737
14,991,787
14,202,953
1,791,207
16,373,473
31,946,344
32,367,633
1,993,821
20,237,772
1,996,270
25,715,582
22,231,593
27,711,852
55,607,383
(269,548)
(3,995,762)
66,735,523
(1,511,161)
(6,896,181)
(6,572,862)
(4,602,511)
Non-current portion of long-term loans and borrowings
44,769,211
53,725,670
F-123
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(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 (f))
- Guaranteed (Note (e))
- Unsecured
Short-term bonds, unsecured (Note (d))
Current portion of finance lease payable (note 21)
Current portion of medium-term notes
Current portion of long-term bank and other loans
Total short-term borrowings and
current portion of long-term loans and borrowings
December 31,
2014
December 31,
2015
2,653,200
1,247,159
37,084,037
2,201,584
400,000
32,147,703
40,984,396
34,749,287
23,536,390
269,548
3,995,762
6,572,862
6,663,722
1,511,161
6,896,181
4,602,511
75,358,958
54,422,862
As at December 31, 2015, except for loans and borrowings of the Group amounting to RMB23 million (December 31, 2014: RMB24 million) and
RMB3,711 million (December 31, 2014: RMB4,957 million) which were denominated in JPY and USD, respectively, all loans and borrowings were
denominated in RMB.
As at December 31, 2015, interest-bearing loans and borrowings of RMB4,849 million including a finance lease payable of RMB220 million
(December 31, 2014: interest-bearing loans and borrowings of RMB1,333 million including a finance lease payable of RMB304 million) and a
finance lease payable of RMB1,221 million (December 31, 2014: none) were due to Chinalco Finance Company Limited ("Chinalco Finance") (
) and Chinalco Financial Leasing, subsidiaries of Chinalco, respectively, as set out in note 36(b).
*
The English name represents the best effort by the management of the Group in translating its Chinese names as it does not have any official English names.
F-124
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (Continued)
Note:
(a)
Long-term bank and other loans
(i)
The maturity of long-term bank and other loans is set out below：
Loans from banks and other
financial institutions
Other loans
Total of long-term bank and other
loans
December 31,
2014
December 31,
2015
December 31,
2014
December 31,
2015
December 31,
2014
December 31,
2015
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
6,558,565
3,316,593
11,770,086
10,244,278
4,600,619
4,863,465
13,779,643
9,100,933
14,297
14,467
14,018
14,040
1,892
2,020
6,060
13,001
6,572,862
3,331,060
11,784,104
10,258,318
4,602,511
4,865,485
13,785,703
9,113,934
31,889,522
32,344,660
56,822
22,973
31,946,344
32,367,633
(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 year ended December 31, 2015 was 5.51% (2014: 5.64%).
F-125
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (Continued)
Note:
(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, 2015 are summarized as follows:
Face
value/maturity
Effective
interest rate
December 31,
2014
December 31,
2015
2007 long-term bonds
2010 medium-term notes
2010 medium-term notes
2011 medium-term notes
2015 medium-term notes
2015 medium-term notes
2012 Ningxia Energy medium-term bonds
2012 medium-term bonds
2012 medium-term bonds
2013 medium-term bonds
2013 medium-term bonds
2014 medium-term bonds
2015 medium-term bonds
2015 medium-term bonds
2,000,000/2017
1,000,000/2015
1,000,000/2015
4,900,000/2016
3,000,000/2018
1,500,000/2018
400,000/2017
2,000,000/2015
3,000,000/2017
3,000,000/2018
2,000,000/2016
3,000,000/2017
3,000,000/2018
2,000,000/2018
4.64%
4.34%
4.20%
6.03%
5.53%
5.01%
6.06%
5.13%
5.77%
5.99%
5.99%
7.35%
6.11%
6.08%
1,993,821
998,249
998,040
4,896,842
-
-
400,000
1,999,473
2,989,167
2,981,609
1,994,753
2,979,639
-
-
1,996,270
-
-
4,898,376
2,981,028
1,487,994
400,000
-
2,992,788
2,987,271
1,997,805
2,988,140
2,993,630
1,988,550
22,231,593
27,711,852
Long-term bonds and medium-term notes and bonds were issued for capital expenditure purposes, operating cash flows and bank loan re-financing.
F-126
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (Continued)
Note:
(Continued)
(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 ended December 31, 2015 was 5.12% (2014: 5.48%).
(d)
Short-term bonds
Outstanding short-term bonds as at December 31, 2015 are summarized as follows:
2014 short-term bonds
2014 short-term bonds
2014 short-term bonds
2014 short-term bonds
2014 short-term bonds
Face
value/maturity
Effective
interest rate
December 31,
2014
December 31,
2015
2,000,000/2015
3,000,000/2015
3,000,000/2015
3,000,000/2015
3,000,000/2015
6.45%
5.40%
5.85%
5.94%
5.80%
2,092,959
3,049,586
3,115,170
3,116,780
3,102,335
-
-
-
-
-
2014 short-term bonds
2014 short-term bonds
2014 short-term bonds
2015 short-term bonds
2015 short-term bonds
2015 short-term bonds
3,000,000/2015
3,000,000/2015
3,000,000/2015
3,000,000/2016
3,000,000/2016
600,000/2016
4.99%
4.75%
5.00%
4.15%
3.85%
3.35%
3,028,864
3,022,213
3,008,483
-
-
-
-
-
-
3,045,981
3,017,741
600,000
23,536,390
6,663,722
All the above short-term bonds were issued for working capital needs.
F-127
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
20.
INTEREST BEARING LOANS AND BORROWINGS (Continued)
Note:
(Continued)
(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,
2014
December 31,
2015
1,993,821
1,996,270
16,000
-
136,000
277,400
1,223,337
12,000
749,207
202,400
827,600
-
1,652,737
1,791,207
587,424
140,000
-
122,000
397,735
-
50,000
50,000
-
300,000
1,247,159
400,000
Guarantors
Long-term bonds
Bank of Communications
Long-term loans
Lanzhou Aluminum Factory*
The Company
Yinxing Energy (Note (ii))
Ningxia Energy (Note (ii))
Agricultural Bank of China Limited, Head Office, Banking Department
(Note (i))
Short-term loans
The Company
Ningxia Energy (Note (ii))
Yinxing Energy (Note (ii))
Guizhou Aluminum Plant
Chalco Trading (Note (ii))
(Note (i))
Note:
(i)
(ii)
The guarantor is a subsidiary of Chinalco.
The guarantor is a subsidiary of the Group.
(f)
Secured interest-bearing loans and borrowings
The assets pledged for bank and other borrowings were set out in note 25 to the financial statements.
F-128
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
21.
FINANCE LEASE PAYABLE
As disclosed in note 7, the Group leased certain machinery under finance leases with lease terms ranging from three to five years.
At December 31, 2015, the total future minimum lease payments under finance leases and their present value are as follows:
Amounts payable:
Within one year
In the second year
In the third to fifth
years, inclusive
Total minimum finance
lease payment
Future finance charges
Total net finance lease
payables (note 20)
Minimum lease payments
December 31
2014
December 31
2015
Present value of minimum
lease payments
December 31
2014
December 31
2015
318,103
444,022
910,926
1,815,657
1,803,103
3,751,049
269,548
390,768
769,130
1,511,161
1,533,730
3,611,147
1,673,051
7,369,809
1,429,446
6,656,038
(243,605)
(713,771)
1,429,446
6,656,038
Portion classified as current liabilities (note 20)
(269,548)
(1,511,161)
Non-current portion
1,159,898
5,144,877
During 2014 and 2015, the Group entered various sale and leaseback agreements with China Merchants Bank Financial Leasing Co., Ltd. ("CMB
Financial Leasing")*
, China
Industrial Bank Financial Leasing Co., Ltd.
("CIB Financial Leasing")*
, Shenzhen Haotian Financial Leasing Co., Ltd.*
, CCB Financial Leasing Co., Ltd.*
, Ruize International Financial Leasing Co., Ltd.*
, Pingan International Financial Leasing Co., Ltd.
("Pingan") *
, Guohong Financial Leasing Co., Ltd.*
, Caterpillar Financial Leasing Co., Ltd.*
, Chongqing Transportation Equipment Financing Lease Co., Ltd*
, JIC Leasing
(Shanghai) Co., Ltd.*
Group, respectively, under which the Group sold the machinery and construction in progress and leased the assets back.
, and Chinalco Finance and Chinalco Financial Leasing, which are the related parties of the
F-129
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
21.
FINANCE LEASE PAYABLE (Continued)
Set out below are the particulars of these transactions with third-party financial leasing companies, Chinalco Financial Leasing:
i.
Sale and leaseback transactions with third-party financial leasing companies:
During the year 2014, the Group and several finance lease companies entered into two sales and lease back agreements under which the
lease terms range from 2014 to 2019 and the lease rentals are payable by instalments with interest charged at prevailing lending rates. Upon
the expiry of the lease period, the Group is entitled to purchase the leased assets at nominal amount. Below is the summary of sales and
lease back arrangements during the year.
Machinery
2,192,500
1,492,288
1,468,840
1,732,665
1,490,111
Construction
in Progress
-
-
-
-
-
Total
2,192,500
1,492,288
1,468,840
1,732,665
1,490,111
Original costs of the leased assets sold
Net carrying amounts of the leased assets sold
Consideration
Minimum lease payments
Initial recognition amount of leased assets
under sales and lease back agreement
F-130
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
21.
FINANCE LEASE PAYABLE (Continued)
i.
Sale and leaseback transactions with third-party financial leasing companies (Continued):
During the year 2015, the Group and several finance lease companies entered into eight sales and lease back agreements under which the
lease terms range from 2015 to 2020 and the lease rentals are payable by instalments with interest charged at prevailing lending rates. Upon
the expiry of the lease period, the Group is entitled to purchase the leased assets at nominal amount. Below is the summary of sales and
lease back arrangements during the year.
Original costs of the leased assets sold
Net carrying amounts of the leased assets sold
Consideration
Minimum lease payments
Initial recognition amount of leased assets
under sales and lease back agreement
Machinery
7,287,627
4,491,368
3,833,960
4,497,289
3,833,970
Construction
in Progress
700,000
700,000
700,000
894,618
700,000
Total
7,987,627
5,191,368
4,533,960
5,391,907
4,533,970
ii.
Sale and leaseback transactions with related-party financing leasing company:
During the year 2014, the Group and Chinalco Finance, entered into a sales and lease back agreement under which the lease terms range
from 2014 to 2017 and the lease rentals are payable by instalments with interest bearing charged at prevailing lending rates. Upon the expiry
of the lease period, the Group is entitled to purchase the leased assets at nominal amount. Below is the summary of sales and lease back
arrangement during the year.
Original costs of the leased assets sold
Net carrying amounts of the leased assets sold
Consideration
Minimum lease payments
Initial recognition amount of leased assets
under sales and lease back agreement
Machinery
Construction
in Progress
397,520
391,477
300,000
330,819
304,239
-
-
-
-
-
Total
397,520
391,477
300,000
330,819
304,239
F-131
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
21.
FINANCE LEASE PAYABLE (Continued)
ii.
Sale and leaseback transactions with related-party financing leasing company (Continued):
During the year 2015, the Group and Chinalco Financial Leasing, entered into six sales and lease back agreements under which the lease
terms range from 2015 to 2018 and the lease rentals are payable by instalments with interest bearing charged at prevailing lending rates.
Upon the expiry of the lease period, the Group is entitled to purchase the leased assets at nominal amount. Below is the summary of sales
and lease back arrangements during the year.
Original costs of the leased assets sold
Net carrying amounts of the leased assets sold
Consideration
Minimum lease payments
Initial recognition amount of leased assets
under sales and lease back agreement
Machinery
1,692,907
1,201,671
1,150,000
1,264,760
962,250
Construction
in Progress
265,180
265,180
-
-
187,814
Total
1,958,087
1,466,851
1,150,000
1,264,760
1,150,064
In 2015, the Group disposed of the assets under the aforementioned sales and lease back arrangements and incurred gains and losses of
RMB92 million and RMB1,066 million (2014: nil and RMB115 million), respectively, which were amortized over their respective useful
lives of the assets.
F-132
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
22.
OTHER NON-CURRENT LIABILITIES
Financial liabilities
- Long-term payables for mining rights
- Other financial liabilities
Obligations in relation to early retirement schemes (Note (i))
Deferred government grants
Deferred gain relating to sales and lease back agreements Note (ii)
Deferred government subsidies (Note (iii))
Provision for rehabilitation
Others
December 31,
2014
December 31,
2015
757,185
14,109
797,694
300
771,294
797,994
1,128,572
824,631
-
104,080
94,195
14,315
827,305
1,384,865
88,955
96,780
100,285
6,475
2,165,793
2,504,665
2,937,087
3,302,659
Note:
(i)
Obligations in relation to early retirement schemes
During the years ended December 31, 2010 and 2014, certain subsidiaries and branches implemented certain early retirement benefit schemes which allow qualified
employees to early retire on a voluntary basis. The Group undertakes obligation to pay the early retirement employees' living expenses for no more than 5 years in the
future on a monthly basis according to early retirement benefit schemes, together with social insurance and housing fund pursuant to the regulation of the local Social
Security Office. Living expenses, social insurance and housing fund are together referred to as "the Payments". The Payments are forecasted to increase by 3% per
annum with reference to the inflation rate and adjusted based on the average death rate of China. The Payments are discounted by the treasury bond rate of December
31, 2014 and 2015, respectively. As at December 31, 2014 and 2015, the current portion of the Payments within one year is reclassified to "other payables and accrued
liabilities".
As at December 31, 2014 and 2015, obligations in relation to retirement benefits under the Group's early retirement schemes are as follows:
As at January 1
Provision made during the year
(note 27(b) and note 30)
Interest costs
Payment during the year
As at December 31
Non-current
Current (note 22)
2014
2015
80,040
1,360,284
3,868
(70,091)
1,374,101
34,893
14,007
(275,681)
1,374,101
1,147,320
1,128,572
245,529
827,305
320,015
1,374,101
1,147,320
(ii)
(iii)
As disclosed in note 21, the Group entered into several sales and lease back agreements which were finance leases during the year. The deferred gains resulting from the
sale were classified under other non-current liabilities and were amortized over the useful lives of the assets leased back.
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.
F-133
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
23.
OTHER PAYABLES AND ACCRUED LIABILITIES
Financial liabilities
- Payable for capital expenditures
- Accrued interest
- Payables withheld as guarantees and deposits
- Dividends payable by subsidiaries to non-controlling shareholders
- Consideration payable for investment projects
- Current portion of payables for mining rights
- Others
Sales and other deposits from customers
Taxes other than income taxes payable (Note)
Accrued payroll and bonus
Staff welfare payables
Current portion of obligation in relation to early
retirement schemes (note 22)
Contribution payable for pension insurance
Others
December 31,
2014
December 31,
2015
5,599,870
923,930
960,935
187,228
89,569
519,990
920,101
5,119,061
1,112,528
1,040,315
233,036
98,966
218,158
1,002,727
9,201,623
8,824,791
2,689,453
374,721
277,239
251,587
245,529
51,266
111,756
1,654,058
385,554
179,580
276,435
320,015
123,331
15,646
4,001,551
2,954,619
13,203,174
11,779,410
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, 2015, except for other payables and accrued liabilities of the Group amounting to RMB22 million and RMB0.311 million which
were denominated in USD and HKD, respectively (December 31, 2014: RMB365 million in USD, RMB0.004 million in HKD), all payables and
accrued liabilities were denominated in RMB (December 31, 2014: all in RMB).
F-134
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
24.
TRADE AND NOTES PAYABLES
Trade payables
Notes payable
December 31,
2014
December 31,
2015
10,517,159
5,234,103
7,785,562
6,720,576
15,751,262
14,506,138
As at December 31, 2015, except for trade and notes payables of the Group amounting to RMB228 million which were denominated in USD
(December 31, 2014: RMB1,450 million in USD, RMB0.2 million in EUR), all trade and notes payables were denominated in RMB (December 31,
2014: all in RMB).
The ageing analysis of trade and notes payables is as follows:
December 31,
2014
December 31,
2015
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Over 3 years
15,215,869
293,832
62,882
178,679
14,014,456
248,509
55,067
188,106
15,751,262
14,506,138
The trade and notes payables are non-interest-bearing and are normally settled within one year.
F-135
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
25.
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, 2015, a summary of
these pledged assets was as follows:
Property, plant and equipment (note 7)
Land use rights (note 8(b))
Intangible assets (note 6)
Inventories (note 13)
Investment in an associate (note 9(b))
Notes receivable (note 14)
Trade receivables (note 14)
December 31,
2014
December 31,
2015
9,249,127
409,181
1,124,726
50,000
450,611
98,000
270,084
6,102,859
257,610
1,241,057
-
421,270
26,500
360,000
11,651,729
8,409,296
As at December 31, 2015, in addition to the loans and borrowings which were pledged by the above assets, the current portion of long-term loans and
borrowings amounting to RMB882 million (December 31, 2014: RMB874 million) and the non-current portion of long-term loans and borrowings
amounting to RMB10,384 million (December 31, 2014: RMB11,572 million) were secured by the contractual right to charge users for electricity
generated in the future. As at December 31, 2015, no short-term loans and borrowings (December 31, 2014: RMB241 million) were secured by letters
of credit. As at December 31, 2015, the current portion of long-term loans and borrowings amounting to RMB10 million and non-current portion of
long-term loans and borrowings amounting to RMB1,667 million were secured by the investment in a 70.82% owned subsidiary of the Company,
Ningxia Energy. As at December 31, 2015, the balance of investment in Ningxia Energy of the Company was RMB5,895 million. In addition, as at
December 31, 2015, a short-term loan amounting to RMB80 million (December 31, 2014: nil) was secured by the note receivables in the Group
which had been eliminated.
F-136
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
26.
PROFIT/(LOSS) BEFORE INCOME TAX
An analysis of profit or loss before income tax from continuing operations are as follows:
Purchase of inventories in relation to trading activities
Raw materials and consumables used
Changes in work-in-progress and finished goods
Power and utilities
Depreciation and amortisation
Employee benefit expenses (Note)
Repair and maintenance
Transportation expenses
2013
2014
2015
91,157,837
38,485,788
(671,500)
21,427,650
7,161,026
7,327,057
1,474,121
1,266,498
71,647,273
34,949,449
1,014,376
17,740,895
7,482,802
8,153,968
1,857,471
1,055,912
60,318,158
28,903,325
594,799
15,826,259
7,294,988
6,056,960
1,797,181
1,149,261
Note:
For the year ended December 31, 2015, employee benefit expenses include early retirement benefit expenses and termination benefit expenses amounting to RMB35
million (2013 from continuing operations: RMB4 million, 2014: RMB1,360 million) and RMB27 million (2013 from continuing operations: nil, 2014: RMB176 million),
respectively.
F-137
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
27.
OPERATING EXPENSES
(a)
Selling and distribution expenses
An analysis of selling and distribution expenses from continuing operations are as follows:
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
2013
2014
2015
1,216,665
217,869
68,784
70,163
33,479
59,460
15,220
33,457
1,055,912
249,843
61,707
70,418
36,553
52,113
7,011
31,896
1,149,261
268,244
61,212
67,247
12,838
74,207
4,467
22,731
158,083
197,578
115,047
1,873,180
1,763,031
1,775,254
F-138
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
27.
OPERATING EXPENSES (Continued)
(b)
General and administrative expenses
An analysis of general and administrative expenses from continuing operations are as follows:
Early retirement benefit expenses (note 22)
Termination benefit expenses (note 30)
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
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)
Water and electricity expenses
Property management fees
Bank charges and others
Impairment of intangible assets and land use rights
and leasehold land
Others
Note:
2013
2014
2015
3,788
-
970,308
593,896
133,394
159,030
297,337
142,084
51,231
76,994
37,874
39,732
40,693
24,583
31,444
30,372
20,708
37,653
92,608
-
169,503
1,360,284
176,002
1,050,384
519,979
89,833
179,813
142,264
118,831
51,164
84,608
34,697
39,134
33,433
28,984
25,176
42,105
24,176
40,693
110,969
249,228
436,630
34,893
26,753
954,402
560,842
72,446
172,337
(232,150)
115,440
38,741
86,969
30,283
40,462
17,910
17,141
23,666
32,030
25,427
37,314
95,047
-
184,118
2,953,232
4,838,387
2,334,071
(i)
(ii)
Taxes other than income tax expense mainly comprise business tax, surcharges, land use tax, property tax and stamp duty.
During the year ended December 31, 2015, auditors' remuneration include audit and non-audit services provided by Ernst & Young, including Ernst &
Young Hong Kong and Ernst & Young Hua Ming LLP amounting to RMB22.9 million (2013: RMB25.2 million, 2014: RMB22.2 million), and services
provided by other auditors.
F-139
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
28.
OTHER INCOME AND OTHER GAIN/(LOSSES), NET
(a)
Government grants
For the year ended December 31, 2015, government grants amounting to RMB1,769 million (2013 from continuing operations: RMB806
million, 2014: RMB824 million) were recognized as income for the year necessary to compensate the costs and facilitate the Group's
development. There are no unfulfilled conditions or contingencies attached to the grants.
(b)
Other (losses) gains, net
Partial disposal of Jiaozuo Wanfang (note 9(b))
Gain on disposal of Shanxi Huaxing (note 40(a))
Realized gains/(loss) on futures, forward and
option contracts, net (Note)
Unrealized gains/(loss) on futures, forward
and option contracts, net (Note)
Gain on acquisition of a subsidiary
Gain on previously held equity interest remeasured
at acquisition-date fair value
Gain on deemed disposal of a subsidiary
Gain on disposal of Aluminum Production Line
Gain on disposal of investments in a joint venture and associates
Gain on disposal of Chalco Iron Ore
Gain on disposal of aluminum plants
and building of Guizhou Branch (note 7)
Gain on disposal of Hong Kong properties
(note 36(a)(xiii))
Gain on disposal of urban properties and
land use rights for capital injection (note 9(b))
Gain on disposal of Gansu Hualu land use right (note 8(b))
Gain/(losses) on disposal of other property,
plant and equipment and land use rights, net
Gain on investments in financial products
Others
2013
2014
2015
-
-
105,565
10,318
651,185
53,953
804,766
33,247
5,709
5,413,244
-
-
-
-
209,057
18,746
93,462
-
-
156,617
110,250
-
-
-
-
-
-
-
-
-
-
(44,144)
71,023
63,189
832,369
2,588,134
(477,733)
(213,085)
-
-
-
-
-
-
1,364,821
209,735
350,218
375,025
18,075
38,469
(62,428)
7,399,252
356,935
5,023,600
Note:
None of these futures, forward and option contracts is designated for hedge accounting.
F-140
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
29.
FINANCE INCOME/FINANCE COSTS
An analysis of finance income/finance costs from continuing operations are as follows:
Finance income - interest income
(616,576)
(1,047,607)
(812,084)
Interest expense
Less: interest expense capitalized in property,
plant and equipment (note 7)
6,515,655
(634,599)
7,128,947
(532,695)
6,045,011
(476,032)
2013
2014
2015
Interest expense, net of capitalized interest
Amortisation of unrecognized finance expenses
Exchange (gain)/losses, net
Finance costs
Finance costs, net
5,881,056
82,698
(99,273)
6,596,252
123,881
10,464
5,568,979
284,835
95,851
5,864,481
6,730,597
5,949,665
5,247,905
5,682,990
5,137,581
Capitalisation rate during the year (note 7)
4.05% to 6.25%
5.80% to 7.10%
4.90% to 6.55%
30.
EMPLOYEE BENEFIT EXPENSES
An analysis of employee benefit expenses from continuing operations are as follows:
Salaries and bonus
Housing fund
Staff welfare and other expenses (Note)
Employment expense in relation to early
retirement schemes (note 22 and note 27(b))
Employment expenses in relation to
termination benefit (note 27(b))
2013
2014
2015
4,849,651
472,557
2,001,061
3,788
4,314,247
424,238
1,879,197
1,360,284
3,930,088
395,203
1,670,023
34,893
-
176,002
26,753
7,327,057
8,153,968
6,056,960
Note:
Staff welfare and other expenses include staff welfare, staff union expenses, staff education expenses, unemployment insurance expenses and pension insurance
expenses, etc.
Employee benefit expenses include remuneration payables to directors, supervisors and senior management as set out in note 31.
F-141
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION
(a)
Directors' and supervisors' remuneration
The aggregate amounts of remuneration payables to directors and supervisors of the Company during the year are as follows:
Fees
Basic salaries, housing fund,
other allowances and benefits in kind
Discretionary bonus
Pension cost
2013
689
3,297
-
193
4,179
2014
622
2,590
-
316
3,528
2015
653
1,143
-
140
1,936
F-142
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
The remuneration of each director and supervisor of the Company for the year ended December 31, 2013 is set out below:
Name of directors and supervisors
Fees
Salary
Discretionary
Bonus
Pension
Total
Directors:
Xiong Weiping
Luo Jianchuan
Liu Caiming (Note (i))
Liu Xiangmin
Jiang Yinggang (Note (ii))
Wu Jianchang (Note (ii))
Ma Si-hang, Frederick (Note (ii))
Wu Zhenfang (Note (iii))
Wang Jun (Note (ii))
Shi Chungui (Note (iv))
Lv Youqing (Note (iv))
Zhang Zhuoyuan (Note (iv))
Wang Mengkui (Note (iv))
Zhu Demiao (Note (iv))
Supervisors:
Ao Hong (Note (iv))
Zhao Zhao (Note (ii))
Yuan Li
Zhang Zhankui
Total
Note:
(i)
-
-
-
-
-
94
94
63
75
75
-
96
96
96
733
653
164
627
599
-
-
-
-
-
-
-
-
-
689
2,776
-
-
-
-
-
-
-
521
-
521
689
3,297
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37
37
8
37
37
-
-
-
-
-
-
-
-
-
770
690
172
664
636
94
94
63
75
75
-
96
96
96
156
3,621
-
-
37
-
37
-
-
558
-
558
193
4,179
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. On March 18, 2014, Mr. Liu
Caiming resigned from the position of a non-executive Director.
F-143
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
Note:
(Continued)
(ii)
(iii)
(iv)
In accordance with the Company's Articles of Association, all Directors and Supervisors of the Company were appointed for a term of three years, eligible
for re-appointment. These directors and supervisor were newly appointed at the 2012 annual general meeting on June 27, 2013.
Mr. Wu Zhenfang was elected and appointed as director at the 2013 first extraordinary general meeting on August 30, 2013.
Due to the expiry of the term of the fourth session of the Board, these directors and supervisor were no longer served as Directors and Supervisor of the
Company since June 27, 2013.
F-144
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
The remuneration of each director and supervisor of the Company for the year ended December 31, 2014 is set out below:
Name of directors and supervisors
Fees
Salary
Discretionary
Bonus
Pension
Total
-
-
-
-
94
189
189
150
-
-
622
-
-
-
-
606
528
515
491
-
-
-
-
-
-
2,140
-
450
-
450
622
2,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
63
63
63
63
-
-
-
-
-
-
669
591
578
554
94
189
189
150
-
-
252
3,014
-
64
-
64
-
514
-
514
316
3,528
Directors:
Xiong Weiping
Luo Jianchuan
Liu Xiangmin
Jiang Yinggang
Wu Jianchang (Note (i))
Ma Si-hang, Frederick (Note (ii))
Wu Zhenfang (Note (iii))
Wang Jun (Note (iv))
Liu Caiming (Note (v))
Sun Zhaoxue (Note (vi))
Supervisors:
Zhao Zhao
Yuan Li
Zhang Zhankui
Total
Note:
(i)
(ii)
(iii)
(iv)
(v)
On 27 June 2014, Wu Jianchang resigned due to the age, which took effect on 26 February 2015.
Ma Si-hang, Frederick was appointed as director at the 2012 general meeting of shareholders on 27 June 2013.
Wu Zhenfang was appointed as director at the 2013 first extraordinary general meeting of Shareholders on 30 August 2013.
Wang Jun was appointed as director at the 2012 general meeting of Shareholders on 27 June 2013.
On 18 March 2014, Liu Caiming resigned from the position of a non-executive director. On 26 February 2015, Liu Caiming returned to the position of a
non-executive director.
(vi)
On 16 September 2014, Sun Zhaoxue resigned from the position of a non-executive director and a vice president, and he was under investigation.
F-145
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
The remuneration of each director and supervisor of the Company for the year ended December 31, 2015 is set out below:
Name of directors and supervisors
Fees
Salary
Discretionary
Bonus
Pension
Total
Directors:
Ge Honglin (Note (i))
Ao Hong (Note (ii))
Luo Jianchuan (Note (ii))
Liu Xiangmin
Jiang Yinggang
Liu Caiming (Note (iii))
Wang Jun
Ma Si-hang, Frederick (Note (iv))
Lie-A-Cheong Tai-Chong, David
(Note (iv))
Chen Lijie (Noted (v))
Hu Shihai (Noted (vi))
Wu Zhenfang (Noted (ix))
Wu Jianchang (Noted (x))
-
-
-
-
-
-
150
192
-
162
102
47
-
-
-
-
-
643
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
-
-
-
-
-
-
-
-
-
-
-
-
713
-
150
192
-
162
102
47
-
653
-
-
-
-
-
643
-
500
-
-
500
653
1,143
-
-
-
-
-
-
-
70
-
70
-
-
70
1,366
-
570
-
-
570
140
1,936
Supervisors:
Zhao Zhao
Yuan Li
Zhang Zhankui (Note (vii))
Wang Jun (Note (viii))
Total
Note:
(i)
Mr. Ge Honglin was elected as an executive director of the Company at the 2015 first extraordinary general meeting of the Company and he was elected as
the chairman of the Board of the Company at the sixteenth meeting of the fifth session of the Board of the Company. On February 16, 2016, Mr. Ge
proposed to resign as an executive Director, the chairman of the Board and from each of his positions in relevant special committees under the Board of the
Company due to his work commitment.
F-146
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
Note:
(Continued)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
On November 20, 2015, due to work arrangement, Mr. Luo Jianchuan resigned from the Executive Director and President of the Company, along with all
the duties of various special committees. Mr. Ao Hong was elected to be the Executive Director in the second extraordinary shareholders' meeting in 2015 of
the fifth session of the board of directors.
Mr. Liu Caiming was elected as a non-executive director of the fifth session of the Board of the Company at the 2015 first extraordinary general meeting of
the Company.
On November 12, 2015, due to other work arrangement, Mr. Ma Si-hang resigned as an independent non-executive director and relevant duties of various
special committees of the board of directors. Through the review of the election nomination committee of the fifth session of the board of directors and
discussion of board of directors' 23th meeting, Mr. Lie-A-Cheong Tai-Chong, David was nominated to be the candidate of Non-executive Director. In the
second extraordinary shareholders meeting in 2015, he was elected to be independent non-executive director of the fifth session of the board of directors.
Ms. Chen Lijie was elected as an independent non-executive director of the fifth session of the Board of the Company at the 2015 first extraordinary general
meeting of the Company.
Mr. Hu Shihai was elected as an independent non-executive director of the fifth session of the Board of the Company at the 2015 annual general meeting of
the Company.
On November 13, 2015, due to other work arrangement, Mr. Zhang Zhankui resigned as a supervisor of the Group. On November 13, 2015, Mr. Zhang
Zhankui was appointed as chief financial officer.
The controlling shareholder, Chinalco nominated Mr. Wang Jun as the candidate for the supervisor of the fifth session of the board of supervisors. Mr.
Wang Jun was elected to be supervisor of the fifth session of the board of supervisors.
On April 2, 2015, due to being under an investigation by the competent authority, Mr. Wu Zhenfang resigned as an independent non-executive Director and
from relevant positions in the special committees under the Board of the Company by submitting a resignation to the Board.
(x)
Due to his age, Mr. Wu Jianchang resigned from the position of independent Non-executive Director of the Company, with effect from February 26, 2015.
F-147
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
31.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S REMUNERATION (Continued)
(a)
Directors' and supervisors' remuneration (Continued)
The remuneration of the directors and supervisors of the Company fell within the following bands:
Number of individuals
Nil to RMB1,000,000
2013
18
2014
13
2015
16
During the year, no options were granted to the directors or the supervisors of the Company (2013 and 2014: 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 (2013 and 2014: nil).
No directors or supervisors of the Company waived any remuneration during the years 2013, 2014 and 2015.
(b)
Five highest paid individuals
During the year ended December 31, 2015, the five highest paid employees of the Group include a director and a supervisor (2013 and
2014: four directors) whose remuneration is reflected in the analysis presented above. The remuneration payable to the remaining three
individuals during 2015 (2013 and 2014: one) is as follows:
Basic salaries, housing fund, other allowances
and benefits in kind
Discretionary bonus
Pension cost
2013
2014
645
-
37
682
491
-
63
554
2015
1,875
-
204
2,079
The number of the remaining three individual during 2015 (2013:1; 2014: 1) whose remuneration fell within the following band is as
follows:
Nil to RMB1,000,000
F-148
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
32.
INCOME TAX EXPENSE/(BENEFIT) FROM CONTINUING OPERATIONS
Current income tax expense:
- PRC enterprise income tax
Deferred income tax expense/(benefit)
Number of employees
2013
1
2014
1
2015
3
2013
2014
2015
214,631
124,920
260,721
814,189
255,299
(485,719)
339,551
1,074,910
(230,420)
In general, the Group's PRC entities are subject to PRC corporate income tax at the standard rate of 25% (2013: 25%, 2014: 25%) on their respective
estimated assessable profits for the year. Certain branches and subsidiaries of the Company located in the western regions of the PRC are granted tax
concessions including a preferential tax rate of 15% (2013: 15%, 2014: 15%).
F-149
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
32.
INCOME TAX EXPENSE/(BENEFIT) FROM CONTINUING OPERATIONS (Continued)
The reconciliation between the tax on the Group's profit or loss before income tax from continuing operations and the theoretical tax amount that
would arise using the weighted average tax rate applicable to profit or loss of the consolidated entities from continuing operations is as follows:
Profit/(loss) before income tax
895,174
(15,965,813)
193,293
2013
2014
2015
Tax expense/(benefit) calculated at standard income
tax rate of 25% (2013 and 2014: 25%)
Tax effects of:
Preferential income tax rates applicable to
certain branches and subsidiaries
Impact of change in income tax rate
Tax losses of which no deferred tax assets recognized
Deductible temporary differences of which
no deferred tax assets recognized
Utilisation of previously unrecognized tax losses
Tax incentive in relation to deduction limits of certain expenses
Non-taxable income and deductible interest
Expenses not deductible for tax purposes
Write-off of unrecoverable deferred tax
assets previously recognized
Recognition of deferred tax assets related to previously
unrecognized deductible temporary
differences and tax losses
Unrecognized taxable temporary differences
relating to equity investments
Recognition of taxable temporary differences relating to
equity investments previously unrecognized
True up adjustments in respect of prior year's annual
income tax filings and others
223,794
(3,991,453)
48,323
(91,880)
2,424
2,364,091
59,779
(140,368)
(14,096)
(2,434,836)
41,222
(19,631)
(53,490)
2,045,362
1,223,707
(9,477)
(4,949)
(205,539)
417,544
21,442
4,538
422,230
241,812
(358,106)
(2,502)
(149,084)
30,280
345,009
383,314
76,775
-
-
-
-
-
1,321,405
(15,588)
(31,883)
(238,728)
(351,846)
-
24,446
Income tax expense/(benefit)
339,551
1,074,910
(230,420)
Effective tax rate
38.45%
(6.73%)
(119%)
Share of income tax expense of associates and joint ventures of RMB41 million (2013 from continuing operations: RMB23.5 million, 2014:
RMB52.0 million) and RMB21 million (2013 from continuing operations: RMB7.7 million, 2014: RMB20.4 million) is included in "share of profits
and losses of associates" and "share of profits and losses of joint ventures", respectively.
F-150
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
33.
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
(a)
Basic
The basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to equity holders of the parent by the weighted
average number of shares in issue during the year.
Profit/(Loss) attributable to owners
of the parent (RMB)
- From continuing operation
- From discontinued operation
2013
2014
2015
751,266,167
235,913,328
(16,208,169,006)
-
206,318,673
-
Other equity instruments' distribution -From continuing operation
-
-
(19,287,671)
Weighted average number of ordinary shares in issue
13,524,487,892
13,524,487,892
14,272,716,517
987,179,495
(16,208,169,006)
187,031,002
Basic earnings/(loss) per share (RMB)
- From continuing operation
- From discontinued operation
(b)
Diluted
0.05
0.02
0.07
(1.20)
-
(1.20)
0.01
-
0.01
The diluted earnings/(loss) per share for the years ended December 31, 2013, 2014 and 2015 are the same as the basic earnings/(loss) per
share as there were no dilutive potential shares during those years.
34.
DIVIDENDS
According to the articles of association of the Company, the Company considers the maximum limit of profit appropriation to its shareholders is the
lowest of:
(i)
(ii)
the sum of the current period net profit and opening retained earnings in accordance with IFRSs;
the sum of the 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 at the annual shareholders' meeting dated June 25, 2015, no dividend would be distributed for the year ended December
31, 2014. Thus, no dividend was paid in 2015 (2013 and 2014: nil).
According to the resolution of the Board of Directors dated March 17, 2016, the directors did not propose any final dividend for the year ended
December 31, 2015, which is to be approved by the shareholders (2013 and 2014: nil).
F-151
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
CASH FLOWS GENERATED FROM OPERATING ACTIVITIES
Notes
2013
2014
2015
Cash flows generated from operating activities
Profit/(loss) before income tax
From continuing operations
From discontinued operation
Adjustments for:
Share of profits and losses of joint ventures
Share of profits and losses of associates
Depreciation of property, plant and equipment
(Gain)/loss on disposal of other property,
plant and equipment and land use rights, net
Impairment losses of property, plant and equipment
Impairment losses of intangible assets
Impairment losses of land use rights and leasehold land
Amortisation of intangible assets
Amortisation of land use rights and leasehold land
Amortisation of prepaid expenses included
in other non-current assets
Realized and unrealized (gains)/loss on futures,
option and forward contracts
Gain on disposal of Shanxi Huaxing
Loss on disposal of Ningxia photovoltaic subsidiaries
Gain on disposal of Jiaozuo Wanfang
Gain on disposal aluminum production buildings
and plants of Guizhou Branch
Gain on disposal of land use right of Gansu Hualu
Gain on disposal of urban properties for capital injection
Gain on disposal of Hong Kong properties
Gain on acquisition of a subsidiary
Gain on disposal of Chalco Iron Ore
Gain on disposal of investments in a
joint venture and an associate
Gain on previously held equity interest
remeasured at acquisition-date fair value
Receipt from government subsidies
Interest income
5
9(a)
9(b)
7
28(b)
7
6
8
6
8
12
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
28(b)
895,174
(414,618)
(15,965,813)
-
(148,749)
(512,746)
6,969,075
(242,304)
501,159
7
-
278,691
80,219
73,598
(89,510)
(350,575)
6,967,819
44,144
5,679,521
108,424
140,804
288,249
84,608
142,126
(96,096)
(266,867)
-
-
(804,766)
-
-
-
-
(651,185)
(5,413,244)
(5,709)
(53,953)
(134,806)
(2,928)
-
-
-
-
-
-
-
-
-
-
-
(154,726)
(605,385)
193,293
-
(23,238)
(284,531)
6,868,929
(18,075)
10,011
-
-
255,098
86,969
83,992
690,818
(2,588,134)
18,873
(832,369)
(1,364,821)
(375,025)
(350,218)
(209,735)
-
-
-
-
(280,535)
(340,278)
Interest expense
Gain on financial products
Change in special reserve
Others
28(b)
6,134,531
18,749
37,488
46,941
6,720,132
71,023
65,450
-
5,949,665
(38,469)
(103,364)
(3,085)
6,554,528
2,879,424
7,345,771
F-152
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
35.
CASH FLOWS GENERATED FROM OPERATING ACTIVITIES (Continued)
Notes
2013
2014
2015
Cash flows generated from operating activities (Continued)
Changes in working capital:
(Increase)/decrease in inventories
(Increase)/decrease in trade and notes receivables
(Increase)/decrease in other current assets
Increase in restricted cash
Increase in other non-current assets
Increase/(decrease) in trade and notes payables
Increase in other payables and accrued liabilities
Increase/(decrease) in other non-current liabilities
(633,711)
(4,045,321)
(2,541,644)
(297,223)
(194,854)
5,784,099
4,005,052
3,543
1,132,087
841,622
3,158,148
(615,432)
(23,834)
3,296,851
2,745,679
712,929
1,954,192
(44,771)
(769,218)
(126,364)
(566,664)
(841,662)
1,019,266
(461,995)
Cash generated from operations (Note(i))
8,634,469
14,127,474
7,508,555
PRC corporate income taxes paid
(353,062)
(308,715)
(277,105)
Net cash generated from operating activities
8,281,407
13,818,759
7,231,450
Non-cash transactions of investing activities
and financing activities
Debt to equity swap (Note (ii))
Capital injection in an associate by properties
and land use right (Note (iii))
-
-
121,000
-
74,800
565,627
Note:
i.
ii.
iii.
iv.
The cash inflows from the derecognized notes receivable which are discounted to banks are included in the cash flows generated from operating activities.
As disclosed in note 9 (a), Guizhou Mining Company Co., Ltd. converted its receivables amounting to RMB74.8 million due from Hengtaihe Mining Corporation Co.,
Ltd. into capital injection.
As disclosed in note 9 (b) in 2015, the Company together with its two subsidiaries, Chalco International Trading and Shanghai Kelin made capital contributions to
Chinalco Property Development by way of injecting certain urban property assets.
In 2015, the Group had endorsed notes receivables from selling products and providing services amounting to RMB6,971 million.
F-153
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS
The Company is controlled by Chinalco, the parent company and a state-owned enterprise established in the PRC. Chinalco itself is controlled by the
PRC government, which also owns a significant portion of the productive assets in the PRC. In accordance with IAS 24 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.
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
Note
2013
2014
2015
Sales of goods and services rendered:
Sales of materials and finished
goods to:
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures of Chinalco
Joint ventures
Associates
Provision of utility services to:
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures
Associates
Provision of engineering, construction and
supervisory services to:
Chinalco and its subsidiaries
An associate
(i)
(ix)
(ii)
(ix)
(iii)
(ix)
F-154
8,844,205
102,723
-
52,318
1,400,098
7,040,457
170,338
142
48,903
2,146,870
11,085,064
703,628
-
79,034
2,165,445
10,399,344
9,406,710
14,033,171
390,368
18,233
11,628
10,014
390,046
17,750
113
1,977
302,571
14,803
-
553
430,243
409,886
317,927
40,259
19
68,634
-
62,375
-
40,278
68,634
62,375
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
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
Rental revenue of land use rights and buildings to:
Chinalco and its subsidiaries
Associates of Chinalco
Purchase of goods and services:
Purchases of engineering, construction
and supervisory services from:
Chinalco and its subsidiaries
Associates of Chinalco
Note
2013
2014
2015
(vii) (ix)
1,357
3,169
-
(vi)
(iii)
(ix)
5,524
124
5,648
34,887
-
34,281
249
34,887
34,530
1,842,045
140
987,706
-
1,610,428
-
1,842,185
987,706
1,610,428
Purchases of key and auxiliary materials
and finished goods from:
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures
Associates
(iv)
(ix)
3,799,542
254
1,076,867
380,255
3,009,894
386,609
1,268,123
762,003
1,710,841
-
1,276,078
414,539
5,256,918
5,426,629
3,401,458
Provision of social services and logistics services by:
Chinalco and its subsidiaries
(v)
(ix)
243,865
312,626
324,872
F-155
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
Purchase of goods and services: (Continued)
Provision of utilities services by:
Chinalco and its subsidiaries
Joint ventures
Provision of products processing services by
Chinalco and its subsidiaries
Note
2013
2014
2015
(ii)
(ix)
(vii)
(ix)
186,007
27
414,745
-
643,597
-
186,034
414,745
643,597
64,377
76,075
62,623
Rental expenses for buildings and land use rights
charged by Chinalco and its subsidiaries
(vi),(ix)
600,892
561,528
590,657
Other significant related party transactions:
Borrowing from a subsidiary of Chinalco
(viii),(ix)
1,000,000
1,429,000
5,929,000
Interest expense on a borrowing from
a subsidiary of Chinalco
40,922
38,772
137,777
Entrusted loan from a subsidiary of Chinalco
70,000
70,000
-
Entrusted loans and other borrowings to:
Joint ventures
An associate
Chinalco and its subsidiaries
726,235
26,106
393,000
764,000
-
-
140,000
-
-
1,145,341
764,000
140,000
F-156
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
Other significant related party
transactions: (Continued)
Interest income on entrusted loans
and other borrowings to:
Joint ventures
An associate
Chinalco and its subsidiaries
Note
2013
2014
2015
69,462
2,518
34,923
60,459
88
2,027
14,061
-
-
106,903
62,574
14,061
Disposal of the Aluminum Fabrication Segment and
transferred loan to Chinalco and its subsidiaries
Disposal of investments in a joint venture
and an associate to Chinalco
(xvii)
(xviii)
10,614,600
264,474
Disposal a subsidiary to a subsidiary of Chinalco
(xix)
12,953,368
-
-
-
-
-
-
Interest income from the unpaid disposal
proceeds from:
Chinalco and its subsidiaries
250,124
542,811
326,217
Disposal assets under sale and leaseback contract
to a subsidiary of Chinalco
Finance lease under a sale and leaseback contract
from a subsidiary of Chinalco
(xi)
(xi),(ix)
-
-
300,000
1,150,000
304,239
1,150,064
Provision of financial guarantees to:
Joint ventures
An associate
(x)
(x)
381,800
-
345,760
23,710
340,900
17,470
381,800
369,470
358,370
Financial guarantees provided by:
Subsidiaries of Chinalco
Discounted notes receivables to a subsidiary
of Chinalco
20(e)
20,000
138,000
12,000
1,278,907
118,757
122,000
All transactions with related parties are conducted at prices and on terms mutually agreed by the parties involved, which are determined as
follows:
(i)
Sales of materials and finished goods comprised sales of alumina, primary aluminum, copper and scrap materials. Transactions entered into are covered by
general agreements on mutual provision of production supplies and ancillary services. The pricing policy is summarized below:
F-157
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
All transactions with related parties are conducted at prices and on terms mutually agreed by the parties involved, which are determined as
follows: (Continued)
(i)
Sales of materials and finished goods comprised sales of alumina, primary aluminum, copper and scrap materials. Transactions entered into are covered by
general agreements on mutual provision of production supplies and ancillary services. The pricing policy is summarized below: (Continued)
(1)
The price prescribed by the PRC government ("state-prescribed price") is adopted;
(2)
(3)
(4)
If there is no state-prescribed price, state-guidance price is adopted;
If there is neither state-prescribed price nor state-guidance price, then the market price (being price charged to and from
independent third parties) is adopted; and
If none of the above is available, then the 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)
(iii)
(iv)
(v)
(vi)
Utility services, including electricity, gas, heat and water, are provided at the state-prescribed price.
Engineering, project construction and supervisory services were provided for construction projects of the Group. The state-
guidance price or prevailing market price (including the 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 and coal) 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.
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 the market rent rate. The Group also entered into a building rental agreement with
Chinalco Group and pays rent based on the market rate for its lease of buildings owned by Chinalco.
(vii)
The pricing policy for product processing services is the same as that set out in (i) above.
F-158
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
(viii)
(ix)
(x)
(xi)
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 are 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.
The related party transactions in respect of these items above also constitute connected transactions or continuing connected
transactions as defined in Chapter 14A of the Listing Rules.
The Group provided guarantees to Xinyugou Coal and Ningxia Tian Jing Shen Zhou Wind Power Co., Ltd., joint ventures of the
Group, and Xingshengyuan Coal, an associate of the Group, for their bank loans amounting to RMB311 million, RMB30 million
and RMB17 million, respectively.
As disclosed in note 21, the Company and its subsidiaries have entered into several sales and lease back contracts with Chinalco
Finance and Chinalco Financial Leasing, respectively. Under the contracts, the Company and its subsidiaries sold certain assets
and construction in progress to China Finance and Chinalco Financial Leasing, and leased back the assets and construction in
progress under finance lease terms.
(xii)
As disclosed in note 9(b), the Group transferred certain urban properties and cash to Chinalco Property Development as capital
injection which constituted a connected transaction.
F-159
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
(xiii)
Transfer of the Property Assets of Chalco Hong Kong to Chinalco assets holdings
In November 2015, Chalco Hong Kong and Chinalco Assets Holdings entered into an asset transfer agreement, pursuant to which,
Chalco Hong Kong agreed to dispose of the property assets ("HK Property") of Chalco Hong Kong to Chinalco Assets Holdings.
The appraised value of the properties was HKD372 million (equivalent to RMB311 million) as at the Benchmark Date of
September 30, 2015. According to the asset transfer agreement, 30% of the total consideration, i.e. HKD112 million (equivalent to
RMB93 million), shall be paid to Chalco Hong Kong by Chinalco Assets Holdings in December 2015, and the remaining 70% of
the total consideration shall be paid before June 30, 2016. The transaction between the Group and Chinalco Assets Holdings
constituted a connected transaction.
The Group disposed of the Hong Kong property with carrying value of RMB102 million and recognized a gain of RMB210
million. In December 2015, the Group received the first batch of the asset transfer consideration of RMB93 million.
(xiv)
As disclosed in note 39, the Group acquired relevant assets and liabilities of High-Purity Aluminum Plant and Light Metal
Material Plant ("High Purity Aluminum and Light Metal") from Baotou Group which also constituted a connected transaction.
(xv)
As disclosed in note 9(b), the capital injection to Chalco Resource constituted a connected transaction.
(xvi)
As disclosed in note 9(b), the capital injection to China Rare Earth constituted a connected transaction.
(xvii)
During the year 2013, the Group disposed Aluminum Fabrication Segment, assets of an alumina production line, and transferred
receivables to Chinalco at consideration of RMB10,614.6 million.
(xviii) During the year 2013, the Group disposed its 50% equity interest in Chalco Sapa and its 40% equity interest in Guizhou Chalco to
Chinalco at consideration of RMB264.5 million.
(xix)
During the year 2013, the Group disposed a 65% equity interest in Chalco Iron Ore to Chinalco Overseas Holding, a wholly-
owned subsidiary of Chinalco at consideration of USD2,118 million (equivalent of RMB12,953 million).
F-160
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(a)
Significant related party transactions (Continued)
During the years ended December 31, 2013, 2014 and 2015, 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, 2013, 2014 and 2015 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.
*
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.
F-161
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(b)
Balances with related parties
Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at the year end
are as follows:
Cash and cash equivalents deposited with
A subsidiary of Chinalco (Note)
Trade and notes receivables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Joint ventures
Provision for impairment of receivables
December 31,
2014
December 31,
2015
4,889,705
7,585,515
886,532
1,922
229
8,213
857,742
23
-
28,268
896,896
886,033
(167,799)
(125,694)
Note:
On August 26, 2011, the Company entered into an agreement with Chinalco Finance, pursuant to which, Chinalco Finance agreed to provide deposit
services, credit services and other financial services to the Group. On August 24, 2012 and April 28, 2015, the Company renewed the financial service
agreement with Chinalco Finance with a validation term of three years ending on August 25, 2018.
729,097
760,339
F-162
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(b)
Balances with related parties (Continued)
Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at the year end
are as follows: (Continued)
Other current assets
Chinalco and its subsidiaries
Associates
Joint ventures
Provision for impairment of other current assets
Other non-current assets
Chinalco and its subsidiaries
Joint ventures
An associate
Borrowings and finance lease payable
Subsidiaries of Chinalco
Trade and notes payables
Chinalco and its subsidiaries
Associates of Chinalco
Associates
Joint ventures
December 31,
2014
December 31,
2015
4,841,266
90,977
1,310,499
4,852,181
-
1,438,938
6,242,742
6,291,119
(54,516)
(49,014)
6,188,226
6,242,105
8,195,904
-
111,846
4,252,776
409,251
111,846
8,307,750
4,773,873
1,402,639
6,070,364
429,809
4
15,520
81,988
481,006
-
-
160,215
527,321
641,221
F-163
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(b)
Balances with related parties (Continued)
Other than those disclosed elsewhere in the consolidated financial statements, the outstanding balances with related entities at the year end
are as follows: (Continued)
December 31,
December 31,
Other payables and accrued liabilities
Chinalco and its subsidiaries
Associates of Chinalco
Joint ventures
Associates
2014
2015
1,426,842
880
91,207
472
1,281,120
171
1,019
62,613
1,519,401
1,344,923
As at December 31, 2015, included in long-term loans and borrowings and short-term loans and borrowings are borrowings payable to other
state-owned enterprises amounting to RMB31,345 million (December 31, 2014: RMB31,680 million) and RMB50,794 million (December
31, 2014: RMB73,651 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-164
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
36.
SIGNIFICANT RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
(c)
Compensation of key management personnel
Fees
Basic salaries, housing fund,
other allowances and benefits in kind
Discretionary bonus
Pension cost-defined contribution schemes
2013
689
5,424
-
319
6,432
2014
622
4,062
-
508
5,192
2015
653
3,202
-
221
4,076
Details of directors' and senior management's remuneration are included in note 31 to the financial statements.
(d)
Commitments with related parties
As at December 31, 2014 and 2015, except for the other capital commitments disclosed in note 43(c) to these financial statements, the
Group had no significant commitments with related parties.
F-165
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management
The Group's activities expose it to a variety of financial risks, including 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 the 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. The 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, trade and notes receivables,
trade and notes payables, receivable from a subsidiary of Chinalco due to disposal of an entity in the preceding year and
disposal of Hong Kong Properties in the current year, and short-term and long-term loans denominated in United States
dollars ("USD"), Australian dollars ("AUD"), Euro ("EUR"), Japanese yen ("JPY") and Hong Kong dollars ("HKD").
Related exposures are disclosed in notes 12, 14, 15, 16 and 20 and 24 to the 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, 2014 and
2015, the Group only has significant exposure to USD.
As at December 31, 2015, if RMB had strengthened/weakened by 5% against USD with all other variables held constant,
the comprehensive income for the year would have been approximately RMB177 million lower/higher (2014: RMB238
million higher/lower), mainly as a result of foreign exchange gains and losses arising from translation of USD-
denominated borrowings and receivables. Profit was less sensitive to the fluctuation in the RMB/USD exchange rates in
2015 than in 2014, mainly due to the decrease in the USD denominated cash and receivables.
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, 2014 and 2015.
F-166
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(a)
Market risk (Continued)
(ii)
Interest rate risk
As at December 31, 2014 and 2015, as the Group had no significant interest-bearing assets except for bank deposits (note
16), entrusted loans (note 15), receivables arising from disposal of subsidiaries, business and assets (note 12 and note 15)
and a prepayment paid to a supplier (note 12), 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. The interest rates of entrusted loans and a deposit paid to a supplier are fixed, the interest rate of the
receivables from disposal of subsidiaries, business and assets to Chinalco is at the rate of one-year bank loan determined
by People's Bank of China at the payment date and the interest rate of the receivables from disposal of an entity to a
subsidiary of Chinalco is LIBOR plus 0.9%. As the interest rates applied to the deposits and receivables from disposal of
subsidiaries, business and assets were relatively low and the interest rates applied to the entrusted loans and a
prepayment paid to a supplier were fixed, 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, 2014 and 2015.
The interest rate risk for the Group's financial liabilities 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, 2015, if interest rates had been 100 basis points (December 31, 2014: 100 basis points) higher/lower
for bank and other loans borrowed at floating interest rates with all other variables held constant, net profit for the year
would have been RMB503 million lower/higher (2014: RMB547 million), respectively, mainly as a result of the
higher/lower interest expense on floating rate borrowings.
F-167
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(a)
Market risk (Continued)
(ii)
Interest rate risk (Continued)
The fair value interest rate risk of the Group mainly arises from long-term bonds, medium-term notes and short-term
bonds issued at fixed rates. As the fluctuation of comparable interest rates of corporate bonds with similar terms 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, 2014 and 2015.
(iii)
Commodity price risk
The Group uses futures and option contracts to reduce its exposure to fluctuations in the price of primary aluminum and
other products. The Group uses the futures contract for hedging other than speculation. With reference to the hedging of
primary aluminum, production company hedges the output of primary aluminum and trading company hedges the
quantities of buyout and self-supporting.
The Group uses mainly futures contracts and option contracts traded on the Shanghai Futures Exchange and London
Metal Exchange ("LME") to hedge against fluctuations in primary aluminum prices. As at December 31, 2015, the fair
values of the outstanding futures contracts amounting to RMB2 million (December 31, 2014: RMB121 million) and
RMB11 million (December 31, 2014: RMB4 million) are recognized in financial assets and financial liabilities at fair
value through profit or loss, respectively. As at December 31, 2015, the fair value of outstanding options contracts
amounting to RMB151 million (December 31, 2014: RMB25 million) was recognized in financial liabilities at fair value
through profit or loss.
F-168
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(a)
Market risk (Continued)
(iii)
Commodity price risk (Continued)
A summary of futures contracts held as at December 31, 2014 is as follows:
Primary aluminum:
-long position
-short position
Copper:
-long position
Zinc:
-long position
-short position
Lead:
-short position
Coal:
-long position
-short position
As at December 31, 2014
Quantity
(expressed
in tonnes)
Contract
value
Market
value
Contract
maturity
44,535
121,860
600,762
1,703,565
591,871
1,571,999
January to May 2015
February to March 2015
384,072
379,780
January to March 2015
16,444
7,700
340
68,568
51,148
16,723
7,672
308
67,140
51,996
January to May 2015
January to May 2015
January 2015
September 2015
January to May 2015
8,900
1,000
460
25
90,000
52,000
F-169
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(a)
Market risk (Continued)
(iii)
Commodity price risk (Continued)
A summary of futures contracts held as at December 31, 2015 is as follows:
As at December 31, 2015
Quantity
(expressed
in tonnes)
Contract
value
Market
value
Contract
maturity
51,850
229,535
532,285
2,470,025
568,353
2,513,938
425
2,525
1,275
800
15,513
92,433
16,863
9,884
15,615
92,756
17,116
10,732
Jan to Mar 2016
Jan to Jun 2016
Jan 2016
Jan to Feb2016
Feb to May 2016
Feb 2016
Primary aluminum:
-long position
-short position
Copper:
-long position
-short position
Zinc:
-long position
-short position
F-170
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(a)
Market risk (Continued)
(iii)
Commodity price risk (Continued)
As at December 31, 2015, if the commodity futures prices had increased/decreased by 3% (December 31, 2014: 3%) and
all other variables held constant, profit for the year would have changed by the amounts shown below:
Primary aluminum
Copper
Zinc
Lead
Coal
2014
2015
Decrease/increase
RMB22.053 million
Increase/decrease
RMB8.545 million
Increase/decrease
RMB0.204 million
Decrease/increase
RMB0.007 million
Increase/decrease
RMB0.341 million
Decrease/increase
RMB43.776 million
Decrease/increase
RMB1.736 million
Increase/decrease
RMB0.144 million
N/A
N/A
F-171
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(b)
Credit risk
Credit risk arises from balances with banks and financial institutions, short-term investments, trade and notes receivables, other
current and non-current receivables as well as credit exposures of customers, including outstanding receivables and committed
transactions. The carrying amounts of short-term investments and these receivables included in notes 10, 12, 14, 15, and 16
represent the Group's maximum exposure to credit risk in relation to its financial assets. The Group also provided financial
guarantees to certain subsidiaries, two joint ventures and an associate as well as a third party. The guarantees to joint ventures and
an associate mentioned in note 36 represented the Group's maximum exposure to credit risk in relation to its guarantees to joint
ventures and an associate. As at December 31, 2015, the guarantees balance provided to a third party is RMB11 million(December
31, 2014: RMB14 million).
The Group maintains substantially all of its bank balances and cash and short-term investments in several major state-owned banks
in the PRC. With strong support from the PRC government 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 and their related parties, 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 financial statements.
Management does not expect any further losses from non-performance by these counterparties. The Group holds collateral for
some entrusted loans. As at December 31, 2015, the Group has the receivables amounting to RMB8,792 million (December 31,
2014: RMB12,294 million) from Chinalco and its subsidiaries which arose from the disposal of subsidiaries, business and assets.
Chinalco and its subsidiaries have settled the receivables and the related interest thereof in accordance with the payment terms.
Therefore, the Group believes that there is no material credit risk related to the above-mentioned receivables.
For the year ended 31 December 2015, revenues of approximately RMB31,818 million (2013 from continuing operations:
RMB30,255 million, 2014: RMB24,986 million,) are derived from entities directly or indirectly owned or controlled by the PRC
government including Chinalco. There were no other individual customers from whom the Group has derived revenue of more
than 10% of the Group's revenue during the year ended December 31, 2013, 2014 and 2015. 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, 2013, 2014
and 2015.
F-172
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(c)
Liquidity risk
Cash flow forecast is performed in the operating entities of the Group and aggregated by the Group Treasury. The 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. This 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, 2015, the Group had total banking facilities of approximately RMB138,392 million (2014: RMB142,051
million) of which amounts totalling RMB67,620 million (2014: RMB65,394 million) have been utilized as at December 31, 2015.
Banking facilities of approximately RMB63,877 million (2014: RMB71,660 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, 2015, the Group had credit facilities through its futures agent at the LME amounting to USD120
million (equivalent to RMB799.23 million) (December 31, 2014: USD120 million (equivalent to RMB734.28 million)), of which
USD58 million (equivalent to RMB376.28 million) (December 31, 2014: USD57 million (equivalent to RMB346.09 million)) has
been utilized. The futures agent has the right to adjust the related credit facilities.
Management also monitors rolling forecasts of the Group's liquidity reserve on the basis of expected cash flows.
F-173
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
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, 2014
Finance lease payables,
including current portion
Long-term bank and other loans,
including current portion
Long-term bonds
Medium-term notes and bonds,
including current portion
Short-term bonds
Short-term bank and other
Interest payables for borrowings
318,103
444,022
910,926
-
1,673,051
6,572,862
-
4,000,000
23,000,000
40,984,396
5,793,584
3,331,060
-
6,900,000
-
-
2,516,312
11,784,104
2,000,000
10,258,318
-
31,946,344
2,000,000
9,400,000
-
-
3,488,030
-
-
-
596,089
20,300,000
23,000,000
40,984,396
12,394,015
Financial liabilities at fair value
through profit or loss
Financial liabilities included in other
payables and accrued liabilities,
excluding accrued interest
Financial liabilities included in other
non-current liabilities (Note)
Trade and notes payables
29,384
8,277,693
-
15,751,262
-
-
-
-
-
-
29,384
8,277,693
229,704
-
581,265
-
359,264
-
1,170,233
15,751,262
104,727,284
13,421,098
28,164,325
11,213,671
157,526,378
F-174
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.1
Financial risk management (Continued)
(c)
Liquidity risk (Continued)
As at December 31, 2015
Finance lease payables,
including current portion
Long-term bank and other loans,
including current portion
Long-term bonds
Medium-term notes and bonds,
including current portion
Short-term bonds
Short-term bank and other loans
Interest payables for borrowings
Financial liabilities at fair value
through profit or loss
Financial liabilities included in other
payables and accrued liabilities,
excluding accrued interest
Financial liabilities included in other
non-current liabilities (Note)
Trade and notes payables
Within 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
1,815,657
1,803,103
3,751,049
-
7,369,809
4,602,511
-
6,900,000
6,600,000
34,749,287
5,489,314
161,700
7,712,263
-
14,506,138
4,865,485
2,000,000
6,400,000
-
-
2,057,931
13,785,703
-
12,500,000
-
-
3,110,273
-
-
-
-
9,113,934
-
-
-
-
5,156,622
-
-
32,367,633
2,000,000
25,800,000
6,600,000
34,749,287
15,814,140
161,700
7,712,263
150,251
-
437,129
-
385,975
-
973,355
14,506,138
82,536,870
17,276,770
33,584,154
14,656,531
148,054,325
Note:
As disclosed in note 22, as at December 31, 2015, the carrying value of financial liabilities included in other non-current liabilities was
RMB798 million (December 31, 2014: RMB771 million).
F-175
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(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
December 31, 2014
Financial assets
at fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
financial
investments
Total
-
-
120,901
-
-
-
1,663,590
16,268,600
-
6,820,992
5,332,534
-
5,332,534
-
4,635,600
4,635,600
-
-
-
-
120,901
1,663,590
16,268,600
6,820,992
120,901
30,085,716
4,635,600
34,842,217
-
-
-
-
74,850
74,850
8,393,122
-
8,393,122
8,393,122
74,850
8,467,972
120,901
38,478,838
4,710,450
43,310,189
Current
Trade and notes receivables
Available-for-sale financial
investments
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
Financial assets included in other
non-current assets
Subtotal
Total
F-176
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial liabilities
Current
Financial liabilities at fair value through
profit or loss
Interest-bearing loans and borrowings
Financial liabilities included in other
payables and accrued liabilities
Trade and notes payables
Subtotal
Non-current
Financial liabilities included in other
non-current liabilities
Interest-bearing loans and borrowings
Subtotal
December 31, 2014
Financial
liabilities at fair
value through
profit or loss
Financial
liabilities at
amortized cost
Total
29,384
-
-
-
-
75,358,958
9,201,623
15,751,262
29,384
75,358,958
9,201,623
15,751,262
29,384
100,311,843
100,341,227
-
-
-
771,294
44,769,211
771,294
44,769,211
45,540,505
45,540,505
Total
29,384
145,852,348
145,881,732
F-177
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial assets
Current
Trade and notes receivables
Available-for-sale financial
investments
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
Financial assets included in other
non-current assets
Subtotal
Total
December 31, 2015
Financial assets
at fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
financial
investments
Total
-
-
2,058
-
-
-
5,151,039
-
5,151,039
-
224,820
224,820
-
1,734,739
20,753,136
9,192,087
-
-
-
-
2,058
1,734,739
20,753,136
9,192,087
2,058
36,831,001
224,820
37,057,879
-
-
-
-
130,440
130,440
6,057,461
-
6,057,461
6,057,461
130,440
6,187,901
2,058
42,888,462
355,260
43,245,780
F-178
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(a)
Financial instruments by category (Continued)
Financial liabilities
December 31, 2015
Current
Financial liabilities at fair value through profit or loss
Interest-bearing loans and borrowings
Financial liabilities included in other payables
and accrued liabilities
Trade and notes payables
Subtotal
Non-current
Financial liabilities included in other
non-current liabilities
Interest-bearing loans and borrowings
Subtotal
Total
Financial
liabilities at fair
value through
profit or loss
Financial
liabilities at
amortized cost
161,700
-
-
-
-
54,422,863
8,824,791
14,506,138
Total
161,700
54,422,863
8,824,791
14,506,138
161,700
77,753,792
77,915,492
-
-
-
797,994
53,725,670
797,994
53,725,670
54,523,664
54,523,664
161,700
132,277,456
132,439,156
F-179
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy
Fair value
The carrying amounts and fair values of the Group's financial instruments, other than those with carrying amounts that reasonably
approximate to fair values and those carried at fair value, are as follows:
Carrying amounts
Fair values
December 31,
2014
December 31,
2015
December 31,
2014
December 31,
2015
Financial assets
Financial assets included in
other non-current assets
8,393,122
6,057,461
8,703,168
6,245,648
Financial liabilities
Financial liabilities included in
other non-current liabilities
Long-term interest-bearing loans
and borrowings
Carrying amounts
Fair values
December 31,
2014
December 31,
2015
December 31,
2014
December 31,
2015
771,294
797,994
771,294
797,994
44,769,211
53,725,670
44,292,962
52,987,968
45,540,505
54,523,664
45,064,256
53,785,962
F-180
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Fair value (Continued)
Management has assessed that the fair values of cash and cash equivalents, restricted cash and time deposits, trade and notes
receivables, financial assets included in other current assets, entrusted loans, trade and notes payables, financial liabilities included
in other payables and accrued liabilities, short-term and current portion of interest-bearing loans and borrowings, interest payable
and the current portion of long-term payables approximate to their carrying amounts largely due to the short term maturities of
these instruments.
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 financial assets included in other non-current assets and financial liabilities included in other non-
current liabilities have been calculated by discounting the expected future cash flows using rates currently available for
instruments on with similar terms, credit risk and remaining maturities.
The fair values of long-term interest-bearing loans and borrowings have been calculated by discounting the expected
future cash flows using rates currently available for instruments with similar terms, credit risk and remaining
maturities.
The Group's own non-performance risk for financial liabilities included in other non-current liabilities and long-term interest-
bearing loans and borrowings as at December 31, 2014 and 2015 was assessed to be insignificant.
F-181
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group's financial instruments:
Assets measured at fair value
As at December 31, 2014
Fair value measurement using
Financial assets at fair value
through profit or loss:
Futures contracts
Short-term investments
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
120,901
-
-
4,635,600
120,901
4,635,600
-
-
-
Total
120,901
4,635,600
4,756,501
As at December 31, 2015
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
Financial assets at fair value
through profit or loss:
Futures contracts
Short-term investments
2,058
59,940
-
224,820
61,998
224,820
-
-
-
2,058
284,760
286,818
F-182
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Fair value hierarchy (Continued)
Liabilities measured at fair value
As at December 31, 2014
Fair value measurement using
Financial liabilities at fair
value through profit or loss:
Futures contracts
European option contracts
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
4,455
-
4,455
-
24,929
24,929
-
-
-
As at December 31, 2015
Fair value measurement using
Financial liabilities at fair
value through profit or loss:
Futures contracts
European option contracts
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
10,719
-
-
150,981
10,719
150,981
-
-
-
Total
4,455
24,929
29,384
Total
10,719
150,981
161,700
F-183
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Fair value hierarchy (Continued)
Assets for which fair values are disclosed
As at December 31, 2014
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
Loans and receivables:
Financial assets included in other
non-current assets
-
8,703,168
-
8,703,168
As at December 31, 2015
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
Loans and receivables:
Financial assets included in other
non-current assets
-
6,245,648
-
6,245,648
F-184
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.2
Financial instruments (Continued)
(b)
Fair value and fair value hierarchy (Continued)
Fair value hierarchy (Continued)
Liabilities for which fair values are disclosed
As at December 31, 2014
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Financial liabilities at amortized cost:
Financial liabilities included in
other non-current liabilities
Long-term interest-bearing loans
and borrowings
-
-
-
771,294
44,292,962
45,064,256
-
-
-
As at December 31, 2015
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Financial liabilities at amortized cost:
Financial liabilities included in
other non-current liabilities
Long-term interest-bearing loans
and borrowings
-
-
-
797,994
52,987,968
53,785,962
-
-
-
Total
771,294
44,292,962
45,064,256
Total
797,994
52,987,968
53,785,962
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 for both financial assets and financial liabilities (2014: nil).
F-185
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
37.
FINANCIAL AND CAPITAL RISK MANAGEMENT (Continued)
37.3
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 debt
divided by total capital. Net debt is calculated as total liabilities (excluding deferred tax liabilities and income tax payable) 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 debt less non-controlling interests.
During 2014 and 2015, the change in sales prices of the Group's primary products has adversely impacted on the profitability of the Group.
The gearing ratio as at December 31, 2014 and 2015 are as follows:
Total liabilities (excluding deferred tax liabilities
and income tax payable)
Less: restricted cash, time deposits and
cash and cash equivalents
Net debt
Total equity
Add: net debt
Less: non-controlling interests
December 31,
2014
December 31,
2015
152,049,076
137,922,304
(17,932,190)
(22,487,875)
134,116,886
115,434,429
39,653,846
134,116,886
(11,353,155)
50,297,436
115,434,429
(11,457,339)
Total capital attributable to owners of the parent
162,417,577
154,274,526
Gearing ratio
83%
75%
The decrease in the gearing ratio as at December 31, 2015 mainly resulted from the increase of share capital by the issuance of A shares.
F-186
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
38.
PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS
Details of the Group's subsidiaries that have material non-controlling interests are set out below:
Percentage of equity interest held by
non-controlling interests
Ningxia Energy
Shandong Huayu
Loss for the year allocated to
non-controlling interests
2014
2015
29.18%
45.00%
29.18%
45.00%
Ningxia Energy
Shandong Huayu
Dividends paid to non-controlling interests
Ningxia Energy
Shandong Huayu
Accumulated balances of non-controlling
interests at the reporting dates
Ningxia Energy
Shandong Huayu
(550,825)
(19,940)
(29,716)
(21,459)
64,553
-
41,905
-
3,572,917
766,693
3,496,613
742,704
F-187
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
38.
PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS (Continued)
The following tables illustrate the summarized financial information of the above subsidiaries. The amounts disclosed are before any inter-company
eliminations:
2014
Revenue
Total expenses
Loss for the year
Total comprehensive Loss for the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net cash flows from operating activities
Net cash flows used in investing activities
Net cash flows from/(used in) financing activities
Effect of foreign exchange rate changes, net
Ningxia
Energy
Shandong
Huayu
4,676,461
(6,366,978)
(1,690,517)
(1,690,517)
4,052,484
29,611,512
(6,952,449)
(17,417,698)
2,004,293
(2,270,943)
372,707
84
2,644,227
(2,688,539)
(44,312)
(44,312)
584,375
2,480,330
(1,372,077)
(385)
589,152
(71,158)
(435,947)
-
Net increase in cash and cash equivalents
106,141
82,047
2015
Revenue
Total expenses
Loss for the year
Total comprehensive Loss for the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net cash flows from operating activities
Net cash flows used in investing activities
Net cash flows (used in)/from financing activities
Effect of foreign exchange rate changes, net
Ningxia
Energy
Shandong
Huayu
3,929,406
(3,981,824)
(52,418)
(52,418)
3,392,945
30,534,583
(6,507,721)
(18,229,159)
2,281,584
(2,077,674)
(227,037)
(576)
2,355,849
(2,403,535)
(47,686)
(47,686)
930,275
2,461,806
(1,751,726)
(1,110)
261,886
(36,529)
120,570
-
Net (decrease)/increase in cash and cash equivalents
(23,703)
345,927
F-188
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
39.
BUSINESS COMBINATION
In November 2015, Baotou Aluminum, the subsidiary of the Company, acquired relevant assets and liabilities of High-Purity Aluminum and Light
Metal of Baotou Aluminum Group at a total cash consideration of RMB37.662 million. Baotou Aluminum Group is a subsidiary of Chinalco, the
parent company of the Group. Before and after the acquisition, both sides are controlled by Chinalco, and the control is not temporary. Thus, the
acquisition is considered to be business combination under common control. The combination date is November 30, 2015, which is determined by the
date of transfer of the assets and liabilities.
The book values of the assets and liabilities of High-Purity Aluminum and Light Metal as at the acquisition date and the comparative financial figures
were as follows:
Assets
Trade and notes receivables
Other current assets
Inventories
Property, plant and equipment
Intangible assets
Liabilities
Trade and notes payables
Other payables and accrued expenses
Interest bearing loans and borrowings
Net assets
Difference recognized in equity
Satisfied by cash
Total purchase consideration
December 31,
2014
December 31,
2015
19,959
11,808
101,898
87,609
2,139
2,911
3,791
191,707
47,729
13
146,224
76,611
1,347
43,597
137,539
65,000
25,004
25,788
11,874
37,662
37,662
37,662
An analysis of the cash flows of cash and cash equivalents in respect of the acquisition of High-Purity Aluminum Plant and Light Metal is as follows:
Cash consideration paid
Cash and bank balances acquired
Net outflow of cash and cash equivalents included in cash flows from investing activities
(30,000)
-
(30,000)
F-189
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
40.
DISPOSAL OF SUBSIDIARIES
(a)
Disposal of Shanxi Huaxing
In December 2015, the Group entered into Equity Transfer Agreement with Shenzhen CR Yuanda, a state-owned entity, to transfer 50%
equity interests in Shanxi Huaxing, a wholly owned subsidiary, through the Shanghai United Assets and Equity Exchange at a price of
RMB2,351 million. The price was determined based on the appraisal value provided by an independent qualified appraisal company.
According to the Equity Transfer Agreement, 30% of the consideration amounting to RMB705 million has been received by the Group in
December 2015 whereas the remaining amount of RMB1,646 million would be paid within one year from the effective date of the Equity
Transfer Agreement and the balance is interest bearing charged at prevailing lending interest rate.
The directors of the Company are of the opinion that the Group lost control over Shanxi Huaxing and accounted for it as a joint venture
accordingly. As of the date of disposal, the carrying amounts of Shanxi Huaxing was RMB2,115 million, and the Group recognized gain of
disposal of subsidiary of RMB1,294 million for 50% equity interest disposed of. The Group re-measured the remaining 50% net assets of
Shanxi Huaxing to fair value of RMB2,351 million and recognized fair value gain of RMB1,294 million accordingly.
F-190
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
40.
DISPOSAL OF SUBSIDIARIES (Continued)
(a)
Disposal of Shanxi Huaxing (Continued)
The details of the net assets disposed of are as follows:
Net assets disposed of:
Cash and cash equivalents
Restricted cash and time deposits
Trade and notes receivables
Other current assets
Inventories
Property, plant and equipment (note 7)
Land use right (note 8)
Intangible assets (note 6)
Deferred tax assets (note 11)
Other non-current assets
Trade and notes payables
Other payables and accrued expenses
Interest bearing loans and borrowings
Income tax payable
Other non-current liabilities
Net assets
50% of net assets transferred into joint venture (Note)
Net assets disposed of
Gain on disposal of Shanxi Huaxing
Satisfied by:
Cash
Receivables as at December 31, 2015
Note:
50% of net assets transferred into joint venture
Gain on remeasurement of the remaining
equity interest at fair value (note 28(b))
Initial cost of investment in joint venture (note 9(a))
Date of disposal
114,794
46,716
34,479
30,849
340,218
4,495,019
251,295
365,427
3,057
487,076
(426,288)
(898,781)
(2,312,574)
(4,271)
(412,192)
2,114,824
(1,057,412)
1,057,412
1,294,067
2,351,479
705,444
1,646,035
2,351,479
1,057,412
1,294,067
2,351,479
F-191
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
40.
DISPOSAL OF SUBSIDIARIES (Continued)
(a)
Disposal of Shanxi Huaxing (Continued)
An analysis of the cash flows of cash and cash equivalents in respect of the Disposal of Shanxi Huaxing is as follows:
Cash consideration received
Less: cash and cash equivalents of Shanxi Huaxing disposed of
Net inflows of cash and cash equivalents in respect
of the disposal of Shanxi Huaxing
(b)
Loss control of Ningxia photovoltaic subsidiaries
2015
705,444
114,794
590,650
In September and October 2015, LingWu People's Court, Yinchuan Intermediate People's Court and Wuzhong People's Court accepted the
liquidation petition filed by the Group's subsidiaries, Ningxia Ning Electric Silicon Co., Ltd.*
Electric PV Material Co., Ltd.*
, Ningxia Ning
, Ningxia Ning Electric Silicon Materials Co., Ltd.*
(hereinafter referred to as
"Ningxia photovoltaic subsidiaries"), respectively. Upon the liquidation administrators took control over those companies, the directors of
the Company considered the Group lost control over Ningxia photovoltaic subsidiaries and therefore ceased to consolidate these companies
since then ("date of lost control").
and Ningxia Yinxing Polycrystalline Silicon Co., Ltd.*
The book value of assets and liabilities of Ningxia photovoltaic subsidiaries is result from the fair value adjustments of Ningxia photovoltaic
subsidiaries' assets and liabilities arising from acquisition of Ningxia Energy in 2013.
*
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.
F-192
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
40.
DISPOSAL OF SUBSIDIARIES (Continued)
(b)
Loss control of Ningxia photovoltaic subsidiaries (Continued)
The details of the net assets of Ningxia photovoltaic subsidiaries are as follows:
Net assets:
Cash and cash equivalents
Trade and notes receivables
Other current assets
Inventories
Property, plant and equipment (note 7)
Land use right (note 8(b))
Intangible assets (note 6)
Other non-current assets
Available-for-sale financial investments
Trade and notes payables
Other payables and accrued expenses
Deferred tax liabilities (note 11)
Other non-current liabilities
Net assets
Trade and notes receivable due from
Ningxia photovoltaic subsidiaries
Other current amount due from Ningxia
photovoltaic subsidiaries
Provision for trade and notes receivable due from
Ningxia photovoltaic subsidiaries
Provision for other current assets due from
Ningxia photovoltaic subsidiaries
Consideration
Date of lost
control
189
47,619
166,377
18,718
387,324
114,330
3,954
8,432
5,686
(290,441)
(215,198)
(36,389)
(61,123)
149,478
15,644
1,435,802
(15,644)
(1,321,712)
114,090
16,515
Release of unrealized gains or losses between Ningxia photovoltaic
subsidiaries and the Group upon deconsolidation
Net loss on lost control of Ningxia photovoltaic subsidiaries
(18,873)
An analysis of the cash flows of cash and cash equivalents in respect of lost control of Ningxia photovoltaic
subsidiaries is as follows:
Cash consideration paid
Less: cash and cash equivalents of Ningxia photovoltaic subsidiaries
Net outflows of cash and cash equivalents in respect of lost
control of Ningxia photovoltaic subsidiaries
F-193
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
41.
OTHER EQUITY INSTRUMENTS
2015
-
189
(189)
On October 22, 2013, a subsidiary of the Company, Chalco Hong Kong Investment Company Limited (the "Issuer") issued USD350 million senior
perpetual securities at an initial distribution rate of 6.625% (the "2013 Senior Perpetual Securities"). The proceeds from issuance of the 2013 Senior
Perpetual Securities after the issuance costs is USD347 million (equivalent to RMB2,123 million). The proceeds will be on-lent to the Company and
any of its subsidiaries for general corporate use. Coupon payments of 6.625% per annum on the 2013 Senior Perpetual Securities are paid semi-
annually in arrears from October 29, 2013 and may be deferred at the discretion of the Group. The 2013 Senior Perpetual Securities have no fixed
maturity and are callable only at the Group's option on or after October 29, 2018 at their principal amounts together with any accrued, unpaid or
deferred coupon distribution payments. After October 29, 2018, the coupon distribution rate will be reset to a percentage per annum equal to the sum
of (a) the initial spread of 5.312 per cent, (b) the U. S. Treasury Rate, and (c) a margin of 5.00 per cent. per annum. While any coupon distribution
payments are unpaid or deferred, the Group, the wholly owned subsidiaries of Chalco Hong Kong as guarantors, and the issuer cannot declare or pay
dividends or make distributions or similar discretionary payments in respect of, or repurchase, redeem or otherwise acquire any securities of lower or
equal rank.
On April 10, 2014, Chalco Hong Kong Investment Company Limited issued USD400 million senior perpetual securities at an initial distribution rate
of 6.25% (the "2014 Senior Perpetual Securities"). The proceeds from issuance of the 2014 Senior Perpetual Securities after the issuance costs is
USD398 million (equivalent to RMB2,462 million). The proceeds will be on-lent to the Company and any of its subsidiaries for general corporate
use. Coupon payments of 6.25% per annum on the 2014 Senior Perpetual Securities are paid semi-annually on April 29, and October 29, in arrears
from April 17, 2014 and may be deferred at the discretion of the Group. The first coupon payment date was April 29, 2014. The 2014 Senior
Perpetual Securities have no fixed maturity and are callable only at the Group's option on or after April 17, 2017 at their principal amounts together
with any accrued, unpaid or deferred coupon distribution payments. After April 17, 2017, the coupon distribution rate will be reset to a percentage per
annum equal to the sum of (a) the initial spread of 5.423 per cent, (b) the U. S. Treasury Rate, and (c) a margin of 5.00 per cent. per annum. While
any coupon distribution payments are unpaid or deferred, the Group, the wholly owned subsidiaries of Chalco Hong Kong as guarantors, and the
issuer cannot declare or pay dividends or make distributions or similar discretionary payments in respect of, or repurchase, redeem or otherwise
acquire any securities of lower or equal rank.
F-194
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
41.
OTHER EQUITY INSTRUMENTS (Continued)
On October 27, 2015, the Company issued RMB2,000 million perpetual medium-term notes at an initial distribution rate of 5.50% (the "2015
Perpetual Medium-term Notes"). The proceeds from issuance of the 2015 Perpetual Medium-term Notes is RMB2,000 million. The proceeds will be
used for repayments of interest-bearing loans and borrowings. Coupon payments of 5.50% per annum on the 2015 Perpetual Medium-term Notes are
paid annually in arrears from October 29, 2015 and may be deferred at the discretion of the Company. The 2015 Perpetual Medium-term Notes have
no fixed maturity and are callable only at the Group's option on October 29, 2020 or any coupon distribution date after October 29, 2020 at their
principal amounts together with any accrued, unpaid or deferred coupon distribution payments. The coupon distribution rate will be reset to a
percentage per annum equal to the sum of (a) the initial spread of 2.61 per cent, (b) the China Treasury Rate, and (c) a margin of 300 Bps every five
years after October 29, 2020. While any coupon distribution payments are unpaid or deferred, the headquarters of the Company cannot declare or pay
dividends to shareholders or decrease the share capital, or make material fixed asset investments of the headquarters of the Company.
Pursuant to the terms of the 2013 Senior Perpetual Securities, 2014 Senior Perpetual Securities and 2015 Perpetual Medium-term Notes, the Group
has no contractual obligation to repay their principal or to pay any coupon distribution. The 2013 Senior Perpetual Securities, 2014 Senior Perpetual
Securities and 2015 Perpetual Medium-term Notes do not meet the definition of financial liabilities according to IAS 32 Financial Instruments:
Presentation, and are classified as equity and subsequent distribution declared will be treated as distribution to equity owners.
42.
CONTINGENT LIABILITIES
As at December 31, 2014 and 2015, the Group had no significant contingent liabilities.
F-195
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
43.
COMMITMENTS
(a)
Capital commitments of property, plant and equipment
Contracted, but not provided for
12,624,047
7,770,944
(b)
Commitments under operating leases
The future aggregate minimum lease payments as at December 31, 2015 pursuant to non-cancellable lease agreements entered into by the
Group are summarized as follows:
December 31,
2014
December 31,
2015
Within one year
In the second to fifth years, inclusive
After five years
December 31,
2014
December 31,
2015
556,727
2,310,421
16,276,818
561,028
2,167,718
15,088,512
19,143,966
17,817,258
(c)
Other capital commitments
As at December 31, 2015, commitments to make capital contributions to the Group's joint ventures and associates were as follows:
December 31,
2014
December 31,
2015
1,102,250
74,800
1,492,475
244,800
1,177,050
1,737,275
Associates
Joint ventures
F-196
ALUMINUM CORPORATION OF CHINA LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 2013, 2014 and 2015
(Amounts expressed in thousands of RMB unless otherwise stated)
44.
EVENTS AFTER THE REPORTING PERIOD
(a)
(b)
(c)
On February 1, 2016, Jiaozuo Wanfang, held the first extraordinary general meeting and conducted general election of non-independent
directors and independent directors of the seventh session of the board of directors. None out of six non-independent nor the three
independent directors was appointed by the Company. Thus, the Company lost significant influence on Jiaozuo wanfang.
As set out in note 17 (a), on June 25, 2015, the Group and Shandong Aluminum, a subsidiary of Chinalco, signed an asset exchange
agreement that the Group would exchange part of the assets and liabilities of Chalco Shandong with part of the assets and liabilities of
Shandong Aluminum. In January 2016, the exchange of Chalco Shandong business and Shandong Aluminum business was completed.
On February 5, 2016, the Company received notice from Chinalco, that ACCOH, a subsidiary of Chinalco, has increased holding H shares
of the Company through the Hong Kong stock exchange trading system since November 9, 2015. As of February 4, 2016, Chinalco and
ACCOH have increased holding A and H shares of the Company by 188 million shares, accounting for about 1.26% of the total shares of
the Company. On the same day, Chinalco and the persons acting in concert held 5,135 million A shares and 187 million H shares of the
Company in aggregate, accounting for about 35.71% of the total shares of the Company.
45.
COMPARATIVE AMOUNTS
Certain comparative amounts have been revised as a result of the business combination under common control as disclosed in note 39.
46.
APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorized for issue by the board of directors on April 15, 2016.
F-197
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 October 12, 2012)
(Amended with the Approval of the Shareholders' General Meeting of the Company on December 29, 2015)
Table of Contents
Chapter
Title
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
13
18
21
27
32
47
51
61
67
70
72
76
85
94
100
101
104
105
107
108
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.
- i -
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
100000000035734.
The Company's sponsors include Aluminum Corporation of China, 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)82298322
Fax: (010)82298158
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.
- 1 -
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.
Article 7.
Article 8.
The Company hereby formulated these Articles of Association (the "Company's Articles of Association" or the "Articles") at the
Shareholders' General Meeting on December 29, 2015 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.
These Articles of Association shall enter into effect if they are adopted by the special resolutions at the Shareholders' General Meeting of the
Company.
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.
- 2 -
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.
- 3 -
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: the exploration and mining of bauxite and other metals, limestone and coal; the
production and sale of aluminum, magnesium and other metal products, smelted products and processed products; the production and sales
of coal; the production and sales of carbon products and related non-ferrous metal products, water, electricity and steam, industrial oxygen
and nitrogen; the production, sales, loading, unloading and transportation services of autoclaved fly ash bricks; the production and sales of
sulfuric acid (or the hazardous chemicals); electricity generation and sales; research and development, production and sales of products from
comprehensive utilization of mine tailings (including red mud); prospective design, construction and installation; the manufacturing,
installation and maintenance of machinery and equipment, spare parts, non-standard equipment; the repairing of automotive and
construction machinery; the manufacture and sales of automobile of special process; the road transport of cargo; the installation,
maintenance, inspection and sales of telecommunications communication and testing instruments; automat measurement control, the design,
installation and testing of network and software system; the material inspection and analysis; operation of office automation and
instruments; relevant technological development and technical services.
- 4 -
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.
- 5 -
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.
- 6 -
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
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:
- 7 -
Number of shares
Sponsor's name
subscribed Investment method
Investment time
Aluminum Corporation of China
7,673,770,000 Net assets
Guangxi Investment Group Co., Ltd.
196,800,000 Net assets
June 28, 2001
June 28, 2001
Guizhou Materials Development and
Investment Co., Ltd.
Total
129,430,000 Net assets
June 28, 2001
8,000,000,000
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 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.
- 8 -
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 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.
- 9 -
Following the approval of the State Council, China Construction Bank Corporation has recovered the Company's 6.42 percent 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 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.
- 10 -
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 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 in 2007.
Upon the issuance, the composition of the Company's share capital is as follows: there are 13,524,487,892 ordinary shares, in which, the
holders of A shares hold 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.
- 11 -
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 additional 1,379,310,344 A shares by way of non-public issuance in
June 2015.
Upon the completion of the additional issuance, the composition of the Company's current share capital is as follows: there are
14,903,798,236 ordinary shares, in which, the holders of A shares hold 10,959,832,268 shares, accounting for 73.54 percent of the
Company's total ordinary shares; the holders of overseas listed foreign investment shares hold 3,943,965,968 shares, accounting for 26.46
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 RMB14,903,798,236 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.
- 12 -
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.
- 13 -
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)
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;
(4)
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;
- 14 -
(5)
other circumstances approved in laws or administrative regulations.s
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.
- 15 -
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.
With respect to redeemable shares which the Company has the right to buy back, if the buyback is to be made in a manner other than
through the market or by tender, the buyback price must be limited to a maximum price; if the buyback is to be made by tender, tenders
shall be available to all shareholders alike under same conditions.
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.
- 16 -
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)
(ii)
acquisition of the right to buy back its own shares;
amendment of any contract for the buyback of its own shares;
- 17 -
(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:
- 18 -
(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 MP30fulfilled 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:
- 19 -
(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).
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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)
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;
(5)
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.
- 21 -
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:
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(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)
a register kept at the Company's domicile other than those provided for under items (2) and (3) of this paragraph;
- 23 -
(2)
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;
(3)
registers of shareholders kept in such other places as the Board of Directors may decide necessary for listing of the Company's
shares.
- 24 -
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)
(2)
(3)
(4)
(5)
(6)
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
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.
- 25 -
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 record date. Shareholders whose names appear on the register at closing on the record date shall be the shareholders entitled to
the relevant rights and interests.
- 26 -
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 143 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:
- 27 -
(1)
(2)
(3)
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;
Article 47.
Article 48.
Article 49.
Article 50.
(4)
(5)
(6)
(7)
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;
- 28 -
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.
- 29 -
CHAPTER 7 Rights and Obligations of the Shareholders
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.
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:
- 30 -
(1)
(2)
(3)
(4)
(5)
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)
current and previous names and aliases;
main addresses (domiciles);
(iii)
(iv)
(c)
(d)
(e)
nationalities;
full-time and other part-time occupations and duties;
identification documents and their numbers.
the status of the Company' share capital;
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;
- 31 -
(v)
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.
(6)
(7)
(8)
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)
(3)
(4)
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;
not to return their shares except in circumstances specified in laws and regulations;
- 32 -
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:
- 33 -
(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.
- 34 -
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)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
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;
to consider and approve reports of the Board of Directors;
to consider and approve reports of the Board of Supervisors;
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;
- 35 -
to pass resolutions on the merger, division, dissolution or liquidation of the Company;
to pass resolutions on the issuance of corporate bonds;
to pass resolutions on the engagement, dismissal or non-renewal of the engagement of accounting firms by the Company;
to amend the Articles of Association of the Company;
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;
to consider and approve changes in the use of raising funds;
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:
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(1)
(2)
(3)
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;
(4)
(5)
(6)
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'
- 37 -
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).
- 38 -
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)
Article 67.
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.
- 39 -
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:
- 40 -
(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.
- 41 -
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.
For the holders of domestic shares, notice of a Shareholders' General Meeting may also be delivered by way of public announcement. Such
announcement shall be published in one or more newspapers or periodicals designated by the securities regulatory authority of the State
Council within the period from the 45th day to the 50th day (including the 45th and the 50th day) prior to the date of the meeting to be held.
Once the announcement is made, all the holders of domestic shares shall be deemed to have received the notice of the relevant Shareholders'
General Meeting.
For holders of H Shares, notice of a Shareholders' General Meeting may also be delivered or provided by other means as specified in Article
231 of these Articles of Association, subject to laws, regulations and the relevant listing rules of the place where the Company's shares are
listed.
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.
- 42 -
Article 72.
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.
Article 73.
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.
Article 74.
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.
Article 75.
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.
- 43 -
Article 76.
Article 77.
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.
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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
- 45 -
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:
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(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.
Article 87.
Article 88.
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)
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.
(2)
If the Board of Directors agrees to call an Extraordinary Shareholders' General Meeting, it shall issue a notice calling such
- 47 -
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.
(3)
(4)
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.
(5)
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.
- 48 -
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.
- 49 -
Article 90.
Article 91.
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 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.
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CHAPTER 9 Special Voting Procedures for Class Share holders
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)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
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;
- 51 -
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;
the increase of the rights and privileges of shares of another class;
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.
- 52 -
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 58 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
- 53 -
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.
- 54 -
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.
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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 and Planning Committee, an Audit
Committee, a Remuneration Committee, a Nomination Committee, and an Occupational Health and Safety and Environment Committee.
The Audit Committee shall be composed entirely of independent directors, of whom at least one shall be a financial or accounting
professional. The Remuneration Committee and the Nomination 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
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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)
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.
(2)
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.
(3)
if a shareholder alone or shareholders together holding at least 3 percent of the voting rights in the Company put(s) forth an
- 57 -
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)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
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;
- 58 -
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;
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;
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;
to decide on the establishment of the Company's internal management organization;
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;
to decide on the establishment of the Company's internal management organization;
to formulate amendments to these Articles of Association;
to formulate the basic management systems of the Company;
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.
- 59 -
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.
Article 109.
Article 110.
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 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.
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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 percent 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.
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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:
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(1)
(2)
(3)
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.
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 executive and outside directors of any material matter to be resolved by the Board
of Directors within a period required by Article 114 of these Articles of Association and provide sufficient materials with
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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
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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.
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.
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.
Article 118.
Article 119.
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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.
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.
Article 121.
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.
Article 122.
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.
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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.
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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.
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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 laws and regulations
and/or relevant listing rules, 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.
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(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:
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(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;
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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.
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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)
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;
(2)
(3)
(4)
(5)
(6)
(7)
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 callingofmeetings oftheBoard 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.
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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.
Article 130.
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.
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Article 131.
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
Article 132.
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.
Article 133.
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.
His or her main duties shall be as set forth below:
(1)
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;
(2)
(3)
(4)
(5)
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;
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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
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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 abroad 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;
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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;
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.
(5)
(6)
(7)
(8)
(9)
(10)
Article 134.
Directors or other senior management staff of the Company 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.
CHAPTER 13 Manager
Article 136.
The Company has a manager, who shall be engaged or dismissed by the Board of Directors.
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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.
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Article 139.
Article 140.
Article 141.
Article 142.
Article 143.
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.
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CHAPTER 14 Board of Supervisors
Article 144.
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.
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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.
As needed, the Board of Supervisors shall establish an office to be responsible for the daily affairs of the Board of Supervisors.
Article 147.
Article 148.
Article 149.
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.
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Article 150.
Article 151.
Article 152.
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)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
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;
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;
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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.
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Article 153.
Article 154.
Article 155.
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.
Article 156.
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.
Article 157.
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.
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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)
(10)
(11)
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;
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;
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.
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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
Article 159.
Article 160.
Article 161.
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.
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-?
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;
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(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)
(10)
(11)
(12)
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;
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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;
not to compete with the Company in any way without the informed consent of the Shareholders' General Meeting;
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.
provided for by laws;
ii.
iii.
required in the public interest;
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.
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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:
(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.
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Article 166.
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.
Article 167.
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 officer 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.
Article 168.
Article 169.
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.
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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 amended 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.
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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.
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Article 173.
Article 174.
Article 175.
Article 176.
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 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:
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(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.
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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)
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;
(3)
(4)
remuneration for other services provided toward the management of the Company or a subsidiary thereof;
the payment by way of compensation for his or her 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.
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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 58 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.
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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's shares are listed, the aforementioned financial reports may be
provided to shareholders by other means as specified in Article 231 of these Articles of Association.
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Article 184.
Article 185.
Article 186.
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 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.
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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.
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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:
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(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, intinterim 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 percent 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 percent of the average annual distributable profit
realized in the past three years;
The exceptional circumstances refer to the following:
i.
ii.
where the auditing firm issues a non-standard unqualified audit report on the financial report of the Company for the
year; and
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 of Directors considers that the stock price of the Company
does not reflect its share capital size and distributing dividend in shares will be favorable 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 the 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:
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1.
2.
The profit distribution plan of the Company shall be drawn up by the management before being submitted to the Board of
Directors and the supervisory committee of the Company for consideration. The Board of Directors 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 the shareholders.
Where the Company does not distribute cash dividend by reason of the exceptional circumstances in Article 194 above, the Board
of Directors 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 of Directors 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:
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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 of Directors 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 the 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.
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Article 199.
Article 200.
Article 201.
Article 202.
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.
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.
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.
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.
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Under the premise of obeying the laws of China, the Company has the right to forfeit the unclaimed dividends, subject to the expiry of the
applicable relevant limitation period.
The Company shall have the right to cease sending dividend warrants to holders of overseas listed foreign investment shares by post, but
such right shall only be exercised until the dividend warrants have been left uncashed on two consecutive occasions. However, such power
may be exercised after the first occasion on which such a warrant is returned undelivered.
The Company shall have the right to sell the shares of untraceable shareholders of overseas listed foreign investment shares in the manner as
the Board of Directors thinks appropriate, subject to compliance with the following conditions:
(1)
during a period of 12 years at least three dividends in respect of the shares in question have become payable and no dividend
during that period has been claimed;
(2)
on expiry of the 12 years the Company gives notice of its intention to sell the shares by way of advertisements published in one or
more newspapers in the place of listing of the Company and notifies the securities regulatory authority where the Company's
shares are listed of such intention.
Article 203.
Article 204.
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.
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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:
(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.
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Article 208.
Article 209.
Article 210.
Article 211.
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.
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Article 212.
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.
the Shareholders' General Meeting at which its term of office would otherwise have expired;
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ii.
iii.
any Shareholders' General Meeting at which it is proposed to fill the vacancy caused by its removal;
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; or
any such conditions that shall be described.
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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 H 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 holders of H Shares by other means as specified in Article 231 of the 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.
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CHAPTER 18 Merger and Division of the Company
Article 214.
The Company may carry out mergers or divisions in accordance with the laws.
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.
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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 and liquidated in accordance with the laws if:
CHAPTER 19 Dissolution and Liquidation of the Company
(1)
(2)
(3)
(4)
(5)
the Shareholders' General Meeting resolves to dissolve the Company;
dissolution is necessary as a result of the merger or dissolution of the Company;
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 for breaching
laws and administrative regulations;
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.
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Article 219.
Article 220.
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.
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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.
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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.
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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 competent
authority, 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)
the Board of Directors shall pass a resolution to draw up a proposal on amendment of the Company's Articles of Association or the
shareholders shall propose to amend the Company's Articles of Association;
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(2)
(3)
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 submitted 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 administrative regulations 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
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.
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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 designated newspapers
(if any) and/or other designated media (including websites) of the securities regulatory bodies and the stock exchange where the Company's
shares are listed.
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; and
proxy forms.
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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.
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CHAPTER 22 Dispute Resolution
Article 234.
The Company shall comply with the following rules for dispute resolution:
(1)
(2)
(3)
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.
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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. 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.
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CHAPTER 23 Supplementary Provisions
Article 235.
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.
Article 236.
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.
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EXHIBIT 8.1
A list of Aluminum Corporation of China Limited's principal subsidiaries is provided in Note 1 to consolidated financial statements included in this annual
report following Item 19.
EXHIBIT 12.1
I, YU Dehui, certify that:
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 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 15, 2016
By: /s/YU Dehui
Name: YU Dehui
Title: Chairman of the Board of Directors
EXHIBIT 12.2
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, ZHANG Zhankui, certify that:
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 15, 2016
By: /s/ZHANG Zhankui
Name: ZHANG Zhankui
Title: Chief Financial Officer
EXHIBIT 13.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company") for the year ended December 31, 2015 as
filed with the Securities and Exchange Commission on the date hereof, I, YU Dehui, Chairman of the Board of Directors 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 15, 2016
By: /s/YU Dehui
Name: YU Dehui
Title: Chairman of the Board of Directors
EXHIBIT 13.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the annual report on Form 20-F of Aluminum Corporation of China Limited (the "Company") for the year ended December 31, 2015 as
filed with the Securities and Exchange Commission on the date hereof, I, ZHANG Zhankui, 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 15, 2016
By: /s/ZHANG Zhankui
Name:ZHANG Zhankui
Title: Chief Financial Officer
April 15, 2016
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-7561
United States
Ladies and Gentlemen:
We have read Item 16F of Form 20-F dated April 15, 2016 of Aluminum Corporation of China Limited and are in agreement with the statements contained in
the first, second, and third paragraphs on page 127 therein. We have no basis to agree or disagree with other statements of the registrant contained therein.
/s/ Ernst & Young
Hong Kong